4th Circuit Court of Appeals rules Verizon worker can sue over

Daily Record, The (Baltimore), May 30, 2002 by Daily Record Legal Affairs Writer

A Maryland Verizon employee will have another chance to prove that the administrator of the telecommunications giant's disability benefits plan wrongly gave the company private medical information to assist it in its efforts to fire her as a “direct threat” to her co-workers.

The 4th U.S. Circuit Court of Appeals on Tuesday reinstated Frances Darcangelo's claims against Verizon Communications Inc. and CORE Inc. for negligence, invasion of privacy, violation of Maryland's medical record confidentiality statute and violation of the state unfair and deceptive trade practices statute.

The court held that those claims should not have been dismissed by the district court because, based solely on the allegations in her complaint, they were not pre-empted by the federal Employee Retirement Income Security Act, or ERISA.

The appeals court, however, affirmed U.S. District Judge Frederic N. Smalkin's decision to dismiss Darcangelo's breach of contract claim, concluding that it did not state a claim upon which relief could be granted.

Darcangelo alleged in a complaint filed in state court that CORE, acting as Verizon's agent, gathered information about her mental health condition and treatment so that Verizon could fire her.

Presumably, Verizon feared an Americans with Disabilities Act claim if it fired Darcangelo, Tuesday's opinion notes. If an employee poses a direct threat to others, that fact is an affirmative defense to an ADA claim.

Verizon and CORE had Darcangelo's complaint removed to federal court in Baltimore, where Smalkin granted their motion to dismiss.

In reversing dismissal of four of her five claims, the appeals court reviewed the allegations in Darcangelo's complaint in her favor, although it noted that further factual developments might warrant dismissal at a later stage of the case.

The appeals court held that the claims were not related to ERISA - and therefore not pre-empted by ERISA - because they did not arise from CORE's performance of its administrative duties related to the plan.

“[T]he simple fact that a defendant is an ERISA plan administrator does not automatically insulate it from state law liability for alleged wrongdoing against a plan participant or beneficiary,” Judge M. Blane Michael wrote for the court.

In addition, Darcangelo's claims did not “overlap with any of the enforcement provisions available under ERISA,” the court concluded, rejecting Verizon's claim that her lawsuit sought to enforce ERISA's fiduciary requirements.

“Under the defendants' view, ERISA administrators would enjoy blanket immunity - at least from damages under state tort law - for any manner of wrongful conduct aimed at plan participants and beneficiaries, regardless of how unrelated that conduct is to the ERISA plan,” Michael wrote.

“If Darcangelo [were] alleging that CORE, in the course of processing a benefits claim or performing some other plan duty, improperly disclosed her private medical information, this would be a claim for breach of fiduciary duty under ERISA,” Michael wrote (emphasis in original).

Darcangelo, however, “alleges conduct by CORE that is completely unauthorized - conduct that was not undertaken in the course of carrying out its plan responsibilities,” Michael continued.

“The clear implication of these allegations is that CORE was not performing a fiduciary function, but was simply behaving as a rogue administrator, acting entirely outside the scope of its duties under the plan.”

WHAT THE COURT HELD

Case: Frances Darcangelo v. Verizon Communications Inc., et al. Published. Opinion by Michael, J. Filed May 28, 2002.

Issue: Were appellants state tort claims against her employer and the administrator of her employer's disability-benefits plan preempted by ERISA?

Holding: No. Based on the allegations in the complaint, the plan administrator's wrongdoing did not arise from the performance of its administrative duties related to the plan.

Counsel: Edwin R. Burkhardt for appellant; Karen M. Wahle and M. Natalie McSherry for appellees.