Law v. Aetna Life Insurance Company et al
Filing
54
ORDER denying 41 Aetna's Motion for Reconsideration ; granting 15 Government's Motion to Dismiss.Signed by Honorable David C. Bramlette, III on 9/26/11 (PL)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
SPENCER D. LAW
PLAINTIFF
VERSUS
CIVIL ACTION NO: 5:09-cv-116-DCB-JMR
AETNA LIFE INSURANCE COMPANY,
UNITED STATES OF AMERICA A/K/A
DEPARTMENT OF THE NAVY A/K/A
NAVAL INSTALLATIONS COMMAND,
and JOHN AND JANE DOES 1-10
DEFENDANTS
OPINION AND ORDER
This cause comes before the Court on Defendant Aetna’s Motion
for Reconsideration [docket entry no. 41] of this Court’s July 12,
2011 Order [docket entry no. 39], which concluded that the Court
possessed jurisdiction over Law’s claims against Aetna. Having
carefully
considered
the
said
Motion,
the
Responses
thereto,
applicable statutory and case law, and being otherwise fully
advised in the premises, this Court finds and orders as follows:
I. Procedural History
Because the Court recently gave an account of the facts which
underlie Plaintiff Law’s claims in its previous Order, this Court
will proceed directly to the arguments before it. The Court once
again faces the question of whether it has the authority, pursuant
to 28 U.S.C. § 1332(a), to adjudicate Law’s claims with respect to
Aetna. Aetna vigorously argues that while the Court was correct in
finding that Law’s claims against the Bureau of Navy Personnel
(“BUPERS”) sound in contract, Law lacks privity of contract with
Aetna, and therefore the only claims that can survive against it
are those that sound in tort. Aetna then contends that it is
entitled to derivative sovereign immunity with respect to Law’s
tort claims because, as the administrator of Law’s Long Term
Disability Benefits Plan (“Plan”) [docket entry no. 1, exhibit A],
it was acting on behalf of the United States.
Law,
in
response,
requests
that
the
Court
refrain
from
addressing the issue of privity, believing that any finding in that
respect would be best suited for a 12(b)(6) motion, and joins in
Aetna’s belief that at least some of his claims sound in tort.
However, he refutes Aetna’s assertion that it is entitled to
derivative immunity with respect to these claims. After carefully
considering these arguments, the Court finds no basis to alter its
previous findings that (1) Law’s claims against both Defendants
arise out of the insurance contract and (2) the Court possesses
jurisdiction over Law’s claims against Aetna.
II. Discussion
On a motion brought under Fed. R. Civ. P. 12(b)(1), which a
court must consider before any other challenge, see Moran v.
Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994), a court
must dismiss a cause for lack of subject matter jurisdiction “when
the court lacks the statutory or constitutional power to adjudicate
the case.”
Home Builders Ass’n of Miss. v. City of Madison, Miss.,
143 F.3d 1006, 1010 (5th Cir. 1998)(quoting Nowak v. Ironworkers
2
Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)).
Under
12(b)(1), the Court may consider “(1) the complaint alone; (2) the
complaint supplemented by the undisputed facts evidenced in the
record; or (3) the complaint supplemented by undisputed facts plus
the court’s resolution of disputed facts.” Lane v. Halliburton, 529
F.3d 548, 557, (5th Cir. 2008) (quoting Barrera-Montenegro v.
United States, 74 F.3d 657, 659 (5th Cir. 1996)). In that respect,
the court’s permissible inquiry is slightly broader in scope than
the familiar 12(b)(6) analysis, where the court may only consider
the documents either attached to or incorporated in the complaint.
Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir.
1996).
Further,
the
court
must
accept
as
true
all
material
allegations in the complaint, as well as any reasonable inferences
to be drawn from them,
Kaiser Aluminum & Chem. Sales, Inc., v.
Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982), and
must review those facts in a light most favorable to the plaintiff.
Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir. 1995);
Garrett v. Commonwealth Mortgage Corp. of Am., 938 F.2d 591, 593
(5th Cir. 1991).
