Medical Mut. of Ohio v. K. Amalia Enterprises Inc.

• Decision Date: 02 December 2008
• Docket Number: No. 07-4422.,07-4422.
• Citation: 548 F.3d 383
• Parties: MEDICAL MUTUAL OF OHIO, Plaintiff-Appellant, v. K. AMALIA ENTERPRISES INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

548 F.3d 383

MEDICAL MUTUAL OF OHIO, Plaintiff-Appellant, v. K. AMALIA ENTERPRISES INC., et al., Defendants-Appellees.

No. 07-4422.

United States Court of Appeals, Sixth Circuit.

Argued: July 24, 2008.

Decided and Filed: December 2, 2008.

ARGUED:

Timothy B. Pettorini, Critchfield, Critchfield & Johnston, Ltd., Wooster, Ohio, for Appellant. Christopher L. Lardiere, Lardiere Law Offices, LLC, Columbus, Ohio, Joel H. Mirman, Adams, Babner & Gitlitz, LLC, Columbus, Ohio, for Appellees.

ON BRIEF:

Timothy B. Pettorini, David J. Wigham, Critchfield, Critchfield & Johnston, Ltd., Wooster, Ohio, for Appellant. Christopher L. Lardiere, Lardiere Law Offices, Columbus, Ohio, Joel H. Mirman, Adams, Babner & Gitlitz, LLC, Columbus, Ohio, Stephen E. Chappelear, Jeffrey A. Yeager, Hahn, Loeser & Parks, L.L.P., Columbus, Ohio, for Appellees.

Before: MOORE and SUTTON, Circuit Judges; ALDRICH, District Judge.^*

OPINION

KAREN NELSON MOORE, Circuit Judge.

Plaintiff-Appellant Medical Mutual of Ohio ("MMO"), an insurance company, brought suit against Loan A. Tran ("Tran") and Khanh B. Luu ("Luu") for failing to disclose that their dependent son had a preexisting medical condition (hemophilia). MMO also included as defendants Tran's employer, k. Amalia Enterprises Inc. ("k. Amalia"), which contracted with MMO to provide group health insurance, and k. Amalia's Chief Financial Officer, John M. Barr ("Barr"), who signed the group-health-insurance contract on behalf of k. Amalia. MMO appeals the district court's grant of summary judgment to k. Amalia, Barr, Tran, and Luu. Because all of MMO's claims are barred by a contractual limitations provision, we AFFIRM the district court's grant of summary judgment to k. Amalia, Barr, Tran, and Luu and AFFIRM the district court's denial of MMO's motion for reconsideration.

I. BACKGROUND

A. Factual Background

Barr, k. Amalia's Chief Financial Officer, contracted with MMO to provide a group-health-insurance plan. He signed the Group Application on October 20, 2001. MMO agreed to cover k. Amalia's employees from November 1, 2001, to October 31, 2002; they renewed the contract in 2002, but did not renew it in 2004.

As part of the contract, MMO required k. Amalia employees to complete Medical History Questionnaires if they wished to be covered by the group-health-insurance plan. Tran, an employee,¹ and her husband completed and signed the "Health and Life Application/Policy Change" form on October 14, 2001. Joint Appendix ("J.A.") at 139-41 (Pl.'s Mot. for Leave to Substitute Original Aff., Ex. A-1). The application submitted by Tran stated that neither Tran nor her dependents had currently (or had previously had) any of the medical conditions listed on the form, including hemophilia. Tran also checked a box indicating that neither she nor her dependents "had, or [had] been treated for, or been told that" they had "any other condition/disorder/disease" that was not listed explicitly on the form. J.A. at 140 (Pl.'s Mot. for Leave to Substitute Original Aff., Ex. A-1).

A member of the Financial Investigations Department for MMO stated in his affidavit that "MMO assessed its risk, determined its rates, and issued the group contract for health insurance to the K. Amalia group in reliance upon the truth and accuracy of the information in the applications." J.A. at 137 (Pl.'s Mot. for Leave to Substitute Original Aff., Ex. A, Ferrara Aff. ¶ 5). The contract gave MMO "the right to void a Covered Person's coverage if that person engages in fraudulent conduct relating to an Application." J.A. at 106 (Contract at § 5.5). The contract also contained the following contractual limitations provision:

No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty (60) days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three (3) years after the time written proof of loss is required to be furnished. In the case of legal action other than those to recover benefits, no such action may be brought more than two (2) years from the date the cause of action arises.

J.A. at 105 (Contract at § 5.3).

