Opinion
Civil Action No. 3:00-CV-1116-D
June 27, 2001
MEMORANDUM OPINION AND ORDER
Plaintiff Hyun Friz ("Friz") was injured when she was thrown from the four-wheel all-terrain vehicle ("ATV") on which she was riding. Her husband, plaintiff John Friz, was an employee of defendant ADS The Power Resource, Inc. ("ADS"), who maintained an ERISA qualified self-funded employee welfare benefit plan ("Plan"). Plaintiffs made a claim for benefits under the Plan, explicitly disclosing as the basis that Friz was injured in an ATV accident. Unfortunately for plaintiffs, the Plan explicitly excludes coverage for care or services for injuries sustained from ATV accidents. The Plan's Third-Party Administrator, defendant Third Party Advantage Administrators, Inc. ("TPAA"), dutifully denied the claim based on the Plan's ATV exclusion. This lawsuit is not so much about Friz's entitlement to Plan benefits — plaintiffs have failed to mount any serious contention that the Plan provides coverage — as it is about the procedures that ADS and TPAA followed. Plaintiffs maintain that defendants failed or refused to provide requested explanations, information, or documents in connection with the denial of benefits, thereby breaching their fiduciary duties and subjecting themselves to ERISA statutory penalties and attorney's fees. ADS moves for summary judgment, which the court grants in part and denies in part. The court also raises sua sponte that part of plaintiffs' breach of fiduciary cause of action is subject to dismissal.
Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001-1461.
TPAA filed a motion for summary judgment on June 8, 2001. That motion is not yet ripe and will be decided separately.
I
On April 24, 1999 Friz was injured in the ATV accident at issue. She and her husband made a claim for benefits, which TPAA denied on behalf of the Plan. On July 26, 1999 plaintiffs (through their lawyer) wrote TPAA requesting copies of Plan documents, a detailed explanation of the specific reasons for denying the claim (including the specific Plan provisions on which the denial was based), a list of all information needed to resubmit the claim, an explanation of the claim review procedure, and all documents related to the denial of the claim. TPAA responded by August 2, 1999 letter, citing the Plan's ATV exclusion by page, section, and subsection, and stating, in pertinent part: "As the injury in question was due to an all terrain vehicle accident, all charges were denied per the plan document."Plaintiffs complain in their lawsuit that this response did not include copies of all documents concerning the Plan, a detailed explanation of the specific reasons for denying the claim and the specific plan provisions on which denial was based, a list of all information needed to resubmit the claim, an explanation of the claim review procedure, and all documents related to the denial of the claim. Thus on August 27, 1999 they wrote TPAA again, stating that they desired to appeal the denial of Plan coverage. They also requested an explanation of the appellate procedure and any additional information or steps needed to be taken to pursue an appeal under the Plan. Plaintiffs noted in their letter that they had not been provided all information needed to resubmit the claim or an explanation of the claim review procedures and all documents related to the denial of the claim. They also pointed to the ERISA provision that requires receipt of the documents within 30 days of their request.
On August 30, 1999 TPAA responded by letter, stating that along with its August 2, 1999 letter it had submitted a copy of the ADS Plan, that in the letter it had cited the specific ATV Plan exclusion on which it had relied, and that it sent only the Plan because it was the only document that controlled its decision. The letter also advised plaintiffs of their right to appeal the decision within 90 days of the date the written notice of denial was sent, cited the specific appeal sections in the Plan, and advised them that the appeal must be submitted in writing to ADS.
Plaintiffs complain in their lawsuit that this letter failed to provide all information needed to resubmit the claim and did not explain the claim procedure. On September 20, 1999 plaintiffs wrote to ADS advising it that they were appealing the denial of coverage and requesting that ADS provide them an explanation of the Plan's appellate procedure, including any additional information or steps that were necessary and all documents related to the denial of the claim. They also requested all information needed to resubmit the claim due to delay for additional information, and they asked for an explanation of the claim review procedures and all documents related to the denial of the claim. Plaintiffs complain in this suit that they have not received, since September 20, 1999, any response to their appeal, despite Plan language that states that, with exceptions, an appeal ordinarily will be considered within 60 days, or perhaps 90 days if additional information is required before the planholder can make a decision, and that the planholder must notify the covered person, explaining any delays. They allege that defendants have not responded to their requests for an explanation of the Plan's appellate procedure, including any additional information or steps that were necessary and all information needed to resubmit the claim.
