Howard v. Equitable Life ( 1998 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-20544
Summary Calendar
CRAIG HOWARD,
Plaintiff-Appellant,
VERSUS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES,
Defendant-Appellee.
Appeal from the United States District Court
For the Southern District of Texas
(H-96-CV-3093)
March 4, 1998
Before JOLLY, BENAVIDES, and PARKER, Circuit Judges.
Per Curiam:*
Appellant Craig Howard appeals the district court’s order
granting The Equitable Life Assurance Society of the United States
(hereinafter “Equitable”) summary judgment and awarding Equitable
$420,949.30 for repayment of benefits. Finding error, we reverse
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
and remand.
BACKGROUND
Howard purchased two disability insurance policies from
Equitable. The first policy had an effective date of August 16,
1990. The second policy which covered business overhead expenses
(BOE) had an effective date of December 19, 1991. Before Equitable
would underwrite the BOE policy, it requested Howard to submit to
a medical exam.
After both polices were in effect, Howard was involved in an
automobile accident on December 30, 1992, which caused serious
injury to his right knee. As a result of this injury, Howard filed
a claim with Equitable requesting benefits under both policies.
Benefits were paid pursuant to the BOE policy for the contractually
specified period of two years. Benefits were paid under the
disability policy until July 31, 1995, at which time Equitable
determined that Howard no longer met the criteria for total
disability under the policy. At that time, Howard’s treating
physician had not given him permission to return to work.
Howard then sought residual disability benefits, to begin on
the date his physician gave him permission to return to work,
December 5, 1995. Howard received written notice that his claim
for residual benefits was denied.
Howard brought suit in state court seeking to recover benefits
for total disability from the period Equitable stopped paying him
benefits until he was released to return to work by his treating
2
physician. Howard further sought to recover benefits for partial
disability from December 5, 1995, to the present. The lawsuit
alleged breach of contract, violations of the Texas Insurance Code
and the Deceptive Trade Practices Act, as well as breach of the
duty to deal fairly and in good faith. Equitable denied these
claims and filed a counterclaim for overpaid benefits asserting
that Howard was never entitled to disability benefits he had
received under false pretenses. Equitable removed the lawsuit to
federal court asserting diversity jurisdiction as well as federal
question jurisdiction under the Employment Retirement Income
Security Act, 29 U.S.C. §§ 1001, et seq. (“ERISA”).
Equitable filed a motion for summary judgment on Howard’s
state law claims. The district court conducted an abbreviated
hearing on the motion. At the beginning of the hearing, the
district court asked Equitable about ERISA preemption. Equitable
responded that it elected not to brief the ERISA issue in its
motion because it did not have sufficient discovery at that time to
do so.2 Equitable instead relied upon its argument that Howard was
not disabled to support its motion for summary judgment on the
state law claims. At the conclusion of the hearing, the district
court made the following finding:
I have looked at the evidence and found that you didn’t
carry a sufficient weight of evidence to get past the
claims adjustor stage. And so he owes the money he was
2
See Transcript of Summary Judgment Hearing, p.3.
3
erroneously paid back because he has complained that they
paid him and that they didn’t keep paying him.3
No further order was entered except a final judgment awarding
Equitable $420,949.30 for repayment of benefits and a brief order
denying Howard’s motion for reconsideration. Howard timely filed
a notice of appeal.
ANALYSIS
We review a district court’s grant of summary judgment de novo
using the same standard of review as the district court. Exxon
Corp. v. St. Paul Fire and Marine Insur. Co., 129 F.3d 781, 784
(5th Cir. 1997). The summary judgment of the district court cannot
stand because it was granted pursuant to its diversity
jurisdiction. Equitable removed this action on the basis of both
diversity jurisdiction and ERISA preemption. Whether Equitable can
prevail on the state law claims as a matter of law is irrelevant if
ERISA preempts Howard’s state law claims. Cf. Hermann Hospital v.
MEBA Medical & Benefits Plan, 845 F.2d 1286 (5th Cir. 1988)
(affirming the district court finding that the plaintiff’s common
law claims were preempted by ERISA, and therefore diversity
jurisdiction could not be maintained). Even if the district court
entertained Howard’s claims under its diversity jurisdiction, the
court would have to apply federal law to determine questions of
preemption. See Hetzel v. Bethlehem Steel Corp., 50 F.3d 360, 363
3
Transcript of Summary Judgment Hearing, p.15.
4
(5th Cir. 1995). The preemption analysis necessarily must be
conducted first.
On appeal, Equitable argues that even if we find a genuine
issue of material fact in dispute regarding Howard’s state law
claims, it can still prevail under ERISA. Although urged by
Equitable to do so, we will not review this case under ERISA when
ERISA preemption was never adjudicated at the district court level.
Carrigan v. Exxon Co., 877 F.2d 1237, 1240 n.7 (5th Cir. 1989).
Indeed, at the summary judgment hearing, Equitable stated that it
had not conducted sufficient discovery to brief the ERISA issue.
Because removal jurisdiction was invoked pursuant to ERISA, the
district court must address the issue of ERISA preemption first.
CONCLUSION
For the foregoing reasons, the judgment of the district court
is REVERSED and the cause is REMANDED for further proceedings.
5