Tarr v. State Mut. Life Assur. Co. of America, Civil Action No. 94-40167-NMG.

• Citation: 913 F. Supp. 40
• Decision Date: 30 January 1996
• Docket Number: Civil Action No. 94-40167-NMG.
• Parties: David TARR, D.P.M., Individually and as a Class Action on Behalf of Plan Beneficiaries of the L.S. Starrett Company Health Plan, Plaintiffs, v. STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA, and the Trustees of the L.S. Starrett Company Voluntary Employee Benefits Trust, Defendants.
• Court: U.S. District Court — District of Massachusetts

913 F. Supp. 40

David TARR, D.P.M., Individually and as a Class Action on Behalf of Plan Beneficiaries of the L.S. Starrett Company Health Plan, Plaintiffs, v. STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA, and the Trustees of the L.S. Starrett Company Voluntary Employee Benefits Trust, Defendants.

Civil Action No. 94-40167-NMG.

United States District Court, D. Massachusetts.

January 30, 1996.

Norman H. Jackson, Boston, MA, for plaintiffs.

Jeffrey R. Hellman, Charles L. Howard, Hartford, CT, for defendants.

MEMORANDUM AND ORDER

GORTON, District Judge.

Plaintiff, Dr. David Tarr, D.P.M., a podiatrist who practices in Athol, Massachusetts, filed a complaint in the above-entitled matter on October 24, 1994 against the administrator and insurance provider of certain employee health plans. Pending before this Court are motions by the defendants 1) to dismiss all counts of plaintiff's complaint, pursuant to Fed.R.Civ.P. 12(b)(6), 2) to compel plaintiff to respond to defendants' requests for discovery, and 3) to refer the discovery dispute (which forms the basis of its motion to compel) to a magistrate judge. For the reasons stated herein, the motion to dismiss will be allowed and the other motions, accordingly, are moot.

I. FACTUAL BACKGROUND

When considering a motion to dismiss, this Court accepts as true the allegations of the complaint and draws all reasonable inferences in favor of the plaintiff. Carreiro v. Rhodes Gill and Co., Ltd., 68 F.3d 1443, 1446 (1st Cir.1995). Plaintiff's complaint asserts the following relevant factual allegations:

1. Several of plaintiff's patients have health plan coverage provided under a self-funded employee benefit plan named the L.S. Starrett Company Voluntary Employee Benefits Trust ("the Starrett Plan"). The Starrett Plan is administered by defendant, the Trustees of the L.S. Starrett Company Voluntary Employee Benefits Trust ("the Trustees"). Defendant, State Mutual Life Assurance Company of America ("State Mutual"), insures the employee health plan benefits of the L.S. Starrett Company. State Mutual also processes claims for "the State Mutual Plans," a number of employee benefit plans governed by ERISA which it insures as part of its general book of business. In the course of his practice, plaintiff has treated patients who are participants or beneficiaries under the State Mutual Plans.

2. For several years, plaintiff has adopted and followed the policy of accepting from his patients an assignment of their right to be reimbursed by insurance plans for services rendered by him. Plaintiff has then billed the insurance companies directly under the assignment. Until the Fall of 1993, State Mutual paid plaintiff's bills.

3. In the Fall of 1993, Starrett posted a notice to its employees effective October 25, 1993, that it would only cover the services of podiatrists who were official in-network participants of the State Mutual Plan. State Mutual began asking plaintiff for patient's treatment records on all of his bills submitted to it. Plaintiff told the insurance company that it would have to obtain permission from the patients before he would release such records.

4. State Mutual requested and received such permission from numerous patients. It failed, however, to inform plaintiff of the names of those patients, made no further request for any medical records, and, with respect to certain claims for which no additional request for records was made, has had the claims "under review" for an unreasonably long period of time.

Plaintiff's complaint sets forth four counts:

Count I — a claim, pursuant to ERISA, to recover benefits due under the Starrett Plan,

Count II — a claim, pursuant to ERISA, to recover benefits due under the State Mutual Plans,

Count III — a state law claim for breach of contract, and

Count IV — a state law claim under M.G.L. c. 93A, for unfair trade practices.

In ¶ 11 of each Count, plaintiff also alleges that L.S. Starrett Company posted an inadequate "Notice of a Plan Change as required by ERISA."

On December 12, 1994, defendants filed the pending motion to dismiss all counts of the complaint based upon the following four arguments:

1) plaintiffs state law claims are preempted by ERISA,

2) plaintiff's ERISA claims are not ripe in that he has failed to exhaust the administrative remedies provided under the plans,

3) plaintiff lacks standing to challenge the modification of the Starrett Plan, and

4) the Trustees and State Mutual are not proper parties to be sued under Count I.

These arguments are considered seriatim.

