Acosta v. WH Adm'rs, Inc.
| Decision Date | 26 March 2020 |
| Docket Number | Case No. RDB-18-1290 |
| Parties | R. Alexander ACOSTA, Secretary of Labor, Plaintiff, v. WH ADMINISTRATORS, INC., et al., Defendants. |
| Court | U.S. District Court — District of Maryland |
Geoffrey Forney, Andrea C. Luby, Ryan M. Kooi, United States Department of Labor Office of the Solicitor, Philadelphia, PA, for Plaintiff.
David Anthony Hill, Silver Spring, MD, for Defendants.
WH Administrators, Inc., pro se.
Brendan Turner, pro se.
Susanne Sheil, pro se.
Secretary of Labor R. Alexander Acosta ("Plaintiff" or "Secretary") brings this case in his official capacity on behalf of the Department of Labor against Defendants WH Administrators, Inc. ("WHA"), its Chief Executive Officer Brendan Turner ("Turner") and Chief Operating Officer Susanne Sheil ("Sheil") (collectively, "Defendants"), alleging violations of the Employee Retirement Income Security Act of 1974, as amended 29 U.S.C. § 1001, et seq. ("ERISA"), by failing to fund their welfare plans, denying legitimate claims by beneficiaries, engaging in various prohibited transactions, and accepting commissions from service providers. (Compl., ECF No. 1.) Currently pending before this Court is Plaintiff's Motion for Summary Judgment (ECF No. 38), which was filed on May 2, 2019 and as to which no responsive pleading has ever been filed. Also pending is Defendants’ Motion for Extension of Time (ECF No. 48), which was filed on August 30, 2019. The submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons that follow, Defendants’ Motion for Extension of Time (ECF No. 48) is DENIED AS MOOT, and Plaintiff's Motion for Summary Judgment (ECF No. 38) is GRANTED.
In ruling on the pending motion for summary judgment, the Court reviews the facts and all reasonable inferences in the light most favorable to the nonmoving party. Scott v. Harris , 550 U.S. 372, 378, 127 S. Ct. 1769, 167 L.Ed.2d 686 (2007) ; see also Hardwick ex rel. Hardwick v. Heyward , 711 F.3d 426, 433 (4th Cir. 2013). Defendant WHA and its corporate officers, Turner and Sheil, were in the business of selling and administering self-funded welfare benefit plans governed by the Employee Retirement Income Security Act of 1974 ("ERISA").
WHA was organized under the laws of the State of Texas on July 23, 2013, and was subsequently converted to a Maryland corporation. (Certificate of Formation, ECF No. 38-48.) It is headquartered in Bethesda, Maryland. (Answer ¶ 22, ECF No. 22.) Brendan Turner is its owner and Chief Executive Officer, and Susanne Sheil is its Chief Operating Officer. (Id. ¶¶ 23, 24.) Turner and Sheil are married. (Sheil Dep. Tr. At 11:5-9, ECF No. 38-27.) Both Turner and Sheil exercised actual control over the decision-making processes and day-to-day operations of WHA. (Id. at 10:1-12:13; Turner Dep. Tr. at 17:13-18:4, ECF No. 38-3.) They are the only individuals with signatory authority over WHA's bank accounts at Manufacturers and Traders Trust Company ("M&T Bank"), which holds on deposit the contributions paid by employers and employees to fund the welfare benefit plans that WHA administers. (Sheil Dep. Tr. at 33:4-7, 37:6-8, 47:18-48:6, ECF No. 38-27; Turner Dep. Tr. at 37:5-12, 140:2-12, 143:10-21, ECF No. 38-3.)
WHA designed, implemented, and administered welfare plans for its employer clients under ERISA (the "WHA Plans"). (Answer ¶ 78, ECF. No. 22; Turner Dep. Tr. at 12:10-20, 13:11-15, ECF No. 38-3.) Turner himself designed WHA's three types of standard self-insured employee welfare benefit plans for employers: the Basic Plan, the Patient Protection and Affordable Care Act of 2010 Plan ("PPACA"), and the Preferred Provider Organization Plan ("PPO"). (Answer ¶ 33, ECF No. 22; Turner Dep. Tr. at 56:3-57:13, 65:11-12, 104:3–4, 189:2-190:1, 196:3-4, 213:11-21, 223:7-19, 250:9-11, ECF No. 38-3; ECF No. 38-17 at 3.) Under the Plans, the employer's obligation for funding its welfare plans was to be limited to a maximum amount of required premium payments because any claims exceeding the overall premium payments would be covered by stop-loss insurance funded by the employer's premium payments. (Turner Dep. Tr. at 106:19-107:2, 108:5-20, ECF No. 38-3; ECF No. 38-17 at 3.) Turner never had an actuary assess the soundness of his plan designs. (Turner Dep. Tr. at 202:14-21, 204:14-205:11, ECF No. 38-3.)
WHA has designed, sold, and administered welfare plans for over one hundred employers. (Phillips Decl. ¶ 6, ECF No. 38-60; Client List, ECF No. 38-13.) Before July 31, 2018, WHA had approximately fifteen employer clients and administered their related welfare benefit plans. (Sheil Dep. Tr. at 17:18-20, ECF No. 38-27.) As of July 31, 2018, WHA no longer had a third-party administrator assigned to process and adjudicate medical claims for the WHA Plans. (Phillips Decl. ¶¶ 4, 12, ECF No. 38-60.)
