University of Wisconsin Hospitals and Clinics Authority v. Aetna Health and Life Insurance Company et al

Filing 18

ORDER granting 7 Motion to Dismiss Plaintiff's Complaint on the ground that plaintiff University of Wisconsin Hospitals and Clinics Authority failed to exhaust its administrative remedies. Signed by District Judge Barbara B. Crabb on 8/31/2015. (jls)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - UNIVERSITY OF WISCONSIN HOSPITALS
AND CLINICS AUTHORITY,
OPINION AND ORDER
Plaintiff,
15-cv-283-bbc
v.
AETNA HEALTH AND LIFE INSURANCE
COMPANY and AETNA HEALTH INSURANCE
COMPANY,
Defendants.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Plaintiff University of Wisconsin Hospitals and Clinics Authority filed this case in
the Circuit Court for Dane County, Wisconsin, asserting claims for breach of contract and
other related theories under state law. Plaintiff alleged that it was a third party beneficiary
of a health insurance contract between Karen Chaves and defendants Aetna Health and Life
Insurance Company and Aetna Health Insurance Company and that defendants breached
that contract by failing to pay for medical services that plaintiff provided Chaves.
Defendants removed the case to this court under 28 U.S.C. §§ 1441 and 1446 on the ground
that plaintiff’s claims are preempted by the Employee Retirement Income Security Act.
Plaintiff concedes that its claim is governed by ERISA because Karen Chaves is a participant
in an ERISA benefits plan, dkt. #15 at 4, so I need not discuss that issue.
Now defendants seek dismissal of the complaint with prejudice on three grounds: (1)

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plaintiff does not have the right to enforce Chaves’s rights under ERISA; (2) plaintiff did not
exhaust its administrative remedies; and (3) plaintiff should be sanctioned for its repeated
filings of state law claims that should have been filed as ERISA claims. Because I agree with
defendant that plaintiff failed to exhaust its administrative remedies, I am granting
defendant’s motion to dismiss without discussing defendant’s other arguments.

OPINION
The parties agree that the general rule is that a plaintiff must exhaust its
administrative remedies before raising a claim under ERISA. Schorsch v. Reliance Standard
Life Insurance Co., 693 F.3d 734, 739 (7th Cir. 2012). In most contexts, exhaustion is
considered an affirmative defense that must be proven by the defendant. Jones v. Bock,
549 U.S. 199, 211-212 (2007) (“[C]ourts typically regard exhaustion as an affirmative
defense.”). (Defendant cites a number of district court cases for the proposition that
plaintiff was required to plead exhaustion in its complaint, but I need not decide whether
those cases are inconsistent with Jones to resolve defendant’s motion.) Generally, a court
cannot dismiss a claim for failing to comply with a requirement that is an affirmative defense
unless the plaintiff admits facts in its complaint showing that it did not comply with the
requirement. O'Gorman v. City of Chicago, 777 F.3d 885, 889 (7th Cir. 2015). If the
defendant relies on documents outside the complaint to support its argument in favor of
dismissal, the general rule is that the court must deny the motion or convert it into a motion
for summary judgment. Edgenet, Inc. v. Home Depot U.S.A., Inc., 658 F.3d 662, 665 (7th

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Cir. 2011).
In this case, both sides cite documents outside the pleadings. However, I conclude
that it is unnecessary to convert defendants' motion to dismiss into one for summary
judgment because the parties do not dispute any facts related to exhaustion.

Cf. id.

(concluding that “[n]o harm was done” by failing to convert motion because “[t]he facts are
essentially uncontested and present a question of law”); Loeb Industries, Inc. v. Sumitomo
Corp., 306 F.3d 469, 480 (7th Cir. 2002) (failing to convert motion not reversible error
when “there are no potential disputed material issues of fact”). In particular, the parties
agree that the plan requires two levels of administrative appeal; plaintiff filed a timely firstlevel appeal; on August 13, 2014, defendant denied the first appeal; plaintiff did not file a
timely second-level appeal; and, on November 30, 2014, approximately one month after the
deadline for filing the second appeal, plaintiff filed a letter in which it demanded payment
of Karen Chaves’s medical expenses.
The parties dispute three legal issues: (1) whether plaintiff was excused from filing a
second-level appeal because doing so would have been futile; (2) whether plaintiff’s
November 30 letter qualifies as a second-level appeal; and (3) whether plaintiff’s November
30 letter should have been accepted as an appeal despite its untimeliness. Because I am
resolving each of these issues in favor of defendant, I conclude that plaintiff has failed to
exhaust its administrative remedies and the case must be dismissed.
“[A] failure to exhaust administrative remedies will be excused . . . when resort to
administrative remedies would be futile.” Orr v. Assurant Employee Benefits, 786 F.3d 596,

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602 (7th Cir. 2015). In this case, plaintiff says that it would have been futile to file a second
appeal because “[t]he Plan’s benefits denial letter was so conclusory that the only reasonable
interpretation of it is that the plan had made its final decision on Ms. Chaves’ claim.” Plt.’s
Br., dkt. #15, at 9. Plaintiff does not cite to a copy of the decision and I do not see a copy
in the record, but defendant does not deny plaintiff’s allegation that the denial “included no
rationale or findings of fact in support of its decision.” Id.
Plaintiff does not cite any authority to support a view that a claimant does not have
to appeal a conclusory administrative decision. The general standard for futility is that the
plaintiff “must show that it is certain that his claim will be denied on appeal, not merely that
he doubts that an appeal will result in a different decision.” Zhou v. Guardian Life Insurance
Company of America, 295 F.3d 677, 680 (7th Cir. 2002) (internal quotations and
alterations omitted).

