De Santiago-Young et al v. Histopath, Inc. et al

Filing 63

ORDER ON MOTION TO DISMISS granting in part and denying in part 39 Motion to Dismiss.(Signed by Judge Nelva Gonzales Ramos) Parties notified.(mserpa, 2)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
CORPUS CHRISTI DIVISION
DENA K. DE SANTIAGO-YOUNG, et al, §
§
Plaintiffs,
§
VS.
§ CIVIL ACTION NO. 2:14-CV-179
§
HISTOPATH, INC., et al,
§
§
Defendants.
§
ORDER ON MOTION TO DISMISS
Pending before the Court is Defendant HistoPath, Inc.’s (HistoPath’s) “Opposition
to Plaintiffs’ Motion for Leave to Amend Complaint and Motion to Dismiss Claims”
(Motion to Dismiss, D.E. 39), in which it seeks an order: (A) dismissing Plaintiffs’
claims against the individual Defendants, Dr. Linville and Ms. Wilkins, because ERISA
does not permit actions pursuant to 29 U.S.C. § 1132(a)(2) against individuals rather than
a plan; (B) striking Plaintiffs’ claims for breach of fiduciary duty under 29 U.S.C.
§ 1132(a)(2) because such claims cannot be brought simultaneously with those under 29
U.S.C. § 1132(a)(1); and (C) in the event that the claims are not eliminated, granting
HistoPath additional time to file a responsive pleading.1 For the reasons set out below,
the motion to dismiss is GRANTED IN PART and DENIED IN PART.
A. The Plaintiffs’ Claims
In their Third Amended Complaint (D.E. 38), Plaintiffs allege that Vincent W.
Young, P.A. (Young) accepted employment with HistoPath in 2010, after negotiations
1

While HistoPath’s filing also opposed Plaintiffs’ request to amend, that portion of the filing was adjudicated by
the Court’s Order (D.E. 37), granting leave to amend and establishing a briefing procedure on the remaining motion
to dismiss.

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that included promises that he and his family would be covered by certain health benefits,
including a “Section 125 Flexible Spending Account” designed to allow him to use pretax dollars to pay for certain medical expenses. In fact, HistoPath has medical benefits
that qualify for treatment under the Employee Retirement Income Security Act (ERISA),
and Young and his family members are entitled to participate in, and receive benefits
under, those plans. The plans included major medical coverage (Blue Cross/Blue Shield
and then Humana) and HistoPath’s Medical Expense Reimbursement Plan (MERP),
which was followed by its Health Reimbursement Arrangement (HRA) for health care
expenses not covered by the major medical insurance policy.
When Young requested information on the “Flexible Spending Account” to cover
his family’s out-of-pocket health care costs not covered by major medical, he was told
that such a plan did not exist.

This issue took on monumental proportions when

HistoPath changed its health insurance coverage from Blue Cross/Blue Shield to
Humana.

