Colorescience, Inc. v. Bouche

• Decision Date: 16 November 2020
• Docket Number: Case No.: 20cv595-GPC(DEB)
• Court: U.S. District Court — Southern District of California
• Parties: COLORESCIENCE, INC, Plaintiff, v. STEPHEN BOUCHE, ERIC D. NIELSON, and THE NIELSEN LAW FIRM, P.C., Defendants.

COLORESCIENCE, INC, Plaintiff, v. STEPHEN BOUCHE, ERIC D. NIELSON,and THE NIELSEN LAW FIRM, P.C., Defendants.

Case No.: 20cv595-GPC(DEB)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

November 16, 2020

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

[DKT. NO. 30.]

Before the Court is Defendants' motion for summary judgment. (Dkt. No. 30.) Plaintiff filed an opposition and Defendants filed a reply. (Dkt. Nos. 60, 61.) Based on the reasoning below, the Court GRANTS Defendants' motion for summary judgment.

Procedural Background

On March 30, 2020, Plaintiff Colorescience, Inc. ("Plaintiff" or "Colorescience"), as Plan Administrator of the Colorescience Welfare Benefit Plan ("the Plan"), filed a complaint seeking to enforce its subrogation lien, a constructive trust and injunctive relief pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(3), (Dkt. No. 1, Compl.), as well as a motion for temporary restraining order ("TRO") "enjoining [Defendants] Stephen Bouche, [Eric D.] Nielsen, the Nielson Law Firm P.C., and any other party from dissipating, transferring, pledging, spending, disposing of, or encumbering the settlement proceeds received or to be received by or on behalf of Stephen Bouche from a tort action pending in the District Court for Harris County, Texas captioned Stephen Bouche v. Quantum Hospitality, LLP, Cause No. 45760." (Dkt. No. 2.) The complaint arises due to medical benefits paid by the Plaintiff, as Plan Administrator under an ERISA plan, to Stephen Bouche's medical providers based on injuries he suffered in a slip and fall accident that occurred in Texas in February 2014. (Dkt. No. 1, Compl.) Plaintiff seeks to enforce a subrogation lien on the tort recovery Stephen Bouche received in settling the Texas state court case. (Id.) After full briefing by the parties, and a hearing, the Court denied the TRO on April 9, 2020. (Dkt. No. 17.) The Court concluded that Plaintiff had not established irreparable harm as well as a likelihood of success on the merits because there were disputed issues of material fact as to whether Defendant Stephen Bouche was a Plan Participant; (id. at 7); the applicability of Section 10.06C of the Plan, (id. at 9); and whether the February 2018 surgery related to the injuries he suffered from the slip and fall in February 2014. (Id.)

On April 21, 2020, Defendants Stephen Bouche ("Stephen"), Eric D. Nielsen ("Mr. Nielsen"), and the Nielson Law Firm P.C. (collectively "Defendants") filed a motion to dismiss arguing that Stephen was never a Plan Participant or Dependent as defined under the ERISA Plan; therefore, because ERISA does not apply, the Court lacks personal jurisdiction over Defendants under the equitable enforcement provisions of ERISA to support nationwide personal jurisdiction. (Dkt. No. 21.) On June 10, 2020, the Court denied the motion to dismiss because Plaintiff plausibly alleged claims for equitable subrogation and constructive trust. (Dkt. No. 28.) In its order, the Court also noted that Defendants relied on evidence outside the complaint but denied Defendants' request to convert the motion to dismiss to a motion for summary judgment because Plaintiff did not have an opportunity to respond to the request. (Id. at 6.)

On August 21, 2020, Defendants filed a third-party complaint against HealthSCOPE Benefits, Inc. ("Healthscope"), the third-party administrator of the Plan. (Dkt. No. 42.) Healthscope filed an answer on September 16, 2020. (Dkt. No. 46.)

During the pendency of this case, on April 9, 2020, Stephen filed an interpleader in the Texas state court case of Stephen Bouche v. Quantum Hospitality, LLC and deposited $477,093.98 in the Harris County Registry. (Case No. 20cv1136-GPC(DEB), Dkt. No. 1-2 at 2.) Colorescience subsequently filed a notice of removal to the Southern District of Texas as a Plaintiff in Intervention. (20cv1136-GPC(DEB), Dkt. No. 1.) On April 30, 2020, Colorescience filed an answer and a claim to the interpleaded fund. (Id., Dkt. Nos. 9, 10.) On June 23, 2020, the district court in the Southern District of Texas denied Bouche's motion to remand and granted Colorescience's motion to transfer to this district under the first to file rule. (Id., Dkt. No. 24.) On the same day, the case was transferred to this Court from the Southern District of Texas. (Id., Dkt. No. 25.) On June 29, 2020, the case was low numbered to this case and assigned to the same undersigned judge. (Id., Dkt. No. 27.) On September 25, 2020, the Court granted Plaintiff's motion to consolidate with Case No. 20cv1136-GPC(DEB) as well as a request to transfer registry funds of $477,093.98 plus any accrued interest, from the Texas district court to this Court. (Dkt. No. 50.)

