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

Filing 114

ORDER GRANTING IN PART AND DENYING IN PART 104 Motion to Dismiss; GRANTING IN PART AND DENYING IN PART 105 Motion to Dismiss; GRANTING 106 Motion to Dismiss. Plaintiffs promissory estoppel claim against each Defendant for the first seven days of inpatient services provided to John Doe remains live. 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 IN PART AND DENYING IN PART BRUNDAGE
AND THE BRUNDAGE PLAN’S MOTION TO DISMISS, (2) GRANTING
BMA’S MOTION TO DISMISS, AND (3) GRANTING IN PART AND
DENYING IN PART INETICO’S MOTION TO DISMISS
Before the Court are a Motion to Dismiss filed by Defendants
Brundage Management Company, Inc. (“Brundage”) and Brundage Management
Company, Inc. Employee Benefit Plan (the “Brundage Plan”) (Dkt. # 104); a
Motion to Dismiss filed by Defendant Benefit Management Administrators, Inc.
(“BMA”) (Dkt. # 106); and a Motion to Dismiss filed by Defendant Inetico, Inc. t/a
1

Ineticare (“Inetico”) (Dkt. # 105). The Court held a hearing on the Motions on
November 16, 2015. At the hearing, Alan Milstein, Esq., represented Plaintiffs
Kennedy Krieger Institute, Inc.; Kennedy Krieger Children’s Hospital, Inc.; and
Kennedy Krieger Associates, Inc. (collectively, “Plaintiffs”). Bryan Bolton, Esq.,
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 IN
PART AND DENIES IN PART Brundage and the Brundage Plan’s Motion to
Dismiss, GRANTS BMA’s Motion to Dismiss, and GRANTS IN PART AND
DENIES IN PART Inetico’s Motion to Dismiss.
BACKGROUND
Brundage is a company incorporated in Texas with a principal place
of business in Texas. (“Am. Compl.,” Dkt. # 102 ¶ 4.) Brundage provides health
care 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
2

Florida corporation with its principal place of business in Florida, provides “care
management services” to BMA on behalf of Brundage. (Am. 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 (Am.
Compl. ¶ 17.) Her minor son, John Doe, was also covered by the plan. (Id. ¶ 18.)
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. ¶¶ 18–19.) 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. ¶ 21.) The physician referred
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. ¶¶ 20–21.)

1
2

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

Kennedy Krieger Institute, Inc. is the parent corporation of Kennedy Krieger
Children’s Hospital, Inc. and Kennedy Krieger Associates, Inc. (Am. Compl. ¶ 1.)
All of the Kennedy Krieger entities are non-profit corporations incorporated and
headquartered in Maryland. (Id. ¶ 1–3.)
3

In November 2012, Kennedy Krieger’s “Neurobehavioral Unit team”
evaluated John Doe and determined that he should be admitted. (Id. ¶ 24.) 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. ¶ 25–26.) Plaintiffs allege that prior to
February 14, 2013, Inetico,
acting individually and on behalf of the other Defendants, acting as
the agent of the other Defendants, and acting under the control of and
at the direction 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,
authorized the first seven days of coverage, and promised that the
coverage would continue so long as it continued to be medically
necessary . . . .
(Id. ¶ 29.) On February 14, Plaintiffs admitted John Doe in reliance on Inetico’s
representation. (Id. ¶ 31.)
Plaintiffs allege that on February 22, 2013, Inetico “disingenuously
and in bad faith claimed that the inpatient treatment was ‘not medically necessary’
then or at any prior time.” (Id. ¶ 34.) 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.
¶¶ 37.) John Doe was successfully treated and released after completing the
program. (Id. ¶ 40.) The total bill for Plaintiffs’ services is $750,000, and remains
outstanding. (Id. ¶ 41.)
4

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. ¶ 43–44.) Plaintiffs further allege
that Brundage attempted to dissuade Jane Doe from pursuing the matter further by
advising her that Brundage would be bankrupt if forced to pay, and suggested that
she would be fired if she pursued the matter. (Id. ¶ 46.) 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, and
violations of the Texas Insurance Code. (Dkt. # 1 ¶¶ 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.)
After a hearing on Defendants’ respective motions to dismiss and for
judgment on the pleadings, the Court entered an Order ruling on the motions on
July 27, 2015. (Dkt. # 101.) The Court’s Order dismissed Plaintiffs’ claims for
breach of contract and fraud with prejudice, dismissed Plaintiffs’ claim for
5