At that time, the Young family’s out-of-pocket expenses for prescription

medications increased dramatically and they, again, sought information on HistoPath’s
medical reimbursement program. While Defendant Wilkins confirmed that such a plan
existed, she failed to provide the Young family with any details that would provide
effective access to that employment benefit. Instead, she suggested that the information
had already been provided to the Youngs.
As they persisted in seeking a health care expense reimbursement benefit, the
Youngs were asked repeatedly to submit duplicative or irrelevant information to multiple
points of contact and the processing of their claims—and payment thereon—was not
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forthcoming. Wilkins misrepresented the terms of the plans, leading the Youngs to
believe that their individual reimbursement amount was half of what it actually was. She
also provided the wrong information in response to their repeated requests for plan
documents and did not provide claim forms. When HistoPath changed health insurance
providers, they failed to transfer coverage for the Youngs’ son. When this matter was
turned over to counsel, HistoPath’s counsel demanded a blanket medical release before
tending to the processing of their claims—a requirement that is not a part of any plan that
the Youngs are aware of.
It was not until April 3, 2014, after Young’s wife filed a complaint with the United
States Department of Labor that HistoPath provided a single Summary Plan Description
related to the HRA. The Youngs contend that this document does not comply with
ERISA requirements, that it is confusing and incomplete, and that additional information
regarding the HRA continues to be withheld. After this lawsuit was filed, in responses to
third party discovery, the Youngs learned that HistoPath had its MERP from before
Young was employed until it was replaced by HistoPath’s HRA. Thus the Young family
had been denied health care expense reimbursement from pre-tax dollars from the time
Young began employment through the filing of suit, by being denied access to
HistoPath’s MERP and HRA.
While the Youngs have repeatedly sought reimbursement for medical expenses
incurred from 2010 to 2015, their claims have not been processed. HistoPath’s MERP
and HRA have neither paid nor denied the claims. HistoPath’s plans have not explained
the failure to process the claims but instead seek information to which the plans are not
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entitled. The Youngs now sue, having taken all necessary steps prior to litigation, having
exhausted their administrative dispute resolution and appellate rights, or being deemed to
have done so under the circumstances.
The Youngs contend that Defendants HistoPath (the plans’ Administrator and a
fiduciary), Wilkins (the plans’ Benefit Coordinator and a fiduciary), and Kenneth W.
Linville, M.D. (the plans’ Administrator and a fiduciary) intentionally withheld
information about the plans after learning that Young family members suffered from
some serious, permanent, and costly medical conditions. The Youngs complain that the
plans are not compliant with ERISA requirements and that HistoPath, Wilkins, and
Linville breached various administrative and fiduciary duties in failing and refusing to
supply necessary information so that the Youngs could obtain the benefits offered by the
plans. They also assert that Young has experienced retaliation for his efforts to enforce
his ERISA rights, including an effort to transform his employment contract into an “at
will” relationship.
The Youngs seek orders against Defendants for:
1. Equitable relief—
a. to compel production of complete information on the plans;
b. to require that Defendants bring the plans into compliance with
ERISA;
c. to clarify plan benefits and an accounting regarding the Youngs’
claims;
d. removing Wilkins and Linville as plan fiduciaries; and
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e. enjoining retaliatory conduct and reinstating Vincent Young’s
employment status, including pay raises and benefits that have been
denied because of his medical expense reimbursement or ERISA
claims;
2. Money damages—
a. for plan benefits that were improperly withheld or denied;
b. compensating for pay raises and other employment benefits,
including expense reimbursements for employment-related travel,
which have been denied to him in retaliation for his medical expense
reimbursement or ERISA claims; and
c. money damages as penalties for Defendants’ failure to comply with
ERISA requirements and for breach of fiduciary duties; along with
3. Attorney’s fees for bringing this ERISA claim.
Defendant HistoPath seeks dismissal of various claims, as discussed below.
A. Simultaneous Claims Pursuant to 29 U.S.C. § 1132(a)(1) and (3)
Under § 1132(a)(1), a plan participant may seek monetary, declaratory, and
injunctive relief to enforce his plan benefits and other rights under an ERISA-qualified
plan, including civil penalties for failure to provide information.

Such claims are

generally directed against the plan and are for the participant’s personal benefit. Under
§ 1132(a)(2), a plan participant may sue a plan fiduciary for breach of fiduciary duty
pursuant to § 1109 for plan losses caused by a fiduciary breach, seeking restitution and
removal of such fiduciaries. A claim under § 1109 is for the benefit of the plan rather
than the individual participant.

