United States District Court, S.D. New York
MARIANNE GATES, individually and on behalf of all others similarly situated, Plaintiff,
UNITED HEALTHCARE INSURANCE COMPANY; ALLIANCEBERNSTEIN L.P.; LIFE, AD&D, DISABILITY & MEDICAL PLAN FOR EMPLOYEES OF ALLIANCEBERNSTEIN L.P.; UNITED HEALTHCARE CHOICE PLUS COPAY PLAN FOR ALLIANCEBERNSTEIN L.P.; ALLIANCEBERNSTEIN L.P. RETIREE MEDICAL PLAN FOR EMPLOYEES OF ALLIANCEBERNSTEIN L.P.; and ALLIANCEBERNSTEIN L.P. UNITED HEALTHCARE INDEMNITY PLAN, Defendants.
OPINION & ORDER
KATHERINE B. FORREST, District Judge.
This ERISA action was originally commenced in May 2011. Now, more than three years later, and one trip up to the Circuit and back, this Court again has before it motions by defendants for summary judgment or dismissal as to all remaining claims. For the reasons set forth below, those motions are GRANTED in part and DENIED in part.
Marianne Gates ("plaintiff' or "Gates") and the members of the classes that she seeks to represent, were or are participants in and/or beneficiaries of employee health care plans sponsored by private companies, including AllianceBernstein L.P. ("AB"), and partially or fully administered and/or insured by defendant United Healthcare Insurance Company ("URIC"). (Second Amended Class Action Complaint ("SAC") ¶ 2, ECF No. 75.) Plaintiff Gates is a retired employee of AB and a participant in the Life, AD&D, Disability & Medical Plan for Employees of AllianceBernstein L.P., the AllianceBernstein L.P. Retiree Plan for Employees of AllianceBernstein L.P., and the AllianceBernstein L.P. United Healthcare Indemnity Plan (together, the "Other AB Plans"). (Id. ¶ 9.) She was formerly a participant in the United Healthcare Choice Plus Copay Plan ("Copay Plan" or "Plan"). (See id. ¶ 41.) UHIC's calculation of benefits and claims procedures under the Copay Plan are at the heart of this suit.
A. Plaintiffs Claims
Gates has, in her personal capacity and as a representative of putative classes, sued URIC as Claims Administrator of the Copay Plan, AB as the Sponsor and Plan Administrator of the Copay Plan, and the Copay Plan itself. (See SAC ¶¶ 11-12, 15, 17.) Plaintiff has asserted a series of claims relating to benefits for medical services she received between July 12, 2010 and February 24, 2011. (See id. ¶¶ 57-65.) The SAC asserts seven claims for relief, of which only five remain. Two of those claims (the Second and Fourth) are asserted against UHIC; the rest of the claims (the First, Third and Fifth) are asserted against various AB defendants. There is a fair amount of confusion in the papers and even at oral argument as to what is in fact alleged in each claim for relief and what the available remedy would or could be if a violation were proven. The pleading itself-always a good place to start-defines the remaining five claims as follows:
1. First Claim for Relief (against AB defendants): to recover benefits pursuant to § 502(a)(1)(B) and for injunctive relief pursuant to § 502(a)(3); that claim includes an assertion of a breach of fiduciary duty for use of the Estimating Policy;
2. Second Claim for Relief (against UHIC): for injunctive relief pursuant to§ 502(a)(3) to bar UHIC's continued use of the Estimating Policy;
3. Third Claim for Relief (against AB Plans): for relief pursuant to §§ 502(a)(3) and 503 for breach of fiduciary duty for failure to comply with appropriate claims procedure;
4. Fourth Claim for Relief (against UHIC "derivatively on behalf of' the Plans for which UHIC serves as Claims Administrator): for relief pursuant to §§ 409(a), 502(a)(2), and 502(a)(3) for breach of fiduciary duty for failure to comply with appropriate claims procedure;
5. Fifth Claim for Relief (against AB): for relief pursuant to §§ 409(a) and 502(a)(2) for breach of fiduciary duty for failure to terminate UHIC as Claims Administrator and failure to prudently select and monitor the Claims Administrator.
Gates' claims may be grouped into three categories: benefits claims (First and Second Claims for Relief), procedural claims (Third and Fourth Claims for Relief), and a monitoring claim (Fifth Claim for Relief).
B. The Parties' Arguments
1. First and Second Claims
The First and Second Claims for Relief are at the heart of this lawsuit. They seek monetary damages and injunctive relief in connection with Gates' assertion that she has not been paid the full benefits she is owed. Plaintiff claims that URIC applied an erroneous methodology to its calculation of her benefits. The First Claim for Relief references both monetary and prospective injunctive relief against the AB defendants but the parties have argued it as if it is limited to monetary relief. The Second Claim for Relief seeks only prospective injunctive relief against URIC.
