Williams v. Endicott Clay Products et al
MEMORANDUM AND ORDER denying 15 Motion to Dismiss for Failure to State a Claim. Ordered by Judge Joseph F. Bataillon. (ADB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MEMORANDUM AND ORDER
ENDICOTT CLAY PRODUCTS CO. and
FIRST ADMINISTRATORS, INC.,
This matter is before the court on the defendants’ motion to dismiss pursuant to
Fed. R. Civ. P. 12 for lack of subject matter jurisdiction and for failure to state a claim.
Filing No. 15. This is an action for recovery of medical benefits from a welfare benefit
plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1001 et seq. The plaintiff, Michael Williams (“Williams”), filed a complaint in
federal court on February 6, 2012, stating that the failure of Endicott Clay Products and
First Administrators, Inc. (collectively, “defendants”) to pay health insurance benefits for
Williams’s pre-certified surgeries was a breach of ERISA. Filing No. 1. Defendants
argue that Williams failed to exhaust his administrative remedies, depriving the court of
subject matter jurisdiction under 12(b)(1) of the Federal Rules of Civil Procedure. Filing
No. 15. Defendants further argue that Williams’s statement in his complaint that he
exhausted administrative remedies is a legal conclusion that is not sufficient to meet
12(b)(6) of the Federal Rules of Civil Procedure. Filing No. 16. Both parties provided
additional documentation, and this court will consider the relevant materials.1
Williams asserts that this motion must be converted to summary judgment because of the
additional materials submitted by defendants. Filing No. 31. To determine whether subject matter
jurisdiction is appropriate, the court may consider documents outside the pleadings without converting the
Under the Federal Rules of Civil Procedure, a party may assert the lack of
subject-matter jurisdiction as a defense to a claim. Fed. R. Civ. P. 12(b)(1). “Because
jurisdiction is a threshold issue for the court, the district court has broader power to
decide its own right to hear the case than it has when the merits of the case are
Bellecourt v. United States, 994 F.2d 427, 430 (8th Cir. 1993) (quoting
Osborn v. U.S., 918 F.2d 724, 729 (8th Cir. 1990)). “A district court has authority to
consider matters outside the pleadings when subject matter jurisdiction is challenged
under Rule 12(b)(1).” Harris v. P.A.M. Transp., Inc., 339 F.3d 635, 637, n. 4 (8th Cir.
2003) (quoting Osborn, 918 F.2d at 728 n.4). For the court to dismiss for lack of subject
matter jurisdiction under 12(b)(1), “the complaint must be successfully challenged either
on its face or on the factual truthfulness of its averments.” Titus v. Sullivan, 4 F.3d 590,
593 (8th Cir. 1993). “In a facial challenge to jurisdiction, all of the factual allegations
regarding jurisdiction would be presumed true and the motion could succeed only if the
plaintiff had failed to allege an element necessary for subject matter jurisdiction.” Id. In
a factual attack on the jurisdictional allegations of the complaint, however, the court can
consider competent evidence such as affidavits, deposition testimony, and the like in
order to determine the factual dispute. Id. In a factual challenge, this court is “free to
weigh the evidence and satisfy itself as to the existence of its power to hear the case.”
Osborn, 918 F.2d at 730.
“No presumptive truthfulness attaches to the plaintiff's
allegations, and the existence of disputed material facts will not preclude the court from
motion to one for summary judgment. See Harris v. P.A.M. Transport, Inc., 339 F.3d 635, 637 n.4 (8th
Cir. 2003). The court will, therefore, consider the relevant materials.
evaluating for itself the merits of jurisdictional claims.” Id. The plaintiff has the burden
of proving that jurisdiction does in fact exist. Id.
