RG Steel Wheeling, LLC v. The Health Plan of the Upper Ohio Valley Inc.
Filing
37
MEMORANDUM OPINION AND ORDER DENYING 13 DEFENDANT'S SECOND MOTION TO DISMISS. Signed by Senior Judge Frederick P. Stamp, Jr on 10/3/13. (cc)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
RG STEEL WHEELING, LLC,
a Delaware limited liability
company, debtor-in-possession,
Plaintiff,
v.
Civil Action No. 5:13CV7
(STAMP)
THE HEALTH PLAN OF THE
UPPER OHIO VALLEY INC.,
a West Virginia corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
DENYING DEFENDANT’S SECOND MOTION TO DISMISS
I.
The
plaintiff,
RG
Background
Steel
Wheeling,
LLC,
(“RG
Steel”
or
“plaintiff”) filed this civil action in this Court on January 18,
2013.
The plaintiff’s complaint alleges that The Health Plan of
the Upper Ohio Valley, Inc. (“The Health Plan” or “defendant”) had
entered into a contract, the Administrative Services Agreement,
with RG Steel which required The Health Plan to manage two medical
benefit plans for retirees: (1) those who were eligible before
August
1,
2003,
tax-exempt
Voluntary
Employee
Beneficiary
Association beneficiaries (“VEBA beneficiaries”), and (2) those who
were not eligible before that date, “non-VEBA beneficiaries.”
The
complaint further asserts that The Health Plan mismanaged the two
retirement funds resulting in the overpayment of $1,455,522.03 to
the VEBA beneficiaries’ trust account, causing a loss of the same
amount to RG Steel.
The plaintiff alleges that this loss occurred
when
RG
Steel
beneficiaries
entered
offset
bankruptcy
the
payment
in
May
that
2012,
The
and
Health
the
Plan
VEBA
had
negligently placed in the wrong bank account.1
In response to the complaint, the defendant filed a motion to
dismiss this case in its entirety for failure to state a claim
pursuant to Federal Rule of Civil Procedure 12(b)(6) and/or for
failure to join an indispensable party under Federal Rule of Civil
Procedure 12(b)(7).2
The defendant thereafter filed a supplemental brief to the
motion to dismiss or, in the alternative, a second motion to
dismiss under Rule 12(b)(6).
This Court then ordered that this
filing be treated as a second motion to dismiss and directed the
parties to submit further briefs on the issues raised in the
defendant’s second motion to dismiss, as well as potential issues
raised by this Court during oral argument on the motion held on
September 6, 2013.
A.
See ECF No. 29.
The Plaintiff’s Brief
In its brief, the plaintiff first argues that RG Steel
Wheeling and its previous entities (Wheeling-Pittsburgh Steel Corp.
1
As this Court has set forth a more detailed description of
the plaintiff’s complaint in another order, it will be omitted
here. See ECF No. 31.
2
This Court heard oral argument on the motion to dismiss on
September 6, 2013. Rulings were made at the conclusion of that
hearing. This Court then entered a memorandum opinion and order
confirming its pronounced order denying the defendant’s motion to
dismiss in part and granting it in part.
A more complete
background of the defendant’s first motion to dismiss can be found
at ECF No. 31, and is omitted here.
2
and Severstal) had a contractual relationship with the defendant to
manage group health benefits for both the VEBA beneficiaries and
the non-VEBA beneficiaries, however, the non-VEBA beneficiaries
were paid through RG Steel instead of a separate account.
The
plaintiff also reports that the Delaware bankruptcy court’s order
states that the stipulation by the parties, RG Steel and the VEBA
beneficiaries, does not release any person or entity that is not a
party to the stipulation.
The plaintiff then contends that the cases cited by this Court
in the September 6, 2013 oral argument, Board of Education of
McDowell County v. Zando, Martin & Milstead Inc., 390 S.E.2d 796
(W. Va. 1990) and Groves v. Compton, 280 S.E.2d 708 (W. Va. 1981),
do not apply to the facts of this case because those cases deal
with a single indivisible loss arising from the actions of multiple
parties that have contributed to the loss.
Here, the plaintiff
asserts, the VEBA beneficiaries have not contributed to the loss
suffered by RG Steel; the VEBA beneficiaries have simply retained
the negligently placed money.
The plaintiff further argues that the defendant’s best route
of action would be to institute a third-party action against the
VEBA beneficiaries.
