Denver Health & Hosp. Auth. v. Beverage Distribs. Co., Civil Case No. 11–cv–01407–LTB–KLM.

Decision Date08 February 2012
Docket NumberCivil Case No. 11–cv–01407–LTB–KLM.
Citation843 F.Supp.2d 1171
PartiesDENVER HEALTH AND HOSPITAL AUTHORITY, Plaintiff, v. BEVERAGE DISTRIBUTORS COMPANY, LLC, a Colorado limited liability company; A Plan Designed to Provide Security for Employees of Beverage Distributors Company, LLC; and Principal Life Insurance Company, Defendants.
CourtU.S. District Court — District of Colorado

OPINION TEXT STARTS HERE

Kerri J. Atencio, Michael Justin Rosenberg, Nelson Andrew Waneka, Roberts Levin Rosenberg, PC, Denver, CO, for Plaintiff.

Allison Rachel Cohn, Darren E. Nadel, Littler Mendelson, PC, Denver, CO, Edna Sybil Bailey, Wilson Elser Moskowitz Edelman & Dicker, LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

BABCOCK, District Judge.

This matter is before me on three motions. The first is Defendant Principal Life Insurance Company's (Principal), Motion to Dismiss Plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6)[Docs # 5 and 6]. The second is Plaintiff Denver Health and Hospital Authority's (DHHA), Motion for Leave to Amend Complaint pursuant to Fed.R.Civ.P. 15(a)(2)[Doc # 31]. The third is the Motion for Judgement on the Pleadings [Doc # 34], filed jointly by Beverage Distributors Company, LLC (Beverage), and A Plan Designed to Provide Security for Employees of Beverage Distributors Company, LLC (the Plan) (jointly, “Beverage Distributors”). After consideration of the parties' arguments, and for the reasons stated herein, I DENY Principal's motion in accordance with the instructions below; I GRANT DHHA's motion and accept its second amended complaint tendered therewith; and I GRANT Beverage Distributors' motion. These orders leave the case to proceed with two claims and two defendants: (1) the negligent misrepresentation claim against Beverage, and (2) the promissory estoppel claim against Principal.

I. Background

DHHA alleges the following in its first amended complaint. DHHA is a political subdivision of the State of Colorado. It operates the City and County of Denver's health system, including Denver Health Medical Center (Denver Health).

Beverage is a Colorado limited liability company. Beverage provides medical and other benefits to its full time, active duty employees and their dependents through the Plan.

The Plan is an employee welfare benefit plan pursuant to, and for the purposes of, the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA). Beverage is the Plan's Administrator. The Plan does not identify who or what is the claims administrator, but it defines the term as “an entity authorized by the Plan Administrator to process claims for benefits under this plan.”

Principal is a company authorized to conduct business in Colorado and was so conducting at all times pertinent to this lawsuit. One of its functions is to process claims under the Plan according to the Plan's provisions.

Junnapa Intarakamhang was a full time, active duty Beverage employee. As such, she was a member under the Plan. She had established a domestic partnership with Terrence Hood in 2006. Together, they submitted an application for domestic partner coverage for Hood under the Plan on June 25, 2008.

On March 21, 2009, while Intarakamhang was a Plan member, Hood sustained severe and traumatic injuries in a motorcycle crash. Paramedics rushed Hood to Denver Health where he would receive lifesaving medical care and treatment for months. On March 24, 2009, Denver Health solicited and received hospital preadmission authorization from Principal for Hood's hospital stay. Over the next several weeks, Principal repeatedly preauthorized additional days for Hood's stay. These authorizations led Denver Health to continue caring for Hood and to decline seeking a different third party payor. Hood was discharged on June 10, 2009.

By letter dated May 14, 2009, Beverage advised Intarakamhang that coverage for Hood under the Plan had been rescinded because Hood “did not qualify for benefits ... due to his marital status currently and at the time he certified the declaration of domestic partnership form[.] The information in Beverage's files did not support rescission. Beverage never provided notice to Hood himself that it had rescinded his coverage under the Plan. Nor did it return any premiums Hood paid for coverage. The Plan does not provide for rescission of a member or covered dependent's coverage in the event of a misstatement in an application or under any other circumstances.

Principal later advised Denver Health by letter that benefits were not payable for Hood's care because he was not a covered dependent under the Plan and that there was a “plan termination date of 06/20/2008.” Principal did not notify Hood directly of its determination that benefits were not payable for the charges incurred at Denver Health.

