Opinion
No. 1:04-cv-00584-RLY-TAB.
January 18, 2005
ENTRY ON PENDING MOTIONS
I. Introduction.
On February 25, 2002, Plaintiff Andrea C. Mings underwent gastric bypass surgery. At the time, Mings was a participant in her employer's employee welfare benefit plan. Prior to Mings' surgery, her physician called Mings' insurance carrier and received pre-certification for the procedure. Thereafter, Defendant Wal-Mart Stores, Inc. Associates Health and Welfare Plan (the "Plan") denied coverage for the procedure claiming that it was not covered under the Plan's terms and conditions. As a result of this denial, Mings filed her original complaint in the Marion Superior Court claiming that the Plan violated Indiana statutory law. In addition, Mings claimed that the Plan should be estopped from denying coverage. On March 31, 2004, the Plan removed the action to this Court claiming ERISA preemption.
Three separate but related motions pend before the Court. The Plan moved for the entry of a protective order precluding all discovery outside the administrative record. [Docket No. 19]. Thereafter, Mings filed a motion to compel joinder [Docket No. 28] and a motion for leave to amend her complaint. [Docket No. 29]. The Court addresses each in turn below.
Interestingly, at the same time, the Plan indicates that "there is no administrative record" due to Mings' failure to exhaust her administrative remedies. [Docket No. 20, pp. 1-2].
II. Discussion.
A. ERISA Preemption.
As a preliminary matter, it is important to understand the nature of Mings' claims. As noted above, the Plan removed this action to federal court claiming ERISA preemption. Mings does not seriously contest this assertion. First and foremost, Mings did not respond in any fashion to the Plan's notice of removal. If she contested whether ERISA governed her claims, she could have filed a motion to remand arguing against preemption. Moreover, as ERISA is the only avenue on which this Court's jurisdiction is based, Mings' failure to contest the removal is an implicit concession that ERISA governs at least some of her claims.
Regardless of Mings' tacit admission that ERISA preemption applies, even a cursory reading of her amended complaint requires such a conclusion. According to her amended complaint, "Ms. Mings would not have had the procedure if it was not covered and Dr. Saydjari would not have performed it if it was not covered. Having assured both Ms. Mings and Dr. Saydjari that the surgery was approved and within the scope of the plan, Wal-Mart is estopped from denying coverage of the procedure." [Docket No. 10, ¶ 10]. Such state law estoppel claims are preempted by ERISA.See Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 127-28 (7th Cir. 1992) (finding that state law action based on negligent misrepresentation to be preempted by ERISA). As the Seventh Circuit has noted, "[o]ne of ERISA's purposes is to protect the financial integrity of pension and welfare plans by confining benefits to the terms of the plans as written, thus ruling out oral modifications. This purpose would be thwarted if participants could maintain suits under state law against a plan administrator that were based on oral representations of coverage." Id. at 128 (citation omitted). See also Vershaw v. Northwestern Nat. Life Ins. Co., 979 F.2d 557, 559 (7th Cir. 1992) ("Though it is unfortunate that an insurance company's agent would lead a policyholder to believe that she was covered when she was not, the policies underlying ERISA require a preference for written over oral contract terms."). Accordingly, ERISA governs Mings' claim for estoppel as well as any claim for wrongful denial of benefits.
The Court makes no determination on whether ERISA also preempts Mings' claim that the Plan also violated Ind. Code § 27-8-14.1-4 by allegedly failing to offer coverage for nonexperimental, surgical treatment by a health care provider for morbid obesity. [Docket No. 10, ¶ 14]. The parties have not briefed this issue and resolution of this issue does not impact the pending motions before the Court.
B. The Plan's Motion for a Protective Order.
As noted above, the Plan seeks a protective order pursuant to Fed.R.Civ.P. 26(c) limiting discovery to the nonexistent administrative record resulting from Mings' failure to exhaust her administrative remedies. According to the Plan, the only "record" it has regarding Mings' procedure is "the Explanation of Benefits forms ("EOB's") for Plaintiff's surgery and a September 12, 2003 letter from Plaintiff's counsel." [Docket No. 20, p. 2]. The Plan argues that discovery must be limited to these documents, which it has already produced to Mings.
In support of its argument, the Plan relies on several cases from the Seventh Circuit Court of Appeals and the Southern District of Indiana that stand for the proposition that where an ERISA plan bestows discretion on the plan administrator, courts are required to review the plan administrator's decisions under a deferential, arbitrary and capricious standard and not allow additional discovery outside the administrative record. See e.g., Perlman v. Swiss Bank Comprehensive Disability Protection Plan, 195 F.3d 975, 982 (7th Cir. 1999) (where an ERISA plan provides the plan administrator with discretion to decide claims, courts should review such decisions under a deferential standard and the parties should not take additional discovery); Trombetta v. Cragin Fed. Bank for Sav. Employee Stock Ownership Plan, 102 F.3d 1435, 1438 n. 1 (7th Cir. 1996) ("Because we have determined that an arbitrary and capricious test applies, plaintiffs' request for discovery was properly denied. The only relevant materials at the time the district court ruled on summary judgment were the materials that were before the Committee when it reached its decision.").
