Cent. Valley AG Coop. v. Leonard

• Decision Date: 30 August 2019
• Docket Number: 8:17CV379
• Parties: CENTRAL VALLEY AG COOPERATIVE, for itself and as Fiduciary of the Central Valley Ag Cooperative Health Care Plan; and Central Valley Ag Cooperative Health Care Plan, Plaintiffs, v. Daniel K. LEONARD, Susan Leonard, The Benefit Group, Inc., Anasazi Medical Payment Solutions, Inc., Claims Delegate Services, LLC, Linus G. Humpal, and GMS Benefits, Inc., Defendants.
• Court: U.S. District Court — District of Nebraska

400 F.Supp.3d 819

CENTRAL VALLEY AG COOPERATIVE, for itself and as Fiduciary of the Central Valley Ag Cooperative Health Care Plan; and Central Valley Ag Cooperative Health Care Plan, Plaintiffs,

v.Daniel K. LEONARD, Susan Leonard, The Benefit Group, Inc., Anasazi Medical Payment Solutions, Inc., Claims Delegate Services, LLC, Linus G. Humpal, and GMS Benefits, Inc., Defendants.

8:17CV379

United States District Court, D. Nebraska.

Signed August 30, 2019

Brock J. Pohlmeier, Kenneth M. Wentz, III, Michaelle L. Baumert, Jackson, Lewis Law Firm, Omaha, NE, Rene E. Thorne, Pro Hac Vice, Jackson, Lewis Law Firm, New Orleans, LA, for Plaintiffs.

Diana J. Vogt, Robert S. Sherrets, Sherrets, Bruno Law Firm, Brandon J. Crainer, Elizabeth A. Culhane, Emily R. Langdon, Joseph E. Jones, Timothy J. Thalken, Fraser, Stryker Law Firm, Jordan R. Hasan, Richard P. Jeffries, Tara A. Stingley, Cline, Williams Law Firm, Omaha, NE, Henry M. Perlowski, Pro Hac Vice, Megan P. Mitchell, Pro Hac Vice, Arnall, Golden Law Firm, Atlanta, GA, for Defendants.

MEMORANDUM AND ORDER

Laurie Smith Camp, Senior United States District Judge This matter is before the Court on several motions. For the reasons discussed below, the Defendants' Motions for Summary Judgment, ECF Nos. 257, 263, and 270, will be granted. The Plaintiffs' Motion for Partial Summary Judgment, ECF No. 273, will be denied. Because this action will be dismissed, the Court will not address the Motions in Limine, ECF Nos. 223, 243, 347, 350, 352, 355, and 371, and they will be denied as moot.

FACTUAL BACKGROUND

In compliance with the Court's local rules, the parties submitted numbered statements of undisputed facts and corresponding responses. While the Court will not list here every statement of fact admitted by the several parties, it has thoroughly reviewed all the facts and evidence submitted.¹ Unless otherwise indicated, the following facts are undisputed for purposes of the pending Motions for Summary Judgment.

I. The Parties and the ERISA Plan

Central Valley Ag Cooperative ("Central Valley")² is a Nebraska corporation with its principal place of business in York, Nebraska. Central Valley provides farm planning, supplies, and services to members of its cooperative in Nebraska, Kansas, and Iowa. Central Valley Non-Stock and United Farmers were separate entities that each had their own group employee health and welfare plan prior to the entities' corporate merger in 2014. After the merger, Central Valley provided its employees the Central Valley Ag Cooperative Health Care Plan ("Central Valley Plan" or "Plan"), which was a qualified employee welfare plan within the definition of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 – 1461. In addition to health coverage offered by the Central Valley Plan, individual employees could choose to purchase additional insurance including a Vision Benefit Plan ("VSP") as well as insurance against accidents, critical illness, and cancer

, directly from the Plan's broker. Those individual policies were not part of the Plan.

Central Valley's Plan was overseen by an informal Benefits Committee in charge of selecting and managing the benefits, including health insurance, offered to employees. The Benefits Committee members included Central Valley's President, Carl Dickinson; Senior Vice President for Human Resources, Tim Esser; Senior Vice President of Member Services, Peggy Hopwood; and Central Valley's current Chief Financial Officer, Don Swanson. Dickinson, Hopwood, and Swanson were employees of United Farmers before the merger. In July or August 2015, Central Valley's Vice President of Risk Management, Rick Smithpeter, was added to the Benefits Committee. Dickinson had ultimate decision-making authority over Plan selection for the 2015 and 2016 Plan years.

Defendant GMS Benefits, Inc. (GMS) is the trade name for Group Marketing Services, Inc. GMS provides broker and employee benefit plan consulting services to employers. Defendants Susan Leonard and Daniel Leonard are the President and Vice-President, respectively, of Group Marketing Services, Inc., and its sole shareholders. United Farmer hired GMS as its broker in 2005 and GMS continued in that capacity for Central Valley in 2014 following the merger. GMS is not named as a fiduciary of the Central Valley Plan in any document describing, establishing, or related to the Plan for any Plan year. At no time were GMS, Susan Leonard, or Daniel Leonard fiduciaries with respect to the Central Valley Plan.

