Biomet, Inc. Health Benefit Plan v. Black

• Decision Date: 21 May 1999
• Docket Number: No. 3:98 CV 348 AS.,3:98 CV 348 AS.
• Parties: BIOMET, INC. HEALTH BENEFIT PLAN, Plaintiff, v. Marita BLACK, Kelcey Black, Rochester City Dray, Inc., Gary A. Houser, and Carolina Casualty Company, Defendants.
• Court: U.S. District Court — Northern District of Indiana

51 F.Supp.2d 942

BIOMET, INC. HEALTH BENEFIT PLAN, Plaintiff, v. Marita BLACK, Kelcey Black, Rochester City Dray, Inc., Gary A. Houser, and Carolina Casualty Company, Defendants.

No. 3:98 CV 348 AS.

United States District Court, N.D. Indiana, South Bend Division.

May 21, 1999.

COPYRIGHT MATERIAL OMITTED

Stephanie A. Smithey, Gary J. Dankert, Ice Miller Donadio and Ryan, Indianapolis, IN, for Biomet Inc. Health Banefit Plan, plaintiff.

Keith A. Gaston, Cynthia M. Locke, White and Raub, Indianapolis, IN, for defendants.

MEMORANDUM AND ORDER

ALLEN SHARP, District Judge.

This cause is before the Court on Plaintiff's Motion for Summary Judgment and Defendants' counter-motion for Judgment on the Pleadings. The Court heard oral argument on May 10, 1999 and the parties have fully briefed the issues. Having considered same, the Court now addresses both motions.

JURISDICTION

Jurisdiction is based upon the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. and specifically on ERISA § 502(a)(3)(B)(i) and (ii).¹

BACKGROUND

Plaintiff, Biomet Inc. Health Benefit Plan (Plan), is a self-funded employee welfare benefit plan established pursuant to and governed by ERISA. The Plan was established by Biomet to provide employee members and their beneficiaries certain medical, surgical and other benefits as described in the plan.

The Plan filed its Complaint against Defendants to enforce a subrogation lien for medical payments of $91,006.02 it made on behalf of Kelcey Black for injuries he received in a motor vehicle accident in December, 1991.² Defendants Rochester City Dray, Inc. and Houser were allegedly liable for that accident. The Blacks sued Rochester City Dray and Houser and eventually reached a settlement agreement with them and their insurance carrier, Carolina Casualty.³ As a result of the settlement agreement Kelcey Black received an immediate payment of $40,025. In addition, an annuity was purchased for $19,975 to fund two future payments of $15,000 each in the years 2001 and 2006. The Plan asserts that its subrogation lien⁴ and the terms of the settlement agreement⁵ entitle it to recover the full $91,006.02 paid out on behalf of Kelcey Black. The Plan's complaint also purports to seek monetary damages, reimbursement and/or declaratory judgment, equitable relief, as well as attorneys' fees and costs.

Defendants contend that: 1) the Plan is an improper plaintiff pursuant to ERISA; 2) the third parties are improper defendants; 3) the Plan's demand for full reimbursement requires de novo review; 4) the Plan's demand for $78,759 is overreaching and unreasonable; 5) the Plan is not entitled to attorney fees; and 6) prejudgment interest is payable only on the original payment less the costs of recovery.

DISCUSSION

As a general rule, the subrogation rights of an ERISA-qualified employee medical benefits plan are enforceable against both the employee-beneficiary and/or a third-party tortfeasor who is held responsible for the injuries to the employee-beneficiary. Theresa G. Fremont, Annotation, Treatment of Subrogation Rights of ERISA-Qualified Self-Funded Employee Benefit Plans, 138 A.L.R.Fed. 611 (1997). In this regard, state statutes that limit or prohibit subrogation with respect to such plans are generally preempted by ERISA.⁶ See FMC Corp. v. Holliday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990). Among the federal courts in this circuit that have considered the question, an overwhelming majority have held that ERISA preempts state antisubrogation rules as they affect a plan's right to reimbursement from beneficiaries who recover from third-party tortfeasors. See Cutting v. Jerome Foods, Inc., 820 F.Supp. 1146, 1150-51 (W.D.Wis.1991), aff'd, 993 F.2d 1293 (7th Cir.1993), cert. denied, 510 U.S. 916, 114 S.Ct. 308, 126 L.Ed.2d 255 (1993); Murzyn v. Amoco Corp., 925 F.Supp. 594 (N.D.Ind.1995); Carpenter v. Modern Drop Forge Co., 919 F.Supp. 1198 (N.D.Ind.1995); Fravel v. Stankus, 936 F.Supp. 474 (N.D.Ill.1996); Estate of Lake v. Marten, 946 F.Supp. 605 (N.D.Ill.1996). Accordingly, the subrogation issue is properly before this Court.

