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

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 ...


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