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HomeMy WebLinkAbout2015-5848 HIGHMARK HEALTH SERVICES : IN THE COURT OF COMMON PLEAS OF FORMERLY HIGHMARK, INC. : CUMBERLAND COUNTY, PENNSYLVANIA D/B/A HIGHMARK BLUE SHIELD : Plaintiff : : v. : No. 2015-05848 CIVIL : THE WESTON GROUP, INC. : CIVIL ACTION – LAW Defendant : : v. : : MODEL CONSULTING, INC. : JURY TRIAL DEMANDED Additional Defendant : : IN RE: DEFENDANT THE WESTON GROUP’S MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF’S CROSS MOTION FOR SUMMARY JUDGMENT BEFORE GUIDO, P.J and BREWBAKER, J. OPINION and ORDER OF COURT In the present case, Highmark Health Services (Highmark) filed a Complaint against The Weston Group, Inc. (Weston) alleging breach of contract, unjust enrichment, and for “account stated,” and Weston filed a joinder complaint against Model Consulting, Inc. Before the Court 1 are cross motions for summary judgment by Highmark and Weston. Effective August 1, 2007, Defendant Weston and Plaintiff Highmark entered into a contract and agreement for major medical healthcare service. In Section FA – Financial Arrangements of that agreement, Paragraph 2D states “Any remaining accumulated deficit shall be paid by \[Weston\] to Highmark Blue Shield within sixty (60) days of the completion of the 2 settlement.” As a result, Weston was expected to pay a “deposit” amount for each employee on a monthly basis. At the end of the year, Highmark calculated the difference between the 1 Model Consulting filed a response to Defendant Weston’s Motion for Summary Judgment indicating it had no position the disposition of Weston’s motion. If the motion were to be granted, Model Consulting requested the joinder complaint be dismissed with prejudice. 2 Plaintiff’s Complaint, filed 6/21/2013, Exhibit A, Section FA §2.D. “deposit” amount and the total amount paid on all claims for Weston’s employees, and Weston was expected to pay the difference between the deposit amount and the maximum contract amount. If the administrative and claim costs exceeded the maximum contract amount, that difference was considered a “deficit” to be paid upon termination of the contract. The contract was renewed in 2008, 2009 and 2010 containing identical language 3 regarding the deficit being due upon termination. Prior to the renewal of the 2008 contract, Weston reviewed the Retrospective Refund Deposit/Maximum Settlement Summary Report from August 1, 2008 to July 31, 2009 and was informed that the amount of $664,131.05 was a deficit that would be carried forward towards future settlements and would need to be paid upon 4 termination of the agreement with Highmark. On July 6, 2011, Weston notified Highmark that it was terminating the 2010 agreement 5 effective August 1, 2011. Highmark submitted a Retrospective Final Settlement Summary 6 Report showing a total deficit due of $730,466.78. Weston acknowledges receipt of the final 7 statement, but denies that it owes Highmark $730,466.78. Weston alleges that the deficit only grew because Highmark lowered the “deposit” amount in order to stay competitive with other 8 health care companies, thereby allowing the “deficit” amount to increase. Highmark initiated this action by filing a Complaint on June 21, 2013. Weston filed its Answer with New Matter on August 27, 2013. On October 29, 2013, Weston filed a Joinder Complaint against Model Consulting. On January 14, 2016, Weston filed a motion for summary 3 Plaintiff’s Complaint, ¶¶ 11, 15, 19. 4 Deposition of Lori Stanke, 8/11/2015, Exhibit 1 5 Plaintiff’s Complaint, ¶ 22, Exhibit K. 6 Plaintiff’s Complaint, ¶ 23, Exhibit L. 7 Plaintiff’s Complaint, ¶ 23; Defendant Weston’s Answer and New Matter, filed 8/27/2013, ¶ 23. 8 Plaintiff’s Motion for Summary Judgment included 2 sworn Affidavits and citations to deposition testimony. Under the Nanty-Glo rule, we will not consider these in deciding on Plaintiff’s motion. Nanty-Glo v. American Surety Co., 163 A. 523 (Pa. 1932) (holding that no testimonial evidence may be considered in deciding whether to grant summary judgment because credibility is solely a matter for the jury). 2 judgment, removing the case from the trial list. On March 15, 2016, Highmark filed its own motion for summary judgment. Argument on both motions was heard on April 8, 2016. We will first address the issues raised in Weston’s Motion for Summary Judgment 9 because Weston challenges this Court’s subject matter jurisdiction. Weston argues that the healthcare agreement entered into between Highmark and Weston falls under the provisions of 10 the Employee Retirement Income Security Act of 1974 (“ERISA”), and that the broad preemption language of ERISA requires this matter be transferred to federal court. Weston further contends that Highmark’s claims have an obvious connection to the health insurance plan in question and that the money sought to be recovered by Highmark relates to the administration and payment of claims which are both ERISA concerns. Moreover, Weston points to email exchanges indicating that “Highmark manipulated its own underwriting recommendations, thereby lowering the monthly premiums paid by Weston on behalf of its employees, which had a 11 direct effect on the amount that Highmark now claims is owed under the contract.” Highmark counters that ERISA does not preempt Highmark’s claims because the matter is a “run of the mill” state law contract claim involving a debt owed by an employer to the insurer. Highmark contends that “although an ERISA plan is involved, and mentioned \[…\] this action is clearly for the collection of a debt that does not otherwise implicate the ERISA plan or 12 beneficiaries of that plan.” Finally, Highmark argues that the emails cited by Weston are irrelevant because the contract at issue was between Highmark and Weston and did not involve the benefits available to or calculated for Weston’s employees. 