Summary
holding that plaintiff could not maintain class action seeking lost interest and other relief
Summary of this case from McDonald v. Pension Plan of the Nysa-Ila Pension Trust F.Opinion
97 Civ. 6490 (LAP)
February 5, 2001
ORDER AND MEMORANDUM
Sean Miner ("Miner"), a former employee of the NYNEX corporation ("NYNEX"), brings this class action against Empire Blue Cross and Blue Shield ("BC/BS"), the third-party administrator of plaintiff's health benefit plan. Miner seeks monetary damages and declaratory and injunctive relief pursuant to the Employee Retirement Income Security Act ("ERISA") as a result of delayed benefit payments. Defendant now moves for judgment on the pleadings dismissing the complaint pursuant to Federal Rule of Civil Procedure 12(c).
For the reasons set forth below, defendant's motion is granted, and the class complaint is dismissed with leave to replead Claims One and Two in plaintiff's individual capacity.
BACKGROUND
From 1983 to 1989, Miner was an employee of the NYNEX corporation. (Compl. ¶ 6). NYNEX provided its employees health Demonstration copy of activePDF Toolkit (http://www.activepdf.com) benefits through a self-funded plan that was administered by BC/BS. (Id.). It is undisputed that this plan is governed by ERISA. In 1989, Miner was placed on long-term disability due to chronic asthma. (Id.). Miner's asthma led to numerous emergency room visits, hospital admissions and required continuous medication, "on average approximately 25 medications per day." (Id. ¶¶ 19, 20). Miner submitted hundreds of claims each year to BC/BS for reimbursement (representing thousands of dollars) and made hundreds of calls to BC/BS inquiring about the delay in reimbursement. (Id. ¶¶ 21, 24). BC/BS either responded that the claim was being processed and that Miner would have to be patient or that BC/BS had no record of the claim, requiring Miner to resubmit the claim, on occasion, several times over. (Id. ¶ 21). Miner eventually retained an attorney on a contingency basis and enlisted the assistance of his union representative in an effort to obtain reimbursement from BC/BS. (Id. ¶¶ 24, 25). After seemingly endless contacts with BC/BS, Miner received reimbursement for his claims, some, years after they had been submitted. (Id. ¶¶ 26, 29). In many cases, however, Miner could not determine which claims had been reimbursed because the explanation of benefits that accompanied the reimbursement checks were "incomprehensible," as BC/BS grouped together various claims as "Other Med Services" or "Medical Care". (Id. ¶¶ 27, 28).
In September 1997, Miner filed a four-count class action against BC/BS seeking monetary damages and declaratory and Demonstration copy of activePDF Toolkit (http://www.activepdf.com) injunctive relief as a result of the delayed benefit payments. Miner claims that during the six-year period prior to the filing of the lawsuit, BC/BS engaged in unlawful claims processing practices by delaying payments, failed to pay "the full and fair value" of benefits, and unlawfully retained "the interest `float' on its delayed payments." (Id. ¶¶ 8, 57). BC/BS now moves for judgment on the pleadings on the ground that plaintiff fails to state a claim for relief under ERISA.
DISCUSSION
I. Standard Applicable to a Motion for Judgment on the Pleadings
Rule 12(c) of the Federal Rules of Civil Procedure serves as an auxiliary device that enables a party to assert the 12(b)(6) defense after the pleadings are closed. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994); Wenger v. Canastota Central School District, 961 F. Supp. 416, 423 n. 16 (N.D.N.Y. 1997). In deciding a motion for a judgment on the pleadings, therefore, courts apply the same standard as used in a Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. Sheppard, 18 F.3d at 150; Wenger, 961 F. Supp. at 423. The court accepts all allegations as true and draw all reasonable inferences in favor of a nonmovant. Sheppard, 18 F.3d at 150. The claim should not be dismissed unless it appears that the plaintiff can prove no set of facts in support of the claims that would entitle him or her to relief. Id.; see Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
II. Claim One Fails To State A Cause of Action
Miner claims that due to BC/BS's delay or refusal to make payments, he and the other purported class members are entitled to benefits pursuant to 29 U.S.C. § 1132(a)(1)(B). Specifically, Miner alleges that he and other class members
29 U.S.C. § 1132(a)(1)(B) states:
A civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
have repeatedly and continuously been subjected to BC/BS's unlawful claims processing policies and practices, and as a result, ha[ve] repeatedly and continuously received delayed (or no) payments.