II. PREEMPTION OF STATE LAW CLAIMS BY ERISA

Defendants maintain that Counts III and IV of plaintiff's complaint, alleging breach of contract and a claim pursuant to M.G.L. c. 93A, respectively, are preempted by ERISA. Section 514 of ERISA supersedes "any and all State laws insofar as they ... relate to any employee benefit plan...." 29 U.S.C. § 1144(a) (emphasis added). ERISA defines the term "State laws" to include "all laws, decisions, rules, regulations or other State action having the effect of law." 29 U.S.C. § 1144(c)(1). The Supreme Court has established that a law "relates to" an employee benefit plan for purposes of section 514 "if it has a connection with or reference to such a plan." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990).

In Ingersoll-Rand Co., the Supreme Court identified two tests for determining whether a cause of action is preempted by ERISA because it "relates to" an employee benefit plan. First, a claim is expressly preempted by ERISA where a plaintiff, in order to prevail, must plead, and the court must find, that an ERISA plan exists. Id. at 140, 111 S.Ct. at 483-84; see also Vartanian v. Monsanto Co., 14 F.3d 697, 700 (1st Cir.1994). Second, even if there is no express preemption, a claim is preempted if it conflicts directly with a cause of action afforded by ERISA. Ingersoll-Rand Co., 498 U.S. at 142, 111 S.Ct. at 485.

In the case at bar, plaintiff's breach of contract claim "relates to" plans that are subject to the strictures of ERISA because the Court's inquiry "must be directed to" the plans. Vartanian, 14 F.3d at 700; Ingersoll-Rand Co., 498 U.S. at 140, 111 S.Ct. at 483-84; Plaintiff has alleged, and at trial would have to prove, the existence of the employee benefit plans governed by ERISA to support his claim that payments owed to him were wrongfully withheld. See Ingersoll-Rand Co., 498 U.S. at 140, 111 S.Ct. at 483-84 (state law wrongful discharge claim preempted because "there simply is no cause of action if there is no plan"; emphasis in original). Also, the claims which underlie plaintiff's Chapter 93A action were for benefits under those same plans. In short, because plaintiff must plead, and the Court must find, that the ERISA plans exist, plaintiff's state law claims are preempted. Vartanian, 14 F.3d at 700.¹

In an attempt to avoid the preemptive sweep of ERISA, plaintiff responds that he has two kinds of claims against defendant, 1) "personal" claims, and 2) claims as an assignee of the beneficiaries of the plans. Plaintiff reasons that when suing on his own behalf, he cannot be an ERISA plaintiff, because the statute limits the class of plaintiffs who may bring an action under its civil enforcement provision. He further reasons that, if ERISA preempts his state law claims, he will be left without a remedy and, therefore, "as to Dr. Tarr, personally, his 93A claims and his breach of contract claims cannot be preempted by ERISA." Plaintiff's Opposition at 6.

Plaintiff's arguments fail for two reasons. First, Dr. Tarr's assertion that he has "personal" claims is refuted by the fact that he has pleaded all of his claims as an assignee of his patients' "rights to be reimbursed by defendants for services performed by him." Complaint at ¶ 8. Second, "the lack of an ERISA remedy does not affect a preemption analysis." Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1333 (5th Cir.), cert. denied, 506 U.S. 1033, 113 S.Ct. 812, 121 L.Ed.2d 684 (1992); see also Vartanian v. Monsanto Co., 822 F.Supp. 36, 42-43 (D.Mass.1993), aff'd, 14 F.3d 697 (1st Cir. 1994). Accordingly, defendants' motion to dismiss will be ALLOWED as to Counts III (breach of contract) and IV (c. 93A) of plaintiff's complaint.

III. FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES

Defendants next maintain that plaintiffs ERISA claims (Counts I and II) should be dismissed because he has failed to exhaust the administrative remedies afforded by the plans.

Courts which have considered the question have observed that:

it is well established that, barring exceptional circumstances, plaintiffs seeking a determination pursuant to ERISA of rights under the pension plans must ... exhaust available administrative remedies under their ERISA-governed plans before they may bring suit in federal court.

Communications Workers of America v. A.T. & T, 40 F.3d 426, 431 (D.C.Cir.1994) (internal quotation omitted); Drinkwater v. Metro. Life Ins. Co., 846 F.2d 821, 826 (1st Cir.), cert. denied, 488 U.S. 909, 109 S.Ct. 261, 102 L.Ed.2d 249 (1988); Springer v. Wal-Mart Assocs. Grp. Health Plan, 908 F.2d 897, 899 (11th Cir.1990). Although ERISA does not, by its terms, mandate exhaustion of remedies, courts have reasoned that ERISA's requirement that plans provide internal administrative procedures for the review of denials of claims demonstrates Congressional intent that the plans' internal claims procedures be used before resorting to the courts. See Springer, 908 F.2d at 899. "Because ERISA itself does not specifically require exhaustion of remedies available under pension plans, courts have applied this requirement as a matter of judicial discretion." Communications Workers, 40 F.3d at 432.

The exhaustion doctrine serves many important policy considerations, including: 1) the reduction of frivolous litigation, 2) the promotion of consistent treatment of claims, 3) the provision of a...