Civil No. 2:98CV0729C
September 20, 2000.
In this action, certain health care facilities sued to recover payment from insurers and employers for services provided to various patients. The complaint alleges that Defendants violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. by (1) failing to provide coverage for treatment provided to the patients a violation of 29 U.S.C. § 1104 and 29 U.S.C. § 1133 and (2) failing to provide documents a violation of 29 U.S.C. § 1024. This case is before the court on a variety of dispositive motions.
The court held a hearing on all pending motions on July 27, 2000. Having fully considered the arguments of counsel, the submissions of the parties, and applicable legal authority, the court now enters the following order.
A. The Parties
Plaintiff Brightway Adolescent Hospital ("Brightway") is a Utah facility that operates an acute health care facility in St. George, Utah. (See Compl. at 2.) The facility provides in-patient treatment for adolescents for mental, nervous, and emotional disorders and substance abuse problems. (See id.) Plaintiff Cross Creek Manor ("CCM") is a residential treatment center operating near St. George, Utah. Like Brightway, CCM provides treatment for minors suffering from mental, nervous, and emotional disorders and substance abuse problems.
At various times between 1995 and 1997, Brightway and/or CCM provided care to Plaintiffs Moses O'Gara, Taylor Milne, Leah Pawl-Ginsberg, Ramsey Salama, Amy Sorensen, Cherrelyn Jones, Ronald Fogler, and Amy Graham. Plaintiff Delbert Goates, a medical doctor, prescribed and provided treatment to the various patients during their time at Brightway and/or CCM. (Hereinafter, all of the plaintiffs are collectively called "Plaintiffs").
The defendants are employers and health care insurers, whom Plaintiffs allege violated ERISA. Defendants Health Plan of Nevada, Inc. ("HPN"), Sierra Health and Life Insurance Company, Inc. ("SHL"), and Behavioral Healthcare Options, Inc. ("BHO") are the three health care insurers who allegedly covered the patients during the times the patients received care. (Hereinafter, HPN, SHL and BHO are collectively called "the Sierra Defendants"). According to Plaintiffs, SHL and HPN acted as either plan administrators or agents for the plan administrator and BHO provided third-party administrative and/or utilization review services to the plan. (See Compl. at 6-7.)
Defendants EGG Energy Measurements, Inc., Nevada Waterscapes, Inc., Nellis Cab Co., Sunrise Country Club, and Gold Strike Hotel are the (patients' parents') employers. Defendants Does 1-10 are unknown "ERISA plans, plan administrators, plan sponsors, and plan fiduciaries. . . ." (Id. at 7.)
B. The Complaint
The second amended complaint alleges various ERISA violations related to the treatment and administrative appeal process of the various patients. Goates alleges that he examined each patient and recommended that he/she be admitted to Brightway for treatment. Subsequently, the Sierra Defendants denied coverage for the treatment provided for each patient. Plaintiffs allege that they sought some sort of administrative appeal of the decision to deny coverage, and in all of the cases, the appeals were unsuccessful.
The second amended complaint alleges that (1) the various Sierra Defendants violated 29 U.S.C. § 1104 and 1133 by wrongly denying coverage for the medical treatment provided by (a) failing to provide competent peer review of the recommendations of the treating physicians; (b) failing to act in good faith in carrying out their administrative appeal process, and (c) otherwise breaching their fiduciary duties; and (2) that all the Defendants violated 29 U.S.C. § 1024(b)(4) by failing to provide copies of relevant documents within the statutorily mandated time period.
The action comes before the court on several dispositive motions. First, Defendant Gold Strike Hotel moves to be dismissed from this action on the grounds that it is not subject to personal jurisdiction in Utah. For the reasons set forth by the court during the July 27, 2000 hearing, this motion is denied without prejudice.
Second, the Sierra Defendants move for dismissal or for summary judgment on the grounds that (i) they are not the plan administrators; (ii) their decisions to deny benefits were not arbitrary and capricious; and (iii) some of the Plaintiffs have not exhausted their administrative remedies. The Sierra Defendants also move to dismiss this case for improper venue or, in the alternative, to transfer the case to Nevada pursuant to 28 U.S.C. § 1404(a).
Lastly, the Plaintiffs move for a continuance pursuant to Federal Rule of Civil Procedure 56(f) on the grounds that they have not yet received adequate discovery.
A. Plaintiffs' Motion for 56(f) Continuance
Federal Rule of Civil Procedure 56(f) allows a party opposing a motion for summary judgment to seek deferral of a ruling pending discovery of essential facts. See Committee for the First Amendment v. Campbell, 962 F.2d 1517, 1521-22 (10th Cir. 1992). "A prerequisite to granting relief, however, is an affidavit furnished by the nonmovant . . . [that] explain[s] why facts precluding summary judgment cannot be presented. This includes identifying the probable facts not available and what steps have been taken to obtain these facts." Id. at 1522 (citations omitted). "The purpose of the affidavit is to ensure that the nonmoving party is invoking the protections of Rule 56(f) in good faith and to afford the trial court the showing necessary to assess the merit of a party's opposition." Id. (quotation omitted). "Rule 56(f) may not be invoked by the mere assertion that discovery is incomplete or that specific facts necessary to oppose summary judgment are unavailable; the opposing party must demonstrate `how additional time will enable him to rebut movant's allegations of no genuine issue of fact.'" Pasternak v. Lear Petroleum Exploration, Inc., 790 F.2d 828, 833 (10th Cir. 1986); see also Weir v. Anaconda Comp., 773 F.2d 1073, 1083 (10th Cir. 1985) (Merely asserting "that the evidence supporting a [party's] allegation is in the hands of the [opposing party] is insufficient to justify a denial of a motion for summary judgment under Rule 56(f).").
