Filed: Jun. 16, 2010
Latest Update: Feb. 22, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1092 ESTATE OF JOHN CECIL SPINNER, Deceased, Plaintiff - Appellant, v. ANTHEM HEALTH PLANS OF VIRGINIA, INCORPORATED; EMPLOYEES GROUP HEALTH PLAN OF COMMERCIAL GLASS & PLASTICS, INCORPORATED, John M. Hiller, Administrator; COMMERCIAL GLASS & PLASTICS, INCORPORATED; JOHN M. HILLER, Defendants - Appellees. Appeal from the United States District Court for the Western District of Virginia, at Lynchburg. Norman K. Moon, District
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1092 ESTATE OF JOHN CECIL SPINNER, Deceased, Plaintiff - Appellant, v. ANTHEM HEALTH PLANS OF VIRGINIA, INCORPORATED; EMPLOYEES GROUP HEALTH PLAN OF COMMERCIAL GLASS & PLASTICS, INCORPORATED, John M. Hiller, Administrator; COMMERCIAL GLASS & PLASTICS, INCORPORATED; JOHN M. HILLER, Defendants - Appellees. Appeal from the United States District Court for the Western District of Virginia, at Lynchburg. Norman K. Moon, District ..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1092
ESTATE OF JOHN CECIL SPINNER, Deceased,
Plaintiff - Appellant,
v.
ANTHEM HEALTH PLANS OF VIRGINIA, INCORPORATED; EMPLOYEES
GROUP HEALTH PLAN OF COMMERCIAL GLASS & PLASTICS,
INCORPORATED, John M. Hiller, Administrator; COMMERCIAL
GLASS & PLASTICS, INCORPORATED; JOHN M. HILLER,
Defendants - Appellees.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg. Norman K. Moon, District
Judge. (6:07-cv-00050-nkm-mfu)
Argued: March 24, 2010 Decided: June 16, 2010
Before KING and GREGORY, Circuit Judges, and Joseph R. GOODWIN,
Chief United States District Judge for the Southern District of
West Virginia, sitting by designation.
Affirmed by unpublished opinion. Judge Gregory wrote the
opinion, in which Judge King and Judge Goodwin joined.
ARGUED: William Adair Bonner, LAW OFFICES OF WILLIAM ADAIR
BONNER, Media, Pennsylvania, for Appellant. David Edward
Constine, III, TROUTMAN SANDERS, LLP, Richmond, Virginia;
Mark Joseph Peake, CASKIE & FROST, Lynchburg, Virginia,
for Appellees. ON BRIEF: Laura D. Windsor, TROUTMAN SANDERS,
LLP, Richmond, Virginia, for Appellee Anthem Health Plans of
Virginia, Incorporated.
Unpublished opinions are not binding precedent in this circuit.
2
GREGORY, Circuit Judge:
This appeal arises from the district court’s dismissal of
the appellant’s Employee Retirement Income Security Program
(“ERISA”) complaint for failure to state a claim under Federal
Rule of Civil Procedure (“Fed. R. Civ. P.”) 12(b)(6). The
Estate of John Cecil Spinner (“the Estate”) sought to have over
$1 million in medical bills, incurred between May 2004 and
December 2004, paid by the defendants. Because the Estate
failed to apply for a continuation or conversion of Spinner’s
insurance coverage, the district court did not abuse its
discretion in holding that the Estate failed to make out a claim
under ERISA. We therefore affirm.
I.
John Cecil Spinner (“Spinner”) became a subscriber and
participant in the Commercial Glass & Plastics (“CGP”) Health
Plan (“the Plan”), which was insured by Anthem Health Plans of
Virginia (“Anthem”), on July 1, 2003. On March 13, 2004, he was
admitted to the Lynchburg General Hospital with an intracerebral
hemorrhage, and on March 25, he received a tracheotomy and
feeding tube, rendering him unable to speak on his behalf. On
April 2, 2004, Robert Hiller 1 (“Hiller”), President of CGP, sent
3
a letter to Spinner’s wife Patricia, which read in relevant
part:
As John is no longer a full or part-time employee of
Commercial Glass & Plastics, and his sick, vacation
and extended time has ended, we are unable to continue
his health insurance coverage. Our Company has less
than 20 employees, Federal COBRA insurance
requirements do not apply. Because of a qualifying
event that cancels John’s health insurance coverage
with Commercial Glass & Plastics you have two options:
• You can add him to the insurance plan with your
employer, or
• You can obtain individual health insurance
coverage for him
Please be aware that a decision needs to be made as
soon as possible. John’s health insurance through
Commercial Glass & Plastics will end on April 30, 2004
and he will need a new policy before this one
terminates.
