USCA1 Opinion
United States Court of Appeals
For the First Circuit
____________________
No. 96-1696
CHARLENE TAGAN GOLAS, INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF
DONALD M. GOLAS,
Plaintiff, Appellant,
v.
HOMEVIEW INC. AND PAUL REVERE LIFE INSURANCE COMPANY,
Defendants, Appellees.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
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Before
Stahl, Circuit Judge,
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Bownes, Senior Circuit Judge,
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and Lynch, Circuit Judge.
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John J. Weltman, with whom Lawson & Weitzen was on brief, for
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appellant.
Joan O. Vorster, with whom Joseph M. Hamilton and Mirick,
_________________ ____________________ _______
O'Connell, DeMallie & Lougee were on brief, for appellee Paul Revere
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Life Insurance Company.
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February 7, 1997
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LYNCH, Circuit Judge. This is an appeal from the
LYNCH, Circuit Judge.
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denial of plaintiff's motion to amend her complaint to add
Ellen Kaplan, an insurance broker, as a defendant in a suit
arising out of Paul Revere Life Insurance Company's refusal
to pay disability insurance benefits to plaintiff's late
husband when he was suffering from his final illness. In her
motion to amend, plaintiff sought to add a new party
defendant on a state law claim in an action which the
district court was simultaneously dismissing against the
original defendants as being preempted by federal law. We
review the denial of the motion to amend for abuse of
discretion and conclude that there is no such abuse under the
circumstances. We need not and do not reach the issue of
whether the state law misrepresentation claim is preempted by
the Employee Income Security Act of 1974, 29 U.S.C. 1001 et
__
seq. ("ERISA").
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In August 1992, plaintiff's husband obtained a
disability insurance policy through his employer, HomeView
Inc. One month later he was diagnosed with bone cancer and
sought disability benefits. His request was denied as being
related to a preexisting condition for which he sought
treatment during the enrollment period.
After her husband's death, plaintiff brought suit
in Massachusetts state court against Paul Revere and HomeView
based on state law misrepresentation theories. The complaint
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alleged that HomeView supplied its employees, including
Donald Golas, with a pamphlet, prepared by Paul Revere,
explaining the rules governing preexisting conditions.
Plaintiff contends that this pamphlet was misleading. It
indicated that an insured individual could obtain disability
benefits as long as the disability was not caused by a
sickness that required him to consult a doctor during the
three month enrollment period. Plaintiff claims that, in
reliance on this statement, her husband visited a doctor
during the enrollment period for administrative purposes
only. However, he was not diagnosed with bone cancer at that
time. It was this visit, plaintiff alleges, that made him
ineligible to receive benefits. Plaintiff argues that,
absent the flawed information, her husband would have waited
until after the enrollment period ended to visit the doctor
and therefore would have been eligible for benefits.
Plaintiff sought damages in state court for her
late husband's emotional distress and for her own loss of
consortium. Plaintiff simultaneously brought suit in federal
court against the same two defendants for benefits allegedly
due under the disability policy pursuant to ERISA. That
ERISA case continues to be pending in the District of
Massachusetts. Defendants removed the state law suit to
federal court, arguing that those claims were also governed
by ERISA. The two cases were not consolidated.
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Once in federal court, Paul Revere moved to dismiss
the state law claims, arguing that they were preempted by
ERISA.1 Plaintiff countered by moving for a remand to state
court. While these motions were pending, plaintiff moved to
amend the complaint to add Kaplan as a defendant, asserting
that, since filing her initial action, she had "discovered
that critical misrepresentations upon which her husband
relied were made to him by Ellen Kaplan." The complaint
alleged that, "[p]rior to accepting disability coverage, Mr.
Golas spoke to Ellen Kaplan who made false statements to him
regarding his coverage under the disability policy," and
that, "[a]s the broker responsible for overseeing the
provision of disability insurance from Paul Revere to
HomeView employees, Ms. Kaplan owed Mr. Golas a duty to make
sure she did nothing to interfere with his obtaining coverage
under the policy."
Defendants opposed the motion to add Kaplan as a
defendant, arguing that amendment would be futile because the
claim against Kaplan would also be preempted by ERISA.
Plaintiff argued that a claim against Kaplan would not be
preempted by ERISA because Kaplan was not an agent of
HomeView or Paul Revere, but an independent insurance broker.
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1. HomeView made its own motion to dismiss some three months
later, incorporating by reference Paul Revere's arguments in
support.
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The district court adopted the magistrate's
recommendation to grant the motion to dismiss the state law
claims against HomeView and Paul Revere based on ERISA
preemption. The district court went on to consider whether
to adopt the magistrate's recommendation to deny plaintiff's
motion to amend the complaint to add Kaplan as a defendant.