Plaintiffs contend that on March 16, 2000 they again wrote to ADS requesting the same information, especially respecting the Plan's appellate procedure. ADS' counsel responded on March 30, 2000, stating that plaintiffs must state the reasons for the appeal and the basis for asserting that the determination of the Plan Administrator was erroneous. Plaintiffs assert that the Plan document is inadequate because it does not explain the appeal process for a denied claim. They posit that because the Plan does not do so, they have been required to seek this information from TPAA and/or ADS, each of whom has refused to supply the requested information.
Although it does not appear that plaintiffs base any of their claims on the structure of the Plan, it is clear that they cannot assert a breach of fiduciary duty cause of action on this premise. See Abraham v. Exxon Corp., 85 F.3d 1126, 1130 (5th Cir. 1996) (holding that employer does not act as fiduciary in designing ERISA plan).
In response to ADS' letter, plaintiffs wrote ADS' counsel on April 5, 2000 requesting precise information concerning the content and form required for the appeal, to whom the appeal should be addressed, and a limited waiver of any applicable limitation period. They maintain that ADS rebuffed these requests and refused to respond.
In their second amended complaint ("amended complaint"), plaintiffs appear to seek the following relief: (1) statutory penalties under 29 U.S.C. § 1132(c) for failing to respond to plaintiffs' written requests dated July 26, 1999 and thereafter for information concerning the steps to seek review of the denial of the claim, see Am. Compl. ¶ I(6)-(7); (2) recovery of denied Plan benefits caused by defendants' refusal to provide the Plan appeal process, see id. ¶ II (6), refusal to provide copies of all documents concerning the Plan, see id. ¶ III(6), and refusal to provide the requested detailed explanation of the denial of the claim, see id. ¶ IV(6); (3) breach of fiduciary duties by reason of such conduct, see id. ¶¶ II(6), III(6), and IV(6); and (4) statutory penalties provided by § 1132(c)(1)(B) for failing to provide such information within 30 days after July 26, 1999.
Plaintiffs filed their amended complaint on June 6, 2001, after the briefing of ADS' motion had been completed. The court has applied ADS' arguments to the causes of action asserted in this pleading.
Plaintiffs assert that ADS' conduct in refusing to provide the Plan appeal process, to provide copies of all documents concerning the Plan, and to provide the requested detailed explanation of the denial of the claim, was arbitrary, illegal, capricious, unreasonable, and not made in good faith. See id. ¶¶ II(6), III(6), and IV(6). These allegations do not appear to state independent claims, but instead appear to be included to support plaintiffs' breach of fiduciary duty claims. In fact, in plaintiffs' opposition brief, they appear to maintain that the arbitrary and capricious and abuse of discretion standards have no place in the court's analysis. See Ps. Br. at 9-10. Accordingly, the court does not consider these assertions to constitute independent claims.
ADS moves for summary judgment. It maintains that plaintiffs cannot recover Plan benefits because the ATV exclusion precludes such benefits. ADS asserts that plaintiffs' claim for statutory penalties based on ADS' failure to provide requested information lacks merit because they knew exactly where they stood with respect to the Plan, were not harmed by non-disclosure, and denial of medical benefits was correct. It posits that consideration of the Bowen factors weighs against an award of attorney's fees.
Plaintiffs object to ADS' reliance on the affidavit of Lyle J. Ratner ("Ratner") as part of its summary judgment evidence. In deciding this motion, the court has relied on the copies of plaintiffs' claim form and of the Plan that are attached to Ratner's affidavit, but not on the averments of the affidavit itself. The court overrules plaintiffs' objections to these documents and deems the other objections moot.
Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980).
II
ADS moves for summary judgment dismissing plaintiffs' claim for medical benefits under the Plan. Although it is not entirely clear from plaintiffs' brief whether they seek medical benefits as opposed to some other form of damages, the court will assume that they do given the content of ¶¶ II(6), III(6), and IV(6) of their amended complaint.
The summary judgment evidence establishes that when plaintiffs submitted a claim for Plan benefits, they stated in response to the question, "How did it happen?": "[Friz] was thrown from a 4-wheeler (ATV) which she was riding on a privately owned ranch." D. App. 5. The record also demonstrates without genuine dispute that the Plan contains the following exclusion: "Unless specified in the `Schedule of Benefits," the Plan does not cover any charges for care or services: for injuries sustained from . . . all terrain vehicles (ATV) accidents." Id. at 13, 16. The court holds as a matter of law that plaintiffs are not entitled to recover Plan benefits under the plain terms of the Plan.
