DECISION and ORDER
A consent to proceed before the undersigned on was filed on May 27, 1993.
BACKGROUND and FACTS
Plaintiff's Legal Guardian, William M. Clark, is a Michigan resident, bringing this action on behalf of his brother, James Clark, also a Michigan resident, who was incapacitated as a result of an automobile accident which took place on June 4, 1988. Defendant, Group Plan for Employees of North Tonawanda Public Schools ("Group Plan") is a health benefit plan organized by the North Tonawanda Public Schools for the benefit of its employees. The Group Plan was formed as a self-insured health benefit plan on December 1, 1988, and is administered by a third party administrator on behalf of the North Tonawanda Public Schools.
James Clark sustained severe brain injuries as a result of his automobile accident, incurring high medical costs. From May 15, 1990 until September 11, 1990, Clark was cared for at the New Medico Healthcare Center in Michigan. The cost of his stay at the New Medico facility during that period was $ 98,889.00. Clark's representative at that time, his former wife Mary Jane Clark, who was and remains an employee of the North Tonawanda School District, filed claims with FCS Health Administrators, Inc. ("FCS"), the Group Plan's third party administrator during that time period, beginning on July 13, 1990, relating to the New Medico confinement.
On August 25, 1990, John Tylec, the Personnel Director for the North Tonawanda Public Schools authorized FCS to initiate "large case management" for James Clark. See Exhibit A, James Clark/New Medico Scenario of Events, Plaintiff's Memorandum in Opposition. Tylec contacted the North Tonawanda Public Schools' attorney on January 25, 1991 to apprise him of the Clark situation. On March 20, 1991, Tylec notified FCS that the New Medico claim should be denied; Mary Jane Clark was notified of this decision by FCS on April 8, 1991. Thereafter, Nova Healthcare Administrators ("Nova") replaced FCS as the third party administrators of the Group Plan. The claim was appealed to Nova pursuant to the Group Plan procedures. On January 30, 1992, Nova informed Mrs. Clark that the claim was denied on the basis that the treatment was not medically necessary.
On December 8, 1992, Plaintiff filed this lawsuit, raising two causes of action - a claim under the Employee Retirement Income Security Act of 1974 ("ERISA"), and a pendent breach of contract claim.
On February 17, 1994, Defendant filed a motion for summary judgment. Oral argument on the matter was held on March 9, 1994.
For the reasons as set forth below, Defendant's motion is GRANTED in part and DENIED in part.
Defendant is seeking summary judgment on the ground that (1) there is no subject matter jurisdiction as the Group Plan at issue in this case is exempt from ERISA, and no other independent jurisdictional basis for the breach of contract claim has been raised, and (2) this action is time barred as no Notice of Claim was filed with the North Tonawanda Public Schools, and the action was filed more than one year following the date the cause of action accrued, the statutory time limit contained in N.Y. Education Law § 3813.
1. ERISA claim
Defendant claims that Plaintiff's cause of action under ERISA must fail as the Group Plan which is the subject of this action is a governmental plan and, therefore, exempt from the provisions of ERISA.
In this case, Plaintiff concurs that the Group Plan is "really a governmental plan exempt from ERISA." See Memorandum in Opposition, dated March 1, 1994, at p. 14. Despite this fact, Plaintiff contends that the Group Plan held itself out to its members as an ERISA plan, devoting a page in the Group Plan Booklet distributed to members to discuss a "Statement of ERISA Rights." Nonetheless, Plaintiff states that he "is concerned that it could be deemed reversible error for this Court to deny Defendant's Motion . . . on the basis that the Plan has either waived or is estopped from claiming, exemption from ERISA," see Plaintiff's Memorandum in Opposition, dated March 1, 1994, at p. 11, as, under the holding of Insurance Corporation of Ireland v. Compagnie des Bauxites, 456 U.S. 694, 102 S. Ct. 2099, 2104, 72 L. Ed. 2d 492 (1982), where subject matter jurisdiction is concerned, "the consent of the parties is irrelevant [and] principles of estoppel do not apply." Id. at 2104. Therefore, Plaintiff seeks to amend the complaint to assert an independent jurisdictional basis for the state breach of contract claim based on diversity.