I. Defendants' Motion to Dismiss

It is well settled that a complaint may not be dismissed for failure to state a claim upon which relief may be granted, unless it appears to a certainty on the face of the compliant that the complaining party is not entitled to any relief. See Fed.R.Civ.P. 12(b)(6); Ind.Rules of Procedure, Trial Rule 12(b)(6); Bienz v. Bloom, 674 N.E.2d 998 (Ind.Ct.App.1996), reh'g denied; Hanover Logansport, Inc. v. Robert C. Anderson, Inc., 512 N.E.2d 465 (Ind.Ct. App.1987). Courts view motions to dismiss for failure to state a claim with disfavor because such motions undermine the policy of deciding causes of action on their merits. Action Repair, Inc. v. American Broadcasting Co., Inc., 776 F.2d 143 (7th Cir.1985); Bienz, 674 N.E.2d at 1001; Hill v. Beghin, 644 N.E.2d 893, (Ind.Ct.App. 1994), trans. denied. Therefore, for purposes of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), all well-pleaded allegations are presumed to be true. Whirlpool Financial Corp. v. GN Holdings, Inc., 67 F.3d 605 (7th Cir. 1995); McTigue v. City of Chicago, 60 F.3d 381 (7th Cir.1995); Richmond v. Nationwide Cassel L.P., 52 F.3d 640 (7th Cir.1995). Furthermore, a court must view those allegations in the light most favorable to the plaintiff, Richmond, 52 F.3d at 644; Gould v. Artisoft, Inc., 1 F.3d 544 (7th Cir.1993), and accept as true all reasonable inferences to be drawn from those allegations. Whirlpool Financial Corp., 67 F.3d at 608; McTigue, 60 F.3d at 382. Dismissal of a complaint for failure to state a claim is granted only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Richmond, 52 F.3d at 644 (quoting, Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); Chaney v. Suburban Bus Div. of Reg'l Transp. Auth., 52 F.3d 623, (7th Cir.1995); Lockhart v. United States, 961 F.Supp. 1260, 1263-64 (N.D.Ind.1997), aff'd 129 F.3d 1267, 1997 WL 730290 (7th Cir.1997). Additionally, the court may only look to the complaint, and well-pleaded material must be taken as admitted. Id. (emphasis added). A Rule 12(b)(6) motion to dismiss is properly utilized to test the legal sufficiency of the complaint or, stated differently, to test the law of the claim, not the facts that support it. Borgman v. Aikens, 681 N.E.2d 213, 216 (Ind.Ct.App.1997), reh'g denied; Gray v. Westinghouse Elec. Corp., 624 N.E.2d 49 (Ind.Ct.App.1993), trans. denied.

A. Proper Plaintiff

Because Defendants' Motion for Judgment on the Pleadings involves jurisdictional issues and asks the Court to dismiss Plaintiff's complaint pursuant to Rule 12(b)(6) and 12(h)(2), Fed.R.Civ.P. the Court deals with it first. Federal courts must resolve jurisdictional issues before proceeding to the merits of a case. See e.g., Crawford v. United States, 796 F.2d 924 (7th Cir.1986). Defendants assert that the Plan lacks standing to bring this suit under § 502(a)(3) because it is not a "participant, beneficiary, or fiduciary" as enumerated in the relevant ERISA section.⁷ This Court cannot adopt such a narrow construction. Reading the statute as a whole, first it is clear that Defendants overlook § 503(d)(1) which states that "an employee benefit plan may sue or be sued under this title as an entity." Furthermore, even if § 503(d)(1) was somehow inapplicable, and this Court believes otherwise, the persuasive authority defendants cite in support of their position are from the Second, Fourth Fifth, Sixth and Tenth circuits and not binding in this circuit. See Levas and Levas v. Village of Antioch, 684 F.2d 446, 451 (7th Cir.1982). The main case relied upon by defendants is Pressroom Unions-Printers League Income Sec. Fund v. Continental Assurance Co., 700 F.2d 889 (2d Cir.1983). Not only do defendants misinterpret this case, also at least one court in this circuit has expressly disagreed with its holding. See Laborers' Pension Fund v. Leopardo Const., Inc., 139 F.R.D. 634 (N.D.Ill.1991) (holding that the district court had discretion to allow filing of an amended complaint to name a pension trust fund administrator, rather than funds themselves, even if funds' lack of standing to bring suit under ERISA would have deprived district court of subject matter jurisdiction). Additionally, the Seventh Circuit case relied upon by defendants is distinguishable from the case before this Court. See Giardono v. Jones, 867 F.2d 409, (7th Cir.1989). Giardono dealt with the anti-inurement provision of ERISA and pertained to whether or not an employer was considered a "participant" of the plan with a right to sue. Compare Peoria Union Stock Yards Co. Retirement Plan v. Penn. Mut. Life Ins. Co., 698 F.2d 320 (7th Cir.1983) (where without expressly considering the issue of jurisdiction, the court found that ERISA did grant standing to a pension fund to challenge alleged violations of the provisions of that Act); Laborers Fringe Ben. Funds-Detroit & Vicinity v. Northwest Concrete & Constr., Inc., 640 F.2d 1350 (6th Cir.1981) (with little or no discussion, treated trust fund itself as trustee for fund contributions with clear access to federal courts under the statute).⁸ More recent persuasive authority also supports the position in Laborers' Pension Fund, 139 F.R.D. 634. See generally, Hotel Employees and Restaurant Employees Int'l Union Welfare Fund v. Gentner, 815 F.Supp. 1354 (D.Nev.1993) (listing fund as plaintiff), aff'd 50 F.3d 719 (9th Cir.1995); NGS American, Inc. v. Barnes, 805 F.Supp. 462 (W.D.Tex.1992), aff'd 998 F.2d 296 (5th Cir.1993).

In Health Cost Controls v. Bichanich, the district court considered a similar issue. 968 F.Supp. 396 (N.D.Ill.1997). After careful analysis the court held that because subrogation rights are Plan assets and the ability to recover benefits previously paid out...