9 The existence of subject matter jurisdiction as a defense may not be waived and can be raised at any time. Pa. R.C.P. 1032(2). Therefore, while most certainly filed at the last minute, we do not agree with Plaintiff that this issue is untimely. 10 Pub. L. No. 93-406, as amended, 29 U.S.C. §1001-1461. 11 Weston’s Brief in Support of Motion for Summary Judgment at 7. 12 Plaintiff’s Brief in Opposition to Defendant’s Motion for Summary Judgment at 7. 3 Turning to the statutory language, ERISA grants exclusive jurisdiction of civil actions under the statute to the federal district courts; the exceptions to which are not relevant to this matter. 29 U.S.C. §1132(e). Section 514(a) of ERISA states in relevant part that “the provisions of this subchapter … shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. §1144(a) (emphasis added). Courts have often noted that ERISA’s preemption section is “conspicuous for its breadth,” “broadly worded,” and “clearly expansive.” California Division of Labor Standards Enforcement v. Dillingham Construction N.A. Inc., 519 U.S. 316, 324 (1997). At one time, the United States Supreme Court gave ERISA preemption an extremely expansive interpretation, stating that the statue should be construed according to its “broad common-sense meaning, such that a state law ‘relate\[s\]’ to a benefit plan ‘in the normal sense of the phrase, if it has a connection with or reference to such a plan.’” Metropolitan Life v. Massachusetts, 471 U.S. 724, 739 (1985) (emphasis added) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S 85, 97 (1983)). Consequently, “in the vast majority of cases concerning ERISA preemption addressed by the \[United States\] Supreme Court in the 1980’s and early 1990’s, the Court concluded without hesitation that, under Section 514(a), the state laws under review were preempted.” Barnett v. SKF USA, Inc., 38 A.3d 770, 777 (Pa. 2012). The United States Supreme Court made a monumental shift in the interpretation of ERISA preemption in 1995. In New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995) (Travelers), the Supreme Court recognized that under the then-existing broad interpretation of ERISA’s preemption statute, “pre-emption would never run its course, for ‘really universally, relations stop nowhere.’” Travelers, 514 U.S. at 655 (citation omitted). Instead, the Court instructed that “\[w\]e simply must go beyond the unhelpful 4 text and the frustrating difficulty of defining \[the statute’s\] key term, and look instead to the objectives of the ERISA statue as a guide to the scope of the state law that Congress understood would survive.” Id. at 656 (emphasis added). ERISA is a “comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). The goals of ERISA were to establish the regulation of employee pension plans as an exclusive federal concern, ensure that the plans were subject to a uniform body of law, minimize the administrative and financial burden of complying with conflicting laws between states or between states and the federal government, and prevent conflicts between state and federal laws. 13 Travelers, 514 U.S. at 656-57. The Supreme Court has therefore held that “lawsuits \[…\] for run-of-the-mill state-law claims such as unpaid rent, failure to pay creditors, or even torts committed by an ERISA plan” are not preempted. Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 833 (1988). Few courts have considered the question of ERISA preemption in the context of an action in contract brought by an insurance company against an employer. Weston cites Washington National Insurance Co. v. Hendricks, 855 F.Supp. 1542 (W.D. Wis. 1994) in support of their 14 argument. In Hendricks, Washington National Insurance, the insurance company, provided insurance coverage to Hendricks, the employer. The policy was funded through a minimum premium agreement and included a post-termination liability agreement and deficit recovery limit agreement. Ultimately a large deficit accumulated and the insurance company terminated the coverage because the employer failed to pay the deficit. The insurance company sued in 13 “The basic thrust of the pre-emption clause, then, was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans.” Id. 14 Weston also cites First National Life Insurance Co. v. Sunshine-Jr. Food Stores, Inc., 960 F.2d 1546 (11th Cir. 1992), which is a case similar to Hendricks and in fact cited and addressed by the Hendricks court, therefore, we will not address this case directly. 