Humana Health Plan, Inc. v. Nguyen et al
Filing
97
MEMORANDUM OPINION AND ORDER - refiled for case management purposes (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
United States District Court
Southern District of Texas
ENTERED
September 08, 2016
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
HUMANA HEALTH PLAN, INC.,
Plaintiff,
v.
PATRICK NGUYEN, DAVID ABNEY,
and CRADY, JEWETT, &
MCCULLEY, LLP,
Defendants.
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David J. Bradley, Clerk
CIVIL ACTION NO. H-13-1793
MEMORANDUM OPINION AND ORDER
Pending before the court are
Defendant/Counter-Plaintiff's
Motion for Summary Judgment (Docket Entry No. 91), and Plaintiffs'
Joint Motion for Summary Judgment (Docket Entry No. 92).
For the
reasons stated below, the cross motions for summary judgment will
be denied,
and docket call will be held at 3:00 p.m.
on Friday,
October 14, 2016.
I.
Standard of Review
Summary judgment is authorized if the movant establishes that
there is no genuine dispute about any material fact and the law
entitles it to judgment.
Fed. R. Civ. P. 56(c).
The Supreme Court
has interpreted Rule 56(c) to mandate the entry of summary judgment
"after adequate time for discovery and upon motion, against a party
who fails to make a showing sufficient to establish the existence
of an element essential to that party's case,
party will bear the burden of proof at trial."
and on which that
Celotex Corp. v.
Catrett, 106 S. Ct. 2548, 2552 (1986).
judgment "must
'demonstrate the
absence of a
Little v. Liquid Air Corp.,
material fact."
(5th Cir. 1994)
Rule 56(c)
A party moving for summary
(en bane).
genuine
issue of
37 F.3d 1069, 1075
If the moving party meets this burden,
requires the nonmovant to present admissible evidence
creating genuine issues of material fact for trial.
Id.
An issue
is genuine if there is sufficient evidence for a reasonable fact
finder to return a verdict for the nonmoving party, and material if
it would affect the outcome of the lawsuit under the governing
substantive law.
2510
(1986).
Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505,
Only disputes over genuine issues of material fact
will properly preclude summary judgment.
"Factual disputes that
are irrelevant or unnecessary will not be counted."
parties file cross-motions for summary judgment,
'each
party's
motion
independently,
viewing
Id.
"When
[courts]
review
the
evidence
and
inferences in the light most favorable to the nonmoving party.'"
Cooley v. Housing Authority of City of Slidell, 747 F.3d 295, 298
(5th Cir.
2014) (quoting
Ford Motor Co.
v.
Texas
Transportation, 264 F.3d 493, 498 (5th Cir. 2001).
Department
of
See also Shaw
Constructors v. ICF Kaiser Engineering, Inc., 395 F.3d 533, 538-39
(5th Cir. 2004), cert. denied, 126 S. Ct. 342 (2005) ("Cross-motions
must be considered separately, as each movant bears the burden of
establishing that no genuine issue of material fact exists and that
it is entitled to judgment as a matter of law.").
-2-
II.
At
all
relevant
Undisputed Facts
times
Patrick
Nguyen
("Nguyen")
was
a
participant in the API Employee Benefits Plan ("Plan") . 1
The Plan
is a self-funded plan sponsored by API Enterprises, Inc.
("API"),
and governed by ERISA,
29 U.S.C.
§§
1001,
et seg. 2
Amy Manuel
("Manuel") was the named Plan Administrator and Plan Fiduciary. 3
Patrick Sanders
("Sanders")
Nguyen family's attorney.
4
was API' s
corporate counsel and the
On July 13, 2009, API and Humana Health
1
See Statement of Undisputed and Material Facts in Support of
Plaintiffs'
Joint Motion for Summary Judgment
("Plaintiffs'
Statement of Facts"), Exhibit 1 to Plaintiffs' Joint Motion for
Summary Judgment ("Plaintiffs' JMSJ"), Docket Entry No. 92-1, p. 2
~ 6 (citing First Amended Complaint, Docket Entry No. 74, p. 2 ~ 8,
and Defendant's First Amended Answer, Docket Entry No. 78, p. 2 ~ 8
("Defendant admits the allegations in Paragraph 8.").
