Kennedy Krieger Institute, Inc. et al v. Brundage Management Company, Inc. Employee Benefit Plan et al

Filing 101

ORDER - GRANTING 59 MOTION filed by Brundage Management Company, Inc. Employee Benefit Plan; GRANTING IN PART AND DENYING IN PART 24 MOTION for Summary Judgment filed by Inetico, Inc.; GRANTING 23 filed by Benefit Management Administrators, Inc.; GRANTING 58 filed by Brundage Management Company, Inc. Signed by Judge David A. Ezra. (rg)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
KENNEDY KRIEGER INSTITUTE,
INC.; KENNEDY KRIEGER
CHILDREN’S HOSPITAL, INC.; and
KENNEDY KRIEGER ASSOCIATES,
INC.,

§
§
§
§
§
§
Plaintiffs,
§
§
vs.
§
§
BRUNDAGE MANAGEMENT
§
COMPANY, INC. EMPLOYEE
§
BENEFIT PLAN; BRUNDAGE
§
MANAGEMENT COMPANY, INC.; §
BENEFIT MANAGEMENT
§
ADMINISTRATORS, INC.; and
§
INETICO, INC. t/a INETICARE, ABC §
ENTITIES #1-10,
§
§
Defendants.
§

CV. No. 5:15-CV-162-DAE

ORDER (1) GRANTING BRUNDAGE’S MOTION FOR JUDGMENT ON THE
PLEADINGS, (2) GRANTING THE BRUNDAGE PLAN’S MOTION FOR
JUDGMENT ON THE PLEADINGS, (3) GRANTING BMA’S MOTION TO
DISMISS OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT, AND
(4) GRANTING IN PART AND DENYING IN PART INETICO’S MOTION TO
DISMISS OR IN THE ALTERNATIVE FOR SUMMARY JUDGMENT
Before the Court is a Motion to Dismiss for Failure to State a Claim,
or in the Alternative, for Summary Judgment filed by Defendant Benefit
Management Administrators, Inc. (“BMA”) (Dkt. # 23); a Motion to Dismiss, or in
the Alternative, for Summary Judgment filed by Defendant Inetico, Inc., t/a
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Ineticare (“Inetico”) (Dkt. # 24); a Motion for Judgment on the Pleadings filed by
Defendant Brundage Management Company, Inc. (“Brundage”) (Dkt. # 58); and a
Motion for Judgment on the Pleadings filed by Defendant Brundage Management
Company, Inc. Employee Benefit Plan (the “Brundage Plan”) (Dkt. # 59). The
Court held a hearing on the motions on July 20, 2015. At the hearing, Alan C.
Milstein, Esq., represented Plaintiffs Kennedy Krieger Institute, Inc., Kennedy
Krieger Children’s Hospital, Inc., and Kennedy Krieger Associates, Inc.
(collectively, “Plaintiffs”); G. Wade Caldwell and Bryan D. Bolton, Esqs.,
represented Brundage and the Brundage Plan; George W. Vie, III, Esq.,
represented BMA; and Melanie Fry, Esq., represented Inetico. After careful
consideration of the supporting and opposing memoranda and the arguments
presented at the hearing, the Court, for the reasons that follow, GRANTS
Brundage’s Motion for Judgment on the Pleadings, GRANTS the Brundage Plan’s
Motion for Judgment on the Pleadings, GRANTS BMA’s Motion to Dismiss, or in
the Alternative for Summary Judgment, and GRANTS IN PART AND DENIES
IN PART Inetico’s Motion to Dismiss, or in the Alternative for Summary
Judgment.
BACKGROUND
Brundage is a company incorporated in Texas with a principal place
of business in Texas. (“Compl.,” Dkt. # 1 ¶ 4.) Brundage provides health care
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benefits to its employees through a self-funded group health plan. (Id. ¶ 5.) The
plan designates Brundage as the plan administrator. (Id. ¶ 14.) BMA, a company
incorporated in Texas with a principal place of business in Texas, is the plan’s
claims administrator. (Id. ¶ 6, 14.) BMA’s responsibilities include receiving and
reviewing claims from plan participants and health care providers to determine
eligibility for coverage under the plan. (Dkt. # 23-3 ¶ 3.) Inetico, a Florida
corporation with its principal place of business in Florida, provides “care
management services” to BMA on behalf of Brundage. (Compl. ¶ 7; “Koch Aff.,”
Dkt. # 32 ¶ 2.) Inetico is responsible for the pre-certification of medical
procedures for plan coverage and “utilization review” of hospital stays. (Koch Aff.
¶ 3.)
Jane Doe was a Brundage employee covered by the plan. 1 (Compl.
¶ 15.) Her minor son, John Doe, was also covered by the plan. (Id. ¶ 16.) John
Doe is “developmentally disabled,” and at the time in question suffered from
“significant mental health issues including but not limited to significant and
frequent self-injury, aggression, and pica (consumption of non-nutritive substances
such as dirt).” (Id. ¶¶ 16–17.) In the fall of 2012, the local physician who had
been treating John Doe believed that his condition was worsening and that further
outpatient treatment would not be effective. (Id. ¶ 19.) The physician referred

1

The mother and son in this case are referred to by pseudonyms in the Complaint.
3

John Doe to Plaintiff Kennedy Krieger Institute, Inc. (“Kennedy Krieger”),2 which
has a “nationally renowned inpatient program for treating children who suffer from
severe behavioral dysfunction,” for inpatient treatment. (Id. ¶¶ 18–19.)
In November 2012, Kennedy Krieger’s “Neurobehavioral Unit team”
evaluated John Doe and determined that he should be admitted. (Id. ¶ 22.) On
November 21, 2012, Kennedy Krieger submitted an authorization request to
Brundage, BMA, and Inetico seeking pre-certification for a four-month admission
to the inpatient Neurobehavioral Unit. (Id. ¶ 23–25.) Plaintiffs allege that prior to
February 14, 2013, Inetico, “individually and on behalf of the other Defendants,
represented to the Plaintiffs and their representatives that inpatient services at
Kennedy Krieger’s Neurobehavioral Unit were covered under the Brundage Plan,
and authorized the first seven days of coverage.” (Id. ¶ 27.) On February 14,
Plaintiffs admitted John Doe in reliance on Inetico’s representation. (Id. ¶ 28.)
On February 22, 2013, Inetico told Plaintiffs that further inpatient care
of John Doe would not be covered by the plan because it was “not medically
necessary.” (Id. ¶ 31.) Kennedy Krieger’s physicians and staff nevertheless
continued treating John Doe, believing that he still posed a danger to himself and
others and that it would therefore be unethical to release him. (Id. ¶¶ 30, 32.) John
2

