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Seifts v. Consumer Health Solutions LLC

United States District Court, S.D. New York

November 21, 2014

SEIFTS, ET AL., Plaintiffs, --
v.
CONSUMER HEALTH SOLUTIONS LLC, ET AL., Defendants

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For Jeffrey C. Seifts, Jeffrey C. Seifts & Co., Inc., Consumer Advocates Group, LTD, individually and on behalf of the participants of the Fleetcare CU 1000P Medical Program John and Jane Does 1-300, Plaintiffs: Brian Mark Culnan, LEAD ATTORNEY, Iseman, Cunningham, Riester and Hyde, LLP, Albany, NY; Christopher A. Smith, LEAD ATTORNEY, Trivella & Forte LLP, White Plains, NY; Scott Paul Trivella, LEAD ATTORNEY, Trivella & Forte, White Plains, NY.

For Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn Demichelle, Susan E. Hoyt, Mary Ann Pulvirenti, Joseph French, Lindord Snyder, Diane Berman, John Bastone, John Gerson, individually and on behalf of the participants of the Fleetcare CU 1000P Medical Program John and Jane Does 1-300, Plaintiffs: Brian Mark Culnan, LEAD ATTORNEY, Iseman, Cunningham, Riester and Hyde, LLP, Albany, NY; Christopher A. Smith, LEAD ATTORNEY, Trivella & Forte LLP, White Plains, NY; Scott Paul Trivella, LEAD ATTORNEY, Trivella & Forte, White Plains, NY; Julie Ann Ortiz Trivella & Forte LLP, White Plains, NY.

For TIG Premier Insurance Company individually and jointly and severally, Cross Claimant, Cross Defendant: William Kevin Kerrigan, Sr., MacCartney, Maccartney, Kerrigan & Maccartney, Nyack, NY.

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OPINION AND ORDER

Edgardo Ramos, UNITED STATES DISTRICT JUGDE.

Before the Court is the Report and Recommendation (" R& R" ) dated March 6, 2014 of Magistrate Judge Lisa Margaret Smith, to whom this matter was referred for an inquest as to damages following default judgments against the Defendants. This action involves numerous plaintiffs, numerous defendants, and assorted causes of action under federal and state law. Accordingly, in the R& R, Judge Smith recommends damages of varying amounts for and against the different parties. For the reasons stated herein, the Court ADOPTS the R& R and directs the entry of judgment as recommended.

I. Background

Plaintiffs Jeffrey C. Seifts, Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn Demichelle, Susan E. Hoyt, Maryann Pulvirenti, Joseph French, Linford Snyder, Diane Berman, John Bastone, and John Gerson, individually and on behalf of the participants of the Fleetcare CU 1000P Medical Program, John and Jane Does 1-300, Jeffrey C. Seifts & Co., Inc., and Consumer Advocates Group, Ltd. (" CAG" ) (collectively, " Plaintiffs" ), commenced this action on November 3, 2005 against Consumer Health Solutions LLC d/b/a Palmetto Administrators (" CHS" ), Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, TIG Premier Insurance Company, William M. Worthy, II, Angela Posey, Obed Kirkpatrick, Jollene Priester, Jack Henson Hawkins, and New Source Benefits, LLC, individually and jointly and severally

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(collectively, " Defendants" ).[1] Plaintiffs assert claims for breach of fiduciary duty and disclosure obligations under ERISA, claims for recovery of the value of wrongly denied benefits, and a series of claims under New York law.

Initially assigned to the Honorable Stephen C. Robinson, the case was transferred to the Honorable Richard J. Holwell on November 12, 2010, Doc. 62, to the Honorable J. Paul Oetken on October 20, 2011, Doc. 83, and to the undersigned on July 22, 2013. Doc. 148. The case was referred to the Honorable Lisa Margaret Smith, United States Magistrate Judge, on November 14, 2011. Doc. 84.

On May 6, 2011, Judge Holwell entered a default judgment in favor of Plaintiffs Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn DeMichelle, Susan E. Hoyt, Maryann Pulvirenti, Joseph French, Linford Snyder, Diane Berman, John Bastone, and John Gerson (the " Individual Plaintiffs" ) and against Defendants CHS, Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, William M. Worthy, II, Angela Posey, Obed Kirkpatrick, Jollene Priester, Jack Henson Hawkins, and New Source Benefits, LLC. Doc. 80. On March 15, 2012, Judge Oetken entered a default judgment in favor of Plaintiffs Jeffrey C. Seifts, Jeffrey C. Seifts & Co., Inc., and CAG (the " Seifts Plaintiffs" ) and against Defendants CHS, Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, William M. Worthy, II, Angela Posey, Obed Kirkpatrick, Jack Henson Hawkins, and New Source Benefits, LLC, jointly and severally. Doc. 102. Both Judge Holwell and Judge Oetken referred the issue of the amount of damages to which the Individual Plaintiffs and Seifts Plaintiffs may be entitled to Judge Smith for an inquest or hearing on damages. Doc. 80; Doc. 84; Doc. 102.