Having already decided to dismiss the claims against Paul
Revere and HomeView, the district court was faced with an
anomalous situation. Plaintiff wished to add a defendant to
a case which was being dismissed as to the two original
defendants. In addition, the ERISA cause of action against
Paul Revere and HomeView was pending in the same court but in
a different action from the one in which the motion to amend
was filed. The district court's ultimate decision to adopt
the magistrate's recommendation to deny the motion to amend
the complaint must be viewed in this practical and procedural
context.
Golas appeals only from the denial of the motion to
amend the complaint to add Kaplan as a defendant and not from
the dismissal of the underlying action on preemption grounds.
Review is for abuse of discretion. Reid v. New Hampshire, 56
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F.3d 332, 342 (1st Cir. 1995); see also Carlo v. Reed Rolled
________ _____ ___________
Thread Die Co., 49 F.3d 790, 792 (1st Cir. 1995) (noting that
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the appeals court will "generally defer to a district court's
decision to deny leave to amend where the reason is apparent
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or declared" (internal quotation marks and citation
omitted)). It is well-settled, as the concurring opinion
from our respected colleague points out, that, when a
district court makes an error of law, by definition it abuses
its discretion. However, that is not the issue that concerns
us here. The facts and circumstances of the case necessarily
influence our evaluation of the denial of the motion to amend
the complaint, and here, they make it unnecessary to reach
the ERISA preemption issue.
We note that at the time the motion was denied, the
two original defendants had been dismissed and there was no
diversity jurisdiction over Kaplan.2 Furthermore, a parallel
ERISA action was pending against HomeView and Paul Revere in
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2. The concurrence argues that the ERISA issue must be
reached because issues of jurisdiction must be addressed
first and, in the absence of diversity, there is no other
basis for federal jurisdiction. This is incorrect. We
disagree with the premise that the court could not address
the motion to amend without first addressing the ERISA issue.
Second, even if the claim against Kaplan were not preempted
by ERISA, the district court would have supplemental
jurisdiction over the claim, because the other two state law
claims had properly been before the district court. In any
civil action over which the district courts have original
jurisdiction, they also have supplemental jurisdiction over
all other claims that form part of the same case or
controversy. 28 U.S.C. 1367. The district court had
jurisdiction over the state law claims against Paul Revere
and HomeView under the complete preemption doctrine.
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987).
__________________________ ______
This is sufficient to confer original jurisdiction on the
district courts. Franchise Tax Bd. v. Construction Laborers
__________________ _____________________
Vacation Trust, 463 U.S. 1, 23-24 (1983); American
________________ ________
Policyholders Ins. Co. v. Nyacol Prods., Inc., 989 F.2d 1256,
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1263 (1st Cir. 1993).
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federal court. Federal courts have traditionally been more
reluctant to exercise jurisdiction over pendent parties than
over pendent claims. See, e.g., Lykins v. Pointer, Inc., 725
___ ____ ______ _____________
F.2d 645, 649 (11th Cir. 1984).3 Under these circumstances,
the district court could not have abused its discretion when
it denied plaintiff's motion to amend the complaint to add
Kaplan as the sole defendant. Even if our review were de
__
novo, as the concurrence suggests, we could affirm on any
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legal ground supported in the record. See, e.g., Eagan v.
___ ____ _____
United States, 80 F.3d 13, 16 (1st Cir. 1996); Levy v. FDIC,
______________ ____ ____
7 F.3d 1054, 1056 (1st Cir. 1993).
We therefore uphold the denial of the motion to
amend, albeit on different grounds than those relied on by
the district court, and thus we express no opinion on the
preemption issue. This opinion does not, as the concurrence
claims, uphold the district court's preemption decision sub
___
silentio. Plaintiff may decide to attempt to add Kaplan as a
________
defendant in the pending ERISA action.4 The district court's
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3. The codification of the supplemental jurisdiction
doctrine in 1990, which makes clear that such jurisdiction
includes the joinder of additional parties, 28 U.S.C.
1367(a), does not change the prudential analysis.
4. It is true that the three-year statute of limitations for
a state law based fraudulent misrepresentation claim expired,
at the very latest, in early 1996. However, to the extent
that plaintiff has a viable state law claim (on which we
express no opinion), the claim could apparently still be
brought, within a year of the date of this opinion, pursuant
to Mass. Gen. Laws ch. 260, 32.
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ruling that any claim against Kaplan would be preempted
presents no bar. It has no precedential or issue preclusive
effect. If a motion is made to add Kaplan to the ERISA
action, the court will have the ability to consider the
preemption issue anew in light of the facts that have been
developed in discovery. Cf. Boston Children's Heart Found.,
___ _______________________________
Inc. v. Nadal-Ginard, 73 F.3d 429, 439-40 (1st Cir. 1996)
____ ____________
(absent precedent on closely related issue, the inquiry as to
whether state law is preempted requires the court to look at
the facts of the particular case).5
The decision of the district court is affirmed.
