Two Texas patients sued their HMOs under the Texas Health Care Liability Act (THCLA), which imposes a duty of ordinary care on managed care entities for treatment and coverage decisions and authorizes damages for resulting injuries. Respondent Davila's physician prescribed a particular medication, but Aetna required him to follow its step-therapy protocol and try a less expensive alternative first under the plan's utilization review criteria. After taking the alternative drug, Davila allegedly suffered serious complications. Respondent Calad underwent surgery; CIGNA's utilization review policy limited the hospital stay that would be covered and she was discharged sooner than her physician thought prudent. She suffered complications and was later readmitted. Both plaintiffs alleged that the HMOs failed to exercise ordinary care in their decision-making and sought damages under state law; they disclaimed any reliance on ERISA and did not plead for benefits under their plans. The HMOs removed the cases to federal court, asserting complete preemption under ERISA § 502(a)(1)(B). The lower courts divided over whether the THCLA claims were completely preempted. The Supreme Court granted certiorari (consolidating Davila's case with Calad's) to resolve whether these state-law negligence claims were, in substance, ERISA claims.
Are state-law causes of action against HMOs under the Texas Health Care Liability Act for failing to exercise ordinary care in making coverage/utilization review decisions completely preempted by ERISA § 502(a)(1)(B), thereby making removal proper and foreclosing state tort remedies?
A state-law cause of action is completely preempted by ERISA § 502(a)(1)(B) (29 U.S.C. § 1132(a)(1)(B)) if: (1) the plaintiff, at some point in time, could have brought the claim under § 502(a)(1)(B) to recover benefits due under the plan, to enforce rights under the plan, or to clarify rights to future benefits; and (2) there is no other independent legal duty that is implicated by the defendant's actions. When both conditions are met, the claim is recharacterized as a federal ERISA claim, removal is proper, and ERISA's civil enforcement mechanism provides the exclusive remedy, preempting state-law causes of action that "duplicate, supplement, or supplant" ERISA's remedial scheme. The saving clause in ERISA § 514(b)(2)(A), which preserves certain state laws that regulate insurance from conflict preemption, does not limit complete preemption under § 502.
Yes. The plaintiffs' THCLA claims are completely preempted by ERISA § 502(a)(1)(B) because they could have been brought as actions to recover benefits or enforce plan rights, and the HMOs' duties arose solely from the ERISA plans and their administration. Removal to federal court was proper; the state-law claims are displaced by ERISA's exclusive civil enforcement scheme. The Court reversed the contrary judgment and remanded.
The Court, in an opinion by Justice Thomas, applied a two-step inquiry. First, each plaintiff could have asserted a § 502(a)(1)(B) claim: the essence of both suits was that the HMOs, through utilization review and coverage determinations, wrongfully failed to provide benefits allegedly due under the plans (e.g., coverage for a prescribed drug or a longer hospital stay). The injuries claimed flowed from the denial or limitation of benefits. Second, no independent legal duty existed apart from ERISA and the plan terms. The THCLA's duty of ordinary care attached only because the HMOs were making benefit-eligibility and coverage determinations under ERISA-regulated plans; it did not impose a freestanding duty that exists regardless of plan administration. Relabeling the claims as negligence or malpractice could not avoid ERISA's exclusive civil enforcement scheme. The Court distinguished Pegram v. Herdrich, which involved physician malpractice and mixed eligibility/treatment decisions by a treating doctor; Davila and Calad challenged pure coverage determinations made pursuant to plan terms by HMOs. Because the conduct at issue derived from plan interpretation and benefit eligibility, § 502 governed. The Court also explained that complete preemption under § 502(a) is jurisdictional and distinct from § 514 conflict preemption: even if a state law arguably "regulates insurance" and could be saved from § 514 preemption, claims that fall within § 502's scope are nonetheless displaced and removable. Finally, the Court acknowledged that ERISA's remedial scheme may not offer the tort damages plaintiffs sought, but emphasized that Congress made ERISA's remedies exclusive. Justice Ginsburg, joined by Justice Breyer, concurred to highlight the resulting remedial gap and invited congressional attention, but agreed with the Court's analysis and outcome.
Davila is the touchstone for ERISA complete preemption. It supplies the now-canonical two-prong test used to determine when state-law claims are recharacterized as federal ERISA § 502 claims and removed to federal court. For health-law and employment-law practitioners, the case sharply limits state tort recovery against HMOs for coverage/utilization decisions, steering such disputes into ERISA's narrow remedial channel. For federal courts, Davila clarifies the distinction between defensive, conflict preemption under § 514 and jurisdictional, complete preemption under § 502. For law students, Davila is frequently examined alongside Metropolitan Life v. Taylor, Pilot Life, Pegram, and Rush Prudential. It is essential for issue spotting: identify whether the gravamen of a claim is a denial of plan benefits and whether any independent legal duty is implicated. If not, the claim is completely preempted, removable, and limited to ERISA remedies (benefits due, injunctive or declaratory relief, and certain equitable relief)—not tort damages.
Aetna Health v. Davila crystallizes ERISA's jurisdictional reach over disputes that, at bottom, challenge coverage determinations under employee benefit plans. By articulating a precise two-prong test for complete preemption, the Court ensured that such claims are funneled into ERISA's exclusive civil enforcement scheme, foreclosing state-law damages remedies even when state legislatures attempt to impose ordinary-care duties on HMOs.