Melichar v. Blue Cross & Blue Shield of Kan., Inc.

309 F.Supp.3d 719

Stacy MELICHAR, Plaintiff,

v.BLUE CROSS AND BLUE SHIELD OF KANSAS, INC., and The Health Benefit Plan for Members of the Kansas Bankers Association, Defendants.

4:17CV3147

United States District Court, D. Nebraska.

Signed April 13, 2018

Vincent M. Powers, Powers Law Firm, Lincoln, NE, for Plaintiff.

Clete P. Samson, Marcia A. Washkuhn, Kutak, Rock Law Firm, Omaha, NE, for Defendants.

MEMORANDUM AND ORDER

Richard G. Kopf Senior United States District Judge

Plaintiff seeks more than $88,000 from Defendants, who allegedly denied payment for medical services provided to Plaintiff under a health insurance policy issued through Plaintiff's employer. (Filing No. 11, Amended Complaint.) Defendants seek dismissal of this case pursuant to Fed. R. Civ. P. 12(b)(3) for improper venue. Alternatively, Defendants ask the Court to transfer this case to the United States District Court for the District of Kansas pursuant to 28 U.S.C. § 1404(a) for the convenience of the parties and witnesses and in the interest of justice. (Filing No. 12.)

I. FACTUAL BACKGROUND

On August 17, 2017, Plaintiff filed her Complaint, and Defendants timely removed the case to this court under 28 U.S.C. § 1446(b). (Filing No. 1, Notice of Removal.) In its Notice of Removal, Defendants established that Plaintiff's Complaint was based on an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001 – 1461. See 29 U.S.C. §§ 1002(1), 1003(a). (Filing No. 1, Notice of Removal ¶¶ 6–8.)

Plaintiff alleges that she is a resident of Lincoln, Nebraska, and that she was enrolled in a Health Benefit Plan ("Plan") through her employer, Community First National Bank ("Bank"), which is a Kansas bank and a member of the Kansas Bankers Association ("Association"). (Filing No. 11, Amended Complaint ¶ 2; Filing No. 14–1, Stones Decl. ¶ 6.¹ )

Plaintiff alleges she required certain health care services and treatment beginning in December 2015, and such services were provided in Lancaster and Saunders County, Nebraska. (Filing No. 11, Amended Complaint ¶ 3.) Plaintiff contends Defendants paid for some of these medical treatments, but then later demanded that certain health care providers refund certain payments. Plaintiff further asserts that Defendants denied payment entirely to two other Lincoln, Nebraska, health care providers that treated Plaintiff. Plaintiff claims that Defendants' denial of payment "breach[ed] their contract of insurance" with Plaintiff, and Defendants are estopped from disputing their liability for the payments because they "did previously authorize the treatments and previously made payments to the plaintiff's healthcare providers, and knew or should have known that the plaintiff would rely to her detriment upon the actions of the defendants in making said payments." (Filing No. 11, Amended Complaint ¶¶ 7–8.)

The Plan is an ERISA plan established by the Association for the exclusive purpose of providing certain welfare benefits to employees of Association-member employers, all of which are Kansas banks and trust companies and the Association itself. (Filing No. 14–1, Stones Decl. ¶ 4, Ex. A.) Defendant Blue Cross Blue Shield of Kansas ("BCBSKS") and the Association entered into an Administrative Services Agreement under which the Association delegated authority to BCBSKS to administer claims made by enrollees under the Plan. (Filing No. 14–3, Graves Decl. ¶ 4, Ex. A; Filing No. 14–1, Stones Decl. ¶ 8.)

BCBSKS is a Kansas corporation with its principal place of business in Topeka, Kansas. (Filing No. 14–3, Graves Decl. ¶ 3.) BCBSKS administered claims filed under the Plan from its headquarters in Topeka, Kansas. Accordingly, any benefit claims at issue in this lawsuit were reviewed and administered by BCBSKS in Kansas. (Filing No. 14–3, Graves Decl. ¶ 5.) Kansas is the sole situs of the Plan's administration, all of the Plan's assets are located in Kansas, and all decisions concerning the Plan's administration are made in Kansas. Moreover, all material records and witnesses related to the Plan, its policies and procedures, and the Plan's administration are located in Kansas. (Filing No. 14–1, Stones Decl. ¶ 5; Filing No. 14–3, Graves Decl. ¶¶ 5, 7.)

Plaintiff claims that BCBSKS used BCBS Network Blue in Omaha, Nebraska, in initially paying, and then denying payment for, medical services provided to Plaintiff at Bryan Medical Center in Lincoln, Nebraska. (Filing No. 16, Pl.'s Br. Opp'n Defs.' Mtn. Dsm. at CM/ECF p. 2.)²

II. MOTION TO DISMISS FOR IMPROPER VENUE

A defendant moving to dismiss under Fed. R. Civ. P. 12(b)(3) bears the burden of demonstrating that the plaintiff's choice of venue is improper. United States v. Orshek , 164 F.2d 741, 742 (8th Cir. 1947) ; Luebbert v. Employers & Operating Engineers Local 520 Pension Fund , No. 4:06CV01140, 2007 WL 1100455, at *2 (E.D. Mo. Apr. 10, 2007) (considering 12(b)(3) motion in ERISA case). Venue for an ERISA action is proper "in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found." 29 U.S.C. § 1132(e)(2) (Westlaw 2018).

