Plan v. the Med. Coll. of Wis. Inc.

• Decision Date: 02 September 2011
• Docket Number: Nos. 10–2284,10–3046.,s. 10–2284
• Citation: 657 F.3d 496,51 Employee Benefits Cas. 2441
• Court: U.S. Court of Appeals — Seventh Circuit
• Parties: KOLBE & KOLBE HEALTH & WELFARE BENEFIT PLAN, et al., Plaintiffs–Appellants,v.The MEDICAL COLLEGE OF WISCONSIN, INC., et al., Defendants–Appellees.

657 F.3d 496

51 Employee Benefits Cas. 2441

KOLBE & KOLBE HEALTH & WELFARE BENEFIT PLAN, et al., Plaintiffs–Appellants,

v.The MEDICAL COLLEGE OF WISCONSIN, INC., et al., Defendants–Appellees.

Nos. 10–2284

10–3046.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 10, 2011.Decided Sept. 2, 2011.

Sarah A. Zylstra (argued), Attorney, Boardman, Suhr, Curry & Field, Madison, WI, for Plaintiffs–Appellants.Kenneth A. Hoogstra (argued), Terry E. Nilles, Attorneys, Von Briesen & Roper, S.C., Milwaukee, WI, for Defendants–Appellees.Before FLAUM and WILLIAMS, Circuit Judges, and HERNDON, District Judge.^*HERNDON, District Judge.

This is a suit by Kolbe & Kolbe Welfare Benefit Plan (the Plan), a self-funded employee welfare benefit plan, and its administrator and plan fiduciary, Kolbe & Kolbe Millwork Company (Kolbe & Kolbe) (collectively plaintiffs unless context dictates otherwise),¹ for the right to recover amounts the Plan paid on behalf of an uncovered person under the Plan to The Medical College of Wisconsin, Inc. (Medical College) and Children's Hospital of Wisconsin, Inc. (Children's Hospital) (collectively defendants unless context dictates otherwise). Plaintiffs brought suit alleging claims under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (ERISA), the federal common law of ERISA, and under state law. Over the course of several orders, the district court dismissed the complaint for failure to state a claim upon which relief could be granted and also granted attorney fees to the defendants. The attorney fees were the subject of a separate judgment and appeal (10–3026), however, this court, on its own motion, consolidated the appeals for briefing and disposition. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings.

I. Background

According to the plaintiffs' second amended complaint, the facts of which we accept as true, Dawson v. Newman, 419 F.3d 656, 658 (7th Cir.2005), Kolbe & Kolbe, sponsors and administers the Plan, a self-funded welfare benefit plan covered by ERISA that Kolbe & Kolbe offers to its employees. Scott Gurzynski was a Kolbe & Kolbe employee who was covered under the Plan. On approximately August 20, 2007, Gurzynski submitted to Kolbe & Kolbe an employee enrollment change form, seeking to add his daughter, K.G., born earlier that year, to the Plan. On the form, however, Gurzynski left several sections blank that were needed to determine whether his daughter would be covered as an eligible dependant under the Plan. Specifically, he did not indicate on the form whether the child resided with the employee, was dependent upon the employee for more than fifty percent support and maintenance, and whether the child qualified to be claimed as a tax exemption on the employee's or the employee's spouse's federal income tax return.

Because Gurzynski's employee enrollment change form was incomplete, Kolbe & Kolbe made numerous inquiries of Gurzynski to try and obtain the information necessary to determine whether K.G. was eligible to be covered under the Plan. Over three months later, on approximately November 28, 2007, Gurzynski informed Kolbe & Kolbe over the telephone that K.G. did not reside with him but rather lived with K.G.'s mother and that he was not claiming K.G. as a tax exemption. Approximately two days later, Kolbe & Kolbe met with Gurzynski and informed him that it needed additional information and requested Gurzynski to send it to Kolbe & Kolbe as soon as possible. Thereafter, Kolbe & Kolbe made numerous attempts to solicit from Gurzynski the information Kolbe & Kolbe deemed necessary to make a coverage determination. After several months of inquiry, Kolbe & Kolbe reviewed the still inadequate information that it was able to obtain from Gurzynski and denied Gurzynski's request for coverage under the Plan for K.G. On June 24, 2008, over ten months from the date of Gurzynski's application, Kolbe & Kolbe sent Gurzynski notification of this decision by letter, informing Gurzynski that K.G. was not eligible for coverage during 2007 and that any claims submitted to the Plan since January 1, 2007, would be reprocessed. No appeal of this decision was ever filed.

The Plan contained a “Right to Request Overpayments” provision. That provision provided as follows:

“The Plan reserves the right to recover any payments made by the Plan that were:

• Made in error; or

• Made after the date the person should have been terminated under this Plan; or

• Made to any Covered Person or any party on a Covered Person's behalf where the employer determines the payment to the Covered Person or any party is greater than the amount payable under this Plan.

