Opinion
04-CV-6081 CJS.
September 15, 2004
Scott D. Moore, Esq., Moore, Woodhouse Pawlak LLP, Elmira, New York, for the Plaintiff.
Healthnow New York, Inc., Frank V. Balon, Esq., Webster Szanyi LLP, Buffalo, New York, for the Defendant.
RMTS Associates, LLC and Trustmark Insurance Company, Jill Lesser, Esq., New York, New York, for the Defendants.
DECISION AND ORDER
INTRODUCTION
This state law breach of contract case, with additional claims under federal law, is before the Court under federal question jurisdiction to decide a motion to dismiss filed by defendants RMTS Associates, LLC ("RMTS") and Trustmark Insurance Company ("Trustmark") (together, "defendants"). For the reasons that follow, the Court grants defendants' motion (# 6).
PROCEDURAL HISTORY
Plaintiff commenced this case in New York State Supreme Court, Chemung County, by filing a summons and complaint and serving the same on all defendants. Defendant HealthNow New York, Inc. ("HealthNow") filed a notice of removal in this Court alleging federal question jurisdiction under the Employee Retirement Income Security Act (ERISA), Pub.L. 93-406, Title I, § 2, Sept. 2, 1974, 88 Stat. 832. Notice of Removal (Mar. 2, 2004). HealthNow then filed an answer in this Court to the original complaint. That complaint had alleged two common law claims of breach of contract against all defendants. Subsequently, plaintiff filed an amended complaint ("complaint"), the one at issue here, that alleges four causes of action against defendants: (1) breach of contract against RMTS and Trustmark; (2) an ERISA breach of fiduciary duty claim against RMTS and Trustmark; (3) an ERISA breach of fiduciary duty claim against HealthNow; and (4) a breach of contract claim against HealthNow.
FACTUAL BACKGROUND
As is required on a motion to dismiss, the Court assumes that all the allegations in the complaint are true and reads the complaint in the light most favorable to plaintiff. See H.J. Inc. v. Northwest Bell Telephone Co., 492 U.S. 229, 249 (1989). In 1999, plaintiff negotiated with HealthNow to establish a self-funded medical insurance plan ("plan") for its employees. Complaint ¶ 6. The plan is not attached to the documents filed with the Court, but the complaint indicates that the plan's first year began on April 1, 1999 and ran through March 31, 2000. Id. ¶ 7. The plan's administrator was defendant HealthNow. Id. ¶ 10. Although the complaint states that HealthNow obtained stop loss insurance coverage for the plan, the stop loss insurance contract, attached to defendants' motion papers, shows that only plaintiff and Trustmark were parties to that contract. Cf. complaint ¶ 9 with Stop Loss Contract Specific Excess Coverage (attached as Ex. A to Lesser cert. (document # 8) (Apr. 2, 2004)).The Stop Loss Contract Specific Excess Coverage contract ("contract") provided coverage up to $1,000,000 per employee, after a $50,000 per-employee deductible, for medical costs paid under plaintiff's plan. The contract lists the "contract holder" as plaintiff and the plan administrator as HealthNow. Contract at 1, 3. The contract provides plaintiff with reimbursement for medical expenses paid out to employees in excess of the deductible. Contract Part III. B., at 5. The contract also requires the "Contract Holder or Plan Administrator" to provide monthly reports to Trustmark of claims made on the plan, and in Part V., lays out the specific and detailed information required in the monthly reports. Contract Part III. B., at 5; Part V., at 6-7. In addition to the monthly reporting requirement, the contract also requires that immediate notification be sent to Trustmark of any employee who, inter alia, has received cancer treatment. Contract Part V., at 7. Like the plan, the contract was effective from April 1, 1999 through March 31, 2000. Contract at 3. Additionally, the contract contained an option to renew. Contract at 11.
