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IHC Health Services, Inc. v. Calfrac Well Services Corp.

United States District Court, D. Utah

September 25, 2018

IHC HEALTH SERVICES, INC., dba INTERMOUNTAIN MEDICAL CENTER, Plaintiff;
v.
CALFRAC WELL SERVICES CORPORATION, Defendant.

          MEMORANDUM DECISION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          JILL N. PARRISH UNITED STATES DISTRICT COURT JUDGE.

         This matter comes before the court on the parties' cross motions for summary judgment. Defendant Calfrac Well Services Corporation (“Calfrac”) moved for summary judgment on each of Plaintiff's three claims on January 11, 2018 (ECF No. 22). On January 12, 2018, Plaintiff IHC Health Services, Inc. (“IHC”) moved for summary judgment on all claims, as well as on its request for attorney's fees and prejudgment interest (ECF No. 23).

         I. BACKGROUND

         This dispute involves the denial of benefits allegedly due under a self-funded health benefit plan. Defendant Calfrac funds and administers a health benefit plan for its employees (the “Plan”) that was established and is operated under the Employee Retirement Income Security Act of 1974 (“ERISA”). Plaintiff IHC is a corporation that operates several hospitals in Utah, including Intermountain Medical Center. Nonparty UMR is a third-party claims administrator hired by Calfrac to provide administrative services for the Plan.

         T.Q., a beneficiary of the Plan, was born at Intermountain Medical Center on June 10, 2014 via cesarean section after only 30 weeks of gestation. Complications resulting from his premature birth led to a lengthy period of hospitalization, and by the time T.Q. was discharged on August 17, 2014, he had incurred a hospital bill totaling $443, 223.34-$368, 983.43 of which Calfrac is alleged to owe after contractual adjustments.[1]

         Because IHC erroneously believed that Blue Cross Blue Shield was the primary insurer, [2]IHC sought and was granted authorization for T.Q.'s care from Blue Cross Blue Shield at the time of A.Q.'s admission. IHC did not discover its error until September 9, 2014, at which point it submitted the claim to UMR. On December 26, 2014, UMR informed T.Q.'s father, the Plan participant, that Calfrac was denying the claim for failure to obtain prior authorization as required by the Summary Plan Description (“SPD” or “Plan document”).[3] A subsequent appeal did not change this initial determination.

         IHC filed its Complaint on October 3, 2016, alleging three counts against Calfrac: (1) for recovery of plan benefits under 29 U.S.C. § 1132(a)(1)(B); (2) for breach of fiduciary duty under 29 U.S.C. §§ 1104, 1109, and 1132(a)(2), (3); and (3) for failure to produce plan documents under 29 U.S.C. §§ 1024(b)(4) and 1132(c)(1). However, in the course of briefing the instant motions, IHC conceded that (1) it cannot maintain a claim for breach of fiduciary duty alongside a claim for payment of benefits owed, (ECF No. 35 at 2), and (2) Calfrac is not liable for statutory penalties flowing from a failure to disclose plan documents, (ECF No. 37 at 8). As a result, Calfrac is entitled to summary judgment on Counts II and III of the Complaint.

         The court, then, need only resolve the parties' motions as they relate to plaintiff's first Count-a claim for payment of benefits due under § 1132(a)(1)(B)-and plaintiff's request for attorney's fees and prejudgment interest.

         The court held oral argument on these motions on September 19, 2018. On the basis of that hearing, the parties' briefs, and a review of the relevant law, the court grants in part and denies in part each of the motions for summary judgment.

         II. LEGAL STANDARD

         A. Summary Judgment Standard

         Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” When both parties move for summary judgment in an ERISA case, thereby stipulating that a trial is unnecessary, “summary judgment is merely a vehicle for deciding the case; the factual determination of eligibility of benefits is decided solely on the administrative record, and the non-moving party is not entitled to the usual inferences in its favor.” LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir. 2010) (quoting Bard v. Boston Shipping Ass'n, 471 F.3d 229, 235 (1st Cir. 2006)).

         B. Standard of Review for Denial of Benefits

          “[A] denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If, as here, the plan explicitly vests such discretion with the administrator, a reviewing court will apply “a deferential standard of review, asking only whether the denial of benefits was arbitrary and capricious.” Weber v. GE Grp. Life Assurance Co., 541 F.3d 1002, 1010 (10th Cir. 2008) (internal quotation marks omitted). “Under the arbitrary and capricious standard, we curtail our review, asking only whether the interpretation of the plan was reasonable and made in good faith.” Id. (internal quotation marks omitted).

