Pachaly v. Benefits Administration Committee Unilever United States Inc. et al

Filing 66

ORDER granting 33 Motion to Dismiss. Signed by Judge Robert N. Chatigny on 1/16/13. (Gillenwater, J)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
FREDERICK PACHALY,

:

Plaintiff,

:

V.

:

BENEFITS ADMINISTRATION
COMMITTEE UNILEVER UNITED
STATES INC. et al.,

:
:
:

Defendants.

Case No. 3:11cv156 (RNC)

:

RULING AND ORDER
The plaintiff, Frederick Pachaly, brings this action
against the defendants, the Unicare Benefits of Choice
Program ("the Plan") and Benefits Administration Committee
Unilever United States Inc. ("Unilever"), under the Medicare
Secondary Payer Statute ("MSP"), 42 U.S.C. § 1395y, and the
Employee Retirement Income Security Act ("ERISA"), 29 U.S.C.
§ 1132.

He seeks to enjoin Unilever from discontinuing his

benefits under the Plan.

Pending is the defendants' motion

pursuant to Federal Rule of Civil Procedure 12(b)(6) to
dismiss the complaint for failure to state a claim on which
relief may be granted (Doc. 33).

With regard to the MSP

claim, the defendants' argue principally that the private
right of action authorized by the statute is limited to
claims for damages and cannot be invoked unless a primary

1

insurer has improperly denied a claim resulting in payment
of the claim by Medicare, which has not occurred here.

I

agree with the defendants' argument that the MSP does not
authorize the plaintiff's claim for injunctive relief and
find it unnecessary to rule on the defendants' other
arguments regarding the MSP claim, which are less clear-cut.
With regard to the ERISA claim, the defendants' main
argument is that the plaintiff has not pleaded the essential
elements of a claim of promissory estoppel. I agree with
this argument as well.

Accordingly, the defendants' motion

to dismiss is granted.
I.

Background
The plaintiff began working for Elizabeth Arden, a

wholly owned subsidiary of Unilever, in 1993.

In 1996, he

became ill and began receiving long term disability ("LTD")
benefits under Unilever's Plan.

Pursuant to the terms of

the Plan,1 he was entitled to receive health, dental and
life insurance benefits as long as he was eligible for LTD
coverage and paid the required premiums.2

The Plan also

1

As the Summary Plan Description ("SPD") and the Plan
are included in the same document, they are collectively
referred to as "the Plan."
2

The Plan provides that "other benefits in which
[employees] have enrolled (such as medical, dental, life,
2

provided that Unilever, as Plan administrator, could alter
or terminate benefits under the Plan at any time.
Specifically, the Plan's introductory section provides that:
[Unilever] expects to continue the Plans, but
reserves the right to change or end them at any
time . . . . [Unilever's] rights to make such
changes include, but are not limited to, the right
to discontinue at any time all benefits under any
or all of the Plans. Compl., Ex. A (Doc. 1-1) at
5.
Similarly, the Administrative Section of the Plan provides
that:
[Unilever] reserves the right to end or amend, in
any manner not prohibited by law, UNICare Plans at
any time with respect to any active, retired or
former employees. In the event of termination of
the Retirement Plan, you will become 100% vested
in your accrued benefit. If any other employee
benefit plan is terminated, you will not be vested
in any benefits or have any further rights other
AD&D) . . . may continue during [their] disability period,
provided [they] make the required contributions." Compl.,
Ex. A (Doc. 1-1) at 69. An individual is eligible for LTD
benefits under the Plan "after being totally disabled for 6
consecutive months." The Plan defines total disability as
being "prevented from doing any job for which [employees]
are reasonably qualified by training, education, or
experience" due to "illness, an accidental injury, or
disability." Although employees "need not be confined in a
hospital or at home to receive LTD plan benefits, [they]
must be under the care of a legally qualified physician or
surgeon and [they] must provide satisfactory evidence of
continuing disability upon the requests of the insurance
company." Id. at 62. It is undisputed that during the
relevant time period the plaintiff has remained eligible for
LTD benefits under the Plan's criteria and has continuously
paid the requisite premiums for health and welfare benefits.
3

than payment of a benefit for Covered Expenses or
losses you incur before the Plan is terminated.
Id. at 117.
The plaintiff received primary health coverage under
the Plan from the onset of his disability until Unilever
notified him by letter on February 17, 2010, that the Plan's
coverage had become secondary to Medicare.

