|||Illinois Appellate Court
|||308 Ill.App.3d 441, 720 N.E.2d 315, 241 Ill.Dec. 860, 1999.IL.0042774
23 Employee Benefits Cas. 2246
|||November 04, 1999
|||WENDY HINTERLONG, AS INDEPENDENT ADM'R OF THE ESTATE OF DOROTHY T. WOLLIN,
S. P. BALDWIN, LOWELL D. CARPENTER, MARK J. BOWMAN, DREYER MEDICAL CLINIC, S. C., MERCY CENTER FOR HEALTH CARE SERVICES, JOONG H. CHOH, PAUL BATTY, AND ELGIN CARDIAC SURGERY, LTD.,
|||Appeal from the Circuit Court of Kane County. No. 94--L--0478 Honorable
Timothy Q. Sheldon Judge, Presiding.
|||The opinion of the court was delivered by: Justice Rapp
|||IN THE COURT OF APPEALS OF THE STATE OF ILLINOIS
|||4 November 1999
|||(Dreyer Health Maintenance Organization, a/k/a Dreyer Health Plan, Defendant-Appellee).
|||Plaintiff, Wendy Hinterlong, as independent administrator of the estate
of her deceased mother, Dorothy Wollin, appeals from summary judgment entered
in favor of defendant Dreyer Health Maintenance Organization (Dreyer HMO),
a/k/a Dreyer Health Plan. Plaintiff contends the trial court improperly
concluded that her state law claim for medical malpractice based upon a
theory of vicarious liability was preempted by section 514(a) of the Employee
Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. §1144(a)
(1994)). We vacate and remand.
|||In December 1993, while undergoing surgery to correct coronary artery
disease, Dorothy suffered a massive heart attack. She died shortly thereafter.
At the time of her death, Dorothy was a member of Dreyer HMO, later known
as Dreyer Health Plan.
|||In June 1994, plaintiff, as independent administrator of Dorothy's estate,
brought an 18-count complaint in the circuit court of Kane County against
numerous parties for negligent medical treatment that resulted in Dorothy's
death. Counts XVII and XVIII were directed against defendant for wrongful
death and survival actions and were premised upon a theory of vicarious
|||Defendant is structured as an "Independent Practice Association" or "IPA
model" health maintenance organization (HMO). An IPA, as opposed to a "staff
model" HMO, is an entity that arranges and pays for health care for its
members by contracting with independent medical groups, clinics, or physicians,
instead of providing health care through its own salaried employees. Defendant
contracted with the Dreyer Clinic (clinic) to provide medical services to
defendant's members. The clinic was a corporate entity that wholly owned
|||The contract between the clinic and defendant provided for a system of
managed care known as global capitation. Under this system, defendant paid
the clinic premiums obtained from an employer, less a 10% administrative
fee and a percentage for pharmacy expenses. In exchange, the clinic assumed
the financial risks of providing complete medical care for defendant's members.
This included the expense of treatment by specialists employed by the clinic,
specialists not employed by the clinic, and hospitalization when necessary.
If the total cost of care provided to all defendant's members was less than
the total amount of premiums received, the clinic kept the profit. If the
opposite was true, the clinic had to absorb the excess. When the clinic
made a profit from its relationship with defendant, the physicians employed
by the clinic received bonuses.
|||In 1989, defendant entered into a contract with Dorothy's employer, AT&T,
to arrange for health care services for eligible employees who enrolled
with defendant. In exchange, AT&T paid a portion of the premiums for employees
who chose defendant as its health care provider. Defendant was only one
option in AT&T's comprehensive employee welfare benefit plan. Defendant
entered into similar contracts with numerous other employers. Pursuant to
AT&T's employee welfare benefit plan, Dorothy enrolled with defendant.
|||Defendant required each member to chose a primary care physician (PCP)
who was responsible for providing primary medical care to the member and,
if necessary, making written referrals to specialists and recommending hospitalization.