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5. At oral argument we were advised that there was discovery
taken on the issue of whether Kaplan was an agent, either of
HomeView or of Paul Revere. The proffered amended complaint
is ambiguous on this issue, although the concurrence assumes
that Kaplan was not an agent of either company. In Kaplan's
deposition testimony attached to Golas' brief, Kaplan states
that she held an employee benefits meeting for HomeView
employees to explain the Paul Revere disability policy and an
Aetna insurance policy that was also being offered to
HomeView employees. This undermines Golas' argument that
Kaplan was an independent broker. The facts may by now be
established, but no findings are before us. However, if
Kaplan was an agent of either of the two companies, the
factual assumption underlying the concurrence is incorrect,
and the resulting legal conclusions unjustified. Indeed, if
Kaplan is an agent of HomeView, the case would fall squarely
within the ambit of Vartanian v. Monsanto Co., 14 F.3d 697
_________ ____________
(1st Cir. 1994).
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BOWNES, Senior Circuit Judge, concurring. I concur
BOWNES, Senior Circuit Judge, concurring.
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in the result, but, with respect, I do not think that this
case can be disposed of by the conclusory assertion that the
district court did not abuse its discretion in denying
plaintiff's motion to amend her complaint so as to add Ellen
Kaplan as a defendant. In his report and recommendation,
adopted by the district court, the magistrate judge stated
the following reason for denying the motion to amend the
complaint:
I find that Plaintiff['s] attempt to add
Ellen Kaplan as a party defendant and to
assert against her a claim for
misrepresentation would be futile because
such a claim would be pre-empted by
ERISA.
It is clear that the district court's denial of the
motion was not an exercise of discretion, but was compelled
by its legal ruling that the claim against Kaplan would be
pre-empted by ERISA. Accordingly, the district court's
.
denial of the motion is subject to review de novo, rather
__ ____
than for abuse of discretion. See Carlo v. Reed Rolled
___ _____________________
Thread Die Co., 49 F.3d 790, 793 (1st Cir. 1995). The
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Supreme Court has stated unequivocally that "[a] district
court by definition abuses its discretion when it makes an
error of law." Koon v. United States, 116 S. Ct. 2035, 2047
______________________
(1996) (citation omitted).
To be sure, in the ordinary case, the decision
whether to grant or deny a motion to amend the complaint is
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discretionary with the trial court, and so is normally
reviewed for abuse of discretion; but the case before us is
not ordinary in this respect. Here it is clear that the
motion was denied because of the magistrate's stated
conclusion that the claim against Kaplan was pre-empted as a
matter of law, and his unstated but apparent corollary
conclusion that, as a result, he was deprived of discretion
(by the doctrine of futility) to grant the motion.
Thus, the question before us is not whether the
district court abused its discretion in denying plaintiff's
motion to amend the complaint, but whether the basis for this
ruling was legally correct. If the district court's ruling
was erroneous, as I think it was, then the motion to amend
was not "futile" and should not have been denied on that
ground. As a consequence, the district court lacks
jurisdiction to decide the merits of the state-law
misrepresentation claim because, as the majority acknowledges
inferentially, the only basis for federal jurisdiction is
ERISA pre-emption. I do not think, therefore, that this
appeal can be decided on a principled basis without
discussing the scope of ERISA pre-emption.
The majority purports to "express no opinion on the
preemption issue," and suggests that the plaintiff could
still pursue her claim against Kaplan by seeking to amend her
pending ERISA complaint so as to add Kaplan as a defendant.
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The majority fails to recognize, however, that the practical
effect of its disposition of the case is to uphold the
district court's pre-emption ruling sub silentio, and to
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leave the plaintiff with no recourse in any forum. A finding
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of no pre-emption results in dismissal of the claim for lack
of federal jurisdiction and leaves the plaintiff free to seek
redress in state court. In contrast, the majority's refusal
to address the merits of the district court's pre-emption
ruling is not only analytically unsound, it also leaves the
plaintiff exactly where she started -- with her state-court
action subject to removal to federal court on the ground of
pre-emption and with pre-emption as a bar to recourse in
federal court.
For the reasons that follow, I conclude that ERISA
does not pre-empt plaintiff's misrepresentation claim against
Kaplan and that, therefore, the proper disposition of this
case would be to deny plaintiff's motion for lack of federal
jurisdiction over the purported state-law claim, leaving the
plaintiff free to pursue the claim in the state court.6
I.
I.