1. Whether Law can maintain an action against Aetna arising
under the Long Term Disability Plan
In its earlier order, this Court determined that Law’s claims
against BUPERS were not properly before this Court. For purposes of
determining
whether
the
Tucker
Act,
and
its
jurisdictional
requirements, controlled Law’s action against BUPERS, the Court had
3
to decide if Laws’s claims sounded in contract or tort. The Court
held that Law’s action primarily sounded in contract and ruled
that, pursuant to the Tucker Act, the Court of Federal Claims
possessed jurisdiction over all Law’s claims against BUPERS.
It further rejected Aetna’s contention that it was entitled to
derivative immunity under the Tucker Act. Specifically, it found
that the cases cited in support of Aetna’s position arose under the
Federal Tort Claims Act and stated that, given that “all of Law’s
claims arise out of the insurance contract,” the Federal Tort
Claims
Act
was
inapplicable
and
Aetna
was
not
entitled
to
derivative immunity. Picking up on the Court’s language, Aetna now
argues that if Law’s claims are primarily contractual--which it
contends they are not--then Law cannot maintain a suit against it
because Law is not in privity with Aetna. The bases for Aetna’s
contention appear to be Law’s failure to affirmatively allege that
he had formed a contract with Aetna and the disclaimer contained in
the services contract (“Services Agreement”) between Aetna and
BUPERS
that
there
are
no
third
party
beneficiaries
to
the
Agreement. See Services Agreement § 20.1
1
Aetna finds significance in the facts that (1) Law did not
specifically allege that he had formed a contract with Aetna in the
Complaint and (2) Law indicated in his latest memorandum that he
anticipates amending his Complaint to include a third party
beneficiary claim. In his Complaint, however, Law clearly alleged
that both Defendants were responsible for a breach of contract.
Further, Law attached his Long Term Disability Plan to the
Complaint, in which Aetna was named as the Plan administrator. It
was not necessary for Law to provide a detailed legal argument in
4
At this stage in the litigation, there is little doubt that
Law has a right to pursue his claim against Aetna under the Plan.
As a Plan beneficiary, Law certainly has the right to seek benefits
under the Plan, and Aetna, as the Plan administrator, was required
to, and did, make a claim determination under the Plan. First, Law
was required to submit evidence and he did submit evidence of his
disability to Aetna, not to the United States, pursuant to his
disability Plan. See Am. Compl. at ¶ 23. Secondly, it was an Aetna
representative who reviewed and denied his disability claim.
See
id. at ¶ 24. Thirdly, it was Aetna, not the United States, that
notified the Plaintiff of its decision to deny his claim for
benefits and informed him of his right to appeal its decision--a
step that required Law to submit to Aetna further evidence to
support his claim. See id. at ¶ 25.
Finally, Aetna denied his
administrative appeal. See id. at ¶ 25.
All actions of the Parties up to this point indicate that (1)
Aetna is required to receive evidence from Law to support his
claim; (2) Aetna is responsible for making a determination of
benefits; and (3) Aetna is accountable on appeal for its previous
decisions. It seems contrary to the Parties’ previous course of
dealing for Aetna to now disclaim any obligation to defend its
decision to deny the claim now that it has reached this stage of
his Complaint in order to state a plausible claim for relief. See
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
5
the litigation.
Based on these facts alone, which are all alleged
in the Complaint, there is an adequate basis for Law to maintain
his present action against Aetna. See Halliburton, 529 F.3d at 557
(citing In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th
Cir. 2007)).
Turning to the Services Agreement between Aetna and BUPERS,
the Agreement provides more foundation for Law to maintain a suit
in this Court against Aetna.2 While the Agreement expressly states
that there are no third party beneficiaries under the Agreement, it
also contains language suggesting that Aetna is subject to an
employee’s suit for wrongful determination of benefits under the
Plan. See Services Agreement § 15. Section 15 of the Services
Agreement, entitled Defense of Claim Litigation, provides: “In the
event of a legal action involving a claim for benefits under the
Plan, Aetna U.S. Healthcare shall undertake the defense of such
suit . . . .”
In its earlier brief, the Government, the other
party to this Agreement, interpreted this provision to require
Aetna to “undertake the defense of any legal action under the plan,
provided there is no conflict between Aetna and the United States.”