WHA formed "Producer Agreements" with insurance brokers operating throughout the United States who solicited business on behalf of WHA. (Turner Dep. Tr. at 39:17-41:11, ECF No. 38-3; ECF Nos. 38-49, 38-50, 38-51.) These Producer Agreements required the insurance brokers to use the sales materials that WHA provided and to transmit to employers the proposals that WHA drafted to determine health insurance coverage. (ECF Nos. 38-49, 38-50, 38-51.) The sales materials informed employers that WHA Plans were "level-funded insurance plans," leading many employers to believe they were purchasing fully funded welfare plans for their employees to be funded by paying no more than the stated monthly premium and a compliance fee. (Meyer Decl. ¶¶ 3-4, 12, ECF No. 38-36; Romero Decl. ¶¶ 3, 5, 13, ECF No. 38-39; Ferrell Decl. ¶¶ 4, 12, ECF No. 38-37; Suntrup Decl. ¶¶ 4, 11, ECF No 38-40; ECF No. 38-52 at 6.) Turner also represented to employers that the WHA Plans would be underwritten by a stop-loss insurance carrier paid through contributions used to fund the plans. (Turner Dep. Tr. at 108:5-20, ECF No. 38-3; ECF No. 38-7.)
Turner's compliance proposals state that the welfare benefit plan at issue is "built upon unique underwriting guidelines," which he explained meant a calculation he performed based on the total number of employees, the gender percentages of the employee population, and any previous medical claims experience. (Turner Dep. Tr. at 188:8-189:19, ECF No. 38-3; ECF No. 38-16 at 5.) The proposals further state that WHA offers a "guaranteed cost structure which takes the risk off of the employer's plate and allows for accurate budgeting and project planning." (Id. ; ECF No. 38-55.) The premium rates in the proposals were set on a twelve-month timeframe. (Turner Dep. Tr. at 227:4-229:10, ECF No. 38-3; ECF No. 38-16 at 8.)
Employers accepted the compliance proposals by signing Compliance Service Agreements, which stated that WHA is obligated to "[e]stablish and administer a PPACA compliant medical plan design as outlined in the proposal" and which provided a schedule for the required monthly premium payments. (Turner Dep. Tr. at 16-19, 226:13-228:10, 228:2-3, ECF No. 38-3; ECF No. 38-19.) The Service Agreements also required WHA to "[e]nsure that funding requirements for the trust are properly set and that appropriate stop loss protection is in place, if needed." (ECF No. 38-19; ECF No. 38-56.) WHA was responsible for determining whether stop-loss insurance coverage was needed for each plan. (Turner Dep. Tr. at 135:7-12, 175:11-13, 242:2-12, ECF No. 38-3.)
The WHA Plans identified WHA as the "Plan Administrator" and "Named Fiduciary" with "sole, full and final discretionary authority to interpret all Plan provisions ..." and to "make determinations in regards to issues relating to eligibility for benefits." (ECF No. 38-20 at 2, 4, 48.) WHA had authority to delegate the adjudication of medical claims to a claims administrator. (Id. at 8, 47.) Under a Welfare Plan Services Agreement dated January 1, 2015, Defendants appointed Benefit Administrative Systems, LLC as the claims administrator responsible for adjudicating claims filed by participants of the WHA Plans. (Answer ¶¶ 82, 115, ECF No. 22; January 1, 2015 Service Agreement, ECF No. 38-64.) On January 1, 2017, Defendants retained Cypress Benefit Administrators, LLC ("Cypress") as the claims administrator. (Answer ¶ 83, ECF No. 22; WHA-Cypress Service Agreement, ECF No. 38-21.) On July 31, 2018, Cypress stopped providing services to WHA. (Phillips Decl. ¶ 12, ECF No. 38-60.)
Prior to July 31, 2018, under WHA and Cypress's Service Agreement, WHA was responsible for collecting "fees and premiums due from [employer] Clients" along with determining who was eligible for coverage under the employers’ plans. (WHA-Cypress Service Agreement, ECF No. 38-21.) Cypress was responsible for the receipt, adjudication, and processing of all medical claims. (Id. ) While Cypress was responsible for interpreting the governing plan documents and determining whether eligible plan participants were entitled to medical benefits, WHA was responsible for collecting and distributing plan assets to Cypress so that Cypress could pay the medical claims that it processed for payment. (Id. ; Turner Dep. Tr. at 76:20-78:9, 80:11-14, 81:16-82:2, 250:4-16, ECF No. 38-3; Sheil Dep. Tr. at 83:18-84:10, ECF No. 38-27.)
Turner and Sheil authorized the payment of claims from two of WHA's accounts at M&T Bank controlled by Turner and Sheil. (ECF No. 39-1 (SEALED); ECF No. 39-3 (SEALED); ECF No. 39-7 (SEALED); ECF No. 39-8 (SEALED).) Although WHA was required under the Service Agreements with its employer clients to help establish individual trust accounts to hold premium contributions, Turner failed to establish a separate trust account for every plan. (Turner Dep. Tr. at 243:15-244:2, ECF No. 38-3; Sheil Dep. Tr. at 49:2-5,...
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