Under § 1132(a)(3), a “catch-all provision,” a plan

participant or beneficiary may obtain injunctive or other equitable relief for violation of

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the statute. The Youngs bring their breach of fiduciary duty claims against HistoPath,
Wilkins, and Linville largely under § 1132(a)(3).
HistoPath seeks dismissal of the Youngs’ claims for breach of fiduciary duty
because they are not entitled to personal relief under § 1132(a)(2) and because, as a
matter of law, they are not permitted to raise such claims under § 1132(a)(3)
simultaneously with their claims for plan benefits under § 1132(a)(1). Brown v. Aetna
Life Ins. Co., 975 F. Supp. 2d 610, 622-23 (W.D. Tex. 2013). As the Fifth Circuit has
noted, the Supreme Court has read § 1132(a) as setting out alternative bases for relief,
with eligibility for relief under § 1132(a)(3) predicated on the absence of available relief
under § 1132(a)(1). Tolson v. Avondale Industries, Inc., 141 F.3d 604, 610 (5th Cir.
1998) (citing Varity Corp. v. Howe, 516 U.S. 489 (1996)).
In Varity, the plaintiffs were no longer members of the ERISA-qualified plan and
were suing their employer as the plan administrator for tricking them into withdrawing
from the plan. They were permitted to proceed under (a)(3) because they did not have
participant status under (a)(1) and were not suing on behalf of the plan under (a)(2). The
Youngs argue that they should be able to state their (a)(3) claims as alternative claims
that are eliminated only if they are successful on their (a)(1) claim, citing three cases:
Curcio v. John Hancock Mutual Life. Ins. Co., 33 F.3d 226, 228 (3d Cir. 1994); Jones v.
American General Life & Accident Ins. Co., 370 F.3d 1065, 1074 (11th Cir. 2004); and
Parente v. Bell Atlantic Pennsylvania, Civ. A. 99-5478, 2000 WL 419981, *3 (E.D. Pa.
Apr. 18, 2000).

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These cases do not help the Youngs. Curcio preceded the Varity decision and is
thus unpersuasive. See, Roig v. Ltd. Long Term Disability Program, No. Civ. A. 992460, 2000 WL 1146522, *9 (E.D. La. Aug. 4, 2000) (acknowledging Curcio and
refusing to allow simultaneous claims under § 1132(a)(1) and (3) under Varity), aff'd in
part, rev’d and remanded in part, 275 F.3d 45 (5th Cir. 2001) (per curiam). The Jones
opinion actually followed Varity, allowing an (a)(3) claim only because the plaintiffs did
not have an (a)(1) claim.
Parente allowed the claims in the alternative so that plaintiff could recover under
(a)(3) if his claim under (a)(1) failed. This has been identified as a “minority view.”
“The majority view is that the plaintiff's ultimate success is ‘irrelevant; the pertinent
inquiry is whether [the plaintiff] can state a claim under [that provision].’” Krase v. Life
Ins. Co. of N. Am., No. 11 C 7659, 2012 WL 4483506, *3 (N.D. Ill. Sept. 27, 2012). In
adopting the district court’s opinion, the Fifth Circuit in Tolson expressly stated that
failure to recover under (a)(1) does not render an (a)(3) claim viable. Tolson, 141 F.3d at
610.

Its reasoning, further explained in a footnote, is that the two claims are not

alternative, but the same, using different labels. Id., n.17 (citing Wald v. Southwestern
Bell Corp. Customcare Medical Plan, 83 F.3d 1002, 1006 (8th Cir. 1996)).
More specifically, in response to the argument that plan participants or
beneficiaries should be able to use both sections as requests for alternate relief under
Federal Rule of Civil Procedure 8, one court explained Varity as follows:
[D]ismissing a duplicative claim for “equitable relief” does
not violate Rule 8: “the dismissal of Plaintiff's equitable
claims under Varity would not bar Plaintiff from asserting
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inconsistent legal theories, as Rule 8 allows, but from
asserting the same legal theory twice under separate labels.”
This interpretation of Varity leaves the door open for
plaintiffs to pursue truly distinct claims under subsections
(a)(1)(B) and (a)(3). See id. at *5 (collecting cases). At the
same time, it prevents plaintiffs from “repackaging” their
denial-of-benefits claims as subsection (a)(3) claims for
equitable relief consistent with Varity 's admonition that this
catchall provision only applies when relief is otherwise
unavailable.
Krase, 2012 WL 4483506 at *3.
The Youngs have adequate relief available for the alleged improper denial of
benefits through their right to sue the plan directly under § 1132(a)(1), seeking the plan
benefits as well as civil penalties for failure to provide plan information. The Court
GRANTS HistoPath’s motion to strike the Youngs’ statement of a private right of action
for damages arising from breach of fiduciary duty under § 1132(a)(3).
B. Breach of Fiduciary Duty Claims Against Individual Defendants
According to their Claims for Relief, Plaintiffs have sued Wilkins and Linville for
the following:
• § 1132(a)(1)(B) and (a)(3): failure to pay and clarify benefits under the
out-of-pocket medical reimbursement plan for the years 2010 to present,
including seeking consequential damages, plan information, an
accounting, and removal of Wilkins and Linville as plan fiduciaries.
• § 1104(a)(1): breach of fiduciary duty regarding disclosure of plan
information, accepting and denying claims, and misleading statements
regarding plan benefits, and seeking civil penalties and removal of
Wilkins and Linville as fiduciaries.
D.E. 38, pp. 30-37.
With respect to breach of fiduciary duty, § 1104 is not a civil enforcement
provision by itself.
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Therefore, its enforcement must be accomplished through a