In response, Mings offers a variety of reasons why discovery should be permitted in this case. Mings argues that: (1) her failure to exhaust her administrative remedies should be excused because any appeal would have been futile; (2) she seeks discovery not of the plan administrator's discretionary decision, but of the "facts surrounding the precertification she was given" [Docket No. 27, p. 4]; (3) the requested discovery is clearly relevant; (4) "[t]he requested discovery is needed to respond to Wal-Mart's claim that an appeal would not have been futile." [Docket No. 27, p. 5]; and (5) the discovery is not unduly burdensome or harassing. Although the Court does not agree with all of Mings' arguments, the Plan's motion for a protective order is denied.
In reaching this conclusion, the unusual posture of the parties' arguments regarding the protective order motion is noteworthy. On its face, the Plan's motion is exactly what it purports to be — a nondispositive discovery motion. Yet a closer look reveals several potentially casedispositive issues on which the parties are seeking a ruling from the Court. For example, the Plan claims that Mings failed to exhaust her administrative remedies and that she "should not be allowed to circumvent the requirements of ERISA and the Plan by refusing to follow appeal procedures, yet conduct a fishing expedition for information that was never the subject of a proper appeal and, in any event, was never part of an administrative record." [Docket No. 20, p. 1]. In response, Mings contends that her failure to exhaust administrative remedies should be excused. This issue is potentially case dispositive. See Zhou v. Guardian Life Ins. Co. of America, 295 F.3d 677 (7th Cir. 2002) (finding that district court did not abuse its discretion by dismissing complaint on the grounds that the plaintiff failed to exhaust administrative remedies). In addition, the Plan argues that "[b]ecause Plaintiff presents no evidence or claim of a written misrepresentation for estoppel in this case where the Plan language is unambiguous, her `theory is not viable.' Therefore, her attempt to justify her discovery on this unfounded claim fails and should be prohibited." [Docket No. 31, p. 3]. Arguing that Mings will ultimately be unsuccessful on the merits is ordinarily not a basis to deny discovery regarding her claims. Such issues are more appropriately resolved by a motion for summary judgment.
The Plan is correct that, when a plan administrator is given discretion, the Court reviews the administrator's decision under an arbitrary and capricious standard based on those materials before the administrator at the time of the decision. Thus, any claim by Mings that the Plan wrongfully denied her benefits is properly limited to the administrative record. Vallone v. CNA Financial Corp., 375 F.3d 623, 629 (7th Cir. 2004). However, Mings also asserts an estoppel claim. As the Seventh Circuit recently stated:
the plaintiffs' estoppel claim . . . is not actually an appeal of a decision of the Plan Administrator. An estoppel claim requires (among other things) a knowing misrepresentation. . . . Thus, since the estoppel claim is not a review of a decision of the Plan Administrator, the district court erred in limiting discovery to the administrative record with respect to the estoppel claim.Id. at 629-30. Likewise, in McIntire v. Fortis Ins. Co., 2004 WL 2272166, at *5 (S.D. Ind. Sept. 15, 2004), Judge Hamilton found that:
The plan administrator is not responsible for determining if an estoppel claim has merit. Nor is an estoppel claim simply a part of the appeal of the decision of the plan administrator. [The plaintiff's] estoppel claim is in addition to her appeal of the plan administrator's decision, and it requires proof outside the administrative record. . . .
(internal citation omitted). Accordingly, the Plan's motion for a protective order is denied.
The Court's denial of the Plan's motion for a protective order does not grant carte blanche discovery to Mings. Mings seeks discovery about "whether similar requests were treated in a similar fashion." [Docket No. 27, p. 4]. How other requests were treated, of which Mings had no knowledge of at the time, is not discoverable. Such information cannot alter the plain language of the plan nor establish whether Mings' reliance on any alleged misrepresentation was reasonable. In short, such information is irrelevant. Mings must hone her requests to focus on the discovery of information relevant to her estoppel claim.
C. Mings' Motion to Compel Joinder.
On October 15, 2004, Mings moved the Court to compel joinder of the various medical providers that performed services relating to Mings' gastric bypass surgery (the "medical providers"), and who now "are unpaid and unhappy and are pursuing her via collection agencies." [Docket No. 28, p. 2]. According to Mings, "[t]hese Medical Providers are needed because Wal-Mart is claiming immunity under ERISA from an estoppel." [Id.]. The Plan opposes Mings' motion on two fronts. First, the Plan asserts that Mings' motion is untimely. Second, the Plan argues that Federal Rule of Civil Procedure 19 does not permit joinder of the medical providers as involuntary plaintiffs. The Court addresses each of these objections in turn.