(Compl. at ¶ 18). Miner further asserts that to the extent he received reimbursement payments, the accompanying "Explanation of Benefit" ("EOB") forms were "incomprehensible," making it impossible for Miner to discern exactly which claims were reimbursed.
[T]he EOB forms grouped numerous submissions together as one line item, covering lengthy periods of time during which the submissions had been made (usually a month), and identifying the submissions under an ambiguous heading, such as "Other Med Services" or "Medical Care." . . . [As a result, Miner] could not determine the extent to which BC/BS had responded to all of his claims submissions.
(Id. at ¶¶ 27, 28). Miner concludes that
[i]n implementing and maintaining deficient claims processing systems and thereby delaying its ultimate payment of claims, and in failing to pay interest on its delayed payments to Plaintiffs, BC/BS failed to provide Sean Miner and all other Class Plaintiffs with the full and fair value of the benefits they were owed, because BC/BS failed to take into account the lost benefit value that resulted from BC/BS's extensive payment delays.
(Id. ¶ 36). As a result, Miner claims that
Plaintiff and other Class members are entitled under ERISA, § 1132(a)(1)(B), to an award of damages reflecting the decreased value of their benefits as a result of BC/BS's delay or refusal to make payments to Plaintiff and other Class members.
Miner also seeks attorneys fees, expert fees and costs of the action pursuant to 29 U.S.C. § 1132(g).
To bring an action pursuant 29 U.S.C. § 1132(a)(1)(B), the benefits sought must be due to the participant or beneficiary under the terms of his or her plan. Insofar as Miner seeks reimbursement under his plan for unpaid claims, he may not bring this claim as a class action. Any such claim for benefits requires an individualized assessment of each plaintiff's case. See Fed.R.Civ.P. 23(a)(2) and (3); Dunnigan v. Metropolitan Life Ins. Co., 99 F. Supp.2d 307, 325-26 (S.D.N.Y. 2000). Therefore, plaintiff may amend his complaint to bring a claim in his individual capacity for unpaid benefits pursuant to § 1132(a)(1)(B).
Miner also seeks an award of interest representing the lost time value of the delayed payments. In dicta, the Supreme Court Demonstration copy of activePDF Toolkit (http://www.activepdf.com) has stated that
the statutory provision explicitly authorizing a beneficiary to bring an action to enforce his rights under the plan — § [1132](a)(1)(B) . . . — says nothing about the recovery of extracontractual damages, or about the possible consequences of delay in the plan administrators' processing of a disputed claim. Thus, there really is nothing at all in the statutory text to support the conclusion that such a delay gives rise to a private right of action for compensatory or punitive relief.
Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985). Additionally,
courts in the Second Circuit have uniformly held that interest on delayed benefit payments is "extracontractual" relief that cannot be recovered under section 1132(a)(1)(B). See Walsh v. Eastman Kodak Co., 53 F. Supp.2d 569, 571-73 (W.D.N.Y. 1999); Klein [v. Empire Blue Cross Blue Shield, 93 Civ. 5178], 1998 WL 336633, at *3 [(S.D.N.Y. June 23, 1998)]; O'Rourke v. Pitney Bowes, Inc., 95 Civ. 10288, 1997 WL 431091, *14 (S.D.N.Y. July 31, 1997); DeVito v. Pension Plan of Local 819, 975 F. Supp. 258, 270-273 (S.D.N.Y. 1997); Frank v. Civil Serv. Employee Ass'n, Inc., 91 Civ. 673, 1992 WL 73191, *1 (W.D.N Y Mar. 20, 1992). Indeed, no court in this Circuit or elsewhere has recognized a claim for interest on delayed benefit payments under section 1132(a)(1)(B).
