SUSAN NEALY, &C., APPELLANT, v. US HEALTHCARE HMO, ET AL., DEFENDANTS,
AND RALPH YUNG, M.D., RESPONDENT.
93 N.Y.2d 209 (1999).
March 25, 1999
1 No. 44
[99 NY Int. 0035]
Decided March 25, 1999
Marc S. Oxman, for appellant.
G. William Scott for United States Secretary of Labor,
amicus curiae.
Bhalinder L. Rikhye, for respondent.
Eliot Spitzer, Attorney General of the State of New
York, amicus curiae.
KAYE, CHIEF JUDGE:
The novel question presented by this appeal is whether the Employee Retirement
Income Security Act (ERISA) preempts plaintiff's medical malpractice, breach
of contract and breach offiduciary duty claims against a primary care physician
who allegedly delayed in submitting a specialist's referral form for approval
by a health maintenance organization (HMO) governed by ERISA. Concluding
that ERISA does not preempt plaintiff's claims, we reverse the Appellate
Division's dismissal order and reinstate the complaint against the doctor.
In January 1992, plaintiff's husband, Glenn Nealy, then 37 years old, was
diagnosed with coronary arteriosclerosis and a coronary artery lesion. As
a result, Mr. Nealy took disability leave from his job at Photocircuits Corporation
and was treated for his condition by a cardiologist, Dr. Stephen Green. His
treatment, which included an angioplasty performed by Dr. Green in March
1992, was in large part covered by Blue Cross/Massachusetts Mutual, the carrier
selected by Photocircuits to provide employee medical insurance. Around the
time of Mr. Nealy's angioplasty, Photocircuits replaced its carrier with
a choice of three HMOs, including US Healthcare, and informed its employees
that coverage would become effective April 1, 1992. Mr. Nealy promptly enrolled
in the US Healthcare Versatile Plus HMO, which allowed its members to see
non–participating physicians, and paid his first monthly premium.
On April 2, and again on April 3, Mr. Nealy visited the offices of defendant,
Dr. Ralph Yung, whom he had selected as hisprimary care provider under the
US Healthcare HMO. [1]
He experienced renewed chest pain and also required follow–up care as a result
of the angioplasty. On his first visit, Mr. Nealy was denied an appointment
because he had not yet received a US Healthcare identification number. The
next day, he spoke with a US Healthcare representative who told him that
a copy of his enrollment form could be presented in lieu of an identification
number, and he made a second attempt to visit Dr. Yung. Again he was turned
away––this time because his enrollment form bore the wrong primary physician
number.
On April 10, 1992––having received his US Healthcare identification card
the previous day––Mr. Nealy was examined by Dr. Yung. During that visit,
Dr. Yung took a patient history that noted a history of angina and angioplasty,
performed a routine new–patient physical examination, and renewed all the
medications that had been prescribed by Dr. Green. At Dr. Yung's request,
Mr. Nealy returned on April 13 to provide blood and urine samples for laboratory
analysis. When Dr. Yung informed him during one or both of these visits that
he should see a cardiologist, Mr. Nealy requested a referral to Dr. Green,
who was not a participating US Healthcare provider. Dr. Yung allegedly assured
his patient that he would submit a request toUS Healthcare to approve an
out–of–plan referral and do what he could to secure approval of the request.
It was not until approximately April 20, however, that Dr. Yung completed
a non–participating provider request form and submitted it for approval to
US Healthcare. [2]
On May 4th, Mr. Nealy received a copy of a letter from US Healthcare addressed
to Dr. Yung denying the request for a referral to Dr. Green. The reason given
was that US Healthcare had a participating provider in the area. After the
referral to Dr. Green was denied, Mr. Nealy decided to accept a referral
to Dr. Carl Spivak, a participating US Healthcare cardiologist. He obtained
the referral to Dr. Spivak on May 18 and promptly made an appointment for
the next day. Tragically, however, on May 18 Mr. Nealy suffered a massive
myocardial infarction and died.
