ERISA-Sixth Circuit Rules That State Law Claim Of Negligence Is Totally Preempted By ERISA, And Therefore Is Removable To Federal Court

In Milby v. MCMC LLC, No. 16-5483 (6th Cir. 2016), Samantha Milby was granted monthly long-term disability benefits through a group insurance policy provided by her employer, University of Louisville Hospital. Her benefits were subsequently terminated after her disability carrier hired defendant MCMC, a third-party medical record reviewer, and MCMC opined that Milby could return to work. Milby brought this state-law claim against MCMC, alleging negligence since it was practicing medicine without a license. MCMC removed the case to federal court alleging complete preemption under ERISA.  Milby appeals the district court’s denial of her motion to remand the case back to state court, and its grant of MCMC’s motion to dismiss her case. The Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings.

As to the complete preemption issue, the Court said that, in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004),  the Supreme Court articulated a two-prong test to determine whether a state law claim is completely preempted or not.  A state law claim is subject to complete preemption if it satisfies both prongs of the following test: (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.

The Court determined that the state-law claim in this case fits in the category of claims that are completely preempted by ERISA. First, the claim is in essence about the denial of benefits under an ERISA plan. Second, the defendant does not owe an independent duty to the plaintiff because the defendants were not practicing medicine under the specific Kentucky law invoked here as the basis for negligence per se. Accordingly, prong (1) and prong (2) are met.


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