5 federal district court alleging a state claim of breach of contract and alternatively federal claims under ERISA. The district court for the Western District of Wisconsin noted that the dispute over unpaid premiums had an “obvious connection” to ERISA. Id. at 1551. Additionally, the court noted that the insurance company terminated the insurance coverage because of the non- payment of the deficit amounts. Ultimately, the court held that ERISA preempted the state breach of contract claim because the case “involve\[d\] a dispute about the benefits agreement between entities that have responsibilities under ERISA.” Id. at 1551. After an extensive analysis of the above cases and a review of the remaining case law, we conclude that the current matter is not preempted by ERISA. While the agreement in question does make reference to ERISA, and an ERISA plan is involved, the cause of action is for the collection of a debt that does not impact any of the objectives of ERISA. The outcome of the present case will not upset the federal uniform administration of plans, nor will it cause a conflict between state and federal law. Rather, the case is a “run of the mill” contract case where the outcome will only affect the parties in question. We find Hendricks, a non-binding decision of a federal district court in a different state, to be distinguishable in two important respects. First, the case was decided in 1994, one year before the Supreme Court’s decision in Travelers which marked the significant shift in ERISA preemption jurisprudence discussed above. Second, in Hendricks the insurance company actually terminated the insurance coverage, thereby directly affecting the employee’s benefits; conversely, in the present case, Weston made the decision to terminate the contract. In following the Supreme Court’s guide to let the objectives of ERISA guide the preemption decision, we do not agree that ERISA preempts Highmark’s state breach of contract claims. Consequently, we will deny Weston’s Motion for Summary Judgment. 6 Turning next to Highmark’s Motion for Summary Judgment, Highmark argues that there are no disputed material facts in the present case. Highmark contends that Weston has admitted the existence of the contract, a breach of the contract, and damages. Weston raises arguments similar to those found in its own motion for summary judgment, namely that Highmark manipulated and overinflated costs to increase the deficit and that ERISA applies. A motion for summary judgment is proper where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Pa. R.C.P. 1035.2. The reviewing court must view the record in the light most favorable to the nonmoving party, resolving all doubts as to the existence of a genuine issue of material fact against the moving party. Basile v. H & R Block, Inc., 761 A.2d 1115, 1118 (Pa. 2000). There does not appear to be a dispute regarding the existence of a contract. However, we do not agree with Highmark’s assertion that there are no disputed material facts. Despite Highmark’s claim that Defendant does not dispute the amount at issue, Weston’s Answer clearly states that “it is denied that Defendant is indebted to Plaintiff in the amount of \[$730,466.78\] and 15 proof thereof is demanded at trial of this case.” Therefore, we find that material issues of fact remain as to whether the contract was breached and the damages owed, if any. As a result, we will also deny Highmark’s motion for summary judgment. ORDER AND NOW, this 3rd day of May, 2016, upon consideration ofPlaintiff Highmark’s Motion for Summary Judgment and Defendant Weston’s Motion for Summary Judgment, the following is entered: 15 Defendant’s Answer, ¶23. 7 DENIED 1. Defendant Weston’s Motion for Summary Judgment is ; and DENIED 2. Plaintiff Highmark’s Motion for Summary Judgment is . BY THE COURT, __________________________ Jessica E. Brewbaker, J. Jack M. Hartman, Esquire CGA Law Firm 135 North George Street York, PA 17401 For the Plaintiff Victor N. Lea, Esquire Lea and Lea 1138 Hamilton Street Allentown, PA 18101 For the Weston Group Barry A. Kronthal, Esquire Margolis Edelstein 3510 Trindle Road Camp Hill, PA 17011 For Model Consulting, Inc. :rlm 8 HIGHMARK HEALTH SERVICES : IN THE COURT OF COMMON PLEAS OF FORMERLY HIGHMARK, INC. : CUMBERLAND COUNTY, PENNSYLVANIA D/B/A HIGHMARK BLUE SHIELD : Plaintiff : : v. : NO. 2015-05848 CIVIL : THE WESTON GROUP, INC. : CIVIL ACTION – LAW Defendant : : v. : : MODEL CONSULTING, INC. : JURY TRIAL DEMANDED Additional Defendant : : IN RE: DEFENDANT THE WESTON GROUP’S MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF’S CROSS MOTION FOR SUMMARY JUDGMENT BEFORE GUIDO, P.J. and BREWBAKER, J. ORDER OF COURT AND NOW, this 3rd day of May, 2016, upon consideration ofPlaintiff Highmark’s Motion for Summary Judgment and Defendant Weston’s Motion for Summary Judgment, the following is entered: DENIED 1. Defendant Weston’s Motion for Summary Judgment is ; and DENIED 2. Plaintiff Highmark’s Motion for Summary Judgment is . BY THE COURT, __________________________ Jessica E. Brewbaker, J.