Misch v. Community Mut. Ins. Co., C-1-94-428.

• Decision Date: 01 December 1994
• Docket Number: No. C-1-94-428.,C-1-94-428.
• Citation: 896 F. Supp. 734
• Parties: Marlene MISCH, Plaintiff, v. The COMMUNITY MUTUAL INSURANCE CO., Defendant.
• Court: U.S. District Court — Southern District of West Virginia

896 F. Supp. 734

Marlene MISCH, Plaintiff, v. The COMMUNITY MUTUAL INSURANCE CO., Defendant.

No. C-1-94-428.

United States District Court, S.D. Ohio, Western Division.

December 1, 1994.

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Richard Stuart Wayne, Strauss & Troy, Robert Armand Perez, Cincinnati, OH, for plaintiff.

Michael Joseph Canter, Daniel Jerome Buckley, Vorys, Sater, Seymour & Pease, Cincinnati, OH, for defendant.

ORDER

CARL B. RUBIN, District Judge.

This matter is before the Court upon Defendant's Motion to Dismiss the Complaint (Doc. no. 2). For the reasons set forth below, the Motion hereby is DENIED.

Factual and Procedural Background

Plaintiff Marlene Misch brings this class action complaint against Defendant The Community Mutual Insurance Co. (Community Mutual), an Ohio corporation which provides medical, hospital, major medical, comprehensive and other coverage to Ohio policyholders. The action is brought under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq.

The complaint sets forth the following allegations: The health insurance policies of Community Mutual typically provide that Community Mutual will pay a percentage of health care providers' charges and the plan participant will pay the remaining percentage. These percentages are usually 80% and 20%, respectively. However, Community Mutual has negotiated "secret" discounts with health care providers that apply to the portion of the charges paid by Community Mutual, but not to the portion paid by the policyholder. The result of such agreements is that policyholders in fact pay more than 20% of the total charges incurred for services rendered by health care providers, and health care providers bill at a higher rate to offset the discounts. In addition, Community Mutual calculates lifetime maximums¹ based on payments which exceed the discounted amounts actually paid by Community Mutual. Community Mutual intentionally withheld these agreements providing for discounted rates from the public and did not disclose them to the policyholders. Community Mutual also affirmatively misled its policyholders by mailing Explanation of Benefit (EOB) statements which falsely stated the amount Community Mutual had paid to health care providers for covered services.

Based on the above allegations, Plaintiff brings the following claims: (1) Plaintiff is entitled to recover benefits pursuant to 29 U.S.C. § 1132(a)(1)(B) in light of Community Mutual's failure to advise policyholders of the reductions in co-payment obligations resulting from the discounted rates it negotiated with health care providers and in light of its calculation of annual or lifetime maximums based on amounts in excess of those actually paid; and (2) Community Mutual breached its fiduciary duties under 29 U.S.C. §§ 1109(a) and 1106(b) by negotiating the discounts with health care providers and not discounting the policyholders' share of the bills, paying a lower percentage of costs than specified in the plan, affirmatively misleading policyholders regarding the discounts, and calculating lifetime maximums based on payments in excess of the amounts actually paid. Plaintiff seeks to hold Community Mutual liable for the negotiated discounts and for the benefits policyholders were precluded from receiving as a result of having reached lifetime or annual maximums. Plaintiff requests damages in the form of excessive co-payments, court enforcement of the policy terms, and an accounting of the charges Community Mutual failed to pay as a result of the discount agreements.

Defendant's Claims

Community Mutual moves to dismiss the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Defendant claims that (1) the method used to calculate policyholders' co-payments is specified in the policy, Community Mutual has adhered to the policy terms, and Plaintiff has therefore received all of the benefits to which she is entitled; (2) Plaintiff's objection is actually one as to plan design and Community Mutual owes Plaintiff no fiduciary duty with regard to plan design; (3) the alleged misadministration of a policy which funds a plan cannot constitute a misuse of plan assets; and (4) a breach of fiduciary claim under § 1109 can only be brought on behalf of the plan, not the individual plan participants.

