Hill v. Blue Cross and Blue Shield of Mich.

Decision Date13 May 2005
Docket NumberNo. 03-2607.,03-2607.
Citation409 F.3d 710
PartiesJohn L. HILL, Francine Barnes, Franchot Barnes, Francesca Barnes, and Glory Celestine, Plaintiffs-Appellants, v. BLUE CROSS AND BLUE SHIELD OF MICHIGAN, Defendant-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Michael G. Wassmann, Elwood S. Simon & Associates, Birmingham, Michigan, for Appellants. James J. Walsh, Bodman, Longley & Dahling, Ann Arbor, Michigan, for Appellee.

ON BRIEF:

Michael G. Wassmann, Elwood S. Simon, Elwood S. Simon & Associates, Birmingham, Michigan, Stewart A. Lebenbom, Lebenbom & Pernick LLP, Detroit, Michigan, for Appellants. James J. Walsh, Bodman, Longley & Dahling, Ann Arbor, Michigan, G. Christopher Bernard, Bodman, Longley & Dahling, Detroit, Michigan, Joseph W. Murray, Blue Cross and Blue Shield of Michigan, Detroit, Michigan, for Appellee.

Before: MOORE and GILMAN, Circuit Judges; GWIN, District Judge.*

OPINION

MOORE, Circuit Judge.

Plaintiffs-Appellants John L. Hill, Francine Barnes, Franchot Barnes, Francesca Barnes, and Glory Celestine ("Plaintiffs") filed the instant putative class action against Defendant-Appellee Blue Cross and Blue Shield of Michigan ("BCBSM"), the third-party administrator for Plaintiffs' employer-sponsored health insurance program ("the Program"). Plaintiffs allege that BCBSM's handling of their claims for emergency-medical-treatment expenses resulted in the wrongful denial of benefits and constituted a breach of BCBSM's fiduciary duties to Program members under the Employee Retirement Income Security Act of 1974 ("ERISA"). The district court granted BCBSM's motion to dismiss Plaintiffs' suit without prejudice on the ground that Plaintiffs failed to exhaust administrative remedies available under the Program prior to filing suit. Plaintiffs now appeal, alleging, inter alia, that exhaustion is not required for claims for breach of fiduciary duty, that exhaustion of administrative-review procedures would be futile, and that Plaintiff Hill has in fact exhausted his administrative remedies. For the reasons set forth below, we AFFIRM IN PART and REVERSE IN PART the district court's order granting BCBSM's motion to dismiss Plaintiffs' complaint.

I. FACTUAL AND PROCEDURAL HISTORY
A. Factual History
1. Program Coverage of Emergency-Medical-Treatment Expenses

General Motors's ("GM") September 1999 collective bargaining agreement with United Auto Workers ("UAW") provides for the establishment of a GM-sponsored health insurance program. The Program's benefits include coverage for treatment of "medical emergencies":

Services in the emergency room of a hospital are covered for the initial examination and treatment of conditions resulting from accidental injury or medical emergencies.

* * * * * *

Emergency treatment: Coverage is provided for the services of one or more physicians for the initial examination and treatment of conditions resulting from accidental injury or medical emergencies.

Joint Appendix ("J.A.") at 106, 110. The Program documents provide that the determination as to whether a claimant has suffered a "medical emergency" should be based on the symptoms exhibited by the claimant at the time of treatment, not the claimant's ultimate diagnosis:

"[M]edical emergency" means a permanent health-threatening or disabling condition, other than an accidental injury, which requires immediate medical attention and treatment.

The condition must be of such a nature that severe symptoms occur suddenly and unexpectedly and that failure to render treatment immediately could result in significant impairment of bodily function, cause permanent damage to the enrollee's health, or place such enrollee's life in jeopardy. The enrollee's signs and symptoms verified by the treating physician at the time of treatment, and not the final diagnosis, must confirm the existence of a threat to the enrollee's life or bodily functions.

J.A. at 101 (second emphasis added).

2. Current Claims-Processing Methodology

The central assertion underlying Plaintiffs' suit is that BCBSM, the Program's third-party administrator, has violated the Program's emergency-medical-treatment provisions by utilizing an automated claims-processing system that makes claim determinations based on a physician's final diagnosis rather than the claimant's signs and symptoms at the time of treatment. Plaintiffs allege that for some health insurance plans BCBSM administers, the claims-handling procedures have been modified in that administrative review of a claimant's particular "signs and symptoms" is required before a claim is denied if the claimant's final diagnosis is not included on the list of conditions that automatically qualify for emergency medical coverage. BCBSM, however, allegedly has chosen not to implement this new claims-handling procedure for several employer-sponsored plans that it administers on behalf of large institutional clients, including GM. The Plaintiffs allege that BCBSM's decision not to implement its new claims-handling procedures for certain clients' plans arises out of a fear that increased benefit pay-outs will lead these companies to terminate BCBSM's third-party-administrator contracts. BCBSM, on the other hand, contends that it has not adopted the administrative-review procedures for the GM-sponsored plan because the plan's Administrative Manual sets forth the claims-handling procedures that BCBSM must follow, and any alteration of these procedures requires the consent of GM and the UAW.