On March 6, 2013, Judge Smith issued her R& R, concluding that a judgment for damages should be entered as follows:

o $128,821.73 to CAG from Defendants FleetCare Group LLC, Fleet Care Corporation, CHS, Worthy, Bart Posey, Angela Posey, and Kirkpatrick;

o $3,348.75 to Manfredo from Defendant FleetCare Group LLC;

o $3,794.28 to Audet from Defendant FleetCare Group LLC;
o $1,180 to Hoyt from Defendant FleetCare Group LLC;
o $5,886.09 to Pulvirenti from Defendant FleetCare Group LLC;
o $6,975 to French from Defendant FleetCare Group LLC; and
o $10,583.34 to Bastone from Defendant FleetCare Group LLC.

R& R 40-41. Judge Smith declined to recommend an award of attorneys' fees to the Seifts Plaintiffs but invited them to argue their claim to such fees in any objections to the R& R. The Seifts Plaintiffs filed no objections. Id. at 41. Conversely, Judge Smith concluded that the Individual Plaintiffs would be entitled to an attorneys' fees awarded as provided for in § 349 of the New York General Business Law and noted that this Court might refer the case back to her for a determination of any application by those Plaintiffs for attorneys' fees. Id. No such application has been filed as of yet. Id. The R& R noted that objections, if any, would be due by March 24, 2014 and that failure to timely object would preclude later

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appellate review of any order of judgment entered. Id. at 42. Neither the Seifts Plaintiffs, nor the Individual Plaintiffs, nor the Defendants filed objections. They have therefore waived their right to object to the R& R. See Dow Jones & Co. v. Real-Time Analysis & News, Ltd., No. 14 Civ. 131 (JMF) (GWG), 2014 WL 5002092, at *1 (S.D.N.Y. Oct. 7, 2014) (citing Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Caidor v. Onondaga County, 517 F.3d 601, 604 (2d Cir. 2008)).

II. Standard of Review

A district court reviewing a magistrate judge's report and recommendation " may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). Parties may raise " specific," " written" objections to the report and recommendation " [w]ithin fourteen days after being served with a copy." Id. ; see also Fed.R.Civ.P. 72(b)(2). A district court reviews de novo those portions of the report and recommendation to which timely and specific objections are made. 28 U.S.C. § 636(b)(1)(C); see also United States v. Male Juvenile (95-CR-1074), 121 F.3d 34, 38 (2d Cir. 1997). The district court may adopt those parts of the report and recommendation to which no party has timely objected, provided no clear error is apparent from the face of the record. Lewis v. Zon, 573 F.Supp.2d 804, 811 (S.D.N.Y. 2008). The district court will also review the report and recommendation for clear error where a party's objections are " merely perfunctory responses" argued in an attempt to " engage the district court in a rehashing of the same arguments set forth in the original petition." Ortiz v. Barkley, 558 F.Supp.2d 444, 451 (S.D.N.Y. 2008) (citations and internal quotation marks omitted).

III. Conclusion

No party has objected to the R& R. The Court has reviewed Judge Smith's thorough R& R and finds no error, clear or otherwise. Judge Smith reached her determination on damages after a careful review of the parties' submissions. R& R 2-3. The Court therefore ADOPTS Judge Smith's recommended judgment regarding damages for the reasons stated in the R& R and REFERS back to Judge Smith future applications, if any are filed, for attorneys' fees with regard to the Individual Plaintiffs.

The parties' failure to file written objections precludes appellate review of this decision. PSG Poker, LLC v. DeRosa-Grund, No. 06 CIV. 1104 (DLC), 2008 WL 3852051, at *3 (S.D.N.Y. Aug. 15, 2008) (citing United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997)).

It is SO ORDERED.

REPORT AND RECOMMENDATION

Lisa Margaret Smith, Magistrate Judge.