A. Where Plan is Administered

As noted above, one of the three ways to establish proper venue in an ERISA case is by filing the action where the plan is "administered." Here, neither party disputes that the relevant Plan is administered in Kansas because Defendants have established that the Plan is managed in Kansas, and Plaintiff has not shown to the contrary. (Filing No. 14–1, Stones Decl. ¶ 5.) All claims made under the Plan are reviewed and administered by BCBSKS in Kansas, and the day-to-day management of the Plan is conducted in Kansas. (Filing No. 14–1, Stones Decl. ¶¶ 5, 8; Filing No. 14–3, Graves Decl. ¶¶ 4–5.) All of Plaintiff's claims and requests for benefits, including those that were denied and which are at issue in this lawsuit, were reviewed and analyzed by BCBSKS's employees and representatives in Kansas. (Filing No. 14–3, Graves Decl. ¶ 5.) Because it is undisputed that the Plan is administered in Kansas, venue in this court is not proper under the "plan-administration" portion of 29 U.S.C. § 1132(e)(2).

B. Where Breach Took Place

Venue in an ERISA action also is proper where the alleged breach occurred. This, according to Plaintiff, is "[t]he issue" in this case. (Filing No. 16, at CM/ECF p. 3.) The parties do not cite, nor has the court found, an Eighth Circuit Court of Appeals opinion that addresses the issue of where the alleged breach occurs in an ERISA action, and there is a split of authority on this issue among district courts. Some district courts hold that the breach occurs where the benefit payment was to be received,³ and other courts hold that the breach takes place where the decision was made to deny benefit payments.⁴ Still other courts hold that the nature of the ERISA claim is dispositive—that is, "[i]f the claim is for breach of contract, the breach occurs where the plaintiff was to receive the benefits due them under the contract. On the other hand, if the claim is for breach of a fiduciary duty, the breach occurs where the defendants acted or failed to act in accordance with their duties." Garvey v. Piper Rudnick LLP Long Term Disability Ins. Plan , 2008 WL 410088, at *8 (D. Or. 2008).⁵

Here, Plaintiff's claim is that "[t]he defendants did breach their contract of insurance to the plaintiff" by failing to pay for Plaintiff's medical treatment under the terms of the health-insurance policy issued to Plaintiff through her employer. (Filing No. 11 ¶ 7.) The basis of this claim is that Defendants failed to perform their contractual duty to pay for Plaintiff's medical treatment. This failure of performance occurred when Plaintiff or her health-care providers—all located in Nebraska—did not receive such payment. See Northwest Arkansas Masonry, Inc. v. Summit Specialty Prod., Inc. , 29 Kan.App.2d 735, 31 P.3d 982, 985 (2001) ("A breach of contract occurs when there is a failure of performance of a duty arising or imposed by agreement."); Andersen v. A.M.W., Inc. , 266 Neb. 238, 665 N.W.2d 1, 5 (2003) (breach of contract occurred when defendant failed to make commission payment to plaintiff). Under analogous general principles of contract law, Defendants in this case breached the insurance contract with Plaintiff when Plaintiff failed to receive benefits due in Nebraska.

This conclusion is supported by the structure of the ERISA venue provision, which sets forth three separate venue options: "in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found." 29 U.S.C. § 1132(e)(2) (emphasis added). Deciding that the breach takes place where the decision to deny benefits is made would render the first two venue options one and the same.

The judicial authority is divided on whether the breach took place where the payment was denied or where the payment was to be received. The better view, supported by an analogy to contract law, is that the breach took place where the payment was to be received. Otherwise, if the place of breach were the place where the benefits were denied, the place of breach always would be where the plan is administered, rendering the first two venue options in ERISA coextensive.

14D Charles A. Wright et al., Federal Practice and Procedure § 3825 (4th ed. Apr. 2017). See also Cole v. Central States Southeast & Southwest Areas Health & Welfare Fund , 225 F.Supp.2d 96, 98 (D. Mass. 2002) (same); Schoemann ex rel. Schoemann v. Excellus Health Plan, Inc. , 447 F.Supp.2d 1000, 1002 (D. Minn. 2006) (stating that "case law does not provide a clear answer" regarding where breach takes place for purposes of ERISA venue provision; collecting cases on both sides and rejecting argument that, for purposes of ERISA venue, a breach takes place where decision to deny coverage is made because "it is hard to believe that Congress intended that the ERISA venue...