3. Named Plaintiffs' Allegations

The instant class action includes five named plaintiffs: John L. Hill ("Hill"), Francine Barnes, Franchot Barnes, Francesca Barnes, and Glory Celestine ("Celestine").

Hill alleges that in December 2000, he sought treatment at the emergency room of Henry Ford Hospital for an infected growth on his back, and that he subsequently filed a claim for benefits under the Program. BCBSM granted the facilities portion of Hill's claim but denied the portion of the claim attributable to physician fees. The "Explanation of Benefits" ("EOB") form provided to Hill allegedly stated that:

This service isn't payable because your contract only covers when the reported condition shows the patient received emergency care. The information we reviewed did not show a life-threatening medical emergency or an accidental injury caused by an outside force.

J.A. at 37 (First Am. Compl. ¶ 9). After receiving the EOB, Hill claims he "contacted his union representative, who later informed [him] that he was going to have to pay the claim personally." J.A. at 37 (First Am. Compl. ¶ 10).

Francine Barnes, Franchot Barnes, and Francesca Barnes each allege that they "visited emergency rooms for treatment of various medical conditions," and that their claims for benefits were "improperly denied by BCBSM." J.A. at 37 (First Am. Compl. ¶¶ 11, 12); J.A. at 38 (First Am. Compl. ¶ 13). Unlike Hill, none of the Barneses have alleged that they utilized any administrative-review procedures established under the Program; rather, they only allege that they "have spent a significant amount of time and resources attempting to resolve emergency medical benefit disputes with BCBSM and, thereby, have exhausted the administrative remedies available to them." J.A. at 52 (First Am. Compl. ¶ 48).

Celestine alleges that she was injured in an automobile accident and taken by ambulance to an emergency room for treatment. According to Celestine, BCBSM improperly refused to pay her claim based on her final diagnosis. Celestine also alleges that, "[a]fter receiving past due notices and letters from collection agencies for the amounts due, [she] communicated with Healthcare Recoveries, Inc., a consumer advocate for General Motor's [sic] health care programs, which is attempting to obtain payment of [her] benefits claims on her behalf." J.A. at 39-40 (First Am. Compl. ¶ 18). In addition, Celestine asserts that she and the other Plaintiffs "have spent a significant amount of time and resources attempting to resolve emergency medical benefit disputes with BCBSM and, thereby, have exhausted the administrative remedies available to them." J.A. at 52 (First Am. Compl. ¶ 48).

B. Procedural History

In January 2003, Hill filed the instant putative class action on behalf of himself and

all persons who participate in, or are covered under, one or more of the employee benefit plans insured and/or administered by [BCBSM] who have coverage for emergency medical services and had one or more benefit claims for emergency medical services denied by BCBSM based on the patient's final diagnosis and/or medical condition ....

J.A. at 41 (First Am. Compl. ¶ 22); see also J.A. at 10 (Compl.¶ 13).1 The four-count complaint seeks: (1) declaratory and injunctive relief for breach of fiduciary duties pursuant to 29 U.S.C. §§ 1104 and 1132(a)(3); (2) declaratory and injunctive relief for breach of a fiduciary duty by a co-fiduciary pursuant to 29 U.S.C. §§ 1105 and 1132(a)(3); (3) recovery of benefits pursuant to 29 U.S.C. § 1132(a)(1)(B); and (4) restitution to the Program pursuant to 29 U.S.C. §§ 1109(a) and 1132(a)(2).

In March 2003, Hill filed an amended complaint adding Francine Barnes, Franchot Barnes, Francesca Barnes, and Celestine as named plaintiffs. BCBSM then moved to strike the allegations of these four additional named plaintiffs, asserting that the amendment of the complaint was improper under Federal Rule of Civil Procedure 15(a). BCBSM also filed a Rule 12(b)(6) motion to dismiss on the grounds that: (1) Hill had not exhausted the Program's administrative remedies, and (2) the Labor Management Relations Act ("LMRA"), not ERISA, governed Hill's claims. In ruling on BCBSM's motions, the district court first ordered the addition of Celestine and the Barneses pursuant to Federal Rule of Civil Procedure 21, thereby rendering moot BCBSM's motion to strike....

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