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Diagnostic Medical Associates, M.D., P.C. v. New York City District Council of Carpenters Welfare Fund

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


March 21, 2006

DIAGNOSTIC MEDICAL ASSOCIATES, M.D., P.C., AND GEOFFREY RICHSTONE, PLAINTIFFS,
v.
NEW YORK CITY DISTRICT COUNCIL OF CARPENTERS WELFARE FUND, DEFENDANT.

The opinion of the court was delivered by: Frank Maas, United States Magistrate Judge

MEMORANDUM DECISION

Plaintiff Diagnostic Medical Associates M.D., P.C. ("DMA"), and its former sole shareholder, plaintiff Geoffrey Richstone ("Richstone"), bring this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., to recover payment for extensive medical treatment allegedly rendered by them between January 1, 1998, and November 9, 1999 (the "Treatment Period") to William Marcucci ("Marcucci"), a participant in the Major Medical and Dental Benefits Plan ("Plan") established by defendant New York City District Council of Carpenters Welfare Fund ("Fund").

The parties have cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons detailed below, the defendant Fund's motion for summary judgment is granted, and plaintiffs' cross-motion for summary judgment is denied.

I. Factual Background

The following facts are undisputed, unless otherwise noted.

A. The Parties

Plaintiff Richstone is a former physician who lost his license to practice medicine in 1999, following a finding that he had engaged in various acts of misconduct, including the ordering of excessive tests for his patients. (Def.'s R. 56.1 Stmt. ¶ 6; Pls.' Counter R. 56.1 Stmt. ¶ 6).

Plaintiff DMA is a New York professional corporation whose sole shareholder during the Treatment Period was Richstone. (Compl. ¶ 1; Def.'s R. 56.1 Stmt. ¶ 5).

Defendant Fund operates the Plan, which is an "employee welfare benefit fund" within the meaning of that term under ERISA. (Compl. ¶ 3; Answer ¶ 3). The Trustees of the Fund are the Plan fiduciaries. (Compl. ¶ 4; Answer ¶ 4).

B. DMA/Richstone Medical Practice

At the outset of the Treatment Period, Richstone was the sole shareholder of DMA. (Def.'s R. 56.1 Stmt ¶ 5). Thereafter, on March 25, 1998, DMA was dissolved by proclamation of the New York State Department of State. (Id. ¶ 8; Decl. of Gary Silverman, Esq., sworn to on Aug. 5, 2005 ("Silverman Decl."), Ex. H). DMA applied for reinstatement after this action was filed. (See Aff. of Bruce Hesselbach, Esq., sworn to on Sept. 7, 2005 ("9/7 Hesselbach Aff."), Ex. V). The website of the New York State Department of State indicates that DMA is currently an active professional corporation, whose chairman or chief executive officer is Daniel Crane, M.D. (See http://www.dos.state.ny.us/) (last visited Mar. 20, 2006). Although the website does not disclose the date DMA was reinstated, it clearly was on or after August 29, 2005. (See 9/7 Hesselbach Aff. Ex. V).

Prior to the Treatment Period, the Fund learned of potential billing problems regarding Richstone. (See Aff. of Bruce Hesselbach, Esq., sworn to Aug. 3, 2005 ("8/3 Hesselbach Aff."), Ex. L (Dep. of John Pirrone, taken on June 16, 2005 ("Pirrone Dep.")), at 35-36). Indeed, at some point between 1994 and 1997, the Fund decided to suspend all of its payments to Richstone and DMA. (Id. at 54-55). Thereafter, the New York State Department of Health revoked Richstone's medical license effective November 8, 1999, based upon its finding that Richstone had committed professional misconduct by, among other things, ordering excessive tests and using unwarranted treatment facilities. (Silverman Decl. Ex. J).

