Lions Volunteer Blind Industries, Inc. v. Automated Group Administration, Inc., 1999 U.S. App. LEXIS 28397 (6^th Cir. November 2, 1999); 1999 FED App. 0376P (6th Cir.)-Considering a permissive interlocutory appeal for the second time, this court reversed the district court, and found that a state law misrepresentation claim was indeed preempted. Volunteer Blind, a nonprofit organization, decided to change its employee group health insurance from an "insured plan" with Blue Cross and Blue Shield ("Blue Cross") to a "partially self-funded plan" with Automated Group Administration, Inc. (AGA). AGA had assured Volunteer Blind that all employees and dependants covered under the Blue Cross plan would be equally covered under the self-funded plan.  However, this turned out not to be the case: AGA denied coverage to employee Warren Barnett based on a clause excluding "totally disabled" persons—an exclusion apparently not present in the original Blue Cross plan.

AGA won a partial motion for summary judgment on Volunteer Blind’s claim for benefits and its allegation of breach of fiduciary duty under ERISA, but was denied summary judgment on the question of preemption of Volunteer Blind’s claim of state law misrepresentation. At AGA's urging, the district court certified an interlocutory appeal on the preemption question and this court accepted the matter for review.

In a 1995 argument before the Sixth Circuit, AGA attempted to render the misrepresentation claim moot by arguing that AGA’s proposal merely altered the funding status of the existing Blue Cross plan, and therefore the AGA plan was not a "new plan" for ERISA purposes.  This would mean that Mr. Barnett was still covered under the Blue Cross plan, and thus there was no misrepresentation as to Barnett’s continuing complete coverage. Furthermore, if the prior Blue Cross plan was still in effect, Barnett's claim was clearly preempted as "related to" an ERISA plan, both because Barnett is a beneficiary with ERISA standing and because AGA's alleged misrepresentation intimately involved an existing ERISA plan. Following remand with instructions to resolve this dispute, the district court found the AGA plan to be a new plan.

This court suggested that the district court misapplied two of its cases dealing with preemption--Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272 (6^th Cir. 1991), and Perry v. P * I * E Nationwide, Inc., 872 F.2d 157 (6^th Cir. 1989). The district court cited Perry for the proposition that a claim is preempted when the conduct constituting misrepresentation occurs before the new ERISA benefit plan comes into existence. This court corrected this interpretation of Perry by pointing out that "Perry's focus is not on chronology but rather on ERISA's ability to provide the remedy that the plaintiffs seek [such as benefits denied under a plan]." Perry adopted the reasoning of Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8^th Cir. 1981), which asserted that there is preemption "when Congress (1) intends to occupy the field and (2) provides a remedy for the alleged misconduct."

The district court's description of Cromwell as holding that all misrepresentation claims are preempted by ERISA was also inaccurate. The question is whether the state law claim is, in essence (even if not stated as such), a claim for the recovery of ERISA plan benefits. These state law claims go to "'the very heart of issues within the scope of ERISA's exclusive regulation'" and thus are clearly preempted.

Similarly, the state law misrepresentation claim at issue here was brought to obtain Barnett's medical expenses—benefits that were denied by AGA's plan. This court therefore held that AGA's state law claim was sufficiently "related to" the subject matter regulated by ERISA to be preempted.