Samaritan Health Center v. Simplicity Health Care

• Decision Date: 31 March 2006
• Docket Number: No. 02-C-0387.,02-C-0387.
• Citation: 459 F.Supp.2d 786
• Parties: SAMARITAN HEALTH CENTER, Plaintiff, v. The SIMPLICITY HEALTH CARE PLAN, Simplicity Manufacturing, Inc., First Health Benefits Administrators Corp., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

459 F.Supp.2d 786

SAMARITAN HEALTH CENTER, Plaintiff, v. The SIMPLICITY HEALTH CARE PLAN, Simplicity Manufacturing, Inc., First Health Benefits Administrators Corp., Defendants.

No. 02-C-0387.

United States District Court, E.D. Wisconsin.

March 31, 2006.

COPYRIGHT MATERIAL OMITTED

Todd Hunter, Todd Hunter Law Firm, Walter R. Stewart, WR Stewart & Associates, Madison, WI, for Plaintiff.

Alan M. Levy, Robert E. Schreiber, Jr., Lindner & Marsack SC, Milwaukee, WI, for Defendants.

DECISION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT AGAINST CLAIMS OF SAMARITAN AND DENYING MOTION FOR SUMMARY JUDGMENT AGAINST CROSS-CLAIM OF SIMPLICITY AND THE PLAN

CLEVERT, District Judge.

In October 1995, Mary Ann Bowe was admitted to plaintiff Samaritan Health Center's skilled nursing facility. Initially, defendants paid for Bowe's stay, but after about three weeks of care they denied further claims for payment. Samaritan, as assignee, brought this lawsuit under the Employee Retirement Income Security Act (ERISA) to recover welfare benefits allegedly owed to Bowe. Defendants Simplicity Health Care Plan (the "Plan") and Simplicity Manufacturing, Inc. (Simplicity) cross-claimed against defendant First Health Benefits Administrators Corp. for indemnification pursuant to contract. Defendant First Health moves for summary judgment against both Samaritan's claim and Simplicity and the Plan's cross-claim.¹

Summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party has the initial burden of demonstrating it is entitled to summary judgment. Id. at 323, 106 S.Ct. 2548. Once that burden is met, the nonmoving party must designate specific facts to support or defend each element of its cause of action, showing that there is a genuine issue for trial. Id. at 322-24, 106 S.Ct. 2548. In analyzing whether a question of fact exists, the court construes the evidence in the light most favorable to the party opposing the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The mere existence of some factual dispute does not defeat a summary judgment motion; there must be a genuine issue of material fact for the case to survive. Id. at 247-48, 106 S.Ct. 2505. "Material" means that the factual dispute must be outcome-determinative under governing law. Contreras v. City of Chicago, 119 F.3d 1286, 1291 (7th Cir.1997). Failure to support any essential element of a claim renders all other facts immaterial. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. To establish that a question of fact is "genuine," the opposing party must present specific and sufficient evidence that, if believed by a jury, would actually support a verdict in its favor. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 249, 106 S.Ct. 2505. Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

In their opposition brief, Simplicity and the Plan state that for purposes of the pending summary judgment motion, "First Health must accept as accurate the allegations in the Cross Claim." (Br. of Simplicity & Plan in Opp'n at 1.) Simplicity and the Plan misunderstand the procedural rules. At the summary judgment stage, allegations in pleadings are not enough. When a summary judgment motion is supported with evidence, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but ... must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Unless an allegation has been admitted in an answer, it is no defense to a summary judgment motion.

UNDISPUTED FACTS

Simplicity established a welfare benefit plan, subject to ERISA, which provided medical benefits as well as prescription drug, dental, vision, and sickness and accident benefits. (Compl., Ex. 1, at 72²; FHB Proposed Finding of Fact (FHB PFOF) ¶ 2.³) The plan was named "The Simplicity Health Care Plan." (Compl., Ex. 1 at 72.) All benefits under the Plan were "self-funded and paid directly from the general assets of the plan sponsor." (Id.)