The plaintiff

wrote several letters to Unilever objecting to any attempt
to treat the Plan's coverage as secondary to Medicare.
Counsel for Unilever responded by letter on March 18, 2010,
agreeing with the plaintiff that the Plan provides primary
coverage:
This serves to notify you that we have determined
that your client submitted bills totaling
$4,484.31 to United Healthcare (see attached).
These claims were pended by United Healthcare as
UHC was under the assumption that your client was
on Medicare. In fact, there were multiple letters
to your client asking for the Medicare EOB. After
reading your client’s responses- I have asked
United Healthcare today to reprocess the claims as
if United Healthcare was primary. Accordingly,
within the next few weeks your client should
expect to see these bills covered under the terms
of the Unicare Medical Plan. Compl. ¶ 15.
The plaintiff followed up with letters requesting that
Unilever provide him with a formal statement on company
letterhead confirming that the coverage provided by the Plan
is primary.

Unilever did not provide such a formal

4

statement.

On April 13, 2010, however, its counsel again

confirmed that the Plan provides primary coverage:
In response to your letter. . . , we have advised
United Healthcare that Unilever should be
considered "primary" while Mr. Pachaly is on Long
Term Disability and is not enrolled in Medicare
Part B. We have also advised United Healthcare to
reprocess Mr. Pachaly’s claims that were in pended
status with Unilever as primary. Id. at ¶ 17.
After receiving this letter, the plaintiff sought written
confirmation that the Plan would remain primary even if he
were enrolled in Medicare.

Unilever did not respond.

In October 2010, Unilever decided to discontinue the
provision of health and welfare benefits to any individual
who remained on LTD for more than thirty months following
initial receipt of benefits.

Unilever issued the plaintiff

an enrollment package informing him that his benefits would
terminate beginning in 2011, and urging him to enroll in
Medicare.

On January 10, 2011, Unilever sent the plaintiff

a letter confirming that it was terminating his health
insurance coverage under the Plan:
In order to align the UNICare Benefits of Choice
Program with federal law, Unilever will
discontinue all health and welfare benefit
coverage for participants on LTD following 30
months of receiving the benefit. You have been
receiving health and welfare benefit coverage for
at least 30 months and coverage will end as of
January 31, 2011. Due to this change, it is
5

important for you to immediately enroll in
Medicare Part B, if you have not already done so,
to ensure you have medical coverage on and after
February 1, 2011. Depending on your health needs,
you may also want to consider enrolling into a
Medicare Part D Prescription Drug Plan. Id. at ¶
21.
After receiving this letter, the plaintiff brought this
suit seeking injunctive relief preventing Unilever from
discontinuing his Plan benefits.

Unilever agreed to

maintain the status quo with regard to the plaintiff's
benefits pending a determination of whether the complaint
states a claim on which relief can be granted.

As a result,

the plaintiff's medical bills have continued to be covered
under the Plan.
II.

Discussion
In deciding a Rule 12(b)(6) motion to dismiss, well-

pleaded facts must be accepted as true and considered in the
light most favorable to the plaintiff.
F.3d 106, 111 (2d Cir. 2007).

Patane v. Clark, 508

To survive dismissal, "a

complaint must contain sufficient factual matter, accepted
as true, to 'state a claim to relief that is plausible on
its face.'"

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)).

In considering a motion to dismiss, courts may

6

consider "the facts alleged in the complaint, documents
attached to the complaint as exhibits, and documents
incorporated by reference in the complaint."

DiFolco v.

MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010).
The MSP Claim
Medicare provides health insurance benefits to people
over sixty-five with disabilities or end stage renal
disease.

42 U.S.C. § 1395c.

Before Congress passed the

MSP, Medicare served as the primary payer for all medical
treatment within its scope.

Mason v. Am. Tobacco Co., 212

F. Supp. 2d 88, 91 (E.D.N.Y. 2002) aff'd, 346 F.3d 36 (2d
Cir. 2003).

The MSP was enacted to reduce federal spending

by making Medicare's payment obligations secondary to those
of any entity contractually obliged to pay for an
individuals's primary health care.

Id.

Thus, the MSP

"makes Medicare a ‘secondary’ payer where another entity, a
‘primary payer,’ is required to pay under a ‘primary plan’
for an individual's healthcare."
(internal quotations omitted).

Mason, 346 F.3d at 38
A 'primary plan' is defined

by the MSP as "a group health plan or large group plan."
U.S.C. § 1395y.
The MSP provides that the administrators of a primary

7

42

plan "may not take into account that an individual (or the
individual's spouse) who is covered under the plan by virtue
of the individual's current employment status with an
employer is entitled to [Medicare] benefits."
1395y(b)(1)(A)(I).

42 U.S.C. §

In the event primary insurers refuse to

pay medical expenses because their insureds also are
eligible for Medicare, the MSP provides for an enforcement
mechanism through which the United States can recover
Medicare payments from the noncompliant primary insurers.
Mason, 346 F.3d at 38.

