Transit Mgmt SE Louisiana v. Tenet Hlth Sys.
| Decision Date | 31 August 2000 |
| Docket Number | No. 99-30359,99-30359 |
| Citation | 226 F.3d 376 |
| Parties | (5th Cir. 2000) TRANSIT MANAGEMENT OF SOUTHEAST LOUISIANA, INC.; TRANSIT MANAGEMENT OF SOUTHEAST LOUISIANA EMPLOYEE HEALTH AND WELFARE TRUST, Plaintiffs - Appellants and TENET HEALTH SYSTEMS HOSPITALS, INC., formerly known as NME Hospitals, Inc., Intervenor - Appellant v. GROUP INSURANCE ADMINISTRATION, INC.; ET AL., Defendants BANKERS LIFE & CASUALTY COMPANY; ATLANTA LIFE INSURANCE COMPANY; MAXICARE LIFE AND HEALTH INSURANCE COMPANY; BANKERS LIFE & CASUALTY COMPANY/GROUP INSURANCE ADMINISTRATION, INC., A Joint Venture; ATLANTA LIFE INSURANCE COMPANY/GROUP INSURANCE ADMINISTRATION, INC., A Joint Venture; MAXICARE LIFE AND HEALTH INSURANCE COMPANY/GROUP INSURANCE ADMINISTRATION, INC., A Joint Venture, Defendants - Appellees WILBUR J. BABIN, JR., also known as Bill, Plaintiff-Appellant v. BANKERS LIFE & CASUALTY COMPANY; MAXICARE LIFE AND HEALTH INSURANCE COMPANY; ATLANTA LIFE INSURANCE COMPANY, Defendants - Appellees WILBUR J. BABIN, JR., Plaintiff - Appellant v. BANKERS LIFE AND CASUALTY COMPANY; MAXICARE LIFE AND HEALTH INSURANCE COMPANY; ATLANTA LIFE INSURANCE COMPANY, Defendants- Appellees |
| Court | U.S. Court of Appeals — Fifth Circuit |
[Copyrighted Material Omitted] Appeals from the United States District Court for the Eastern District of Louisiana
Before POLITZ, SMITH, and DENNIS, Circuit Judges.
The principal question of Louisiana law presented by this appeal is whether the life insurance companies which provided life and stop loss insurance for an employees' health and welfare plan may be held vicariously liable to the employer, the employees' trust, and the plan's health care providers, for the third party plan administrator's wrongful misappropriation of the plan's funds, because the life insurers became joint venturers or solidary obligors with the plan administrator by virtue of the written contracts and course of dealings between the parties. The district court granted the life insurers' motions for partial summary judgment and dismissal of the plaintiffs' claims on the grounds that the insurance companies had not participated in the wrongful conduct, entered joint ventures, or otherwise subjected themselves to joint or solidary liability for the plan administrator's misappropriation of funds. We affirm. The evidence educed for purposes of the motions for partial summary judgment and dismissal demonstrates that the life insurance companies did not expressly or impliedly agree to become joint venturers or solidary obligors with the plan administrator. We also dismiss for lack of appellate jurisdiction an appeal involving one insurer.
Transit Management of Southeast Louisiana, Inc., operator of the New Orleans Transit System, and the Transit Management of Southeast Louisiana Employee Health and Welfare Trust provide health and welfare benefits to employees of the transit system. (hereinafter we refer to the employer and the employees' trust collectively as "Transit"). In May of 1988, Transit solicited proposals for the services and insurance necessary to provide the transit employees with certain health and welfare benefits. Group Insurance Administration, Inc., (GIA) and Bankers Life & Casualty Company (Bankers) submitted a joint proposal representing themselves to be partners in a joint venture (Bankers/GIA). On September 1, 1988, Transit contracted with Bankers and GIA for a health and welfare benefits plan. Under the contract, GIA was to operate as the third party administrator to administer Transit's self-insured preferred provider organization (PPO) health program, and Bankers was to provide the requisite life insurance and stop loss insurance for the plan. Transit agreed to pay $11.90 per employee per month as an administrative services fee, $6 of which was payable to GIA and the remaining $5.90 was payable to Bankers. GIA would also receive four percent of the insurance premiums charged by Bankers.
In return for its fixed fee, GIA agreed to administer the health plan by processing medical claims and paying health care providers from a GIA bank account into which Transit would deposit funds after notification by GIA that claims had been processed. GIA also agreed to negotiate discounts with the plan's preferred providers so that Transit could offer the medical benefits at the lowest possible cost, saving an average of ten percent in medical discounts and five percent in dental discounts. Transit's medical benefits were self-insured as Transit funded their direct costs subject to the stop loss insurance coverage for claims that reached certain high levels.
