Freitas v. Geisinger Health Plan

• Citation: 542 F.Supp.3d 283
• Decision Date: 27 May 2021
• Docket Number: No. 4:20-CV-01236,4:20-CV-01236
• Parties: Lori FREITAS, et al., Plaintiffs, v. GEISINGER HEALTH PLAN, et al., Defendants.
• Court: U.S. District Court — Middle District of Pennsylvania

542 F.Supp.3d 283

Lori FREITAS, et al., Plaintiffs,

v.GEISINGER HEALTH PLAN, et al., Defendants.

No. 4:20-CV-01236

United States District Court, M.D. Pennsylvania.

Filed May 27, 2021

Charles Kannebecker, Weinstein Schneider Kannebecker & Lokuta, Milford, PA, for Plaintiffs.

Adrian Zareba, Thomas G. Collins, Buchanan Ingersoll & Rooney PC, Harrisburg, PA, Gretchen W. Root, Buchanan Ingersoll & Rooney PC, Pittsburgh, PA, for Defendants.

MEMORANDUM OPINION

Matthew W. Brann, United States District Judge

On May 21, 2020, Plaintiffs Lori Freitas and Kaylee McWilliams initiated this class action lawsuit against Defendants Geisinger Health Plan and SCIOinspire Corp.¹ Plaintiffs’ complaint contains twelve counts seeking relief for alleged violations of the Employee Retirement Income Security Act of 1974 ("ERISA").² On September 24, 2020, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).³

I. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), the Court dismisses a complaint, in whole or in part, if the plaintiff has failed to "state a claim upon which relief can be granted." A motion to dismiss "tests the legal sufficiency of a pleading"⁴ and "streamlines litigation by dispensing with needless discovery and factfinding."⁵ " Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law."⁶ This is true of any claim, "without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one."⁷

When addressing a motion to dismiss, the Court "accept[s] as true all factual allegations in the complaint and draw[s] all inferences from the facts alleged in the light most favorable to [the plaintiff]."⁸ However, "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions."⁹ "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."¹⁰

"Generally, consideration of a motion to dismiss under Rule 12(b)(6) is limited to consideration of the complaint itself."¹¹ However, a court may consider the full text of a document cited by the plaintiff that are integral to the complaint where it is "clear on the record that no dispute exists regarding the authenticity or accuracy of the document."¹² Because the plan documents are integral to Plaintiffs’ claims, and because neither party contests the validity of these documents, the Court finds it appropriate to consider these materials in disposing of Defendants’ motion to dismiss.

II. BACKGROUND

The allegations in this case are relatively straightforward. At all relevant times, Plaintiffs received health insurance from the Geisinger Health Plan, an employee welfare benefits plan governed by ERISA.¹³ The Group Subscription Certificates attached to Plaintiffs’ complaint appears to contain all relevant terms of the plan.¹⁴ Plaintiffs allege that Geisinger (being the plan) is a plan fiduciary responsible for making discretionary decisions regarding the denial of benefits claims.¹⁵ Though not named as a fiduciary within the plan, SCIOinspire is alleged in the complaint to be a plan fiduciary responsible for enforcing the plan's subrogation rights.¹⁶

The plan contains a subrogation clause, which consists of three sentences.¹⁷ The clause reads as follows:

• The Plan has the right of subrogation to the extent permitted by the law against third parties that are legally liable for the expenses paid by the Plan under [the Plan's terms].

• The Member shall do nothing to prejudice the subrogation rights of the Plan.

• The Plan may recover benefits amounts paid under [the terms of the Plan] under the right of subrogation to the extent permitted by law.¹⁸

The plan does not define the term subrogation, nor does it elaborate upon how the term should be construed. Further, beyond this clause, the plan does not explicitly set forth any other processes by which the plan might recoup the cost of benefits paid to injured plan members. Notably absent is any provision stating that a member must reimburse the plan for benefits paid if the member receives compensation from a third-party tortfeasor who injures her.¹⁹ The plan also does not expound upon what shall occur if a member prejudices the plan's subrogation rights.

In 2017, while insured under the plan, Plaintiffs were injured in separate accidents by third-party tortfeasors.²⁰ Plaintiffs subsequently received a collective total of $61,525.59 in health benefits under the plan.²¹ At some point, Plaintiffs settled their claims against the tortfeasors who injured them.²² Plaintiffs have not disclosed the amounts for which they settled, although they allege that their settlements did not include compensation for the cost of medical benefits incurred as a result of their injuries.²³ It is also not clear whether Plaintiffs released the tortfeasors from liability before Defendants were able to assert any claims for subrogation.

