Kobleur v. GROUP HOSPITALIZATION & MEDICAL SERV.

• Decision Date: 24 April 1991
• Docket Number: No. CV 290-354.,CV 290-354.
• Citation: 787 F. Supp. 1444
• Parties: Patricia M. KOBLEUR, Individually and on Behalf of her Husband and Ward Joseph M. Kobleur, and on Behalf of All Other Persons Similarly Situated, plaintiff, v. GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., d/b/a Blue Cross and Blue Shield of the National Capital Area, defendant.
• Court: U.S. District Court — Southern District of Georgia

787 F. Supp. 1444

Patricia M. KOBLEUR, Individually and on Behalf of her Husband and Ward Joseph M. Kobleur, and on Behalf of All Other Persons Similarly Situated, plaintiff, v. GROUP HOSPITALIZATION AND MEDICAL SERVICES, INC., d/b/a Blue Cross and Blue Shield of the National Capital Area, defendant.

No. CV 290-354.

United States District Court, S.D. Georgia, Brunswick Division.

April 24, 1991.

COPYRIGHT MATERIAL OMITTED

Brent J. Savage, Richard H. Middleton, Jr., Savannah, Ga., Robert H. Benfield, Jr., Atlanta, Ga., for plaintiff.

Terry L. Readdick, Brunswick, Ga., William H. Major, and Michael R. Hurst, Atlanta, Ga., for defendant.

ORDER

EDENFIELD, Chief Judge.

The defendant in this case has moved that the Court dismiss this action because the plaintiff has failed to exhaust her administrative remedies. To resolve the motion, the Court must decide whether the Federal Employees Health Benefits Act ("FEHBA" or "the Act"), 5 U.S.C. § 8901 through 8913 (1988) requires a person whose insurer has denied her health benefits claim to seek administrative review of the denial by the Office of Personnel Management ("OPM") before she challenges the denial in Court. The Court decides that the plaintiff should have pursued her administrative remedies before bringing this suit, and therefore GRANTS the motion. In addition, for reasons explained below, the Court orders Rule 11 sanctions against attorneys Brent J. Savage, Richard H. Middleton, Jr., Robert H. Benfield, Jr., and three other attorneys, as well as the law firms Adams, Gardner & Ellis and Middleton & Anderson.

I. BACKGROUND

A. The Facts

Although the defendant Group Hospitalization and Medical Services, Inc. ("Blue Cross") labelled this motion a motion to dismiss, it appended an affidavit as an exhibit to the motion. In her response, the plaintiff, Patricia M. Kobleur, also appended several exhibits to her brief in opposition. Accordingly, the Court converted the motion into one for summary judgment on the exhaustion claim to enable it to consider these exhibits, and gave the parties appropriate notice of the conversion.¹

Blue Cross agreed to provide a group health benefit plan for 1989 to the employees and retirees of the Federal Bureau of Alcohol, Tobacco and Firearms ("BATF"). Mrs. Kobleur's husband was a BATF retiree during 1989, suffering from Alzheimer's disease, a progressive dementia. During that year, Mr. Kobleur filed several claims for benefits under the Blue Cross plan. Paragraphs 9 and 10 of the complaint contain the Kobleur's chief dissatisfaction with the manner in which Blue Cross dealt with those claims.

9. Beginning in 1989 and continuing through January 1, 1990, Patricia Kobleur has filed claims on behalf of Joseph Kobleur with Blue Cross arising out of treatment for Alzheimer's disease, a progressive dementia. This treatment involved hospitalization at a local medical center as well as admission to a mental health facility. The latter admission required Mr. Kobleur to be adjudicated incapacitated and Mrs. Kobleur was appointed his legal guardian. Blue Cross treated Mr. Kobleur's claims for his hospitalization at Candler General Hospital as involving a "mental illness" and accordingly limited the benefits paid to Mr. Kobleur. Blue Cross then treated Mr. Kobleur's diagnosis of dementia disease for his commission to Charter Hospital of Savannah as being a physical illness, and denied complete coverage for this hospitalization.

10. Had Blue Cross properly recognized Mr. Kobleur's condition as a physical illness or disorder, and paid benefits under the group health plan issued to ATF accordingly, the amounts payable under said plan to date would have substantially exceeded the amount paid by Blue Cross because of its arbitrary decision to treat Mr. Kobleur's illness as a "mental illness or condition."²

Thus, the Kobleurs suggest that Blue Cross wanted to have it both ways. The complaint implies that Blue Cross would change its classification of Alzheimer's from physical to mental or mental to physical in such a way as to ensure that, whatever the Kobleurs claimed, their coverage would be minimized.

Mrs. Kobleur's sister, who was handling the Kobleur's financial affairs at the time, asked Janalyn Smith of Blue Cross if there was any way to appeal the alleged denial of benefits.³ Ms. Smith said no.⁴ The Kobleurs did not appeal the denial of benefits.