If a member's PCP recommended hospitalization, final approval would have
to be given by the clinic's utilization review department. Defendant did
not conduct independent utilization review of a PCP's recommendation. Instead,
under the global capitation agreement, defendant created financial incentives
for the clinic, vis à vis the physicians, to keep hospitalization
and nonclinic specialist referrals to a minimum.
|||From April 1991 through December 1993, Dorothy sought treatment from the
clinic physicians for a heart condition. In her complaint, plaintiff contended
that the care Dorothy received was negligent. Specifically, plaintiff cited
a failure to timely diagnose and aggressively treat Dorothy's life-threatening
condition, to timely refer her to a specialist, and to timely hospitalize
her. Plaintiff further alleged Dorothy's treating physicians were agents
of defendant and stated 12 reasons why defendant was vicariously liable
for Dorothy's death. Soon after plaintiff filed her complaint, defendant
petitioned for removal to federal court and subsequently moved for dismissal
or summary judgment based upon the preemption provision of section 514(a)
of ERISA (29 U. S. C. §1144(a) (1994)). After a hearing on the merits
of defendant's preemption claim, the United States District Court for the
Northern District of Illinois denied the petition for removal and remanded
the case to the trial court. In its summary order denying removal, the district
court relied on its earlier ruling in Smith v. HMO Great Lakes, 852 F. Supp.
669 (N.D. Ill. 1994), in holding that plaintiff's claims for medical malpractice
and wrongful death were not preempted by ERISA. Defendant did not appeal
this ruling to the federal appeals court.
|||Instead, upon remand, defendant filed an answer to plaintiff's complaint
in which it denied each and every allegation of negligence and further denied
that Dorothy's treating physicians were its agents, real or apparent. Defendant
also raised three affirmative defenses, including ERISA preemption, which
it had already raised and fully litigated in the district court. Following
a lengthy discovery period, defendant moved for summary judgment based upon
both ERISA preemption and the substantive merits of the complaint. In a
detailed written order the trial court, in spite of the earlier ruling by
the district court, granted summary judgment based upon ERISA preemption
but stated that summary judgment would be inappropriate based upon the merits
of the complaint because it determined that a genuine issue of material
fact existed as to the agency relationship between defendant and the treating
physicians. The trial court made findings pursuant to Supreme Court Rule
304(a) (155 Ill. 2d R. 304(a)), and plaintiff timely appealed.
|||This case presents a first for an appellate court in this state. We must
decide whether, under the facts of this case, the broad statutory shield
known as ERISA (29 U. S. C. §1001 et seq. (1994)) preempts a state
law medical malpractice action based upon a theory of vicarious liability
brought against an IPA-model HMO that contracted to arrange for health care
services as part of a comprehensive employee benefits package established,
maintained, and administered by a corporate employer. For the reasons that
follow we hold that it does not.
|||A. Standard of Review
|||Because this case comes to us from an order granting summary judgment,
we conduct a de novo review. Espinoza v. Elgin, Joliet & Eastern Ry. Co.,
165 Ill. 2d 107, 113 (1995). Summary judgment is a drastic means of disposing
of litigation and therefore should be reversed on appeal if the record reveals
the presence of a material question of fact or, if none, that the moving
party was not entitled to judgment as a matter of law (see 735 ILCS 5/2--1005(c)
(West 1998); Zoeller v. Augustine, 271 Ill. App. 3d 370, 374 (1995)). Plaintiff
contends that summary judgment was inappropriate in this case because, as
a matter of law, her medical malpractice action based upon a theory of vicarious
liability was not preempted by section 514(a) of ERISA. We agree.
|||B. Scope of Review
|||The supremacy clause of the United States Constitution provides that the
laws of the federal government "shall be the supreme Law of the Land; ***
any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."
U.S. Const., art. VI, cl. 2. Through this clause Congress is vested with
the power to preempt state law. Determining whether state law is preempted
by federal law, however, must begin " 'with the assumption that the historic
police powers of the States [are] not to be superceded by ... Federal Act
unless that [is] the clear and manifest purpose of Congress.' [Citation.]"
Cipollone v. Liggett Group, 505 U.S. 504, 516, 120 L. Ed. 2d 407, 422, 112
S. Ct. 2608, 2617 (1992). Thus, the basic question we address is whether
it was the intent of Congress in enacting a statute, such as ERISA, to preempt
a particular state law. Scholtens v. Schneider, 173 Ill. 2d 375, 379 (1996).
