Schoen v. Health Mgmt. Assocs., Inc.
| Decision Date | 25 August 2015 |
| Docket Number | Case No: 2:14-cv-411-FtM-29CM |
| Court | U.S. District Court — Middle District of Florida |
| Parties | WILLIAM J. SCHOEN, Plaintiff, v. HEALTH MANAGEMENT ASSOCIATES, INC., a Delaware corporation, Defendant. |
This matter comes before the Court on review of defendant's Motion to Dismiss Plaintiff's Amended Complaint (Doc. #27) filed on September 22, 2014. Plaintiff filed a Response in Opposition (Doc. #28) on October 13, 2014. With leave of Court, defendant also filed a Reply (Doc. #29) and plaintiff filed a Sur-Reply (Doc. #33).
Under Federal Rule of Civil Procedure 8(a)(2), a Complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This obligation "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)(citation omitted). To survive dismissal, the factual allegations must be"plausible" and "must be enough to raise a right to relief above the speculative level." Id. at 555. See also Edwards v. Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010). This requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(citations omitted).
In deciding a Rule 12(b)(6) motion to dismiss, the Court must accept all factual allegations in a complaint as true and take them in the light most favorable to plaintiff, Erickson v. Pardus, 551 U.S. 89 (2007), but "[l]egal conclusions without adequate factual support are entitled to no assumption of truth," Mamani v. Berzain, 654 F.3d 1148, 1153 (11th Cir. 2011)(citations omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. "Factual allegations that are merely consistent with a defendant's liability fall short of being facially plausible." Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012)(internal quotation marks and citations omitted). Thus, the Court engages in a two-step approach: "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 556 U.S. at 679.
Count I of the Amended Complaint (Doc. #20) alleges a breach of the Employment Agreement entered into between plaintiff William J. Schoen (plaintiff) and Health Management Associates, Inc. (HMA or defendant). Count II of the Amended Complaint asserts a wrongful denial of benefits under the Supplemental Executive Retirement Plan (SERP) pursuant to the Employee Retirement Income Security Act (ERISA), § 502(a)(1)(B). Count III of the Amended Complaint seeks a declaratory judgment with regard to plaintiff's health benefits under the Employment Agreement detailed in Count I as HMA takes the position that the Employment Agreement expired on or about January 1, 2004. Count IV of the Amended Complaint is alleged in the alternative to Count I, and alleges that plaintiff and HMA entered into an implied in fact contract through the date of his termination on August 25, 2013. A summary of the background in Counts I and II follows.
In February 1983, plaintiff joined the Board of Directors of Hospital Management Associates, Inc. in Fort Myers, Florida. Plaintiff later became the President and Co-CEO, and in this capacity moved Hospital Management Associates, Inc. to Naples, Florida. In 1986, plaintiff became Chairman of the Board, President and CEO, and took the company public under a new name, Health Management Associates, Inc. (HMA or defendant). After twoyears, plaintiff took HMA back to the status of a private, non-public company. In 1991, plaintiff once again took HMA public on the NYSE by a second public stock offering and continued in his role as President, CEO, and Chairman of the Board. During the 1990s, HMA's stock grew exponentially and maintained consistent profitability.
In 2001, at the age of 66, plaintiff stepped down as President and CEO of HMA, but remained Chairman of the Board. Effective January 2, 2001, plaintiff entered into a written Employment Agreement with HMA to serve as Chairman of HMA and its Board of Directors. The Employment Agreement references an annual retirement benefit to plaintiff for life under HMA's Supplemental Executive Retirement Plan (SERP), and up to an additional 10 years if his spouse survives him. The Employment Agreement further entitles plaintiff and his spouse with coverage under one of HMA's executive medical plans until November 30, 2006, and with Medicare supplemental insurance after that date. The Employment Agreement contains an expiration date of January 1, 2004. Plaintiff continued in his position as Chairman until his termination without cause and removal from the Board of Directors on August 15, 2013. HMA abided by the terms of the Employment Agreement, including paying plaintiff's yearly salary and health care premium payments, providing automobile and club expenses, office and secretarial assistance, and 150 hours of personal useof HMA's Falcon 50 or equivalent aircraft, until plaintiff's August 15, 2013 termination and removal from the Board of Directors.