The problems that Richstone faced as a result of his medical practices were not limited to the denial of his claims or civil proceedings. Indeed, on February 13, 2001, Richstone pleaded guilty to three counts of a twelve-count indictment and acknowledged that he had unlawfully received Medicare kickbacks, conspired with others to receive such kickbacks, and falsely subscribed to his personal tax return. See United States v. Geoffrey Richstone, 00 Cr. 338-01 (AKH) (Feb. 13, 2001). On December 5, 2001, Judge Hellerstein of this Court sentenced Richstone to concurrent three-year terms of imprisonment, to be followed by three years of supervised release. (Id.). Richstone also was fined $430,000. (Id.).

C. The Plan

The Plan grants the Trustees of the Fund the sole authority to:

[m]ake such rules as may be necessary for administration of the Plan, construe the Plan subject to its provisions, supply any omissions and reconcile any inconsistencies, make equitable adjustments for any mistakes or errors and decide all questions arising in the interpretation of the Plan; all of which shall be conclusive, final, and binding on all parties. (Silverman Decl. Ex. A (Plan) at 69). The Plan also vests authority in the Trustees to provide "a full, fair and final review of any claim denied by the Fund Office in accordance with the Plan's claim procedures." (Id.).

Under the Plan, the "Covered Expenses" for which reimbursement may be sought include certain listed "treatments, services and supplies if they are Medically Necessary." (Id. at 39). The Plan defines "Medically Necessary" to include treatment "which . . . could not have been omitted without adverse effect on the Participant's condition or the quality of medical care." (Id. at 10). The Plan also provides that the "Exclusions to Covered Expenses" include "charges incurred for any treatment, services or supplies . . . that is not Medically Necessary and that is not ordered by a Physician who is practicing within the scope of his or her license." (Id. at 44-45).

The Plan also sets forth the procedures applicable to the participants' medical benefits claims. Under the Plan, "[a] Participant is obligated to file any claim for benefits . . . within 180 days after a Covered Expense is incurred." (Id. at 71). The Plan further provides that "[i]f a Participant's claim is denied . . . , the Fund Office shall furnish such Participant with a written notice of such denial" no more than ninety days after its receipt of the claim, unless "special circumstances" warrant an extension of not more than ninety days. (Id.). The notice of denial is required to set forth: (1) the specific reasons for the denial; (2) the specific provisions of the Plan on which the denial is based; (3) a description of any additional information or material necessary to refile the claim and why such information is necessary; and (4) a description of the available review procedures. (Id. at 71-72). If a written notice of the denial of a claim is not furnished in accordance with the above within the required time frame, the Plan provides that the "Participant's claim shall be deemed denied." (Id. at 71-72).

Throughout the Treatment Period, Empire Blue Cross/Blue Shield ("Empire") was the Plan Administrator. (Def.'s R. 56.1 Stmt. ¶ 9). Following the denial of a claim, a participant in the Plan may seek review by the Plan Administrator "within 60 days after the Participant received written notification of the denial of his . . . claim for benefits."*fn1 (Silverman Decl. Ex. A at 72) (emphasis added). If the claim is again denied, the Plan provides that the Administrator must ordinarily "provide the Participant with a written notice of denial within 60 days after the Plan Administrator's receipt of such claim for review" and that the "decision . . . shall be communicated in writing and shall include the specific references to the pertinent Plan provisions on which the denial was based." (Id.).

Finally, the Plan states that "[n]o legal action against the Plan for the recovery of any claim shall be commenced until a Participant has exhausted all of the administrative claims review procedures under this Plan, including a final appeal to the Trustees." (Id. at 73) (emphasis added). The Plan does not describe any procedural requirements such as time limits for this final appeal. (Id.).

D. Marcucci's Medical Treatment and Claims

During the Treatment Period, Marcucci was an eligible Participant in the Plan. (Def.'s R. 56.1 Stmt ¶ 4; Decl. of John Pirrone, sworn to on Aug. 4, 2005 ("Pirrone Decl."), ¶ 3). Dr. Richstone treated Marcucci throughout the Treatment Period, as he had since as early as 1993. (See 8/3 Hesselbach Aff. Ex. D (Dep. of William Marcucci, taken on June 21, 2002 ("Marcucci Dep.")) at 9).

