Via Christi Regional v. Blue Cross and Blue Shield

• Decision Date: 03 March 2005
• Docket Number: No. 04-1253-WEB.,04-1253-WEB.
• Citation: 361 F.Supp.2d 1280
• Parties: VIA CHRISTI REGIONAL MEDICAL CENTER, INC., Chance Industries Inc., the Chance Industries, Inc. Employee Benefit Plan, and Cecillia Arnold Plaintiffs, v. BLUE CROSS AND BLUE SHIELD OF KANSAS, INC., Defendant.
• Court: U.S. District Court — District of Kansas

361 F.Supp.2d 1280

VIA CHRISTI REGIONAL MEDICAL CENTER, INC., Chance Industries Inc., the Chance Industries, Inc. Employee Benefit Plan, and Cecillia Arnold Plaintiffs, v. BLUE CROSS AND BLUE SHIELD OF KANSAS, INC., Defendant.

No. 04-1253-WEB.

United States District Court, D. Kansas.

March 3, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Joseph H. Cassell, W. Thomas Gilman, Redmond & Nazar, L.L.P., Wichita, KS, for Plaintiffs.

Alan L. Rupe, Stacia G. Boden, Kutak Rock, LLP, Wichita, KS, Scott H. Raymond, Blue Cross and Blue Shield of Kansas, Inc., Topeka, KS, Tory M. Bishop, Kutak Rock LLP, Omaha, NE, for Defendant.

MEMORANDUM AND ORDER

WESLEY E. BROWN, Senior District Judge.

Now before the Court is Defendant's motion to dismiss under Fed.R.Civ.P. 12(b)(1) lack of jurisdiction over subject matter and Fed.R.Civ.P. 12(b)(6), failure to state a claim upon which relief can be granted. Plaintiffs assert jurisdiction under 28 U.S.C. § 1331, 29 U.S.C. § 1132(e)(1), and 28 U.S.C. § 1367. This case consisted originally of two distinct actions as Arnold filed suit against BCBS separately from the other Plaintiffs; however, the two cases were consolidated. (Doc. 24).

I Nature of the Case

Plaintiff Chance Company (Chance) had a self insured plan and a stop loss policy with Blue Cross & Blue Shield (BCBS) which protected Chance and the Chance Benefit Plan (Plan) from claims exceeding $50,000. On October 17, 2001, Cecillia Arnold (Arnold) was pregnant and having labor signs and was admitted to Via Christi Regional Medical Center (Via Christi). Arnold had a child, Haskins, who required extensive medical care. Haskins is eligible for medical benefits as the grandson of Arnold King (King), an employee of Company and a participant in the plan. Upon Arnold's admission to Via Christi, Albert Arnold as the father of Haskins, executed an admission consent agreement where he assigned to Via Christi any and all medical benefits payable from any policy of insurance. The total amount due to Via Christi for Haskins' care was $647,996.26. Company later changed the plan from a self insured to a fully insured plan and canceled the stop loss policy. Company then received notice that a claim was due for the expensive treatment given to Haskins. The Plan is unable to pay the amount due for Haskins' medical care.

Plaintiffs argue that BCBS breached its fiduciary duty by failing to advise them that this claim was outstanding before Company cancelled the stop loss policy. Via Christi claims damages under the theory of promissory estoppel because BCBS represented that benefits were available for Haskins' treatment.

BCBS argues that neither Chance nor the Plan is a fiduciary; therefore, under ERISA, the Court is without subject matter jurisdiction. BCBS also maintains that Via Christi does not have a valid assignment and that ERISA preempts Via Christi's promissory estoppel claim. Finally BCBS asserts that none of the Plaintiffs have suffered a compensable injury

II. Motion to Dismiss Standards

The Court can exercise jurisdiction only when specifically authorized to do so. Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir.1994). Having invoked the jurisdiction of the federal courts, it is the plaintiff's burden to demonstrate that jurisdiction is proper. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Scheideman v. Shawnee County Bd. of County Comm'rs, 895 F.Supp. 279, 281 (D.Kan.1995).

"Rule 12(b)(1) motions generally take one of two forms. First, a moving party may make a facial attack on the complaint's allegations as to the existence of subject matter jurisdiction. In reviewing a facial attack, the district court must accept the allegations in the complaint as true. Second, a party may go beyond allegations contained in the complaint and challenge the facts upon which subject matter jurisdiction is based." Stuart v. Colorado Interstate Gas Co., 271 F.3d 1221, 1225 (10th Cir.2001) (internal citations omitted); Jensen v. Johnson County Youth Baseball League, 838 F.Supp. 1437, 1440 (D.Kan.1993). A court has wide discretion to allow affidavits and other documents to resolve disputed jurisdictional facts. Wheeler v. Hurdman, 825 F.2d 257 259 (10th Cir.1987); see also Sizova v. Nat'l Inst. of Stds. & Tech., 282 F.3d 1320 (10th Cir.2002).