Kennedy Krieger Institute, Inc. is the parent corporation of Kennedy Krieger
Children’s Hospital, Inc. and Kennedy Krieger Associates, Inc. (Compl. ¶ 1.) All
of the Kennedy Krieger entities are non-profit corporations incorporated and
headquartered in Maryland. (Id. ¶ 1–3.)
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Doe was successfully treated and released after completing the program. (Id.
¶ 35.) The total bill for Plaintiffs’ services is $750,000, and remains outstanding.
(Id. ¶ 36.)
Jane Doe authorized Plaintiffs to administratively appeal her denial of
benefits, and on appeal Defendants determined that the treatment was not
medically necessary and denied the appeal. (Id. ¶ 38–39.) Plaintiffs further allege
that Brundage attempted to dissuade Jane Doe from pursuing the matter further by
advising her that it would be bankrupt if forced to pay, and suggested that she
would be fired if she pursued the matter. (Id. ¶ 41.) As a result, Jane Doe has not
assigned to Plaintiffs her right to pursue an enforcement action under the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001
et seq. (Id.)
Plaintiffs filed suit in the District of Maryland on May 23, 2014,
asserting claims against Brundage, the Brundage Plan, BMA, and Inetico
(collectively, “Defendants”) for promissory estoppel, breach of contract, fraud
(asserted only against Brundage), and violation of the Texas Insurance Code.
(Compl. ¶¶ 44–71.) On March 3, 2015, the Maryland District Court transferred the
action to this Court on the basis that it did not have personal jurisdiction over
Brundage, BMA, or the Brundage Plan. (Dkt. # 70.)

5

Previously pending were Inetico and BMA’s respective Motions to
Dismiss, or in the Alternative, for Summary Judgment, and Brundage and the
Brundage Plan’s respective Motions for Judgment on the Pleadings. Pursuant to
the request of Brundage and the Brundage Plan, the Court allowed supplemental
briefing to allow the addition of Fifth Circuit and Texas authority in support of or
in opposition to the motions. (Dkt. # 83.) All parties have submitted supplemental
briefing, and the motions are ripe for review.
LEGAL STANDARDS
I.

Motion to Dismiss Under Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a

complaint for “failure to state a claim upon which relief can be granted.” In
analyzing a motion to dismiss for failure to state a claim, the court “accept[s] ‘all
well pleaded facts as true, viewing them in the light most favorable to the
plaintiff.’” United States ex rel. Vavra v. Kellogg Brown & Root, Inc., 727 F.3d
343, 346 (5th Cir. 2013) (quoting In re Katrina Canal Breaches Litig., 495 F.3d
191, 205 (5th Cir. 2007)). To survive a Rule 12(b)(6) motion to dismiss, the
plaintiff must plead “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw

6

the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
II.

Motion for Judgment on the Pleadings
Under Federal Rule of Civil Procedure 12(c), a party can move for

judgment on the pleadings after the pleadings are closed, so long as the motion
does not delay trial. Fed. R. Civ. P. 12(c). A motion for judgment on the
pleadings is subject to the same standards as a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6). In re Great Lakes Dredge & Dock Co. LLC, 624
F.3d 201, 209–10 (5th Cir. 2010). Accordingly, “[t]he nonmovant must plead
enough facts to state a claim for relief that is plausible on its face.” United States
v. 0.073 Acres of Land, More or Less, Situate in Parishes of Orleans and Jefferson,
La., 705 F.3d 540, 543 (5th Cir. 2013) (quoting Doe v. MySpace, Inc., 528 F.3d
413, 418 (5th Cir. 2008) (internal quotation marks omitted). “The central issue is
whether, in the light most favorable to the plaintiff, the complaint states a valid
claim for relief.” Id. (quoting Brittan Commc’ns Int’l Corp. v. Sw. Bell Tel. Co.,
313 F.3d 899, 904 (5th Cir. 2002) (internal quotations omitted)).
III.

Motion for Summary Judgment
A court must grant summary judgment when the evidence

demonstrates “that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). In
7

seeking summary judgment, the moving party bears the initial burden of
demonstrating the absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this burden, the
nonmoving party must come forward with specific facts that establish the existence
of a genuine issue for trial. Distribuidora Mari Jose, S.A. de C.V. v.
Transmaritime, Inc., 738 F.3d 703, 706 (5th Cir. 2013) (quoting Allen v. Rapides
Parish Sch. Bd., 204 F.3d 619, 621 (5th Cir. 2000)). “Where the record taken as a
whole could not lead a rational trier of fact to find for the nonmoving party, there is
no genuine issue for trial.” Hillman v. Loga, 697 F.3d 299, 302 (5th Cir. 2012)
(internal quotation marks omitted).
In deciding whether a fact issue has been created, the court must draw
all reasonable inferences in favor of the nonmoving party, and it “may not make
credibility determinations or weigh the evidence.” Tiblier v. Dlabal, 743 F.3d
1004, 1007 (5th Cir. 2014) (quoting Reeves v. Sanderson Plumbing Prods., Inc.,
530 U.S. 133, 150 (2000)). However, “[u]nsubstantiated assertions, improbable
inferences, and unsupported speculation are not sufficient to defeat a motion for
summary judgment.” United States v. Renda Marine, Inc., 667 F.3d 651, 655 (5th
Cir. 2012) (quoting Brown v. City of Hous., 337 F.3d 539, 541 (5th Cir. 2003)).