I start my analysis with the key words of the
statute bearing on pre-emption:
Except as provided in subsection (b)
of this section, the provisions of this
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6. I, of course, intimate no opinion as to the merits of
plaintiff's state-law claim.
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subchapter and subchapter III of this
chapter shall supersede any and all State
_________________________________
laws insofar as they may now or hereafter
_________________________________________
relate to any employee benefit plan
_________________________________________
. . . .
29 U.S.C. 1144(a) (emphasis added).
For purposes of this section:
(1) The term "State law"
includes all laws, decisions,
rules, regulations, or other
State action having the effect
of law, of any State.
29 U.S.C. 1144(c)(1).
The Supreme Court teaches that the pre-emption
provision of 514(a), codified at 29 U.S.C. 1144(a), was
intended
to ensure that plans and plan sponsors
would be subject to a uniform body of
benefits law; the goal was to minimize
the administrative and financial burden
of complying with conflicting directives
among States or between States and the
Federal Government. Otherwise, the
inefficiencies created could work to the
detriment of plan beneficiaries. . . .
Particularly disruptive is the potential
for conflict in substantive law. It is
foreseeable that state courts, exercising
their common law powers, might develop
different substantive standards
applicable to the same employer conduct,
requiring the tailoring of plans and
employer conduct to the peculiarities of
the law of each jurisdiction. Such an
outcome is fundamentally at odds with the
goal of uniformity that Congress sought
to implement.
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142 (1990)
_________________________________
(citations omitted).
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In concluding that plaintiff's misrepresentation
claims were pre-empted, the magistrate judge relied on Carlo
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v. Reed Rolled Thread Die Co., 49 F.3d 790. In Carlo we
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stated
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the ERISA pre-emption doctrine as follows:
Section 514 of ERISA supersedes "any
and all State laws insofar as they may
now or hereafter relate to any employee
______ __
benefit plan. . . ." 29 U.S.C. 1144(a)
(emphasis added). "The term 'State Law'
includes all laws, decisions, rules,
regulations, or other State action having
the effect of law, of any State." 29
U.S.C. 1144(c)(1). The Supreme Court
has established that "a law 'relates to'
an employee benefit plan . . . if it has
a connection with or reference to such a
plan." Ingersoll-Rand Co. v. McClendon,
________________________________
498 U.S. 133, 139, 111 S. Ct. 478, 483,
112 L. Ed. 2d 474 (1990) (quoting Shaw v.
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Delta Air Lines, Inc., 463 U.S. 85, 96-
______________________
97, 103 S. Ct. 2890, 2900, 77 L. Ed. 2d
490 (1983)). "Under this 'broad common-
sense meaning,' a state law may 'relate
to' a benefit plan, and thereby be pre-
empted, even if the law is not
specifically designed to affect such
plans, or the effect is only indirect."
Id. (quoting Pilot Life Ins. Co. v.
___ __________________________
Dedeaux, 481 U.S. 41, 47, 107 S. Ct.
_______
1549, 1553, 95 L. Ed. 2d 39 (1987)).
Id. at 793 (footnote omitted).
___
Carlo, a leading case in this circuit on ERISA pre-
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emption, see Degnan v. Publicker Indus., Inc., 83 F.3d 27, 29
___ ________________________________
(1st Cir. 1996), held that ERISA pre-empted the state-law
misrepresentation claims because they had "a connection with
or reference to" an employee benefit plan. Carlo, 49 F.3d at
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794-95. But we have never held that Carlo sweeps all state-
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law misrepresentation claims into the ERISA corner merely
because an employee benefit plan exists.
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In Boston Children's Heart Found., Inc. v. Nadal-
________________________________________________
Ginard, 73 F.3d 429 (1st Cir. 1996), we reviewed ERISA pre-
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emption cases, including Carlo, and concluded:
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State laws that have merely a
"tenuous, remote, or peripheral
connection with a covered benefit plan"
may not be preempted by ERISA. Rosario-
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Cordero v. Crowley Towing & Transp. Co.,
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46 F.3d [120,] 123 [1st Cir. 1995]
(citation and internal quotation marks
omitted). Such is normally the case with
respect to laws of general applicability.
See District of Columbia v. Greater
___ ____________________________________
Washington Board of Trade, 506 U.S. at
___________________________
130 n.1, 113 S. Ct. at 583 n.1; Rosario-
________
Cordero v. Crowley Towing & Transp. Co.,
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46 F.3d at 123; Combined Mgt., Inc. v.
_______________________
Superintendent of the Bureau of
_________________________________________
Insurance, 22 F.3d 1, 3 (1st Cir.), cert.
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denied,, ___ U.S. ___, 115 S. Ct. 350,
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130 L. Ed. 2d 306 (1994). A court cannot
conclude that a state law is one of
general applicability, and as such is not
preempted by ERISA, based on the form or
label of the law, however. See Carlo v.
___ ________
Reed Rolled Thread Die Co., 49 F.3d at
___________________________
794 n.3; Zuniga v. Blue Cross and Blue
_______________________________
Shield of Michigan, 52 F.3d 1395, 1401
___________________
(6th Cir. 1995). Absent precedent on a
closely related problem, the inquiry into
whether a state law "relates to" an ERISA
plan or is merely "tenuous, remote, or
peripheral" requires a court to look at
the facts of [sic] particular case. See
___
Rosario-Cordero v. Crowley Towing &
_________________________________________
Transp. Co., 46 F.3d at 125 n.2.
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Boston Children's Heart Found., 73 F.3d at 439-40.
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In Johnson v. Watts Regulator Co., 63 F.3d 1129
________________________________
(1st Cir. 1995), we pointed out the consequences that may
flow from ERISA pre-emption: It "may cause potential state-
law remedies to vanish, or may change the standard of review,
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or may affect the admissibility of evidence, or may determine
whether a jury trial is available." Id. at 1131-32
___
(citations omitted).
A recent Supreme Court decision has a direct
bearing on the scope of ERISA pre-emption. In New York State
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Conference of Blue Cross & Blue Shield Plans v. Travelers
_____________________________________________________________
Ins. Co., 115 S. Ct. 1671 (1995), several commercial
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insurers, acting as fiduciaries of ERISA plans they
administered, joined with their trade associations and "[o]n
the claimed authority of ERISA's general preemption
provision" brought actions in the United States District
Court against state officials to invalidate three hospital
surcharge statutes. Id. at 1675. Writing for a unanimous
___
Court, Justice Souter made a number of observations on the
scope of ERISA pre-emption:
Our past cases have recognized that
the Supremacy Clause, U.S. Const., Art.
VI, may entail pre-emption of state law
either by express provision, by
implication, or by a conflict between
federal and state law. And yet, despite
the variety of these opportunities for
federal preeminence, we have never
assumed lightly that Congress has
derogated state regulation, but instead
have addressed claims of pre-emption with
the starting presumption that Congress
does not intend to supplant state law.
Indeed, in cases like this one, where
federal law is said to bar state action
in fields of traditional state
regulation, we have worked on the
assumption that the historic police
powers of the States were not to be
superseded by the Federal Act unless that
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was the clear and manifest purpose of
Congress.
Id. at 1676 (citations and internal quotation marks omitted).
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The Court commented on the statutory pre-emption language of
514(a), "all state laws insofar as they . . . relate to any
employee benefit plan," pointing out that "[i]f 'relate to'
were taken to extend to the furthest stretch of its
indeterminacy, then for all practical purposes pre-emption
would never run its course." Id. at 1677. The Court
___
concluded:
We simply must go beyond the unhelpful
text and the frustrating difficulty of
defining its key term, and look instead
to the objectives of the ERISA statute as
a guide to the scope of the state law
that Congress understood would survive.
Id.
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The Court, in the course of its analysis, stated:
Indeed, to read the pre-emption
provision as displacing all state laws
affecting costs and charges on the theory
that they indirectly relate to ERISA
plans that purchase insurance policies or
HMO memberships that would cover such
services, would effectively read the
limiting language in 514(a) out of the
statute, a conclusion that would violate
basic principles of statutory
interpretation and could not be squared
with our prior pronouncement that
[p]reemption does not occur . . . if the
state law has only a tenuous, remote, or
peripheral connection with covered plans,
as is the case with many laws of general
applicability.
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Id. at 1679-80 (citation and internal quotation marks
___
omitted) (alteration in original).
In discussing the sweep of ERISA pre-emption the
Travelers Court pointed to three categories of state laws
_________
that Congress intended to pre-empt: first, "state laws that
mandate[] employee benefit structures or their
administration," id. at 1678; second, "state laws providing
___
alternate enforcement mechanisms," id.; third, state laws
___
that bind plan administrators to a "particular choice and
thus function as a regulation of an ERISA plan itself," id.
___
at 1679. See also Coyne & Delaney Co. v. Selman, 98 F.3d
___ ____ _______________________________
1457, 1468-69 (4th Cir. 1996). It is obvious that none of
these state-law categories are implicated here.
The Court held that the New York statutory
surcharges had only "an indirect economic effect on choices
made by insurance buyers, including ERISA plans" and,
therefore, there was no pre-emption. Travelers at 1679-80.
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Two other observations about Travelers must be
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made. First, it was decided seven weeks after Carlo. This
_____ _____
means, of course, that the Carlo panel did not have the
_____
benefit of the Court's latest views on ERISA pre-emption.
Second, none of the ERISA pre-emption cases decided in this
circuit subsequent to Travelers have cited it.
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I now turn to post-Travelers decisions by other
_________
circuits. In a case the Fourth Circuit described as a
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"garden-variety professional malpractice claim" the court
held:
In light of the Supreme Court's recent
(and narrowing) interpretation of the
scope of ERISA preemption in New York
________
State Conference of Blue Cross & Blue
_________________________________________
Shield Plans v. Travelers, --- U.S. ---,
_________________________
115 S. Ct. 1671, 131 L. Ed. 2d 695
(1995), we hold that Delany's malpractice
claim is not preempted because it does
not "relate to" an employee benefit plan
within the meaning of ERISA's preemption
provision, 29 U.S.C. 1144(a).
Coyne & Delany Co., 98 F.3d at 1466-67. Quoting Travelers
___________________ _________
for the proposition that courts "'address claims of
preemption with the starting presumption that Congress does
not intend to supplant state law,'" 98 F.3d at 1467
(citations omitted), the Fourth Circuit added, "[t]his is
especially true in cases involving fields of traditional
state regulation, including common law tort liability," id.
__
In the course of its opinion the Fourth Circuit noted that
plaintiff's malpractice claim was "not aimed at a plan
administrator at all since the defendants [were] sued in
their capacities as insurance professionals for actions taken
in that capacity." Id. at 1471. This case is analogous to
___
the one before us.
Morstein v. National Ins. Servs., Inc., 93 F.3d 715
______________________________________
(11th Cir. 1996) (en banc), cert. denied, 1996 WL 693349
__ ____ _____ ______
(U.S. Jan. 21, 1997) (No. 96-764), is even more closely
analogous to the case at bar. Plaintiff Morstein was
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president, director, and sole stockholder of a small company.
She met with an insurance broker for the purpose of obtaining
a replacement policy of major medical insurance for herself
and the company's other employee. The policy was to be
administered by National Insurance Services, Inc. At the
meeting with the broker, plaintiff informed him that any
replacement policy would be unacceptable if it excluded from
coverage treatment related to any preexisting medical
condition. Plaintiff alleged that the broker assured her
that the replacement policy would provide the same coverage
as her existing policy. Over a year after the replacement
policy was issued, plaintiff had total hip replacement
surgery. National Insurance Services refused to pay her
claim for payment on the ground that the surgery was for a
preexisting condition which plaintiff had not disclosed on
her application. 93 F.3d at 716-17.
Plaintiff filed an action in state court alleging
negligence, malfeasance, misrepresentations, and breach of
contract. Defendants removed the case to federal court on
the basis of ERISA pre-emption. Id. at 717.
___
In Morstein, the Eleventh Circuit, sitting en banc,
________ __ ____
characterized the Supreme Court's decision in Travelers as
_________
having "essentially turned the tide on the expansion of pre-
emption doctrine." Id. at 721. The holding of the Eleventh
___
Circuit bears quoting:
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Allowing preemption of a fraud claim
against an individual insurance agent
will not serve Congress's purpose for
ERISA. As we have discussed, Congress
enacted ERISA to protect the interests of
employees and other beneficiaries of
employee benefit plans. To immunize
insurance agents from personal liability
for fraudulent misrepresentation
regarding ERISA plans would not promote
this objective. If ERISA preempts a
beneficiary's potential cause of action
for misrepresentation, employees,
beneficiaries, and employers choosing
among various plans will no longer be
able to rely on the representations of
the insurance agent regarding the terms
of the plan. These employees, whom
Congress sought to protect, will find
themselves unable to make informed
choices regarding available benefit plans
where state law places the duty on agents
to deal honestly with applicants.
Id. at 723-24 (citation omitted).
___
In Central States, Southeast and Southwest Areas
_______________________________________________
Health and Welfare Fund v. Pathology Lab. of Ark., P.A., 71
_________________________________________________________
F.3d 1251, 1253 (7th Cir. 1995), cert. denied, 116 S. Ct.
_____ ______
1876 (1996), the Seventh Circuit, citing Travelers, held:
_________
Nothing in ERISA prevents medical
professionals from submitting--and state
courts from enforcing--bills for services
that are not covered by welfare benefit
plans. Although ERISA preempts state law
that "relates to" plans, 29 U.S.C.
1144(a), that clause does not annul state
laws of general applicability just
because they affect the price of medical
care.
In Boyle v. Anderson, 68 F.3d 1093 (8th Cir. 1995),
_________________
cert. denied, 116 S. Ct. 1266 (1996), a case involving a
_____ ______
challenge to certain provisions of a Minnesota health care
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reform statute known as MinnesotaCare, the court relied on
Travelers in holding that there was no ERISA pre-emption,
_________
stating, "In the context of the MinnesotaCare legislation,
Travelers and the other precedents cited in this litigation
_________
compel this court not to preempt a state's effort to serve as
a 'laboratory of democracy' in the realm of health care."
Id. at 1109.
___
The Seventh Circuit also relied on Travelers in
_________
rejecting an ERISA pre-emption claim in Safeco Life Ins. Co.
____________________
v. Musser, 65 F.3d 647 (7th Cir. 1995). The case was brought
_________
by a health insurer who challenged the fees assessed against
such insurers to provide health insurance to individuals
whose physical and mental conditions prevented them from
obtaining insurance in the private market. In a similar
case, the Second Circuit, relying on Travelers, inter alia,
_________ _____ ____
held that ERISA did not pre-empt a Connecticut statute that
imposed surcharges on hospital bills of patients with private
health insurance to subsidize medical care for the poor.
Connecticut Hosp. Ass'n v. Weltman, 66 F.3d 413 (2d Cir.
_____________________________________
1995). See also Greenblatt v. Delta Plumbing & Heating
___ ____ __________________________________________
Corp., 68 F.3d 561, 573-74 (2d Cir. 1995) (noting the
_____
limiting gloss put on the broad language of 514(a) of ERISA
by Travelers).
_________
As these cases recognize, Travelers has restricted
_________
the scope of ERISA pre-emption.
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22
II.
II.
I turn now to what I consider to be the sole issue
before the panel: whether the district court erred in ruling
that ERISA pre-emption rendered "futile" plaintiff's motion
to amend her complaint to add Ellen Kaplan as a defendant.
The question of ERISA pre-emption is reviewed de novo. See
__ ____ ___
Degnan v. Publicker Indus., Inc., 83 F.3d at 28-29. I
___________________________________
recognize that the standard of review for a district court's
refusal to allow an amendment to the complaint is abuse of
discretion. This standard is not applicable here, however,
because the root issue -- stated by the district court as the
basis for its decision -- is ERISA pre-emption, a question of
law. See Carlo v. Reed Rolled Thread Die Co., 49 F.3d at
___ _____________________________________
792-93. Moreover, if there is no pre-emption, the federal
courts are bereft of jurisdiction. Thus, in my view, there
is no way of avoiding the pre-emption issue.
Normally in a pre-emption case the starting point
is an examination of the facts, but there is not much in the
way of facts here. All we know is derived from the
allegations in the purported amended complaint, which must be
accepted as true at this stage of the litigation. These
allegations can only be construed as stating that Kaplan made
misrepresentations to plaintiff's husband, Donald Golas,
and/or failed to give him correct information about the
conditions of eligibility for participation in the Revere
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Insurance policy. The amended complaint alleges that Kaplan
was an insurance broker. I take that to mean that she "sold"
Revere's insurance policy to HomeView. Although Kaplan is
linked to HomeView and Revere as to the alleged
misrepresentations, there is no claim that Kaplan acted as
agent for or on behalf of either or both of the other two
defendants. The amended complaint, broadly construed,
alleges a common-law misrepresentation claim against Kaplan
individually.
Strictly speaking, the ERISA disability insurance
plan is not implicated in plaintiff's misrepresentation
claim. Donald Golas never became a covered employee;
instead, the complaint focuses on the alleged
misrepresentations which plaintiff alleges were the cause of
Golas's being excluded from insurance coverage. Neither the
extent of insurance coverage nor the amount of benefits is
involved. Even the eligibility requirements themselves are
not in dispute; it is only the alleged misrepresentations
about those eligibility requirements that give rise to
plaintiff's cause of action. Plaintiff's burden of proof
thus goes to whether her husband would have been eligible to
join the plan if Kaplan had not made misrepresentations as to
his eligibility. See Coyne & Delaney Co., 98 F.3d at 1462
___ ____________________
n.4.
-24-
24
This case is markedly different from Carlo, 49 F.3d
_____
790. In Carlo, the plaintiff was a former employee of
_____
defendant Reed and a participant in its retirement plan.
Plaintiff Carlo elected early retirement on the basis of
monthly benefits he was told he would receive. The actual
monthly benefits he received were twenty percent less than
the amount promised him. Defendant apologized for the error
and offered to let him continue working at the same position.
Carlo did not accept the offer and took early retirement
under protest. He subsequently brought suit in Massachusetts
state court for breach of contract and negligent
misrepresentation. Id. at 792. We found ERISA pre-emption.