Plaintiffs Jeffrey C. Seifts, Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn Demichelle, Susan E. Hoyt, Maryann Pulvirenti, Joseph French, Linford Snyder, Diane Berman, John Bastone, John Gerson, individually and on behalf of the participants of the Fleetcare CU 1000P Medical Program, John and Jane Does 1-300, and Jeffrey C. Seifts and Co., Inc. and Consumer Advocates Group, Ltd. commenced this action against Defendants Consumer Health Solutions LLC d/b/a Palmetto Administrators, Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, TIG Premier Insurance Company[1] William M. Worthy,

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II, Angela Posey, Obed Kirkpatrick, Jollene Priester, Jack Henson Hawkins, and New Source Benefits, LLC, individually and jointly and severally, asserting claims for breach of their fiduciary duties and their disclosure obligations under ERISA and to recover the value of benefits wrongly denied by Defendants. Plaintiffs also assert claims under New York law for breach of contract, breach of implied contract, quantum meruit, unjust enrichment, conversion, negligence and negligent misrepresentation, fraud and intentional misrepresentation, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, intentional infliction of emotional distress, and violations of New York Insurance Law and New York General Business Law provisions.

On May 6, 2011, the Honorable Richard J. Holwell entered a default judgment in favor of Plaintiffs Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn DeMichelle, Susan E. Hoyt, Maryann Pulvirenti, Joseph French, Linford Snyder, Diane Berman, John Bastone, and John Gerson (the " Individual Plaintiffs" ) and against Defendants Consumer Health Solutions, LLC d/b/a Palmetto Administrators, Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, William M. Worthy, II, Angela Posey, Obed Kirkpatrick, Jollene Priester, Jack Henson Hawkins and New Source Benefits, LLC. Docket # 80. The issue of the amount of damages to which the Individual Plaintiffs may be entitled was referred to the undersigned for an inquest/hearing on damages. Id.; see also Docket # 84. On March 15, 2012, the Honorable J. Paul Oetken entered a default judgment in favor of Plaintiffs Jeffrey C. Seifts, Jeffrey C. Seifts & Co., Inc., and Consumers Advocates Group, Ltd. (the " Seifts Plaintiffs" ), and against Defendants Consumer Health Solutions, LLC d/b/a Palmetto Administrators, Fleetcare Group, LLC, Fleet Care Corporation, Bart Posey, William M. Worthy, II, Angela Posey, Obed Kirkpatrick, Jack Henson Hawkins and New Source Benefits, LLC, jointly and severally. Docket # 102.[2] Judge Oetken likewise referred the issue of the amount of damages to which the Seifts Plaintiffs may be entitled to the undersigned for an inquest/hearing on damages. Id.

On March 26, 2012, the Seifts Plaintiffs and the Individual Plaintiffs filed their affidavits in support of their requested damages. Docket ## 107-115.[3] Thereafter, Defendants Jollene Priester and Jack Hawkins filed separate motions to vacate the default judgment, Docket ## 118, 135. In the interim, Defendant Priester filed an opposition to the Individual Plaintiffs' submissions in support of their requested damages. Docket # 122, On July 31, 2012, Judge Oetken denied the motions to vacate the default judgment. Docket # 142. On August 6, 2012, the Court granted all other Defendants until September 4, 2012, to serve and file affidavits in opposition to the Seifts Plaintiffs' and the Individual Plaintiffs' requests for damages. Docket # 144. None of the other Defendants has filed any submission in opposition to the requests for damages.

Upon review, the Court found that the submissions from the Seifts Plaintiffs and the Individual Plaintiffs in support of their

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requested damages were deficient, and on July 24, 2013, the undersigned issued an Order (the " July 24 Order" ), stating:

[F]or each claim upon which either the Seifts Plaintiffs or the Individual Plaintiffs, or both, seek relief, those Plaintiffs shall. . . provide the Court with legal authority which states the elements of the claim, and then shall show how the facts deemed admitted in the First Amended Complaint satisfy those elements.

In addition, neither the Seifts Plaintiffs nor the Individual Plaintiffs have provided any legal support whatsoever for the amount and type of damages being sought. Accordingly, with respect to the damages being sought on each claim for which either the Seifts Plaintiffs or the Individual Plaintiffs, or both, intend to establish liability, those Plaintiffs shall provide legal authority, i.e., citations to case law, in support of the damages being sought and the manner of calculating damages. In other words, all Plaintiffs should link their proposed damages figures to their established legal claims.

Docket # 147 at 5 (footnote omitted). The Individual Plaintiffs filed their supplemental submissions on September 20, 2013, Docket ## 156-62. The Seifts Plaintiffs have filed nothing in response to the Court's July 24 Order.