GIA administered the health plan from 1988 to 1995. In September of 1991, Atlanta Life Insurance Company (Atlanta) was substituted for Bankers as the life and stop loss insurer, and in September of 1993, Maxicare Life and Health Insurance Company (Maxicare) took over from Atlanta in this capacity. Bankers, Atlanta and Maxicare each signed "joint venture" instruments with GIA.1 Atlanta also signed an agreement to be bound by the contract to the same extent as had been Bankers. Maxicare did not sign an amendment to the contract, but it did forward its joint venture agreement with GIA to Transit and provided the same insurance coverage as had Bankers and Atlanta.
GIA agreed in its contract with Transit to administer Transit's PPO for a fixed monthly fee per Transit employee and to provide all services at the least possible cost to Transit and its employees. However, GIA negotiated with hospitals and physicians for discounts ranging from fifteen to thirty-three percent and, without making disclosures to Transit of the true discounts obtained, retained as its own profit funds representing the discounts exceeding the estimated ten percent.2 Transit alleges that GIA wrongfully misappropriated such funds in the amount of $4,712,024 over the life of the contract pursuant to the undisclosed discounts scheme. Additionally, GIA was authorized to draw upon the Transit Loss Fund Account only for the purpose of paying the processed invoices of health care providers. Apparently, however, GIA paid the invoices of providers who were not in the preferred provider organization, deliberately failed to pay PPO providers, and improperly transferred funds due the PPO providers into GIA's general operating account and commingled them with its own funds. Large sums of money were transferred from this account to affiliates of GIA. As a result, many providers of health care services in the Transit benefits plan were not paid. Transit contends that approximately $665,000 of dedicated funds were improperly diverted under this scheme. Significantly, however, Transit does not contend that the insurance companies participated in GIA's wrongful conduct or scheme, had any knowledge of them, or received any benefit therefrom.
Transit filed suit in federal court (No. 96-1445) to recover funds paid to GIA under the contract and asserted claims under Louisiana state law, the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (ERISA), and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68 (RICO). In addition to suing GIA, its holding company, and other affiliates (GIA, U.S.A., Inc.; Robert H. Carter, III and Associates, Inc.; and Robert H. Carter, III), Transit named as defendants each of the three life insurers (Bankers, Atlanta, and Maxicare) as well as each of the three purported joint ventures: Bankers/GIA; Atlanta/GIA; and Maxicare/GIA. Tenet HealthSystem Hospitals, Inc. (Tenet), as an unpaid PPO healthcare provider operating several hospitals, intervened as plaintiff, adopted by reference Transit's allegations in the complaint, and argued that under Louisiana Civil Code article 1978, it was a third party beneficiary to the contracts. Tenet averred that it had provided over $225,000 of uncompensated medical services to Transit employees and their beneficiaries under the health plan.
Three other suits were consolidated with the one brought by Transit: (1) an adversary proceeding filed by Wilbur J. "Bill" Babin, Jr., Trustee in Bankruptcy, in the bankruptcy proceedings of Group Insurance Administration of Louisiana, Inc. (GIA/LA) in the United States Bankruptcy Court for the Eastern District of Louisiana (No. 96-3165),3 (2) an adversary proceeding filed by Babin, as Trustee, against Carter, GIA/USA, and GIA of Illinois, Inc., asserting claims under the Bankruptcy Code (No. 97-1310); and (3) a separate suit by Transit against certain GIA insurers (No. 97-1736).4
The district court, on October 1, 1998, entered an Order and Reasons ruling on 17 dispositive motions. Among these rulings, the court denied Transit's motion for partial summary judgment against the three life insurers and the three alleged joint ventures on claims relating to GIA's improper retention of medical provider discounts and diversion of funds advanced on provider invoices. None of the parties asserted that ERISA preempted the state law claims. Considering the plaintiffs' claims to be Louisiana breach of contract claims, the district court found that the insurance companies had not formed any joint venture under Louisiana law and denied Transit's motion for partial summary judgment against them. The district court granted Transit's partial summary judgment motion as to GIA after concluding that GIA had breached the contract. However, the district court's ruling encompassed only a finding of liability and did not address damages. Accordingly, the district court denied GIA's motion for partial summary judgment against Transit, and it also denied as moot motions to dismiss the three purported joint ventures. Likewise, considering Transit's RICO claims against the insurers to be based solely on their alleged vicarious liability as joint venture partners of GIA, the district court granted the insurers' motions to dismiss the RICO claims....
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