violations of the Texas Insurance Code without prejudice, and dismissed Plaintiffs’
claim for promissory estoppel against Brundage, the Brundage Plan, and BMA
without prejudice. (Id.) The Court further dismissed Plaintiffs’ promissory
estoppel claim against Inetico to the extent that Plaintiffs sought recovery for the
cost of Doe’s care beyond the first seven days of care. (Id.) The Court found that
Plaintiffs had stated a claim for promissory estoppel against Inetico, however, with
respect to the first seven days of care. (Id.)
Plaintiffs filed an Amended Complaint on August 17, 2015. (Dkt.
# 102.) The Amended Complaint alleges promissory estoppel as the sole cause of
action against Defendants. (Am. Compl. ¶¶ 49–60.) Defendants filed their
respective Motions to Dismiss for failure to state a claim on September 3, 2015.
(Dkt. ## 104, 105, 106.) Plaintiffs filed an omnibus Response in opposition, and
Brundage and Inetico filed Replies. (Dkt. ## 109, 110, 111.)
LEGAL STANDARDS
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
6

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
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
DISCUSSION
Defendants argue they are entitled to dismissal of Plaintiffs’
promissory estoppel claim to recover the cost of care provided to John Doe beyond
the first seven days of care. Defendants specifically argue that Plaintiffs have
failed to state a promissory estoppel claim for care provided after the first seven
days, and that even if Plaintiffs have stated such a claim, it is preempted by
ERISA. 3 Brundage further argues that it cannot be sued on common law claims in
its capacity as an ERISA plan sponsor and administrator. Finally, Inetico argues
that Plaintiffs’ claim should be dismissed because Plaintiffs failed to separately
plead the amount of alleged damages for the first seven days of care and the

3

The Court previously dismissed without prejudice Plaintiffs’ promissory estoppel
claim against Brundage, the Brundage Plan, and BMA for the cost of the first
seven days of care based on Plaintiffs’ failure to sufficiently plead that Inetico was
acting as the other Defendants’ agent. (Dkt. # 101 at 18–19.) Plaintiffs’ Amended
Complaint includes specific factual allegations with respect to Inetico’s alleged
agency relationship with the other Defendants, and Defendants have not challenged
Plaintiffs’ promissory estoppel claim for the first seven days of care on this basis.
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amount for care provided after the first seven days. The Court will first address the
issue of ERISA preemption.
I.

ERISA Preemption
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
right to receive benefits under the terms of an ERISA plan; and (2) the claims
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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.
In its previous Order, the Court found that Plaintiffs’ promissory
estoppel claim to recover the costs of the first seven days of John Doe’s care was
not preempted by § 1144(a). (Dkt. # 101 at 10.) Plaintiffs’ allegations that
Defendants “promised and represented that there was coverage and agreed to pay
for the first seven days of inpatient care,” and that Plaintiffs reasonably relied on
Defendants’ promises in admitting John Doe, are neither dependant on nor derived
from John Doe’s right to recover benefits under the terms of the Brundage Plan,
and are thus not preempted by ERISA. (Id. at 10–11.) As in Access Mediquip,
L.L.C. v. UnitedHealthcare Insurance Co., 662 F.3d 376 (5th Cir. 2011), aff’d on
reh’g en banc, 698 F.3d 229 (2012), Plaintiffs’ promissory estoppel claim for the
first seven days of care can be decided without reference to the plans’ terms or the
rights of plan beneficiaries. (Dkt. # 101 at 11–12.)
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The Court also found, however, that Plaintiffs had not pleaded
sufficient facts to support the allegation that Defendants promised to pay for care
provided to John Doe after the first seven days. (Id. at 17.) To address this
deficiency, Plaintiffs’ Amended Complaint alleges that Inetico,
acting as the agent 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, authorized the first seven days of coverage, and promised that
coverage would continue so long as it continued to be medically
necessary for Mr. Doe to stay in the inpatient Neurobehavioral Unit.
This promise . . . was a promise that the services were covered under
the Plan and that in seven days it would review whether inpatient
treatment was still necessary.
(Am. Compl. ¶¶ 29–30 (emphasis in original).) Plaintiffs further allege that the
self-injurious behavior that justified John Doe’s initial admission remained present
on the seventh day of admission, that continued inpatient treatment remained
medically necessary, and that Defendants nevertheless refused to pay for the cost
of continued inpatient treatment. (Id. ¶¶ 32, 34–37.)
Defendants argue that as pleaded, Plaintiffs’ promissory estoppel
claim for recovery beyond the first seven days of care is preempted by ERISA
because it requires a determination of whether continued care was “medically
necessary” under the terms of the plan. The Court agrees. State law claims based
on alleged misrepresentations by a plan fiduciary to a third-party service provider
regarding whether, or the extent to which, a beneficiary is covered by the plan are
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independent of the rights of plan beneficiaries to receive benefits under the plan.
Access, 662 F.3d at 383. Because such claims do not depend on whether the
provider’s services were covered under the patients’ plans, but instead on whether
the provider reasonably relied on the representations of a plan fiduciary, they are
not preempted by ERISA. Id. at 385. By contrast, a state law claim that implicates
the right to receive benefits under the terms of an ERISA plan and affects the
relationship between the plan and its fiduciaries is preempted. Id. at 382. “[A]ny
determination of benefits under the terms of a plan—i.e., what is ‘medically
necessary’ or a ‘Covered Service’—[] fall[s] within ERISA.” Lone Star OB/GYN
Assocs. v. Aetna Health Inc., 579 F.3d 525, 531 (5th Cir. 2009).
Plaintiffs’ claim for promissory estoppel with respect to care provided
after the first seven days is preempted because it depends on whether the services it
provided during that period were covered under the terms of John Doe’s plan. The
basis for Plaintiffs’ claim is that Inetico, as agent for the other Defendants,
promised that coverage for Kennedy Krieger’s inpatient services “would continue
so long as it continued to be medically necessary.” (Am. Compl. ¶ 29.) To
recover on its claim, Plaintiffs must show that the harm caused by its reasonable
reliance on this promise “can only be avoided by the enforcement of the promise.” 4