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DISCUSSION
I.

Promissory Estoppel
A.

Motions to Dismiss and for Judgment on the Pleadings
Defendants each argue that Plaintiffs’ claims for promissory estoppel

are preempted by ERISA. ERISA’s preemption provision provides that it “shall
supersede any and all State laws insofar as they may now or hereafter relate to any
employee benefit plan.” 29 U.S.C. § 1144(a). “The Supreme Court has observed
repeatedly that this broadly worded provision is ‘clearly expansive,’” but has
“declined to apply an ‘uncritical literalism’ to the phrase” given that the statutory
language “relate to,” read broadly, “would encompass virtually all state law.”
Access Mediquip L.L.C. v. UnitedHealthcare Ins. Co., 662 F.3d 376, 382 (5th Cir.
2011) (quoting Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 146 (2001) and
N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645, 655 (1995)), aff’d on reh’g, 698 F.3d 229, 230 (5th Cir. 2012) (en
banc). A court conducting a preemption inquiry thus must “look instead to the
objectives of the ERISA statute as a guide to the scope of the state law that
Congress understood would survive.” Id. (quoting Travelers, 514 U.S. at 656).
Under the Fifth Circuit’s test for determining whether § 1144(a)
preempts a state law claim, a defendant pleading preemption must show that
“(1) the state law claims address an area of exclusive federal concern, such as the
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right to receive benefits under the terms of an ERISA plan; and (2) the claims
directly affect the relationships among traditional ERISA entities—the employer,
the plan and its fiduciaries, and the participants and beneficiaries.” Id. (quoting
Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 246 (5th Cir.
1990)). State law claims are preempted where they are dependent on and derived
from the rights of plan beneficiaries to recover benefits under the terms of the plan.
Id. at 383. State law claims are not preempted, however, when based on alleged
misrepresentations by a plan fiduciary to third-party service providers regarding
whether or the extent to which a beneficiary is covered by the plan. Id. at 384.
Plaintiffs’ promissory estoppel claim is not preempted by § 1144(a).
Plaintiffs allege that “Defendants promised and represented that there was
coverage and agreed to pay for the first seven days of inpatient care, and impliedly
promised to pay for any additional period of inpatient care that Kennedy Krieger
was required to provide in the event that it could not release Mr. Doe.” (Compl.
¶ 48.) Plaintiffs allege that they reasonably relied on these promises in admitting
John Doe, and have been harmed by Defendants’ subsequent refusal to pay for the
cost of his care. (Id. ¶¶ 51, 54.) The substance of the claim is thus that Defendants
misrepresented the extent to which services provided by Kennedy Krieger, a
third-party provider, to John Doe would be covered by the Brundage Plan. This

10

claim is neither dependent on nor derived from John Doe’s right to recover benefits
under the terms of the Brundage Plan, and is thus not preempted under ERISA.
As Plaintiffs point out, this result is directly controlled by the Fifth
Circuit’s decision in Access Mediquip, L.L.C. v. UnitedHealthcare Insurance Co.
In Access, Access Mediquip (“Access”), a third-party services provider, sued
United Healthcare Insurance Company (“United”), alleging state law causes of
action for promissory estoppel, negligent misrepresentation, violations of the Texas
Insurance Code, quantum meruit, and unjust enrichment. 662 F.3d at 377. The
first three claims were premised on Access’s allegations that it provided services to
United beneficiaries “in reliance on United’s representations regarding how much,
and under what conditions, United would pay Access for those services.” Id. at
380. The Fifth Circuit held that the merits of Access’s misrepresentation claims
did not depend on the rights of the plan beneficiaries, and could be decided by
determining, without reference to the plans’ terms, the reimbursement Access
could have reasonably expected given United’s representations and whether
United’s disposition of the claims was consistent with that expectation. Id. at 385.
Here, Plaintiffs’ claim for promissory estoppel requires the same analysis: whether
Plaintiffs could have reasonably expected reimbursement of the cost of John Doe’s
inpatient services given the representations made by Defendants.

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While Defendants characterize Plaintiffs’ promissory estoppel claim
as disputing the administration of benefits under the Brundage Plan, the merits of
the claim “do not depend on whether its services were or were not fully covered
under the patients’ plans.” Id. As in Access, “[i]t is immaterial whether the
alleged statements regarding the extent that the patients’ plans covered [the
provided] services were correct or incorrect as descriptions of the plan[’s] terms.”
Id. Plaintiffs’ claimed right to reimbursement does not depend on the terms of the
ERISA plans, but on whether Plaintiffs reasonably relied on Defendants’ alleged
representations that John Doe’s inpatient stay would be reimbursed. As stated by
the Fifth Circuit, this type of state law claim
concern[s] the relationship between the plan and third-party,
non-ERISA entities who contact the plan administrator to inquire
whether they can expect payment for services they are considering
providing to an insured. The administrator’s handling of those
inquiries is not a domain of behavior that Congress intended to
regulate with the passage of ERISA, which “imposes no fiduciary
responsibilities in favor of third-party health care providers regarding
the accurate disclosure of information, or, indeed, regarding any other
matter.”
Id. at 385–86 (quoting Memorial, 904 F.2d at 247). Plaintiffs’ promissory estoppel
claim is therefore not preempted by § 1144(a).
Defendants finally resort to the argument that Access was wrongly
decided. Even if correct, this Court is bound by the Fifth Circuit’s decision, which
was affirmed on rehearing en banc. See Access Mediquip, L.L.C. v.
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UnitedHealthcare Ins. Co., 698 F.3d 229, 230 (5th Cir. 2012) (en banc). The Court
further notes that the holding in Access is consistent with substantial authority
from other circuits. See In Home Health, Inc. v. Prudential Ins. Co. of Am., 101
F.3d 600, 602 (8th Cir. 1996) (holding that provider’s claim for negligent
misrepresentation was not preempted by ERISA); Meadows v. Emp’rs Health Ins.,
47 F.3d 1006, 1011 (9th Cir. 1995) (ruling that provider’s claims for negligent
misrepresentation and estoppel were not preempted by ERISA); Lordmann Enters.,
Inc. v. Equicor, Inc., 32 F.3d 1529, 1534 (11th Cir. 1994) (holding that ERISA
does not preempt a provider’s negligent misrepresentation claim against an
insurer); Hospice of Metro Denver, Inc. v. Grp. Health Ins. of Okla., 944 F.2d 752,
756 (10th Cir. 1991) (holding that provider’s promissory estoppel claim based on
representation that coverage was available for plan beneficiary was not preempted
by ERISA). Defendants are therefore not entitled to judgment on the pleadings or
dismissal under Rule 12(b)(6) on this basis.
Because Plaintiffs’ promissory estoppel claim is not preempted by
ERISA, the Court must address whether Plaintiffs have sufficiently pleaded a
claim for promissory estoppel against each defendant. The Court must first
determine what law applies. Plaintiffs argue that Maryland law should govern and
that transfer of the case from the District of Maryland to this Court does not mean