Mings' characterization is imprecise. The Plan is not claiming "immunity under ERISA," as alleged by Mings. Instead, the Plan asserts that ERISA preempts Mings' state law claims. On this point, the Plan is correct. Accordingly, Mings' estoppel claims must be evaluated under ERISA.
According to the Court-approved Case Management Plan ("CMP"), "[a]ll motions for leave to amend the pleadings and/or to join additional parties shall be filed on or before August 31, 2004." [Docket No. 16, p. 3]. Despite this clear deadline, Mings did not file the instant motion until October 15, 2004 — 45 days late. Initially, Mings appears to acknowledge the tardiness of her motion, explaining that the "delay" was a result of her failed attempt to get the medical providers to voluntarily join this action and failed settlement negotiations with the Plan. However, neither of these explanations provides good cause to ignore Court-ordered deadlines. As the Plan points out, "[i]f settlement discussions were allowed to stay all scheduling deadlines and excuse compliance therewith, such practice would greatly impair the court's docket and render scheduling plans meaningless, as such discussions often continue up to trial." [Docket No. 33, p. 2]. At the very least, Mings should have filed a motion requesting modification of the deadlines rather than simply allowing them to pass.
Surprisingly, in reply Mings asserts that "Ms. Mings' motions are timely." [Docket No. 37, p. 2]. They are not. Citing Fed.R.Civ.P. 16(b), Mings seemingly argues that a CMP deadline may be modified unilaterally if good cause exists. Therefore, according to Mings, "[i]n her motions to amend and to compel joinder, Ms. Mings explained the reasons why there was good cause to slightly modify this deadline." [Docket No. 37, p. 2]. If this truly is Mings' position, she misunderstands Rule 16(b). In relevant part, the rule states that "[a] schedule shall not be modified except upon a showing of good cause and by leave of the district judge or, when authorized by local rule, by a magistrate judge." Fed.R.Civ.P. 16(b) (emphasis added). In other words, it is up to the Court to determine whether good cause exists, and parties should not simply ignore deadlines. While it could deny Mings' motions for failing to adhere to the Courtordered deadlines, the Court prefers to resolve these matters on their merits.
"The purpose of Rule 19 under the Federal Rules of Civil Procedure is `to permit joinder of all materially interested parties to a single lawsuit so as to protect interested parties and avoid waste of judicial resources.'" Davis Companies v. Emerald Casino, Inc., 268 F.3d 477, 481 (7th Cir. 2001), quoting Moore v. Ashland Oil, Inc., 901 F.2d 1445, 1447 (7th Cir. 1990). To determine whether joinder is required under Rule 19, the Court conducts a two-prong test:
First, the court must determine whether a party is one that should be joined if feasible — called, in the old days, a "necessary" party. To answer that question, the court must consider (1) whether complete relief can be accorded among the parties to the lawsuit without joinder, (2) whether the absent person's ability to protect its interest in the subject-matter of the suit will be impaired, and (3) whether any existing parties might be subjected to a substantial risk of multiple or inconsistent obligations unless the absent person joins the suit. Only if the court concludes, based on those factors, that the party should be included in the action but it cannot be, must it go on to decide whether the litigation can proceed at all in the party's absence. If there is no way to structure a judgment in the absence of the party that will protect both the party's own rights and the rights of the existing litigants, the unavailable party is regarded as "indispensable" and the action is subject to dismissal. . . .Thomas v. U.S., 189 F.3d 662, 666-67 (7th Cir. 1999) (citations omitted). Stated differently, "the district court must answer three questions: Should the absentee be joined? If the absentee should be joined, can the absentee be joined? If the absentee cannot be joined, should the lawsuit proceed without her nonetheless?" Western Maryland Ry. Co. v. Harbor Ins. Co., 910 F.2d 960, 961 (D.C. Cir. 1990) (footnotes omitted).
The Court must first decide whether the medical providers should be joined, i.e. are they necessary parties? Pursuant to Rule 19(a), a person shall be joined, if feasible, if: (1) "complete relief cannot be accorded among those already parties"; or (2) the absent person "claims an interest relating to the subject matter of the action and is so situated to the disposition of the action" that his absence may "impede or impair the person's ability to protect that interest" or "leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations." The Plan argues that Mings' motion must fail because the medical providers do not satisfy Rule 19(a). The Court agrees.