On June 26, 2020, Defendants filed the instant motion for summary judgment repeating the argument that Stephen was never a Plan Participant or Dependent as defined under the Plan; therefore, the Court does not have personal jurisdiction over Defendants. (Dkt. No. 30.) On July 22, 2020, the Court granted Plaintiff's ex parte request to extend time to file a response to the motion for summary judgment in order to conduct discovery pursuant to Federal Rule of Civil Procedure ("Rule") 56(d). (Dkt. No. 39.) Plaintiff filed its opposition on October 26, 2020. (Dkt. No. 60.) On November 6, 2020, Defendants filed their reply. (Dkt. No. 61.)

/ / /

/ / /

Factual Background

Colorescience is a small corporation that develops, markets, and sells skin care products and provides medical, dental, vision, and prescription drug benefits to employees and their dependents and these benefits are self-insured by Plaintiff. (Dkt. No. 2-2, Plummer Decl. ¶¶ 2, 3.) Plaintiff is the Plan Administrator of the Colorescience Welfare Benefit Plan. (Dkt. No. 30-1, Ex. 1, Plan at 5.¹)

Deborah Bouche ("Deborah") was employed by Colorescience in Houston, Texas and was a participant in the Plan and is the mother of Defendant Stephen. (Dkt. No. 2-2, Plummer Decl. ¶ 5; Dkt. No. 30-2, Deborah Decl.) Stephen was born on July 30, 1987 and attained the age of 26 on July 30, 2013. (Dkt. No. 60-1, P's Response to Ds' SSUF² Nos. 3, 4.) Stephen was never an employee of Colorescience. (Id., No. 2.) He was not covered by the Plan before he reached the age of 26. (Id., No. 5.) He was not mentally or physically incapable of sustaining his own living before the age of 26. (Dkt. No. 30-2, Ex. 2, Deborah Decl. at 2; Dkt. No. 30-3, Ex. 3, Stephen Decl. at 2.) At the time of his slip and fall accident on February 25, 2014, he was over 26 years old. (Dkt. No. 30-2, Ex. 2, Deborah Decl. at 2; Dkt. No. 30-3, Ex. 3, Stephen Decl. at 2.)

In early November 2017, Deborah inquired about coverage for Stephen during the open enrollment period and subsequently applied for enrollment in early December 2017 and Stephen's enrollment became effective January 1, 2018. (Dkt. No. 14-1, Plummer Decl. ¶ 2.) In support of her enrollment application for Stephen, Deborah submitted a Social Security determination finding Stephen disabled as of October 2016, (Id.; Dkt. No.14-2, Plummer Decl., Ex. 1), and documentation confirming that Stephen's existing coverage with Blue Cross Blue Shield was ending on December 31, 2017. (Dkt. No. 14-1, Plummer Decl. ¶ 2.) This information was submitted to Healthscope, the Plan's third-party administrator, who informed Deborah that Stephen would be enrolled for coverage as her dependent under the Plan effective January 1, 2018. (Id.)

Stephen underwent back surgery in February 2018. (Dkt. No. 14-1, Plummer Decl. ¶ 3.) Initial charges and bills from Altus Hospital relating to that surgery were submitted to Healthscope and were in excess of $1.2 million. (Id. ¶ 3.) Due to the size of the claims, Healthscope conducted an audit of Stephen's coverage under the Plan. (Id. ¶ 4.)

On July 13, 2018, Corey Plummer ("Plummer"), Colorescience's HR Director responsible for overseeing the administration of employee benefit plans, sent an email to Deborah requesting information Healthscope had advised was necessary for it to complete its audit concerning Stephen's eligibility for coverage. (Dkt. No. 14-1, Plummer Decl. ¶ 5; Dkt. No. 14-3, Plummer Decl. Ex. 2.) In apparent response to Plummer's letter, on July 17, 2018, Mr. Nielsen, on behalf of Deborah and Stephen, wrote a letter concerning Plummer's request for information about whether there was a qualifying event to add Stephen on January 1, 2018 and whether he was an incapacitated child. (Dkt. No. 14-4, Plummer Decl., Ex. 3.) Mr. Nielsen attached a copy of the Social Security determination finding Stephen disabled as of October 2016 and a letter dated December 12, 2017 from Blue Cross Blue Shield stating that Stephen's coverage was cancelled on December 31, 2017. (Id.)

Plummer then sent two additional emails dated July 17, 2018 and July 24, 2018 requesting further information. (Dkt. No. 14-1, Plummer Decl. ¶ 7.) Mr. Nielsen responded on July 24, 2018 and wrote,

Any cancellation of coverage with Blue Cross was made in reliance upon representations you and Britt Braham made that Stephen would be covered beginning January 1, 2018 under your health insurance policy. Absent those representations, the policy with Blue Cross would never have been cancelled effective December 31, 2017. As you both knew then, Stephen was found tobe totally disabled by the Social Security Administration on October 18, 2017, retroactive to October 2016. It appears now that, even though some payments have been made for Stephen's medical care and recent surgery, someone may be trying to rewrite history to try to avoid paying all of the covered medical care and procedures. Is the disability determination by the Social Security Administration not a qualifying event?

(Dkt. No. 14-5, Plummer Decl., Ex. 4 at 2.) Then, in response to Plummer's question requesting documents to support Stephen's "[s]tatus as an incapacitated child on or before age 26", (id. at 4), Mr. Nielsen wrote, "Why is the...