2
Id. at 1 ~ 1 (citing First Amended Complaint, Docket Entry
No. 74, p. 1 ~ 1, and Defendant's First Amended Answer, Docket
Entry No. 78, p. 1 ~ 1 ("Defendant disputes Plaintiffs' standing to
bring this action to enforce the terms of the API Employee Benefits
Plan ("Plan") but admits that this action is governed by ERISA.").
3
Defendant/Counter-Plaintiff' s Motion for Summary Judgment
("Defendant's MSJ"), Docket Entry No. 91, p. 7 ~ 5 ("The Plan
designated API employee Amy Manuel to act as Plan Administrator.") ;
Plaintiffs' Statement of Facts, Exhibit 1 to Plaintiffs' JMSJ,
Docket Entry No. 92-1, p. 1 ~ 5 ("Amy Manuel serves as Plan
Administrator and Plan Fiduciary." (citing Oral Deposition of Amy
Manuel ("Manuel Deposition"), pp. 35:8-10 and 40:3-5, Exhibit 8 to
Plaintiffs' JMSJ, Docket Entry No. 92-8, pp. 10-11)).
4
Defendant's MSJ, Docket Entry No. 91, p. 8 ~ 8 (recognizing
Patrick Sanders as API's General Counsel); Plaintiffs' Statement of
Facts,
Docket Entry No.
92-1, p. 2 ~ 9 ("Patrick Sanders
( 'Sanders' ) is API' s General Counsel and the Nguyen family's
counsel.") (citing Manuel Deposition,
p. 17:12-13, Exhibit 8 to
Plaintiffs' JMSJ, Docket Entry No. 92-8, p. 5, and Oral Deposition
of Patrick Nguyen ("Nguyen Deposition"), Exhibit 10 to Plaintiffs'
JMSJ, Docket Entry No. 92-10, pp. 36:24-38:2).
-3-
Plan ("HHP") executed a Plan Management Agreement ("PMA") pursuant
to which HHP served as the Plan Manager, but the Plan Administrator
retained
discretion
to
interpret
the
terms
of
the
Plan
and
determine questions of eligibility for Plan participation. 5
In
pertinent part the PMA states
1. 8
Plan Administrator (or Administrator) means the
person named in the documents describing the Plan
as responsible for the operation and administration
of the Plan. If no such person is identified, then
the person establishing or maintaining the Plan
will be deemed to be the Plan Administrator.
1.9
Plan Manager means Humana Health Plan, Inc., acting
in accordance with this Agreement.
ARTICLE II
Relationship Between the Parties
2.1
In performing its obligations under this Agreement,
the Plan Manager operates within a framework of the
Plan's management policies and practices authorized
or established by the Plan Administrator,
in
accordance with the provisions of the Plan.
In
this context, the Plan Manager's normal operating
procedures, practices and rules will be followed
unless they are inconsistent with the Plan's
management policies or practices.
2.2
The Plan Manager does not have discretionary
authority or responsibility in the administration
of the Plan.
The Plan Manager will not exercise
discretionary authority or control respecting the
disposition or management of assets of the Plan.
5
Defendant' s MSJ, Docket Entry No. 91, p. 7 <]I 5 ("The Plan
contracted with Humana Health to provide administrative services
for the Plan. The terms of this relationship were memorialized in
a Plan Management Agreement.
Exhibit 1."); Plaintiffs' Statement
of Facts, Exhibit 1 to Plaintiffs' JMSJ, Docket Entry No. 92-1,
p. 1 <]I 2 ("Humana Health Plan ('HHP') is the Plan Manager.").
-4-
2.3
The Plan Administrator and not the Plan Manager is
ultimately
responsible
for
interpreting
the
provisions of the Plan and determining questions of
eligibility for Plan participation.
2.4
Accordingly, except as may otherwise be expressly
provided herein, the Plan Manager is not a trustee,
sponsor, or fiduciary with respect to directing the
operation of the Plan or managing any assets of the
Plan. 6
API was covered by a stop-loss policy of insurance ("Stop-Loss
Policy") underwritten by Humana Insurance Company ("HIC") pursuant
to which HIC agreed to pay claims that exceeded applicable stoploss deductible amounts. 7
providing
that
HIC
"shall
The Stop-Loss Policy contains a clause
be
subrogated
to
the
rights
of
the
Policyholder, and shall be entitled to be reimbursed first from any
net proceeds subsequently recovered from responsible third parties,
their insurers or others who may be responsible to pay or indemnify
the Covered Person.