The statute provides:

In order to recover payment made under this
subchapter for an item or service, the United
States may bring an action against any or all
entities that are or were required or responsible
(directly, as an insurer or self-insurer, as a
third-party administrator, as an employer that
sponsors or contributes to a group health plan, or
large group health plan, or otherwise) to make
payment with respect to the same item or service
(or any portion thereof) under a primary plan.
42 U.S.C. § 1395y(b)(2)(B)(iii).
The MSP also authorizes a "private cause of action for
damages."

42 U.S.C. § 1395y(b)(3)(A).

Under this private

enforcement mechanism, "individuals whose medical bills are
improperly denied by insurers and instead paid by Medicare,"
can seek double damages on the government's behalf, "and the
government is subrogated to the right of the private citizen

8

for the recovery of such funds."

Woods v. Empire Health

Choice, Inc., 574 F.3d 92, 101 (2d Cir. 2009).

In other

words, "a primary plan is liable under the private cause of
action when it discriminates against planholders on the
basis of their Medicare eligibility and therefore causes
Medicare to step in and (temporarily) foot the bill."

Bio-

Med. Applications of Tennessee, Inc. v. Cent. States Se. &
Sw. Areas Health & Welfare Fund, 656 F.3d 277, 286 (6th Cir.
2011) cert. dismissed, 132 S. Ct. 1087 (U.S. 2012).
Congress enabled private parties to recover double damages
"to motivate them to bring lawsuits that, in the end,
vindicate Medicare's interests."

Id.3

The threshold issue

that must be decided here is whether the plaintiff's claim
for injunctive relief is also authorized by the statute.
Under the plain language of the statute, §
1395y(b)(3)(A), the only private cause of action it
authorizes is an action for damages.

3

As other courts have

Though enacted with the objective of incentivizing
private parties to sue to vindicate harm to the government,
MSP's private cause of action is not a qui tam provision (a
provision that grants standing to an otherwise-uninjured
plaintiff to bring a claim on behalf of the government) and
requires that the private party suffer its own harm, as
would occur if a primary plan failed to make a required
payment to or on behalf of that party. Bio-Med., 656 F.3d
at 297 n.17 (citing Woods, 574 F.3d at 100).
9

observed, the legislative history and purpose of the MSP
support a determination that such damages do not accrue
until Medicare pays for benefits that the primary insurer
has improperly failed to pay.
Bio-Med, 656 F.3d at 286-87.

See Mason, 346 F.3d at 36;
Here, the plaintiff is not

attempting to collect damages for medical bills improperly
paid by Medicare on his behalf, but instead seeks an
injunction requiring Unilever to pay for future medical
expenses.

No court has allowed a claim for injunctive

relief under § 1395y(b)(3)(A) and I am persuaded that such a
claim is not authorized by the statute.4
The ERISA Claim
ERISA § 502(a)(3), codified at 29 U.S.C. § 1132(a)(3),
provides that an action may be brought "by a participant,
beneficiary, or fiduciary [of an employee welfare benefit
plan] (A) to enjoin any act or practice which violates any
provision of this subchapter or the plan terms, or (B) to
obtain other appropriate equitable relief (i) to redress
such violations or (ii) to enforce any provisions of this
subchapter or the terms of the plan."
4

29 U.S.C. §

The government may be authorized to seek
declaratory and injunctive relief under §
1395y(b)(2)(B)(iii). See United States v. Baxter Int'l,
Inc., 345 F.3d 866, 909 (11th Cir. 2003).
10

1132(a)(3).

If benefits are contractually vested in an

employee welfare plan, they are protected under ERISA.
Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 77
(2d Cir. 1996).

The plaintiff sues under § 502(a)(3)

claiming that he is entitled to vested welfare benefits
under the doctrine of promissory estoppel.5
Promissory estoppel in ERISA cases requires the
following: (1) a promise; (2) reliance on the promise; (3)
injury caused by the reliance; (4) an injustice if the
promise is not enforced; and (5) extraordinary
circumstances.

Aramony v. United Way Replacement Benefit

Plan, 191 F.3d 140, 151 (2d Cir. 1999).

The defendants

contend that the plaintiff has failed to allege the
existence of a promise as required by the first element.
The plaintiff contends that this element is satisfied in
light of the terms of the Plan and representations Unilever
and its agents made in letters to him explaining his
benefits.6

The defendants argue that neither the terms of

5

The plaintiff previously claimed that his benefits
have contractually vested but that claim has been withdrawn.
6

For example, the plaintiff relies on a March 24, 1997
letter from Elizabeth Arden's benefits manager stating that
"if Plaintiff is approved for LTD, his UNICare benefits will
continue for the duration of his LTD period, provided [the
plaintiff] makes the required contributions." See Pl.'s
11

the Plan nor the letters provides the basis for a claim of
promissory estoppel.