Congressional intent to preempt state law may be gleaned from the express
language of the statute if the language is clear and unambiguous; or, if
not, intent may also be implied from the statute's structure and purpose.
See Scholtens, 173 Ill. 2d at 379, citing Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 95, 77 L. Ed. 2d 490, 500, 103 S. Ct. 2890, 2899 (1983).
|||In analyzing claims of federal preemption, we operate under the strong
presumption that Congress did not intend to supercede state law. New York
State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance
Co., 514 U.S. 645, 654, 131 L. Ed. 2d 695, 704, 115 S. Ct. 1671, 1676 (1995).
Plaintiff's claims sound in medical malpractice, which undisputably falls
within the traditional ambit of state law. Therefore, defendant bears the
"considerable burden" of overcoming the presumption that, in passing ERISA,
Congress did not intend to displace medical malpractice claims based upon
a theory of vicarious liability brought against an IPA-model HMO. See De
Buono v. NYSA-ILA Medical & Clinical Services Fund, 520 U.S. 806, 814, 138
L. Ed. 2d 21, 29, 117 S. Ct. 1747, 1751-52 (1997). In our view, defendant
has not met its burden.
|||As with any problem involving statutory interpretation, in ascertaining
congressional intent, we begin with an analysis of the language of the statute.
Scholtens, 173 Ill. 2d at 380. Section 514(a) of ERISA provides that ERISA
preempts "any and all State laws insofar as they may now or hereafter relate
to any employee benefit plan" as described in section 503 of ERISA (29 U.S.C.
1003 (1994)). (Emphasis added.) 29 U.S.C. §1144(a) (1994). Thus, resolution
of the dispute before us requires a two-prong analysis involving the following
questions: (1) whether defendant can be characterized fairly as an employee
welfare benefit plan (EWBP) within the contours of ERISA, and, if so, (2)
whether plaintiff's medical malpractice claim premised on a theory of vicarious
liability is an action under state law that "relates to" defendant in its
status as an EWBP. If the answer to either question is no, then the claim
is not preempted. Because both inquires are interdependent, however, if
it is easier to dispose of the controversy under the second prong (i.e.,
assuming for the sake of argument that an EWBP exists and finding that the
claim does not relate to the plan), we will do so.
|||C. Is Defendant an EWBP?
|||Plaintiff contends that defendant itself is not an EWBP within the meaning
of ERISA and therefore defendant cannot invoke the shield of ERISA preemption
as a defense. In response, defendant asserts (without providing any authority
except the definition of an EWBP found in ERISA itself) that "the law is
completely settled" that "ERISA is triggered *** not because [it] was an
ERISA plan, but because it administered an ERISA plan." (Emphasis in original.)
By this, defendant admits that it is not an EWBP in and of itself; nevertheless,
it claims that its status as an "administrator" of part of AT&T's EWBP confers
ERISA's full panoply of protection upon it.
|||We decline to address whether defendant is in fact an EWBP because it
is easier for us to dispose of this matter under the second prong of the
two-prong analysis set out above. In other words, we assume for the sake
of argument that defendant can be characterized fairly as an EWBP within
the contours of ERISA and proceed to determine whether plaintiff's claims
against defendant "relate to" it in its status as an EWBP. By making the
assumption that defendant is an EWBP subject to ERISA, we do not intend
to hold that it is or is not. However, we do recognize, contrary to defendant's
characterization of the law as being "completely settled," that "there is
some 'confusion' as to whether [ERISA's] 'tautological' definition [of an
EWBP] encompasses HMOs and other managed care organizations" which arrange,
pursuant to contract, to provide medical services for a company's EWBP participants.
