St. Peter's University Hospital v. New Jersey Building Laborers Statewide Welfare Fund, A-1463-11T3, A-1464-11T3, A-1465-11T3; Appellate Division; opinion by Axelrad, P.J.A.D.; decided and approved for publication July 2, 2013. Before Judges Axelrad, Nugent and Haas. On appeal from the Law Division, Middlesex County, L-2666-10, L-2820-10 and L-4712-10. [Sat below: Judge Paley.] DDS No. 22-2-0502 [25 pp.]

St. Peter's University Hospital entered into an agreement with MagNet Inc., a preferred provider organization, under which the hospital agreed to provide medical services to eligible persons insured by group health coverage providers, such as defendants New Jersey Building Laborers Statewide Welfare Fund and its predecessor, defendant Local 594 Building Laborers Welfare Fund, which are employee welfare benefit plans that provide medical benefits to participants and their dependents, at a reduced rate of payment established by MagNet. The discount was conditioned on timely payment under the contract. If not timely paid, the hospital could bill and collect from the insurance provider and eligible person its customary rate for the services. MagNet and the fund entered into a subscriber agreement containing similar terms.

These cases involve three patients insured by the fund for whom the fund paid the hospital's discounted rates well beyond the time period. The hospital filed a complaint against the fund seeking to recover the difference between the discounted rates and the customary rates for the services rendered. The fund filed a third-party complaint against Union Labor Life Insurance Company, a claims administrator and processor that provides services to the fund, for the failure of its claims processor to timely pay the claims.

The Law Division judge granted Union Labor Life's motions for summary judgment and denied the hospital's cross-motions for summary judgment, finding that the state law claims against the fund were expressly pre-empted by § 514(a) of the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 to -1461.

On appeal, the hospital argues that its claims for breach of contract and unjust enrichment merely "involve" an ERISA plan and have too attenuated a connection to the plan to warrant pre-emption under the "related to" standard of § 514(a).

Held: Section 514(a) of ERISA expressly pre-empts a medical provider's claims against an ERISA benefit plan for payment of the provider's customary fees for the services it rendered to patients, rather than the discounted fees the plan would have been legally entitled to pay had it not breached its contractual obligation for timely payment.

Section 514(a) provides that ERISA "shall supersede any and all State laws insofar as they … relate to any employee benefit plan…." The panel says courts have given the phrase "relate to" a broad common-sense meaning. Thus, a law "relates to" an employee benefit plan if it has a connection with or reference to such a plan. However, pre-emption does not occur if the state law has only a tenuous, remote or peripheral connection with covered plans. Thus, a state law claim relates to an employee benefit plan if the existence of an ERISA plan is a critical factor in establishing liability and the court's inquiry would be directed to the plan.

The panel reviews several New Jersey cases that have addressed the issue of ERISA pre-emption and concludes that none are directly on point.

In concluding that the hospital's claim "related to" the ERISA plan and thus were pre-empted, the judge reasoned that the claims would not exist but for the ERISA plan that provided coverage to the patient and the fund is essential to the suit. Agreeing, the panel says the hospital's state law claims are inextricably linked to the existence of the fund's ERISA plan. Because the hospital cannot assert a direct contractual relationship with the fund, its claims are based on the fund's obligations under its agreement with MagNet. However, the inquiry in these three lawsuits does not simply involve an interpretation of that agreement.

Rather, the plan is referenced and incorporated into that agreement, as well as the hospital agreement. Thus, to adjudicate the hospital's claims, the court would have to examine the terms of the ERISA plan to determine whether the fund was liable under either state law cause of action. If the court were to determine that the hospital was entitled to an additional payment, it would mean that a benefit must be paid from the plan, and before a benefit could be paid, an inquiry into the plan would be required to determine such items as whether the benefit was covered and the amount of the co-payment. Thus, the panel concludes that the claims are neither tenuous nor peripheral but clearly "relate to" the ERISA plan under the statute and are expressly pre-empted under § 514(a).

Based on this conclusion, the panel summarily rejects the hospital's arguments that the trial judge failed to consider the parties' contracts, pre-emption will result in the fund's unjust enrichment and pre-emption is contrary to public policy and the goals of Congress. It says these theories are all bottomed in state common law and are pre-empted.

As for the hospital's argument that ERISA does not afford it an adequate remedy, the panel says the hospital failed to present this argument below. Moreover, the argument as to inadequate administrative or judicial remedies is purely speculative. The hospital has failed to articulate any reason why the administrative requirement to pursue an appeal, and its presumed lack of success, would erode the long-established doctrine of ERISA express pre-emption.

For appellant — Camille Kassar (Maloof, Lebowitz, Connahan & Oleske; Anthony J. Chirles Jr. on the brief). For respondents: New Jersey Building Laborers Welfare Fund — Seth Ptasiewicz (Kroll Heineman Carton; Michael G. McNally on the brief); Union Labor Life Insurance Company — Andrew O. Bunn (DLA Piper; Bunn and James V. Noblett on the brief).