Dunnigan, 99 F. Supp.2d at 314. Thus, to bring a claim for interest on delayed payments under § 1132(a)(1)(B), plaintiff must show that the NYNEX plan provides such a benefit.
Miner does not attach the NYNEX plan document to his complaint and does not proffer any language of the plan to argue that he is entitled to interest payments. Therefore, he has made no showing that interest on delayed payments is a benefit provided under the NYNEX plan. Accordingly, Claim One is Demonstration copy of activePDF Toolkit (http://www.activepdf.com) dismissed with leave to replead a claim for unpaid benefits in plaintiff's individual capacity.
III. Claim Two Must Be Dismissed
Miner claims that BC/BS breached its fiduciary duties to the plan participants by:
a. fail[ing] to act solely in the interest of the plaintiff and other Class members for the exclusive purpose of (i) providing benefits to participants and their beneficiaries, and (ii) defraying reasonable expenses of administering the plan ( 29 U.S.C. § 1104 (a)(1)(A)). In fact, BC/BS has favored its own economic self-interest at the expense and to the detriment of the Plaintiff and other Class members.
b. fail[ing] to act with the care, skill, prudence and diligence under the circumstances then prevailing that a company acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims ( 29 U.S.C. § 1104 (a)(1)(B)).
c. More specifically, [by] implement[ing] and maintain[ing] unlawful claims processing practices and procedures so as to delay its ultimate payments to policyholders, deny[ing] them the full value of their benefits, and retain[ing] the interest "float" on delayed payments.
(Compl. ¶ 63). Plaintiff and the other purported class members therefore seek legal and equitable relief, including but not limited to
(a) an award of damages in an amount to be established at trial for all losses sustained as a result of BC/BS's breaches of its fiduciary duties; (b) the restoration and disgorgement of any profits unlawfully realized by BC/BS; or (c) the imposition of a constructive trust of all monies realized by BC/BS.
Plaintiff also seeks fees and costs pursuant to 29 U.S.C. § 1132(g).
(Id. ¶ 65).
Count Two cannot be sustained. First, Miner has brought this action against BC/BS, the third-party administrator of the NYNEX plan, but has failed to name the plan as a defendant. To that extent, it is unclear what profit or monies plaintiff seeks against BC/BS. Plaintiff does not dispute that NYNEX is a self- funded plan, that is, the company funds the reimbursement of claims, and the plan administrator acts as a "mere conduit" of the funds. Lee v. Burkhart, 991 F.2d 1004, 1007 (2d Cir. 1993). Thus, any claims that are not reimbursed represent savings to NYNEX, not BC/BS.
Second, Miner does not specify in his complaint under which section of ERISA he seeks "an award of damages," yet he argues that he "seeks relief under 29 U.S.C. § 1132(a)(3)(B), which authorizes suits to redress plan violations through equitable relief." (Pl. Mem. at 9). Section 1132(a)(3)(B) states that
[a] civil action may be brought by a participant . . . to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.29 U.S.C. § 1132(a)(3)(B). Plaintiff further states that he "seeks to recover both for benefits that were never paid, and for lost interest." (Pl. Mem. at 9). With respect to benefits that Demonstration copy of activePDF Toolkit (http://www.activepdf.com) were never paid, ERISA already provides a remedy for unpaid benefits under § 1132(a)(1)(B). The Supreme Court has stated, in dicta, that "where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be `appropriate' under Section [1132](a)(3)." Varity Corp. v. Howe, 516 U.S. 489, 515 (1996). See also Communications Workers of America v. NYNEX Corp., 93 Civ. 3322, 2000 WL 420561 (S.D.N.Y. 2000) (same). Thus, because an appropriate remedy is available to plaintiff under § 1132(a)(1)(B), he may not seek relief for unpaid benefits under section § 1132(a)(3)(B).