Nealy v. US Healthcare HMO, 93 N.Y.2d 209, 220 n.3, 711 N.E.2d 621, 625
n.3 (1999) (commenting that the Secretary of Labor, charged with interpreting
and enforcing the provisions of ERISA, has noted that an HMO is not an ERISA
plan at all, but rather a service provider to an ERISA plan established
by an employer).
|||D. Do Plaintiff's Claims "Relate to" an EWBP?
|||Operating under the assumption that defendant is an EWBP, we turn to whether
plaintiff's medical malpractice claim "relates to" defendant in its status
as an EWBP. We hold that it does not.
|||As mentioned earlier, ERISA preempts state laws "insofar as they *** relate
to any employee benefit plan." 29 U.S.C. §1144(a) (1994). "State law"
as used in this clause 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) (1994). This encompasses the common law as well as statutory
|||Due to the nature of this case, the evolution of the United States Supreme
Court's ERISA preemption analysis warrants Discussion. During the 1980s
and early 1990s the Supreme Court gave ERISA preemption a breathtakingly
broad scope. In the 1980s the Court found that section 514(a) was "deliberately
expansive." Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 46, 95 L.
Ed. 2d 39, 46, 107 S. Ct. 1549, 1552 (1987). Relying strictly on section
514(a)'s language, the Court at that time was of the opinion that the breadth
of ERISA's preemptive reach was apparent on its face. Shaw, 463 U.S. at
96, 77 L. Ed. 2d at 501, 103 S. Ct. at 2899-90. The Court professed that
the language of section 514(a) was to be given its "broad common-sense meaning,
such that a state law 'relate[s] to' a benefit plan 'in the normal sense
of the phrase, if it has a connection with or reference to such a plan.'
" Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 739, 85
L. Ed. 2d 728, 740, 105 S. Ct. 2380, 2389 (1985), quoting Shaw, 463 U.S.
at 97, 77 L. Ed. 2d at 501, 103 S. Ct. at 2900. Employing this rigid analysis,
the Court found in the vast majority of cases that the state laws being
reviewed had some "connection with" or "reference to" the ERISA plan in
question. Nevertheless, the Court did concede that section 514(a) was perhaps
"not a model of legislative drafting." Metropolitan Life, 471 U.S. at 739,
85 L. Ed 2d at 740, 105 S. Ct. at 2389.
|||In 1995, the Court retreated from its rigid textual analysis of section
514(a). See Travelers, 514 U.S. 645, 131 L. Ed. 2d 695, 115 S. Ct. 1671.
In Travelers, a unanimous Court determined that a New York statute requiring
hospitals to collect surcharges from patients covered by all commercial
insurers other than Blue Cross/Blue Shield was not preempted by ERISA. After
years of trying to make sense of the "plain language" of section 514(a),
the Court broke ranks and admitted the text is simply "unhelpful." Travelers,
514 U.S. at 656, 131 L. Ed. 2d at 705, 115 S. Ct. at 1677. While reiterating
that the language is expansive, the Court found that it is not limitless.
Travelers, 514 U.S. at 655, 131 L. Ed. 2d at 705, 115 S. Ct. at 1677. The
Court questioned the wisdom of its earlier, purely textual interpretation
of the language, cautioning that "[i]f 'relate to' were taken to extend
to the furthest stretch of indeterminacy, then for all practical purposes
preemption would never run its course, for 'really, universally, relations
stop nowhere.' " Travelers, 514 U.S. at 655, 131 L. Ed. 2d at 705, 115 S.
Ct. at 1677, quoting H. James, Roderick Hudson xli (New York ed., World's
Classics (1980)). Thus, recognizing that "infinite relations cannot be the
measure of preemption" (Travelers, 514 U.S. at 656, 131 L. Ed. 2d at 705,
115 S. Ct. at 1677), the Court concluded:
|||"We simply must go beyond the unhelpful text [of section 514(a)] and the
frustrating difficulty of defining its key term ["relates to"], 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 U.