Plaintiffs move for a 56(f) continuance to allow to complete discovery so that they can respond to the Sierra Defendants' dispositive motions. In support of their request for a continuance, Plaintiffs submitted affidavits of Marcie Schaap and Mary Covington. According to Schaap, the Plaintiffs are unable to adequately respond to the pending dispositive motions because:
As noted below, the Plaintiffs' motion for a 56(f) continuance relates to all of the Sierra Defendants' motions except the pending motion to dismiss for improper venue and the motion to transfer to Nevada.
the Sierra Defendants have been unwilling to produce to the Plaintiffs or their counsel all of the relevant information necessary for the Plaintiffs to be fully informed on and thoroughly analyze these denied claims. Many of the Sierra Defendants' allegations of "fact" are based on information and documentation which has been specifically requested by the Plaintiffs on many occasions, both prior to litigation and during litigation, but which the Sierra Defendants have withheld from the Plaintiffs.
(Schaap Aff. ¶¶ 3, 4.) Schaap lists the specific information necessary to properly respond to the pending motions:
the full names, addresses, and credentials of all of the Sierra Defendants' medical reviewers, the medical reviewers' written opinions and rationale . . . the medical reviewers' areas of specialty . . . and the written "BHO Criteria" the Sierra Defendants refer to in their denial letters which they claim were utilized by their medical reviewers in reaching their conclusions that the treatment was not medically necessary. In addition, the Plaintiffs will need to evaluate exactly which records these medical reviewers actually evaluated, how much time they spent on each review, and the administrative service agreements or other contracts between the Sierra Defendant[s] and the plan administrators/plan sponsors.
(Id. ¶ 5.)
Plaintiffs have adequately identified the needed discovery and adequately shown that the information would be material to Plaintiffs' case in chief and in preparing their opposition to the pending dispositive motions. There is no evidence that Plaintiffs have been dilatory in seeking this information. Therefore, the court grants Plaintiffs' motion for a 56(f) continuance.
B. Sierra Defendants' Motions
Since the Plaintiffs are entitled to a 56(f) continuance, the court declines to rule on most of the Sierra Defendants' dispositive motions. Accordingly, the court considers only the Sierra Defendants' motion to dismiss for improper venue and motion to transfer to Nevada.
1. Motion to Dismiss for Improper Venue
A party is entitled to dismissal when venue is improper. See Fed.R.Civ.P. 12(b)(3). 29 U.S.C. § 1132(e)(2) provides four alternative bases to establish venue when claims involving ERISA are raised: (1) where the plan is administered; (2) where the plan was breached; (3) where a defendant resides; or (4) where a defendant may be found. See 29 U.S.C. § 1132(e)(2). The third and fourth bases for venue have been interpreted to mean that venue is proper where personal jurisdiction is proper. See Peay, 205 F.3d at 1210, n. 3 ("Thus, under § 1132(e)(2), a corporation resides wherever personal jurisdiction is proper.").
The Sierra Defendants have not moved to dismiss for lack of subject matter jurisdiction, and their participation in this lawsuit (by, for example, filing these pending motions) indicates that they have consented to personal jurisdiction in this court. Since personal jurisdiction is proper here, venue is also proper under 29 U.S.C. § 1132(e)(2). Therefore, the Sierra Defendants' motion to dismiss for improper venue is denied.
2. Motion to Transfer to Nevada
28 U.S.C. § 1404(a) states that "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Id. The party moving for transfer of venue bears the burden of demonstrating that the existing forum is inconvenient. See Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir. 1991).
In considering a § 1404(a) motion to transfer, a district court should consider:
the plaintiff's choice of forum; the accessibility of witnesses and other sources of proof, including the availability of compulsory process to insure attendance of witnesses; the cost of making the necessary proof; questions as to the enforceability of a judgment if one is obtained; relative advantages and obstacles to a fair trial; difficulties that may arise from congested dockets; the possibility of the existence of questions arising in the area of conflict of laws; the advantage of having a local court determine questions of local law; and, all other considerations of a practical nature that make a trial easy, expeditious and economical.
Id. at 1516.
The Sierra Defendants have not adequately demonstrated that the factors listed above favor a transfer of this case to Nevada. Therefore, the Sierra Defendants' motion to transfer is denied.
The court (1) DENIES Defendant Gold Strike Hotel's motion to dismiss for lack of subject matter jurisdiction; (2) GRANTS Plaintiffs' motion for a 56(f) continuance; (3) DENIES the Sierra Defendants' motion to dismiss for improper venue; and (4) DENIES the Sierra Defendants' motion to transfer to Nevada. All other pending motions are held in abeyance.