         The Tenth Circuit has enunciated a sliding scale framework for “dialing back” the level of deference accorded to an administrator's decision when, as here, the administrator is operating under a conflict of interest as both fiduciary and insurer. See Weber, 541 F.3d at 1010 (citing Metro Life Ins. Co v. Glenn, 554 U.S. 105 (2008)). An administrator's conflict of interest creates a danger of biased claims processing because “[t]he employer's fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary.” Glenn, 554 U.S. at 112.

         A court analyzing a conflict of interest should endeavor a “combination-of-factors” review under which “[a] conflict ‘should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision . . . [and] should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy. . . .” Holcomb v. Unum Life Ins. Co. of Am., 578 F.3d 1187, 1193 (10th Cir. 2009) (quoting Glenn, 554 U.S. at 117).

         Here, it is undisputed that Calfrac is operating under a conflict of interest, but the parties disagree about the weight the court ought to assign to that conflict. While both parties recite various factors relevant to a court's consideration of an administrator's conflict of interest, neither provides facts sufficient to apply these factors. Instead, each party simply arrives at their preferred weight- Calfrac suggesting the conflict is de minimis and IHC urging that the conflict is “severe.”

         Calfrac argues that its conflict should be presumed to be a non-factor unless and until IHC carries its burden to produce facts showing that the conflict affected its denial of benefits to T.Q. But this is not an accurate statement of law. Glenn makes clear that each party has a burden to provide facts to inform the level of weight a court should accord a conflict of interest. To render a conflict de minimis, a conflicted administrator must show that that it “has taken steps to reduce potential bias and to promote accuracy[.]” Glenn, 554 U.S. at 117.

         Indeed, Calfrac seems to recognize as much by arguing that even though it “retains discretion to evaluate claims as the Plan Administrator, nothing in the Administrative Record suggests that it directly did so here.” ECF No. 36, at 11. While this fact is apparently undisputed, a single claim is not the relevant level of abstraction for purposes of this analysis. To be sure, Glenn holds that a conflict of interest will be found to be reduced where a self-funded plan takes measures to “wall off” claims administrators from those concerned with the firm's coffers. See Id. But Calfrac offers no facts to suggest that it has erected this kind of firewall, and the court declines to infer its existence from the fact that Calfrac did not intervene in this particular denial of benefits.

         Because neither party has provided facts sufficient to result in an upward or downward adjustment of the weight of Calfrac's conflict, the court will incorporate only a modest reduction of deference as part of its arbitrary and capricious review. See Weber, 541 F.3d at 1011 (“[W]e will still employ the arbitrary and capricious standard, but we will weigh [the administrator's] conflict of interest as a factor in determining the lawfulness of the benefits denial.”).

         III. ANALYSIS

         A. IHC's Purported Assignment

         Calfrac first argues that this court cannot reach the merits of IHC's claim under § 1132(a)(1)(B) because that subsection vests a right of action only with a plan's “participant or beneficiary.” IHC does not purport to be either, but rather contends it is an assignee of benefits by virtue of a Consent and Conditions of Service form (“Consent Form”) executed by T.Q.'s mother, A.Q., on May 20, 2014. Calfrac contests the validity of the assignment. Both parties agree, however, that if the purported assignment is valid, IHC stands in the beneficiary's shoes and “has standing to assert whatever rights [the beneficiary] possessed.” Denver Health & Hosp. Auth. v. Beverage Distribs. Co., 546 Fed.Appx. 742, 745 (10th Cir. 2013).

         As an initial matter, the court perceives the need to draw an analytical distinction between two concepts related to the Consent Form that have been largely conflated by the parties' briefs. With few exceptions, the parties' analyses of IHC's standing to pursue this action have confused IHC's assignment of benefits with IHC's appointment as an attorney-in-fact (or personal representative) of the beneficiary. These are distinct legal concepts, which is made clear by both the Consent Form and the SPD.

         IHC's Consent Form reads:

8. Assignment of Benefits-Attorney-in-Fact. By signing below, I hereby assign and transfer to the Facility, and to any other health care provider for whom Facility bills, the benefits of any insurance policy or other arrangement that may provide payment for some or all of my care. I also authorize and appoint the Facility and anyone it may designate as my attorney-in-fact for purposes of communicating, appealing, negotiating, or otherwise pursuing in its discretion any or all legal remedies with any Insurance company, ...

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