118
In April of 2012 Nguyen was injured in an automobile accident,
and from April 14, 2012 to April 5, 2013, the Plan paid $274,607.84
6
PMA, Docket Entry No.
91-2, pp. 1-2.
7
Defendant' s MSJ, Docket Entry No. 91, p. 19 (recognizing
existence of a "stop loss contract between API and Humana
Insurance");
Plaintiffs'
Statement of Facts,
Exhibit
1 to
Plaintiffs' JMSJ, Docket Entry No. 92-1, p. 1 ~ 3 (citing Stop Loss
Policy, Exhibit 3 to First Amended Complaint, Docket Entry No. 743).
See also Declaration of Brian Bargender
("Bargender
Declaration"), Exhibit 2 to Plaintiffs' JMSJ, Docket Entry No. 922, p. 2 ~ 9.
8
2009 Stop-Loss Policy, Exhibit 1 to Declaration
Bargender, Docket Entry No. 92-3, p. 4 Section 7.
-5-
of
Brian
in medical expenses for Nguyen arising from the accident.
recovered
$255,000.00
from
an
Under
Insured
Motorist
9
Nguyen
("UIM")
Policy, and $30,000.00 from the tortfeasor's automobile policy, for
a recovery totaling $285,000.00 ("Settlement Funds") . 10
III.
Procedural Background
On June 16, 2013, HHP filed a Verified Complaint (Docket Entry
No. 1) against Nguyen, Nguyen's attorney,
and Abney's law firm,
U.S.C. § 1132 (a) (3)
Crady,
Jewett,
David Abney
& McCulley,
LLP,
("Abney"),
under 29
seeking to enforce the terms of the Plan and
require Nguyen to reimburse the Plan $274,607.84 for benefits paid
on his behalf from the Settlement Funds that Nguyen received from
third parties.n
On June 20, 2013, the court entered a Temporary
Restraining Order (Docket Entry No. 6), restraining defendants and
others acting in concert with them from disposing of the Settlement
Funds.
On July 2, 2013, the court entered an Agreed Preliminary
Injunction (Docket Entry No. 13) pursuant to which the Settlement
Defendant' s MSJ, Docket Entry No. 91, p. 7 ~~ 5-6 (citing
Nguyen Deposition, pp. 29:15-17, 32:10-19, Exhibit 4 to Defendant's
MSJ, Docket Entry No. 91-5, pp. 8-9); Plaintiff's Statement of
Facts, Exhibit 1 to Plaintiffs' JMSJ, Docket Entry No. 92-1, p. 2
~ 10 (citing First Amended Complaint, Docket Entry No. 74, p. 2
~~ 9-10, and Defendant's First Amended Answer, Docket Entry No. 78,
p. 2 ~~ 9-10).
9
Defendant's MSJ, Docket Entry No. 91, p. 7 ~ 6; Plaintiff's
Statement of Facts, Docket Entry No. 92-1, p. 2 ~ 11.
10
11
See Nguyen Deposition, p. 45:8-19, Exhibit 4 to Defendant's
MSJ, Docket Entry No. 91-5, p. 12.
-6-
Funds were deposited into the registry of the court.
On July 3,
2013, HHP filed a Notice of Voluntary Dismissal of David Abney and
Crady, Jewett & McCulley, LLP (Docket Entry No. 18), and the court
signed
an
Order
(Docket
Entry
No.
19)
dismissing
the
claims
asserted against those defendants with prejudice leaving Nguyen as
the only remaining defendant.
On July 18, 2013, Nguyen filed a Counterclaim against HHP for
breach of fiduciary duty (Docket Entry No. 21).
On October 15, 2013, HHP filed a motion for summary judgment,
which the court granted on May 2, 2014, after concluding that HHP
was a Plan fiduciary with standing to prosecute a reimbursement
claim against Nguyen under 29 U.S.C.
Health Plan,
2014).
and,
§
Inc. v. Nguyen,
§
1132 (a) (3).
17 F.Supp.3d 638,
644-47
See Humana
(S.D. Tex.
Nguyen appealed arguing that HHP was not a Plan fiduciary
thus,
did not have standing to seek relief under 29 U.S.C.
1132 (a) (3).
On May 11,
2015,
the Fifth Circuit reversed and
remanded stating:
The district court erred in determining that Humana is an
ERISA fiduciary for two reasons.