Hood incurred approximately $750,000 in medical bills for his treatment at Denver Health. He assigned his right to recover benefits under the Plan to Denver Health and thereby assigned them to DHHA. DHHA alleges that the attempted rescission and refusal to pay covered benefits under the Plan were not substantially justified, were arbitrary and capricious, were unsupported by substantial evidence, constituted abuse of any allowed discretion, and were wrongful.

DHHA filed suit in state court on April 4, 2011. On April 21, 2011, it filed its first amended complaint. The first amended complaint asserted three causes of action. First was a claim for benefits due and equitable relief under § 502(a)(1) of ERISA, 29 U.S.C. § 1132(a)(1)(B) (the § 1132(a)(1)(B) claim). Second was that Principal unreasonably delayed and denied payment of Hood's claim in violation of Colo.Rev.Stat. §§ 10–3–1115 and 10–3–1116(a). Third was promissory estoppel against Principal. Defendants removed the case to this Court on ERISA and federal question grounds pursuant to § 502(e) of ERISA, 29 U.S.C. § 1132(e), and 28 U.S.C. § 1331, respectively.

After removal, Principal filed its motion to dismiss. DHHA then filed its motion for leave to amend its first amended complaint. Next came Beverage Distributors' motion for judgment on the pleadings. In the interest of clarity, brevity, deciding only those issues that I must, and for the reasons explained below, I address the motions out of the order in which they were filed. I begin with DHHA's motion, then turn to Principal's, and end with Beverage Distributors'. As will be elucidated, this order of operations obviates much of Principal's motion but does not prejudice it.

II. DHHA's Motion

DHHA's motion seeks leave to file a second amended complaint pursuant to Rule 15(a)(2). DHHA tendered that second amended complaint with its motion. Its second amended complaint asserts a negligent misrepresentation claim against Beverage and clarifies that the § 1132(a)(1)(B) claim is asserted against only the Plan and not Principal. I note that the second amended complaint also excludes the Colo.Rev.Stat. §§ 10–3–1115 and 10–3–1116(a) claim. I infer from that material change that DHHA is withdrawing that claim. To be clear, then, the second amended complaint asserts three claims: first, a § 1132(a)(1)(B) claim against the Plan; second, a negligent misrepresentation claim against Beverage; and third, a promissory estoppel claim against Principal. For the reasons herein, I grant DHHA's motion and accept its second amended complaint.

A. Rule 15(a)(2)

Rule 15 governs amendments to pleadings generally. SeeFed.R.Civ.P. 15. “Except when an amendment is pleaded ‘as a matter of course,’ as defined by the rule, ‘a party may amend its pleading only with the opposing party's written consent or the court's leave.’ Bylin v. Billings, 568 F.3d 1224, 1229 (10th Cir.2009). Courts “should freely grant leave when justice so requires.” Id. The rule's purpose “is to provide litigants the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties.” Minter v. Prime Equip., 451 F.3d 1196, 1204 (10th Cir.2006) (internal quotations omitted). Therefore, [r]efusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir.1993); accord Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). Granting leave to amend the pleadings pursuant to Rule 15(a) is within the court's wide discretion. See Minter, 451 F.3d at 1204 (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971)); see also Calderon v. Kan. Dep't of Soc. & Rehab. Servs., 181 F.3d 1180, 1187 (10th Cir.1999). Consequently, the trial court's decision will not be reversed “absent an abuse of discretion,” which is when the decision was “arbitrary, capricious, whimsical, or manifestly unreasonable.” Bylin, 568 F.3d at 1229.

B. Discussion

To begin, consonant with Rule 15(a)(2)'s language and purpose, my predilection is to grant DHHA's motion. SeeFed.R.Civ.P. 15(a)(2); see also Minter, 451 F.3d at 1204. That affords “the maximum opportunity for each claim to be decided on its merits rather than on procedural niceties”—the rule's purpose. Minter, 451 F.3d at 1204. Beverage's only challenge to DHHA's motion is that the negligent misrepresentation claim DHHA seeks to add would be futile. For this reason, and because none of the other factors for refusing leave are “apparent or declared,” see Foman, 371 U.S. at 182, 83 S.Ct. 227, I confine my analysis to whether the negligent misrepresentation claim would be futile. I conclude that it would not.

“A proposed amendment is futile if the complaint, as amended, would be subject to dismissal for any reason....” Watson v. Beckel, 242 F.3d 1237, 1239–40 (10th Cir.2001). Beverage argues that the amendment would be futile because it could not withstand a motion to dismiss under Fed.R.Civ.P. 12(b)...

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