On February 6, 2007, the parties signed a First Amendment to Employment Agreement (Doc. #2-4, Exh. C) to amend the "Health Plan" paragraph (paragraph 7), effective November 30, 2006, to continue coverage under one of HMA's executive medical plans, provided however that if plaintiff or his spouse elects Medicare, HMA could provide Medicare supplemental insurance. No other terms of the Employment Agreement were amended.
In early 2013, Glenview Capital Management Company, LLC, a hedge fund and HMA's largest shareholder, began a campaign to replace HMA's Board of Directors, including plaintiff as Chairman. At the same time, Community Health Systems, Inc., a Delaware corporation (CHS) continued negotiations to acquire HMA. On or about July 29, 2013, CHS and its wholly owned subsidiary entered into a merger agreement with HMA and affirmed that all material contracts were valid and binding, including plaintiff's Employment Agreement.
On or about August 7, 2013, after learning that Glenview had the requisite number of votes, plaintiff composed a letter to HMA's Board of Directors stating his intent to retire as of September 1, 2013, or when Glenview seated a new Board of Directors, whichever occurred first. The letter was not accepted and plaintiff continued as Chairman of the Board until he was removed.
On August 15, 2013, plaintiff was notified by Senior Vice President and General Counsel of HMA of the certified results of the vote, and the removal of the Board and plaintiff as Chairman of the Board. A Form 8-K was filed with the Securities and Exchange Commission detailing the removal and the vote tally. (Doc. #2-5, Exh. D.)
On January 10, 2014, plaintiff e-mailed Steve Clifton, Senior Vice President and General Counsel of HMA demanding severance pay in compliance with the Employment Agreement. On January 23, 2014, plaintiff sent a letter to Wayne Smith, Chairman of the Board and CEO of CHS, stating that HMA has owed him $3,239,261 since August 15, 2013. In the letter, plaintiff states that he was replaced as Chairman without cause and therefore, pursuant to the Employment Agreement, he was entitled to receive a lump-sum payment equal to the gross income paid to the Executive of HMA for each of three calendar years preceding the termination as severance. Plaintiff also mentions a "gross up" provision for an additional payment of 80% in taxes. (Doc. #2-6, Ex. E.) No such severance payment was paid despite plaintiff's demands.
Under the same Employment Agreement, HMA was also obligated to provide plaintiff with personal use of a Falcon 50 Aircraft, or equivalent, for 150 hours of air time per calendar year during his employment, and for 15 years thereafter with any unused hours to be carried over to future years. HMA abided by the terms of theEmployment Agreement during his employment and until CHS acquired HMA in 2013, but HMA has refused to provide the aircraft at least twice after January 2014. As a result, plaintiff incurred expenses for use of a substitute aircraft and elects the annual operating benefit equal to the cost that HMA would have expended to carry out the fractional ownership program for 15 years. The failure to provide the aircraft benefit constitutes a breach of the Employment Agreement.
Effective May 1, 1990, HMA established a Supplemental Executive Retirement Plan (SERP) for executives to receive retirement and survivor benefits. (Doc. #2-8, Exh. G.) Plaintiff's benefits were to be payable for his life with 120 payments guaranteed at a rate of $25,000 a month. (Id. at p. 21.) SERP was amended effective December 13, 1993 (First Amendment, id. at p. 19), effective September 17, 1996 (Second Amendment, id. at p. 28), effective December 5, 2000 (Third Amendment, id. at p. 30), and last amended effective January 1, 2009 (Fourth Amendment and Restatement, id. at p.35), and plaintiff was an eligible participant in the Plan at the time of his termination on August 15, 2013. The Fourth Amendment to the SERP specifically names plaintiff as a participant, and the SERP provides that plaintiff would be entitled to payment from HMA if a change of ownership occurred. A change of ownership did occur after plaintiff's normalretirement date, and therefore plaintiff was entitled to an immediate single cash sum "Actuarial Equivalent of the Participant's Retirement Benefit" which took into account his spouse's 10 year survivorship annuity right and the obligation to pay plaintiff for any tax impact. Pursuant to the Fourth Amendment to the SERP, a schedule was established for plaintiff' life and for the life of plaintiff's spouse if she survives him in the amount of...
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