Barber v. Sedgwick Claims Management Services, Inc.

Filing 191

MEMORANDUM OPINION AND ORDER denying 67 MOTION by Sedgwick Claims Management Services, Inc. to Dismiss Counts I and II of Plaintiff's 1 Complaint; granting in part and denying in part 75 MOTION by Jill C. Barber for Leave to File Sur-Reply to Defendant's Reply to Response to Motion to Dismiss or for Oral Argument. Signed by Judge Robert C. Chambers on 3/17/2016. (cc: attys; any unrepresented parties) (mkw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION

JILL C. BARBER,
Plaintiff,
v.

CIVIL ACTION NO. 3:14-27349

SEDGWICK CLAIMS MANAGEMENT
SERVICES INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant’s Motion to Dismiss (ECF No. 67) and Plaintiff’s
Motion for Leave to File Sur-Reply to Defendant’s Reply to Response to Motion to Dismiss or for
Oral Argument (ECF No. 75). For the reasons set forth below, Defendant’s Motion to Dismiss
(ECF No. 67) is DENIED and Plaintiff’s Motion for Leave to File Sur-Reply (ECF No. 75) is
GRANTED in part and DENIED in part.1
I.

1

Background

Although Plaintiff filed a Motion for Leave to File a Sur-Reply, the motion itself contained all of
Plaintiff’s substantive arguments. Plaintiff herself stated at the conclusion of her Motion“[t]he content of
this motion represents all of the argument that Plaintiff would make in regard to that issue.” ECF No. 75,
at 2. In other words, Plaintiff circumvented L. R. Civ. P. 7.1(a)(7) by setting forth her actual argument
within her Motion. Prior to the Court responding to Plaintiff’s Motion, Defendant filed a Response
Memorandum (addressing the substantive arguments in Plaintiff’s Motion). ECF No. 77. Both Plaintiff’s
Surreply Motion and Defendant’s Response were considered in the Court’s consideration of Defendant’s
Motion to Dismiss; therefore, Plaintiff’s Motion is granted with respect to the request to file a surreply even
though no additional briefing will be considered (as Plaintiff already set forth her argument in the Motion
itself and Defendant filed a Response). Plaintiff’s Motion is denied with respect for her request for an oral
argument. The briefs and pleadings already filed in this case were sufficient for the Court to rule upon
Defendant’s Motion to Dismiss.

Plaintiff alleges in the Complaint that on September 24, 2012, she was bitten by a brown
recluse spider while working in the stock room at the Family Dollar Store in West Hamlin, Lincoln
County, West Virginia. ECF No. 1, at ¶ 14. On September 28, 2012, she filed a worker’s
compensation claim as a result of the injuries she sustained from the bite. Id. at ¶ 15. Defendant
Sedgwick Claims Management Services Inc. (“Sedgwick”), as third-party claims administrator for
self-insured Family Dollar, authorized periodic payments of both indemnity for wage loss and
medical benefits. Id. at ¶ 16. However, Plaintiff experienced severe complications from the wound
and filed the abovementioned Complaint against Defendant on October 29, 2014.
Defendant moves to dismiss Count 1 and Count 2 of Plaintiff’s Complaint at this juncture.
Count 1 of the Complaint alleges a “First Act of Fraudulent Conduct” in which Plaintiff claims
that on May 2, 2013, a wound care physician who was treating Plaintiff, Dr. Harrison, requested
that Defendant approve hyperbaric oxygen therapy for Plaintiff’s wound (due to the fact that it
would not heal). Id. at ¶ 20. Defendant, however, denied this request, claiming that its peer review
doctor, Dr. Hamilton, deemed the request for hyperbaric oxygen not medically necessary. Id. at ¶
22. Plaintiff then received two Claims Administrator’s Orders in May, 2013, denying the
treatment, which incorporated Dr. Hamilton’s report. Id. at ¶¶ 22, 23. The Orders referred to the
Plaintiff as “a 47-year old male” and stated Plaintiff “has high risk of comorbidities to prevent
wound healing including smoking, alcohol use, and illicit drug use as documented.” Id. at ¶ 22.
Plaintiff contends that these allegations are false and that Dr. Hamilton, as well as
Sedgwick’s claims administrator, Iryna Slotylo, knew or should have known that these assertions
were false based on the medical records that were provided to them. Id. at ¶¶ 25, 26. Additionally,
despite Plaintiff’s attempts to correct these errors by contacting Ms. Slotylo, Plaintiff alleges that
Ms. Slotylo fraudulently relied on Dr. Hamilton’s report to deny medical treatment, and then

