CHS/Community Health Systems, Inc. v. Ledford et al
Filing
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MEMORANDUM OPINION OF THE COURT. Signed by Chief Judge Kevin H. Sharp on 8/29/2016. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jw)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
CHS/COMMUNITY HEALTH
SYSTEMS, INC.,
Plaintiff,
v.
WILLIA LEDFORD,
Defendant.
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Case No. 3:16-cv-00387
Judge Sharp
MEMORANDUM
Plaintiff CHS/Community Health Systems, Inc. (“CHS”) brings an ERISA claim under
29 U.S.C. § 1132(a)(3) against Defendant Willia Ledford. The Verified Complaint, (Docket No.
1), alleges that Defendant violated the terms of the Community Health Systems Group Health
Plan1 (“Plan”) by failing to cooperate with CHS to protect CHS’s rights and reimburse CHS to
the extent of benefits paid out in the amount that Defendant received.
Defendant has filed a Motion to Dismiss for failure to state a claim pursuant to Federal
Rule of Civil Procedure 12(b)(6). (Docket No. 22). Plaintiff has filed a Response in Opposition,
(Docket No. 31), to which Defendant has replied, (Docket No. 32). For the reasons set forth
below, the Court will deny Defendant’s Motion.
BACKGROUND
The facts, as alleged in the Complaint, are as follows:
Plaintiff is the Sponsor and Administrator of the Plan, which is self-funded and covered
by ERISA. (Docket No. 1 at 1, ¶ 2). Defendant was injured in a slip-and-fall accident at a
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This document refers to the 2014 Community Health Systems Group Health Plan Summary Plan
Description HCR (“SPD”), which is the only plan document before this Court.
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Marriott Hotel in New York City on July 14, 2014. (Id. at 2, ¶ 10). Plaintiff paid medical
benefits on Defendant’s behalf in the amount of $22,795.36. (Id. at 2, ¶ 11). Defendant settled
her claims arising out of the accident for at least $400,000. (Id. at 4, ¶ 13). Plaintiff requested
that Defendant reimburse it in the amount of $22,795.36 pursuant to the terms of the SPD, but
Defendant refused. (Id. at 5, ¶ 14).
This suit followed.
LEGAL STANDARD
In deciding a motion to dismiss under Rule 12(b)(6), the Court will “construe the
complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all
reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th
Cir. 2007) (citation omitted); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002) (citation
omitted). “The factual allegations in the complaint need to be sufficient to give notice to the
defendant as to what claims are alleged, and the plaintiff must plead ‘sufficient factual matter’ to
render the legal claim plausible, i.e., more than merely possible.” Fritz v. Charter Township of
Comstock, 592 F.3d 718, 722 (6th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). “However, ‘a legal conclusion couched as a factual allegation’ need not be accepted as
true on a motion to dismiss, nor are recitations of the elements of a cause of action sufficient.”
Fritz, 592 F.3d at 722 (quoting Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir.
2009)). Further, in determining whether a complaint sets forth a plausible claim, a court not only
may consider the allegations, but “may also consider other materials that are integral to the
complaint, are public records, or are otherwise appropriate for the taking of judicial notice.” Ley
v. Visteon Corp., 543 F.3d 801, 805 (6th Cir. 2008) (internal quotation marks omitted) (quoting
Wyser–Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir. 2005)).
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ANALYSIS
Defendant raises two arguments to support her Motion to Dismiss. She argues that
Plaintiff has no right to reimbursement because the SPD Plaintiff provided is not legally binding
or part of the benefit plan. Defendant also argues that, even if the SPD is legally binding,
Plaintiff does not have a claim for reimbursement because Plaintiff has not fulfilled the
conditions that give rise to a reimbursement claim.
I.
Plaintiff’s Reimbursement Claim is Not Barred Because the SPD is Legally
Binding
Defendant argues that Plaintiff’s reimbursement claim must fail because it is premised
upon provisions in the SPD, which is not legally binding. In essence, Defendant argues that
Plaintiff cannot rely on the SPD to grant it a reimbursement right; Plaintiff should have
produced, instead, an actual plan document. (Docket No. 23 at 11-12; Docket No. 32 at 4-5).