Seeking to recover damages for her husband's death, plaintiff commenced this
action in Supreme Court asserting breach of contract, breach of fiduciary
duty, wrongful death, negligence and other claims against defendants Dr.
Yung, Dr. Richard H.Bernstein (Vice President and Director of US Healthcare),
US Healthcare and two subsidiaries. Plaintiff also asserted medical malpractice
claims against Dr. Yung and Dr. Bernstein. Dr. Bernstein and US Healthcare
successfully sought removal of the case to Federal court, where the claims
were dismissed on the ground that they were preempted by ERISA (844 F Supp
966 [SDNY]), and no appeal was taken to determine the correctness of that
decision. Because Dr. Yung––who had not yet been served with the summons
and complaint––did not take part in the removal motion, the Federal court
remanded the case against him, as the sole remaining defendant, to Supreme
Court.
After service of process and discovery, Dr. Yung moved for summary judgment
seeking dismissal of the complaint, alleging that ERISA preempted plaintiff's
claims against him as well. Supreme Court denied the motion. The Appellate
Division, however, reversed and dismissed the complaint, concluding that
ERISA preempted plaintiff's claims. We disagree and now reinstate
plaintiff's complaint against Dr. Yung.
Discussion
Concerned with employee pension plan abuses and
mismanagement, Congress in 1974 enacted ERISA, a comprehensive statute "designed
to promote the interests of employees and their beneficiaries in employee
benefit plans" (Aetna Life Ins v Borges, 869 F2d 142, 144
[2d Cir], cert. denied 493 US 811; see also, 29 USC §§ 1001 1001a,
1001b). ERISA subjects employee benefit plans to participation, funding and
vesting requirements as well as rules regarding reporting, disclosure and
fiduciary responsibility (29 USC §§ 1021 et
seq.; see also, Shaw v Delta Air Lines, 463 US 85,
90–91). By imposing these requirements, Congress sought "to insure against
the possibility that the employee's expectation of * * * benefit[s] would
be defeated through poor management by the plan administrator" (Massachusetts
v Morash, 490 US 107,
115). In aid of its goal of protecting plan participants and their beneficiaries,
ERISA facilitates the development of a uniform national law governing employee
benefit plans, and a standard system to guide the processing of claims and
disbursement of benefits (New York State Conference of Blue Cross & Blue
Shield Plans v Travelers Ins Co, 514 US 645,
656–657 [Travelers]).
ERISA's preemption provision is central to achievement of its statutory purposes.
The provision reads that ERISA "shall supersede any and all State laws
insofar as they * * * relate to any employee benefit plan" covered by
ERISA, and it applies to both State statutes and common law (§ 514[a], 29 USC § 1144[a]; id.,
at § 514[c][1], 29 USC § 1144[c][1]; Pilot
Life Ins Co v Dedeaux, 481 US 41,
46). Although the language of the preemption clause is "deliberately
expansive," there is a presumption that Congress does not intend to
supplant State law, and a claimtraditionally within the domain of State law
will not be superseded by Federal law "unless that was the clear and
manifest purpose of Congress" (Travelers, 514 US, at 654–655).
The issue before us is whether ERISA's preemption clause bars plaintiff's
medical malpractice, breach of contract and breach of fiduciary duty claims
against her husband's primary care physician, Dr. Yung. All of these claims
fall within the traditional domain of State regulation. Dr. Yung, therefore,
bears the "considerable burden" of overcoming the presumption that
Congress did not intend to preempt them (DeBuono v NYSA–ILA Medical
and Clinical Svcs Fund, 117 SCt 1747, 1752). In an attempt to surmount
that formidable hurdle, Dr. Yung alleges that ERISA preempts these claims
because they "relate to" the administration of the US Healthcare
HMO. The Appellate Division agreed, holding that he was protected by ERISA
preemption because he had acted in a "purely administrative" capacity,
and not as an "actual provider of medical care" (__ AD2d __,
__). We conclude that plaintiff's claims against Dr. Yung do not "relate
to" an employee benefit plan.