In their summary judgment response, plaintiffs argue that ADS' motion has "missed the point" of this lawsuit, see Ps. Resp. at 2, which they say is that ADS and TPAA have continually failed to provide plaintiffs assistance and information to allow them to appeal the denial of benefits, id. Regardless whether this allegation serves as an adequate basis for another ERISA cause of action, it does not demonstrate a right to recover Plan benefits where, as here, there is no showing that an appeal could have made any difference. For example, had plaintiffs learned during discovery in the instant suit that, in certain circumstances, the Plan did allow recovery for ATV-related injuries, and that had plaintiffs been able to exercise their appellate rights under the Plan they could have obtained them, they arguably would have a claim. No such showing has been made. Nor have plaintiffs established that any documents or detailed explanations that ADS could have provided would have changed the fact that, under any set of circumstances, the Plan does not cover Friz's injuries arising from an ATV accident that is unequivocally excluded from Plan coverage. The court therefore dismisses with prejudice their claim for Plan benefits.
III
Plaintiffs sue ADS for breach of fiduciary duty based on its refusal to provide the Plan appeal process, to provide copies of all documents concerning the Plan, and to provide the requested detailed explanation of the denial of the claim. ADS has not clearly moved for summary judgment as to these claims. Instead, its motion relates to plaintiffs' causes of action for medical benefits, statutory penalties, and attorney's fees. It is well-settled rule that it is error for the court to grant summary judgment on a ground not raised. See John Deere Co. v. Am. Nat'I Bank, Stafford, 809 F.2d 1190, 1192 (5th Cir. 1987). The court therefore declines at this time to grant summary judgment dismissing plaintiffs' breach of fiduciary duty claims.
In light of plaintiffs' summary judgment response, which focuses on the denial of their right of appeal as the "fundamental issue" presented by their lawsuit, see Ps. Resp. at 2, they may not intend to prosecute breach of fiduciary claims based on the denial of copies of all documents concerning the Plan and the failure to provide the requested detailed explanation of the denial of the claim. Assuming arguendo that they do intend to do so, the court raises sua sponte that ADS is entitled to summary judgment dismissing these elements on the ground that a reasonable trier of fact could not find that ADS breached its fiduciary duty in these respects. It is well settled that the court may grant summary judgment sua sponte if it gives the adverse party proper notice. Mo. Pac. R.R. Co. v. Harbison-Fischer Mfg. Co., 26 F.3d 531, 539 (5th Cir. 1994); Arkwright-Boston Mfrs. Mut. Ins. Co. v. Aries Marine Corp., 932 F.2d 442, 445 (5th Cir. 1991).
Plaintiffs' own evidence shows that five business days after plaintiffs' July 26, 1999 letter, TPAA responded in writing, stating explicitly that their claim was denied based on the ATV exclusion, and specifying the page, section, and subsection number of the Plan where the exclusion could be found. Since plaintiffs themselves had prepared a claim form that stated they were seeking benefits for injuries that Friz had incurred when she was thrown from an ATV, no more detailed explanation was necessary. The letter included a copy of the Plan, and plaintiffs presumably had a copy of the claim form that they had prepared and submitted (or at least could recall the content), No additional documentation was required to deny a claim that was plainly excluded from coverage under the Plan.
The court can take judicial notice that July 26, 1999 was a Monday and August 2, 1999 was a Monday.
Accordingly, within 30 days of the date this memorandum opinion and order is filed, plaintiffs must file an opposition response to the court's granting summary judgment dismissing these two predicate elements for their breach of fiduciary duty claim (the third — based on ADS' alleged refusal to provide the Plan appeal process — is not the subject of this order and remains to be litigated). ADS may not file a reply brief unless the court invites it to do so.
IV
Plaintiffs also sue under § 1132(c) for statutory penalties based on ADS' failure to respond to plaintiffs' written requests for information concerning the steps to seek review of the denial of the claim, refusal to provide the Plan appeal process, refusal to provide copies of all documents concerning the Plan, and refusal to provide the requested detailed explanation of the denial of the claim. ADS moves for summary judgment dismissing plaintiffs' claims for statutory penalties, contending that they knew exactly where they stood regarding the Plan, that they were not harmed by non-disclosure, and that the denial of medical benefits was correct.