Even if “the individual named defendants would be the people

reviewing the plaintiffs' administrative appeals,” that “is not enough to relieve plan
participants of the duty to exhaust remedies.” Ames v. American National Can Co., 170
F.3d 751, 756 (7th Cir. 1999).
Although a failure to provide reasons for a decision may provide grounds for some
“doubt” about the success of an appeal, I cannot say that it provides “certainty” on that
issue. If it is not enough to show that the same individual or entity is making the initial
decision and deciding the appeal, then a conclusory decision is not enough either.
Accordingly, I conclude that plaintiff has not demonstrated that it would have been futile
to file a second appeal.

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Plaintiff makes a related argument that defendant’s conclusory decision violated 29
U.S.C. § 1133, which required defendant to provide “specific reasons” for its denial.
However, plaintiff fails to cite any authority or otherwise develop an argument in favor of
a view that a potential violation of § 1133 is grounds for excusing a failure to exhaust. In
my own research, I uncovered Schorsch v. Reliance Standard Life Insurance Co., 693 F.3d
734 (7th Cir. 2012), in which the court stated that a plaintiff “cannot circumvent ERISA's
administrative remedies by simply pointing to errors in [the defendant’s] claims termination
process. Flaws in [the] . . . notice and other errors become relevant only if [the plaintiff]
reasonably relied on them in failing to request a review of its decision . . ., or if [defendant’s]
missteps denied her meaningful access to a review.” Id. at 739. Because plaintiff does not
argue that it can meet this standard, any violation of § 1133 by defendant is not dispositive.
Next, the parties debate whether plaintiff’s November 30, 2014 letter qualifies as a
second-level appeal. Neither party cites to a copy of the letter, but, in its proposed amended
complaint, plaintiff alleges that its counsel wrote to “advis[e] Aetna that he was retained by
UWHCA to pursue the unpaid balance on the above-referenced claims” and to “request[]
payment.” Dkt. #15-1 at ¶ 15. Plaintiff does not allege that counsel identified the letter as
a request for further administrative review. Powell v. AT&T Communications, Inc., 938
F.2d 823, 827 (7th Cir. 1991) (letter from counsel does not qualify as administrative claim
unless “[t]he content of the letter [is] reasonably calculated to alert the employer to the
nature of the claim and request[s] administrative review”). Accord Edwards v. Briggs &
Stratton Retirement Plan, 639 F.3d 355, 363-64 (7th Cir. 2011).

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Regardless of the letter’s content, plaintiff admits that the letter was untimely.
Edwards, 639 F.3d at 362 (“[A]n ERISA claimant's failure to file a timely administrative
appeal from a denial of benefits ‘is one means by which a claimant may fail to exhaust her
administrative remedies.’”) (quoting Gallegos v. Mount Sinai Medical Center, 210 F.3d 803,
808 (7th Cir. 2000)). Plaintiff says that the delay should be excused because it was only 30
days, Plt.’s Br., dkt. #15 at 9, but, in Edwards, the court rejected a similar argument that
“substantial compliance” with the administrative deadline is adequate. Id. at 352 (“[T]he
Plan has fixed a clear deadline . . . for filing administrative appeals from denials of benefits,
and the Plan has the right to enforce that deadline.”). Plaintiff cites no contrary authority.
Finally, plaintiff says that defendant “was 12 days late under the terms of its own
Plan in denying [plaintiff’s] first level of appeal.” Plt.’s Br., dkt. #15, at 9. Plaintiff does
not explain why it believes that defendant’s decision was untimely, it cites no authority that
a plan’s failure to meet self-imposed deadlines allows a claimant to file a late appeal and it
does not otherwise develop an argument on this issue. Accordingly, I conclude that plaintiff
has forfeited any argument that its untimeliness should be excused because defendant’s
decision may have been untimely as well.

ORDER
IT IS ORDERED the motion to dismiss filed by defendants Aetna Health and Life
Insurance Company and Aetna Health Insurance Company, dkt. #7, is GRANTED on the
ground that plaintiff University of Wisconsin Hospitals and Clinics Authority failed to

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exhaust its administrative remedies. The clerk of court is directed to enter judgment in favor
of defendant and close this case.
Entered this 31st day of August, 2015.
BY THE COURT:
/s/
BARBARA B. CRABB
District Judge

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