BASILE PAPPAS and THEODORA
Pappas v. Asbel, Supreme Court of Pennsylvania, Eastern District, December
23, 1998 -- Court dismisses HMO's claim for protection from tort cases
under ERISA; technically a health insurance case but ramifications for
IN THE SUPREME COURT OF PENNSYLVANIA
DAVID S. ASBEL, D.O.,
PENNSYLVANIA HOSPITAL INSURANCE
CO. (PHICO) and THE COMMONWEALTH OF PENNSYLVANIA MEDICAL PROFESSIONAL
LIABILITY CATASTROPHE LOSS FUND (CAT FUND),
UNITED STATES HEALTHCARE
SYSTEMS OF PENNSYLVANIA, INC.,
No. 98 Eastern District Appeal Docket 1996
Appeal from the Orders of the
Superior Court Filed March 15, 1996 and May 23, 1996 at No. 2617
Philadelphia 1995, reversing the Order of the Court of Common Pleas of
Delaware County at No. 92-3903
450 Pa. Super. 162, 675 A.2d 711 (1996).
ARGUED: April 30, 1997
DECIDED: December 23, 1998
OPINION OF THE COURT MR. JUSTICE CAPPY
This is an appeal from the order of the Superior Court reversing the
trial court's entry of summary judgment in favor of third-party defendant
United States Healthcare Systems of Pennsylvania, Inc. ("U.S. Healthcare").
The issue on which this court granted allocatur is whether the Employee
Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1001, et seq.,
preempts the state tort law claims brought against U.S. Healthcare. For
reasons which differ from those relied upon by the Superior Court, we find
that ERISA does not preempt these claims. We therefore affirm the order of
the Superior Court.
At 11:00 a.m. on May 21, 1991, Basile Pappas ("Pappas") was admitted to
Haverford Community Hospital ("Haverford") through its emergency room
complaining of paralysis and numbness in his extremities. At the time of his
admission, Pappas was an insured of HMO-PA, a health maintenance
organization operated by U.S. Healthcare.
Dr. Stephen Dickter, the emergency room physician, concluded that Pappas was
suffering from an epidural abscess which was pressing on Pappas' spinal
column. Dr. Dickter consulted with a neurologist and a neurosurgeon; the
physicians concurred that Pappas' condition constituted a neurological
emergency. Given the circumstances, Dr. Dickter felt that it was in Pappas'
best interests to receive treatment at a university hospital.
Dr. Dickter made arrangements to transfer Pappas to Jefferson University
Hospital ("Jefferson") for further treatment. At approximately 12:40 p.m.
when the ambulance arrived, Dr. Dickter was alerted to the fact that U.S.
Healthcare was denying authorization for treatment at Jefferson. Ten minutes
later, Dr. Dickter contacted U.S. Healthcare to obtain authorization for the
transfer to Jefferson. At 1:15 p.m., U.S. Healthcare responded to Dr.
Dickter's inquiry and advised him that authorization for treatment at
Jefferson was still being denied, but that Pappas could be transferred to
either Hahnemann University ("Hahnemann"), Temple University or Medical
College of Pennsylvania ("MCP").
Dr. Dickter immediately contacted Hahnemann. That facility advised Haverford
at approximately 2:20 p.m. that it would not have information on its ability
to receive Pappas for at least another half hour. MCP was then reached and
within minutes it agreed to accept Pappas; Pappas was ultimately transported
there at 3:30 p.m. Pappas now suffers from permanent quadriplegia resulting
from compression of his spine by the abscess.
Pappas and his wife filed suit against Dr. David Asbel, his primary care
physician, and Haverford. They claimed that Dr. Asbel had committed medical
malpractice and that Haverford was negligent in causing an inordinate delay
in transferring him to a facility equipped and immediately available to
handle his neurological emergency.
Haverford then filed a third party complaint against U.S. Healthcare,
joining it as a party defendant for its refusal to authorize the transfer of
Pappas to a hospital selected by the Haverford physicians. Dr. Asbel also
filed a cross-claim against U.S. Healthcare seeking contribution and
U.S. Healthcare filed a motion for summary judgment on all of the third
party claims, alleging that the third party claims are preempted by '
1144(a) of ERISA.1 The trial court granted the motion.2 The Superior Court
on appeal, however, determined that ERISA did not preempt the state law
claims. This court subsequently granted U.S. Healthcare's Petition for
Allowance of Appeal in order to determine whether these third party claims
fall within the scope of those state actions which are preempted by ERISA.