4

As noted in the Court’s previous Order, the parties dispute whether Maryland or
Texas law applies to Plaintiffs’ claim. (Dkt. # 101 at 14.) Because both states
apply the Second Restatement’s definition of promissory estoppel, Zenor v. El
11

Pavel Enters., Inc. v. A.S. Johnson Co., Inc., 674 A.2d 521, 532 (Md. 1996); see
also Hartford Fire Ins. Co. v. City of Mont Belvieu, Tex., 611 F.3d 289, 295 (5th
Cir. 2010). Whether equity requires enforcing the promise necessarily depends on
what was promised, and whether a defendant failed to fulfill that promise. Here,
what Defendants allegedly promised, and whether they failed to fulfill that
promise, requires determining the meaning of “medically necessary” under the
terms of John Doe’s plan—and by extension, whether Kennedy Krieger’s services
after the first seven days of inpatient care were covered by the plan. This is
precisely the sort of determination preempted by ERISA.
Plaintiffs argue that their promissory estoppel claim based on
Defendants’ alleged promise to cover the cost of John Doe’s care after the first
seven days of care, like their claim for the first seven days of care, is governed by
Access. In that case, 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 Fifth Circuit held that Access’s claims for promissory estoppel, negligent

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), there is no conflict
of law, and the 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).
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misrepresentation, and violations of the Texas Insurance Code were not preempted
by ERISA because the claims were based on Access’s reliance on alleged
misrepresentations made by United “regarding how much, and under what
conditions,” United would pay the provider for its services. Id. at 380. Because
these claims depended on the amount of reimbursement Access could have
reasonably expected given United’s representations, not on whether its services
were fully covered under the terms of the patients’ plans, they were not subject to
ERISA preemption. Id. at 385.
Access does not govern the result here, however, because the
representations underlying Access’s claims are distinct from the promise alleged
by Plaintiffs. In Access, United employees represented to Access that each of the
three patients in question were insured by United and had coverage for the
contemplated surgical procedures, and indicated that Access could bill United for
the services provided. Id. at 379–80. United subsequently refused to reimburse
Access. Id. The Fifth Circuit, characterizing Access’s claims, stated that “fairly
construed, Access’s claims allege that United’s agents’ statements, though
superficially about coverage under the plan, were in their practical context
assurances that Access could expect to be paid reasonable charges if it would
procure or finance the devices used in [the patients’] surgeries.” Id. at 381.

13

United’s statements were thus effectively representations, unqualified by any
condition, that it would reimburse Access for the contemplated services.
By contrast, the promise alleged by Plaintiffs with respect to payment
for services provided after the first seven days—“that the coverage would continue
so long as it continued to be medically necessary for Mr. Doe to stay in the
inpatient Neurobehavioral Unit”—is a representation of the conditions under which
John Doe’s coverage for Kennedy Krieger’s services under the plan would
continue. (Am. Compl. ¶ 29.) A claim that implicates the right to payment under
the terms of an ERISA benefit plan is preempted by § 1144(a). Lone Star
OB/GYN, 579 F.3d at 530. The pleaded promise is not a representation that
Kennedy Krieger would be reimbursed for its services, but rather a representation
of when Kennedy Krieger’s services would be covered. The promise is expressly
conditional: coverage for John Doe’s inpatient care beyond the first seven days
would continue only “so long as it continued to be medically necessary.” (Am.
Compl. ¶ 29.) The scope of Defendants’ alleged promise—that John Doe’s
coverage for Kennedy Krieger’s inpatient services would continue—thus depends
on the scope of its condition, and thus necessarily turns on the definition of
“medically necessary” under the plan.
Plaintiffs’ alleged promise is plagued by the same defect that caused
the Fifth Circuit in Access to find that Access’s claims for unjust enrichment and
14