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allowed it to be presented to the West Virginia Office of Judges of the Worker’s Compensation
Division (“Office of Judges”) and to remain in evidence while Plaintiff’s protests were pending.
Id. at ¶¶ 27, 28. Although Plaintiff settled her worker’s compensation claims on July 28, 2014, she
alleges that Defendant’s actions unnecessarily delayed treatments for her wound causing pain,
anxiety, and emotional distress. Id. at ¶¶ 33, 34.
Count 2 of Plaintiff’s Complaint, alleges a “Second Act of Fraudulent Conduct” in which
Plaintiff states that in the spring of 2013, one or more of her treating physicians suspected the
possibility of a condition or diagnosis known as Pyoderma Gangrenosum (“PG”), as a contributing
factor to the unresponsiveness of Plaintiff’s arm to treatment. Id. at ¶ 37. On October 24, 2013,
Defendant arranged an independent medical evaluation of Plaintiff by Dr. ChuanFang Jin, who
opined that if Plaintiff was in fact suffering from PG, then her medical condition was not related
to her work related injury. Id. at ¶ 38. Then, Plaintiff’s wound care specialist, Dr. MacFarland,
wrote a letter to Defendant indicating her suspicion that Plaintiff had underlying PG, advising
Defendant “we find it prudent now for her to be seen at Mayo Clinic by a specialist for this
condition and an appointment has been arranged for January 6, 2014,” and requesting Defendant
approve the appointment through worker’s compensation. Id. at ¶ 40. Prior to receiving a reply
from Defendant, Plaintiff spent several days at the Mayo Clinic undergoing a series of tests. Id. at
¶ 42. At the conclusion of the examination, the physicians who participated in the testing and
evaluation told Plaintiff that, in their opinion, she did not have PG. Id. at ¶ 43. Although a full
description of the findings and conclusions would not be available to Plaintiff for 6 to 8 weeks, the
doctors at the Mayo Clinic provided Plaintiff with some of the laboratory reports that were
available at the time. Id. On March 4, 2014, ten weeks after Plaintiff requested approval of her
Mayo Clinic examination, Defendant authorized and approved her request. Id. at ¶ 44.

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On March 10, 2014, Plaintiff’s counsel provided his first notice of representation to Ms.
Slotylo and attached the available medical records from Plaintiff’s Mayo Clinic evaluation,
indicating Plaintiff did not suffer from PG. Id. at ¶ 45. Then, on March 11, 2014, My Slotylo
provided Dr. Jin with an “additional medical record, the hospitalization record in St. Mary’s
Hospital with admission on November 12, 2013 and discharge on November 23, 2013.” Id. at ¶
46. That same day, without re-examining Plaintiff, Dr. Jin issued a supplemental report to
Defendant and concluded that Plaintiff’s most likely diagnosis was PG. Id. Ms. Slotylo then
rendered a Claim Decision denying further benefits to the Plaintiff because she suffered from PG.
Id. at ¶ 47. This information was represented to the Office of Judges. Id.
Plaintiff claims that at the time Mr. Slotylo issued the Claim Decision, she knew and fully
appreciated that:
1. Plaintiff had been evaluated at Mayo Clinic in January 2014, and had been
determined not to be suffering from PG;
2. The St. Mary’s Hospital records she had provided to Dr. Jin on March 11, 2013
did not definitively diagnose Plaintiff’s condition as PG;
3. Dr. MacFarland was the attending or supervising wound care specialist
overseeing the November 2013 hospitalization of Plaintiff and did not then
definitively diagnose PG;
4. Dr. MacFarland had subsequently requested the Mayo Clinic evaluation (on
December 17, 2013) to definitively evaluate whether or not Plaintiff had PG;
5. She had on March 4, 2014, belatedly approved Dr. MacFarland’s
recommendation for the evaluation by Mayo Clinic; and
6. Plaintiff through counsel had previously provided her with the laboratory
reports from Mayo Clinic which did not diagnose PG.
Id. at ¶ 48. After issuing this Claim Decision, Ms. Slotylo did not approve any further medical
treatment for Plaintiff. Id. at ¶ 50. As such, Plaintiff alleges that she was forced to obtain medical
treatment on her own and at her own expense, and that, as in Count 1, Defendant’s fraudulent
behavior delayed her in obtaining proper medical treatment for her wound and caused her
unnecessary pain, anxiety, and emotional distress. Id. at ¶ 51, 52.

