Traditions Senior Mgmt., Inc. v. United Health Adm'rs, Inc.

• Decision Date: 27 June 2013
• Docket Number: Case No: 8:12-cv-2321-T-30MAP
• Citation: Traditions Senior Mgmt., Inc. v. United Health Adm'rs, Inc., Case No: 8:12-cv-2321-T-30MAP (M.D. Fla. Jun 27, 2013)
• Parties: TRADITIONS SENIOR MANAGEMENT, INC., Plaintiff, v. UNITED HEALTH ADMINISTRATORS, INC., d/b/a UNITED HEALTH PLUS, GARDEN STATE HEALTHCARE ADMINISTRATORS, INC., JOSEPH SCHWARTZ, an individual, and OXFORD COVERAGE, INC., Defendants.
• Court: U.S. District Court — Middle District of Florida

TRADITIONS SENIOR MANAGEMENT, INC., Plaintiff, v.UNITED HEALTH ADMINISTRATORS INC., d/b/a UNITED HEALTH PLUS GARDEN STATE HEALTHCARE ADMINISTRATORS, INC.JOSEPH SCHWARTZ, an individual, and OXFORD COVERAGE, INC., Defendants.

Case No: 8:12-cv-2321-T-30MAP

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

DONE and ORDERED: June 27, 2013

ORDER

THIS CAUSE comes before the Court upon Defendants' Motion to Dismiss the Amended Complaint, Dkt. #30, the Plaintiff's Complaint, Dkt. #26, and Plaintiff's Response to Defendant's Motion to Dismiss, Dkt. #33.After reviewing these filings, the Court concludes the motion to dismiss should be granted in part and denied in part.

BACKGROUND

Traditions Senior Management, Inc.(TSM) alleges that in 2009, its insurance broker and advisor, Joseph Schwartz(Schwartz), advised TSM to accept an arrangement by which "Schwartz and his affiliated companies" -- United Health Administrators, Inc.(UHP), Garden State Health Care Administrators, Inc.(Garden), and Oxford Coverage, Inc.(Oxford) -- would take the risk and benefit of TSM becoming"self-insured."Dkt. #26, 3."Schwartz and his affiliated companies" would collect premium payments and bear the risk of paying claims, even if the claims exceeded those premiums.Dkt . #26, 3-4.They would also keep premium payments in excess of covered claims.Dkt . #26, 3-4.TSM orally agreed to this arrangement, but no written contract was created.Dkt. #26, 3-4.

Under this plan, UHP was responsible for "processing and paying health benefits directly to the employees' health providers."Dkt. #26, 4.Garden received premiums and was responsible for proper distribution of employee health claims.Dkt. #26, 4.Oxford and Schwartz were "indemnifiers to pay covered health claims to the extent they exceeded the premiums paid by TSM."Dkt. #26, 4.Schwartz was also the president of Garden and Oxford.Dkt. #26, 3.

"TSM and the health facilities it managed paid premiums in excess of $4.7 million . . ." between September 2009 and August 2011.Dkt. #26, 4.UHP, Garden, and Oxford "were entrusted with [these] premiums . . . for the purpose of paying covered employee health insurance claims."Dkt. #26, 4.And TSM alleges that Schwartz "personally made the decisions regarding disbursement of the premiums."Dkt. #26, 7.

By the summer of 2011, "legitimate employee health claims were not being processed or paid."Dkt. #26, 5."[A]t that time, the aggregate claims approached $1 million."Dkt. #26, 5.TSM demanded UHP, Garden, and Oxford process and pay the claims.Dkt. #26, 5.The companies initially agreed, but have since "failed and refused to do so without explanation."Dkt. #26, 5.Since that time, TSM claims to have paid "over $700,000 in employee health claims which were the responsibility of the Defendants."Dkt. #26, 5.

MOTION TO DISMISS STANDARD

To warrant dismissal of a complaint, under Rule 12(b)(6) of the Federal Rules of Civil Procedure, it must be "clear that no relief could be granted under any set of facts that could be proved consistent with the allegations."Blackston v. State of Alabama, 30 F.3d 117, 120(11th Cir.1994), citingHishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59(1984).On a motion to dismiss, this Court accepts as true all the allegations in the complaint and construes them in the light most favorable to the plaintiff.Jackson v. Bellsouth Telecomms., 372 F.3d 1250, 1262(11th Cir.2004).Further, this Court favors the plaintiff with all reasonable inferences from the allegations in the complaint.Stephens v. Dep't of Health & Human Servs., 901 F.2d 1571, 1573(11th Cir.1990)("On a motion to dismiss, the facts stated in [the] complaint and all reasonable inferences therefrom are taken as true.").

In Bell Atlantic Corp. v. Twombly, the Supreme Court articulated the standard by which claims should be evaluated on a motion to dismiss:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.Factual allegations must be enough to raise a right to relief above the speculative level.