First, the district
court's interpretation of the PMA is not persuasive. The
district court focused on the subrogation and recovery
clause and determined that its broad language gave Humana
independent power to investigate and prosecute claims,
even over the Plan's objections.
But the relevant
language merely defines the range of potential disputes
covered by the contract; it says nothing about who has
the right to finally decide whether to investigate or
pursue a claim.
Second, even if we interpret the PMA to give Humana broad
power, the district court failed to explain why Humana is
-7-
not a ministerial agent.
Humana's various duties
outlined in the subrogation and recovery clause describe
the tasks performed by many law firms and collections
agencies.
And the mere fact that Humana serves as the
Plan's legal or collections agent is insufficient to show
that Humana was the Plan's fiduciary, unless specific
facts show that Humana exercised discretion as described
in§ 1002 (21) (A) (i) and (iii). See 29 C.F.R. § 2509.755, at D-1 . . . cf. Health Cost Controls of Ill., Inc. v.
Washington, 187 F.3d 703, 709 (7th Cir. 1999) (holding
that person was an ERISA fiduciary because plan had
assigned [to that attorney] legal right to reimbursement,
and "[b]y virtue of the assignment," the attorney
obtained "broader power than that of a lawyer hired to
handle a claim, or of an ordinary collection agent").
We hold that the subrogation and recovery clause does not
show that Humana is an ERISA fiduciary. Accordingly, we
hold that the district court erred when it determined
that Humana was an ERISA fiduciary based on the language
of that clause.
Because the district court based its
decision on its interpretation of the subrogation and
recovery clause, we have not had to consider other
evidence that might show whether Humana exercised actual,
decision-making authority over the plan or its assets.
Cf. Musmeci v. Schwegmann Giant Super Mkts., Inc. 332
F.3d 339, 351 (5th Cir. 2003) (explaining that this court
uses "functional approach" to determine whether purported
fiduciaries exercise discretionary control over ERISA
plans); Hatteberg v. Red Adair Co. Emps.' Profit Sharing
Plan, 79 Fed. Appx. 709, 716 (5th Cir. 2003 ) (per curiam)
(explaining that
"factual matter"
showing alleged
fiduciary's actual role are "key"). Because we reverse
and remand on statutory standing grounds, we do not
decide whether the district court erred on the merits.
Humana Health Plan,
Inc.
v.
Nguyen,
785 F.3d 1023,
1028-29
(5th
Cir. 2015).
Following remand HHP sought leave to amend to add HIC as an
additional plaintiff and to assert that pursuant to the Stop-Loss
Policy that HIC issued to API, "HIC is subrogated to the rights of
API and is entitled to be reimbursed first from proceeds recovered
from any parties responsible to pay or indemnify a Covered Person
-8-
under the Plan.u 12
under Rule
HHP argued that "HIC is required to be joined
19 of the
Federal Rules
of Civil
Procedure because
failure to join HIC will impair and impeded its ability to protect
its interest and/or leave the parties subject to a substantial risk
of
incurring
multiple
or
inconsistent
obligations. ul 3
Alternatively, HHP argued that it "should be allowed to join HIC in
this action pursuant to Rule 20 of the
Federal Rules
of Civil
Procedure because HIC's claims arise out of the same transaction or
occurrence, or series of transactions or occurrences, as the claims
. , ul 4 and that "HIC should be allowed to join
currently pending.
this action as a permissive plaintiff because it seeks the same
relief as HHP.u 15
HHP explained that its motion to amend was filed
on the heels of this matter being remanded by the Fifth
Circuit for further proceedings to determine HHP's
fiduciary status. Based upon the initial proceedings in
this Court, HHP did not believe that HIC's joinder was
necessary to the proceedings.
However, after the Fifth
Circuit questioned HHP's authority to pursue the claims,
it became necessary for HIC to assert its rights under
the Stop-Loss Policy. HHP still believes that the facts
will illustrate that it has fiduciary standing in this
case, but HIC also has enforceable rights as a subrogee
of API, which it is entitled to present to this Court. 16
12
Plaintiff Humana Health Plan, Inc.'s Motion for Leave to Join
Additional Parties and to Amend the Verified Complaint, Docket
Entry No. 67, p. 2 ~ 5.
13
Id. at 2 ~ 9.
14
Id. at 2-3
~
10.