The plaintiff contends, however, that this
route
fail
would
likely
because
the
VEBA
beneficiaries
were
innocent recipients of the misplaced money through the bankruptcy
proceedings of RG Steel.
Finally, the plaintiff asserts that it
would not be receiving double recovery if it wins this case because
3
the damages are in excess of $1.7 million and would be used to
satisfy the claims of the other creditors of RG Steel who did not
receive the same treatment as the VEBA beneficiaries because of The
Health Plan’s mistake.
In its response to the plaintiff’s brief, the defendant claims
that based on RG Steel’s complaint, every claim in this action
against it is based on the same set of facts as the settlement
reached with the VEBA beneficiaries in the Delaware bankruptcy
court.
The Health Plan then contends that even if there were
different actions contributing to the loss, West Virginia law still
views the two parties as joint tortfeasors if the detrimental
outcome was the consequence of both actors’ behavior (i.e. The
Health Plan and the VEBA beneficiaries).
Further, the defendant
argues that although the plaintiff claims that The Health Plan
negligently
placed
money
in
the
wrong
account,
it
was
also
negligent for the VEBA beneficiaries to not notify RG Steel or The
Health Plan of the overpayment; thus, there would be a unity of
causation.
Additionally, the defendant claims that it can set forth
claims
of
negligence
and/or
conversion
against
the
VEBA
beneficiaries, and claims of unjust enrichment and/or failure to
mitigate damages against RG Steel and the VEBA beneficiaries.
The
Health Plan also contends that it would have joined the bankruptcy
court proceedings between RG Steel and the VEBA beneficiaries had
it not relied on its belief that the settlement in bankruptcy court
4
would be credited toward this litigation.
argues
that
it
is
entitled
to
a
Finally, the defendant
set-off
value
of
the
full
bankruptcy settlement between the VEBA beneficiaries and RG Steel
because under West Virginia law, the set-off amount is calculated
based on the face amount of the settlement.
B.
The Defendant’s Brief
In its brief, the defendant first argues that it is entitled
to a set-off of the good faith settlement reached by RG Steel and
the VEBA beneficiaries.
Based on the case cited by this Court,
Zando, and the case law that follows it, the defendant contends
that because it seeks contribution from the VEBA beneficiaries as
a settling non-party, it is entitled to a set-off of any verdict
rendered against it equivalent to the amount of the settlement in
excess of $1.7 million.
Thus, because of that set-off, the
defendant asserts, RG Steel would no longer have a claim against
The Health Plan.
Further, relying on the West Virginia case law in Zando and
related cases, the defendant claims in its second argument that
this Court has the authority, if the parties do not agree, to
determine the manner of handling the set-off in this case.
The
defendant thus asks that this Court use a set-off amount of the
settlement reached in bankruptcy court because the facts underlying
the case in bankruptcy court between the VEBA beneficiaries and the
plaintiff are the same as the facts underlying this case between RG
Steel and the defendant. Thus, the defendant asserts, because West
5
Virginia case law disallows double recovery by a plaintiff, this
Court should not allow RG Steel to be unjustly enriched.
The
defendant asks that this Court permit a set-off in the amount of
$1,704,585.03.
In its response, RG Steel argues that The Health Plan has
failed to show that the VEBA beneficiaries and The Health Plan are
jointly liable under a common cause of action.
Further, the
plaintiff contends that the two parties did not contribute to a
single, indivisible loss because the VEBA beneficiaries were not a
party to the Administrative Services Agreement.
The plaintiff
also claims that if The Health Plan has a claim against the VEBA
beneficiaries,
it
can
make
those
claims
as
a
result
of
the
bankruptcy court’s order, but it cannot make those claims as a setoff against RG Steel.
Finally, the plaintiff asserts that it is
too early in this litigation to allow a complete dismissal on the
set-off issue because the facts are underdeveloped, thus, a Rule
12(b)(6) dismissal would be premature.
Having reviewed the parties’ pleadings and the relevant law,
this Court finds that the defendant’s motion to dismiss should be
denied.
II.
Applicable Law
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which
relief
can
be
granted”
as
a
motion
in
response
plaintiff’s complaint before filing a responsive pleading.
6
to
a
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.
Advanced Health-Care Servs.,
Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”
Id. at
143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.”
Fed. R. Civ. P.
