Waxman v. HARDAWAY CONST. CO., INC.

• Decision Date: 07 March 1988
• Docket Number: No. 3-85-1066.,3-85-1066.
• Citation: 693 F. Supp. 587
• Parties: Stanley R. WAXMAN, et ux, et al. v. HARDAWAY CONSTRUCTION COMPANY, INC., et al.
• Court: U.S. District Court — Middle District of Tennessee

693 F. Supp. 587

Stanley R. WAXMAN, et ux, et al. v. HARDAWAY CONSTRUCTION COMPANY, INC., et al.

No. 3-85-1066.

United States District Court, M.D. Tennessee, Nashville Division.

March 7, 1988.

Stanley R. Waxman, Memphis, Tenn., pro se.

Douglas Fisher and Thomas M. Pinckney, Jr., Howell, Fisher, Branham & North, Nashville, Tenn., for defendants Hardaway Const. Co., Inc., Employee Benefit Plan, Charles Hardaway, Hardaway Const. Co., Inc., L. Hall Hardaway, Sr., L. Hall Hardaway, Jr., and American Group Administrators, Inc.

John S. Bryant, Bass, Berry & Sims, Nashville, Tenn., for defendant Lafayette Life Ins. Co.

MEMORANDUM

JOHN T. NIXON, District Judge.

This is an action brought by Stanley Waxman, his wife, Jean Waxman, and his son, Michael L. Waxman, to recover from the defendants certain medical and hospital expenses pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S. C. § 1001, et seq. ("ERISA"). Plaintiffs contend that such payments are due them by reason of their participation in a program providing medical and hospitalization coverage, and life insurance coverage, known as the Hardaway Construction Company, Inc. Employee Benefit Plan (hereinafter referred to as the "Hardaway Plan"). Defendants Hall Hardaway, Sr., Hall Hardaway, Jr., Charles Hardaway, Hardaway Construction Company, Inc., the Hardaway Plan, and American Group Administrators, Inc. (hereinafter referred to as the "Hardaway defendants"), assert two defenses. First, they contend that plaintiffs have no statutory standing to bring this action under ERISA because plaintiffs were never ERISA participants or beneficiaries. Second, they assert that plaintiffs were terminated from the Hardaway Plan for nonpayment of premiums prior to the date upon which the hospital and medical expenses in question were incurred and that plaintiffs were never reinstated after their termination. Defendants Donald Luna and LHC & Associates, Inc. have not answered the complaint and did not appear at trial. Plaintiffs' claims against Lafayette Life Insurance Company, and all issues related to damages, were severed from the trial to determine the liability of the remaining defendants by Order entered July 15, 1987. The first phase of the trial in this matter was tried by the Court, without a jury, on July 15, 1987. This Memorandum constitutes the Court's findings of fact and conclusions of law in accordance with Rule 52 of the Federal Rules of Civil Procedure.

I. FINDINGS OF FACT

The principal characters in this lawsuit are plaintiff Stanley Waxman and defendants Hall Hardaway, Jr., Donald Luna, and Charles Hardaway. Plaintiff Stanley Waxman is a financial consultant with an extensive business background. At one time he was responsible for an insurance program and negotiated insurance contracts with insurers and reinsurers. Defendant Hall Hardaway, Jr., was and is vice chairman of Hardaway Construction Company. He is active in 150 partnerships and ten corporations, including defendant Hardaway Construction Company. He is one of the trustees of the Hardaway Plan. Defendant Donald Luna was a mortgage broker in the business of procuring loans. Defendant Charles Hardaway was the Hardaway Plan's coordinator.

Waxman, Luna, and Hall Hardaway, Jr. first became acquainted in 1980 when Waxman and Luna presented a business proposition to Hall Hardaway, Jr. concerning Poole Truck Line. Hardaway rejected this venture. Subsequently, Waxman and Luna agreed that Waxman would do loan brokering work for Luna on an independent contractor basis.

In early 1982, Hall Hardaway, Jr. agreed to allow Luna and some of his business associates to use office space owned by Hardaway Construction Company. Hardaway hoped that Luna would be able to secure financing for construction projects in which Hardaway was involved. Hardaway also advanced money to Luna and allowed him to use credit cards with the expectation that these sums would be recouped from fees Luna would earn by arranging loans. Neither Luna nor Waxman was ever on the regular payroll of any Hardaway entity.

In the summer of 1982, Luna asked Hall Hardaway, Jr. if Luna and one or two of his associates could participate in the Hardaway Plan, which provided hospitalization and medical coverage, and life insurance for participants, and afforded them an option to make this coverage available to their dependents upon payment of the premium. Luna agreed to pay for the participation of himself and his associates. Hardaway agreed to permit Luna and his associates to participate, and Waxman was enrolled in the Hardaway Plan on July 1, 1982. Waxman was issued an enrollment card and was given a booklet outlining the benefits available under the plan. Waxman allowed his other health insurance coverage to lapse in reliance upon his status as a participant in the Hardaway Plan.

