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LIBERTY LIFE ASSUR. CO. v. TOYS "R" US

September 28, 1995

LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, a fiduciary as the claims administrator to the SWEZEY & NEWINS, INC. GROUP BENEFITS PLAN and as subrogated to and assigned the rights of CHARLES GEISLER, Plaintiff, against TOYS "R" US, INC., TOYS "R" US HEALTH PLAN, SWEZEY & NEWINS, INC., CHARLES GEISLER and PAMELA GEISLER, Defendants.


The opinion of the court was delivered by: JOHNSON

 JOHNSON, District Judge:

 INTRODUCTION

 Before this Court is (1) Liberty Life Assurance Company of Boston's ("Liberty Life" or "Plaintiff") motion to amend its Complaint pursuant to Rule 21 of the Federal Rules of Civil Procedure; (2) Charles Geisler and Pamela Geisler's (the "Geislers") motion to join in Plaintiff's motion to amend the Complaint; (3) Defendants Toys "R" Us, Inc. ("Toys") and Toys "R" Us Health Plan's ("Toys Plan") (collectively, the "Toys Defendants") motion to dismiss the Complaint for lack of standing and to dismiss Plaintiff's first, third, fourth and fifth claims for relief for failure to state a claim upon which relief can be granted, pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, respectively; (4) the Toys Defendants' motion to dismiss the crossclaims of the Geislers for failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; and (5) the Toys Defendants' motion for sanctions against the Geislers Pursuant to Rule 11 of the Federal Rules of Civil Procedure.

 For the reasons discussed herein, Plaintiff's motion to amend its Complaint is granted; the Geislers' motion to join in Plaintiff's motion to amend the Complaint is granted; the Toys Defendants' motion to dismiss the Complaint is granted in part and denied in Part; the Toys Defendants' motion to dismiss the crossclaims of the Geislers is denied as moot; and the Toys Defendants' motion for sanctions against the Geislers is denied.

 BACKGROUND

 This action involves the continuation coverage provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and the primary and secondary liability of two employee benefit plans. Defendant Charles Geisler was employed by Defendant Toys until his retirement in February 1991. Mr. Geisler, who suffers from chronic myeloid leukemia, received primary medical coverage from the Toys Plan until February 1991.

 On or about March 28, 1991, Toys offered Mr. Geisler continuation benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, 100 Stat. 82 ("COBRA") under the Toys Plan. Mr. Geisler elected to continue his medical care under the Toys Plan. He thus paid premiums to the Toys Plan for his COBRA coverage.

 In November 1991, Mr. Geisler requested approval from the Toys Plan to undergo an autologous bone marrow transplant at the University of Minnesota Hospital. The Toys Plan approved this treatment for Mr. Geisler on April 16, 1992.

 In June 1992, a representative of Mediplan Corporation, Inc. ("Mediplan"), which administers the Toys Plan, contacted Liberty Life regarding Mr. Geisler's health coverage under the plan insured by Liberty Life, the Swezey Plan. Defendant Swezey & Newins, Inc. ("Swezey") is Pamela Geisler's employer and provides its employees and their families with group medical benefits. Mediplan informed Liberty Life that the Toys Plan was not responsible for Mr. Geisler's medical bills incurred after his termination of employment.

 On August 7, 1992, the Toys Plan advised Mr. Geisler that he was ineligible for continuation of health benefits under COBRA since he had been covered under the Swezey Plan, his wife's health plan. *fn1" At that time, Mr. Geisler was hospitalized for a bone marrow procedure.

 In May 1993, Liberty Life paid Mr. Geisler's medical bills on a primary basis preserving its right under the Swezey Plan to recover any amounts paid in excess of its liability as the secondary insurer for Mr. Geisler. On or about September 9, 1993, the Geislers entered into a subrogation/ assignment agreement with Liberty Life, under which Mr. Geisler's claims under ERISA were assigned to Liberty Life.

 Liberty Life now seeks, inter alia, an order from this Court pursuant to § 502(a)(3) of ERISA declaring that it is only secondarily liable for the medical expenses of Mr. Geisler incurred for the 29 months following the date of his retirement. Liberty Life claims that Mr. Geisler's former employer, Toys, should have provided continuation benefits to Mr. Geisler after his termination of employment with Toys pursuant to the COBRA. Accordingly, Liberty Life seeks reimbursement by Toys and/or the Toys Plan pursuant to § 502(a)(1)(B) for benefits paid on behalf of Mr. Geisler during the period March 28, 1991 to January 31, 1993.

 Liberty Life also seeks to enforce the coordination of benefits provisions of the Swezey Plan pursuant to § 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3). Finally, Liberty Life asserts a promissory estoppel claim, a violation of COBRA notice rights claim and an equitable subrogation claim against Toys and/or the Toys Plan.

 PROCEDURAL ISSUES

 The Complaint in this action was filed on July 8, 1993. The Toys Defendants' motion to dismiss the Complaint was filed on September 9, 1993. On October 15, 1993, Liberty Life filed its Response to the motion to dismiss, as well as a motion to amend the Complaint. On the same date, the Geislers filed a crossmotion to withdraw their crossclaims and join as Co-Plaintiffs in this action in the filing of an amended complaint. The Toys Defendants then filed a Reply in further support of their motion to dismiss the Complaint on November 3, 1993. This Reply also supported their motion to dismiss the crossclaims of the Geislers. Plaintiff's Surreply and numerous correspondences were filed with this Court thereafter.

 In order to avoid further delay in the resolution of this action, and because the Complaint and the proposed Amended Complaint are substantially identical for purposes of the COBRA allegations, this Court treats the motion to dismiss the Complaint as a motion to dismiss the Amended Complaint. *fn2" This facilitates resolution of this action without affecting the substantive outcome of the issues.

 DISCUSSION

 I. Plaintiff's Motion to Amend its Complaint

 Courts are generally liberal in granting leave to amend. See Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). Courts, however, do have discretion to deny such leave "where the motion 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); see, e.g., Tokio Marine & Fire Insurance Co. v. Employers Insurance of Wausau, 786 F.2d 101, 103 (2d Cir. 1986). The plaintiff bears the burden of demonstrating why such leave should be granted in the face of an overly long delay. See Cresswell, 992 F.2d at 72; Sanders v. Thrall Car Mfg. Co., 582 F. Supp. 945, 952 (S.D.N.Y. 1983).

 Liberty Life seeks to realign the Rule 19 Defendants (the Geislers) as Co-Plaintiffs in this action. *fn3" Liberty Life also seeks to "add several factual allegations relating to events that occurred since the filing of the Complaint, in particular, that Charles and Pamela Geisler have executed an assignment and subrogation agreement with Liberty Life." Pl.'s Mem. Supp. Mot. Amend at 1. Finally, Liberty Life seeks leave to incorporate the crossclaims of the Geislers as additional claims.

 Because this Court finds that no party will be prejudiced by granting leave to amend the Complaint in this action, and because the interests of justice so require, this Court grants Plaintiff's motion to amend its Complaint. To prevent further delay in the adjudication of this ...


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