The Plan has the right to recover against Covered Persons if the Plan has paid them or any other party on their behalf.”

The Plan defined “Covered Person” as “an Employee or Dependent who are [sic] enrolled under this Plan.” Both the definition of “Employee” and “Dependent” direct to “see [the] Eligibility and Enrollment section of this [Summary Plan Description.]”

From the time Gurzynski's form was submitted, and before, until the time the decision was made to deny coverage, K.G. was treated as an inpatient at Children's Hospital by physicians of the Medical College on at least four separate occasions (August 3, 2007, September 27, 2007, January 4, 2008, and February 8, 2008). K.G. received discounted treatment from Children's Hospital and Medical College because both defendants had entered into physician or provider agreements (the provider agreements) with third-party network providers ² who had entered into member or service agreements with Kolbe & Kolbe ³ whereby Kolbe & Kolbe agreed to pay a fee in exchange for discounted health services that the third-party network providers had procured with Medical College and Children's Hospital in the provider agreements. Under the terms of the provider agreements, Medical College and Children's Hospital agreed to provide “Covered Services” to eligible Plan employees and their dependents. “Covered Services” was defined to mean those medical services covered under a Plan, subject to any limitations on such coverage as may contained in such Plan.⁴ Kolbe & Kolbe was listed as a third-party beneficiary of the provider agreements.

Upon each admission to Children's Hospital, either K.G.'s mother or Gurzynski executed a Children's Hospital and Health System (CHHS) agreement on behalf of K.G., which included a “financial agreement” provision that stated as follows: “I hereby assign all insurance benefits, to which the patient is entitled, to CHHS or to any physician or provider who may provide care to the patient during treatment. I understand that I am financially responsible to the above providers for charges not covered by insurance.”

Following K.G.'s treatment, Medical College and Children's Hospital submitted invoices and requests for payment to the Plan.⁵ The Plan made payments in the amount of $472,357.84 to Medical College and $1,199,538.58 to Children's Hospital. Because Kolbe & Kolbe determined that K.G. was not covered under the Plan, however, Kolbe & Kolbe made demands to Medical College and Children's Hospital to return all payments made by the Plan. Both Medical College and Children's Hospital refused, leading to this lawsuit.

On April 6, 2009, plaintiffs filed their complaint, and on May 4, 2009, defendants filed a motion to dismiss. Prior to the court ruling on that motion, plaintiffs filed an amended complaint and defendants filed a motion to dismiss the amended complaint, specifically plaintiffs' § 502(a)(3) count under ERISA. Defendants attached the Plan in support of its motion. On October 6, 2009, the court entered an opinion and order, concluding “that plaintiffs have not stated a plausible claim for relief under § 502(a)(3) ... [but allowed] them an opportunity to add to their complaint factual allegations that would show that they have plausible grounds for asserting an equitable lien against defendants.” Kolbe & Kolbe Health & Welfare Benefit Plan v. Med. Coll. of Wis., Inc., 2009 WL 3245108, at *1, 2009 U.S. Dist. LEXIS 93067, at *2 (W.D.Wis. Oct. 6, 2009). The court also noted that “ordinarily, in ruling on a motion to dismiss, under Rule 12(b)(6), the court may consider only the complaint,” but concluded that “in cases like this one, in which plaintiffs have referred to a document ... in the complaint and the document is central to the claims at issue, the court may consider it as part of the pleadings.” Id. at *1, 2009 U.S. Dist. LEXIS 93067 at *3 (citing Fed.R.Civ.P. 10(c)). Thus, the court also considered the Plan defendants submitted and ordered plaintiffs “to file copies of any agreements between them that would bear on plaintiffs' right to pursue equitable relief, together with any supplemental briefing they wish to submit.” Id. at *1, *7, 2009 U.S. Dist. LEXIS 93067 at *3, *20.

On October 21, 2009, plaintiffs filed their second amended complaint, seeking to recover under three theories: (1) equitable relief under § 502(a)(3) of ERISA; (2) an independent cause of action under the federal common law of unjust enrichment; and (3) relief for breach of contract under state law. Attached to the complaint were nine exhibits: a physician agreement between Medical College and NCHA; a member agreement between Kolbe & Kolbe and NCHA; a provider agreement between Children's Hospital ⁶ and Bowers; a physician agreement between Children's Medical Group and Bowers; a services agreement between Bowers and Kolbe & Kolbe; and four CHHS agreements, two of which were signed by K.G.'s mother and two signed by Gurzynski.

Defendants filed a motion to dismiss the second amended complaint, specifically plaintiffs' claim under § 502(a)(3) of ERISA. On November 17, 2009, the court found that plaintiffs had failed to state a claim upon which relief could be granted under § 502(a)(3) because they were seeking...