I agree.

With regard to the terms of the Plan, the plaintiff
relies on the following language: "other benefits in which
you have enrolled (such as medical, dental, life, AD&D) . .
. may continue during your disability period, provided you
make the required contributions."
1) at 69.

Complaint, Ex. A (Doc. 1-

The Plan goes on to state, however, that "LTD

Plan coverage ends on the date . . . the Plan terminates."
Id.7

As mentioned earlier, the Plan also contains

reservation of rights clauses permitting Unilever to change
or terminate the Plan for any reason at any time.
117.

Id. at 5,

Viewed in light of these unambiguous provisions, the

language in the Plan stating that the plaintiff would
receive benefits so long as he paid his premiums cannot
support the plaintiff's claim.

See Robinson v. Sheet Metal

Mem. In Opp'n To Mot. To Dismiss (Doc. 38) at 22-23 and
attached Ex. A.
7

Under ERISA, an employer typically has a right to
terminate or unilaterally amend a welfare benefit plan at
any time. See Schonholz, 87 F.3d at 77. The reverse
presumption applies to disability benefits, however, which
automatically vest no later than the time the employee
becomes disabled unless the plan includes explicit language
to the contrary. Gibbs v. CIGNA Corp., 440 F.3d 571, 576
(2d Cir. 2006).
12

Workers' Nat. Pension Fund, Plan A, 441 F. Supp. 2d 405, 432
(D. Conn. 2006) aff'd in part, appeal dismissed in part, 515
F.3d 93 (2d Cir. 2008) ("Plan provisions indicating that
payments would be made 'for life' . . . when read in
conjunction with other provisions expressly reserving the
[administrator's] right to amend the Plan, did not
constitute a contractual promise. . . . A fortiori, then,
these same provisions cannot satisfy the first element of
Plaintiff's promissory estoppel claim.").
Turning to the letters, such informal communications do
not alter Unilever's obligations under the terms of the Plan
in the absence of a showing of fraud.

Moore v. Metro. Life

Ins. Co., 856 F.2d 488, 492 (2d Cir. 1988).

"Were all

communications between an employer and plan beneficiaries to
be considered along with the SPDs as establishing the terms
of a welfare plan, the plan documents and the SPDs would
establish merely a floor for an employer's future
obligations" eliminating "predictability as to the extent of
future obligations" and creating "substantial disincentives
for even offering such plans."

Id.

The complaint does not

allege facts supporting a plausible claim of fraud based on
the letters.

Thus, they do not provide the basis for a

13

promissory estoppel claim.
The complaint also fails to plead facts showing the
existence of "extraordinary circumstances."

This element

typically is found when plan administrators made a promise
about benefits to induce the insured to act.

See Robinson,

441 F. Supp. 2d at 432 (citing Schonholz, 87 F.3d at 79).
The requirement that a plaintiff prove extraordinary
circumstances serves to "lessen the danger that commonplace
communications from employer to employee will routinely be
claimed to give rise to employee's rights beyond those
contained in formal benefit plans."

Id.

There is no

allegation that Unilever made a promise to the plaintiff
concerning his benefits to induce any action on his part.
Accordingly, the plaintiff has failed to state a cognizable
claim under ERISA.8
8

The complaint can be read to allege a breach of
fiduciary duty claim under ERISA as the plaintiff claims
that Unilever acted under a conflict of interest and placed
its pecuniary interest before the interests of the plaintiff
in terminating his benefits. ERISA creates certain
fiduciary duties on the part of plan trustees and
administrators. Wilkins v. Mason Tenders Dist. Council
Pension Fund, 445 F.3d 572, 579 (2d Cir. 2006) (citing ERISA
§ 404(a)(1)(B)). In the context of amending the terms of a
welfare plan, however, plan administrators do not fall into
the category of fiduciaries. Lockheed Corp. V. Spink, 517
U.S. 882, 890 (1996). Rather, an employer's decision to
amend or terminate an ERISA plan is a settlor function,
analogous to establishing a trust, and is "immune from
14

III. Conclusion
Accordingly, the defendant's motion to dismiss (Doc.
33) is hereby granted.
So ordered this 16th day of January 2013.

/s/RNC
Robert N. Chatigny
United States Disrict Judge

ERISA's fiduciary obligations."
551 U.S. 96, 101 (2007).
15

Beck v. PACE Int'l Union,