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II.

Standard of Review

In Plaintiff’s Response to Defendant’ Motion to Dismiss, Plaintiff claims to unilaterally
convert Defendant’s Motion to Dismiss into a motion for summary judgement. Specifically
Plaintiffs notes, “Plaintiff hereby introduces factual documents in opposition to Defendant’s
motion, thus converting it from a Rule 12(b)(6) motion into a motion for summary judgment under
Rule 56, as set forth in Rule 12(d), and as ultimately required by Persinger . . . .” ECF No. 71, at
1–2. Plaintiff cites no authority to support this contention. Rather, as Defendant points out, the
Fourth Circuit has held that “a Rule 12(b)(6) motion to dismiss supported by extraneous materials
cannot be regarded as one for summary judgment until the court acts to convert the motion by
indicating that it will not exclude from its consideration of the motion the supporting extraneous
materials.” Finley Lines Joint Protective Bd. Unit 200 v. Norfolk S. Corp., 109 F.3d 993, 997 (4th
Cir. 1997). As such, it is the Court’s decision whether to include extraneous materials in its
consideration. Because Defendant filed a motion to dismiss, did not address any matters outside
the Complaint, and has not had the opportunity to present all material that would be pertinent to a
motion for summary judgment, the Court will not consider Plaintiff’s extraneous evidence at this
time. Tsai v. Md. Aviation, No. 07-1511, 2008 WL 5424085, at *4 (4th Cir. Dec. 31,
2008)(“Because the district court converted a straightforward motion to dismiss into one for
summary judgment without giving plaintiff the ‘reasonable opportunity to present all material
made pertinent to such a motion by Rule 56,’ we reversed.”)(quoting Fed. R. Civ. P. 12(b)(6)).
Defendant, however, concedes that it filed its 12(b)(6) motion untimely, as Defendant filed
the Motion after its responsive pleading. However, Fed. R. Civ. P. 12(h)(2) provides that “[f]ailure
to state a claim upon which relief can be granted . . . . may be raised . . . . by a motion under Rule
12(c).” As such, the Court will construe Defendant’s Motion to Dismiss as a Motion for Judgment

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on the Pleadings. The Fourth Circuit has indicated that the standard for motions made pursuant to
Rule 12(c) is the same as the standard applied to motions made pursuant to 12(b)(6), noting the
“distinction is one without a difference.” Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278
F.3d 401, 405–06 (4th Cir. 2002). As such, the standard of review for a motion for judgment on
the pleadings is set forth below.
To overcome a motion for judgment on the pleadings, a complaint must be plausible. Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 546 (2007). This standard requires a plaintiff to set forth the
“grounds” for an “entitle[ment] to relief” that is more than mere “labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Id. at 555 (internal quotation
marks and citations omitted). To survive a motion for judgment on the pleadings, a complaint must
contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Facial
plausibility exists when a claim contains “factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted).
Accepting the factual allegations in the complaint as true (even when doubtful), the
allegations “must be enough to raise a right to relief above the speculative level . . . .” Id. (citations
omitted). If the allegations in the complaint, assuming their truth, do “not raise a claim of
entitlement to relief, this basic deficiency should . . . . be exposed at the point of minimum
expenditure of time and money by the parties and the court.” Id. at 558 (internal quotation marks
and citations omitted). Finally, “[a]lthough for the purposes of a motion [for judgment on the
pleadings] we must take all of the factual allegations in the complaint as true, we ‘are not bound
to accept as true a legal conclusion couched as a factual allegation.’” Id. (quoting Twombly, 550
U.S. at 555).

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III.