Marcucci suffered from a series of medical ailments. (Id. at 10, 13, 21-22, 26). As a consequence, he routinely went to Richstone's office every six weeks for a physical examination. (Id. at 17). Following a 1997 car accident, Richstone also began treating Marcucci for low back, neck and knee pain. (Id. at 10).

During 1998, Marcucci went to DMA's office regularly for physical therapy sessions. (Id. at 10-11). Marcucci had a standing appointment for such physical therapy every Monday, Wednesday and Friday. (Id. at 19, 43-44). During these sessions, a technician on the payroll of DMA, who was not a licensed physical therapist, administered treatment consisting of "stretching exercises" and the application of "hot packs." (Aff. of Cyrus During, sworn to on Aug. 31, 2005 ("During Aff."), ¶ 1). DMA did not charge Marcucci or bill the Plan for these services. (Id.). If Marcucci had other medical problems while he was at DMA's office for the physical therapy sessions, however, he would also see Richstone. (Id. ¶ 2; Marcucci Dep. at 47-48). Marcucci also saw Richstone on several occasions when he went to DMA for vitamin B-12 shots which were not reimbursable. (8/3 Hesselbach Aff. Ex. B (Dep. of Geoffrey Richstone, taken on Sept. 26, 2002) at 100-04; Silverman Decl. ¶ 11).

Richstone claims to have treated Marcucci for a host of ailments on 126 separate occasions during the Treatment Period. (See 8/3 Hesselbach Aff. Ex. G). In 1999, while this alleged treatment was underway, Marcucci signed separate written assignments of his medical benefits claims to Richstone and DMA (the "1999 Assignments"). (Aff. of William Marcucci, sworn to on Nov. 17, 2005 ("Marcucci Aff."), ¶ 1 & Ex. A). Richstone and DMA subsequently submitted 126 claims to Empire seeking payment totaling $24,340. (Pls.' R. 56.1 Stmt. ¶ 3; 8/3 Hesselbach Aff. Ex. F). After receiving some of these claims, Empire sent a letter to Richstone requesting a copy of his "contemporaneous office medical records" and "diagnostic test results." (Hesselbach Aff. Ex. F at 2). In response, Richstone sent Empire copies of his handwritten medical notes. (Id. at 3-4). Typewritten versions of Richstone's handwritten notes also were submitted to Empire, along with a few test results. (Id. Exs. F & O; Pls.' R. 56.1 Stmt. ¶ 14).

After reviewing the documentation provided by Richstone, Empire denied many of the claims based on the provider's alleged failure to provide necessary information and most of the others on the ground that insufficient information was provided. (Silverman Decl. ¶ 8 & Ex. A). A handful of claims also were denied as untimely. (Id.). DMA and Richstone contend that Empire never made a final determination with respect to the claims for which additional information was requested. (Pls.' R. 56.1 Stmt. ¶ 3).

E. Prior Lawsuit

On April 13, 2001, DMA commenced an action in Supreme Court, New York County, against the Fund seeking payment for the rejected claims ("DMA-I"). The Fund removed the DMA-I suit to this Court, where it was assigned to the Honorable Barbara S. Jones. (Def.'s R. 56.1 Stmt. ¶ 23). Following the close of discovery in that action, the Fund moved for summary judgment on a number of grounds, including DMA's failure to exhaust the administrative procedures set forth in the Plan. (Id. ¶ 24). By memorandum decision dated March 9, 2004, Judge Jones granted the Fund's motion for summary judgment based on DMA's failure to exhaust its administrative remedies. See Diagnostic Med. Assocs. v. New York City Dist. Council of Carpenters Welfare Fund, No. 01 Civ. 6437 (BSJ), 2004 WL 439512, at *2 (S.D.N.Y. Mar. 9, 2004).