With respect to the claim for lost interest, as discussed above, Miner has made no showing that such a benefit is available under the NYNEX plan. Miner attempts to articulate an independent basis for an award of interest under § 1132(a)(3)(B) by relying on the recent decision in Dunnigan. There, the court joined the Third and Seventh Circuits in holding that "the language and policy of ERISA, together with common law contract principles, support recognition of an independent cause of action for recovery of interest under the statute." Dunnigan, 99 F. Supp.2d at 311. Citing the recent Second Circuit decision in Strom v. Goldman, Sachs Co., 202 F.3d 138 (2d Cir. 1999), the court stated that "the lesson of Strom is that a plan participant may recover monetary restitution, or `make whole' relief, from a plan fiduciary under section [1132](a)(3)(B), as long as the Demonstration copy of activePDF Toolkit (http://www.activepdf.com) participant establishes liability — that is, a breach of ERISA or the plan document." Dunnigan, 99 F. Supp.2d at 320. The court further found that "as a matter of federal common law, the duty of good faith and fair dealing that is implied in every contract applies with equal force to ERISA plans," id. at 324, and, thus, where a plaintiff can prove that his or her payments were delayed due to a breach of the duty of good faith on the part of a plan fiduciary, the plaintiff will be entitled to interest on those delayed payments, id. at 321.
While I note the court's well-reasoned opinion in Dunnigan, for purposes of this motion, I need not and do not decide the issue of whether § 1132(a)(3)(B) provides an independent cause of action for interest on delayed benefit payments. In his argument, Miner notably omits the specific holding of Dunnigan that a claim for interest cannot be brought as a class action. "A class action suit does not allow for the individualized treatment mandated . . . by any claim for interest based upon a breach of good faith. . . . An automatic award of interest is contrary to both the language and policy of ERISA." Id. at 325-26. An "individualized evaluation of the facts, allegations and equities surrounding each case" must be made to meet both "the requirement that equitable relief be premised on an underlying breach" and ERISA's goals. Id. at 325, 326. See also Holmes v. Pension Plan of Bethlehem Steel Corp., No. 98 Civ. 1241, 1999 WL 554591, at *7 (E.D.Pa. 1999), aff'd, 2000 WL 666074 (3d Cir. 2000) ("[C]ourts are still required to make individualized assessments of each claim, examine the individual facts behind each claim, balance the equities, and determine that a benefit payment was improperly delayed"). Accordingly, Miner may not maintain this claim as a class action, and Claim Two is dismissed with leave to replead a claim for interest pursuant to § 1132(a)(3)(B) in his individual capacity.
IV. Claims Three and Four Cannot Be Sustained
Miner next seeks declaratory relief pursuant to §§ 1132(a)(1)(B) and 1132(a)(3) and injunctive relief pursuant to § 1132(a)(3). These claims must also be dismissed. First, to the extent Miner seeks a declaration of his (and other class members') rights to interest on delayed payments, as discussed above, such relief is not available under § 1132(a)(1)(B) because Miner has made no showing that the NYNEX plan provides that benefit. Additionally, even if I were to adopt the holding of Dunnigan, which I decline to do at this time, a claim for interest under § 1132(a)(3) may not be sought through a class action. Accordingly, those aspects of Claims Three and Four are dismissed.
Miner also seeks a declaration that "BC/BS is required to abide by its contractual obligations," (Compl. ¶ 68), and an injunction "barring BC/BS from violating its contractual obligations," (id. ¶ 71). Miner has not attached the NYNEX plan or any contract between NYNEX and BC/BS. Additionally, he does Demonstration copy of activePDF Toolkit (http://www.activepdf.com) not cite or rely upon any contractual language representing BC/BS's "contractual obligations." Accordingly, in the absence of any showing of what BC/BS's contractual obligations might be, this aspect of Claims Three and Four is dismissed.