The simple statutory words "relate to" have been the subject of
significant scholarly comment and litigation, including considerable attention
from the United States Supreme Court (see, DeBuono, supra,
117 SCt, at 1749, n.1; see also, Peter D. Jacobson and
Scott D. Pomfret, Form, Function, and Managed Care Torts: Achieving Fairness
and Equity in ERISA Jurisprudence, 35 Hous L Rev 985 [1998]; Catherine
L. Fisk, The Last Article About the Language of ERISA Preemption?: A
Case Study of the Failure of Textualism, 33 Harv J on Legis 35 [1996];
Larry J. Pittman, ERISA's Preemption Clause and the Health Care Industry:
An Abdication of Judicial Law–Creating Authority, 46 Fla L Rev 355 [1994]).
On the one hand, virtually any State law may be said to "relate to" an
employee benefit plan, for "universally, relations stop nowhere" (Travelers, supra,
514 US, at 655). On the other hand, application of the preemption clause
to "the furthest stretch of its indeterminancy" would render Congress'
words of limitation a "mere sham" and nullify the presumption against
preemption (id.). Plainly, there is tension between the "deliberately
expansive" language of the preemption clause––which, applied literally,
would operate to shield benefit plans––and ERISA's goal of protecting employees
from abuses at the hands of such entities.
After many years of broadly interpreting ERISA's preemption clause, in 1995
the United States Supreme Court adopted a more pragmatic approach, noting
that its prior efforts to define "relate to" did not always afford "much
help drawing the line" (Travelers, 514 US, at 655–656). Whereas
the Court had previously explained that a law "relates to" an employee
benefit plan if it has a connection with or makes reference to such aplan,
in Travelers the Court acknowledged that even that definition of
the phrase failed to provide adequate guidance (id., at 656). Thus,
the Court concluded, in determining whether a State law relates to an employee
benefit plan, it is often necessary to "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" ( Travelers, 514
US, at 656; see also, DeBuono, supra,
117 SCt, at 1751 [where there is no clear "connection with or reference
to" an ERISA benefit plan, consideration must be given to the objectives
of ERISA to determine whether the presumption against preemption has been
overcome]).
In Travelers itself, the Supreme Court concluded that a State statute
imposing surcharges on hospital bills paid by certain employee benefit plans,
but exempting Blue Cross/Blue Shield plans, was not preempted by ERISA. Arguing
for preemption, the commercial insurers asserted that the surcharges had
an indirect economic effect on choices made by insurance buyers, including
ERISA plans, and as such, the State statute had a "connection with" those
plans. The Supreme Court, however, held that the indirect economic influence
of the surcharges did not interfere with the congressional goal of uniform
standards of plan administration. The statute did not "bind planadministrators
to any particular choice and thus function as a regulation of an ERISA plan
itself," nor did it "preclude uniform administrative practice or
the provision of a uniform interstate benefit package" (514 US, at 659–660).
The effect of the law bore only on "the costs of benefits and the relative
costs of competing insurance to provide them," and the law was therefore
not preempted by ERISA (id., at 660; see also, DeBuono, supra,
117 SCt, at 1751–52; Boggs v Boggs, 117 SCt 1754, 1760; California
Div of Labor Standards Enforcement v Dillingham Constr, N A, Inc., 117
SCt 832, 841–842).
Here, plaintiff alleges that Dr. Yung, as a direct provider of medical services,
violated the duties and standard of care owed to his patient by improperly
assessing the nature and extent of his condition and by failing to take reasonable
steps to provide for his timely treatment by a specialist. Viewed pragmatically,
those claims are not preempted by ERISA. Plaintiff's allegations of negligent
medical care do not "relate to" the administration of an ERISA
plan [3]
merely because they refer to Dr. Yung's delay in submitting the US Healthcare
form seeking a referral to Dr. Green. Plaintiff does not allege that Dr.
Yung is responsible for delay caused by US Healthcare's decision–making process
with respect to coverage or benefits. Her claim against Dr. Yung is that
he failed to take timely action to treat her husband.