13

that Texas law should now apply to their claims. Defendants’ supplemental
briefings seem to assume, without arguing, that Texas law should apply.
“A federal court sitting in diversity ordinarily must follow the
choice-of-law rules of the State in which it sits.” Atl. Marine Const. Co., Inc. v.
U.S. Dist. Court for the W. Dist. of Tex., 134 S. Ct. 568, 582 (2013). The rules are
somewhat different, however, when an action is transferred from another federal
court. When a case is transferred pursuant to 28 U.S.C. §1404(a), the state law
applicable in the original court also applies in the transferee court. Id. When a
case is transferred from a district court that had no personal jurisdiction over the
defendant or where venue was otherwise improper, on the other hand, the choiceof-law rules of the transferee state apply. Nat’l Union Fire Ins. Co. of Pittsburgh,
Pa. v. Am. Eurocopter Corp., 692 F.3d 405, 408 n.3 (5th Cir. 2012).
Here, the Maryland District Court transferred the action based on its
finding that it did not have personal jurisdiction over Brundage, BMA, and the
Brundage Plan, and therefore Texas choice-of-law rules apply. While the parties
dispute whether Maryland or Texas law applies here, “[w]here there are no
differences between the relevant substantive laws of the respective states, there is
not conflict, and a court need not undertake a choice of law analysis.” R.R. Mgmt.
Co. v. CFS La. Midstream Co., 428 F.3d 214, 222 (5th Cir. 2005).

14

Both Texas and Maryland apply the Second Restatement’s definition
of promissory estoppel. Zenor v. El Paso Healthcare Sys., Ltd., 176 F.3d 847, 864
(5th Cir. 1999) (citing Trammel Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631,
636 (Tex. 1997)); Pavel Enters., Inc. v. A.S. Johnson Co., Inc., 674 A.2d 521, 532
(Md. 1996). Under the Restatement approach, to recover on a claim for
promissory estoppel, a plaintiff must show “(1) a clear and definite promise; (2)
where the promisor has a reasonable expectation that the offer will induce action or
forbearance on the part of the promise; (3) which does induce actual and
reasonable action or forbearance by the promise; and (4) causes a detriment which
can only be avoided by the enforcement of the promise.” Pavel, 674 A.2d at 532;
see also Hartford Fire Ins. Co. v. City of Mont Belvieu, Tex., 611 F.3d 289, 295
(5th Cir. 2010). “To support a finding of promissory estoppel, the asserted
‘promise’ must be sufficiently specific and definite that it would be reasonable and
justified for the promisee to rely upon it as a commitment to future action.”
Comiskey v. FH Partners, LLC, 373 S.W.3d 620, 635 (Tex. App. 2012); see also
Mogavero v. Silverstein, 790 A.2d 43, 51 (Md. App. 2002) (denying promissory
estoppel defense where alleged promise was “too vague and indefinite”). Finding
no conflict between Texas and Maryland promissory estoppel law, the Court will
not undertake a choice-of-law analysis. See R.R. Mgmt. Co., 428 F.3d at 222.

15

It is uncontested that Plaintiffs have sufficiently alleged foreseeable
reliance that may only be remedied through enforcement of a promise. Inetico
argues, however, that Plaintiffs’ Complaint fails to allege a promise on which
Plaintiffs could justifiably rely. The Complaint alleges that Inetico, “individually
and on behalf of the other Defendants, represented to the Plaintiffs and their
representatives that inpatient services at Kennedy Krieger’s Neurobehavioral Unit
were covered under the Brundage Plan, and authorized the first seven days of
coverage.” (Compl. ¶ 27.) In the allegations listed under the promissory estoppel
cause of action, Plaintiffs again allege that Inetico, individually and on behalf of
the other Defendants, represented to Plaintiffs that “there was coverage for the
inpatient services at Kennedy Krieger’s Neurobehavioral Unit that Mr. Doe
required.” (Id. ¶ 46.) Plaintiffs allege that “Defendants promised and represented
that there was coverage and agreed to pay for the first seven days of inpatient care,
and impliedly promised to pay for any additional period of inpatient care that
Kennedy Krieger was required to provide in the event that it could not release Mr.
Doe.” (Id. ¶ 48.)
The Court finds that these allegations, accepted as true and taken in
the light most favorable to Plaintiffs, are sufficient to allege that Inetico promised
that Plaintiffs would be reimbursed for one week of care for John Doe. The
allegations that Inetico, on behalf of the other Defendants, “authorized the first
16