For the reasons that follow, 1 conclude, and respectfully recommend that Your Honor should conclude, that a judgment should be entered awarding damages as set forth below.

BACKGROUND[4]

Individual plaintiff Jeffrey C. Seifts (" J. Seifts" ) is the owner of corporate plaintiffs J.C. Seifts and Co., Inc. and Consumer Advocates Group, Ltd. (" CAG" ). All of the other individual plaintiffs -- Ellen Manfredo, Charles Hargreaves, Selma Denmark, Peter Audet, Carolyn Demichelle, Susan E. Hoyt, Maryann Pulvirenti, Joseph French, Linford Snyder, Diane Berman, John Bastone, and John Gerson (the " Individual Plaintiffs" ) -- were members of CAG. Both J. Seifts and the Individual Plaintiffs enrolled in a medical insurance plan, FleetCare CU 1000P Medical Program (" FleetCare Plan" ), and paid premiums, in exchange for which they expected to receive health care benefits. However, Plaintiffs were unlawfully denied benefits by the Defendants.

The history of these claims is as follows:

In the late summer or early fall of 2004, J. Seifts, on behalf of CAG, contacted Defendant FleetCare Group LLC (" FleetCare Group" or " FleetCare LLC" ) regarding the purchase of health insurance coverage for an association. J. Seifts wanted to find coverage for CAG members that would provide medical indemnity coverage and hospitalization coverage, i.e., coverage for office visits, laboratory testing services, doctors' services, hospital professional services, and related ancillary medical services, at a reasonable premium. J. Seifts had several telephone conversations as well as in-person meetings with individual defendants Bart Posey and Obed Kirkpatrick, who were acting as agents of FleetCare Group, and came to an agreement with respect to an insurance plan for CAG members. Final agreement on all material terms of the FleetCare Plan was reached on October 15, 2004. The Individual Plaintiffs, who decided to participate in the FleetCare Plan, filled out application forms and tendered premium payments. The effective start date of

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the FleetCare Plan was November 1, 2004.

During November and December, 2004, eligible claims for health care benefits were not paid or were paid in error. When the Individual Plaintiffs' medical claims were not paid, the Individual Plaintiffs received collection notices from their health care providers and were unable to obtain the medical care that they needed. Plaintiffs contacted Defendants to try to correct the situation, but claims payment problems persisted. When prompted by J. Seifts to pay outstanding medical claims, Defendant Consumer Health Solutions LLC d/b/a Palmetto Administrators, the third-party administrator for the FleetCare Plan, issued several checks to health care providers, but they were all returned for insufficient funds. In late spring or early summer of 2005, some Defendants began telling CAG members and health care providers seeking payment that the FleetCare Plan was self-funded, knowing that such statements were incorrect and misleading, in order to divert attention from their failure to pay claims and their conversion of premiums and to destroy the business relationships between and among J. Seifts, J.C. Seifts and Co., CAG, and the Individual Plaintiffs.

After a period of months, Plaintiffs realized that any further attempts to have Defendants pay their medical claims would be useless. Defendants were refusing to pay the claims, were ignoring the claims, and were using the premium payments for purposes other than the provision of medical benefits to FleetCare Plan participants.

On November 3, 2005, Plaintiffs commenced this action. Docket # 1. On March 10, 2006, Plaintiffs filed a First Amended Complaint. Docket # 17. The First Amended Complaint contains 14 claims asserted against all Defendants, unless otherwise noted: violation of ERISA, 29 U.S.C. § § 406[5] & 1132, resulting from Defendants' breach of fiduciary duty in failing to pay Plaintiffs' benefits claims (against all Defendants except TIG); conversion (of Plaintiffs' premiums); negligence and negligent misrepresentation; quantum meruit; fraud and intentional misrepresentation; breach of contract; tortious interference with business relations of J. Seifts, J.C. Seifts and Co., and CAG (against all Defendants except TIG); unjust enrichment; breach of implied contract; breach of the covenant of good faith and fair dealing (against all Defendants except TIG); breach of common law fiduciary duty (against all Defendants except TIG); intentional infliction of emotional distress (against all Defendants except TIG); violation of New York Insurance Law § 3224-a, the " prompt pay" law; and violation of New York General Business Law § 349.

As noted above, on May 6, 2011, a default judgment was entered in favor of the Individual Plaintiffs, Docket # 80, and on March 15, 2012, a default judgment was entered in ...


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