In reviewing whether a trial court's award of summary judgment was
appropriate, we view the record in the light most favorable to the
non-moving party, and all doubts as to the existence of a genuine issue of
material fact must be resolved against the moving party. Pennsylvania State
University v. County of Centre, 532 Pa. 142, 144-145, 615 A.2d 303, 304
(1992). Only where there is no genuine issue as to any material fact and it
is clear that the moving party is entitled to a judgment as a matter of law
will summary judgment be entered. Skipworth v. Lead Industries Assoc., Inc.,
547 Pa. 224, 230, 690 A.2d 169, 171 (1997). As the issue presented in this
case is one of law, our scope of review is plenary. See Phillips v. A-BEST
Products Co., 542 Pa. 124, 130, 665 A.2d 1167, 1170 (1995).
Our analysis begins with a review of the basic principles of preemption law.
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. It is this clause which
gives to the United States Congress power to preempt state law.
In determining whether state law is preempted by a federal law, a reviewing
court is cautioned that such a review "start[s] with the assumption that the
historic police powers of the States [are] not to be superseded by . . .
Federal Act unless it [is] the clear and manifest purpose of Congress."
Cipollone v. Liggett Group, 505 U.S. 504, 516, 112 S.Ct. 2608, 2617, 120
L.Ed.2d 407, 422 (1992) (citations omitted). Thus, Congress' intent is the
"ultimate touchstone" in this analysis. Id.
A state law can be preempted in one of three ways. The first is where the
United States Congress enacts a provision expressly preempting state law.
Pacific Gas and Electric Co. v. State Energy Resources Conservation and
Development Comm'n, 461 U.S. 190, 103 S.Ct. 1713, 75 L.Ed. 2d 752 (1983).
Even where there is no explicit preemption provision, preemption will still
be found where Congress has legislated the field so comprehensively that it
has implicitly communicated the intent to occupy a given field to the
exclusion of state law. Schneidewind v. ANR Pipeline Co., 485 U.S. 293,
299-300, 1008 S.Ct. 1145, 1150, 99 L.Ed.2d 316, 325 (1988). Finally, a state
law will be preempted where a state law actually conflicts with federal law.
Id. See also Cellucci v. General Motors Corp., 1998 WL 1333 (Pa. 1998).
It is this first method of preemption which is at issue in this matter. The
express preemption provision in question states that "the provisions of this
title . . . shall supersede any and all State laws3 insofar as they may now
or hereafter relate to any employee benefit plan . . . ." 29 U.S.C. '
None of the parties in this matter dispute that the United States Supreme
Court has yet to speak directly to the issue of whether negligence claims
against a health maintenance organization "relate to" an ERISA plan. U.S.
Healthcare, however, cites to several United States Supreme Court cases from
the 1980's and early 1990's as support for its contention that these claims
should be preempted by ERISA.
U.S. Healthcare is indeed accurate in its claim that the Supreme Court had
given the ERISA preemption provision an almost breathtaking scope in the
1980's and early 1990's. The Court stated that the preemption provisions
were "deliberately expansive". Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
46, 107 S.Ct. 1549, 1522, 95 L.Ed.2d 39, 49 (1987). The Court at that time
held the opinion that "[t]he breadth of [' 1144(a)'s] pre-emptive reach is
apparent from that section's language." Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 96, 103 S.Ct. 2890, 2899-2900, 77 L.Ed. 2d 490, 501 (1983). It
declared that the words of the preemption provision were to be given their
"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 Ins. Co. v. Massachusetts, 471
U.S. 724, 739, 105 S.Ct. 2380, 2388, 85 L.Ed.2d 728, 740 (1985) (citations
omitted). In the vast majority of cases concerning ERISA preemption
addressed by the Court during this period, it was found that the state laws
being reviewed had some "connection with" or "reference to" the ERISA plan.
Although the Court did concede that the ERISA preemption provision "perhaps
[is] not the model of legislative drafting" that the Court would hope for,
Pilot Life, 481 U.S. at 46, 107 S.Ct. at 1552, 95 L.Ed. 2d at 47, the Court
in the 1980's and early 1990's did not admit to any possibility that the
plain meaning of the words of the preemption provision could not be given
The Court noticeably changed tack in New York State Conference of Blue Cross
& Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131
L.Ed.2d 695 (1995). In Travelers, the unanimous Court determined that a New
York statute which required 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 striving to make sense of the plain
language of the preemption provision, the Court frankly admitted that the
text is "unhelpful". Id. at 656, 115 S.Ct. at 1677, 131 L.Ed.2d at 705. The
Court recognized 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, for '[r]eally, universally, relations stop
nowhere.'" Id. at 655, 115 S.Ct. at 1677, 131 L.Ed.2d at 705 (citations
omitted). The Court reasoned that the language of the preemption provision
is so extensive that if the Court were to look merely to the bare language
of the provision, the provision would for all intents and purposes be
without limit - an intent which the Court would not ascribe to Congress. Id.