Waxman viewed his participation in the Hardaway Plan as a gift or "perk." He testified that he did not know and could care less who made the gift. Defendant Charles Hardaway, the Hardaway Plan's insurance coordinator, issued invoices to Luna for premiums due under the Hardaway Plan for Luna and his associates. Hardaway did not send premium notices directly to Waxman.

Waxman, his wife, and his son were participants in the Hardaway Plan beginning June 1, 1982, and all claims submitted by plaintiffs for medical expenses that were incurred from June 1, 1982, until October 31, 1982, were paid by the Hardaway Plan. On July 1, August 1, September 1, and October 1, 1982, however, Charles Hardaway sent Luna invoices advising him that Waxman's payments were delinquent. Hardaway relied on Luna to pay the invoices or give them to Waxman. On August 19, 1982, Pappy Grove, an associate of Luna, sent a notice to Hardaway advising him that "we have contacted Stanley Waxman today requesting his payments due." Waxman denies that he received the invoices Hardaway sent to Luna, but he acknowledges that he received notice from Luna's office that his payments were overdue.

On October 30, 1982, Luna submitted a check to Charles Hardaway to pay premiums owed by himself and Peggy Smith, one of Luna's associates. Luna paid no premium on Waxman's behalf, and no premium for Waxman had yet been received from any source. As a result, Charles Hardaway terminated Waxman from the Hardaway Plan on October 31, 1982, but Hardaway did not communicate this fact to Waxman immediately. Thereafter, however, Charles Hardaway sent Waxman four notices that he had been terminated from the Hardaway Plan.

First, in January of 1983, Charles Hardaway received bills for medical services rendered to one of Waxman's dependents, but Hardaway returned the bills to Waxman. In a letter sent to Waxman on January 20, 1983, accompanying the return of these bills, Hardaway informed Waxman that coverage had been terminated on October 31, 1982. Waxman denies that he received this letter. Second, on February 1, 1983, in another letter sent to Waxman, Charles Hardaway states: "We are returning claim on Michael Waxman for services rendered after expiration date of November 1, 1982." Waxman also claims he did not receive this letter. Third, in February of 1983, Waxman was told directly by Charles Hardaway that he had been terminated. Waxman acknowledges that Hardaway told him this, but stated that he did not accord it much credence because Luna and Hall Hardaway, Jr., had given him conflicting information. Waxman stated, however, that he knew that Charles Hardaway was the Hardaway Plan insurance coordinator and that when Waxman had claims he submitted them to Charles Hardaway. Fourth, in May of 1983, defendant American Group Administrator's Inc. sent a form to Charles Hardaway that Hardaway then sent to Waxman. In the "Remarks" section of that form, Waxman again was informed that his policy was terminated on October 30, 1982. Waxman acknowledged that he had received this form.

In February of 1983, Luna's corporation, LHC & Associates, Inc., became entitled to $193,000 from Imperial Associates, Inc., a Hardaway development corporation. Charles Hardaway determined that Luna and his associates owed the Hardaway Plan the sum of $3,260.60. Part of this was to go toward the premiums owed by Waxman for the time period ending in October of 1982 when he was covered by the Hardaway Plan. This sum incorrectly included a premium for Waxman for November of 1982. This was the only payment ever made on behalf of Waxman, and it was made four months after he had been terminated from the Hardaway Plan.

On March 3, 1983, Luna asked Hall Hardaway, Jr. to write Waxman a check for $40,000. Luna told Hardaway that Waxman needed the money because his house was being foreclosed upon. Hardaway wrote the check with the understanding that Luna and LHC & Associates, Inc. would be responsible for repayment. Luna testified that the $40,000 paid to Waxman was given as an advance of money that was to be due Luna on a venture in Mississippi.

In June of 1984, Luna called Hall Hardaway, Jr. and asked if Hardaway could help get Michael Waxman admitted into Baptist Memorial Hospital in Memphis. Luna said he would take care of the payments. Hall Hardaway, Jr. said that he did not think that Waxman had any coverage under the Hardaway Plan, but would check to see. Luna later talked to Charles Hardaway and told Hardaway to send the bills for Michael Waxman's hospitalization to Luna. When a person from the Memphis hospital contacted Charles Hardaway, Hardaway told the person to send all bills to him. After receiving the bills, Hardaway forwarded them to Luna.

The Hardaway Plan contained a conversion privilege that allowed certain persons to continue under the plan after terminating their employment with the Hardaway Construction Company, Inc. This provision stated:

CONVERSION TO AN INDIVIDUAL MEDICAL POLICY

If your coverage ceases because of termination of employment, you are entitled to convert to an Individual Medical Insurance Policy,

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