quantum meruit—in contrast to its claims for misrepresentation and promissory
estoppel—were preempted. Access alleged that, had it not provided its services to
the United patients, another provider would have had to procure or finance the
devices used in their surgeries. Access, 662 F.3d at 386. These claims depended
on whether the ERISA plan would have obliged United to reimburse the other
potential providers, which would have required a determination of whether the
plans conferred a right to coverage for the services provided. Id. Plaintiffs’
promissory estoppel claim for services provided after the first seven days similarly
depends on the terms of John Doe’s plan—in particular, whether continuing
inpatient services after the first seven days of care were “medically necessary,” and
thus covered, by the plan.
Plaintiffs argue that reference to the definition of medically necessary
under the plan terms is not, in fact, required under their pleadings. The Amended
Complaint alleges that Defendants “authorized the first seven days of coverage,
and promised that the coverage would continue so long as it continued to be
medically necessary,” necessarily implying that Defendants had determined
Kennedy Krieger’s inpatient services to be medically necessary when John Doe
was first admitted. (Am. Compl. ¶ 29 (emphasis added).) The Amended
Complaint further alleges that the self-injurious behavior that originally justified
John Doe’s admission “remained present on the seventh day of admission,” and
15

that Defendants nevertheless subsequently claimed that continued inpatient
services were not be covered. (Id. ¶¶ 32, 35.) Plaintiffs argue that as a result, no
reference to the plan terms is necessary to prove their claim for promissory
estoppel—if Defendants initially determined that Kennedy Krieger’s services were
medically necessary, and John Doe’s condition had not changed at the time
Defendants refused continued coverage, the factfinder could determine that
inpatient services continued to be medically necessary based on Defendants’
original determination of medical necessity, without reference to the actual
definition of medically necessary under the plan.
While Plaintiffs’ argument is well-stated, the Court is not persuaded
that Plaintiffs can avoid ERISA preemption on this basis. First, whether Kennedy
Krieger’s inpatient services “continued to be medically necessary” necessarily
depends on whether they were medically necessary in the first place. If an
insurer’s initial determination that a provider’s services were medically necessary
was in fact incorrect, a subsequent refusal to cover ongoing services would not
breach a promise to continue coverage “so long as it continues to be medically
necessary”—if the coverage was not medically necessary to begin with, it by
definition could not continue to be medically necessary. As a result, in order to
determine whether the insurer breached its promise, the factfinder would have to
determine whether the services in question were medically necessary in the first
16

instance. Such a determination would require reference to the definition of
medical necessity under the plan terms, and is thus preempted by ERISA.
Second, and as noted above, the Supreme Court has repeatedly
described the ERISA preemption provision as “clearly expansive,” aiming to
ensure that plans and plan sponsors would be subject to a uniform body of benefits
law. Access, 662 F.3d at 382 (citing Egelhoff, 532 U.S. at 146); see also
Travelers, 514 U.S. at 656. Allowing a provider to plead a claim for promissory
estoppel based on an insurer’s promise to cover medically necessary services
would significantly undermine this purpose, enabling the litigation of ERISA plan
terms under state law based on the sort of interaction between providers and
insurers—an initial representation of coverage, accompanied by periodic reviews
to determine whether coverage remains medically necessary—that occurs every
day. Finally, the Court notes that while Plaintiffs’ present pleadings do not provide
a basis to recover the cost of John Doe’s care beyond the first seven days, Plaintiffs
are not without a remedy. If Plaintiffs are unable to enforce the terms of the plan
through a valid assignment of Jane Doe’s ERISA claim, see Tango Transport v.
Healthcare Fin. Servs. LLC, 322 F.3d 888, 892 (5th Cir. 2003), Plaintiffs may
bring suit against Jane Doe for the cost of the services provided, and Jane Doe

17

could then join Defendants as third-party defendants to enforce her own rights
under the terms of the plan.5
In sum, the Court finds that Plaintiffs’ promissory estoppel claim
against Defendants for services provided to John Doe after the first seven days of
care is preempted by ERISA. The Court therefore DISMISSES WITHOUT
PREJUDICE Plaintiffs’ promissory estoppel claim to the extent it seeks to
recover for services provided beyond the first seven days of care. 6
II.