The Court concluded that "we have to recognize that our prior attempt to
construe the phrase 'relate to' does not give us much help in drawing the
line here," and that it "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. at 656, 115 S.Ct. at 1677, 131
L.Ed.2d at 705. The Court determined that the "basic thrust of the
preemption provision . . . was to avoid a multiplicity of regulation in
order to permit the nationally uniform administration of employee benefit
plans." Id. at 657, 115 S.Ct. at 1677-1678, 131 L.Ed. at 706. It recognized
fairly significant bounds on the preemption provision when it stated that "[p]re-emption
does not occur . . . if the state law has only a tenuous, remote, or
peripheral connection with covered plans, as in the cases with many laws of
general applicability. " Id. at 661, 115 S.Ct. at 1680, 131 L.Ed.2d at
708-709 (citation omitted). The Court also cautioned that "nothing in the
language of [ERISA] or in the context of its passage indicates that Congress
chose to displace general health care regulation, which historically has
been a matter of local concern." Id. at 661, 115 S.Ct. at 1680, 131 L.Ed.2d
at 709 (citations omitted).
The cases following Travelers have continued this trend. In California
Division of Labor Standards Enforcement v. Dillingham Construction, NA.,
Inc., U.S. , 117 S.Ct. 832, 136 L.Ed.2d 791 (1997), the majority relied upon
Travelers to find that a California prevailing wage law was not preempted by
ERISA. It is in the concurring opinion authored by Mr. Justice Scalia,
however, that we find the most cogent recognition that the law of ERISA
preemption had, in effect, been changed by Travelers. Mr. Justice Scalia
opined that the cases from the 1980's and early 1990's, which were premised
upon the now rejected notion that the plain language of the ERISA preemption
provision could be given effect, were superannuated. He reproached the Court
for not forthrightly acknowledging that the holdings of these older cases
"have in effect been abandoned." Id. at , 117 S.Ct. at 843, 136 L.Ed. at 806
(Scalia, J., concurring).
He believed that since Travelers recognized that literal interpretation of
the provision "relate to" was unworkable, then earlier cases which concluded
that the plain language of the preemption provision justified findings that
the provision had "broad scope" and was "conspicuous for its breadth" were
simply no longer good law. Id.
This new position on ERISA preemption was reiterated in DeBuono v. NYSA-ILA
Medical and Clinical Services Fund, U.S. , 117 S.Ct. 1747, 138 L.Ed. 21
(1997). The question presented in DeBuono was whether a New York gross
receipts tax could be applied to hospitals operated by ERISA plans. The
Court again stated that the language "relates to" was unhelpful and that it
must instead explore Congress' intent in enacting ERISA in order to
determine if a state law would indeed fall within ERISA's preemptive scope.
Id. at , 117 S.Ct. at 1751, 138 L.Ed.2d at 29. The Court determined that the
gross receipts tax was not preempted by ERISA because it was "one of myriad
state laws of general applicability that impose (sic) some burdens on the
administration of ERISA plans but nevertheless do not 'relate to' them
within the meaning of the governing statute . . . . Any state tax, or other
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." Id. at , 117 S.Ct at 1752-1753, 138 L.Ed.2d at 30-31
Thus, although U.S. Healthcare is correct when it states that U.S. Supreme
Court decisions from the 1980's and early 1990's support its position that
the preemption provision is to be read broadly, Travelers and its progeny
have thrown the expansive holdings of those earlier cases into question.5 We
thus believe that it would be improper to adopt U.S. Healthcare's position
that we must reflexively interpret the preemption provision in the broadest
possible manner. Instead, we believe that the proper course of action is to
follow the reasoning contained within the Travelers line of cases, even
though we recognize that the Court's earlier cases have not been expressly
Based upon our interpretation of the Travelers line of cases, we conclude
that negligence claims against a health maintenance organization do not
"relate to" an ERISA plan. As noted by Travelers, Congress did not intend to
preempt state laws which govern the provision of safe medical care.