Williams was an employee of Endicott Clay Products (“Endicott”). Endicott was a
sponsor and fiduciary to the ERISA benefit plan (the “Plan”) at all times material to this
claim. Filing No. 1. Defendant First Administrators, Inc., was Endicott’s duly selected
claims administrator. In May 2010, Williams’s doctors determined that Williams needed
multiple surgeries for spinal fusions, insertion of a spine fixation device, and insertion of
a spine prosthetic device. They contacted defendants’ agent, Care Allies, for precertification of the surgeries under the Plan. Filing No. 1. Prior to surgery, Williams’s
medical care providers contacted the workers’ compensation carrier and confirmed that
workers’ compensation was denied. Filing No. 1, ¶ 15.
Williams confirmed the surgeries would not be covered by his workers’
compensation carrier, and provided that information to Endicott. Id. Prior to the events
of this ERISA case, Williams received workers’ compensation for a back injury he
incurred while working for Endicott back in 2004 and 2005. Because of this previous
history, Williams submitted a complaint to the Nebraska Workers’ Compensation Court,
apparently to preempt a claim by Endicott that the injury would be subject to workers’
compensation. Filing No. 29-2. On May 27, 2010, Endicott submitted an answer in the
workers’ compensation case, alleging that Williams’s injury did not arise in the course of
Williams’s employment. Id. On March 10, 2011, the compensation court found that
Endicott was not liable under a workers’ compensation theory. Filing No. 1 , at 3.
In the case currently before this court, Care Allies pre-certified the surgeries on
May 11, 2010. Id. at ¶ 10. On May 26, 2010, Williams had the pre-certified surgeries
and began receiving medical bills. Id. at ¶ 12. Williams’s attorney received letters from
the defendants concerning these medical bills on August 30, 2010; September 15,
2010; and December 14, 2010. Filing No. 29-1, ¶ 12.2 In April 2011, Williams’s attorney
learned that defendants were denying the claim. Id. at ¶ 14. Williams had spoken to
one of his medical providers and received this information. Filing No. 29-1. On May 11,
2011, counsel sent a letter to defendants. Id. at ¶ 15, Ex. C. Counsel indicates he
received nothing until September 7, 2011, at which time he received a letter stating the
defendants would not pay the medical bills.
Id. at ¶ 16. Williams received an
Explanation of Benefits (“EOB”) in November 2011, indicating that benefits were denied
because the injuries were work-related and, therefore, not covered by the Plan.3
A. ERISA Plan
Defendants contend that Williams failed to exhaust his administrative remedies
under the Plan. The Plan contains a review and appeal process for denied benefits. If
a claimant is denied in whole or a part of a claim, the claimant has the right to receive
review under the Plan. Filing 17-2, at pp. 50-53. The Plan states that “the request to
review a claim must be in writing and must be submitted to the address on the
Notification of Decision” and “must be submitted within 180 days following the receipt of
Defendants contend they did not receive letters from counsel. Filing No. 29-1, ¶ 16.
The defendants claim that Williams received an EOB dated August 19, 2010. Filing No. 16 at 3.
Williams and his attorneys deny receiving an EOB prior to November 2011. Filing No. 31. The court finds
that Williams’s claim that he received the EOB on November 15, 2011, is credible for purposes of this
motion. This may be a credibility issue to be determined by the trier of fact at trial.
the adverse benefit determination.” Id. The Plan further states that the claimant “may
authorize another person to represent [the claimant] and with whom [the claimant]
wants the Benefit Services Administrator to communicate regarding specific claims or
an appeal.” Id. The authorization “must be in writing, signed and dated” by the claimant
and include all information required in the Plan’s Authorized Representative Form. Id.
Defendants admit that St. Elizabeth’s Regional Medical Center submitted requests for
reprocessing the claims on November 19, 2010; a “letter of appeal” on April 6, 2011,
and a “second level appeal” on July 12, 2011.
However, defendant’s denied such
requests indicating that a claim appeal can only be requested by the member.
The appeal procedure states:
Filing an Appeal
In case of an adverse benefit determination, the claimant has the right to a
full and fair review. An adverse benefit determination is a denial, reduction
or termination of a benefit.