seven days of coverage” and “promised and represented that there was coverage
and agreed to pay for the first seven days of inpatient care” sufficiently state a clear
and definite promise by Inetico that Defendants would pay for the first seven days
of care provided to John Doe. The allegations do not, however, sufficiently allege
a promise to pay for Doe’s care beyond seven days. The allegation that
Defendants “impliedly promised to pay for any additional period of inpatient care”
is not supported by any factual allegations as to how the Defendants implied such a
promise. The allegation that Defendants represented that Plaintiffs’ inpatient
services were covered under the beneficiary’s plan, without more, does not imply
that Defendants promised to reimburse all such inpatient services subsequently
provided to the beneficiary. Similarly, the allegation that Defendants promised to
pay for the first seven days of inpatient care, without more, does not imply that
Defendants promised to pay for inpatient care past the first seven days.
Plaintiffs’ cause of action for promissory estoppel claims damages for
the entire amount of inpatient care provided to John Doe, which they calculate at
over $750,000. (Compl. ¶ 62.) Lacking factual allegations to support the alleged
implied promise to pay for inpatient care past the first seven days, the Court finds
that Plaintiffs have only alleged a promise of payment by Inetico for the first seven
days of inpatient care provided to John Doe. The Court therefore DISMISSES
WITHOUT PREJUDICE Plaintiffs’ promissory estoppel claim against Inetico to
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the extent it seeks to recover for care provided to John Doe after the first seven
days of inpatient care. To the extent Plaintiffs’ promissory estoppel claim seeks to
recover for the first seven days of inpatient care, the Court DENIES Inetico’s
Motion to Dismiss.
Because the promissory estoppel claims against the additional three
defendants are based on Inetico’s alleged representations, dismissal of the claim
with respect to Inetico requires dismissal of the claim with respect to the remaining
defendants as well. Brundage and the Brundage Plan additionally argue that the
allegation “on behalf of the other Defendants” is insufficient to plead an agency
relationship between Inetico and the other Defendants, and that Plaintiffs’
allegations based on Inetico’s representations therefore also fail to state a claim
against the other Defendants on this basis.3
A principal-agent relationship, under which a principal may be held
vicariously liable for the acts of his agent, requires that the principal has the right

3

The Court notes that this argument, while not made by BMA in its briefs, applies
equally to BMA. The Court further notes that this question is not controlled by the
Maryland District Court’s previous finding that Plaintiffs had not pleaded specific
facts of an agency relationship sufficient to support personal jurisdiction over
BMA, Brundage, or the Brundage Plan. (See Dkt. # 70 at 12.) Whether a plaintiff
has established personal jurisdiction over a defendant by a preponderance of the
evidence is a distinct legal inquiry from whether a plaintiff has pleaded sufficient
factual matter to state a claim, and the Maryland District Court’s finding with
regard to personal jurisdiction thus does not control this Court’s determination of
whether the Complaint’s allegations can withstand a motion to dismiss for failure
to state a claim or for judgment on the pleadings.
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to control the agent. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 541–42 (Tex.
2003); Green v. H&R Block, Inc., 735 A.2d 1039, 1047–48 (Md. 1999). Other
than the allegations that Inetico’s representations were made “on behalf of the
other defendants,” the only allegations relating to Inetico’s relationship with the
other Defendants is that “Ineticare provides third-party administration services on
behalf of some or all of the foregoing entities.” (Compl. ¶ 14.) Without more,
Plaintiffs have not pleaded sufficient factual content to allow the Court to draw the
reasonable inference that Inetico was an agent, rather than an independent
contractor, of Brundage, the Brundage Plan, or BMA, and thus that the other
Defendants are liable for Plaintiffs’ reliance on Inetico’s alleged representations.
The Court therefore DISMISSES WITHOUT PREJUDICE Plaintiffs’
promissory estoppel claim as asserted against Brundage, the Brundage Plan, and
BMA.
B.

Inetico’s Motion for Summary Judgment
Because Plaintiffs’ promissory estoppel claim against Inetico for

recovery of the first seven days of inpatient care provided to John Doe is not
subject to dismissal under Rule 12(b)(6), the Court will address Inetico’s motion in
the alternative for summary judgment on this claim. Inetico has submitted the
affidavit of Janet Koch (“Koch”), Inetico’s Clinical Director of Care Management,
and exhibits consisting of correspondence between Kennedy Krieger, Inetico, and
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John Doe. Plaintiffs have not submitted any additional evidence. Because the
discussion up to this point has been limited to the allegations in Plaintiffs’
Complaint, the Court will set out the relevant facts supported by the summary
judgment record.
On November 21, 2012, Kennedy Krieger’s Neurobehavioral Unit
sent a letter requesting pre-certification for a four-month inpatient admission for
John Doe. (Koch Aff. ¶ 4; Dkt. # 24-4, Ex. A.) On November 30, 2012, Inetico
replied in a letter stating that it was unable to certify the proposed treatment
because the patient did not meet the criteria for inpatient care. (Koch Aff. ¶ 5; Dkt.
# 24-5, Ex. B.) Kennedy Krieger appealed the denial of pre-certification on
January 3, 2013. (Koch Aff. ¶ 7; Dkt. # 24-7, Ex. D.)
On January 8, 2013, Inetico, at BMA’s instruction, “told Kennedy
Krieger that seven days of inpatient treatment would be covered, subject to further
evaluation of the patient’s condition and needs for treatment.” (Koch Aff. ¶ 9.)
Kennedy Krieger responded that the seven-day approval was “unacceptable in its
view of the needs of the patient,” and Inetico subsequently arranged for physician
review of whether the proposed inpatient treatment was medically necessary and
covered by the Plan. (Id. ¶¶ 10–11.) The physician reviewer concluded that the
patient’s needs could be met on an outpatient basis, and on January 17, 2013,
Inetico informed Kennedy Krieger that while its review had found that four to five
20