15
Plaintiff Humana Health Plan, Inc.'s Memorandum or Law
Supporting Its Motion for Leave to Join Additional Parties and to
Amend the Verified Complaint, Docket Entry No. 68, p. 3.
16
Id. at 4-5.
-9-
Although Nguyen
opposed HHP' s
motion
to
amend by arguing
that
"allowing HHP to amend its complaint would unduly prejudice Nguyen
by increasing the delay and by expanding the allegations beyond the
scope of the initial complaint, " 17 and that "the delay between the
filing of the original complaint and the motion for leave to amend
could have been avoided by due diligence, as HHP could have raised
or at least sought to amend long ago," 18
the additional claims .
the court granted HHP's motion to amend (Docket Entry No. 73).
Citing
29
U.S.C.
§
1132 (a) (3),
Plaintiffs'
First
Amended
Complaint states that
21 . . . the Plan seeks equitable relief, including, but
not limited to, equitable lien by agreement, equitable
lien to enforce ERISA and the terms of the Plan,
restitution, and imposition of a constructive trust with
respect to the Disputed Funds.
22.
By refusing to cooperate with the Plan to protect
its rights and refusing to reimburse the Plan to the
extent of benefits paid out of the amount Nguyen
recovered, Nguyen has violated the terms of the Plan.
23.
Since these acts and/or practices violate the Plan's
terms, this Court should enter an order enforcing the
terms of the Plan and requiring Nguyen to reimburse the
Plan in the amount of $274,607.84.
24.
Under the express terms of the Stop-Loss Policy, HIC
is subrogated to the rights of API and has first priority
right of recovery up to the full amount of Stop-Loss
benefits paid on Nguyen's behalf.
17
Response to Plaintiffs' Motion for Leave to Join Additional
Parties and to Amend the Verified Complaint, Docket Entry No. 71,
p. 2 9I 8.
lBid.
-10-
25. As subrogee, HIC holds all rights, duties, and
claims belonging to API - the Named Fiduciary of the Plan
-with respect to third-party recoveries or reimbursement
efforts to the full extent of benefits paid under the
Stop-Loss Policy.
26.
Thus, HIC has fiduciary standing to seek full
reimbursement, pursuant to 29 U.S.C. § 1132(a) (3), of any
and all payments made under the Stop-Loss Policy. 19
Plaintiffs
also
seek
rescission
of
the
Stop-Loss
Policy
and
restitution based on Nguyen's false and misleading statements used
to procure coverage under the Plan. 20
Nguyen
to
turn
over to
the
Plan
HHP seeks judgment requiring
$274,607.84,
and to pay pre-
judgment and post-judgment interest, reasonable attorneys' fees and
costs. 21
Alternatively, HIC seeks a judgment requiring Nguyen to
turn over to HIC the full amount of benefits paid under the StopLoss Policy,
or at least $209,607.84,
and award HIC appropriate
pre-judgment and post-judgment interest, and other relief to which
HIC is entitled including reasonable attorneys' fees and costs. 22
IV.
Ana1ysi.s
The Fifth Circuit remanded this action upon concluding that
this court erred in finding that HHP was a
Plan fiduciary with
standing to seek reimbursement from Nguyen under ERISA.
Nguyen,
19
First Amended Complaint, Docket Entry No. 74, pp. 5-6 ~~ 21-
20
Id. at p. 7 ~~ 30-36.
21
Id. at 7-8
26.
(Prayer for Relief) .
-11-
785
F.3d
at
1030
(remanding
"for
further
proceedings
beginning with a reexamination of the issue of Humana' s standing") .
In the amended complaint filed following remand, HHP and HIC allege
that
they
are
both
reimbursement. 23
A.
Plan
fiduciaries
with
standing
to
seek
Nguyen disagrees.
Applicable Law
"The express grant of federal jurisdiction in ERISA is limited
to suits brought by certain parties
presumably determined that
a
right
as to whom Congress
to
enter
necessary to further the statute's purpose."
federal
court was
Franchise Tax Board
of the State of California v. Construction Laborers Vacation Trust
for Southern California, 103 S. Ct. 2841, 2852 (1983)).
parties" include plan fiduciaries.
"[C]ertain
29 U.S.C. § 1132 (a) (3) . 24
Under
23
First Amended Complaint, Docket Entry No. 7 4, p. 1
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