In response to Defendant’s argument, Plaintiff contends that the SPD is legally binding
by highlighting its introduction. (Docket No. 31 at 2 n.2). The introduction states in pertinent
part that “[t]his document serves as a written plan document and summary plan description
(‘SPD’) of the Community Health Systems Group Health Plan (the ‘Plan’) with respect to certain
benefit packages provided under the Plan.” (Docket No. 1-3 at 6).
Defendant’s argument would be availing only if an SPD cannot be a legally binding
document under any circumstances. However, that is not the case.
In keeping with the Supreme Court’s decision in CIGNA Corp. v. Amara, the Sixth
Circuit has recognized “that SPDs are not ‘legally binding,’ ‘nor “parts” of benefit plans
themselves.’” Engleson v. Unum Life Ins. Co. of Am., 723 F.3d 611, 620 (6th Cir. 2013) (citing
Moore v. Menasha Corp., 690 F.3d 444, 455–56 (6th Cir. 2012) (citing Amara, 131 S.Ct. 1866,
1877–78). However, in Board of Trustees v. Moore, the Sixth Circuit provided a circumstance
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in which an SPD can be legally binding. 800 F.3d 214, 220 (6th Cir. 2015). In Moore, the court
noted that the decision in Amara turned on the fact that there existed two documents – the SPD
and the plan itself – with conflicting terms. 800 F.3d at 219-20 (construing Amara to say that “if
the language in a SPD conflicts with the language in an ERISA plan, a district court is required
to enforce ‘the terms of the plan’”). But, the Moore court recognized that a single document
could serve as both the SPD and the plan itself. Id. at 220 (“Nothing in Amara prevents a
document from functioning both as the ERISA plan and as the SPD, if the terms of the plan so
provide”) (italics in the original). In Moore, no separate plan document existed at all, and the
Sixth Circuit accepted the assertion that the SPD had been adopted as the plan document. Id. at
219. The court also suggested that an SPD could form part of the plan, creating enforceable
rights, where a plan document expressly incorporates the SPD. Id. at 220.
Here, Plaintiff proffers an SPD that calls itself both the SPD and plan document. (Docket
No. 1-3 at 6). Plaintiff contends that the SPD “therefore serves as both the master plan document
and summary plan description, similar to the circumstances presented in Board of Trustees v.
Moore, 800 F.3d 214 (6th Cir. 2015).” (Docket No. 31 at 2 n.2). Thus far, Plaintiff has offered
no other plan documents. (Docket No. 23 at 11). It is not clear whether another plan document
exists or, if it does, whether it expressly incorporates the SPD. However, because Plaintiff
alleges that the SPD serves as both the SPD and plan document itself, this Court – drawing all
reasonable inferences in favor of Plaintiff at this stage – accepts Plaintiff’s allegation that the
SPD is legally binding. For that reason, Plaintiff’s reimbursement claim does not fail for being
premised on provisions in the SPD.
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II.
Plaintiff Has Stated a Claim for Reimbursement Under the SPD
This Court now turns to Defendant’s argument that Plaintiff does not have a claim for
reimbursement because Plaintiff has not fulfilled the conditions that give rise to a claim for
reimbursement. Defendant points to a provision in the SPD entitled “Acts of Third Parties” as
governing Plaintiff’s reimbursement claim. (Docket No. 23 at 2). It states:
Acts of Third Parties
Medical Care benefits are not payable to or for a person covered under the Plan
when the Injury or Illness to the Covered Person occurs through the act or
omission of another person. However, the Plan may elect to advance payment for
Medical Care expenses incurred for an Injury or Illness in which a third party may
be liable. For this to happen, the Covered Person may be required to sign an
agreement with the Plan to pay in full any sums advanced to cover such expenses
from the judgment or settlement he or she receives which are identified as
amounts paid for Medical Care expenses.
(Docket No. 1-3 at 66) (emphasis added). In light of that provision, Defendant contends that, in
order for Plaintiff to have a right to be reimbursed for the benefits it paid out to Defendant,
Plaintiff must have executed a separate agreement with Defendant to reimburse the plan and any
judgment or settlement Defendant received must have identified some portion of it as amounts
paid for medical expenses. (Docket No. 23 at 2). Because Plaintiff did not execute a separate
agreement and no portion of Defendant’s settlement was designated as compensation for medical
expenses, Defendant asserts that Plaintiff has no claim. (Id. at 2-3).