months of inpatient treatment was not necessary, the “seven days with concurrent
review had been approved.” (Id. ¶¶ 12–13.)
On February 8, 2013, Kennedy Krieger informed Inetico that it had a
bed available for John Doe, and Inetico confirmed that the seven-day admission
with concurrent review was still authorized. (Koch Aff. ¶ 16.) John Doe was
admitted on February 14, 2013. (Id. ¶ 17.) On February 22, 2013, Inetico advised
Kennedy Krieger that the patient’s condition did not meet the criteria for continued
stay and denied certification of continued inpatient treatment. (Id. ¶ 18; Dkt.
# 24-9, Ex. F.) Kennedy Krieger nevertheless continued to provide inpatient care
to John Doe and appealed the decision. (Koch. Aff. ¶¶ 20–21.)
On April 30, 2013, Inetico sent a letter to the patient, copied to
Kennedy Krieger, stating that it could not certify the continued inpatient treatment
because it did not “meet the standard of medical necessity under the Plan
Language.” (Id. ¶ 22; Dkt. # 24-10, Ex. G.) Finally, on May 28, 2013, Inetico sent
a letter to the patient, copied to Kennedy Krieger, stating that it was “unable to
uphold the original decision to certify the treatment proposed/provided because
[t]he inpatient stay for dates 2/14/13 through 2/21/13 are not considered to be
medically necessary.” (Koch Aff. ¶ 23; Dkt. # 24-11, Ex. H.)
As stated above, to recover on a claim for promissory estoppel, a
plaintiff must show “(1) a clear and definite promise; (2) where the promisor has a
21

reasonable expectation that the offer will induce action or forbearance on the part
of the promise; (3) which does induce actual and reasonable action or forbearance
by the promise; and (4) causes a detriment which can only be avoided by the
enforcement of the promise.” Pavel, 674 A.2d at 532; Hartford Fire, 611 F.3d at
295. Here, Inetico argues that it is entitled to summary judgment because Plaintiffs
have not shown that their reliance on Inetico’s representation that the first seven
days of John Doe’s inpatient treatment would be covered was reasonable.
According to Inetico, pre-certification does not guarantee payment of a claim, and
thus cannot be reasonably relied upon as a promise of payment by Plaintiffs.
The record indicates that Inetico, after initially declining to certify
four months of inpatient treatment for John Doe, “told Kennedy Krieger that seven
days of inpatient treatment would be covered, subject to further evaluation of the
patient’s condition and needs for treatment.” (Koch Aff. ¶¶ 5, 9.) Inetico later
confirmed, on two different occasions, that the first seven days of “treatment with
concurrent review” was approved. (Id. ¶¶ 13, 16.) While the record includes
documentation of Inetico’s November 30, 2012 refusal to certify four months of
inpatient treatment, its February 22, 2013 refusal to certify continued inpatient
treatment after the first seven days, its April 30, 2013 denial of Kennedy Krieger’s
appeal, and its reversal of its initial decision to certify the first seven days of

22

treatment, the evidence concerning its certification of the first seven days of
treatment is limited to the Koch affidavit.
The Court finds that Inetico has not met its burden to establish that
there is no genuine dispute of material fact. Koch’s testimony that Inetico
represented that the first seven days of inpatient treatment “would be covered,” and
that Inetico subsequently confirmed that the first seven days of treatment had been
approved, creates a genuine dispute of material fact as to whether Plaintiffs’
reliance on Inetico’s representation of coverage was reasonable. Even if
pre-certification does not guarantee payment of a claim, as argued by Inetico, there
is no evidence in the record indicating that Inetico’s representation was a formal
pre-certification. The evidence shows only that Inetico represented that the first
week of inpatient treatment would be covered by John Doe’s benefits plan. To the
extent that Inetico argues that its representation that seven days of treatment would
be covered was limited by the fact that it was “subject to further evaluation of the
patient’s condition and needs for treatment,” that qualifying language could
reasonably be understood to refer to additional treatment subsequent to the first
seven days. The record therefore does not establish that Plaintiffs’ reliance on
Inetico’s coverage was unreasonable as a matter of law.
Inetico argues that St. Luke’s Episcopal Hospital v. Acordia National
supports granting summary judgment here. In that unreported case, the district
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court granted summary judgment to a third-party plan administrator on a hospital’s
claim for negligent misrepresentation based on the administrator’s alleged
misrepresentation that services provided to a plan beneficiary were covered. No.
H-05-1438, 2007 WL 508936, *13–14 (S.D. Tex. Feb. 13, 2007). The district
court found that the hospital had not justifiably relied on the administrator’s
representation of coverage where the administrator gave a detailed disclaimer to
the effect that the summary of benefits was not a guarantee of payment. Id. Here,
however, there is no evidence that Inetico’s representation that the first seven days
of John Doe’s inpatient care would be covered was accompanied by any
disclaimer, much less a detailed one. While Inetico points to language in the
Brundage Plan’s Summary Plan Description that pre-certification does not
guarantee payment of any claims, there is no evidence in the record suggesting that
Kennedy Krieger had a copy of the plan description or otherwise knew the terms of
John Doe’s beneficiary plan. 4
Inetico also cites Provident American Insurance Co. v. Casteneda, a
Texas Supreme Court case, for the proposition that pre-approval cannot constitute
a misrepresentation of the terms of an insurance policy. That case, however, is far
4

While the email from Inetico’s Clinical Director of Care Management to
Kennedy Krieger states that there is plan language attached to the email, the
attached language is not described and is not a part of the summary judgment
record. (Dkt. # 24-8, Ex. E.) Koch attests that the plan language related to “the
approval criteria for inpatient psychiatric care,” but does not indicate whether the
disclaimer language regarding pre-certification was included. (Koch Aff. ¶ 15.)
24

more limited. First, the court’s decision was made in the context of a claim
brought under the Texas Insurance Code and the Deceptive Trade Practices Act,
and ruled that the pre-approval in that case was not actionable under those statutes.
988 S.W.2d 189, 199 (Tex. 1998). The claim here, by contrast, is a common law
claim based on promissory estoppel. Second, the court did not hold that a
pre-approval could never constitute a misrepresentation, but only that the
pre-approval in that case was not a misrepresentation given that the insurance
company lacked facts that were material to the determination of whether the
beneficiary was covered. Id. at 200. There is no evidence or argument that Inetico
lacked material information with regard to whether John Doe’s first seven days of
treatment would be covered. Indeed, when Inetico reversed its decision to certify
the seven days of inpatient treatment, part of the basis for its reversal was that the
Plan did not cover “services that are focused on behavioral modification,
speech/communication difficulties, and developmental delays”—information
which was known to it at the time of its representation to Plaintiffs. (Dkt. # 24-11,
Ex. H.)
Because Inetico has not shown that there is no genuine dispute of
material fact as to whether Plaintiffs’ reliance on its representation of coverage as
to the first seven days of John Doe’s inpatient care was justified, it is not entitled to

25

judgment as a matter of law on Plaintiffs’ claim for promissory estoppel. The
Court therefore DENIES Inetico’s Motion for Summary Judgment on this claim.
II.