Congress enacted the ERISA disclosure provisions to ensure that "`the individual participant knows exactly where he stands with respect to the plan.'" Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 118 (1989) (quoting H.R. Rep. No. 93-533 at 11 (1973)). Imposition of the statutory civil penalty for the failure to provide requested documents is wholly within the discretion of the district court. Abraham v. Exxon Corp., 85 F.3d 1126, 1132 (5th Cir. 1996) (interpreting 29 U.S.C. § 1132(c)(1)). In making this determination, the court should consider the administrator's reasons for refusing to provide the information. Id The court may also consider whether the claimant was prejudiced by the administrator's failure to respond. Godwin v. Sun Life Assur. Co. of Can., 980 F.2d 323, 327 (5th Cir. 1992) (citing Paris v. Profit Sharing Plan for Empls. of Howard B. Wolf Inc., 637 F.2d 357, 362 (5th Cir. 1981)). "In determining whether to assess a penalty under this provision, courts generally consider factors such as bad faith or intentional conduct on the part of the administrator, the length of the delay, the number of requests made and documents withheld, and the existence of any prejudice to the participant or beneficiary." Hamilton v. Mecca, Inc., 930 F. Supp. 1540, 1556 (S.D. Ga. 1996).
The court grants ADS' motion to the extent plaintiffs' claims are based on plaintiffs' assertions that it failed to provide copies of all documents concerning the Plan and refused to provide the requested detailed explanation of the denial of the claim. As the court has explained above in raising summary judgment sua sponte, TPAA gave plaintiffs a sufficient explanation of why their claim was being denied and provided the one document (the Plan) that had a material bearing on the decision (plaintiffs had prepared the other one themselves). Moreover, under their own recitation of the evidence, plaintiffs asked ADS for information concerning the necessary steps to seek review of the denial of the claim and regarding the Plan appeal process. Plaintiffs requested that TPAA give them copies of all documents concerning the Plan and provide a detailed explanation of the denial of the claim.
The court is unable at this point, however, to conclude that ADS is entitled to summary judgment dismissing plaintiffs' claims for penalties arising from the appeal process. The evidence shows that the Plan provides for an appeal, establishes decisional deadlines, and requires the planholder to notify the covered person and explain any delays. The summary judgment evidence that ADS has adduced does not adequately address why ADS did not timely deny the appeal (considering the obvious basis in the Plan for doing so) or what motivated its conduct, nor has it explained the length of the delay. ADS' focus is on the absence of prejudice. See D. Br. at 3. While this is certainly one permissible (perhaps persuasive) factor that enters the discretionary equation, it is not the sole or even primary consideration. Because the court must have a more complete record before it can make this decision, it denies summary judgment in this respect.
In its brief, ADS argues on the basis of Firestone and Abraham that plaintiffs must have a colorable claim in order "to get access to the discretion of the court to award penalties." Id. The court disagrees. The passages of Firestone and Abraham on which ADS apparently relies address whether one can be an ERISA "participant," with standing to sue, even if he ultimately is not entitled to receive benefits under the plan. Whether plaintiffs have a colorable claim is more pertinent to a contention that they were not prejudiced by ADS' failure to comply with an information request.
V
ADS moves for summary judgment dismissing plaintiffs' claim for attorney's fees. In an ERISA action, the court in its discretion may allow reasonable attorney's fees to either party. See 29 U.S.C. § 1132(g)(1); Bellaire Gen. Hosp. v. Blue Cross Blue Shield of Mich., 97 F.3d 822, 832 (5th Cir. 1996). In exercising this discretion, the court must perform a two-part analysis. First, the court determines whether the party is entitled to an award of attorney's fees in light of the relevant factors. Second, if the party is so entitled, the court calculates the proper amount of the fee award. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1459 (5th Cir. 1995). The court determines whether a party is entitled to attorney's fees by weighing five factors: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to pay the fees; (3) whether an award of attorney's fees would deter other persons who will be acting under similar circumstances; (4) whether the party seeking attorney's fees sought to benefit all ERISA participants or beneficiaries or to resolve a significant legal issue; and (5) the relative merits of the parties' positions. Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351, 358 (5th Cir. 1991). No single factor is necessarily decisive, and some factors may be inapplicable to a specific case, "but together they are the nuclei of concerns that a court should address in applying" ERISA. Wegner v. Standard lns. Co., 129 F.3d 814, 821 (5th Cir. 1997) (quoting Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980)).
Because the court has not resolved at this juncture all of plaintiffs' claims on the merits, it cannot adequately assess the relevant factors. The court therefore denies ADS' motion in this respect.
* * *
The court grants in part and denies in part ADS' February 28, 2001 motion for summary judgment. Within 30 days of the date this memorandum opinion and order is filed, plaintiffs must file an opposition response to the court's granting summary judgment as to the two components of plaintiffs' breach of fiduciary duty claim at issue.
SO ORDERED.