Plaintiff says a different section of the SPD governs its right to reimbursement. (Docket
No. 31 at 4-5). That section is entitled “How does the Plan process Subrogation Claims, its
Right of Reimbursement, and its Right of Offset? What are the Plan’s rights in your recovery
from a third party?” (hereinafter “Subrogation and Reimbursement provision”). (Docket No. 1-3
at 47). Some terms Plaintiff points to in that section are:
A third party (including an insurer or other employee benefit plan) may be liable
for, legally responsible for, and/or may pay for expenses incurred by a Covered
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Person for an Illness, a sickness, or a bodily Injury. Benefits may also be payable
or paid under this Plan for such expenses. When this happens, the Plan
Administrator may, at its option: . . . In addition, recover from the Covered Person
any benefits paid under the Plan that the Covered Person is or may be entitled to
receive from the third party (or any insurer or other employee benefit plan)
(“Right of Reimbursement”) first regardless of whether any recovery is
characterized as a recovery for medical, dental, or vision expenses or otherwise.
(Id. at 47-48) (emphasis added).
A. This Court does, without deciding it must, a de novo review to determine the
provision of the SPD that governs Plaintiff’s right to reimbursement
The parties disagree about the standard of review this Court should use to decide which
provision of the SPD governs Plaintiff’s right to reimbursement. Defendant argues that this
Court should review the provisions at issue de novo, not giving deference to Plaintiff’s reading of
the SPD.
(Docket No. 23 at 9).
Plaintiff contends that this Court should defer to its
Administrative Committee’s reasonable interpretation of the SPD, which is that the Subrogation
and Reimbursement provision controls in reimbursement disputes. (Docket No. 31 at 4-5). This
Court need not decide whether Plaintiff’s Administrative Committee’s interpretation should get
deference because, even under the stricter de novo standard of review, this Court finds that the
Subrogation and Reimbursement provision governs Plaintiff’s right to reimbursement.
B. Plaintiff has stated a claim for relief under 29 U.S.C. § 1132(a)(3)
29 U.S.C. § 1132(a)(3) provides in part that a fiduciary, which Plaintiff is, (Docket No. 1
at 1, ¶ 2), may bring a civil action to obtain appropriate equitable relief to enforce the terms of
the plan. Therefore, whether Plaintiff has stated a claim for relief under 29 U.S.C. § 1132(a)(3)
depends on the terms of the SPD with respect to Plaintiff’s right to reimbursement.
When a plan is governed by ERISA, federal courts apply federal common law rules of
contract interpretation to interpret plan provisions. U. Hospitals of Cleveland v. S. Lorain
Merchants Ass'n Health & Welfare Benefit Plan & Trust, 441 F.3d 430, 437 (6th Cir. 2006)
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(quoting Perez v. Aetna Life Insurance Co., 150 F.3d 550, 556 (6th Cir. 1998)). “The federal
common law as expressed by other circuits requires that the terms of an ERISA plan be
interpreted in an ordinary and popular sense, and that any ambiguities in the language of the plan
be construed strictly against the drafter of the plan.” Regents of U. of Michigan v. Employees of
Agency Rent-A-Car Hosp. Ass'n, 122 F.3d 336, 339–40 (6th Cir. 1997) (citing Phillips v.
Lincoln Nat'l Life Ins. Co., 978 F.2d 302, 307–08 (7th Cir. 1992)). “Courts must give effect to
all words, phrases, and clauses in interpreting a contract, avoiding interpretations that would
render any part of the contract surplusage or nugatory.” Tabernacle-The New Testament Church
v. State Farm Fire & Cas. Co., No. 14–2160, 616 F. App'x. 802, at *808 (6th Cir. June 22, 2015)
(citing Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459, 663 N.W.2d 447, 453 (2003)).
Under a de novo review, this Court finds that the terms of the SPD do not premise
Plaintiff’s right to reimbursement on the execution of a separate agreement with Defendant and
the designation of a portion of settlement funds as medical care expenses. Defendant argues that
this Court’s reading of the SPD must give effect to the language in the “Acts of Third Parties”
section by requiring a separate agreement lest the Court render that section meaningless.
