The opinion of the court was delivered by: BRIAN BARNETT DUFF
Robert LoManto ("LoManto") was one of Sun's employees, and he participated in Sun's Comprehensive Welfare Plan ("Plan"), which is an employee benefit plan subject to the Employee Retirement Income Security Act ("ERISA"). Sun's Br. at 2 and 3.
In February 1993, LoManto suffered from a terminal illness, and he contacted National Viator Representatives, Inc. ("NVR"), "an organization that brokers the assignment of the life insurance policies of terminally ill individuals." Sun's Br. at 2; see Pl.'s Br. at 3. Also in February, however, LoManto and NVR learned that the Plan disallows participants to assign for value their life insurance policy benefits. Sun's Ex. 5 and 6.
Nonetheless, NVR arranged for LoManto to assign for value his insurance benefits to Goldberg, d/b/a Assured Lifetime Benefits. Amend. Compl. at P 4. In June 1993, LoManto followed through and assigned his $ 418,000 in benefits to Goldberg for an immediate cash payment of $ 259,160. Sun's Br. at 4; see Amend. Compl. at P 4 and Ex. A. In turn, Goldberg paid NVR a brokerage fee of $ 16,720. Sun's Br. at 4; see Amend. Compl. at P 5.
LoManto and Goldberg required Sun's approval to complete the assignment. Accordingly, in late June, they sent to Sun the necessary paperwork, which included a form titled "assignment of group insurance." Amend. Compl. Ex. B. That form begins: "Having The Intention To Make A Gift, . . . ." Id. On June 29, Sun approved the assignment. Amend. Compl. at P 11. Yet by August 6, Prudential discovered that LoManto did not make a gift to Goldberg but, in fact, made an assignment for value. Sun's Br. at 5; Pl.'s Br. at 3. Prudential revoked Sun's approval of the assignment. Amend. Compl. at P 13. On August 6, LoManto died. Sun's Br. at 5. Prudential paid his $ 418,000 in benefits to a trustee. Id.
First, we inquire whether ERISA preempts Goldberg's state law cause of action. In relevant part, ERISA'S preemption clause provides: "Except as provided in subsection (b) [the saving clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . ." 29 U.S.C. § 1144(a) ("§ 1144").
On several occasions, the Supreme Court has interpreted § 1144, particularly its "relate to" language. In District of Columbia v. Greater Washington Bd. of Trade, U.S. , 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992), the Court wrote that it has "repeatedly stated that a law 'relate[s] to' a covered employee benefit plan for purposes of [§ 1144] 'if it has connection with or reference to such a plan.'" Id. at 583, (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 77 L. Ed. 2d 490, 103 S. Ct. 2890 (1983)). "This reading is true to the ordinary meaning of 'relate to' . . . and thus gives effect to the 'deliberately expansive' language chosen by Congress." Id. (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987)). "Under [§ 1144], ERISA pre-empts any state law that refers to or has a connection with covered benefit plans . . . 'even if the law is not specifically designed to affect such plans, or the effect is only indirect.'" Id. (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 112 L. Ed. 2d 474, 111 S. Ct. 478 (1990)).
On the one hand, the preemption clause is broad. In fact, the "'clause is conspicuous for its breadth,'" and courts should "'expansively'" apply it. Maciosek v. Blue Cross & Blue Shield, 930 F.2d 536, 539 (7th Cir. 1991) (quoting FMC Corp. v. Holliday, 498 U.S. 52, 111 S. Ct. 403, 407, 112 L. Ed. 2d 356 (1990); Ingersoll-Rand, 498 U.S. at 138)). The clause expresses a "clear preemptive mandate" that "remains virtually undefeated." Tomczyk v. Blue Cross & Blue Shield, 951 F.2d 771, 776 (7th Cir. 1991), cert. denied, 504 U.S. 940, 119 L. Ed. 2d 201, 112 S. Ct. 2274 (1992); Maciosek, 930 F.2d at 539. It "knocks out any effort to use state law, including state common law, to obtain benefits under [an ERISA] plan." Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128 (7th Cir. 1992); see Smith v. Blue Cross & Blue Shield, 959 F.2d 655, 657 (7th Cir. 1992).
On the other hand, however, the preemption clause's breadth is finite. In Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 96 L. Ed. 2d 1, 107 S. Ct. 2211 (1986), the Supreme Court stated that "ERISA pre-emption analysis 'must be guided by respect for the separate spheres of governmental authority preserved in our federalist system.'" Id. at 19 (quoting Alessi v. Raybestos-Manhattan Inc., 451 U.S. 504, 522, 68 L. Ed. 2d 402, 101 S. Ct. 1895 (1980)). "Some state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law 'relates to' the plan." Shaw, 463 U.S. at 100, n.21; see Rehabilitation Institute v. Group Administrators, Ltd., 844 F. Supp. 1275, 1279 (N.D. Ill. 1994). In Pohl, the Seventh Circuit stated that "ERISA's preemption provision is very broad, but the word 'related' must not be taken literally." 956 F.2d at 128 (hypothesizing that if "Mrs. Pohl [had] gone to the NBC office to inquire about coverage and while there had slipped on a banana peel and been injured and brought a negligence suit, . . . we would not expect NBC to remove the case to federal court and argue preemption") (citation omitted).
In Decatur Memorial Hospital v. Conn. Gen. Life Ins. Co., 990 F.2d 925 (7th Cir. 1993), the Seventh Circuit considered a case similar to ours. There, the Hospital provided medical services to a patient after insurance Company A wrongly informed the Hospital that it still covered the patient and approved the services. Eventually, the Hospital billed insurance Company B, the correct one, for the services, but company B paid only half of the patient's bill, "penalizing the Hospital for neglecting to obtain approval of the services in advance." Id. at 926. The Hospital sued Company A in state court for negligent misrepresentation to collect the other half. Company A petitioned to remove the case to federal court, arguing that ERISA preempted the Hospital's state law claim. The district court granted company A's petition, agreeing that ERISA preempted the Hospital's claim. The Hospital appealed. On appeal, however, the Seventh Circuit did not decide the preemption issue. It did not need to decide "because even if the Hospital's status as a provider of medical care enables it to escape the limitations on claims under ERISA -- that is, even if a claim under sate law escapes the broad preemption clause in ERISA . . . -- the provider still needs a theory of recovery valid under state law," and the provider did not have one. Id. at 927. Although the court did not decide the preemption issue, it discussed the "cogent arguments on both sides.
The Hospital argued that ERISA was inapplicable because the Hospital "is a provider of medical care rather than a beneficiary under the ERISA plan. It is not a party to, and thus not bound by, limitations in the plan." Id. Yet the court responded that ERISA may be applicable for two reasons. First, "the resources to pay the judgment must come ultimately from the ERISA plan." Id. Second, "to the extent that the Hospital demands 'coverage', . . . it steps into the shoes of the beneficiary to whom it provided care. An assignee cannot have greater rights than the assignor possessed." Id. "An assignee of benefits under an ERISA plan becomes a ...