See docket entry no. 16 at pg. 3. Aetna appears to have consented
to defend all legal actions involving a claim for benefits under
2
The Plan itself, which Law attached to his Complaint,
incorporates the Services Agreement by reference, informing the
employee that Aetna “will provide certain administrative services
under the Plan as outlined in the Administrative Services Contract
between Aetna and the Contractholder.” See Plan at pg. 7.
6
the Plan, including the present suit brought by Law.
Law is merely proceeding in a manner that is both consistent
with the previous actions of the Parties and, based on a reading of
the Services Agreement, permissible under the Plan. Accordingly,
the Court reaffirms its earlier finding that Law may maintain his
action against Aetna arising out of the insurance contract. Since
the Court has previously determined that the amount in controversy
under the Plan exceeds the required statutory amount and that the
Parties have diversity of citizenship, the Court finds that it
possesses jurisdiction over Law’s claim against Aetna. See 28
U.S.C. § 1332(a).
2. Whether Law’s claims against Aetna should be transferred to
the Court of Federal Claims
In its brief, Aetna states that, should the Court find that
Law’s claims against Aetna sound in contract, the prudent course of
action would be to transfer Law’s action to the Court of Federal
Claims.
In
the
July
12,
2011
Opinion,
after
considering
the
judiciousness of that course, this Court concluded that the Court
of Federal Claims does not have jurisdiction over private parties.
In reaching this decision, the Court cited Bowling v. United States
for
the
proposition
that
the
Court
of
Federal
Claims
lacked
jurisdiction over private entities. 93 Fed. Cl. 551, 555 (Ct. Fed.
Cl. 2010). Aetna challenges this conclusion, arguing that the
Court’s reliance on Bowling was inapposite, and instead offers
“case law” of its own, which it believes provides sufficient
7
authority for the Court to reconsider this holding. Yet, the one
case cited in support of its position concerns whether the Court of
Federal Claims was the proper forum for a Back Pay Act suit against
a government official acting in his official capacity. See Salla v.
Califano, 499 F. Supp. 684, 685 (N.D. Ill. 1980) (“The complaint in
this
case
names
the
Secretary
of
the
Department
of
Health,
Education and Welfare in his official capacity as defendant and it
is clear to this court that plaintiff seeks no relief from the
Secretary individually.”). Aetna hardly qualifies as a government
employee acting in an official capacity.
The fact remains that neither this Court nor Aetna has located
any precedent suggesting that Law’s claims against Aetna could be
transferred to the Court of Federal Claims. We have found no
instances where a private party, i.e., a non-government employee or
official, has appeared as a named defendant in the Court of Federal
Claims.
Therefore,
the
Court
declines
Aetna’s
invitation
to
transfer Law’s claims against it to the Court of Federal Claims.
3. Whether Aetna is entitled to derivative immunity with
respect to Law’s tort claims
Aetna’s remaining argument is that it is immune from Law’s
state law tort claims. This argument appears to be contingent on
the Court’s finding that all Law’s viable actions against Aetna
sound in tort.
Nevertheless, the Court will briefly address
whether Aetna is entitled to derivative immunity as a fiscal
intermediary
or
is
immune
from
8
suit
under
the
discretionary
function exception of the Federal Tort Claims Act (“FTCA”). 28
U.S.C. § 2680.
In
support
of
its
fiscal-intermediary
argument,
Aetna
maintains that the Court’s analysis should turn on “‘whether a
judgment against [Aetna] would implicate the federal treasury . .
. or whether the claims constitute a private cause of action
arising
out
of
tort
or
contract
for
which
[Aetna]
would
be
financially responsible.’” See docket entry no. 42 at pg. 4 (citing
cases); docket entry no. 53 at pg. 7 (citing cases) (emphasis
omitted). Aetna contends that because any judgment against it would
be drawn from federal funds, the United States is the real party in
interest
and
it
should
be
immune
from
suit
as
a
fiscal
intermediary. See Services Agreement §§ 5, 6.