F. Marcucci Release

Apparently unbeknownst to the plaintiffs, while DMA-I was pending, Marcucci settled a separate lawsuit against the Fund in which he sought to recover pension benefits and health benefits that he alleged were owed to him. As part of that settlement, on July 18, 2002, Marcucci executed a Settlement Agreement and Release in which, among other things, he released the Fund from any and all claims for health benefits or claims arising under ERISA. (See DMA-I Docket No. 31, Attach. 1 (Settlement Agreement and Release)).

G. Appeals to the Trustees

By letter dated March 31, 2004, plaintiffs' counsel, Bruce Hesselbach Esq., submitted to the Trustees a "series of appeals" seeking payment for the medical services allegedly rendered to Marcucci, along with "supporting documentation." (Silverman Decl. Ex. B). On July 13, 2004, the appeal was presented to the Appeals Committee of the Board of Trustees ("Appeals Committee"), which was informed of, among other things, the history of DMA's claims, Empire's grounds for the denial of the Marcucci claims, and the revocation of Richstone's medical license. (Pirrone Decl. ¶ 9). The Appeals Committee also was provided with a copy of a medical report prepared by Kenneth Herwig, M.D. ("Herwig") in connection with the DMA-I suit.*fn2 (Id.). Herwig's report questioned "the medical necessity of the care provided" "[b]ased upon the frequent repetitive nature of [Marcucci's] complaints and the lack of objective documentation that the complaints were of an organic nature." (Silverman Decl. Ex. D at 1). Herwig concluded that "the care provided for medical services was substandard and that the diagnoses submitted were not based upon established guidelines."*fn3 (Id. at 2).

After reviewing the record, the Appeals Committee voted to deny DMA's appeal on July 13, 2004. (Def.'s R. 56.1 Stmt. ¶ 31).

On July 30, 2004, John Pirrone, the Plan's Assistant Director for Health Benefits, advised Richstone's counsel that the Trustees had reviewed the appeals and other documentation related to the plaintiffs' claims in the amount of $15,290 for services rendered to Marcucci during the Treatment Period. (Silverman Decl. Ex. E). The letter further stated that the Appeals Committee had denied the claims because they were "not presented to the Trustees timely" and "because the documentation failed to establish . . . that the services allegedly provided to [] Marcucci were medically necessary." (Id.).

The plaintiffs did not respond to Pirrone's letter for nearly six months. Then, by letter dated February 25, 2005, Mr. Hesselbach complained that the Appeals Committee evidently did not have all of the plaintiffs' documents before it when it met since the plaintiffs were seeking reimbursement for claims totaling $24,490, not $15,190. (Id. Ex. F). Enclosed with the February 25th letter were additional documents allegedly establishing that the claims for which review was sought totaled $24,490. (Id.). Mr. Hesselbach requested consideration of "this additional appeal." (Id.). Subsequently, by letter dated March 24, 2005, Pirrone informed Mr. Hesselbach that the Appeals Committee had met and reviewed the plaintiffs' latest appeals during its meeting on March 10, 2005, but had chosen to adhere to its earlier decision that they were untimely and not shown to be medically necessary. (Id. Ex. G).

H. DMA II

On September 7, 2004, after the first denial of their claims by the Appeals Committee, DMA and Richstone commenced this action in an attempt to recover the amounts that the Fund had refused to pay with respect to the Marcucci claims. (See 8/3 Hesselbach Aff. Ex. A (Complaint)). The case again was removed to federal court. (See Docket No. 1). Thereafter, in February 2005, the parties consented to my exercise of jurisdiction over this matter for all purposes pursuant to 28 U.S.C. § 636(c). (See Docket No. 8). These cross-motions subsequently were filed in August 2005. (See Docket Nos. 15, 17).

II. Discussion

A. Summary Judgment

Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate only when: the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Fed. R. Civ. Proc. 56(c).