[T]he request to review a claim must be in writing and must be submitted
to the address on the Notification of Decision. This request must be
submitted within 180 days following the receipt of the adverse benefit
The claimant may submit written comments, documents, or other
information in support of the appeal. The participant will be provided,
upon request and free of charge, reasonable access to and copies of all
relevant records used in making the decision. The review will take into
account all information regarding the denied or reduced claim whether or
not presented or available at the initial determination.
The review will be conducted by someone other than the original decision
maker(s) and without regard to the original decision. If a decision requires
medical judgment, an appropriate medical expert who was not previously
involved in your case will be consulted. If the decision on appeal is
adverse, you may requested in writing the identity of the medical expert
who was consulted.
Filing 17-2, Ex. 1 Plan, at 50-51; Filing No. 30-3, at P. ID #186.
B. Compliance with the Appeals Process
Between November 19, 2010, and August 4, 2011, Endicott received letters from
the hospital provider, St. Elizabeth’s Regional Medical Center (“Hospital”). Filing No.
17-3., ¶ 9.
The Hospital requested reprocessing/appeal of Williams’s claims on
November 19, 2010; April 6, 2011; and July 12, 2011. Id. Williams’s attorney submitted
a letter to defendants on May 11, 2011, and resubmitted the letter on August 4, 2011.
Filing No. 29-1, ¶¶ 15-16. The May 11, 2011, letter to Endicott stated that Williams’s
injury was not a workers’ compensation injury and, therefore, should be covered by the
Filing No. 29-4.
On September 7, 2011, Endicott denied reconsideration,
claiming that Williams had not complied with the 180-day time period to file an appeal.
Filing No. 30-5. According to the letter, the 180-day time period began August 18,
2010, and ended February 15, 2011. Id. Williams argues that if the court considers
compliance with the appeals process mandatory, the letters, including the December 3,
2010, and March 1, 2011, letters sent to defendant Endicott by Williams’s counsel,
constituted an appeal. Defendants argue that neither the Hospital nor Williams’s
attorney were authorized representatives under the Plan and, therefore, could not
appeal on Williams’s behalf. Filing No. 34 at 5.
According to Williams, Endicott has argued that this is not a workers’
compensation claim and that this is not a medical claim. Such inconsistencies, argue
plaintiff, are not consistent with the purpose of the plan and show that any attempt to
appeal was futile in any event.
Subject Matter Challenge
The defendants challenge subject matter jurisdiction both on the face of the
complaint and as a factual challenge. The court finds that Williams met his burden of
showing that this court has subject matter jurisdiction.
1. Facial Attack
The defendants argue that Williams’s claim of subject matter jurisdiction fails any
facial challenge because Williams only alleges that he has exhausted all administrative
remedies. Williams, argue defendants, did not provide any factual allegations showing
that he followed the appeals process.
Filing No. 16 at 10.
Federal courts have
construed ERISA to require the claimant to exhaust contractual remedies under the
health benefits plan, and if a claimant fails to pursue and exhaust administrative
remedies under a particular ERISA plan, his or her claim for relief is barred. Chorosevic
v. MetLife Choices, 600 F.3d 934, 941 (8th Cir. 2010) (quoting Layes v. Mead Corp.,
132 F.3d 1246, 1252 (8th Cir. 1998)). However, a facial challenge to jurisdiction only
succeeds if the claimant has failed to allege an element necessary for jurisdiction. In
this case, Williams alleged that he had exhausted administrative remedies on the face
of the complaint. Williams specifically states that he “has exhausted all administrative
remedies including service of this Complaint on the Department of Labor and the
Secretary of the Treasury pursuant to ERISA section 502.” Filing No. 1, ¶ 6. Further,
plaintiff alleged “that plaintiff has complied with all internal appeals and thus all
administrative prerequisites for bringing this action have taken place.” Id. at ¶ 17. The
court finds, therefore, that Williams arguably alleged all of the elements necessary to
show that this court has jurisdiction on the face of the complaint.