After the plan and contract were in place, one of plaintiff's employees was hospitalized for cancer treatment in January 2000. Complaint ¶ 15. On March 31, 2000, RMTS, as agent for Trustmark, issued a renewal for the contract running from April 1, 2000 through March 31, 2001. Id. ¶ 17. In October 2000, plaintiff "realized that there was a claim to be made on the stop loss coverage which was triggered when a claim exceeded a threshold of $50,000." Complaint ¶ 18. Plaintiff requested HealthNow to make the claim, and then alleges that HealthNow "instituted a process of obtaining a confidentiality agreement between [d]efendant HealthNow, [p]laintiff, [d]efendant RMTS and [d]efendant Trustmark." Id. ¶ 20. Plaintiff does not explain the significance of the confidentiality agreement to the claims, but says that it was signed after February 22, 2001. Id. ¶ 21. After requesting supporting documentation between February and June 2001, RMTS then denied the claim in September 2001. Id. ¶¶ 22-23. Evidently that denial was not enough, because plaintiff states, without further factual background information, that "RMTS as agent for [d]efendant Trustmark made a final denial for claim" on May 1, 2002. Complaint ¶ 24.
Plaintiff's complaint does not state whether the claim mentioned here is related to the cancer patient's treatment the previous January, but the clear implication of the complaint is that it is.
In its review of the contract, the Court does not find any provision pertaining to appeal of denied claims.
ANALYSIS
In considering a motion for dismissal under Rule 12, a moving defendant must show that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. See H.J. Inc. v. Northwest Bell Telephone Co., 492 U.S. 229, 249 (1989); see also 2 MOORE'S FEDERAL PRACTICE, § 12.34[1][a] (Matthew Bender 3d ed.). As previously stated, the Court must view the complaint, and draw all reasonable inferences, in the light most favorable to the non-moving party. Id.; see also 2 MOORE'S FEDERAL PRACTICE, § 12.34[1][b] (Matthew Bender 3d ed.) (court must accept plaintiff's factual allegations as true).
Jurisdiction
A district court is required to remand a removed case "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction," 28 U.S.C. § 1447(c). Therefore, before addressing the parties contentions on the motion, the Court will analyze whether it properly has jurisdiction over the complaint. The original complaint made no specific mention of ERISA; however, the complaint at issue here plainly alleges breaches of duties arising from ERISA as well as common law breach of contract. As the Second Circuit recently held,
The Supreme Court long ago explained that "if the plaintiff really makes a substantial claim under an act of Congress, there is jurisdiction whether the claim ultimately be held good or bad." The Fair v. Kohler Die Specialty Co., 228 U.S. 22, 25 (1913) (Holmes, J.). In other words, the question of whether a federal statute supplies a basis for subject matter jurisdiction is separate from, and should be answered prior to, the question of whether the plaintiff can state a claim for relief under that statute.
The jurisdictional inquiry is rather straightforward and depends entirely upon the allegations in the complaint: "where the complaint . . . is so drawn as to seek recovery directly under the Constitution or laws of the United States, the federal court, but for two possible exceptions later noted, must entertain the suit." Bell v. Hood, 327 U.S. 678, 681-82 (1946). The two exceptions occur "where the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous." Id. at 682-83. Thus, in order to sustain federal jurisdiction, the complaint must allege a claim that arises under the Constitution or laws of the United States and that is neither made solely for the purpose of obtaining jurisdiction nor wholly insubstantial and frivolous.Carlson v. Principal Financial Group, 320 F.3d 301, 306 (2d Cir. 2003). No party contests jurisdiction and the Court does not find that the ERISA claims are made solely to obtain jurisdiction.
Motion to Dismiss
As previously stated, plaintiff's complaint makes four claims, only two of which are relevant to the pending motion to dismiss: (1) breach of contract against RMTS and Trustmark; and (2) an ERISA breach of fiduciary duty claim against RMTS and Trustmark. Defendants claim they are entitled to dismissal for failure to state a cause of action on the theories that: they did not breach the agreement; RMTS was not a party to the contract at issue here; and neither is a fiduciary under ERISA.