Analysis

Count 1 and Count 2 of Plaintiff’s Complaint allege fraud under the Persinger doctrine.
Persinger v. Peabody Coal Co., 474 S.E.2d 887 (W. Va. 1996). The Persinger case was first
presented to the West Virginia Supreme Court of Appeals through certified questions from the
United States District Court of the Southern District of West Virginia. Id. at 889–90. In Persinger,
plaintiff filed a claim with the West Virginia Workers’ Compensation Fund over an alleged injury
sustained on the job. Id. at 890. Plaintiff’s employer, however, informed the Fund that it was
unaware that the plaintiff had suffered any injury; therefore, the Fund denied plaintiff’s claim. Id.
at 891.The plaintiff, however, appealed this decision and was ultimately awarded benefits. Id. He
then brought a civil action in the United States District Court for the Southern District of West
Virginia at Beckley for fraud against his employer, alleging that the employer knew its
representations to the Fund were false and misleading. Id.
The District Court certified questions to the Supreme Court of Appeals of West Virginia,
requesting a determination as to whether an employee could maintain such a cause of action. The
West Virginia Supreme Court ultimately determined that:
West Virginia Code § 23-2-6 (1994) does not preclude an employee from
maintaining a separate and distinct cause of action against an employer for damages
as a result of the employer knowingly and intentionally fraudulently
misrepresenting facts to the Workers’ Compensation Fund that are not only in
opposition to the employee’s claim, but are made with the intention of depriving
the employee of benefits rightfully due him.
Id. at Syl. 1. However, the Court also held that “[i]n recognizing the existence of this type of [fraud]
action, we do not wish to open a Pandora’s box of litigation, nor do we wish to infringe upon an
employer’s right to contest an employee’s claim.” Id. at 897. In other words, because an employer
has a statutory right in a worker’s compensation action to contest the compensability of an

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employee’s injury, the Court held that the Persinger cause of action was to be narrowly construed.
Id. Specifically, it stated:
In order for a plaintiff employee to prevail on the narrowly construed cause of
action by the employee against an employer for fraudulent misrepresentation
concerning the employee’s workers’ compensation claim, the employee must (1)
plead his or her claim with particularity, specifically identifying the facts and
circumstances that constitute the fraudulent misrepresentation, and (2) prove by
clear and convincing evidence all essential elements of the claim, including the
injury resulting from the fraudulent conduct. . . .If the pleadings or evidence
adduced is insufficient to establish either of the two factors stated above, the trial
court may dismiss the action pursuant to Rule 12(b) . . . .
Id. at Syl. 4.
Therefore, in accordance with the Persinger holding, Plaintiff here must allege all
elements of her fraud claim with particularity in order to survive a motion for judgment on the
pleadings. Thus, the Court will turn to the elements of fraud. The essential requirements of a fraud
claim are: “(1) that the act claimed to be fraudulent was the act of the defendant or induced by
him; (2) that it was material and false; that plaintiff relied upon it and was justified under the
circumstances in relying upon it; and (3) that he was damaged because he relied upon it.” Horton
v. Tyree, 139 S.E. 737, 738 (W. Va. 1927). The reliance element of a fraud claim (element 2) was
later clarified in Cobb v. E.I. duPont deNemours & Co., 549 S.E.2d 657 (W.Va. 1999) where the
West Virginia Supreme Court held that “[a] plaintiff need not show that he or she personally
relied upon the fraudulent act to succeed in a Persinger cause of action. Instead, the material and
false reliance element in a Persinger action refers to the party to whom an employer conveyed
false information.” Id. at 661.2
This interpretation of the reliance element was decided when workers’ compensation was

2

As will be discussed infra, the landscape of workers’ compensation in West Virginia has changed since
the holding in Cobb. Therefore, even though the reliance in this case is not identical to the reliance discussed
in Cobb (because the workers’ compensation scheme has since changed), the reliance element of fraud is
still met and the holding in Cobb does not warrant dismissal of Plaintiff’s claims.

