Weyant v. Phia Grp. LLC

556 F.Supp.3d 310

Jessica WEYANT, Plaintiff,

v.The PHIA GROUP LLC, et al., Defendants.

17 Civ. 8230 (LGS)

United States District Court, S.D. New York.

Signed August 17, 2021

Charles Thomas Kannebecker, Law Office of Charles Kannebecker, Milford, PA, for Plaintiff.

Ryan L. Woody, Matthiesen Wickert & Lehrer, S.C., Hartford, WI, Thomas John Luz, KLG Luz & Greenberg, New York, NY, for Defendants.

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Plaintiff Jessica Weyant brings this putative class action against Defendants The Phia Group, LLC ("Phia") and INDECS Corporation ("INDECS") (collectively, "Defendants"), on behalf of herself and those similarly situated. The only remaining claim is Plaintiff's claim for conversion. The parties cross-moved for summary judgment on this claim. The Court granted summary judgment in favor of Defendants on the ground that Plaintiff did not exhaust her administrative remedies. On appeal, the Second Circuit vacated the Court's decision, held that there was no clear administrative remedy available for Plaintiff to pursue and remanded for consideration of the remaining arguments presented in the parties’ motions for summary judgment. Weyant v. Phia Grp. LLC , 823 F. App'x 51, 53 (2d Cir. 2020) (summary order). Upon further consideration of the parties’ remaining arguments, the parties’ motions are denied.

I. BACKGROUND

A. Overview

Unless otherwise stated, the following facts are undisputed and drawn from the parties’ submissions on the motions.

During the relevant period, Plaintiff was a participant in the Orange-Ulster School Districts Health Plan (the "Plan"). Defendant INDECS is the claims administrator for the Plan. Defendant Phia is the authorized agent of INDECs for the purposes of subrogation and reimbursement efforts on behalf of the Plan.

On April 10, 2012, Plaintiff was injured in a motor vehicle accident in Maryland (the "Accident"). As a result of Plaintiff's injuries from the Accident, the Plan provided $16,057.19 in medical benefits to Plaintiff (the "Plan Benefits"). Plaintiff returned the Plan Benefits under protest, after Defendants asserted a lien on certain settlement funds she had recouped in a separate action related to the Accident (the "Maryland Action"). Plaintiff brought this action seeking entitlement to the Plan Benefits against INDECS and Phia, but not against the Plan -- the party that ultimately received Plaintiff's repayment of Plan Benefits minus a service fee.

B. Repayment of Plan Benefits

Plaintiff contested the validity of the lien and objected to repayment of the Plan Benefits. On October 4, 2016, Raymond Marshall, Plaintiff's counsel, emailed Mary Burkhalter, Phia's claims handler, stating:

As I just mentioned to you over the phone, my client desires to contest the validity of the entire lien. Because a lien has been asserted, I believe there are two potential options. The first option is that the amount of the lien could remain in escrow pending the dispute. The second option, and what I propose, is that my firm mail a check to the Phia Group for the entire amount of the lien ... but that the payment will be sent to Phia Group under protest.

In support of their motion for summary judgment Defendants submitted a sworn declaration from Ms. Burkhalter. Ms. Burkhalter asserts that she spoke with Mr. Marshall on October 4, 2016, and "[i]nstead of holding the funds in escrow until any dispute could be resolved, it was his proposal that his firm send Phia a check for the full amount ‘right away.’ "

The parties dispute the reasons for, and extent of, Plaintiff's objections to repayment. Defendants contend that Plaintiff objected to repayment on the ground that some of the Plan Benefits may have been for treatment that was not related to the Accident and, as a result, should not be subject to repayment on account of Plaintiff's receipt of the Maryland Action settlement funds. In support of this contention Defendants assert that on October 13, 2016, Charles Kannebecker,¹ another lawyer for Plaintiff, informed Ms. Burkhalter that "he want[ed] [Phia] to sign an agreement that Phia would accept the funds but that if Ms. Weyant felt that the Plan had paid claims for treatment that was not related to this accident, she could appeal those payments." Plaintiff denies that she or her counsel stated that her dispute "was only regarding claims purportedly not related to the accident," and contends that she communicated that she contested the entire lien. In an email dated October 11, 2016, Ms. Burkhalter asked Mr. Marshall to provide a "reason patient feels [the] plan [is] not entitled to reimbursement," and stated that the Plan will "accept $10,000.00 in satisfaction [of] its subrogation claim in the amount of $16,057.19." The record does not include a response from Mr. Marshall to Ms. Burkhalter's question regarding the reasons for Plaintiff's objection to the repayment or to the Plan's proposed reduction of the repayment.