Let us know if you have questions and we will try to
answer them.
J.A. 136.2 Neither Spinner nor his wife applied to continue or
convert his insurance coverage after the letter was sent by
Hiller. Spinner was transferred to Kindred Hospital (“Kindred”)
in Greensboro, North Carolina on April 29, 2004. Prior to the
1
The complaint lists “John Hiller” as President of CGP, but
his name is actually “Robert.” Though all the pleadings list
him as “John,” we refer to him as “Robert” because the parties
agree that it was an error.
2
Citations to J.A. __ refer to the Joint Appendix filed by
the parties upon appeal.
4
transfer, Kindred contacted Anthem, who was still Spinner’s
insurance provider, to verify coverage; Anthem sent
certification on April 21, 2004. On May 1, 2004, Spinner’s
insurance benefits were terminated. CGP notified Anthem that
Spinner’s benefits had been cancelled on May 4, 2004. Despite
the lapse in coverage, Spinner continued to receive medical care
at Kindred, until he passed away on December 30, 2004. Kindred
demanded payment from Anthem for the medical expenses Spinner
incurred from April 29 to December 30, 2004, a sum which totaled
$1,142,970.42. However, Anthem refused to tender payment
because Spinner was not insured at the time services were
rendered.
William Adair Bonner (“Bonner”) was appointed Administrator
of Spinner’s Estate on November 13, 2006. On November 20, 2006,
Bonner sent a letter to Anthem that read in relevant part:
I have reviewed a letter from Mr. Spinner’s employer,
dated April 2, 2004, addressed to Patricia Spinner,
and have determined that it does not comply with the
requirements of notice to Patricia Spinner and to John
Cecil Spinner respecting their individual rights to
Virginia State continuation of insurance benefits. I
enclose a copy of said letter.
During Mr. Spinner’s lifetime he was covered under a
group policy with Anthem Blue Cross Blue Shield
through his employer.
I anticipate prompt contact from your Legal Department
respecting this matter.
I am demanding by this correspondence that you forward
to my attention the appropriate legal notification of
5
rights to continuing insurance coverage which should
have been previously sent to Mr. Spinner during his
lifetime. At all relevant times of service Mr.
Spinner was an incapacitated person. He died December
30, 2004.
J.A. 143 (emphasis added). A similar letter was sent to Hiller
on the same date. Neither Hiller nor Anthem responded to
Bonner’s letter. On January 22, 2007, Bonner sent a letter to
Anthem’s General Counsel that read in relevant part:
As my demand as Administrator of the Estate of John
Cecil Spinner for necessary notification and forms to
file for continuation of health benefits and any other
available benefits has been denied, please forward to
me instructions and necessary forms for my filing of
an administrative appeal.
J.A. 141.
Bonner filed suit against Anthem, Employees Group Health
Plan of CGP, CGP and Hiller on behalf of the Estate in the
Virginia Circuit Court at Lynchburg, alleging violations of
Virginia insurance laws and common law claims of estoppel and
bad faith. Defendants filed notice of removal with the district
court in the Western District of Virginia, alleging the state
law claims were pre-empted by ERISA, and the case was removed to
federal court. The Estate then filed an amended complaint in
district court, alleging that the defendants: unlawfully denied
Spinner benefits under ERISA § 502(a)(1)(B), 29 U.S.C.
§ 1132(a)(1)(B) (Count I); breached their fiduciary duties under
ERISA § 502(a)(2) & (a)(3), 29 U.S.C. § 1132(a)(2) & (a)(3)
6
(Counts II and III); and failed to provide either continuation
of coverage or conversion of coverage under Virginia Code
§§ 38.2-3416 & 38.2-3541 (Count IV); and alleged estoppel and
bad faith under Virginia common law (Counts V and VI). The
defendants jointly filed a motion to dismiss under Fed. R. Civ.