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managed exclusively by the State of West Virginia. However, as Defendant points out, “from 2006
to 2008, one private entity, Brickstreet, provided an alternative plan to the state insurance fund.”
ECF No. 68, at 8. Then in 2008, the worker’s compensation market in West Virginia opened up to
private insurers. Neither party has provided the Court with a case applying Persinger in the current
worker’s compensation scheme involved in Plaintiff’s case.
However, Bowens v. Allied Warehousing Services., Inc., 729 S.E.2d 845 (W. Va. 2012)
applies the Persinger doctrine in the context of a private insurer, Brickstreet, during the 2006-2008
period. Specifically in Bowens, although the private insurer was not a party to the case, plaintiff
brought a fraud claim against a business, Allied, where he was injured working as a temporary
employee. Bowens, 729 S.E.2d at 849–850. As in this case, plaintiff in Bowens had previously
protested two Claims Administrator Orders before the Office of the Judges regarding this injury.
Br. of Resp’t, at 10–11. Plaintiff alleges that while his case was pending before the Office of the
Judges, Defendant Allied provided his temporary employment agency with fraudulent records, and
the temporary employment agency then submitted those records to the Office of the Judges.
Bowens, 729 S.E.2d at 851. The Court applied the analysis as laid out in Cobb, ultimately holding
that that because the Office of Judges did not rely on the allegedly fraudulent records, Plaintiff
could not sufficiently plead a Persinger cause of action. Id. at 852.
However, it is important to point out that in Bowens, the allegedly fraudulent documents
were not introduced until the case was before the Office of Judges, whereas here the allegedly
fraudulent records were introduced to Ms. Slotylo before she issued the Claims Administrator
Orders. In other words, in Bowens, the administrative agency was the decision maker who was
provided with the allegedly fraudulent documents. Therefore, in accordance with Persinger,
plaintiff needed to show reliance by the Office of the Judges. Here, the claims administrator for

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Plaintiff’s employer, Ms. Slotylo, was the decision maker who was provided with the allegedly
fraudulent documents. Therefore, Plaintiff must show reliance by Ms. Slotylo in order to allege
fraud claims in her Persinger causes of action. This interpretation is consistent with the West
Virginia Supreme Court’s interpretation in both Persinger and Cobb, where reliance was required
by the Worker’s Compensation Fund (the decision maker in the previous workers’ compensation
regime)3.
Defendant argues that Plaintiff fails to plead the necessary reliance element of her alleged
fraud claims because the Office of Judges did not rely on any allegedly fraudulent representations
by the Defendant (as Plaintiff concedes that she later settled her claims before the Office of Judges
rendered any decision). The Court disagrees. Rather, Plaintiff alleges the necessary reliance, not
by the Office of Judges, but by the claims administrator, Ms. Slotylo, acting on behalf of the
Defendant to make decisions regarding Plaintiff’s claim. Plaintiff asserts that she was denied
medical treatment and benefits by the adverse decisions made by Ms. Slotylo who knowingly
relied upon false information. Although the Office of Judges made no determinations in this case,
initial determinations were made by Defendant’s employee acting within the authority of the
Defendant as the employer’s workers’ compensation claims administrator. Therefore, Plaintiff’s
Complaint adequately pleads the reliance element of her fraud claims.
As such, Plaintiff does allege viable Persinger causes of action sufficient to survive a
motion for judgment on the pleadings, as Counts 1 and 2 are sufficient to “state a claim to relief
that is plausible on its face.” Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Thus, Defendant’s

Plaintiff also points out that “[i]t is noteworthy that in Cobb, the claim analyst, Mary Parsons, worked for
the Workers’ Compensation Division, and was not an Administrative Law Judge who would decide a
protest. Her position then, under the old state fund system, was analogous to the position of Claims Analyst
or Claim Administrator held by Iryna Slotylo who made the claim decision of which Plaintiff in the instant
case complaints.” ECF No. 71, at 18.
3

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Motion for Judgment on the Pleadings regarding Counts 1 and 2 of Plaintiff’s Complaint is
DENIED.4
IV.

Conclusion

For the foregoing reasons, Defendant’s Motion to Dismiss (ECF No. 67) is DENIED and
Plaintiff’s Motion for Leave to File Sur-Reply to Defendant’s Reply to Response to Motion to
Dismiss or for Oral Argument (ECF No. 75) is GRANTED in part5 and DENIED in part.
The Court DIRECTS the Clerk to send a copy of this written Opinion and Order to counsel
of record and any unrepresented parties.

ENTER:

March 17, 2016

Defendant also argues that the allegations in Counts I and II of Plaintiff’s Complaint are mischaracterized
as fraud claims under the Persinger doctrine, but actually assert bad faith claims against the Defendant. The
Court disagrees. The parties agree that Defendant, as a third party, cannot be subject to a bad faith claim,
but the Complaint explicitly relies on Persinger.
5
However, as mentioned infra, no additional briefing will be considered (as Plaintiff already set forth her
argument in the Motion itself and Defendant filed a Response).
4

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