Simplicity was the named "Plan Sponsor" and "Plan Administrator" in the "Medical Plan Document" dated January 1, 1994. (Compl., Ex. 1, at 64, 71; FHB PFOF ¶ 3.) The Medical Plan Document defined the term "Plan Administrator" as follows:

Simplicity Manufacturing, Inc. is the named fiduciary of the plan, and is the Plan Administrator with the authority to control and manage the operation and administration of the plan. The Plan Administrator will have full power to administer the Plan in all of its details, subject to applicable requirements of law. For this purpose, the Plan Administrator's powers will include, but will not be limited to, the following authority, in addition to all other powers provided by this Plan:

(a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;

(b) To interpret the Plan, its interpretation thereof in good faith to be final and conclusive on all persons claiming benefits under the Plan;

(c) To decide, within its discretion, all questions concerning the Plan and the eligibility of any person to participate in the Plan;

(d) To appoint such agents ... and other persons as may be required to assist in administering the Plan; and

(e) To allocate and delegate its responsibilities under the Plan and to designate other persons to carry out any of its responsibilities under the Plan, any such allocation, delegation or designation to be in writing.

(Compl., Ex. 1 at 64; FHB PFOF ¶ 5.)

Simplicity "engaged the services of certain organizations to provide claims administration services." (Compl., Ex. 1 at 72; FHB PFOF ¶ 6.) First Health was a named third-party claims administrator in the Medical Plan Document. (Compl., Ex. 1 at 57, 72; FHB PFOF ¶ 7.) The Medical Plan Document defined "Claims Administrator" as follows:

The claims administrator for the plan is First Health Strategies, Inc., [⁴] the organization retained by the plan administrator to provide claims administration services to the plan. Although claims determinations will routinely be performed by the claims administrator, the plan administrator retains ultimate authority to interpret plan terms and make determinations regarding eligibility and benefits.

(Compl., Ex. 1 at 57; FHB PFOF ¶ 9.)

The Medical Plan Document stated that "[i]n general, the plan is self-administered by Simplicity." (Compl., Ex. 1 at 72.) However, "Simplicity has engaged the service of certain organizations to provide claims administration services." (Id.) The Medical Plan Document identified that medical benefits would be adjudicated by First Health, in conjunction with Associates for Health Care. (Id.; FHB PFOF ¶ 8.)

If a participant did not agree with a denial of benefits, he or she had "the right to ask the plan to review the claim." (Compl., Ex. 1 at 69.) Participants were directed by the Medical Plan Document to mail any appeal or request for review to First Health Strategies (TPA), Inc. in Kentucky. (Id. at 49-50; FHB PFOF ¶ 10.) Participants were directed to contact the plan administrator with any questions about the Plan. (Compl., Ex. 1 at 70.)

The Medical Plan Document identified the designated agent for service of legal process as Simplicity. (Id. at 71.)

Simplicity, as plan sponsor and administrator of the Plan, and First Health entered into a Master Services Agreement (MSA), effective from January 1, 1996, to December 31, 1999. (Norton Aff., Exs. 1 & 2, at 1; FHB PFOF 11.) The MSA provided that First Health was to perform its services "in accordance with the terms of the Plan." (Norton Aff., Ex. 1, ¶ 1.) It stated further:

FIRST HEALTH is engaged to perform the services under this Agreement as an independent contractor and not as a fiduciary of the Plan or as an employee or agent of [Simplicity]. FIRST HEALTH shall have no final discretionary authority or control over the management or disposition of Plan assets, and no authority over or responsibilities for Plan administration. Because FIRST HEALTH is neither the Plan Sponsor or Administrator, nor a provider of health care services to Plan participants or beneficiaries (collectively "claimants"), FIRST HEALTH shall have no responsibility for: (a) any funding of Plan benefits....

(Norton Aff., Ex. 1, ¶ 3; FHB PFOF ¶ 13.) The parties acknowledged in the MSA that Simplicity, not First Health, had final discretionary authority to determine what benefits would be paid by the Plan. (Norton Aff., 1, ¶ 5.)

The MSA's Services and Fees Exhibit provided that First Health was to conduct the claims review and appeals procedures "in accordance with Plan provisions" and that First Health was to advise the plan administrator, i.e., Simplicity, of all appeals of denied claims for the plan administrator to make the final benefits determinations. (Norton Aff., Ex. 1, Services & Fees Ex. ¶ II.B.7; FHB PFOF ¶ 14.) Other services provided by First Health under the MSA included providing information on plan eligibility and benefits to all participants, verifying eligibility and "calculating amounts payable under the Plan in light of Plan provisions," mailing explanations of benefits and benefits checks, and seeking reimbursement of overpayments of plan benefits. (Norton Aff., Ex. 1, Services & Fees Ex. ¶ II.A & II.B.)

In the MSA, First Health and Simplicity agreed that each would be...