P. 12(b)(6), which the district court granted on December 18,
2008.
The district court found that Count I must fail as a matter
of law because neither Spinner nor his representative applied
for either continuation or conversion of benefits during the
period in question, and therefore could not have been unlawfully
denied benefits under § 1132(a)(1)(B). The complaint failed to
state a claim under Count II because a § 1132(a)(2) claim must
be made on behalf of the plan at issue, and cannot be made on
behalf of an individual. The district court found that
§ 1132(a)(3) only provides equitable relief, not the monetary
damages the Estate sought, and therefore held that Count III
failed as a matter of law. Count IV was dismissed because
1) Virginia insurance laws do not provide a private right of
action, and 2) assuming arguendo they did, the Estate failed to
state a violation of the laws in its complaint. Finally,
because it is settled law in the Fourth Circuit that ERISA
preempts common law claims of estoppel and bad faith, the
7
district court found that both Counts V and VI must fail as
well.
This appeal followed.
II.
This Court reviews a district court’s order granting a
motion to dismiss de novo. Schatz v. Rosenberg, 943 F.2d 485,
489 (4th Cir. 1991). A complaint should be dismissed “if it
does not allege ‘enough facts to state a claim to relief that is
plausible on its face.’” Giarratano v. Johnson,
521 F.3d 298,
302 (4th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly,
550
U.S. 544, 570 (2007)). The facts alleged must be sufficient “to
raise a right to relief above the speculative level.”
Twombly,
550 U.S. at 555. In evaluating the complaint, this Court will
“construe the factual allegations ‘in the light most favorable
to the plaintiff.’”
Schatz, 943 F.2d at 489 (quoting
Battlefield Builders, Inc. v. Swango,
743 F.2d 1060, 1062 (4th
Cir. 1984)). We are not, however, “bound by the complaint’s
legal conclusions.” Robinson v. American Honda Motor Co, Inc.,
551 F.3d 218, 222 (4th Cir. 2009) (quoting
Schatz, 943 F.2d at
489).
8
III.
Before we endeavor to address each Count in the amended
complaint dismissed by the district court, it is important to
note that the Estate made several key factual concessions, both
at the motion to dismiss hearing, and at oral argument before
this Court, which preclude relief in this appeal. First,
Bonner, Administrator of the Estate and counsel on both the suit
below and the appeal, conceded that he received a copy of the
Summary Plan Description (“SPD”), which describes the options
available to plan participants upon termination of their
coverage, at the time he was appointed Administrator. See J.A.
344. Second, Bonner conceded that he was aware of the need to
make an election and apply for benefits as mandated by the SPD
and under ERISA. Finally, Bonner conceded that he never in fact
made an election or application for benefits. In light of these
concessions, all three of the ERISA counts in the amended
complaint must fail. 3
3
Relief under Counts IV, V and VI is clearly precluded by
our precedent. Count IV alleges that the appellees violated
Virginia law by not providing Spinner or his wife with notice of
his options to either continue or convert his insurance coverage
upon termination. However, Va. Code Ann. §§ 38.2-3416 and
38.2-3541 do not have notice requirements, but rather require
group insurance health plans to offer at least one of two
options to group participants upon termination: conversion of
coverage or continuation of coverage. See Va. Code Ann.
§§ 38.2-3416(a) and 38.2-3541(1)-(2).
(Continued)
9
A.
Count I of the Estate’s amended complaint alleges that the
defendants violated 29 U.S.C. § 1132(a)(1)(B) of ERISA, which
reads:
(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
(A) for the relief provided for in subsection
(c) of this section, or
(B) to recover benefits due to him under the
terms of his plan, to enforce his rights
under the terms of the plan, or to clarify
his rights to future benefits under the
terms of the plan;
As the Estate noted in both its arguments before the
district court and its opening brief and oral argument before
this Court, the CGP Plan complied with the requirements of the
statute because both options are recited in the SPD. See J.A.
138-40.
