Kennedy Krieger Inst., Inc. v. Brundage Mgmt. Co.

KENNEDY KRIEGER INSTITUTE, INC.;KENNEDY KRIEGER CHILDREN'S HOSPITAL, INC.;and KENNEDY KRIEGER ASSOCIATES, INC., Plaintiffs, v. 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

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION

July 27, 2015

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/aIneticare ("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 carebenefits 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 referredJohn 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.) JohnDoe 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.)

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 drawthe 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). Inseeking 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...