On November 16, 2016, Ms. Burkhalter emailed Mr. Marshall, stating:

Our office agrees to accept payment in full in the amount of $16,057.19 with the understanding that if said amount reimbursed represents payment for the claims not related to the above incident, the patient has the right to dispute said reimbursement.

On November 18, 2016, Ms. Burkhalter again emailed Mr. Marshall, stating that "the Plan will accept the payment in full and if the patient wishes to contest the payment, the patient may do so."

On November 22, 2016, Plaintiff sent Phia a check for $16,057.19 with a letter stating:

Enclosed please find a check in the amount of $16,057.19, representing the lien for the above employee. [Plaintiff] has reserved her right to contest the validity of the lien. You agreed in your November 18, 2016, email to me that [Plaintiff] could proceed in this manner.

This check is remitted with the condition that this payment is made under protest, does not waive any dispute or constitute a voluntary payment by [Plaintiff]. If you do not agree to these conditions, then you must immediately return this check and you may not keep, cash or deposit this check.

If you do keep, cash or deposit this check, it constitutes an agreement that this payment is made under protest, does not waive any dispute or constitute voluntary payment by [Plaintiff].

Plaintiff testified that she submitted a payment because she was afraid of the consequences of not doing so -- specifically, losing her health insurance while she was pregnant and still recovering from the Accident.

Phia retained $3,532.58 of Plaintiff's payment as a "service fee" and sent the balance to INDECS. Per the sworn declaration of Bruce Buchanan, Sr., President of INDECS, "INDECS forwarded 100% of the recovery to the Plan and has not retained any of the funds paid by [Plaintiff] nor was it paid a fee for its service."²

II. STANDARD

Summary judgment is appropriate where the record establishes "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). There is a genuine dispute of material fact "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; accord Nick's Garage, Inc. v. Progressive Cas. Ins. Co. , 875 F.3d 107, 113 (2d Cir. 2017). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Liberty Lobby , 477 U.S. at 248, 106 S.Ct. 2505 ; accord Saleem v. Corp. Transp. Grp. , 854 F.3d 131, 148 (2d Cir. 2017).

In evaluating a motion for summary judgment, a court must "constru[e] the evidence in the light most favorable to the nonmoving party and draw[ ] all reasonable inferences and resolv[e] all ambiguities in its favor." Wagner v. Chiari & Ilecki, LLP , 973 F.3d 154, 164 (2d Cir. 2020) (internal quotation marks omitted). When evaluating cross-motions for summary judgment, the Court reviews each party's motion on its own merits and draws all reasonable inferences against the party whose motion is under consideration. Cayuga Nation v. Tanner , 6 F.4th 361, 373–74 (2d Cir. 2021). When the movant properly supports its motion with evidentiary materials, the opposing party must establish a genuine issue of fact by citing to particular parts of materials in the record. Fed. R. Civ. P. 56(c)(1)(A). "[A] party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment." Moses , 913 F.3d at 305 (quotation marks omitted).

III. DISCUSSION

A. Conversion Claim

The parties dispute whether Plaintiff's conversion claim arises under the New York Uniform Commercial Code ("UCC"), under New York common law or both. A UCC conversion claim has a demand requirement, while common law conversion does not. As explained below, UCC § 3-419 on conversion applies, and material issues of fact preclude summary judgment on that claim. Summary judgment on any common law conversion claim, which may be precluded upon adjudication of the UCC claim, is also denied.

1. UCC Article 3 Applies

New York law applies to this dispute. Weyant v. Phia Grp. , No. 17 Civ. 8230, 2018 WL 4387557, at *3-4 (S.D.N.Y. Sept. 13, 2018). UCC Article 3 governs "commercial paper -- that is to say, to drafts, checks, certificates of deposit and notes as defined in Section 3-104(2)." N.Y. U.C.C. Law § 3-103, Official Comment 1. "[Article 3] does not apply to money, documents of title or investment securities." N.Y. U.C.C. Law § 3-103. UCC § 3-104 provides:

(1) Any writing to be a negotiable instrument within this Article must

(a) be signed by the maker or drawer; and

(b) contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation or power given by the maker or drawer except as authorized by this Article; and

(c) be payable on demand or at a definite time; and

(d)

...