Counts V and VI, which allege Virginia common law claims of
estoppel and bad faith, clearly fail under our precedent, as
even the Estate acknowledged (“The Fourth Circuit has rejected
that . . . equitable estoppel claims are permitted [under
ERISA].”). See, e.g., Salomon v. Transamerica Occidental Life
Ins. Co., 801 F.2d 659, 660 (4th Cir. 1986) (holding state law
breach of contract and estoppel claims are preempted by ERISA);
Holland v. Slack,
772 F.2d 1140, 1147 (4th Cir. 1985) (same).
Section 514(a) of ERISA “preempts ‘any and all state laws
insofar as they may now or hereafter relate to any employee
benefit plan’ covered by ERISA.” Shaw v. Delta Airlines,
463
U.S. 85, 91 (1983) (quoting 29 U.S.C. § 1144(a)). Thus, the law
is well settled that the Estate’s common law claims, which are
an attempt to collect on benefits controlled by ERISA, are
preempted.
10
29 U.S.C. § 1132(a)(1)(A) & (B). In alleging they were
wrongfully denied benefits, the Estate argues that the
defendants refused to provide information to either the Spinners
or to the Estate Administrator, which was necessary to extend
coverage under the Plan.
In order to make out a claim under § 1132(a)(1)(B), a
person must be “a participant or beneficiary” of the plan at
issue. 29 U.S.C. § 1132(a)(1). The district court found
“[n]othing in the facts alleged, however, suggests that
Plaintiff was wrongfully denied insurance benefits or that
Plaintiff even applied for benefits when Mr. Spinner’s group
coverage ended.” J.A. 369 (emphasis in original). The Estate
further conceded at the motion to dismiss hearing that it had no
such claim.
As to an 1132(a)(1)(B) claim – that’s the standard
general benefit claim that you have in ERISA – there
has been a claim out – alleged in the compliant.
However, this really isn’t a benefit claim. We have
never submitted the bills. There has never been a
formal denial or rejection. There has never been an
appeal of those denials. The real issue in this case
is the process and the application component of the
conversion privilege, which is a fiduciary duty.
J.A. 349. In order to succeed in an action for wrongful denial
of benefits, it is axiomatic that a party must have in fact
applied for the benefits they claim to have been wrongfully
denied. See, e.g. Butler v. MFA Life Ins. Co., 591 F.2d 448,
452 (8th Cir. 1979) (the insurance company can insist on strict
11
performance by the insured of the conditions precedent to obtain
conversion of coverage). Neither Spinner nor his wife contacted
Anthem after receiving the letter from Hiller regarding the
termination of Spinner’s insurance coverage.
For the purposes of argument, we will assume that Spinner
was incapacitated and unable to apply for benefits after March
25, 2004. 4 Once the Estate appointed an Administrator to act on
Spinner’s behalf in November 2006, however, there was an
opportunity for Bonner to make a benefit election. 5 Bonner was
appointed Administrator of the Estate on November 13, 2006. The
SPD provides that a plan beneficiary must “[c]ontact Anthem
within 31 days of the day coverage ends to prevent a lapse in
coverage. If you meet the enrollment requirements for an
4
There was no evidence before the district court that
Spinner’s wife was appointed power of attorney during this
period, and therefore it is unclear whether or not she would
have been able to make the election on her husband’s behalf.
5
While this Court has held that “[e]quitable tolling, while
rare, does allow for exceptions to the strict enforcement of
deadlines,” see Gayle v. United Parcel Service, Inc., 401 F.3d
222, 226 (4th Cir. 2005), we have not applied the principle to
toll ERISA deadlines. Other Circuits have found that under the
appropriate circumstances, the deadline to apply for benefits
under ERISA may be tolled until the appropriate party can
exercise the rights of the beneficiary under the plan. See,
e.g., Barrett v. Principi,
363 F.3d 1316, 1318-21 (Fed. Cir.
2004) (mental illness may justify tolling the 120-day appeal
period under certain circumstances); Chapman v. Choicecare Long
Island Term Disability Plan,
288 F.3d 506, 511-14 (2d Cir. 2002)
(remanding for determination at district court whether mental
illness impaired timely request for review in ERISA case).