8(a)(2). Still, to survive a motion to dismiss, the complaint must
demonstrate the grounds to entitlement to relief with “more than
labels and conclusions . . . factual allegations must be enough to
raise a right to relief above the speculative level.”
Bell
Atlantic v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v.
Iqbal, 556 U.S. 662, 663-666 (2009).
III.
Discussion
In order to satisfy the pleading requirements of Federal Rule
of Civil Procedure 8, the plaintiff must simply present a “short
and plain statement of the claim showing that the pleader is
7
entitled to relief.” Fed. R. Civ. P. 8(a)(2). As explained above,
this does not mandate that the plaintiff prove its claim at the
point of pleading, but only that it present sufficient facts to
convince the Court that its claim is “plausible.”
Twombly, 550
U.S. at 555.
The defendant contends that the plaintiff is unable to show
that its claim is sufficient because RG Steel has already received
a settlement with the VEBA beneficiaries in the same amount that it
is claiming is due from the defendant.
The Health Plan further
argues that it is entitled to a set-off of the settlement amount
reached in the Delaware bankruptcy court which would then destroy
the plaintiff’s claim for damages here because the two claims arise
from the same set of events.
The plaintiff claims that there are still damages to be had
even after it settled with the VEBA beneficiaries. RG Steel argues
that The Health Plan is not entitled to a set-off because this is
not a joint tortfeasor action, the VEBA beneficiaries were not part
of the Administrative Services Agreement that is alleged to be the
basis
of
the
complaint
against
The
Health
Plan.
Thus,
the
plaintiffs contend, the claims against The Health Plan and the
settlement with the VEBA beneficiaries do not arise out of the same
events.
“The right of contribution arises from liability for a joint
wrong committed by two or more parties against the plaintiff.”
Zando, 390 S.E.2d 801.
For instance, in Zando, the plaintiff in a
8
negligence and breach of contract case settled with the third-party
defendants before the jury trial ended.
Id.
The remaining
defendant, however, proceeded to the end of trial and the plaintiff
was awarded a $1,000,000.00 verdict.
Id.
The trial court found
that the remaining defendant was not entitled to a set-off from the
settlements reached between the plaintiff and the third-party
defendants.
Id.
The West Virginia Supreme Court reversed and
found that a practice had arisen in West Virginia “allowing the
defendant against whom a verdict is rendered to reduce the damages
to reflect any partial settlement the plaintiff has obtained from
a joint tortfeasor.”
Id. at 803.
The court scaled back this
pronouncement, however, by also holding that because “damages are
often speculative and liability uncertain [and] the amount of a
settlement legitimately might be far different from a damage award
which results from full litigation[,]” a trial court must determine
whether
the
“settlement
settlement
arrangement
was
in
good
substantially
defendants from receiving a fair trial.”
faith
and
impaired
whether
the
the
remaining
Id. at 804-05 (citing
O’Connor v. Pinto Trucking Serv., 501 N.E.2d 263 (Ill. App. 1986)).
Although the defendant makes a compelling argument, this Court
finds that dismissing the case at this point in the case would be
premature.
In oral argument during the September 6, 2013 hearing,
the plaintiff was unable to point to a specific contract (oral or
written) that was the basis of its complaint but was confident that
a contract in fact existed, the Administrative Services Agreement.
9
Further, the plaintiff states in the briefings for this motion that
it believes there were contracts not only between RG Steel and The
Health
Plan,
but
also
with
its
previous
Pittsburgh Steel Corp. and Severstal.
entities,
Wheeling-
See ECF No. 33 *2.
These
type of questions of the duties owed between the two parties, and
the duties between the parties and the VEBA beneficiaries, reduce
this Court’s ability to determine whether a set-off is appropriate
in this case.
Thus, the parties would best be served by discovery
and further investigation.
Additionally, this Court interprets the Zando case and other
West
Virginia
case
law
as
requiring
a
verdict
before
any
determination can be made of whether the settlement was reached in
good faith or whether or not a set-off is even required.
in
Zando
repeatedly
refers
to
a
verdict
in
The court
discussing
determination of a credit owed to a remaining defendant.
the
See
generally Zando, 390 S.E.2d at 802-809. This conclusion is further
supported by Groves wherein the West Virginia Supreme Court lists
several different methods of determining how a settlement paid by
a joint tortfeasor should be handled as a credit to the remaining
defendant(s).