In 2013, Defendant The Benefit Group, Inc. (Benefit Group), was the third-party administrator for the United Farmers Cooperative Health Care Plan (the "United Farmers Plan"). Hopwood Dep. Ex. 77, ECF No. 264-1. In 2015 and 2016, Central Valley engaged Benefit Group to provide administrative services for the Plan, governed by an administrative services agreement. Esser, on behalf of Central Valley, signed the administrative services agreement for the 2015 Plan Year, effective January 1, 2015 (the "2015 ASA"), see ECF No. 264-13, and signed another administrative services agreement with Benefit Group for the 2016 Plan Year, effective January 1, 2016 (the "2016 ASA"), see ECF No. 264-15. The 2015 and 2016 ASAs stated that Benefit Group was not a fiduciary under the Plan by virtue of paying benefits in accordance with the Plan's rules. Under both administrative services agreements, Central Valley retained "all final authority and responsibility for the Plan and its operation." See id. at 1, PageID.7467. The administrative services agreements also stated that "Employer [Central Valley] shall have final authority in determining the eligibility of claims to be paid by the Plan." Id. No documents governing the Central Valley Plan in either 2015 or 2016 identify Benefit Group as a fiduciary of the Central Valley Plan.

Defendant Anasazi Medical Payment Solutions, Inc. d/b/a Advanced Medical Pricing Solutions (AMPS) provides medical bill review (MBR) services to employee benefit plans. AMPS provided MBR services to the United Farmers Plan and then to the Central Valley Plan in 2015. Defendant Claims Delegate Services, LLC (CDS)³ was a wholly owned subsidiary of AMPS providing reference-based reimbursement ("RBR") services to employee benefit plans. CDS was not involved in providing MBR services and did not provide any services to Central Valley or the Central Valley Plan before January 1, 2016. However, CDS provided RBR services to the Central Valley Plan in 2016. AMPS also provided MBR services to support CDS's RBR services during the 2016 Plan Year.

II. MBR and the 2015 Plan Year

In each year relevant to this case, Central Valley selected the type of benefits the Plan would offer. For the 2015 Plan Year, Central Valley chose the option with the lowest monthly payment, specifically the option that included AMPS providing MBR services. Effective January 1, 2015, Central Valley entered into a Medical Bill Review Addendum (the "MBR Agreement") with Benefit Group. Esser read the MBR Agreement before signing it on Central Valley's behalf and was authorized to enter into the MBR Agreement. Before entering into the MBR Agreement, no Central Valley representative ever spoke to anyone at AMPS or CDS.

Under the MBR program, Benefit Group would receive claims from Plan participants and would forward the claim to AMPS. AMPS would then submit the claim to its proprietary database for review. The AMPS review process would determine whether the claim included charges that were inappropriate and/or excessive. Following this review, AMPS would issue a "recommended allowable payment" amount to Benefit Group, recommending the amounts that should be paid on certain hospital and facility claims. See Humpal Dep. Ex. 16 § 2.7, ECF No. 264-9. Benefit Group would then send Central Valley the payment recommendation for each claim. For each claim, Central Valley could accept AMPS's recommendations, or reject AMPS's recommendations and pay the Preferred Provider Organization (PPO) contracted rate, if available. Hopwood Dep. 74:19-75:1; 75:15-19; 85:2-88:5, ECF No. 262-5; see also MBR Agreement § 2.7, ECF No. 262-11 ("All final determinations and decisions as to eligibility, benefit availability, correctness or appropriateness of charges billed by a provider, and all determinations whether any bill is payable under a benefit plan, are the responsibility of Client [Central Valley]."). Each Central Valley representative who approved funding requests for the 2015 Plan Year was authorized to do so by Central Valley.

The MBR Agreement also set AMPS's fee for Plan Year 2015. It provided that AMPS's fee for MBR services was "equal to 30% of Savings." MBR Agreement, Attachment A, ECF No. 262-11, PageID.6099. The MBR Agreement defined "savings" as "the difference between the lower of either (a) the original total charges billed by the provider or (b) the amount of such charges that would normally be paid by [Central Valley] and its member under its existing contract with the provider, less the allowable amount recommended by AMPS." Id. Attachment A of the MBR Agreement further provided that

If AMPS has received a percentage of Savings payment from Client on a claim in accordance with this Attachment A, but such claim later is subsequently successfully challenged in the appeals process by the provider and a higher adjusted charge is recommended by AMPS and paid by Client, then upon receipt by AMPS of verification of such payment and a copy of the applicable revised or supplemental Explanation of Payment, AMPS shall credit or reimburse TPA for the account of Client for such proportionate amount of percentage of Savings fees previously paid or currently due to AMPS.

Id. Essentially, if Central Valley accepted the AMPS recommendation, and savings were achieved, Central Valley retained 70% of the savings and AMPS retained 30% of the savings. Humpal Dep. Ex. 16, Attachment A, Benefit Group 2383, ECF No. 264-9. The 30% AMPS fee was paid by...