Breach of Contract
Defendants also argue, and Plaintiffs’ counsel conceded at the

hearing, that Plaintiffs’ breach of contract claim is preempted by § 1144(a).
Plaintiffs allege that the Brundage Plan “constitutes a contract” between Brundage
and its employees “established for the benefit of, among others,” health care
providers reimbursed for providing services to plan beneficiaries. (Compl. ¶¶ 57–
58.) Plaintiffs further allege that the Brundage Plan provides coverage for
inpatient treatment such as that provided by Plaintiffs to John Doe, and that
Defendants breached the contract by failing to pay for Doe’s treatment. (Id. ¶¶ 60–
61.) This claim, in contrast to Plaintiffs’ claim for promissory estoppel, depends
on the allegation that the plan required the Brundage Plan to cover John Doe’s
inpatient stay at Kennedy Krieger, and thus to reimburse Plaintiffs. Because
Plaintiffs can recover as third-party beneficiaries only to the extent that the alleged
contract in question provides coverage to a plan beneficiary for the services
provided, Plaintiffs’ breach of contract claim is “dependent on, and derived from,
the rights of the plan beneficiar[y] to recover benefits under the terms of the plan.”
Access, 662 F.3d at 383. Plaintiffs’ breach of contract claim is therefore

26

preempted by ERISA. The Court therefore DISMISSES Plaintiffs’ claim for
breach of contract.
III.

Texas Insurance Code
Brundage argues that Plaintiffs’ claims under the Texas Insurance

Code are also preempted by ERISA. Under § 1144(b), an ERISA plan “shall [not]
be deemed to be an insurance company or other insurer, bank, trust company, or
investment company or to be engaged in the business of insurance or banking for
purposes of any law of any State purporting to regulate insurance companies,
insurance contracts, banks, trust companies, or investment companies.”
§ 1144(b)(2)(B). This provision exempts ERISA plans, including self-funded
ERISA plans such as Brundage’s, from state regulation “insofar as that regulation
‘relates to’ the plans.” FMC Corp. v. Holliday, 498 U.S. 52, 61 (1990).
In Access, the Fifth Circuit held that claims brought under the Texas
Insurance Code were not preempted where the statutory claims were based on
alleged misrepresentations made by ERISA plan fiduciaries to a third-party
provider. 662 F.3d at 384–85. Such misrepresentation claims do not seek to
regulate the administration of ERISA plans or the fiduciary duties of plan
administrators toward such plans, but merely the representations ERISA entities
make to third parties about the extent to which they will pay for their services. Id.
at 385. To the extent that Plaintiffs’ Texas Insurance Code claim is based on the
27

misrepresentations alleged in its promissory estoppel claim, it would not be
preempted by ERISA. The Court, however, is unable to determine Plaintiffs’ basis
for this claim. First, the part of the Texas Insurance Code cited in Plaintiffs’
Complaint was recodified in 2003, see Tex. Mut. Ins. Co. v. Ruttinger, 381 S.W.3d
430, 435 n.3 (Tex. 2012), and it is therefore unclear on which current provision of
the Code this cause of action rests. Additionally, the factual allegations for the
claim are limited to “Defendants’ conduct, as described above.” (Compl. ¶ 71.)
Because the allegations “described above” include distinct factual circumstances
(those underlying the promissory estoppel claim and those underlying the claim for
fraud), it is not clear which allegations form the foundation of the Texas Insurance
Code claim.
As pleaded, Plaintiffs’ claim under the Texas Insurance Code fails to
provide notice of the nature of their claim and leaves the Court unable to determine
whether the claim is preempted by ERISA. The Court therefore DISMISSES
WITHOUT PREJUDICE Plaintiffs’ claim under the Texas Insurance Code.
IV.

Fraud Claim Against Brundage
Brundage further argues that Plaintiffs’ claim against it for fraud