550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929(2007)(internal citations omitted).Further, courts are not "bound to accept as true a legal conclusion couched as a factual allegation."Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209(1986).SeeElectrostim Med. Services, Inc. v. Lindsey, 8:11-CV-2467-T-33TBM, 2012 WL 1560647(M.D. Fla.2012).

Count I: Breach of Fiduciary Duty Against Schwartz

To establish a claim for breach of fiduciary duty, a plaintiff must plead the "existence of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff's damages."Gracey v. Eaker, 837 So. 2d 348, 353(Fla.2002).The most difficult part of this analysis is determining if a fiduciary duty actually exists.A fiduciary duty is formed when a party is "under a duty to act for or to give advice for the benefit of another upon matters within the scope of that relation."Doe v. Evans814 So.2d 370(Fla.2002)(citation omitted);Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 536, 540(Fla. 5th DCA, 2003).Likewise, ". . . a fiduciary relationship may be implied by law, and such relationships are 'premised upon the specific factual situation surrounding the transaction and the relationship of the parties.'"Doe v. Evans814 So.2d 370, citingCapital Bank v. MVB, Inc., 644 So.2d 515, 518(Fla. 3d DCA1994).

As alleged in the complaint, Schwartz has a fiduciary duty to TSM in his capacity as an insurance broker and advisor.Southtrust Bank and Right Equipment Co. of Pinellas County, Inc. v. Export Ins. Services, Inc., 190 F.Supp.2d 1304(M.D. Fla., 2002)(holding that an insurance broker and advisor has a fiduciary duty to his client, because of the trust implicit in such a relationship).

In his advisory role, TSM claims it trusted and sought advice from Schwartz for seven years, and Schwartz was personally responsible for disbursing and handling $4 million paid by TSM for the benefit of its employees, thus creating a fiduciary duty.Dkt. #26, 3.TSM also claims Schwartz exploited this position of trust by "intentionallydiverting premiums paid by TSM to himself."Dkt. #26, 4-7.This claim establishes a sufficient factual basis for a breach of fiduciary duty and damages resulting from that breach.Gracey v. Eaker, 837 So. 2d 348, 353(Fla.2002).Thus, these alleged facts establish a legally plausible claim of breach of fiduciary duty against Schwartz.

Count II: Breach of Fiduciary Duty Against UHP, Garden, and Oxford

In an "arms-length transaction," there is no duty to act for the benefit or protection of the other party.Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 540-542, citing (citation omitted), citing Lanz v. Resolution Trust Corp., 764 F.Supp. 176, 179(S.D.Fla.1991).A payment, series of payments, or a business relationship is not enough to create the trust and reliance necessary to form a fiduciary duty.SeeDoe v. Evans814 So.2d 370;Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d at 540-542;Lanz v. Resolution Trust Corp., 764 F.Supp. at 176.

TSM alleges Schwartz is the president of Garden and Oxford and this subjects those companies to the same fiduciary duty owed by Schwartz.Dkt. #26.An insurance advisor certainly owes his client a fiduciary duty, but the president of a corporation does not owe a fiduciary duty to another corporation by virtue of being in business with them.SeeSouthtrust Bank and Right Equipment Co. of Pinellas County, Inc. v. Export Ins. Services, Inc., 190 F.Supp.2d at 1304.According to the facts alleged by TSM, Schwartz's position as the president of Garden and Oxford was distinct from his role as TSM's advisor.Said another way, Schwartz was not an agent of Garden and Oxford in his capacity as TSM's advisor.Dkt. #26.Thus, Oxford and Garden cannot owe TSM a fiduciary duty simply because their employee owes TSM a fiduciary duty in a capacityoutside of his employment.See generallyDoe v. Evans814 So.2d 370;Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 536.

The alleged fact that TSM paid UHP, Garden, and Oxford $4 million is insufficient, by itself, to establish a fiduciary relationship.SeeDoe v. Evans814 So.2d 370;Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d 540-542;Lanz v. Resolution Trust Corp., 764 F.Supp. 176.This is no different than any ordinary business transaction and does not give rise to a heightened expectation of trust without a special relationship between the parties.Id.

Finally, TSM alleges that "Schwartz and his affiliated companies would act as trustee for premium payments . . ." and as third party administrators for TSM's premium payments and insurance scheme.Dkt. #26, 3.One who is entrusted with the management of another's money owes a fiduciary duty to that person.SeeDoe v. Evans814 So.2d at 374("a fiduciary relation exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of that relation");Taylor Woodrow Homes Florida, Inc. v. 4/46-A Corp., 850 So.2d at 540("To establish a fiduciary relationship, a party must allege some degree of dependency on one side and some degree of undertaking on the other side to advise, counsel, and protect the weaker party.").

TSM alleges the corporate Defendants breached their fiduciary duty as third party administrators by not paying out valid claims from TSM's money.Dkt. #26, 4-5, 8-9.TSM's allegations that the three corporate defendants acted as trustee for its premium payments states a plausible cause of action that a fiduciary relationship was...