B. The Statutory and Regulatory Scheme of FEHBA

FEHBA "established a comprehensive program to provide federal employees and retirees with subsidized health care benefits." Hayes v. Prudential Ins. Co. of Amer., 819 F.2d 921, 922 (9th Cir.1987), cert. denied, 484 U.S. 1060, 108 S.Ct. 1014, 98 L.Ed.2d 980 (1988); see Appeal of Bolden, 848 F.2d 201, 202 (D.C.Cir.1988). As the Ninth Circuit explained in Hayes:

Under the Act, the United States does not act as an insurer, but, through the Office of Personnel Management (OPM), contracts with various private carriers to develop health care plans with varying coverages and costs. The plans are for a term of one year, and are renegotiated annually.

819 F.2d at 922. Section 8902(j) of the Act requires the private carrier to agree to pay for or provide a health service or supply if OPM finds that the plan member is entitled to those services under the terms of the contract. In other words, OPM's interpretation of the plan's provisions binds the carrier. Hayes, 819 F.2d at 924. OPM must interpret the plan's provisions when a claim is denied and the enrollee appeals that denial to OPM pursuant to OPM's regulations:

§ 890.105 Filing claims for payment or service.

(a) General. Each health benefits plan adjudicates claims filed under the plan. An enrollee must initially submit all claims to the health benefits plan in which he or she is enrolled. If the plan denies a claim, the enrollee may ask the plan to reconsider the denial. If the plan affirms its denial or fails to respond as required by paragraph (b) of this section, the enrollee may ask OPM to review the claim.

(b) Time frames for reconsidering a claim.

. . . . .

(3) If a plan either affirms its denial of a claim or fails to respond to an enrollee's written request for reconsideration ..., the enrollee may write to OPM and request that OPM review the plan's decision.

5 C.F.R. § 890.105 (1991). If OPM fails to reverse the carrier's denial of a claim, the enrollee may sue for relief. OPM, however, is not a proper defendant in such a case. Section 890.107 of the regulations, entitled "Legal Actions," states: "An action to recover on a claim should be brought against the carrier of the health benefits plan."

II. ANALYSIS

A. Summary Judgment

Under the summary judgment standard, the Court "must determine whether there is any genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law." Regan v. United States Small Business Admin., 926 F.2d 1078, 1080 (11th Cir.1991) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)). The district court must review the evidence and all reasonable factual inferences arising from it in the light most favorable to the nonmoving party. E.g., Regan, 926 F.2d at 1080. This motion, however, concerns a dispute concerning a pure question of law. Specifically, the parties disagree whether the doctrine of exhaustion of administrative remedies applies in this case. The parties do not disagree on any facts material to this question.

B. Exhaustion Generally

Blue Cross says that Mrs. Kobleur has not exhausted her administrative remedies, and concludes that, as a result, the case should be dismissed. Exhaustion doctrine requires parties to pursue all administrative remedies before seeking judicial relief. E.g., In re Inspection of Norfolk Dredging Co., 783 F.2d 1526, 1528 (11th Cir.1986); Jean v. Nelson, 711 F.2d 1455, 1505 (11th Cir.1983), vacated en banc on other grounds, 727 F.2d 957 (11th Cir. 1984). The rationale for the doctrine is that, "absent compelling circumstances ... the avenues of relief nearest and simplest should be pursued first." Moore v. City of East Cleveland, 431 U.S. 494, 524, 97 S.Ct. 1932, 1948, 52 L.Ed.2d 531 (1977) (Burger, C.J., dissenting); see B. SCHWARTZ, ADMINISTRATIVE LAW 502 (2d ed. 1984). Depending on the circumstances, exhaustion doctrine implicates either the court's jurisdiction, or the court's discretion. "When a plaintiff has failed to exhaust administrative remedies made exclusive by statute, a court will generally be deprived of jurisdiction." Hironymous v. Bowen, 800 F.2d 888, 892 (9th Cir.1986) (citations omitted); see Haitian Refugee Center v. Nelson, 872 F.2d 1555, 1561 (11th Cir.1989); Townsend v. United States Dep't of Justice, 799 F.2d 179, 181 (5th Cir.1986); Power Plant Div., Brown & Root, Inc. v. Occupational Safety and Health Comm'n, 673 F.2d 111, 115 (5th Cir.Unit B 1982). The exhaustion doctrine also applies when pertinent regulations contain the administrative remedy or remedies. See United States v. Barry, 904 F.2d 29, 31 (11th Cir.1990) (per curiam) (where litigant did not file written request for relief, as allowed by regulation, he had not exhausted appropriate administrative remedy). Failure to exhaust the remedy is a jurisdictional defect, however, only where Congress has designated that particular administrative remedy as a statutory precondition to a lawsuit. E.g., United States v. California Care Corp., 709 F.2d 1241, 1248 (9th Cir.1983); see Weinberger v. Salfi, 422 U.S. 749, 766, 95 S.Ct. 2457, 2467, 45 L.Ed.2d 522 (1975). In all other cases, exhaustion is a matter of judicial discretion. E.g., Haitian Refugee Center, 872 F.2d at 1561; Power Plant Div., 673 F.2d at 114-15. This discretionary branch of the exhaustion doctrine frequently is called the "judicially-created" exhaustion doctrine.

Several policy considerations should inform a court's decision whether to impose a judicial exhaustion requirement in a given case....