After Plaintiffs settled their claims, SCIOinspire contacted them by letter and demanded reimbursement for the cost of medical benefits they had received pursuant to the plan (collectively, $61,525.59).²⁴ The letters offered no explanation or reasoning regarding SCIOinspire's requests, although Plaintiffs allege (and Defendants do not contest) that they were sent based on Defendants’ interpretation that the plan's subrogation clause authorized them to seek reimbursement from Plaintiffs for the cost of their benefits.²⁵ Plaintiffs subsequently paid SCIOinspire at least some of what was demanded.²⁶

Plaintiffs then commenced this class-action lawsuit on May 21, 2020 seeking under § 502(a)(1)(B) to recover the funds they have paid in reimbursement in response to the SCIOinspire letters, as well as any funds that other members have paid in reimbursement under similar circumstances.²⁷ Plaintiffs also assert five breach of fiduciary duty claims under § 502(a)(3), four of which arise from Defendants’ allegedly wrongful interpretation of the plan's subrogation clause. Defendants now seek to dismiss on the basis that Defendants’ interpretation of the plan's subrogation clause was correct as a matter of law.

III. DISCUSSION

A. Denial of Benefits Claim Under § 502(a)(1)(B)

Defendants first move to dismiss Plaintiffs’ § 502(a)(1) claim, which alleges that Defendants have wrongfully denied Plaintiffs benefits that are owed to them under the terms of the plan.²⁸ Defendants argue that Plaintiffs’ claim must be dismissed because, in their view, the plan's subrogation clause unambiguously authorizes Defendants to seek reimbursement from members where the members have received both plan benefits and third-party compensation. Defendants offer a number of theories supporting their interpretation, all of which are premised on the assertion that this Court must apply equitable principles to construe the terms of the plan.

The Court respectfully disagrees. Consequently, Defendants’ motion to dismiss Plaintiffs’ § 502(a)(1) claims is denied.

1. Legal Background

Following almost a decade of research,²⁹ Congress enacted ERISA to regulate the administration of private-pension and welfare-benefit plans.³⁰ Congress was principally concerned that the operative legal regime at the time (based on state trust law) failed to sufficiently protect plan participants, who frequently found themselves losing benefits due to a lack of reliable standards and rules.³¹ ERISA sought to remedy this problem by creating uniform minimum standards governing the administration of private-pension and welfare-benefit plans.³²

However, cognizant of the burden that a heavy-handed approach might place on plan administrators, Congress structured ERISA to balance the interest of protecting plan beneficiaries with that of creating a system which is not so onerous as to discourage employers from participating in it.³³ The result of this cost-benefit analysis was a statutory regime focused primarily on holding parties accountable to the terms of a given plan, whatever those terms may be.³⁴ Accordingly, ERISA does not mandate "minimum substantive content" to be included in each plan, but rather sets forth various standards to ensure that plans are consistently and uniformly enforced.³⁵

ERISA also broadly preempted state law governing private-pension and welfare-benefit plans, replacing it with a mandate for courts to develop a body of federal common law.³⁶ Consequently, federal common law controls plan interpretation.³⁷ When analyzing plan language, courts must look to "general principles of contract interpretation, at least to the extent those principles are consistent with ERISA."³⁸ Moreover, because the majority of state statutory and common law (including equitable rules developed under or incorporated into state law) is preempted,³⁹ courts are generally precluded from relying on state doctrines where those doctrines have not been adopted under federal common law or are inconsistent with the requirements of ERISA.⁴⁰

As a result of ERISA's preemptive force, the relief available to ERISA plan participants is circumscribed to that which is available under ERISA § 502.⁴¹ For example, plan members and beneficiaries may seek to redress the wrongful denial of benefits under § 502(a)(1)(B) where the denial of benefits violates the terms of the plan or another provision of ERISA.⁴² Further, both plan members and fiduciaries may seek "appropriate equitable relief" under § 502(a)(3) where a remedy is not otherwise available. A brief overview of both provisions is instructive.

Section 502(a)(1) authorizes a plan participant "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."⁴³ Because§ 502(a)(1) remedies violations of a plan's terms , analysis of § 502(a)(1) claims focuses almost exclusively on plan interpretation. As discussed above, courts...