2. Factual Attack
The defendants argue that this court should only consider whether Williams
followed the specific Plan language regarding the appeals procedure, and since he did
not, this court does not have subject matter jurisdiction. When considering a factual
challenge to subject matter jurisdiction, the court must not give a presumption to the
truth of Williams’s allegations; however, the court may weigh the evidence to satisfy
itself that it has jurisdiction. Osborn, 918 F.2d at 730.
Viewing all the facts as presented, Williams establishes that subject matter
jurisdiction exists in this case. First, Williams appealed under the Plan. Williams’s
attorney acted as Williams’s authorized representative, and when Williams’s attorney
filed a letter requesting a review of the denial of the benefits, Williams met the appeals
process requirements. The defendants allege that Williams did not comply with the
strict language of the Plan. However, the facts as presented to date show that the
defendants treated the attorney as a representative and the letter from Williams’s
attorney as an appeal.
Defendants corresponded directly with Williams’s attorney
concerning the medical bills under ERISA. Filing Nos. 29-1, ¶¶ 12, 13, and 16; 29-5.
Defendants received the letter from Williams’s attorney, and only denied it because
Williams’s attorney allegedly did not submit the request within 180 days of the alleged
receipt of the EOB, not for any other reason of noncompliance with the remainder of the
Plan. Filing No. 29-5. Further, this court finds that it is credible for purposes of this
motion that Williams did not receive the EOB until November 11, 2011. See Filing No.
29-1. Considering this date, the defendants inappropriately denied the appeal for failing
to meet the time period to submit, because Williams had until May 9, 2012, to file an
appeal. The letter from Williams’s attorney dated May 11, 2011, fits within this time
period. Filing No. 29-1, ¶ 15. Considering all of the facts, defendants treated the
attorney as Williams’s representative and his letter as an appeal to the benefits denial.
The court finds that Williams complied in substance with the appeals procedure of the
The second reason this court has jurisdiction is that even if Williams did not
comply with the precise letter of the appeals procedure, he has shown that compliance
with the appeals procedure would have been futile. The Eighth Circuit has recognized
that the exhaustion requirement is excused when the claimant shows that pursuing an
administrative remedy would be futile.
Angevine v. Anheuser-Busch Companies
Pension Plan, 646 F.3d 1034, 1037 (8th Cir. 2011). Williams provided information to
defendants that his claim for medical benefits would not be covered by workers’
compensation even before he applied for pre-certification for his surgeries. Filing No. 1.
Defendants do not deny that they received this information.
In an abundance of
caution, Williams alleges he even filed an action in the Nebraska Compensation Court
to determine whether his surgeries would be covered by workers’ compensation. Id.
During this action, the defendants argued that Williams’s injury was not covered by
Id. However, Williams later received notice from the
defendants that the reason for denying his ERISA benefits was because the injury was
a workers’ compensation claim. Id. The defendants were inconsistent throughout this
process, alternatively arguing that Williams was not covered by workers’ compensation
in that case, but arguing he is covered in this case. They also pre-certified Williams’s
surgeries, and then waited months to deny payment, all the while aware that the
workers’ compensation court had denied the claim. Defendants also filed an answer in
the workers’ compensation case that indicated workers’ compensation did not apply.
Further, plaintiff contends that defendants committed irregularities in the claims process
including the above as well as intentionally mischaracterizing the medical information.
Id. at ¶ 19. Plaintiff states that there is a pattern and practice of denying legitimate
claims based on alleged workers’ compensation injuries. Williams has shown through
these allegations against the defendants that any attempt to exhaust administrative
remedies would have been futile.
Williams has met the burden to show that this court has subject matter
IT IS HEREBY ORDERED that defendants’ motion to dismiss for failure to state
a claim and lack of subject matter jurisdiction, Filing No. 15, is denied.
Dated this 11th day of January, 2013.
BY THE COURT:
s/ Joseph F. Bataillon
U.S. District Court Judge
Because of the court’s finding on the subject matter claim, the motion for failure to state a claim
is moot. The issues raised with regard to the failure to state a claim are virtually identical to those made
on the subject matter jurisdiction claim.
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