Copeland Oaks v. Haupt
| Decision Date | 25 March 1999 |
| Docket Number | No. 4:98-CV-780.,4:98-CV-780. |
| Citation | 41 F.Supp.2d 747 |
| Parties | COPELAND OAKS, et al., Plaintiffs, v. Jeffrey A. HAUPT, et al., Defendants. |
| Court | U.S. District Court — Northern District of Ohio |
Earl M. Leiken, Chris Bator, John Edward Hebert, Baker & Hostetler, Cleveland, OH, for plaintiffs.
David B. Spalding, Law Offices Of William B. Shetler, Alliance, Ralph Eric Smearman, Smith, Marshall, Weaver & Vergon, Cleveland, OH, for defendants.
On April 27, 1998, Defendants Jeffrey Haupt and Brooke Haupt (collectively, "Haupt") filed a motion for summary judgment in this lawsuit to enforce the terms of an employee benefit plan arising under the Employee Retirement Income Security Act of 1974 as amended ("ERISA") [Doc. 5]. On July 17, 1998, the Haupts filed a motion for judgment on their counterclaim [Doc. 18]. On July 22, 1998, Plaintiffs Copeland Oaks and Copeland Oaks Employee Benefit Plan (collectively, "Copeland Oaks") also filed a motion for summary judgment [Doc. 19].
In this decision, the Court interprets provisions of Copeland Oak's health care plan relating to the Haupts' claim for medical benefits and Copeland Oak's right to subrogation or reimbursement. Upon reviewing the motions and relevant record materials, the Court finds ERISA preempts that defendant's state law claims. Therefore, the Court denies Defendant Haupt's motion for judgment on its counterclaim.
The Court also finds Plaintiff Copeland Oaks is precluded from exercising its right to subrogation. Having found that Plaintiff Copeland Oaks may not exercise its right to subrogation, the Court grants the defendant's motion for summary judgment and denies plaintiff's motion.
Fed.R.Civ.P. 56(c) states the procedure for granting summary judgment and says in pertinent part:
[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
In considering a motion for summary judgment, the court must view the facts and all inferences to be drawn therefrom in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); 60 Ivy Street Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir. 1987); SEC v. Blavin, 760 F.2d 706, 710 (6th Cir.1985). The moving party has the burden of showing conclusively that no genuine issue of material fact exists. 60 Ivy Street Corp., 822 F.2d at 1435.
Essentially factual disputes about matters essential to adjudication preclude the Court from granting summary judgment. See id. But not every factual dispute between the parties will prevent summary judgment. Rather, the disputed facts must be material. They must be facts that, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The factual dispute must also be genuine. The facts must be such that if they were proven at trial a reasonable jury could return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505. The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. 60 Ivy Street, 822 F.2d at 1435 (citing First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Thus, the judge's function at the point of summary judgment is limited to determining whether sufficient evidence has been presented to make the issue a proper jury question, and not to judge the evidence and make findings of fact. "[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." 60 Ivy Street, 822 F.2d at 1436 (quoting Anderson, 477 U.S. at 249, 106 S.Ct. 2505).
The Court now reviews the facts with these standards in mind.
Copeland Oaks is a nonprofit Ohio corporation providing residential facilities for senior citizens in Sebring, Ohio. Copeland Oaks established and currently maintains the Copeland Oaks Employee Benefit Plan (the "Plan"). The Plan is a health insurance plan established under ERISA offering medical benefits for its eligible employees and their beneficiaries.1 The Plan is self-insured; thus, the Plan pays claimed medical benefits out of the general assets of Copeland Oaks. The Plan has been in effect at all times pertinent to this action.
Jeffrey Haupt is the father and custodial parent of Brooke Haupt. At all relevant times, Jeffrey Haupt has been an "employee" of Copeland Oaks, as 29 U.S.C. § 1002(6) defines that term. The parties have stipulated that both Jeffrey Haupt and Brooke Haupt are each a "Covered Person" under the Plan.