In deciding a motion for summary judgment, the court must "view the evidence in the light most favorable to the party against whom summary judgment is sought and . . . draw all permissible inferences in favor of that party." Fischl v. Armitage, 128 F.3d 50, 55 (2d Cir. 1997). The Court also must accept as true the non-moving party's evidence, if supported by affidavits or other evidentiary material. See Kulak v. City of New York, 88 F.3d 63, 70 (2d Cir. 1996). Assessments of credibility, choosing between conflicting versions of the events, and the weighing of evidence are matters for the jury, not for the court. Fischl, 128 F.3d at 55. See also Fed. R. Civ. Proc. 56(e) 1963 advisory committee's note. Thus, "[t]he court's function is not to resolve disputed issues of fact but only to determine whether there is a genuine issue of material fact to be tried." Fischl, 128 F.3d at 55.

To defeat a motion for summary judgment, the non-moving party cannot merely rely upon allegations contained in the pleadings that raise no more than "some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, the non-moving party must offer "concrete evidence from which a reasonable juror could return a verdict in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

The fact that both sides have moved pursuant to Rule 56 does not mean that one side necessarily must be granted summary judgment. Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 313-14 (2d Cir. 1981). "Rather, the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Id. at 314.

B. Capacity of DMA

The Fund alleges that DMA cannot maintain this action because it was dissolved by proclamation on March 25, 1998. (See Def.'s Mem. in Supp. at 19-20). In their complaint, the plaintiffs acknowledge that DMA was dissolved by proclamation, but state that they are "bringing this action to wind up [DMA's] affairs [by] collect[ing] monies due it for services performed prior to its dissolution." (Compl. ¶ 1). The Fund contends that there are only two claims for benefits (totaling $300) which relate to services rendered to Marcucci in the period before DMA was dissolved. The Fund argues that these consequently are the only claims that fall within the winding-up exception, and that DMA lacks the capacity to maintain this action with respect to all its other claims. (See Def.'s Mem. in Supp. at 21-22).

Rule 17(b) of the Federal Rules of Civil Procedure provides, in part, that the "capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." Fed. R. Civ. Proc. 17(b). Thus, the Court must turn to the law of New York to determine DMA's ability to prosecute this action.

Under New York law, a corporation which has been dissolved and not reinstated has the power to wind up its affairs but lacks the legal capacity to commence an action. See Metered Appliance, Inc. v. 75 Owners Corp., 638 N.Y.S.2d 631 (1st Dep't 1996); Lorisa Capital Corp. v. Gallo, 506 N.Y.S.2d 62, 72 (2d Dep't 1986). Pursuant to Section 203-a(7) of the New York Tax Law, however, when a New York corporation is reinstated after being dissolved for nonpayment of taxes, the reinstated corporation has "such corporate powers, rights, duties and obligations as it had on the date of the publication of the proclamation as if such proclamation had not been made or published." N.Y. Tax Law § 203-a(7) (McKinney 2005).

In this case, although DMA was dissolved by proclamation, evidently for failing to pay taxes, it subsequently sought and obtained reinstatement as an active corporation. (See 9/7 Hesselbach Aff. ¶ 1 & Ex. V). Accordingly, contrary to the Fund's contention, DMA is fully authorized to bring this suit.

C. Effectiveness of the 1999 Assignments

The Fund also argues that the 1999 Assignments to Richstone and DMA cannot be given effect because they are defective in form and because Marcucci subsequently released all of his claims against the Fund in 2002. (See Docket No. 32 at 2-4, 7-9)

To be valid, an assignment must completely divest the assignor of "all control over the right assigned." Caribe Carriers, Ltd. v. C.E. Heath & Co., 784 F. Supp. 1119, 1126 (S.D.N.Y. 1991). Under New York law, an assignment need not utilize any particular phraseology or form to accomplish this goal; thus, any acts or words which show an intent to effect such an assignment are sufficient. See Miller v. Wells Fargo Bank Int'l Corp., 540 F.2d 548, 557 (2d Cir. 1976); Leon v. Martinez, 84 N.Y.2d 83, 88 (1994).