___
In Carlo, plaintiff had been a participant in the
_____
plan and one of the issues was the amount of monthly
retirement pay due him under the substantive provisions of
the plan. Here, by contrast, Donald Golas was not a covered
employee and none of the issues implicate the substantive
provisions of the insurance plan. The allegations are solely
concerned with misrepresentations regarding Golas's
eligibility to become a covered employee.
The analysis used in Boston Children's Heart Found.
______________________________
v. Nadal-Ginard has much to recommend it. In Boston
________________ ______
Children's Heart Found., 73 F.3d 429, suit was brought in
________________________
federal district court against defendant, who worked for
-25-
25
plaintiff nonprofit corporation as an officer and director.
The suit alleged that defendant breached his fiduciary duty
by misappropriating plaintiff's funds. The basis of the suit
was defendant's failure to disclose to the other directors of
the corporation important information concerning provisions
of a severance-benefit plan (the Banks Plan) he had devised.
When the plan was terminated on defendant's initiative, he
received more than $4,000,000 in severance benefits. On
appeal defendant contended that ERISA specifically exempted
the type of severance benefits plan at issue from its
fiduciary duty provisions and pre-empted the application of
state fiduciary law. 73 F.3d at 438. We held:
Here, the alleged breach of fiduciary
duty relates to Nadal-Ginard's action in
establishing the Banks Plan without
disclosing information that a self-
interested fiduciary would be required to
reveal to his fellow directors. Nadal-
Ginard's misconduct preceded the formal
adoption of the plan. The legal
determination that Nadal-Ginard's conduct
constitutes a fiduciary breach does not
require the resolution of any dispute
about the interpretation or
administration of the plan. Further, the
____________
application of state law in this instance
_________________________________________
does not raise the core concern
_________________________________________
underlying ERISA preemption. Indeed, the
___________________________
fact that Nadal-Ginard chose an ERISA
plan rather than some other form of
compensation is peripheral to the
underlying claim that Nadal-Ginard
breached his corporate responsibilities.
This being the case, it cannot be
said that Massachusetts fiduciary law
must be preempted in this instance.
-26-
26
Id. at 440 (emphasis added).
___
Based upon our own circuit cases, the restriction
of the scope of pre-emption under 514(a) of the statute
established in Travelers, and the post-Travelers cases in
_________ _________
other circuits, it is evident that ERISA does not pre-empt
the misrepresentation claim against Ellen Kaplan. There are
eight reasons, gleaned from the cited cases, for this
conclusion. (1) No ERISA benefits are sought and no ERISA
rights or obligations are asserted. (2) Defendant Kaplan
would be personally responsible for any money damages awarded
to plaintiff. (3) Defendant Kaplan is not an ERISA entity,
nor does the alleged misrepresentation claim affect the
relationship between ERISA entities. (4) None of the three
categories of state laws that Travelers holds Congress
_________
intended to pre-empt are implicated. (5) The common-law
claim of misrepresentation is a state law of general
application. Moreover, tort law in general is traditionally
an area of state regulation. It is therefore unlikely that
Congress intended to intrude into this area by pre-emption.
(6) Congress did not intend to shield tortfeasors from
liability for misrepresentation where ERISA benefits, rights,
obligations, and core concerns are not implicated. (7) State
common law imposes a duty of care relative to representations
made by insurance professionals which does not in any way
depend upon ERISA. (8) The alleged misrepresentation
-27-
27
occurred prior to the time when the ERISA plan would have
taken effect.
I would hold, therefore, that the district court
committed reversible error in denying plaintiff's motion to
amend on the ground that the claim raised therein "would be
pre-empted by ERISA."7 Because ERISA does not pre-empt the
claim asserted against Ellen Kaplan, and because there is no
diversity of citizenship between the parties, nor any other
basis for federal jurisdiction, the motion should have been
denied for lack of federal jurisdiction. Plaintiff should be
left to pursue her misrepresentation claim against Kaplan in
the Massachusetts state courts.
Although the majority and I agree on the ultimate
result, we disagree as to the proper path to take in reaching
it. Because I think that this is a case in which the
procedural path is important, I must respectfully concur,
rather than join the majority opinion.
____________________
7. I would also hold that the district court erred in
adopting the magistrate's recommendation, without considering
the application of ERISA to Kaplan as an individual, in light
of the differences between her status vis-a-vis ERISA and
that of the other defendants. Instead, the magistrate merely
said, "For the reason stated . . . [regarding Paul Revere and
HomeView] . . .," plaintiff's claim against Kaplan would also
"be pre-empted by ERISA." He simply assumed that, if ERISA
pre-empted the claim against Revere and HomeView, it must
likewise pre-empt the claim against Kaplan. Given the
distinctions between Kaplan's status as an ERISA entity and
that of the other defendants, this failure to consider the
claim against Kaplan on its own merit also constituted legal
error.
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28