Opinion

I. Motion to Dismiss

A Rule 12(b)(6) motion to dismiss requires the Court to determine whether a cognizable claim has been pled in the complaint. The basic federal pleading requirement is contained in Fed.R.Civ.P. 8(a) which states that a pleading "shall contain ... a short and plain statement of the claim showing that the pleader is entitled to relief". Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976). Rule 8(a)(2) operates to provide the defendant with "fair notice of what plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). A Court examines a complaint in light of the objectives of Rule 8 using the standard articulated in Jones v. Sherrill, 827 F.2d 1102, 1103 (6th Cir.1987):

In reviewing a dismissal under Rule 12(b)(6), the court must accept as true all factual allegations in the complaint. Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir.1983), cert. denied, 469 U.S. 826 105 S.Ct. 105, 83 L.Ed.2d 50 (1984). The motion to dismiss must be denied unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle her to relief. Id. at 158; Conley v. Gibson, 355 U.S. 41 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

The admonishment to liberally construe plaintiff's claim when evaluating a Rule 12(b)(6) dismissal does not relieve a plaintiff of his obligation to satisfy federal notice pleading requirements and allege more than bare assertions of legal conclusions. Wright, Miller & Cooper, Federal Practice & Procedure: § 1357 at 596 (1969). "In practice, a complaint ... must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir.1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985) (quoting In re: Plywood Antitrust Litigation, 655 F.2d 627, 641 (5th Cir.1981), cert. dismissed, 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983)); see also Sutliff, Inc. v. Donovan Companies, Inc., 727 F.2d 648, 654 (7th Cir.1984); Wright, Miller & Cooper, Federal Practice & Procedure: § 1216 at 121-23 (1969). In its scrutiny of the complaint, a Court construes all well-pled facts liberally in favor of the party opposing the motion. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974).

If matters outside of the pleadings are presented to the court on a Rule 12(b)(6) motion and are not excluded by the court, the motion shall be treated as one for summary judgment. Fed.R.Civ.P. 12(b). However, where plaintiff has incorporated documents into the complaint which are central thereto, the documents are part of the pleadings before the court and may be considered in connection with a 12(b)(6) motion. Teagardener v. Republic-Franklin, Inc. Pension Plan, 909 F.2d 947, 949 (6th Cir.1990).

A copy of Plaintiff's plan certificate is attached to, and incorporated into, the complaint. Therefore, the certificate is part of the pleadings before the court and the court will consider same in resolving Defendant's 12(b)(6) motion.

II. Standard of Review Under ERISA

A participant or beneficiary may bring a civil action to recover benefits due 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, or for appropriate relief under § 1109. 29 U.S.C. § 1132(a). The standard of review is de novo unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-957, 103 L.Ed.2d 80 (1989). Where such authority is granted, the arbitrary and capricious standard applies. Id.

The certificate in issue states that Community Mutual,

shall have discretionary authority to determine an individual's eligibility for benefits under the Group Contract and to construe the terms and conditions of this Certificate which describes your benefits. Whenever we make a determination or construction which is not arbitrary and capricious, our determination will be final and conclusive.

Thus, in accordance with the terms of the certificate, the arbitrary and capricious standard applies.

III. Fiduciary Status

Despite the plain language of the certificate, Community Mutual contends that Plaintiff cannot bring a claim for breach of fiduciary duty against it because her claims concern design of the plan and it owed no fiduciary obligation to Plaintiff with regard to plan design. Under ERISA, a person is a fiduciary with regard to a plan to the extent "he has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1002(21)(A)(iii). Both persons named as fiduciaries by a benefit plan, and anyone who exercises discretionary control or authority over the plan's management, administration, or assets, are ERISA fiduciaries. Mertens v. Hewitt Assocs., ___ U.S. ___, ___, 113 S.Ct. 2063, 2066, 124 L.Ed.2d 161 (1993). Where an insurance company administers claims for an employee welfare benefit plan and has the authority to grant or deny the claims, the company is an ERISA fiduciary. Libbey-Owens Ford Co. v. Blue Cross and Blue Shield Mutual of Ohio, 982 F.2d 1031, 1035 (6th Cir.1993).

A plan may grant discretion with respect to some decisions, but not others. See Anderson v. Great West Life Assurance, 942 F.2d 392, 395 (6th Cir.1991). An individual is a fiduciary to the extent he...