Quite simply, complete relief can be accorded between Mings and the Plan without the addition of the medical providers. If Mings is successful on her claim, the Plan will be equitably estopped from denying Mings' claims for benefits under the Plan. If not, then the Plan will not be required to pay a judgment. Moreover, as Mings makes clear in her motion, the medical providers do not claim an interest in the subject matter of this action as Mings' efforts to have the medical providers join voluntarily failed. Indeed, Mings' reliance on Vencor Hospitals Ltd. P'ship v. Aetna U.S. Healthcare, Inc., 2001 WL 1029109 (S.D. Ind. 2001), only underscores the differences between Mings' claims and the potential claims of the medical providers. In Vencor, the court found that a medical provider's claim of promissory estoppel and fraud against an insurance company was not preempted by ERISA because:
[i]n the present case, Vencor does not seek to enforce any promise made or benefit owed to Ms. Hargis; Vencor seeks instead to enforce the representation made to it by Aetna. Aetna's duty to Vencor based on this representation stands independent of the duties it owes to Ms. Hargis under the plan.Id. at *4. Stated another way, Mings' claim of estoppel is, in essence, a claim for benefits under the Plan and thus preempted by ERISA. On the other hand, the medical providers' potential claims, as argued by Mings, fall outside of ERISA and stand independently from the duties owed to Mings by the Plan. They are two different claims subject to two different bodies of law. In short, the medical providers cannot claim an interest in the subject matter of Mings' claims because the medical providers' potential claims relate to a different subject matter.
Finally, disposition of the current action will not, in any conceivable fashion, impede the ability of the medical providers to protect their interests. Additionally, the Court does not find — and Mings does not argue — that the absence the medical providers will subject either Mings or the Plan "to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations." Fed.R.Civ.P. 19(a). Accordingly, Mings' motion to compel joinder of the medical providers is denied.
D. Mings' Motion for Leave to Amend.
Finally, Mings also seeks leave to amend her complaint to add Blue Cross Blue Shield of Illinois ("Blue Cross") and David T., the employee that represented that Mings was precertified, as Defendants in this matter. The Plan objects on the basis that Mings' motion is untimely and futile. For the same reasons discussed above, the Court declines to resolve Mings' motion based on its untimeliness and, instead, turns to its merits.
Amendment of pleadings is allowed as a matter of course once before a responsive pleading is served or otherwise only by leave of court or by written consent of the adverse party. Fed.R.Civ.P. 15(a). "Although leave to amend a complaint should be freely granted when justice so requires, the district court need not allow an amendment . . . when the amendment would be futile." Bethany Pharmacal Co., Inc. v. QVC, Inc., 241 F.3d 854, 860-61 (7th Cir. 2001) (internal citations omitted). Moreover, a new claim is futile if it would not withstand a motion to dismiss. Vargas-Harrison v. Racine Unified School Dist., 272 F.3d 964, 974 (7th Cir. 2001), citing Bower v. Jones, 978 F.2d 1004, 1008 (7th Cir. 1992). In this instance, Mings' proposed amendment could not survive a motion to dismiss and, therefore, must be denied.
Regardless of how Mings characterizes her estoppel claim, it is essentially a claim for benefits under the Plan. See Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 127 (7th Cir. 1992) (noting that claims of promissory or equitable estoppel that attempt to forbid a plan from denying coverage are claims to obtain benefits under a plan and thus preempted by ERISA). In the Seventh Circuit, it is well-established that "`ERISA permits suits to recover benefits only against the Plan as an entity.'" Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490 (7th Cir. 1996), quoting Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985). In addition, despite Mings' argument to the contrary, Indiana does not recognize the tort of negligent misrepresentation under the circumstances before the Court.See Vencor Hospitals Ltd. P'ship v. Aetna U.S. Healthcare, Inc., 2001 WL 1029109, at *4 (S.D. Ind. 2001) ("Because Indiana does not recognize the tort of negligent misrepresentation, we need not consider whether [plaintiff's] claim for negligent misrepresentation is preempted by ERISA.") (internal citations omitted); Darst v. Illinois Farmers Ins. Co., 716 N.E.2d 579 (Ind.Ct.App. 1999) ("[S]ince [Eby v. York-Division, Borg Warner, 455 N.E.2d 623 (Ind.Ct.App. 1983)], we have stated that, despite the limited recognition of the tort in the context of an employer-employee relationship, Indiana does not recognize the tort of negligent misrepresentation.") (footnote omitted). Accordingly, Mings' proposed claims against Blue Cross and David T. are futile, and Mings' motion for leave to amend her complaint is denied.
III. Conclusion.
For the reasons stated above: (1) the Plan's motion for a protective order [Docket No. 19] is DENIED; (2) Mings' motion to compel joinder [Docket No. 28] is DENIED; and (3) Mings' motion for leave to amend her complaint [Docket No. 29] is DENIED.
Mings' submission of additional support [Docket No. 38], which is untimely and submitted without requesting leave of Court to do so, does not alter these holdings.
SO ORDERED.