Provision of medical treatment under an HMO or other managed care plan often
requires reference to that plan's administrative procedures or requirements.
In this case, for example, under the terms of the US Healthcare HMO plan,
Mr. Nealy's primary care physician was required to complete and submit a
referral form in order to obtain treatment by a specialist for his patient.
That alone, however, does not transform Dr. Yung into an ERISA plan administrator,
or plaintiff's State law action charging violations of a physician's duty
of care into claims that "relate to" ERISA plan administration.
While plaintiff's claims make reference to US Healthcare's administrative
framework, any effect those claims may have on an employee benefit plan is "too
tenuous, remote or peripheral" to warrant a finding that they "relate
to" such aplan (Shaw, supra, 463 US, at 100 n.21).
Moreover, considering the objectives of the ERISA statute, it is clear that
Congress did not intend to preempt claims such as those now before us. Plaintiff's
claims do not bind an employee plan to any particular choice of benefits,
do not dictate the administration of such a plan and do not interfere with
a uniform administrative scheme (Travelers, supra, 514
US, at 659–660; Boggs, supra, 117 SCt, at 1760; Dillingham, supra,
117 SCt, at 841–842; DeBuono, supra, 117 SCt, at 1752).
Indeed, plaintiff does not challenge any administrative determination relating
to an employee benefit plan or the extent of rights and benefits under such
a plan. In short, there is nothing about plaintiff's claims that "conflicts
with the provisions of ERISA or operates to frustrate its [objectives]" (Boggs, supra,
117 SCt, at 1760). To the contrary, plaintiff's claims are consistent with
ERISA's "principal object": the protection of plan participants
and beneficiaries (id., at 1762).
Finally, the Appellate Division would have dismissed plaintiff's complaint
on the independent ground that she failed to demonstrate that any deviation
from professional standards was a proximate cause of Mr. Nealy's demise.
At this juncture in the litigation, however, we cannot agree with that conclusion
as a matter of law.
Accordingly, the Appellate Division order should
bereversed, with costs, and the order of Supreme Court reinstated.
* * * * * * * * * * * * * * * *
*
Order reversed, with costs, and order of Supreme Court, Bronx County, reinstated.
Opinion by Chief Judge Kaye. Judges Bellacosa, Smith, Levine, Ciparick, Wesley
and Rosenblatt concur.
Decided March 25, 1999
Notes
-
Dr. Yung disputes plaintiff's allegation that Mr. Nealy visited his offices on
April 2 and 3, admitting only that he first saw Mr. Nealy on or about April 10.
-
The parties dispute whether the non–participating referral form––instead
of a "Versatile" form––was submitted to US Healthcare at Mr. Nealy's
request or the result of Dr. Yung's error. A "Versatile" referral
would have allowed treatment by a non–participating doctor but required Mr.
Nealy to pay a $250 deductible. Plaintiff maintains that Mr. Nealy never
expressed a desire to avoid payment of the deductible and was motivated only
by a desire to see his cardiologist as soon as possible. Dr. Yung claims
that Mr. Nealy did not want to pay the deductible, which is why the non–participating
referral form was submitted.
-
We leave for another day the issue whether the US Healthcare HMO was even
a "plan" within the meaning of the ERISA preemption provision.
The Secretary of Labor, charged with interpreting and enforcing the provisions
of ERISA, in a brief supporting plaintiff's position, notes that the US Healthcare
HMO at issue here is not an ERISA plan at all, but rather a service provider
to the ERISA plan established by Photocircuits, Inc. ERISA defines an "employee
welfare plan" as "any plan, fund or program * * * established or
maintained by an employer * * * for the purpose of providing for its participants
and beneficiaries, through the purchase of insurance or otherwise * * * medical,surgical,
or hospital care or benefits" (29 USC § 1002[1]).
Commentators have observed that there is some "confusion" as to
whether this "tautological" definition encompasses HMOs and other
managed care organizations (see, Jacobson and Pomfret, supra,
at 1020–1022). The issue was not raised by the parties and, given the result
we reach, would in any event be immaterial.