Travelers, 514 U.S. at 661, 115 S.Ct. at 1680, 131 L.Ed.2d at 709. Claims
that an HMO was negligent when it provided contractually-guaranteed medical
benefits in such a dilatory fashion that the patient was injured
indisputably are intertwined with the provision of safe medical care. We
believe that it would be highly questionable for us to find that these
claims were preempted when the United States Supreme Court has stated that
there was no intent on the part of Congress to preempt state laws concerning
the regulation of the provision of safe medical care.6
Furthermore, we believe that negligence laws have "only a tenuous, remote,
or peripheral connection with [ERISA] covered plans, as in the cases with
many laws of general applicability," Travelers, 514 U.S. at 661, 115 S.Ct.
at 680, 131 L.Ed.2d at 708-709, and therefore are not preempted. We
acknowledge that by allowing negligence claims, there will be a financial
impact on HMOs. Yet, that is not enough to countermand the conclusion that
these claims are not preempted. As noted by the DeBuono Court, an incidental
increase in the costs imposed on an ERISA plan will not mandate a finding of
preemption. DeBuono, U.S. at , 117 S.Ct at 1752-1753, 138 L.Ed.2d at 30-31.
For the foregoing reasons, we conclude that ERISA does not preempt the
claims in question. The order of the Superior Court is affirmed.7
Mr. Justice Nigro files a concurring opinion.
MR. JUSTICE NIGRO DECIDED: December 23, 1998
I concur in the result reached by the Majority. I agree that the
Traveler’s line of cases in the United States Supreme Court supports the
proposition that issues raising ERISA preemption are to be narrowly
construed. I write separately, however, to explain why the present
negligence claim against U.S. Healthcare falls outside that narrow
construction and is therefore not preempted. Here, the defendant physician
and hospital brought U.S. Healthcare into the action claiming that it was
U.S. Healthcare’s refusal to authorize a medically necessary transfer which
caused plaintiff’s ultimate injury. Based upon the facts set forth in the
Majority Opinion, I find that U.S. Healthcare’s actions constituted, in
effect, an individual medical decision or judgment as opposed to a decision
affecting the administration of an employee benefit plan. Here, the parties
are merely attempting to assert their already existing rights under the
generally applicable state law of agency and tort. See Dukes v. U.S.
Healthcare, Inc., 57 F.3d 350, 358 (3d Cir. 1995), cert. denied., 115 S. Ct.
The federal courts have addressed issues similar to the present matter.
Independence HMO, Inc. v. Smith, 733 F. Supp. 983 (E.D. Pa. 1990), presented
an analogous situation as the injured party sued her HMO after receiving
negligent medical treatment from a physician on its approved list. The Smith
court, in finding the plaintiff’s action was not preempted, stated that such
a state tort action did not "'impact upon' an employee benefit plan or
'affect the Congressional scheme contained in [ERISA]'." Id. at 988.
Moreover, as the Third Circuit recently explained, "patients enjoy the right
to be free from medical malpractice regardless of whether or not their
medical care is provided through an ERISA plan." Dukes, 57 F.3d at 358.
Dukes explains that ERISA is principally concerned with the various
mechanisms and institutions involved in the funding and payment of plan
benefits and was intended to provide each participant with a remedy in the
event that promises made by the plan were not kept. Id. at 357. Dukes
distinguishes between claims that the "quantum" of benefits promised were
not provided, which is controlled by ERISA, and the "quality" of the
benefits actually received, which is not controlled by ERISA. Id. Dukes
concluded that "[q]uality control of benefits, such as the health care
benefits provided here, is a field traditionally occupied by state
regulation and we interpret the silence of Congress as reflecting an intent
that it remain such." Id. I would adopt the rationale of the Smith and Dukes
decisions and find that the negligence action against U.S. Healthcare is not
preempted. Therefore, I believe the overall purpose for the enactment of
ERISA, as well as subsequent case law, would indicate that the negligence
claim against U.S. Healthcare does not fall under the aegis of the
preemption clause. It is for these reasons that I find state negligence laws
have "only a tenuous, remote, or peripheral connection with [ERISA] covered
plans . . . ." New York State Conference of Blue Cross & Blue Shield Plans,
et al. v. Travelers Insurance Company et al., 514 U.S. 645, 661, 115 S. Ct.
1617, 1679 (1995)(citing District of Columbia v. Greater Washington Board of
Trade, 506 U.S. 125, 129 n.1, 113 S. Ct. 580, 583, n.1 (1992)).