Groves, 280 S.E.2d at 711.
The court in Groves
listed the methods of handling a settlement, all of which require
a final verdict:
[t]he jury can be informed of the amount of the
settlement and instructed that they must deduct this
amount from their award of damages . . . . [the court
can] make no reference to the settlement; and, after the
verdict is returned and judgment entered, the defendant
may utilize the settlement figure ‘when an attempt to
10
satisfy the judgment is made’ . . . . [or] by stipulation
of the parties, the amount of the settlement can be used
as a credit and deducted from the amount of the jury
verdict.
Id.
Thus, at this stage of the proceedings, wherein a verdict has
yet to occur, too many unanswered questions remain to grant a
motion to dismiss at this time.
As stated previously, it is unclear exactly what the terms of
the contract between the parties are or what type of contract was
formed.
Without this information, it would be difficult for this
Court to determine (1) whether or not the VEBA beneficiaries are
simply an innocent party or a joint tortfeasor with The Health Plan
and/or, (2) as the defendant claims, whether or not the VEBA
beneficiaries are a tortfeasor with the plaintiff for failure to
report the misplacement of the funds.
Consequently, the actual
duties of the parties to each other are unclear at this point in
the litigation and thus it is unclear whether or not the plaintiff
has a claim to damages above and beyond the amount reached in the
settlement
with
the
VEBA
beneficiaries
or
even
whether
the
settlement with the VEBA beneficiaries should matter in the instant
case, as it pertains to the contribution due to The Health Plan.
These types of questions may be answered through discovery and
further investigation, or even possibly through a jury trial that
results in a verdict that allows this Court to determine what, if
any, credit the defendant is entitled to based on the bankruptcy
settlement.
11
Finally, this Court notes that “[a] settlement entered into
between a nonparty and a claimant prior to the instigation of a
lawsuit, should discharge the nonparty from further obligation to
either the claimant or the nonparty’s joint tortfeasor, as long as
the settlement was entered into in good faith and the amount of the
settlement is disclosed to the trial court for verdict reduction.”
Cline v. White, 393 S.E.2d 923, 926 (W. Va. 1990).
This same
concept has been reinforced and upheld by later West Virginia
Supreme Court cases exemplifying the extension of Zando.
Smith v.
Monongahela Power Co., 429 S.E.2d 643, 649 (W. Va. 1993); Cook v.
Stansell, 411 S.E.2d 844, 846-47 (W. Va. 1991).
This extension,
however, must also be reigned in by the fact that in order to
receive credit for the settlement of a nonparty, the non-settling
defendant must be able to show that “there is a single and
indivisible injury, the damages are inseparable[,] and any amounts
received from any of the defendants must be deducted from the total
damages sustained.”
Zando, 390 S.E.2d at 808.
Again, even with the case law above ensuring that a nonparty
settlement can be considered as credit to a non-settling defendant,
The Health Plan must also show that there is enough information to
determine that there was a single and indivisible injury.
Given
that there is not a clear picture as to where each party stands in
relation
to
each
other;
based
on
the
bankruptcy
settlement,
contract(s) or lack of a contract involved in this case, and the
plaintiff’s claim as to a fiduciary duty between it and The Health
12
Plan otherwise; the defendant has not proven that the plaintiff’s
claim for damages does not rise above a speculative level. At this
stage in the litigation, it has not been shown that the VEBA
beneficiaries are a nonparty tortfeasor or are, as the plaintiff
contends, an innocent party who received money from an alleged
negligent
mistake
by
The
Health
Plan.
Because
of
these
uncertainties, this Court reiterates that the discovery process and
investigation will ensure that these issues are absolved and this
action is not prematurely dismissed.
Accordingly, this Court finds that dismissal is not warranted
at this time because it is uncertain what the relationships and
obligations are between the parties, specifically whether or not
there has been a single indivisible loss caused by both The Health
Plan and the VEBA beneficiaries, and those facts are integral to
the determination of whether a set-off should be granted.
The
plaintiff still has a “plausible” claim to damages, Twombly, 550
U.S. at 555, and thus the defendant’s second motion to dismiss is
denied.
IV.
Conclusion
For the reasons stated above, the defendant’s second motion to
dismiss (ECF No. 13) is DENIED.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
13
DATED:
October 3, 2013
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
14
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