In the context of ERISA claims, judges in this District have held that "[t]he right to reimbursement under a health plan may be assigned by a patient covered by the health plan to a health care provider so long as the plan instrument does not specifically prohibit such assignments." See Richstone v. Chubb Colonial Life Ins., No. 97 Civ. 3481 (HBP), 1999 WL 287332, at *5 (S.D.N.Y. May 7, 1999) (citing Fisher v. Building Serv. 32B-J Health Fund, No. 96 Civ. 5526 (LAP), 1997 WL 531315, at *4 (S.D.N.Y. Aug. 27, 1997)). A valid assignment of an ERISA claim in turn vests standing in the assignee to pursue the claim in his own name. Id.

In this case, the Fund argues that "[t]he assignments on their face do not evidence the requisite degree of definiteness" necessary for a valid assignment. (Def.'s Reply Mem. at 5). While it is true that the assignments are rather sparse and generic in form, they do explicitly state: "This is a dire[]ct assignment of my rights and benefits under this policy." (Marcucci Aff. Ex. A). Moreover, while it clearly is not dispositive, in his affidavit in support of the plaintiff's summary judgment motion, Marcucci explains that "[w]hen [he] signed the 1999 assignments, it was [his] intention that [he] was transferring all [his] rights to seek and obtain benefits for medical treatments to Dr. Richstone and DMA." (Id. ¶ 3). In light of this record, it seems apparent that the 1999 Assignments are adequate to express and carry out Marcucci's intent to effect a complete assignment of the claims at issue.

Notwithstanding the language of the 1999 Assignments and Marcucci's intent, the fact remains that DMA did not exist as a corporate entity in 1999 when Marcucci purported to transfer an interest in his medical claims to DMA because that entity had been dissolved by proclamation the year before. Since an assignment to a nonexistent entity plainly is ineffective to divest the assignor's entire interest, insofar as Marcucci attempted to transfer his claims to DMA, they remained his property despite the paperwork that he signed. Accordingly, when Marcucci subsequently signed a release of his medical claims against the Fund in 2002, DMA lost the ability to claim any interest in Marcucci's previously-released claims following its reinstatement as an active corporation.

On the other hand, the assignment to Richstone obviously does not suffer the same infirmity. Accordingly, it was effective when it was signed in 1999.*fn4

D. Relevant Principles of ERISA Law

A federal court must review a denial of benefits under ERISA de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Where an employee benefit plan grants a plan fiduciary such discretionary authority to construe the terms of the plan, the court may reverse its decision "only if the fiduciary's decision was arbitrary and capricious." Rombach v. Nestle USA, Inc., 211 F.3d 190, 194 (2d Cir. 2000). To meet this threshold, the denial of benefits must be shown to be "without reason, unsupported by substantial evidence or erroneous as a matter of law." Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995).

In reviewing a denial of benefits, a district court may consider only the administrative record that was before the plan administrator at the time of its decision. See Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir. 1995). Additionally, despite the deference accorded to decisions subject to review under the arbitrary and capricious standard, courts have held under ERISA that the plan's fiduciary must provide a "full and fair review" of a decision denying a claim. See 29 U.S.C. § 1133(2); Crocco v. Xerox Corp., 137 F.3d 105, 108 (2d Cir. 1998) (a plan administrator did not provide a "full and fair review" of claims and therefore the denial of benefits was "arbitrary and capricious"); Tholke v. Unisys Corp., No. 01 Civ. 5495 (HB), 2002 WL 575650, at *3 (S.D.N.Y. Apr. 16, 2002), rev'd on other grounds, 2004 WL 960029 (2d Cir. 2004) (fiduciary's failure "to provide a full and fair review can constitute a decision that was arbitrary and capricious").

1. Applicable Standard of Review 17

In this case, the plaintiffs evidently do not dispute that the Plan Administrator's initial decision concerning the Marcucci claims was subject to review under the arbitrary and capricious standard. They nonetheless argue that "there are no provisions which grant discretion to the Trustees to interpret the [P]lan and to determine factual questions presented to them on appeals." (Pls.' Mem. in Supp. at 7 (emphasis added)). In their view, "[i]n the absence of such discretion, the Trustees' decision should be reviewed de novo." (Id.). Absolutely no authority has been cited for the proposition that appeals of discretionary decisions are subject to de novo review unless an ERISA plan separately states that they too are subject to the Trustees' discretionary authority.