12
individual plan and apply within 31 days, there will be no lapse
in coverage.” J.A. 140. At the district court, the Estate
argued that its November 20, 2006, letter sent to Hiller and
Anthem was sufficient to constitute an application for benefits.
The district court found the argument unavailing. We agree.
The letter which the Estate alleges was sufficient to warrant an
application for benefits instead requests notice of Spinner’s
rights to continue insurance coverage: “I am demanding by this
correspondence that you forward to my attention the appropriate
legal notification of rights to continuing insurance coverage
which should have been previously sent to Mr. Spinner during his
lifetime.” J.A. 143 (emphasis added). It is clear from the
content of his letter that Bonner incorrectly assumed that CGP
was covered by the Consolidated Omnibus Budget Reconciliation
Act, (“COBRA”), 29 U.S.C. §§ 1161(a) and (b), and 1166, which
contains strict notice requirements upon termination of
coverage. The COBRA provisions of ERISA, however, only apply to
group health plans where the employer has more than twenty
employees. § 1161(b). Neither party disputes that COBRA does
not apply to CGP, as it is an employer with less than twenty
employees, and therefore Bonner’s letter not only misstated the
defendants’ obligations to Spinner, but could not under any
circumstances be interpreted as an application for continuation
of benefits under the plan. Bonner’s letter similarly cannot
13
be construed to allege a violation of ERISA’s provisions that
apply to small employers. ERISA requires that CGP, as
administrator of an employee benefit plan, provide an SPD to
participants and beneficiaries that contains information
regarding the plan, including “the plan’s requirements
respecting eligibility for participation and benefits . . .
[and] circumstances which may result in disqualification,
ineligibility, or denial or loss of benefits.” 29 U.S.C.
§ 1022. The section of the SPD entitled “After Coverage Ends,”
J.A. 137-140, contains the information Spinner and subsequently
Bonner were required to receive regarding the availability of
post-plan coverage. It is not disputed that Spinner had a copy
of the SPD in his lifetime. Because Bonner conceded that he
received a copy of the SPD at the time he was appointed
Administrator of the Estate, and it contained the information
mandated by § 1022, his letter fails to allege a violation of
ERISA as well.
We further agree with the district court’s finding that the
letter Hiller sent to Patricia Spinner could not be construed as
a wrongful denial of benefits. First, there was no pleading
before the district court which asserted that Hiller, as
President of CGP, was in fact a fiduciary of the plan.
Furthermore, even assuming that he was, the letter could not be
construed as deceptive in that it informed the Spinners that
14
action must be taken to ensure that Spinner’s insurance did not
lapse before his coverage was terminated at the end of the
month. 6
Because the Estate failed to show that Spinner or the
Administrator of his Estate even applied for benefits, the
district court did not abuse its discretion in dismissing Count
I of the complaint for wrongful denial of benefits under
§ 1132(a)(1)(B).
B.
The Estate alleged in Counts II and III of its amended
complaint that the defendants breached their fiduciary duties
under 29 U.S.C. §§ 1132(a)(2) & (a)(3). The statutory
provisions read as follows:
(a) Persons empowered to bring a civil action
A civil action may be brought –
. . .
6
Although Hiller’s letter misstated the deadline for
applying to continue coverage (thirty-one days from the date the
insurance was terminated – so until May 31, not the end of
April), the Estate failed to show the Spinners were harmed by
being provided an earlier deadline to elect to continue or
convert coverage. Hiller’s notice provided Patricia Spinner
with an opportunity to contact either CGP or Anthem to prevent a
lapse in coverage. Nothing in the record on appeal indicates
that she took any further steps to acquire coverage upon receipt
of the letter.
15
(2) by the Secretary, or by a participant,
beneficiary or fiduciary for appropriate
relief under section 1109 of this title;
(3) by a participant, beneficiary, or fiduciary
(A) to enjoin any act or practice which
violates any provision of this subchapter or
the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress
such violations or (ii) to enforce any
provisions of this subchapter or the terms of
the plan;
29 U.S.C. § 1132(a)(2) & (3). The Estate alleged in the amended
complaint that the defendants breached their fiduciary duties to
the plan by failing to provide information regarding Spinner’s
post-termination coverage options and providing misleading
information about when Spinner’s coverage terminated. On
appeal, appellant appears to argue that defendants Hiller and
Anthem provided misleading notice to Spinner and his wife
regarding the Plan and their rights once the CGP plan was
terminated, in violation of their fiduciary duties as outlined
by ERISA. Because the Estate is seeking individual, non-
equitable relief, both Count II and III must fail.