should be dismissed because Plaintiffs have failed to plead fraud with particularity.
“In alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake. Malice, intent, knowledge, and other
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conditions of a party’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
“Pleading fraud with particularity in this circuit requires time, place and contents
of the false representations, as well as the identity of the person making the
misrepresentation and what that person obtained thereby.” Williams v. WMX
Techs., Inc., 112 F.3d 175, 177 (5th Cir. 1997). While the pleading requirements
of Rule 9(b) “may be to some extent relaxed where . . . the facts relating to the
alleged fraud are peculiarly within the perpetrator’s knowledge,” the complaint
must set forth some factual basis for the claim even when alleged based on
information and belief. U.S. ex rel. Willard v. Humana Health Plan of Tex. Inc.,
336 F.3d 375, 385 (5th Cir. 2003).
In their claim for fraud, Plaintiffs allege that “Brundage falsely
advised Ms. Doe that it would be bankrupt if ordered to pay, and she would be
fired, and as a result Ms. Doe has not assigned her rights to pursue a § 502(a)
enforcement action to the Plaintiffs.” (Compl. ¶ 64.) Plaintiffs similarly allege
that, “[i]n an attempt to dissuade Ms. Doe from pursuing the matter any further . . .
Brundage falsely advised Ms. Doe that it would be bankrupt if ordered to pay, and
suggested that she would be fired if she pursued the matter further.” (Id. ¶ 41.)
Plaintiffs further allege that Brundage made the foregoing false statements and
fraudulent misrepresentations with the knowledge that they were false and with the
intent that Ms. Doe rely upon them. (Id. ¶¶ 65–66.)
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Plaintiffs’ allegations thus set forth the contents of the alleged
misrepresentation—that Brundage would be bankrupt if forced to reimburse
Plaintiffs for John Doe’s care—and what Brundage obtained—Jane Doe’s refusal
to assign her ERISA rights to Plaintiffs. They fail, however, to specify who made
the alleged misrepresentation and where and when it occurred. While Plaintiffs
argue that these specifics are solely within Brundage’s knowledge, their allegations
make clear that the alleged misrepresentation was made to a third party—Jane Doe.
Because the facts relating to the alleged fraud are available through Jane Doe, they
are not “peculiarly within the perpetrator’s knowledge,” and Plaintiffs must satisfy
the full rigor of the Rule 9(b) pleading standard. See U.S. ex rel. Russell v. Epic
Healthcare Mgmt. Grp., 193 F.3d 304, 308 (5th Cir. 1999) (holding that plaintiff
was not entitled to the relaxed 9(b) pleading standard because documents
containing the required information were in the possession of third parties),
abrogated on other grounds by U.S. ex rel. Eisenstein v. City of N.Y., N.Y, 556
U.S. 928 (2012). Having failed to do so, Plaintiffs’ claim for fraud is subject to
dismissal.
While a court generally grants leave to amend after dismissal for
failure to meet the heightened pleading requirements for fraud, Hart v. Bayer
Corp., 199 F.3d 239, 247 n.6 (5th Cir. 2000), the defect in Plaintiffs’ fraud claim is
not only technical. “[A] person who makes a misrepresentation is liable to the
30

person or class of persons the maker intends or has reason to expect will act in
reliance on the misrepresentation.” Ernst & Young, L.L.P. v. Pac. Mut. Life Ins.
Co., 51 S.W.3d 573, 578 (Tex. 2001); Diamond Point Plaza Ltd. P’ship v. Wells
Fargo Bank, N.A., 929 A.2d 932, 945 (Md. 2007). 5 A person who makes a
misrepresentation is also liable where the person makes a fraudulent representation
to a third person and intends or has reason to expect that its substance will be
communicated to another who will rely upon it. Neuhaus v. Kain, 557 S.W.2d
125, 138 (Tex. Civ. App. 1977); Diamond Point, 929 A.2d at 946.
Here, Plaintiffs have not alleged that Brundage intended or expected
that Plaintiffs would rely upon Brundage’s alleged misrepresentation to Jane Doe.
They instead allege that Brundage made fraudulent misrepresentations to Jane Doe
“with the intent that Ms. Doe rely upon them.” (Compl. ¶ 66.) Plaintiffs also
allege that Jane Doe relied on Brundage’s false statements, but do not allege that
they, Plaintiffs, relied on the false statements. (Id. ¶ 67.) While Jane Doe may
have a cause of action for fraud based on the alleged facts, Plaintiffs have no right
to recover for an alleged fraud committed against a third party. See, e.g., Westcliff
Co. v. Wall, 267 S.W.2d 544, 546 (Tex. 1954) (“A person making a representation
is only accountable for its truth or honesty to the very person or persons he seeks to

5

Because both Texas and Maryland follow the Second Restatement of Torts with
respect to claims for fraud, the Court need not conduct a choice-of-law analysis
with respect to Plaintiffs’ fraud claim. See R.R. Mgmt. Co., 428 F.3d at 222.
31

influence . . . .”). Lacking allegations that Brundage knew or expected that
Plaintiffs would act in reliance on its alleged misrepresentation, and that Plaintiffs
relied on the misrepresentation, Brundage is not liable to Plaintiffs for fraud for
misrepresentations allegedly made to Jane Doe. The Court therefore DISMISSES
Plaintiffs’ fraud claim.
V.

Claims Against the Brundage Plan
Finally, Brundage Plan further argues that it is entitled to judgment on

the pleadings because it lacks the capacity to be sued under the common law,
asserting that the “express limitation” of 29 U.S.C. § 1132(d)(1) precludes suit
against an ERISA plan except where suit is brought under the ERISA statute.
Under § 1132(d), “[a]n employee benefit plan may sue or be sued under this
subchapter as an entity.” § 1132(d)(1). Nothing in the provision restricts suits
against an ERISA plan to causes of action brought under ERISA or otherwise
states whether an employee benefit plan may sue or be sued based on non-ERISA
claims. The additional language in § 1132(d)(1) simply sets out the means for
service of process. See id. Further, the Supreme Court has stated that ERISA
plans may be sued for “run-of-the-mill state-law claims,” noting that they are
“relatively commonplace.” Mackey v. Lanier Collection Agency & Serv., Inc.,
486 U.S. 825, 833 (1988). Even if the Supreme Court’s assertion in Mackey was
dictum, the Brundage Plan has cited no authority, and certainly no “express
32

statutory language,” suggesting that actions against an ERISA plan are limited to
those brought under ERISA. The Brundage Plan is therefore not entitled to
judgment on the pleadings on this basis, and the dismissal of Plaintiffs’ claims
against the Brundage Plan for promissory estoppel and under the Texas Insurance
Code, discussed above, is without prejudice.
CONCLUSION
For the foregoing reasons, the Court GRANTS Brundage’s Motion
for Judgment on the Pleadings (Dkt. # 58), GRANTS the Brundage Plan’s Motion
for Judgment on the Pleadings (Dkt. # 59), GRANTS BMA’s Motion to Dismiss,
or in the Alternative for Summary Judgment (Dkt. # 23), and GRANTS IN PART
AND DENIES IN PART Inetico’s Motion to Dismiss, or in the Alternative for
Summary Judgment (Dkt. # 24).
IT IS SO ORDERED.
DATED: San Antonio, Texas, July 27, 2015.

_____________________________________
David Alan Ezra
Senior United States Distict Judge

33