To put it mildly, the plaintiffs' failure to cite any authority with respect to this issue is disconcerting. In DMA v. Guardian Life Ins. Co. of Am., 157 F. Supp. 2d 292, 298 (S.D.N.Y. 2001), Judge Marrero concluded that the plaintiffs' argument that "a bright line bifurcating decisions on denial of claims and the subsequent review of those decisions" should be read into a plan which grants discretionary authority to the plan administrator in connection with the first level of claim processing constituted a "strained and untenable interpretation." Judge Marerro therefore held that the plaintiffs could not prevail unless the plan administrator's denials were arbitrary and capricious. Id.

Under Canon 7 of the Code of Professional Responsibility, a lawyer must represent his client zealously within the bounds of the law. See Code of Prof'l Responsibility Canon 7, Discip. R. 7-106(B)(1), N.Y. Comp. R. & Regs., tit. 22, § 1200.37(b)(1) (McKinney 2003). This imposes upon counsel the duty to inform the tribunal of the existence of adverse authority of which counsel is aware, unless his adversary has previously done so. See id.; see also Allianz CP Gen. Ins. Co. v. Blue Anchor Line, No. 02 Civ. 2238 (NRB), 2004 WL 1048228, at *7 n.4 (S.D.N.Y. May 7, 2004) (chastising counsel for failing to inform court of decision in another case in which it had appeared and unsuccessfully advanced the same argument); cf. Hernandez v. Jones, No. 92 Civ. 2451 (MGC), 1993 WL 323820, at *4 n.8 (S.D.N.Y. Aug. 6, 1993) (observing that the failure to cite controlling authority is "at best inexcusably poor lawyering and at worst suggests counsel's ignorance or violation of DR 7-106(B)(1)"). Since the plaintiffs are bound by Guardian Life and that case was not mentioned in the Fund's papers, it plainly constitutes controlling authority which should have been disclosed.

As in Guardian Life, the Court will apply the more deferential standard to its review of the two grounds asserted by the Appeals Committee as the bases for denying Richstone's claims, i.e., that his appeals to the Trustees were untimely and that the treatment allegedly rendered was not medically necessary.

2. Timeliness

The Fund's first assertion is that the plaintiffs' appeals to the Trustees were untimely. The argument is premised on Plan language indicating that a claim must be challenged within sixty days after it is denied and that a claim shall be deemed denied ninety days after it has been submitted. (See Silverman Decl. Ex. A at 72). However, the only mention of timeliness as a basis for the denial of most of the plaintiffs' claims appears in Pirrone's letters to Mr. Hesselbach, which refer to the untimeliness of the plaintiffs' appeals to the Trustees. (See id. Exs. E, G). While the Plan provides a time limit for the review of a claim by Empire, it does not set forth any deadline for appeals to the Trustees. Indeed, as the plaintiffs correctly note, the provisions requiring an appeal to the Trustees before a suit is brought appear to have been inserted into the Plan without much thought. (See Pls.' Reply Mem. in Supp. at 1-2). Since those provisions do not specify when an appeal to the Trustees must be submitted, the Fund cannot prevail on the theory that the two appeals to the Trustees in this case were untimely.

3. Medical Necessity

The Trustees' (and presumably Empire's) only other reason for the denial of the plaintiffs' claims is that they failed to establish the "medical necessity" of the services rendered. The burden of establishing "medical necessity" or the absence thereof depends on the specifics of an ERISA plan. When "medical necessity" is a prerequisite to a claim for benefits, the burden of proof will generally be on the plan participant. See Juliano v. HMO of New Jersey, 221 F.3d 279, 287 (2d Cir. 2000). When a lack of medical necessity is set forth as the basis for an "exclusion" from coverage under the plan, the burden usually is on the plan provider to prove that the exclusion applies. See Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 765 (2d Cir. 2002) (citing Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405, 1408 (7th Cir. 1994)). As the Second Circuit has noted, however, this general framework is not particularly helpful where, as here, the plan refers to medical necessity in both the summary of benefits and the summary of exclusions. See Mario, 313 F.3d at 765.