A governmental plan is defined at 29 U.S.C. § 1002(32) to include a plan maintained for employees of any state or political subdivision thereof. In Feinstein v. Lewis, 477 F. Supp. 1256 (S.D.N.Y. 1979), the court found that two public school districts were political subdivisions of the state, and that the plaintiff employees were that of "the government of a State or political subdivision thereof." Feinstein, supra, at 1259. Similarly, in Lovelace v. Prudential Insurance Company of America, 775 F. Supp. 228 (S.D. Ohio 1991), the court held that a school district health insurance plan was a "governmental plan," exempted from ERISA, and, therefore, outside of the subject matter jurisdiction of the federal court. Lovelace, supra, at 230. See also Opinion of U.S. Department of Labor, Office of Pension and Welfare Benefit Programs, No. 79-83A (November 20, 1979) (Health and Welfare Fund of the Philadelphia Federation of Teachers, which provided health, disability, retirement, and death benefits to employees and their families, held to be a governmental plan within the meaning of ERISA).
Based on the prevailing caselaw and opinions, the court finds that the Group Plan, formed by the North Tonawanda Public Schools for the benefits of its employees, is a governmental plan, and, therefore, not subject to the provisions of ERISA. Accordingly, Plaintiff's cause of action under ERISA should be dismissed based on a lack of subject matter jurisdiction, and Defendant's motion for summary judgment on this cause of action is GRANTED.
However, the court also finds that, in the interest of justice, Plaintiff should be permitted to amend the complaint to assert a jurisdictional basis on diversity grounds.
Fed.R.Civ. P. 15(a) provides that leave to amend a pleading "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a); Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). However, leave to amend a pleading will be denied when an amendment is offered in bad faith, would cause undue delay or prejudice, or would be futile. Foman, supra, at 182; Richardson Greenshields Securities, Inc. v. Lau, 825 F.2d 647 (2d Cir. 1987). The court has discretion to deny leave to amend where the motion to amend is made after an inordinate delay, no satisfactory explanation is offered for the delay, and the amendment would prejudice the defendant. Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d Cir. 1990). The burden is on the party who wishes to amend to provide a satisfactory explanation for the delay. Cresswell, supra, at 72.
Trial in this case is scheduled to being on March 21, 1994. Defendant filed its motion for summary judgment based on lack of subject matter jurisdiction on February 17, 1994. In his response, filed March 1, 1994, Plaintiff stated that, if the court found no subject matter jurisdiction based on ERISA, it would seek to amend the Complaint to assert an independent jurisdictional ground for the breach of contract claim. Further, Defendant has indicated that it would not object to the amendment of the Complaint to assert diversity as a jurisdictional ground. The court finds that Defendant will not be prejudiced if Plaintiff is allowed to amend his complaint, as Defendant has been preparing for trial in federal court on the breach of contract claim since the initiation of this action. For the court to now dismiss the claim, and to require Plaintiff to re-assert the claim in state court, would only delay the resolution of this action which has pending since 1992, which the court concludes would be prejudicial to Plaintiff.
Therefore, the court directs that Plaintiff file an amended complaint solely for the purpose of asserting diversity as a jurisdictional basis no later than March 18, 1994.
2. Statute of Limitations Bar
Defendant also contends that Plaintiff's breach of contract claim is time barred because of Plaintiff's failure to comply with the requirements of New York Education Law § 3813. N.Y. Education Law § 3813 provides in part that:
No action or special proceeding, for any cause whatsoever, except as hereinafter provided, relating to district property or property of schools . . . or claim against the district or any such school, or involving the rights or interests of any district or any such school shall be prosecuted or maintained against any school district, board of education, board of cooperative educational services, or school . . . or any officer of a school district, board of education, board of cooperative educational services, or school . . . unless it shall appear by and as an allegation in the complaint or necessary moving papers that a written verified claim upon which such action or special proceeding is founded was presented to the governing body of said district or school within three months after the accrual of such claim . . ..
N.Y. Education Law § 3813(1).
Further, subdivision 2-b of N.Y. Education Law § 3813 provides that:
Except as provided in subdivision two of this section and, notwithstanding any other provision of law providing a longer period of time in which to commence an action or special proceeding, no action or special proceeding shall be commenced against any entity specified in subdivision one of this section more than one year after the cause of action arose . . ..