However, the cases on which Aetna relies for this proposition
are factually distinguishable from the present case. For instance,
in
Shands
Teaching
Corporation,
the
Hospital
court
of
&
Clinics
appeals
Inc.
found
v.
that
a
Beech
third
Street
party
administrator was entitled to immunity from a hospital’s suit for
“declaratory judgment concerning the rights and liabilities of the
parties under implementing contracts for the state insurance plan.”
208 F.3d at 1312. Central to the court’s holding was the fact that
state law mandated that the Department of Management Services, an
entity of the state, retain “final decision-making authority over
the existence of coverage or benefits under the plan,” and the
9
plaintiff sought to circumvent that authority by suing a third
party provider. Id. at 1312.
Likewise,
the
majority
of
cases
involving
fiscal
intermediaries cited by Aetna, particularly the Medicare line of
cases, concern a plaintiff’s attempt to use a suit against a third
party to avoid pursuing his claim through the state or federally
created administrative process. See, e.g., Mantranga v. Travelers
Ins. Co., 563 F.2d 677 (5th Cir. 1977);
Kaiser v. Blue Cross of
California, 347 F.3d 1107, 1115 (9th Cir. 2003). Indeed, the
absence of a state or federal regulatory scheme governing the
determination of benefits is a factor that counsels against this
Court granting immunity to a third party. United States v. Deloitte
& Touche, 381 F.3d 438, 443 (5th Cir. 2004) (stating that the
absence of state regulations was a factor that weighed against the
finding that the state was the real party in interest).
Here, no federal administrative scheme mandates that BUPERS
retain any decision-making or interpretive authority with respect
to its insurance plan. In fact, the opposite appears to be true.
Unlike in Shands where the state retained its statutory nondelegable authority to make a final determination of claims arising
under the state implemented insurance plan, here, BUPERS appears to
have
delegated
determinations
all
of
its
regarding
authority
benefit
to
claims,
Aetna
which
to
make
includes
final
the
responsibility to defend against legal actions arising under the
10
Plan. See Services Agreement § 7 (“[BUPERS] hereby delegates to
Aetna U.S. Healthcare authority to make determinations on behalf of
[BUPERS] with respect to disability certifications and benefit
payments under the Plan . . . .”). Because Aetna is vested with
authority to make claim determinations, the Court finds that Law is
not using his lawsuit against Aetna to impermissibly circumvent
already established procedures for pursing his claim.
Further, the Court finds that this inquiry would ultimately
weigh against granting immunity to Aetna since BUPERS’s liability
is limited by the terms of the Services Agreement. Law’s state law
tort claims against Aetna appear to fall squarely within the
parameters of the contract between BUPERS and AETNA. In Section 12
of the Services Agreement, BUPERS has agreed to “pay the amount of
Plan benefits included in any judgment or settlement in [a suit
involving a claim for benefits under the Plan], but shall not be
liable for any other part of such judgment or settlement, including
but not limited to legal expenses and punitive damages, except to
the extent provided in Section 13 below.”3 While the Court will
permit the Parties to make arguments concerning the scope and
effect of this provision,4 because the Parties agreed in advance on
3
Section 13, labeled Indemnification, requires BUPERS to
indemnify and defend Aetna for “all claims, actions, expenses, and
liabilities related to or arising from the Service Agreement or the
Services in any way.”
4
The Court recognizes there is some dispute on how to
interpret Sections 12 and 13 of the Services Agreement. But it is
11
how they will apportion liability in a suit arising under the Plan,
Law’s suit against Aetna cannot implicate federal funds beyond the
amount
to
which
the
United
States
has
already
consented.
Accordingly, the Court finds that Aetna does not quality for
derivative sovereign immunity as a fiscal intermediary.
Lastly, Aetna incorrectly asserts that it is immune from suit
under the FTCA because it was performing a discretionary act on
behalf of the government. See 28 U.S.C.A. § 2680. The discretionary
function exception of the FTCA, however, only applies to suits
against the federal government, its employees, and agents--not
independent contractors. See 28 U.S.C. § 2671 (“[T]he term ‘Federal
Agency’ . . . does not include any contractor with the United
States.”). The Supreme Court has stated that “[the] critical
element in distinguishing an agency from a contractor is the power
of
the
Federal
Government
‘to
control
the
detailed
physical
performance of the contractor.’” See United States v. Orleans, 425
U.S. 807, 814 (1976)(quoting Logue v. United States, 412 U.S. 521,
528 (1973)).