Notwithstanding the lack of clarity as to who has the burden of proof, it is settled law that the determination of what constitutes medical necessity requires "an individual assessment" of a particular patient's situation. Id. Although the plaintiffs complain that the Plan's practice of denying all of their claims means that such a review did not take place in this instance, it is clear that the Trustees had before them and considered all of the materials that the plaintiffs had submitted, as well as Dr. Herwig's report. The Trustees also were aware of Richstone's loss of his medical license for professional misconduct, which occurred after the blanket denials began. There consequently is no basis to conclude that the plaintiffs' claims were not given individualized attention.

The plaintiffs also complain that the Trustees departed from their usual procedures here because they did not receive a synopsis of the medical director's report concerning the Marcucci claims. This is scarcely surprising since those claims were the subject of a prior lawsuit in which the Fund retained Herwig to prepare a report. In any event, the issue is not what was not before the Trustees, but whether the materials that they actually furnished were sufficient to permit the conclusion that they reached regarding the medical necessity of the plaintiffs' treatment. For this reason, it is appropriate to consider the Herwig report even if, as the plaintiffs correctly observe, Herwig has not been designated as an expert in this suit.

Richstone also contends that there was no need for him to produce test results to substantiate that Marcucci's treatment was medically necessary because the requisite tests "were given by other doctors." (Aff. of Geoffrey Richstone, sworn to on Aug. 29, 2005, ¶ 16). However, shortly before Dr. Richstone lost his license, the Plan Administrator had asked him to produce a "legible copy of [his] actual handwritten medical records and all actual diagnostic test reports." (Silverman Decl. Ex. N at 1). While the typewritten notes were produced, only a handful of test results were sent to Empire and those appear to relate to only a few of the many conditions for which Marcucci allegedly was treated. Richstone also never suggested that other test results had been obtained by other physicians. In light of Richstone's admitted fraud, the Trustees certainly were entitled to draw a negative inference concerning the need for much, if not all, of Richstone's alleged medical treatment based on his failure to submit test results for the treatment he furnished.

At the time of their review, the Trustees also were told of information learned in the course of DMA-I. (See Pirrone Decl. ¶ 9). That information included a copy of the DMA appointment book for almost all of the days on which Richstone claimed to have rendered medical treatment to Marcucci during the Treatment Period. (See 8/3 Hesselbach Aff. Ex. at 100-04). On 101 out of 115 dates when Marcucci is listed as visiting the Clinic, there is an indication that he was there for P/T, i.e., physical therapy. (Silverman Decl. ¶ 11). On another six dates, there is a notation that he was there for a Vitamin B-12 shot, (id.), a procedure that Richstone concedes is of "no medical value." (8/3 Hesselbach Aff. Ex. B at 104). From these facts, the Trustees reasonably could conclude that Marcucci visited DMA principally for services which could not be billed, and that his consultations with Richstone during those visits -- if, indeed, they occurred -- were not medically necessary.

To be sure, this is not the only conclusion that the Trustees could have reached. On the same facts, and in light of Richstone's testimony in DMA-I, they could have found that Richstone was extraordinarily dedicated to his patient and paid careful attention to even his most trivial complaints. Nevertheless, despite these competing possible conclusions, it is clear that the Trustees' decision to deny the claims on medical necessity grounds was rational and supported by substantial evidence. For this reason, the Trustees are entitled to summary judgment under the applicable deferential standard of review, and the plaintiffs' cross-motion must be denied.

III. Conclusion

For the foregoing reasons, the defendant Fund's motion for summary judgment (Docket No. 17) is granted, and the plaintiffs' cross-motion for summary judgment (Docket No. 15) is denied. Additionally, the Clerk of the Court is respectfully requested to close this case.

SO ORDERED.

FRANK MAAS United States Magistrate Judge


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