S. at 656, 131 L. Ed. 2d at 705, 115 S. Ct. at 1677.
|||Later, in California Division of Labor Standards Enforcement v. Dillingham
Construction, N.A., Inc., 519 U.S. 316, 136 L. Ed. 2d 791, 117 S. Ct. 832
(1997), a majority of the Court relied upon Travelers to find that a California
prevailing wage law was not preempted by ERISA. In a Concurring opinion,
Justice Scalia opined that the Court's ERISA preemption analysis had been
significantly changed by Travelers. He chastised the majority for not forthrightly
acknowledging that the holdings of the pre-Travelers cases "have in effect
been abandoned." Dillingham, 519 U.S. at ___, 136 L. Ed. 2d at 806, 117
S. Ct. at 843 (Scalia, J., Concurring).
|||In De Buono, 520 U.S. at ___, 138 L. Ed. 2d at 29, 117 S. Ct. at 1751,
the Court followed Travelers again when it explored Congress's intent in
enacting ERISA in order to determine if a state law would indeed fall within
ERISA's preemptive scope. The Court held that a New York gross receipt tax
was not preempted because it was "one of 'myriad state laws' of general
applicability that impose some burdens on the administration of ERISA plans
but nevertheless do not 'relate to' them within the meaning of the governing
statute." De Buono, 520 U.S. at ___, 138 L. Ed. 2d at 30, 117 S. Ct. at
1752. It then concluded, "Any state [law] *** that increases the cost of
providing benefits to covered employees will have some effect on the administration
of ERISA plans, but that simply cannot mean that every state law with such
an effect is pre- empted by the federal statute." De Buono, 520 U.S. at
___, 138 L. Ed. 2d at 31, 117 S. Ct. at 1753.
|||In the face of Travelers and its progeny, defendant invites us to engage
in the type of purely textual interpretation of the "relates to" language
called into question by the Supreme Court. Defendant argues that "all state
causes of action and laws not specifically provided for in the enforcement
provisions [of ERISA] become subject to [its] preemption provision." It
then continues, citing Travelers and Scholtens, that "a state law can 'relate
to' an employee benefit plan even if the effect is indirect or incidental
or if the law was not intended to specifically affect the plan." Defendant's
reliance upon Travelers and Scholtens is misplaced. A close reading of the
portions of Travelers and Scholtens cited by defendant reveals that in both
instances the opinions were discussing the state of Supreme Court ERISA
preemption analysis as it existed in the 1980s and early 1990s, prior to
Travelers. As a result, we decline defendant's invitation to interpret section
514(a) in the manner it proposes. Instead, in our quest to resolve this
controversy, we will consider not only the language of section 514(a) but
also the structure and purpose of ERISA as a whole in deciding whether the
claim at issue is preempted. See Scholtens, 173 Ill. 2d at 383.
|||ERISA was enacted to protect the interests of participants in employee
benefit plans. 29 U.S.C. §1001(b) (1994). It subjects to federal regulation
fringe benefit plans provided by employers. Shaw, 463 U.S. at 90, 77 L.
Ed. 2d at 497, 103 S. Ct. at 2896. In enacting ERISA, Congress found that
"the soundness and stability of plans with respect to adequate funds to
pay promised benefits may be endangered" (29 U.S.C. §1001(a) (1994))
due to a lack of uniformity in the regulations of such plans. ERISA applies
to both pension plans and welfare plans--programs that provide benefits
for contingencies such as illness, accident, disability, death, or unemployment.
29 U.S.C. §1002(1), (2)(A) (1994). The statute sets uniform standards
for welfare plans, such as fiduciary responsibilities and reporting and
disclosure requirements. 29 U.S.C. §§1021 through 1031 (1994).
|||Congress's intent in engrafting section 514(a) on ERISA was to establish
regulation of the administration of employee benefit plans as an exclusively
federal concern. Travelers, 514 U.S. at 656-57, 131 L. Ed. 2d at 706, 115
S. Ct. at 1677-78. In Travelers, the Court noted that the purpose of section
514(a) is to ensure that benefit plans are subjected to a uniform body of
law that minimizes the administrative and financial burden of complying
with conflicting directives among states or between states and the federal
government. Travelers, 514 U.S. at 656-57, 131 L. Ed. 2d at 706, 115 S.