Contract Claims
After reviewing the complaint, the Court determines the moving defendants have shown that plaintiff can prove no set of facts in support of its common law breach of contract claims that would entitle it to relief. With regard to the contract claims, plaintiff alleges a duty on defendants' part to enforce the provisions of the contract requiring plaintiff to provide Trustmark with monthly reports. Complaint ¶ 28. However, the contract's provisions clearly state the contrary. It was upon plaintiff or its plan administrator, not Trustmark or its agent, that the contract imposed a duty to submit monthly reports to Trustmark (referred to as the "Company" in the contract). Contract Part III. B. ("The Contract Holder or Plan Administrator must give the Company a statement. . . ."); Part V. ("The Plan Administrator shall give the Company a written statement. . . ."); Part V.(5) ("the Plan Administrator must also notify the Company immediately when it discovers any claim" for cancer treatment.). The plan administrator, HealthNow, was not listed in the contract as a party. Contrary to plaintiff's contentions, the complaint does not allege any facts that could sustain a claim that Trustmark, or RMTS, or both, failed to follow the requirements of the contract on the theory that HealthNow and plaintiff were not submitting monthly reports, or failed to immediately submit information about the employee undergoing cancer treatment. Thus, plaintiff's contract claims against Trustmark and RMTS must be dismissed for failure to state a cause of action against them.
ERISA Claims
The Court agrees with plaintiff that the contract's waiver of ERISA's application is not determinative of its ERISA claims against defendants. See 29 U.S.C. § 1002(21)(A) (definition of fiduciary). However, the Court is not persuaded that plaintiff will be able to prove any set of facts to show that either Trustmark, or RMTS, was an ERISA fiduciary, or that either breached a fiduciary duty.
First, plaintiff is a New York Corporation evidently engaged in the beverage business. Plaintiff alleges no facts to show that it is a plan administrator, beneficiary, or participant. Plaintiff's law suit seeks not equitable relief, as allowed under ERISA, but money damages. As defendants correctly point out, plaintiff has not identified any particular section of ERISA under which it is claiming relief. When considering a similar issue, the Northern District of New York wrote,
[u]nfortunately for plaintiff, neither § 1132(a)(2) nor § 1132(a)(3) allows an individual to recover damages. First, the Supreme Court has ruled that breach of fiduciary duty claims brought pursuant to § 1132(a)(2) inure to the plan, not to the individual beneficiary. Massachusetts Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). According to the Court, "neither the statute nor the legislative history [of § 1132(a)(2)] reveals a congressional intent to create a private right of action." Id. Russell therefore bars plaintiff from suing under § 1132(a)(2), since he seeks damages on his own behalf, rather than on behalf of the plan. See Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993).
Second, while § 1132(a)(3) confers standing upon individual beneficiaries or participants, it does so only to the extent that such individuals seek "appropriate equitable relief" for violations of ERISA. Burkhart, 991 F.2d at 1011. Money damages are generally unavailable under this section. Id.; Alfarone v. Bernie Wolff Constr. Corp., 788 F.2d 76, 79 (2d Cir. [1986]), cert. denied, 479 U.S. 915 (1986). "The plain language of the statute does not provide for monetary relief and a review of the legislative history confirms that Congress did not contemplate that this phrase would include an award of money damages." Burkhart, 991 F.2d at 1011; see also Novak v. Andersen Corp., 962 F.2d 757, 759-61 (8th Cir. 1992), cert. denied, 124 L. Ed. 2d 678 (1993) (reviewing legislative history of ERISA and concluding that § 1132(a)(3) does not authorize awards of money damages). Since plaintiff seeks monetary damages, rather than equitable relief, he is precluded under Burkhart from suing under § 1132(a)(3).McCabe v. Trombley, 867 F. Supp. 120, 125-26 (N.D.N.Y. 1994).