The parties' main dispute as to these claims relates to whether the terms of the Summary Plan Description ("SPD") which lay out the coordination of benefits ("COB") methodology are ambiguous in whole or in part, thereby allowing for interpretation by URIC and application of the arbitrary-and-capricious standard to such interpretation. Plaintiff asserts that the terms are unambiguous in whole, requiring literal application and permitting no exercise of interpretative discretion by URIC. Defendants argue the opposite. The answer to the question of ambiguity determines the outcome of defendants' motion as to the First Claim. As to the Second Claim, even if the language is unambiguous, there is a further question as to whether injunctive relief is an available remedy. Plaintiff argues that even though she is no longer a participant in the Copay Plan, injunctive relief remains available because she seeks to represent a class some of whose members may still be participants. Defendants argue that plaintiffs ability to seek injunctive relief ended when she ceased to be a participant in the Copay Plan.
2. Third and Fourth Claims
Plaintiffs Third and Fourth Claims for Relief relate to the same alleged concern that UHIC (not named as a defendant in the Third Claim) has breached its fiduciary duties by failing to comply with the appropriate claims procedure as established by the Copay Plan. The Third Claim is asserted against the AB Plans only. The Fourth Claim is asserted against UHIC only.
Neither claim is a model of clarity. However, at bottom, the language of the claims includes sufficient references to be construed as alleging violations of ERISA § 503 relating to claims procedures, as well as breaches of fiduciary duty under § 404 for the § 503 violations. In addition, however, the Fourth Claim for Relief asserts a claim pursuant to § 502(a)(2) for relief under§ 409-which relates to a loss in Plan assets. No such loss is in fact described or alleged. The § 502(a)(2) and accompanying§ 409 claims are irrelevant to the facts alleged in the SAC or in the record on this motion.
The Third Claim for Relief is against the Plan only, not UHIC. It seeks relief for violations of claims procedure requirements established in § 503, alleging that such violations are breaches of fiduciary duties. Plaintiff seeks generalized injunctive relief under § 502(a)(3) for such violations. Threshold issues with this claim are that (1) it does not name UHIC as a defendant and instead seeks to hold the Plan, concededly not itself a fiduciary, liable for UHIC's breaches of§ 503 and UHIC's breaches of fiduciary duties and (2) seeks prospective injunctive relief when plaintiff is concededly no longer a participant in the Plan.
The AB defendants seek judgment on this claim on several grounds: first, on the ground that the claim is asserted against, not on behalf of, the Plan, and the Plan is not a fiduciary; second, on the ground that a failure to comply with claims procedures required by§ 503 cannot constitute a§ 404 breach of fiduciary duty; third, on the ground that plaintiff may only seek to establish a breach of fiduciary duty under§ 502(a)(2), not under§ 502(a)(3); and finally, on the ground that, in any event, remedies for violations of§ 503 are administrative only and injunctive relief is not available.
Plaintiff counters by explaining that her Third Claim is based on § 503's requirement that all participants are entitled to some measure of due process in connection with claims for benefits, and that she did not receive such process. In this regard, she asserts that it is irrelevant that she has named only the Plan as defendant in this claim since it is clear on the face of her claim that she is alleging a breach of fiduciary duty by UHIC. She concedes that the Plan is not a fiduciary; rather, she asserts that the Plan is bound by the requirements of§ 503. Plaintiff argues that she can allege a violation of§ 503 and seek relief under § 502(a)(3) without resort to a claim based on a breach of fiduciary duty. In terms of injunctive relief, plaintiff argues that she has an existing claim-unaffected by the fact that she is no longer a participant in the Copay Plan-for a full and fair review of her claim.
The Fourth Claim for Relief, alleged only against UHIC, alleges a violation of § 502(a)(2), with§ 409 as its remedy. Only secondarily does it reference § 502(a)(3). Defendant UHIC argues that§§ 502(a)(2) and 409 are inapplicable in this case. It then turns to the portion of the Fourth Claim which seeks to invoke more general remedial relief under § 502(a)(3)-a provision not tied to a loss or misuse of plan assets.
UHIC argues that in order to seek relief under§ 502(a)(3), plaintiff must show an underlying violation of ERISA. UHIC argues that plaintiff has not alleged a cognizable violation. But while the Fourth Claim for Relief does not specifically reference § 503, it plainly alleges a violation of§ 503. That section is the substantive portion of ERISA requiring establishment and compliance with certain claims procedures.
UHIC additionally argues that§ 503 claims are limited to claims against employee benefit plans, and that UHIC is a Claims Administrator, not a plan. This is where plaintiffs additional assertions in the Fourth Claim with regard to UHIC's breach of fiduciary duty come into play. According to plaintiff, as Claims Administrator, UHIC was tasked with complying with§ 503, and this it failed to do, thereby breaching its fiduciary duties. In short, while the Fourth Claim for Relief does state a claim under ERISA, it does so under a combination of§§ 502(a)(3), 503, and 404-not §§ 502(a)(2) and 409.
Defendants also argue that, in all events, the remedies available for a § 503 violation are administrative only, including deemed administrative exhaustion or remand. But this ignores that a breach of fiduciary duty may be addressed more generally under§ 502(a)(3), which plaintiff asserts with regard to this claim.