Ct. at 1677-78. Thus, " '[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.' " Travelers, 514
U.S. at 661, 131 L. Ed. 2d at 708-09, 115 S. Ct. at 1680, quoting District
of Columbia v. Greater Washington Board of Trade, 506 U.S. 125, 130 n.1,
121 L. Ed. 2d 513, 520 n.1, 113 S. Ct. 580, 583 n.1 (1992). In summary,
the Court determined that nothing in the language of section 514(a) or in
ERISA's structure or purpose indicates Congress intended to displace matters
of historically local concern, including state laws that govern the provision
of safe medical care. Travelers, 514 U.S. at 661, 131 L. Ed. 2d at 709,
115 S. Ct. at 1680. Indeed, ERISA did not create "a fully insulated legal
world that renders all state law preempted whenever there is a plan in the
picture." Scholtens, 173 Ill. 2d at 392.
|||We recognize that the Supreme Court's ERISA preemption analysis has been
limited primarily to "regulatory"-type statutory provisions. The Court has
not yet spoken directly on the issue of whether medical negligence claims
against an HMO "relate to" an ERISA plan. However, lower federal courts
and a few state courts have addressed the issue, with the majority of post-Travelers
cases coming out against preemption. See Nealy, 93 N.Y.2d 209, 711 N.E.2d
621 (citing Travelers and holding that a state law medical malpractice claim
based upon vicarious liability brought against an HMO did not "relate to"
employee benefits plan and thus was not preempted); Pappas v. Asbel, 724
A. 2d 889, 893-94 (Pa. 1998) (same); In re Estate of Frappier, 678 So. 2d
884, 887 (Fla. App. 1996) (same); Tufino v. New York Hotel and Motel Trades
Council, 646 N.Y.S. 2d 799, 802 (1996)(holding that a medical malpractice
claim based upon vicarious liability was not preempted).
|||In Pacificare of Oklahoma, Inc. v. Burrage, 59 F.3d 151 (10th Cir. 1995),
the court found that a medical malpractice claim based upon vicarious liability
does not involve the administration of the plan's benefits or their level
or quality but rather the doctor's negligent care and the agency relationship
between the doctor and the HMO. In reaching the Conclusion that the claim
was not preempted, the court noted that if a state law does not affect the
structure, administration, or type of benefits provided by an ERISA plan,
the law should not be preempted simply because it has some economic effect
on the plan. Pacificare, 59 F.3d at 154. The court identified four categories
of state laws that should be preempted. These are (1) laws that regulate
the type of benefits or terms of ERISA plans, (2) laws that create reporting,
disclosure, funding, or vesting requirements for ERISA plans, (3) laws that
provide for the calculation of the amount of benefits to be paid under ERISA
plans, and (4) laws that provide remedies for misconduct growing out of
the administration of an ERISA plan. Pacificare, 59 F.3d at 154. According
to what it termed the majority view, the court stated:
|||"[The issue of a doctor's negligence] ' "require[s] ... evidence of what
transpired between the patient and physician and an assessment of whether
in providing admittedly covered treatment or giving professional advice
the physician possessed and utilized the knowledge, skill and care usually
had and exercised by physicians in his community or medical specialty."
' [Citation.] *** [A] malpractice action 'does not involve a claim for plan
benefits, a claim to enforce rights under the benefit plan or a claim challenging
administration of the benefit plan.' [Citation.] The action 'simply involves
a claim that the deceased received allegedly negligent treatment from a
doctor who was "held out" by the health maintenance organization as its
agent.' [Citation.]" Pacificare, 59 F.3d at 154.
|||Other federal courts have shared essentially the same view. For example,
in Dukes v. U.S. Healthcare, Inc. 57 F.3d 350, 356 (3d Cir. 1995), the court
found that medical malpractice claims against HMOs based upon vicarious
liability for the negligence of affiliated medical personnel were not subject
to removal. In reaching its Conclusion, the court distinguished between
a lawsuit claiming the withholding of benefits and a claim that attacked
the quality of care provided. Dukes, 57 F.3d at 357. It then stated, "[T]here
is no allegation here that the HMOs denied anyone any benefits that they
[sic] were due under the plan. Instead the plaintiffs here are attempting
to hold the HMOs liable for their role as the arrangers of their decedents'
medical treatment." Dukes, 57 F.3d at 361; see also Paterno v. Albuerne,
855 F. Supp. 1263, 1264 (S.D. Fla. 1994)(holding that ERISA does not preempt
a vicarious liability medical malpractice claim against an HMO because such
a case does not involve a claim for wrongful denial of benefits).