On August 8, 1997, Brooke Haupt, then a minor, was a passenger in a motor vehicle collision. She sustained severe and permanent injuries. From the injuries received in the August 8, 1997, accident, Brooke Haupt has incurred medical expenses greater than $300,000. The driver of the vehicle, Lewis K. Smith, was solely at fault in causing the collision and died of the injuries he sustained in the accident.
Hartford Underwriters Insurance Company ("Hartford") insured Mr. Smith's vehicle. The Hartford policy provides coverage limits of $100,000 for bodily injury and $5,000 for medical expenses payable per person per accident.
In early 1998, Jeffrey Haupt pursued a claim against Hartford on Brooke Haupt's behalf. After he made the claim, the case settled. On March 19, 1998, Jeffrey Haupt filed an Application to Settle a Minor's Claim with the Mahoning County Probate Court in Ohio. The Mahoning County Probate Court appointed Jeffrey Haupt the guardian of the Estate of Brooke A. Haupt.2 On July 9, 1998, the probate court ordered the proceeds of the Policy, $100,000 (less $30,000 for attorney fees), to be delivered to Butler Wick Trust Company to be held in a special needs trust established for Brooke Haupt's benefit. In making this order, the Probate Court acted pursuant to Ohio Revised Code 2111.50(B)(3).3 Hartford has acknowledged its obligation to pay under the terms of the Policy.4
Jeffrey Haupt filed a claim with Copeland Oaks around October 1, 1997, seeking coverage for his daughter's medical expenses under the Plan. The Plan Document and Summary Plan Description for the Copeland Oaks Employee Benefit Plan ("Plan Document") describes the operation of the Plan. It contains specific provisions governing subrogation, reimbursement, and determination of benefits by the Plan Administrator.
On April 2, 1998, Copeland Oaks filed suit, seeking a declaration from this Court that it had no obligation to pay Defendants Haupt's medical expenses until the Haupts subrogate their right to proceeds of the Hartford insurance policy. The Haupts dispute Copeland Oaks' right to the Hartford proceeds. Because of the dispute surrounding the Plan's subrogation rights, Plaintiff Copeland Oaks has paid none of the medical expenses incurred in the treatment of Brooke Haupt.
The Haupts have filed a counterclaim in which they are seeking to compel Copeland Oaks to pay Brooke Haupt's medical expenses under the Plan while retaining the settlement proceeds from the Hartford Policy. Both parties filed for summary judgment.
Because the parties' respective rights and obligations are dictated by the terms of Plan, it is essential to decide the applicable law governing interpretation and administration of the Plan.
The parties have stipulated that the Plan is an employee benefit welfare plan as defined by 29 U.S.C. § 1002(1).5 Generally, ERISA preempts conflicting state law:
(A) Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
29 U.S.C. § 1144. This preemption clause is broad, but modified by subsections (b)(2)(A) () and (b)(2)(B) (referred to as the "deemer clause"):
(b)(2)(A) Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.
(b)(2)(B) Neither an employee benefit plan ..., nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for the purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.
29 U.S.C. § 1144. These three provisions interact to balance the regulatory power of the state and federal jurisdiction under ERISA.
The Supreme Court has explained that ERISA preempts all state law with two exceptions. The savings clause returns power to the states to regulate insurance. However, if a state law concerns a plan that falls within the deemer clause, ERISA nevertheless preempts the state law:
[The preemption clause] establishes as an area of exclusive federal concern the subject of every state law that "relate[s] to" an employee...
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...right to be made whole, then the plan is ambiguous and the make-whole rule will be applied. See id. at *4; Copeland Oaks v. Haupt, 41 F.Supp.2d 747, 754 (N.D.Ohio 1999) (under Marshall, if plan does not explicitly override make-whole rule or claim priority in the event of incomplete recover......
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Copeland Oaks v. Haupt, PLAINTIFFS-APPELLANT
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