In August 2004, MMO conducted an audit that revealed Tran's dependent son, Hiep Luu, had a pre-existing condition— hemophilia—that had not been disclosed on the insurance application. MMO admits that it knew Hiep Luu had hemophilia "on or before February 1, 2002," but claims that it did not know that this was a pre-existing condition. J.A. at 92 (Req. for Admis. No. 27). MMO estimates that it paid approximately $525,000 for claims related to Hiep Luu's treatment before it realized that he had been diagnosed with hemophilia before Tran completed the MMO insurance application.

"MMO processes approximately 102,000 claims per day and has approximately 1.6 million subscribers." J.A. at 138 (Pl.'s Mot. for Leave to Substitute Original Aff., Ex. A, Ferrara Aff. ¶ 9). MMO admits that some of the claims filed on behalf of Hiep Luu referred to a treatment/drug known as "Factor VIII (Antihemophilic Factor, Recombinant), per IU," J.A. at 88 (Req. for Admis. No. 9), and that "it had access to the procedure code prescription/drug name ... when it decided whether to pay or deny the claims," J.A. at 92 (Req. for Admis. No. 25). Also, MMO admits that "an `antihemophilic' treatment would be administered to an individual afflicted by hemophilia," J.A. at 91 (Req. for Admis. No. 23), and that it paid a claim for such a treatment in February 2002. J.A. at 88-89 (Req. for Admis. No. 11). Finally, MMO admits that it had never informed k. Amalia or Barr of Hiep Luu's medical-claims history.

B. Procedural Background

MMO filed suit against k. Amalia, Barr, Tran, and Luu on April 14, 2005. In its Complaint, MMO alleged that Tran, Luu, k. Amalia, and Barr breached the insurance contract, made negligent misrepresentations, and engaged in fraudulent behavior. MMO sought compensatory damages for these claims. MMO also sought partial rescission of the contract, as it related to health-insurance coverage of Tran and her dependents. For this claim, MMO requested that the court provide "restitution ... in an amount to be determined at trial, but believed to exceed $500,000.00, plus interest, attorney fees and court costs." J.A. at 23 (Compl.¶ 69). Finally, MMO brought a claim against Tran and Luu, alleging that they had been unjustly enriched by their failure to disclose their son's condition and seeking compensatory damages. K. Amalia filed an answer that included counterclaims alleging that the litigation was "frivolous," that MMO had tortiously interfered with k. Amalia's current and future contractual relations, that MMO had negligently handled "the analysis and payment of claims," and that MMO had breached its contract with k. Amalia. J.A. at 52 (Answer and Countercl. at 17). K. Amalia sought compensatory damages in excess of $50,000.00 on its counterclaims.

K. Amalia, Barr, Tran, and Luu filed a joint motion for summary judgment on July 24, 2006, claiming that MMO had failed to file its suit within the contractual limitations period. MMO filed a response in opposition to the summary-judgment motion on August 18, 2006. Depositions of Tran and Luu were taken in December 2006. The district court granted the motion for summary judgment on May 7, 2007, several days after the discovery-cutoff date had passed. MMO filed a Motion for Reconsideration on September 5, 2007, which the district court denied the following day.² After the parties stipulated to the dismissal of the counterclaims without prejudice,³ MMO filed a timely appeal.

II. SUBJECT-MATTER JURISDICTION

Although the district court did not analyze subject-matter jurisdiction, and the parties have not contested our jurisdiction, we must independently satisfy ourselves that the federal courts have subject-matter jurisdiction. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998); Goodyear Atomic Corp. v. Miller, 486 U.S. 174, 178, 108 S.Ct. 1704, 100 L.Ed.2d 158 (1988). To that end, we requested letter briefs addressing jurisdiction prior to oral argument. Federal-question jurisdiction, 28 U.S.C. § 1331, in this case is premised on MMO's federal cause of action brought under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"). Specifically, MMO asserted a claim under ERISA's civil-enforcement provision, § 502(a)(3), 29 U.S.C § 1132(a)(3), seeking partial rescission of the contract between MMO and k. Amalia.

Section 1132(a)(3) provides that a fiduciary may bring a civil action "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C § 1132(a)(3). "Dismissal for lack of subject-matter jurisdiction because of the inadequacy of the federal claim is proper only when the claim is `so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy.'" Steel Co., 523 U.S. at 89, 118 S.Ct. 1003 (quoting Oneida Indian Nation of N.Y. v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974)). Subject-matter jurisdiction is defeated only if the federal "claim `clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous.'" Id. (quoting Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 90 L.Ed. 939 (1946)).

Whatever the merits of MMO's § 1132(a)(3) claim for equitable relief, it is clear that this claim is not "wholly insubstantial and frivolous." Id. There is no dispute that MMO is a fiduciary, that the plan at issue in this case qualifies as an ERISA...