|||Here, defendant asserts that our decision is controlled by Jass v. Prudential
Health Care Plan, Inc., 88 F.3d 1482 (7th Cir. 1996). We disagree. State
courts are not bound to follow decisions of the federal district courts
or circuit courts of appeal. Federal courts exercise no appellate jurisdiction
over state courts; therefore, decisions of the lower federal courts are
not binding on state courts (People v. Kozlowski, 278 Ill. App. 3d 40, 45-46
(1996)), except insofar as the decision may become the law of the case (People
v. Eyler, 133 Ill. 2d 173, 225 (1989)) or the doctrines of res judicata
(claim preclusion) or collateral estoppel (issue preclusion) may apply.
|||We note, as an aside, that plaintiff raised the issue of law of the case
below. The trial court rejected plaintiff's contention that defendant was
estopped from raising ERISA preemption because it had previously been fully
litigated in federal court. On appeal to this court, plaintiff does not
again raise estoppel through law of the case or the other preclusive doctrines.
We will therefore not address or comment further on the issue.
|||Having clarified the precedential value of Jass, we are unmoved by defendant's
assertion that we should follow Jass's Conclusion that a medical malpractice
claim based on a theory of vicarious liability brought against an IPA-model
HMO is in reality a denial of plan benefits and thus subject to ERISA preemption
(Jass, 88 F.3d at 1494). Jass suffers several infirmities. Most notably,
Jass completely ignores Travelers and engages in the purely textual analysis
of section 514(a) called into question by Travelers. Jass is also factually
distinguishable from the case before us.
|||In Jass, the plaintiff sued her doctor and HMO, alleging negligence after
a utilization review nurse determined a course of physical therapy following
knee surgery was unnecessary. The plaintiff claimed that as a result of
the HMO's denial of physical therapy she suffered permanent injury to her
knee. Jass, 88 F.3d at 1485. The court held that the plaintiff's claims
were preempted not because they asserted the physician's negligent treatment
but because the physician's failure to treat stemmed from a denial of benefits--physical
therapy--by a utilization review administrator. Jass, 88 F.3d at 1493.
|||In our case, there was no utilization review conducted. In fact, defendant
was not in the business of conducting utilization review. Defendant, instead,
attempted to control medical costs through financial incentives. Thus, if
a physician wished to maximize income, it was in his or her best interest
to keep referrals, hospitalizations, and expensive procedures to a minimum.
There simply was no allegation of denial of benefits in this case. Rather,
plaintiff alleges a treatment decision was made based upon financial considerations,
not medical considerations.
|||We also believe Jass's attempt to distinguish itself from Pacificare is
seriously flawed. In Jass, the court stated that Pacificare was distinguishable
because "the doctor alleged to have been negligent was 'one of [the HMO's]
physicians.' " (Brackets in original.) Jass, 88 F.3d at 1494, citing but
not quoting Pacificare, 59 F.3d at 154. A close reading of Pacificare does
not bear this out. In Pacificare, the plaintiff alleged vicarious liability
for the medical malpractice of "a Pacificare primary care physician and
alleged agent of Pacificare." Pacificare, 59 F.3d at 152. Nowhere in the
opinion does it state that the physician was directly employed by the HMO
as Jass implies. In Jass, the plaintiff's treating physician was "a physician
named in [the HMO's] list of participating physicians" (Jass, 88 F.3d at
1485), i.e., the physician was one of the HMO's physicians. In other words,
the relationship between the doctor and the HMO in Jass may be no different
from the relationship between the doctor and the HMO in Pacificare. Pacificare
is simply not explicit enough to make the distinction attempted in Jass.
|||Moreover, we believe a review of the district court's opinion on which
Pacificare was based conclusively reveals that the HMO in Pacificare was
an IPA-model HMO rather than a staff-model HMO as suggested in Jass. In
Schachter v. Pacificare of Oklahoma, Inc., 923 F. Supp. 1448, 1450 (N.D.