(Docket No. 23 at 3). Defendant contends that Plaintiff does not have an automatic right to
reimbursement not limited only to portions of a recovery identified for medical expenses. (Id.).
It is illogical for Plaintiff to have reserved the option to execute a separate agreement if the right
to reimbursement is automatic and unlimited, Defendant reasons.
(Docket No. 32 at 2).
Defendant also points to terms2 under the Subrogation and Reimbursement provision as
anticipating the execution of a separate agreement. (Docket No. 23 at 9). Finally, Defendant
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“The Covered Person must cooperate fully with the Plan Administrator in asserting the Plan’s Right of
Reimbursement, sign and return to the Plan Administrator any documents requested by the Plan
Administrator in order to enforce the Plan’s Right of Reimbursement . . . .” (Docket No. 1-3 at 48)
(emphasis added).
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argues that because language under the “Acts of Third Parties”3 conflicts with language under
the Subrogation and Reimbursement provision4, this Court must construe the SPD’s language
against Plaintiff as the drafter. (Id. at 8; Docket No. 32 at 2-4). Even if no separate agreement
were required, Plaintiff could be reimbursed only for amounts identified as medical expenses in
Defendant’s settlement. (Docket No. 32 at 2-4). Because there was no separate agreement and
no portion of Defendant’s settlement was designated as medical expenses, Defendant argues that
Plaintiff has no right to reimbursement. (Docket No. 23 at 2-3).
This Court interprets the SPD more simply than Defendant does. The Court does not
read the “Acts of Third Parties” and the Subrogation and Reimbursement provision as being in
conflict. The Sixth Circuit recognizes the use of the word “may” as optional. See Smith v.
Aegon Companies Pension Plan, 769 F.3d 922, 932 (6th Cir. 2014) (“ERISA's venue provision is
permissive: suit ‘may be brought’ in one of several districts.”); see also Dorris v. Absher, 179
F.3d 420, 429 (6th Cir. 1999) (citations omitted) (“The use of the term ‘may’ in a statute is
generally construed as permissive rather than as mandatory.”). The “Acts of Third Parties”
plainly says that Plaintiff may require Defendant to sign an agreement. (Docket No. 1-3 at 66).
In other words, Plaintiff was at liberty not to execute a separate agreement with Defendant.
Because the language about settlement amounts identified as medical care expenses comes in as
a term of the optional separate agreement, a portion of Defendant’s settlement need not have
been designated as medical care expenses in order for Plaintiff to have a right to reimbursement.
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“[T]he Covered Person may be required to sign an agreement with the Plan to pay in full any sums
advanced to cover such expenses from the judgment or settlement he or she receives which are identified
as amounts paid for Medical Care expenses.” (Docket No. 1-3 at 66) (emphasis added).
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“In addition, recover from the Covered Person any benefits paid under the Plan that the Covered Person
is or may be entitled to receive from the third party (or any insurer or other employee benefit plan)
(“Right of Reimbursement”) first regardless of whether any recovery is characterized as a recovery for
medical, dental, or vision expenses or otherwise.” (Docket No. 1-3 at 48) (emphasis added).
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This Court views the inclusion of the terms Defendant highlights under “Acts of Third Parties”
and the Subrogation and Reimbursement provision as an additional measure Plaintiff took to
safeguard its right to reimbursement. But those terms do not impose any requirements on
Plaintiff.
Interpreting the SPD as Defendant wishes would render some of the extensive
Subrogation and Reimbursement provision meaningless, as it states in part that Plaintiff is
entitled to get reimbursed “regardless of whether any recovery is characterized as a recovery for
medical, dental, or vision expenses or otherwise.” (Id. at 48). The interpretation this Court
adopts does not, however, render the “Acts of Third Parties” section meaningless given that that
section describes optional actions Plaintiff may take. Thus understood, the SPD requires neither
a separate agreement nor settlement funds designated as medical care expenses.
CONCLUSION
Plaintiff has sufficiently stated a claim for relief under 29 U.S.C. § 1132(a)(3).
Accordingly, this Court denies Defendant’s Motion to Dismiss, (Docket No. 22). An appropriate
order will be entered.
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KEVIN H. SHARP
UNITED STATES DISTRICT JUDGE
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