"However, a court is required to convert a Rule 12(b)(1) motion to dismiss into a Rule 12(b)(6) motion or a Rule 56 summary judgment motion when resolution of the jurisdictional question is intertwined with the merits of the case." Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995) citing Wheeler, 825 F.2d at 259. Subject matter jurisdiction and the merits are considered to be intertwined when subject matter jurisdiction is dependent upon the same statute which provides the substantive claim in the case. Id. "Under Wheeler, however, the focus of the inquiry is not merely on whether the merits and the jurisdictional issue arise under the same statute. Rather the underlying issue is whether resolution of the jurisdictional question requires resolution of an aspect of the substantive claim." Pringle v. United States, 208 F.3d 1220, 1223 (10th Cir.2000).

A determination of whether Chance and the Chance Plan are fiduciaries within the meaning of ERISA is both a jurisdictional question and an aspect of the substantive claim. See Wheeler, 825 F.2d at 259. A ruling that these entities are not fiduciaries would effectively be a ruling on the merits as they would not be able to raise their claim under ERISA.

The Court will use the standards under Rule 12(b)(6) to analyze BCBS's motion. Generally a Court does not look beyond the face of a complaint when analyzing a Rule 12(b)(6) motion; however, "it is accepted practice, if a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss." MacArthur v. San Juan County, 309 F.3d 1216, 1221 (10th Cir.2002) quoting Dean Witter Reynolds, Inc. v. Howsam, 261 F.3d 956, 961 (10th Cir. 2001).

BCBS has provided a signed copy of the Administrative Agreement and plaintiffs do not challenge its authenticity. (Def.Ex. 1). Plaintiffs quote from the Administrative Agreement in the complaint and the agreement establishes the contractual relationship between BCBS and Company. Accordingly, the Court will use this document when evaluating this motion.

"A motion to dismiss is appropriate when the plaintiff can prove no set of facts in support of the claims that would entitle plaintiff to relief." Roman v. Cessna Aircraft Co., 55 F.3d 542, 543 (10th Cir.1995). "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Sutton v. Utah State School for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999) (quoting Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir.1991). Furthermore, all well-pleaded factual allegations in the complaint are accepted as true and viewed in the light most favorable to the nonmoving party. Robbins v. Wilkie, 300 F.3d 1208, 1210-1211 (10th Cir.2002).

III. Standing analysis

A. Chance Industries, Inc. (Company)

Company asserts it has standing to bring this action as a fiduciary pursuant to 29 U.S.C. § 1132(a) and 29 U.S.C. § 1109. While there is little support for Company's status as a fiduciary in the pleading, Company argues in greater detail in its brief that it retained some discretionary control over the plan, including:

1). Company was the named Plan Administrator. (Def. ex. 1 ¶ 2).

2). BCBS agreed to perform specific services at the direction of Company. (Id. ¶ 5).

3). BCBS was to advise Company with respect to claims procedures and assist with implementation of procedures including those for submission of claims. (Id. ¶ 5G).

4). Company was to provide BCBS with the list of eligible participants and was required to keep BCBS informed of changes in employment status that affected eligibility. (Id. ¶ 9).

5). Company was to notify BCBS of participants who become eligible for COBRA benefits. (Id. ¶ 10(A)(1)).

6). Company and BCBS could terminate the agreement at any time with 60 days notice. (Id. ¶ 18).

7). In the event of termination of the agreement, Company would assume control over the administration of the Plan. (Id. ¶ 19).

However, under the agreement, BCBS had substantial discretionary authority.

Plan administrator hereby expressly delegates its authority to [BCBS] to perform the services and provide the supplies, form and materials set forth in this Agreement in connection with the administration and operation of the Benefit Plan. To the extent that in discharge of its duties [BCBS] is performing the functions of a fiduciary as defined in Section [29 U.S.C. § 1002(21)(A)] of ERISA ... [BCBS] agrees to perform the following services ...

. . . . .

All claims for benefit payments shall be made on forms satisfactory to [BCBS]. [BCBS] shall, at its own expense, design, produce and provide claims and administrative forms to Plan Administrator for the use of Benefit Plan participants.

Process claims and exercise full discretionary authority in construing benefits for claims submitted and determine the amount of benefits for which Benefit Plan participants are eligible in accordance with the terms and provisions of the Benefit Plan. This construction of benefits for claims shall be the exclusive responsibility of [BCBS] ...

. . . . .

[BCBS] shall have discretionary authority and fiduciary responsibility for provision of full and fair review of claims, claim denials and appeals thereof pursuant to Section 503 of ERISA,... Final determination of payment or denial of claims or of...