Miner also seeks a declaration that BC/BS must meet minimal standards in processing claims and making payments and an injunction barring BC/BS from failing to meet such standards. To make out these claims, Miner cites federal regulations promulgated under ERISA and New York State insurance law and regulations. As discussed in Dunnigan, upon which Miner primarily relies, the Supreme Court made clear in Russell that "violations of the Secretary of Labor's benefit-processing time periods do not create a claim for relief under ERISA." Dunnigan, 99 F. Supp.2d at 322, citing Russell, 473 U.S. at 144.
Nothing in the regulations or in the statute, however, expressly provides for a recovery from either the plan itself or from its administrators if greater time is required to determine the merits of an application for benefits.
Russell, 473 U.S. at 144. "[T]he mere fact that a plan administrator waited months or years to grant benefits to a participant cannot form the basis for an underlying cause of action because . . . the failure to comply with the Secretary of Labor's guidelines does not itself constitute a breach of ERISA." Dunnigan, 99 F. Supp.2d at 323. Accordingly, BC/BS's alleged violation of federal regulations may not support a claim for relief under ERISA.
Similarly, Miner may not seek equitable relief under ERISA due to BC/BS's alleged violation of New York State insurance law and regulations. ERISA "supercede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a). The Supreme Court has held that "[t]he phrase `relate to' was given its broad common- sense meaning, such that a state law `relate[s] to' a benefit plan in the `normal sense of the phrase, if it has a connection with or reference to such a plan.'" Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47 (1981) (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985)) (in turn quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)) (change in original)). "Section [1144](a) was intended to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 141 (1990).
In Pilot, the Court held that a state lawsuit "asserting improper processing of a claim for benefits under an ERISA- regulated plan" is preempted by ERISA. Pilot, 481 U.S. at 56. Likewise here, Miner may not circumvent ERISA's preemption provision by attempting to dress up a state law claim as an ERISA cause of action by alleging violations of state minimum standards for claims processing. Not only do such standards necessarily Demonstration copy of activePDF Toolkit (http://www.activepdf.com) "relate to" a benefit plan by establishing time limitations for claims processing and communication, but inferring a cause of action under ERISA based on a violation of state law would undermine ERISA's enforcement scheme.
[T]he detailed provisions of § [1132](a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA.
Id. at 54. Therefore, Miner may not seek relief under ERISA based on alleged violations of federal regulations or New York State law and regulations. Accordingly, those portions of Claims Three and Four are dismissed.
I note that even if a violation of federal regulations or New York law established a cause of action under ERISA, such a claim could not be brought as a class action. Each case would require an individualized assessment of the facts, circumstances and reasons for any delay in payment.
Finally, Miner requests declaratory and injunctive relief requiring BC/BS to "refrain from engaging in the unlawful patterns and practices described above." I note that, on its face, this claim is ambiguous. Additionally, to the extent Miner seeks equitable relief requiring BC/BS to meet certain minimum standards, as discussed above, such relief is not available under ERISA and Miner has made no showing that the NYNEX plan or any Demonstration copy of activePDF Toolkit (http://www.activepdf.com) contract with BC/BS imposes any duty to meet such minimum requirements. If, however, Miner seeks some other form of relief, he must clearly state his claim for relief and the basis of any cause of action. Accordingly, this aspect of Claims Three and Four is also dismissed.
CONCLUSION
For the reasons set forth above, defendant's motion for judgment on the pleadings, dismissing the class complaint, is granted. Specifically, Claims Three and Four are dismissed and Claims One and Two are dismissed with leave to replead in plaintiff's individual capacity within 30 days of the date hereof.
SO ORDERED: