Summary
In Schwab v. Medfirst Health Plans of Louisiana, 2000 WL 364984, *5 (E.D. La. 2000), Judge Barbier granted plaintiffs motion for relief from judgment under Rule 60(b) due to excusable neglect.
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Civ. NO: 99-2695 SECTION: "J" (3)
April 7, 2000
Before the Court are plaintiff's Motion for Relief From Judgment Under Rule 60(b) (Rec. Doc. 12) and defendant's, MedFirst Health Plans of Louisiana, Inc., Motion to Administratively Terminate Proceedings based on Failure to Exhaust Administrative Remedies (Rec. Doc. 5). Both motions are opposed. The motions, set for hearing on March 1, 2000, are before the Court on briefs without oral argument.
Background
On June 30, 1998, the defendant corporations issued a notice of discontinuation of health insurance coverage to all of their insureds in Louisiana effective December 31, 1998 at midnight. A subsequent letter was mailed to policy holders on July 29, 1998 which listed the termination date of coverage as January 31, 1999.
Jeanne Schwab was an insured whose policy was canceled. During the period of coverage, Schwab developed breast cancer, necessitating extensive medical treatment. Schwab maintains that due to this condition she is now not only uninsured but uninsurable. She has been receiving treatment at Charity Hospital.
After receiving the cancellation letter, Schwab, through her counsel, wrote MedFirst Health Plans of Louisiana contesting its right to cancel her policy, given the development of her breast cancer. MedFirst responded in a letter that the company had the right to unilaterally cancel all policies in the state of Louisiana.
Schwab then sued in the Civil District Court for Orleans Parish in her own capacity and on behalf of others similarly situated to recover damages related to the cancellation of the policy, including pain, suffering, and mental anguish. Defendants removed this matter on the basis that plaintiff's claims are governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001et seq. On February 16, 2000, the Court conducted a call docket and dismissed without prejudice defendants MedFirst Health Plans Inc., Carol Solomon, Mark Harris, Ronnie D. Johnson, Steve Griggs, Sam Nicholson, and Janet Ziomeck for Schwab's failure to serve these parties. The only remaining defendant, MedFirst Health Plans of Louisiana ("MedFirst"), was served and has filed responsive pleadings. After the dismissal, in a minute entry dated February 18, 2000, the Court dismissed as moot defendants' Motion to Dismiss for Failure to Serve the Defendants (Rec. Doc.).
For the following reasons, the Court grants Schwab's Motion for Relief from Judgment Under Rule 60(b) and considers and denies defendants' Motion to Dismiss for Failure to Serve. The Court also denies defendants' Motion to Administratively Terminate Proceedings.
Motion for Relief From Judgment Under Rule 60(b)
In its motion, Schwab argues that she is entitled to relief from the Court's order dismissing without prejudice defendants MedFirst Health Plans Inc., Carol Solomon, Mark Harris, Ronnie D. Johnson, Steve Griggs, Sam Nicholson, and Janet Ziomeck for failure to serve. Schwab asserts that counsel's failure to appear at the call docket was due to the sudden departure of two attorneys and their secretaries from counsel's law firm which caused much confusion over the status of numerous cases in the firm. This confusion, she argues, constitutes mistake, inadvertence, or excusable neglect under Rule 60(b), and, therefore, the Court should resolve any doubt in favor of trying the matter on the merits.
Defendants contend that Schwab's excuse, failing to stay apprised of the calender, does not qualify as "mistake," inadvertence, or excusable neglect within the meaning of Rule 60(b).
While the Fifth Circuit has taken a harsh stance in cases where the facts demonstrate unexcusable neglect or case mismanagement, there is still discretion afforded to a district court in considering a Rule 60(b) motion. See. e.g., United States v. O'Keefe, 169 F.3d 281, 286 (5th Cir. 1999) ("It is well recognized that a motion for relief from a civil judgment under Rule 60(b) is addressed to the discretion of the court."); see also 11 WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE, § 2857 at 255-57 ("A number of cases say that discretion ordinarily should incline toward granting rather than denying relief, especially if no intervening rights have attached in reliance upon the judgment and no actual injustice will ensue. The policy of the law to favor a hearing of a litigant's claim on the merits must be balanced against the desire to achieve finality in litigation.")
In light of its discretion, the Court finds Schwab's argument persuasive. This is particularly true where, as here, the dismissal was for failure to serve and occurred early in the litigation. These defendants will not be prejudiced by granting the motion. They are represented by the same attorneys who already represent MedFirst, the defendant which has been served, and are fully aware of the underlying facts and legal issues in dispute. Therefore, the Court grants Schwab's motion.
Upon granting Schwab's Motion for Relief from Judgment, the Court must now consider defendant's Motion to Dismiss for Failure to Serve Defendants which was previously dismissed as moot.
Motion to Dismiss for Failure to Serve the Defendants
In this motion, defendants MedFirst Health Plan, Inc., Carol Solomon, Mark Harris, Ronnie Johnson, Steve Griggs, Sam Nicholson, and Janet Ziomeck argue that Schwab's claims should be dismissed without prejudice because of Schwab's failure to serve them within 120 days after the filing of the Complaint as required by Rule 4(m). These defendants include the officers, directors, and their company, MedFirst Health Plan, Inc.
Schwab counters that she has "good cause" for failing to serve the defendants and that the Court should excuse the failure to serve as well as direct a time by which service should be made. Schwab maintains that, when this action was originally filed in state court, service was requested upon the defendants but returned by the sheriff as incapable of service at the listed address. Schwab obtained the address through the official registry of the Secretary of State of Louisiana.
"Under Rule 4(m), when a plaintiff fails to serve a defendant within the 120-day period, the district court has two choices: It may either dismiss the action without prejudice . . . or direct that service be effected within a specified time. [T]he rule qualifies the district courts choices, making an extension of time mandatory when the plaintiff shows good cause." Thompson v. Brown, 91 F.3d 20, 21 (5th Cir. 1996) (quoting FED. R. CIV. Proc. 4(m)).
"If good cause is present, the district court must extend time for service. If good cause does not exist, the court may, in its discretion, decide whether to dismiss the case without prejudice or extend time for service." Id. The burden is on the plaintiff to demonstrate good cause. See Geiger v. Allen, 850 P.2d 330, 333 (7th Cir. 1988). Whether Schwab has established good cause is "a discretionary determination entrusted to the district court. . . ." Del Raine v. Carlson, 826 F.2d 698, 705 (7th Cir. 1987)
Consequently, since this is again a decision squarely within its discretion, the Court finds that plaintiff has established good cause. Schwab followed the means of service as prescribed by the state of Louisiana, an acceptable procedure to follow under Rule 4(e)(1) (h)(1). Rule 4 (e (1) provides that "[s]ervice upon an individual from whom a waiver has not been obtained and filed . . ., may be effected in any judicial district of the United States pursuant to the law of the state in which the district court is located. . . ." Pursuant to Louisiana state law, service shall be requested within 90 days of the commencement of the action. See LA. CODE CIV. PROC. art. 1201(C) Defendants do not contest that Schwab did in fact request service within 90 days.
Alternatively, the Court finds that the defendants would not be prejudiced by the denial of this motion or the extension of an additional sixty (60) days to effect service from receipt of MedFirst's response to interrogatories.
In its motion, Schwab has indicated that she has experienced difficulty in serving these defendants and that she has served MedFirst Health Plans of Louisiana with an interrogatory requesting their addresses.
MOTION TO ADMINISTRATIVELY TERMINATE PROCEEDINGS BASED ON FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES
In its motion, Medirst Health Plans of Louisiana argues that the Court should "administratively terminate" this litigation because Schwab failed to file any grievance over the termination of her insurance policy. MedFirst maintains that insureds seeking to recover benefits under health insurance plans are first required to exhaust all available administrative remedies. Because Schwab has failed to pursue the grievance procedure provided in the insurance policy, MedFirst argues that this matter should be dismissed or stayed, requiring Schwab to follow the grievance procedure outlined in the policy.Schwab counters that pursuing the administrative remedies would be futile, since it is obvious that MedFirst made a unilateral, corporate decision to cancel all policies in the State of Louisiana and that this type of business decision can not be addressed through the individual grievance procedure set forth in the policy.
The sole issue presented in this motion is whether Schwab exhausted the administrative remedies available to her. The general rule is clear, under ERISA, a plaintiff cannot avail herself of federal court unless all administrative remedies have been exhausted. See Denton v. First National Bank of Waco, Tx, 765 F.2d 1295, 1303 (5th Cir. 1985)
ERISA itself is silent on the question of exhaustion of administrative remedies under ERISA § 510. Indeed, ERISA contains no exhaustion requirement whatsoever. However, relying upon AMATO v. Bernard, plus Congressional intent and well-settled principles of administrative law, we adopted the common law rule that a plaintiff generally must exhaust administrative remedies afforded by an ERISA plan before suing to obtain benefits wrongfully denied.Chailland v. Brown Root. Inc., 45 F.3d 947, 950 (5th Cir. 1995) (citations omitted) (footnotes omitted)
A noted exception, however, is where pursuit of the administrative remedies would be futile. See Denton, 765 F.2d at 1303. To establish the futility exception, Schwab must prove that "it is certain that [her] claim will be denied on appeal, not merely that [she] doubts that an appeal will result in a different decision." Lindemann v. Mobil Oil Corp., 79 F.3d 647, 650 (7th Cir. 1996) (quotation omitted)
MedFirst's Grievance Procedure
The administrative remedy available in this case was described in Section XIV of the insurance policy as a "grievance procedure." The grievance procedure provides for three levels of action. The first level lists a telephone number for members of the plan to call to resolve a grievance. If the grievance isn't resolved to the member's satisfaction, then the member may avail herself of level two by filing a written grievance, including a summary of the complaint, a statement of the action requested, and other personal information. Between 30 and 60 days later, the member should hear from a Member Relations Representative who, after investigating the claim, will propose a resolution of the grievance. However, if the member still feels aggrieved, level three is available as the final step, where the member levies her claim with a "Grievance Manager" who should issue the company's final opinion within 60 days.
In this case, Schwab never personally invoked the grievance procedure. Instead, her attorney filed a letter with the grievance division, advising that he represented Schwab, Schwabs grievance, and Schwab's membership information. Implicit in the letter was a proposed solution to Schwabs grievance — don't terminate her insurance.
However, Schwab's counsel's letter was not handled by a Member Relations Representative but forwarded to defendant's legal department in Baton Rouge, Louisiana, which responded with its own letter. MedFirst's letter, in no uncertain terms, outlined a legal basis for the company's action to withdraw from all accounts in Louisiana, including the fact that MedFirst received approval for the withdrawal from the Louisiana Department of Insurance. The letter concludes with the affirmation: "[MedFirst] stands by its notice to all MedFirst members that all coverage will terminate on December 31, 1998 at 12:00 midnight."
Upon reading MedFirst's letter, it is hard not to conclude that level three would be a futile step. It is obvious that Schwab's claim has already been considered and rejected by corporate counsel, a higher authority than the Grievance Manager. Cf. Hager v. NationsBank N.A., 167 F.3d 245, 249 (5th Cir. 1999) (holding that plaintiff did in fact exhaust administrative remedies, even though she failed to take third step of filing appeal of committee's denial of her claim)
Further, other reasons support a finding that exhausting the administrative remedies would be futile. The nature of the decision to terminate Schwab's coverage was one made unilaterally and applied to all members in Louisiana. It is not the sort of decision based on individual factors which lends itself to the grievance procedure. Instead, the decision to pull out of the state of Louisiana and to terminate all Louisiana policy holders was based on a corporate policy decision which realistically would not be reversed via an individual grievance. Cf. Chailland, 45 F.3d at 950 (holding that the exhaustion requirement does not apply if the grievance plan is not capable of supplying the remedy).
Therefore, although Schwab didn't fully exhaust administrative remedies, namely, level three, the Court finds that to pursue the remaining remedies would be futile.
CONCLUSION
Pursuant to the foregoing, the Court makes the following rulings:
IT IS ORDERED that plaintiff's Motion for Relief From Judgment Under Rule 60(b) (Rec. Dcc. 12) is GRANTED.
IT IS FURTHER ORDERED that defendants' Motion to Dismiss for Failure to Serve (Rec. Doc. 4) is DENIED and that plaintiff is GRANTED an additional sixty (60) days to effect service following receipt of defendant's response to interrogatories.
IT IS FURTHER ORDERED that defendant's Motion to Administratively Terminate proceedings Based on Failure to Exhaust Administrative Remedies (Rec. Doc. 5) is DENIED.
IT IS FURTHER ORDERED that this matter is set for a status conference in chambers on Thursday, April 27, 2000 at 9:00 a.m.