As stated in the facts above, BUPERS conferred its authority
to Aetna to decide whether benefits are payable under the Plan.
Further, while not dispositive of the issue, the Court notes that
Section 16 of the Services Agreement defines Aetna’s relationship
unnecessary, at this point in the litigation, for the Court to
resolve this dispute.
12
with BUPERS primarily as an independent contractor, not an agent.
The Agreement states: “It is understood and agreed that Aetna U.S.
Healthcare is an agent only with respect to the issuance of claim
payments and an independent contractor with respect to all other
Services being performed pursuant to the Services Agreement.”
Services Agreement § 16. This cause of action arises from Aetna’s
performance of its obligation to determine whether benefits were
payable under the plan, not the issuance of payments, and thus,
according
to
the
Services
Agreement,
Aetna
was
acting
as
an
independent contractor with respect to its final determination of
Law’s claim.5
The fact that BUPERS delegated its authority for making
benefit determinations to an independent company that specializes
in insurance plans and the contract between the Parties defined
Aetna’s relationship to BUPERS as an independent contractor, the
Court finds that Aetna was acting as an independent contractor.
Therefore, because independent contractors do not fall within the
5
Aetna argues that interpreting the phrase “issuance of
payments” to mean the actual act of distributing funds is hyperliteral. This Court disagrees. Such a reading is both literal and
consistent with the rest of the Services Agreement. See American
Heritage Dictionary 680 (Second College ed. 1991)(defining issuance
as: An act of issuing; issue; and issue as: An act or instance of
flowing, passing, or giving out; an act of circulating
distributing, or publishing by an official group.); see also
Service Agreement § 5 (“[BUPERS], by execution of this Services
Agreement, expressly authorizes Aetna U.S. Healthcare to issue and
accept such checks on behalf of [BUPERS] for the purpose of payment
of Plan Benefits . . . .” (emphasis added)).
13
scope of protection afforded the government and its agents under
the FTCA, it unnecessary to determine whether the underlying act
Aetna was performing was discretionary.
There is no question that
Aetna is not entitled to immunity from Law’s state tort law claims
under the FTCA.
III. Conclusion
This Court has already concluded that Law’s claims against
BUPERS may be transferred to the Court of Federal Claims.
28
U.S.C. § 1631 (“Whenever a civil action is filed in a court ... and
that court finds that there is a want of jurisdiction, the court
shall, if it is in the interest of justice, transfer such action
... to any other court in which the action or appeal could have
been brought at the time it was filed.”); Awad, 2001 WL 741638 at
*8
(transferring
claims
governed
by
the
Tucker
Act
from
the
Northern District of Mississippi to the Court of Federal Claims).
Moreover, the Court again finds that this entire matter cannot be
transferred to the Court of Federal Claims because that Court does
not have jurisdiction over Law’s claims against Aetna.
In its July 12, 2011 Order, the Court gave Law ten (10) days
from the date of entry of that Order to indicate to the Court if he
would prefer that his claims against the United States be severed
and transferred to the Court of Federal Claims or dismissed without
prejudice. The Court also allotted ten (10) days for the Defendants
to present their positions on these potential courses of action.
14
Pursuant to that Order, Law has represented to the Court that he
prefers it to dismiss his actions against the United States without
prejudice for re-filing in the proper court. The Court deems Aetna
to have presented its position on this issue in its Motion for
Reconsideration, and it has heard nothing from the United States.
Accordingly, pursuant to Law’s earlier representation to this
Court, the Court will dismiss Law’s claims against the United
States without prejudice, permitting Law to re-file his claims
against the United States in the Court of Federal Claims if he so
chooses.
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendant Aetna’s Motion for
Reconsideration [docket entry no. 41] is DENIED.
IT IS FURTHER ORDERED that the United States’ Motion to
Dismiss [docket entry no. 15] is GRANTED. The Plaintiff’s claims
against the United States shall be dismissed without prejudice.
SO ORDERED, this the 26th day of September, 2011.
/s/ David Bramlette
UNITED STATES DISTRICT JUDGE
15
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