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Am. Mfrs. Mut. Ins. Co. v. Sullivan - 526 U.S. 40, 119 S. Ct. 977 (1999)

Rule:

To state a claim for relief in an action brought under 42 U.S.C.S. § 1983, respondents must establish that they were deprived of a right secured by the Constitution or laws of the United States, and that the alleged deprivation was committed under color of state law. Like the state-action requirement of U.S. Const. amend. XIV, the under-color-of-state-law element of § 1983 excludes from its reach merely private conduct, no matter how discriminatory or wrongful.

Facts:

All employers subject to Pennsylvania's workers' compensation statute were required either (1) to obtain workers' compensation insurance from a private insurer, (2) to obtain such insurance through the state workers' insurance fund (SWIF), or (3) to seek permission from the state to self-insure. Once an employer became liable for an employee's work-related injury, the employer or its insurer had to pay for all "reasonable" and "necessary" medical treatment within 30 days of receiving a bill. However, in 1993, Pennsylvania amended its workers' compensation system to create a "utilization review" procedure, under which, upon a request by an insurer within 30 days of receiving such a bill, the reasonableness and necessity of an employee's medical treatment would be initially reviewed by a private "utilization review organization" (URO) of health care providers before such a medical bill had to be paid. Some employees and employee organizations filed a purported class action against various state officials, the director of the SWIF, and a number of private insurance companies alleging that the state and private defendants, in withholding workers' compensation benefits under the utilization review procedure without predeprivation notice and an opportunity to be heard, acted under color of state law and deprived the plaintiffs of due process in violation of the Federal Constitution's Fourteenth Amendment. The District Court dismissed the private insurance companies from the lawsuit on the ground that they were not state actors. Later, the District Court dismissed the state defendants as well, as the court expressed the view that while the right to receive workers' compensation benefits was a constitutionally protected property interest, the state provisions concerning utilization review comported with due process. On appeal, the Court of Appeals reversed and ordered a remand, expressing the view that the state provisions violated an employee's procedural due process rights by (a) failing to provide adequate notice that the employee's medical benefits might be suspended upon the invocation of utilization review, and (b) not granting the employee an opportunity to respond in writing before that termination took effect. It also held that private insurers were state actors when they elected to invoke the provisions to terminate or suspend an employee's constitutionally protected interest in receiving medical benefits. In response, the state procedures were modified to provide for more extensive notice and an opportunity for employees to provide some input into URO decisions. The case was appealed.

Issue:

In a 42 U.S.C.S. § 1983 "color of state law" action by plaintiff disabled employees who claimed that the Pennsylvania workers' compensation review procedure to evaluate disputed claims deprived them of property within the meaning of the Fourteenth Amendment, were defendant workers' compensation insurers "state actors?"

Answer:

No

Conclusion:

On a writ of certiorari, the Supreme Court of the United States held that a private insurer's decision, pursuant to Pennsylvania's workers' compensation statute, to withhold payment and seek utilization review of the reasonableness and necessity of a particular medical treatment for an employee's work-related injury was not fairly attributable to the state, and did not satisfy the state-action requirement for finding a deprivation of due process under the Fourteenth Amendment. It further held that Pennsylvania's workers' compensation law did not confer upon the plaintiff disabled employees a protected property interest, under the Fourteenth Amendment's due process clause, in the payment of medical benefits for the employees' work-related injuries. Thus, the plaintiffs failed in their due process claim where the employees in question (a) had yet to make good on their claim that the particular medical treatment at issue was reasonable and necessary, and (b) did not contend that they had a property interest in their claims for payment, as distinct from the payments themselves. The Court reversed the judgment for plaintiffs and held that defendant workers' compensation insurers were not "state actors" under the Fourteenth Amendment.

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