Even if the Court were to determine that plaintiff is suing in a fiduciary capacity for the benefit of the plan (a determination the Court cannot easily make from the present complaint), plaintiff still would have to show that the suit fits under ERISA's civil enforcement section. Id. ERISA sets forth a comprehensive civil enforcement scheme that provides in pertinent part:
§ 1132. Civil enforcement
(a) Persons empowered to bring a civil action. A civil action may be brought —
(1) by a participant or beneficiary —
(A) for the relief provided for in subsection (c) of this section [concerning the administrator's refusal to supply requested information], or
(B) 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;
(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 409 [ 29 U.S.C. § 1109] [breach of fiduciary duty];
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (I) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan. . . .29 U.S.C. § 1132(a) (2004). The only possible fit here would be under paragraph (2), authorizing a suit under section 409, which provides, in pertinent part,
(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.29 U.S.C. § 1109 (2004). ERISA contains the following definition of a fiduciary:
a person is a fiduciary with respect to a plan to the extent (I) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. . . .29 U.S.C. § 1002(21)(A). Although the Ninth Circuit has held that stop loss checks issued by a stop loss insurer were plan assets for a self-insured plan, see Patelco Credit Union v. Sahni, 262 F.3d 897, 908 (9th Cir. 2001), the Court has found no case directly holding that a stop loss insurer is automatically a plan fiduciary. In fact, the Court's research has revealed case law on point that is contrary to plaintiff's position in this case: Union Health Care, Inc. v. John Alden Life Ins. Co., 908 F. Supp. 429 (S.D. Miss. 1995) (stop loss insurer not a fiduciary under ERISA); Capital Mercury Shirt Corp. v. Employers Reinsurance Corp., 749 F. Supp. 926, 931 (W.D. Ark. 1990) (settlor's lawsuit sought to recover damages for it, not the plan, thus it did not allege breach of fiduciary duty under the plan).
Evaluating plaintiff's allegations in light of the requirements of ERISA's fiduciary definition, the Court finds that plaintiff cannot prove any set of facts that would entitle it to relief on its claims that either Trustmark or RMTS is a fiduciary under ERISA. Neither defendant is a beneficiary, participant, or plan administrator; neither exercises any discretionary authority or discretionary control respecting management of the plan; neither exercises any authority or control respecting management or disposition of plan assets; neither renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so; and neither has any discretionary authority or discretionary responsibility in the administration of the plan. At best, Trustmark and RMTS might be said to be in a position to indirectly affect the plan's finances. Cf. U.S. v. Glick, 142 F.3d 520 (2d Cir. 1998) (holding that an insurance broker was a fiduciary under § 1002(21)(A) since broker collected monies due to plan). An indirect financial impact on a plan is an insufficient basis upon which to justify finding that defendants are ERISA fiduciaries. See Atlantis Health Plan, Inc. v. Local 713, 258 F. Supp. 2d 284, 293 (S.D.N.Y. 2003) (indirect economic impact on an ERISA plan resulting from conduct that may be actionable under ERISA does not, in itself, suffice to compel federal preemption).
Reasoning from the Ninth Circuit's decision in Sahni, the Court could not find that plaintiff's claim on the contract constituted an asset over which Trustmark and RMTS had control, such that they should be considered fiduciaries. Had either issued a check, and, for example, sent it to the wrong individual, then the Ninth Circuit's decision would clearly apply. However, those are not the factual allegations here.
Plaintiff relies on Brock v. Gerace, 635 F. Supp. 563, 567-68 (D.N.J. 1986) to argue that even if defendants are not plan fiduciaries, they should nevertheless be held liable under ERISA. Pl.'s Mem. of Law at B. That case, however, involved a non-fiduciary who assisted a fiduciary to commit a breach of his duties under the plan. The district court relied on trust law principles not applicable under the facts alleged here:
Plaintiff's memorandum does not contain page numbers, but the argument appears at the end of the section labeled "B. ERISA Coverage Cannot be Disclaimed."
Under the traditional principles of trust law . . . a third party who assisted a trustee in committing a breach of trust would be held liable in an action brought by the beneficiary. Restatement (Second) of Trusts § 326 (1959); Bogert, Trusts and Trustees § 901 (rev. 2d ed. 1982).Brock, 635 F. Supp. at 566-67. Plaintiff has alleged no facts showing that Trustmark or RMTS assisted a trustee to breach its duties to the plan.
CONCLUSION
For the foregoing reasons, defendants Trustmark and RMTS are entitled to dismissal. Their motion (# 6) is granted and the first and second causes of action in the complaint are dismissed.