subsection of § 1132. Nominally, breach of fiduciary duty falls under § 1132(a)(2).
Defendant HistoPath asserts that the Youngs’ claims against individual Defendants,
Wilkins and Linville, for breach of fiduciary duties under § 1132(a)(2) are improper
because such claims may only be asserted against the ERISA plan and claims under
(a)(3) are barred. Brown v. Aetna Life Ins. Co., 975 F. Supp. 2d 610, 622 (W.D. Tex.
2013); Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134 (1985).
Section 1132(a)(2), incorporating the strict terms of § 1109, does not create a
private right of action for damages, but rather provides remedies solely for the benefit of
the plan. Consequently, the only avenue by which the Youngs, as individuals, could
personally recover damages for breach of fiduciary duty is through (a)(3). And, in fact,
the Youngs have defended against the motion to dismiss by relying exclusively on (a)(3).
Because that reliance is misplaced, the Court GRANTS the motion to dismiss with
respect to any claims for damages arising from breach of fiduciary duty.
However, at least three issues remain with respect to the individual Defendants.
First, nothing appears to prevent the Youngs’ claim (on behalf of the plan) for removal of
Wilkins and Linville as plan fiduciaries—a claim that is expressly permitted under §§
1109 and 1132(a)(2). Second, to the extent the Youngs seek civil penalties for failure to
disclose plan terms, that claim is viable under § 1132(a)(1)(A) and (c), even though
Plaintiffs did not expressly invoke those section under that claim for relief. Third,
Defendant HistoPath did not expressly challenge individual liability under § 1132(a)(1).
Consequently, the Court GRANTS the motion to dismiss with respect to any claim
for damages for breach of fiduciary duty against individual Defendants, Wilkins and
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Linville. The Court DENIES the motion to the extent that it seeks elimination of all
claims against the individual Defendants.
C. Additional Time to Respond to Third Amended Complaint
Defendant further seeks a reasonable amount of time to file a responsive pleading
to Plaintiffs’ Third Amended Complaint. HistoPath timely filed responsive pleadings on
March 31, 2015 (D.E. 48, 49). Defendants Wilkins and Linville do not appear to have
been served with summons and no date for a responsive pleading is set. Consequently,
the Court DENIES AS MOOT the request for additional time to file a responsive
pleading.
D. Conclusion
For the reasons set out above, the Court GRANTS IN PART the motion to dismiss
(D.E. 39), STRIKES claims brought under 29 U.S.C. § 1132(a)(3), and DISMISSES
claims brought for damages for breach of fiduciary duty. The Court further DENIES IN
PART the motion and declines to dismiss any remaining claims against the individual
Defendants and DENIES AS MOOT the request for additional time to file a responsive
pleading. This Order is issued without prejudice as to any motion Defendants Wilkins
and Linville may choose to file after being joined in the case.

ORDERED this 23rd day of April, 2015.

___________________________________
NELVA GONZALES RAMOS
UNITED STATES DISTRICT JUDGE

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