1.
Section 1132(a)(2) enables plan participants and
beneficiaries to bring actions on behalf of the plan to recover
for breaches of fiduciary duties which harm the plan. The
Supreme Court made clear that the injury which the § 1132(a)(2)
provision attempts to redress cannot be an individual injury.
16
“[A]lthough § [1132(a)(2)] does not provide a remedy for
individual injuries distinct from plan injuries, that provision
does authorize recovery for fiduciary breaches that impair the
value of plan assets in a participant’s individual account.”
LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248, 256 (2008).
Although LaRue has been characterized as broadening the scope of
the remedy provided by § 1132(a)(2), it certainly does not
encompass the type of claim the Estate attempts to bring in its
suit against Anthem. As the district court aptly pointed out,
the Estate seeks the “recovery of individually-based benefits
that should have allegedly been provided to Mr. Spinner.” J.A.
373. Although the complaint attempts to style the § 1132(a)(2)
claim as one on behalf of the plan, alleging the defendants
breached their fiduciary duties to the plan, mere recitation of
the statutory requirements does not covert what is essentially a
claim to recover individual benefits into a proper claim under
(a)(2). We therefore affirm the district court’s dismissal of
Count II.
2.
The district court dismissed Count III of the amended
complaint because it “does not provide the type of relief that
Plaintiff essentially seeks.” J.A. 374.
The Supreme Court has held that § 1132(a)(3) was intended
to be a catchall provision, providing a “safety net, offering
17
appropriate equitable relief for injuries caused by violations
that § [1132] does not elsewhere adequately remedy.” Varity
Corp. v. Howe, 516 U.S. 489, 512 (1996). Because subsection
(a)(3) provides equitable relief, it is not the appropriate
vehicle through which to redress wrongful denial of benefits.
Id. Instead, this Court has recognized that “[w]hen a
beneficiary simply wants what was supposed to have been
distributed under the plan, the appropriate remedy is
§ [1132](a)(1)(B).” Coyne & Delaney Co. v. Blue Cross & Blue
Shield,
102 F.3d 712, 715 (4th Cir. 1996). Although the Estate
attempted to style Count III as a request for equitable relief
by requesting “restitution in the form of full benefits,” J.A.
126, it is clear that Count III is a restatement of the relief
requested under Count I, namely, full benefits. In order for
restitution to be equitable relief, and not legal relief, it
“must not seek to impose personal liability on the defendant,
but to restore the plaintiff particular funds or property in the
defendant’s possession.” Great-West Life & Annuity Ins. Co. v.
Knudson,
534 U.S. 204, 214 (2002). Here, there is no property
which belongs to the Estate that can be traced back to the
possession of the defendants. Instead, the Estate seeks money
damages for allegedly wrongfully denied benefits, which is
precisely what § 1132(a)(1)(B) is designed to address, not
§ 1132(a)(3). “When a beneficiary simply wants what was
18
supposed to have been distributed under the plan, the
appropriate remedy is § [1132](a)(1)(B).” Coyne, 102 F.3d at
715.
Because § 1132(a)(3) clearly does not provide for the type
of relief the petitioner sought, and therefore dismissal was
proper, we need not address the other bases of the district
court’s dismissal of Count III. See Catawba Indian Tribe of
S.C. v. City of Rock Hill, 501 F.3d 368, 372 n.4 (4th Cir. 2007)
(“We are . . . entitled to affirm the district court on any
ground that would support the judgment in favor of the party
prevailing below.”).
Even if Bonner had made an argument for equitable relief
outside of what is afforded by the statute based on Spinner’s
incapacity and inability to apply for benefits himself, it would
be unavailing given the fact that Bonner has never applied for
benefits as the agent of Spinner’s Estate.
IV.
In light of the foregoing reasoning, the district court
order dismissing petitioner’s complaint is
AFFIRMED.
19