Okla. 1995), the court, in setting forth its statement of facts, stated:
|||"The defendant, PacifiCare of Oklahoma, Inc. ***, is a health maintenance
organization, which furnished employee health care for the employer of Schachter's
deceased mother ***. The defendant, Dr. Raymond W. Goen, *** was *** the
physician who provided medical care to [the deceased]. The defendant, The
Wheeling Medical Group ***, was *** the employer of Dr. Goen." Schachter,
923 F. Supp. at 1450.
|||We conclude the position taken in Pacificare and the majority of federal
district courts is better than that taken in Jass and the trial court in
|||We find Lancaster v. Kaiser Foundation Health Plan of Mid-Atlantic States,
Inc., 958 F. Supp. 1137, 1149-50 (E.D. Va. 1997), instructive. There, the
court found that a medical malpractice claim based upon vicarious liability
brought against an IPA-model HMO was not preempted by ERISA. In so finding,
the court noted:
|||"[A]n indirect negligence claim for vicarious liability inescapably 'relates
to' an employee benefit plan in that it requires at least minor reference
to the plan in order to establish an agency relationship. But such reference
does not sufficiently implicate the underlying objectives of the ERISA statute.
The indirect negligence claims here do not purport to mandate or regulate
an employee benefit plan. Instead, the claims are directed at [the physicians']
alleged negligence and the agency relationship between [the parties]." Lancaster,
958 F. Supp. at 1150. See also Crum v. Health Alliance-Midwest, Inc., 47
F. Supp. 2d 1013 (C.D. Ill. 1999); Kearney v. U.S. Healthcare, Inc., 859
F. Supp. 182, 186 (E.D. Pa. 1994).
|||Here, plaintiff's medical malpractice claim against defendant asserts
at its base that the treating physicians as agents of defendant made poor
medical decisions, not based on sound medical practice, but rather based
on financial considerations and economic constraints. In entering summary
judgment in this case, the trial court reasoned that plaintiff's complaint
that Dorothy's treating physicians were negligent due to defendant's rules
or financial incentives impliedly contained "elements of a denial of benefits"
or at least was "intertwined" with benefit determinations. The trial court
concluded that resolving plaintiff's claims would therefore require reference
to the plan documents that make her claims related to or connected with
the plan. We disagree. Poor medical decisions are not sufficiently analogous
to the denial of plan benefits or sufficiently intertwined with benefit
determinations to implicate ERISA preemption. In a case alleging medical
malpractice of an HMO through vicarious liability, any reference to the
plan documents would be necessary only for proving matters of agency, not
for wrongful plan administration or for withholding of promised plan benefits.
See Jackson v. Roseman, 878 F. Supp. 820, 826 (D. Md. 1995).
|||Medical malpractice actions are laws of general applicability. They are
not intended to regulate the affairs of ERISA plans. Nor do they single
out such plans for special treatment nor predicate rights or obligations
on the existence of an ERISA plan. Medical malpractice actions have neither
the effect of dictating or restricting the manner in which ERISA plans structure
or conduct their affairs nor the effect of impairing their ability to operate
simultaneously in more than one state.
|||ERISA was enacted for the purpose of protecting individuals, not to provide
loopholes through which an ERISA plan can avoid liability for its actions
or the actions of its agents. Nor was ERISA enacted to provide a shield
behind which to hide. See Lancaster, 958 F. Supp. 1137, 1149-50. Without
a clear indication from Congress, we will not impute upon it the intention
to void existing state laws of general applicability, such as medical malpractice
actions, which protect the very beneficiaries of the ERISA statute. "Considerations
of cost containment of the type which drive [sic] the decision making process
in HMO's [sic] did not exist for employee welfare plans when ERISA was enacted."
Pappas v. Asbel, 450 Pa. Super at 171, 675 A.2d at 716 (1996). Redressing
medical negligence, whether directly or indirectly, in no way runs afoul
of ERISA's policies. We therefore vacate the trial court's summary judgment
order in which it found that ERISA preempted plaintiff's medical malpractice
action against defendant and remand the case for further proceedings. [Nonpublishable
material removed under Supreme Court Rule 23.]
|||For the foregoing reasons the order of the circuit court of Kane County
granting summary judgment in favor of defendant is vacated, and the cause
is remanded for further proceedings.
|||Vacated and remanded.
|||INGLIS and McLAREN, JJ., concur.
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