“ERISA has two distinct preemption provisions: Preemption under section 514 (29 U.S.C. Sec. 1144 ), known as conflict or ordinary preemption; and so-called complete preemption under section 502(a)(29 U.S.C. Sec. 1132(a)).” (Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union (2016) 2 Cal.App.5th 793, 799.)
“Conflict preemption is an affirmative defense to a plaintiff's state law cause of action that entirely bars the claim; that is, the particular claim involved cannot be pursued in either state or federal court.” (Id.)
“Complete preemption, in contrast, is a doctrine that recognizes federal jurisdiction over what would otherwise be a state law claim, an issue that typically arises when the defendant has removed the plaintiff's state court lawsuit to federal court.” (Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union (2016) 2 Cal.App.5th 793, 799.)
A state-law-based cause of action (concerning a denial-of-coverage for a claim under an employee health insurance) may be preempted by ERISA under the doctrine of conflict preemption. Conflict preemption is an affirmative defense to a claim, and provides that state remedies which are not permitted by federal law or which exceed federal remedies are not allowed. (ERISA Sec. 514(a); 29 U.S.C. Sec. 1144(a); Metropolitan Life Ins. Co. v. Taylor (1987) 481 U.S. 58, 63 — defensive preemption does not appear on the face of well-pleaded complaint.)
Conflict preemption will defeat a state law claim if it “relates to” an ERISA plan under section 514(a)’s express preemption language. (Darcangelo v. Verizon Communications, Inc. (4th Cir. 2002) 292 F.3d 181, 187.) Courts have found that Congress used the phrase “relate to” in its broadest sense, and thus the U.S. Supreme Court has found that a state law cause of action “relates to” an ERISA plan if it has a “connection with or reference to such a plan.” (Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 97, 98.) It is settled law that Section 1144(a) preempts not only state laws dealing with matters specifically covered by ERISA, but also any state law that purports to regulate, directly or indirectly, the terms and conditions” of ERISA plans. (ERISA Sec. 514(c)(2), 29 U.S.C. Sec. 1144(c)(2).)
In determining whether a state law has a “forbidden connection,” courts are instructed look to ERISA’s objectives as a guide to the scope of the state law, as well as the nature of the effect of the state law on ERISA. (California Div. of Labor Standards Enforcement v. Dillingham Const., N.A., Inc. (1997) 519 U.S. 316, 316-317.) Courts employ a “relationship test” to determine whether a state law claim bears on an ERISA-regulated relationship, such as the relationship between plan and plan member, plan and employer, or employer and employee. (Providence Health Plan v. McDowell (9th Cir. 2004) 385 F.3d 1168, 1172; General American Life Ins. Co. v. Castonguay (9th Cir. 1993) 984 F.2d 1518, 1521 — key is recognizing that the statute “comprehensively regulates” these relationships.)
“The determinative factors courts consider in determining whether the state law and claim at issue ‘relates to’ an employee plan or affects it in ‘too tenuous, remote or peripheral a manner’ are:
(Golden Gate Restaurant Ass'n v. City and County of San Francisco (9th Cir. 2008) 546 F.3d 639, 647.)
“The interpretation of ERISA, including whether ERISA preempts state law, is a question of law which we review de novo.” (Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union (2016) 2 Cal.App.5th 793, 798 citing In re Marriage of Padgett (2009) 172 Cal.App.4th 830, 839.)
“With respect to preemption of state law claims, the Supreme Court has held common law causes of action ’based on alleged improper processing of a claim for benefits under an employee benefit plan, undoubtedly meet the criteria for pre-emption under § 514(a).’” (Morris, supra, 2 Cal.App.5th at -- citing Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 48 [107 S.Ct. 1549, 95 L.Ed.2d 39] (Pilot Life) (action by an employee against his employer’s disability insurance provider); see Marshall, supra, 2 Cal.4th at p. 1049) (action seeking state law remedies for improper denial of benefits preempted]; Hollingshead v. Matsen (1995) 34 Cal.App.4th 525, 542 (state law claims by plan participants and administrator of estate of plan participant against insurance agency and agent, including negligent and intentional infliction of emotional distress, were “fundamentally a claim for recovery of unreimbursed medical expenses” and thus preempted by ERISA.)
“The Supreme Court has also held a claim that an employer wrongfully terminated an employee primarily to avoid contributing to, or paying benefits under, the employee’s pension fund clearly ‘relate[s] to’ an ERISA-covered plan within the meaning of § 514(a), and is therefore pre-empted because the “cause of action makes specific reference to, and indeed is premised on, the existence of a pension plan.” (Morris, supra, 2 Cal.App.5th at -- citing Ingersoll–Rand Co. v. McClendon (1990) 498 U.S. 133, 140.) “The Court explained the purpose of section 514(a) supported its conclusion: ‘Allowing state based actions like the one at issue here would subject plans and plan sponsors to burdens not unlike those that Congress sought to foreclose through § 514(a). 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.’” (Morris, supra, 2 Cal.App.5th at 801 citing Ingersoll–Rand at 142.)
“Memorial Hosp. System v. Northbrook Life Ins. Co. (5th Cir. 1990) 904 F.2d 236, 243-246 [is the] leading case holding hospital’s claim for deceptive and unfair practices arising from representations regarding coverage not preempted and articulating two-factor test.” (Morris, supra, 2 Cal.App.5th at --.)
“In holding the deceptive trade practices claim was not preempted, the Memorial Hospital court, reading ‘the preemption clause of ERISA . . . in context with the Act as a whole, and with Congress’s goal in creating an exclusive enclave for the regulation of benefit plans,’ found binding authority on preemption of state law claims under ERISA had ‘at least two unifying characteristics:
(Morris citing Memorial Hospital, supra, 904 F.2d at pp. 244-245.)
“Applying this two-part test, the court concluded “these two factors are not sufficiently implicated in the present case to warrant a finding that Memorial’s state law claim is preempted.” (Id.)
“The causes of action for breach of oral contract, quantum meruit and promissory estoppel are not preempted where the Plan providers orally agreed to pay for health care services in the specified amounts, authorized the provision of those services and then failed to pay as agreed.” (Morris, supra, 2 Cal.App.5th at 806-807.) “[These] three contract/quasi-contract causes of action do not address an area of exclusive federal concern.” (Id.)
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