Friday, August 01, 2003

ERISA does not preempt employer's suit against health plan administrator

In Sonoco Products Co. v. Physicians Health Plan, Inc., the Fourth Circuit in an opinion by Judge King joined by Judge Shedd and District Judge Bullock held that the breach of contract claim of an employer against its health plan administrator were not preempted by ERISA and therefore the trial court erred in denying the employer's motion to remand the case to state court.

Judge King's opinion says the district court was looking in the wrong direction on the removal question: "In denying Sonoco's motion to remand, the district court concluded that the breach of contract claims in the Complaint 'relate[ ] to ERISA,' and that they were thus 'preempted' pursuant to § 514. Order at 2. On the basis of this conclusion, the court justified its denial of the motion to remand and its assertion of federal jurisdiction over Sonoco's state law claims. Contrary to this reasoning, however, conflict preemption under § 514 does not provide a basis for federal jurisdiction. Rather, it provides a defense to a state law claim that may be asserted in state court. Instead of focusing on § 514 conflict pre-emption, the court should have assessed whether Sonoco's state law claims were, as PHP asserted, completely preempted by ERISA's § 502(a). In other words, the court should have inquired into whether the breach of contract claims 'fit within the scope of ERISA's § 502(a) civil enforcement provision," and as such, whether they were properly 'converted into federal claims.' Darcangelo, 292 F.3d at 187."

The decision goes on to conclude "that Sonoco lacks standing to pursue its breach of contract claims under § 502(a)," and therefore the remedies statute did not provide a basis for removal and the case should have been remanded.

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