3. Fifth Claim for Relief
The Fifth Claim for Relief is asserted against AB and seeks to hold it liable for failing adequately to monitor and terminate URIC. This claim alleges violations of§§ 502(a)(2) and 409. It does not seek relief under any other provision of ERISA.
The AB defendants argue, as they have elsewhere, that§§ 502(a)(2) and 409 are inapplicable to the facts as alleged. In addition, they argue that the claim is really one for liability for breach of a co-fiduciary's duties pursuant to § 405. Plaintiff did not plead § 405. That provision requires (1) knowingly participating in or concealing of an act or omission of another fiduciary, knowing that such act or omission was a breach of fiduciary duty; or (2) enabling another fiduciary to commit a breach through failure to comply with § 404; or (3) knowing that another fiduciary has committed a breach and failing to take remedial steps. See 29 U.S.C. § 1105 [ERISA § 405]. According to defendants, since such a claim requires an underlying breach by UHIC, and since such a breach cannot be established, the claim must fail. In the event that a breach by UHIC is shown, this argument fails. Plaintiff counters that the basis for this claim is UHIC's breach of fiduciary duty. She also asserts that the Fifth Claim is not a "derivative" claim, though it uses that word; rather, that term is used to refer to plaintiffs role as a representative of a class. According to plaintiff, her representative capacity keeps her claim alive despite her own lack of continuing participation in the Copay Plan.
C. The SPD and the Parties' Interpretations
The terms of the Copay Plan are set forth in the Plan Document and the SPD. (See SPD, Smith Deel., Exh. A, ECF No. 81.) The Introduction to the SPD states that it "describes your Benefits, as well as your rights and responsibilities, under the Plan." (SPD at 1.) It provides for submission of claims as well as requests for reviews of denied claims and complaints to be made directly by the participant to UHIC. (Id. at 2.)
The SPD provides that AB has "delegated to the Claims Administrator [UHIC] the exclusive right to interpret and administer the provisions of the Plan. The Claim Administrator's decisions are conclusive and binding." (SPD at 65.) The SPD further provides that AB and URIC have the "sole and exclusive discretion" to "[i]nterpret Benefits under the Plan, " "[i]nterpret the other terms, conditions, limitations and exclusions of the Plan, including this SPD, " and "[m]ake factual determinations related to the Plan and its Benefits." (Id. at 81.) Finally, the SPD states that AB and UHIC may each "delegate this discretionary authority to other persons or entities who provide services in regard to the administration of the Plan." (Id. at 82.)
To determine benefits under the Copay Plan requires reference to a number of different provisions contained within Section 7 of the SPD, entitled "Coordination of Benefits." All of Section 7 is concerned in one way or another with instances in which more than one "Coverage Plan" may apply, and how benefits are determined in such a situation. It starts by defining "When Coordination of Benefits Applies." It states, "This coordination of benefits (COB) provision applies when a person has health care coverage under more than one benefit plan." (SPD at 66.) It then informs the reader that:
The order of benefit determination rules described in this section determine which Coverage Plan will pay as the Primary Coverage Plan. The Primary Coverage Plan that pays first pays without regard to the possibility that another Coverage Plan may cover some expenses. A Secondary Coverage Plan pays after the Primary Coverage Plan and may reduce the benefits it pays.
(Id.) Definitions applicable to the coordination of benefits determination follow. The definition of "Coverage Plan" provides that both the Copay Plan itself and, inter alia, Medicare fall within its ambit. (Id.) The Definitions section also states:
When this Coverage Plan is primary, its benefits are determined before those of any other Coverage Plan and without considering any other Coverage Plan's benefits. When this Coverage Plan is secondary, its benefits are determined after those of another Coverage Plan and may be reduced because of the Primary Coverage Plan's benefits.
(Id. at 67.) Section 7 has a subsection entitled "Order of Benefit Determination Rules." (Id. at 68.) It provides, "When two or more Coverage Plans pay benefits, the rules for determining the order of payment are as follows: A. The Primary Coverage Plan pays or provides its benefits as if the Secondary Coverage Plan or Coverage Plans did not exist." (Id.) On the same page, it provides that if a person is retired, then Medicare is primary and the other Coverage Plan covering the person as a retiree is secondary. (See id. ¶ 1.)
Plaintiff Gates is undisputedly retired from AB. It is also undisputed that for purposes of applying the COB methodology, Medicare is her Primary Coverage Plan and the Copay Plan is secondary. As plaintiff is covered under two plans, one turns to the next subsection, entitled "Effect on the Benefits of this Plan." (SPD at 69.) That subsection provides the methodology for benefit payments in such a situation. It states, first, that "[w]hen this [that is, the Copay Plan] is secondary, it may reduce its benefits by the total amount of benefits paid or provided by all Coverage Plans Primary to this Coverage Plan." (Id.) With regard to a determination as to each claim submitted, the Copay Plan will:
1. Determine its obligation to pay or provide benefits under its contract. [That is, determine whether it is a ...