Whether Brundage is a Proper Party
Brundage further argues that determining whether it is a proper party

to this suit will require consideration of the ERISA plan terms, and that Plaintiffs’
entire promissory estoppel claim is therefore preempted. (Dkt. # 104 at 8.)
Brundage, as Jane Doe’s employer, sponsors the Brundage Plan, which covered
Jane and John Doe. (Am. Compl. ¶¶ 5, 12, 14, 17–18.) Brundage argues that

5

As the Court noted at the hearing, it appears from Plaintiffs’ allegations that
Kennedy Krieger admirably performed its ethical duty in continuing to treat a
patient that remained a danger to himself and others. It is therefore with reluctance
that the Court finds the bulk of Plaintiffs’ claim for recovery preempted. The
Court must nevertheless follow the law as it applies to the allegations stated in the
Amended Complaint, and as set out in detail above, the law requires finding that
Plaintiffs’ claim for recovery beyond the first seven days of care is preempted by
ERISA.
6

Having found that Plaintiffs’ claim for services provided beyond the initial seven
days of care, as currently alleged, is preempted by ERISA, the Court need not
address Defendants’ argument that Plaintiffs’ allegations fail to state a claim for
promissory estoppel.
18

whether it may be held liable depends on its relationship to the Brundage Plan, and
that the Court will need to consider the terms of the plan to determine whether it
Brundage was a plan sponsor and whether the Brundage Plan was functionally
independent from Brundage. (Dkt. # 104 at 9.)
Brundage’s argument is misplaced. The cases cited in support of its
argument deal with claims brought by plan beneficiaries under ERISA’s private
right of action, which limits enforcement of money judgments against an employee
benefit plan to the plan itself unless liability against another person is established
in that person’s individual capacity. 29 U.S.C. § 1132(d)(2); see also Musmeci v.
Schwegmann Giant Super Markets, Inc., 332 F.3d 339, 349 (5th Cir. 2003).
Plaintiffs’ Amended Complaint does not allege a claim under 29 U.S.C. § 1132,
and indeed makes clear that Jane Doe has not assigned Plaintiffs her right to pursue
an enforcement action under that provision. (Am. Compl. ¶ 46.) Plaintiffs’ claim
is instead based on promissory estoppel, and its theory of liability against
Brundage is based on agency, not on Brundage’s relationship to the Brundage
Plan. Plaintiffs specifically allege that Inetico was Brundage’s actual and apparent
agent, that Brundage had the right to control and direct Inetico’s actions, and that
Inetico was authorized to act on behalf of and bind Brundage. (Id. ¶¶ 15–16.)
Plaintiffs further allege that Inetico’s promises regarding John Doe’s coverage
were made “as the agent of the other Defendants,” and that Inetico’s decision to
19

reverse itself and refuse to cover John Doe’s inpatient care “was made after taking
direction from its principals [including] Brundage.” (Id. ¶¶ 29, 36.)
Brundage’s liability under the Amended Complaint thus does not
depend on the terms of the Brundage Plan, but rather on Brundage’s alleged role as
Inetico’s principal. These claims do not “relate to” an ERISA plan under § 1144,
and are thus not subject to ERISA preemption. The Court therefore DENIES
Brundage’s Motion to Dismiss on this basis.
III.

Plaintiffs’ Pleading of Damages
Finally, Inetico summarily argues that Plaintiffs’ failure to allege the

damages arising out of the first seven days of care separately from the damages
arising out of services rendered after the first seven days requires that Plaintiffs’
entire promissory estoppel claim be dismissed. (Dkt. # 105 at 5–6.) Inetico cites
no authority in support of its argument. Plaintiffs have pleaded a single claim for
promissory estoppel, and the Court finds no basis for the proposition that a plaintiff
must separately and specifically allege damages arising out of its reasonable
reliance on a promise based on when the damages were accrued. The Court
therefore DENIES Inetico’s Motion to Dismiss on this basis.
CONCLUSION
For the foregoing reasons, the Court GRANTS IN PART AND
DENIES IN PART Brundage and the Brundage Plan’s Motion to Dismiss (Dkt.
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# 104), GRANTS BMA’s Motion to Dismiss (Dkt. # 106), and GRANTS IN
PART AND DENIES IN PART Inetico’s Motion to Dismiss (Dkt. # 105).
Plaintiffs’ promissory estoppel claim against each Defendant for the first seven
days of inpatient services provided to John Doe remains live.
IT IS SO ORDERED.
DATED: San Antonio, Texas, November 18, 2015.

_____________________________________
David Alan Ezra
Senior United States Distict Judge

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