Opinion
1:24-cv-00162-MIS-GBW
12-20-2024
MICHAEL SELLERS, Plaintiff, v. HUMANA LIFE INSURANCE COMPANY and MANHATTAN LIFE INSURANCE COMPANY, Defendants.
ORDER DENYING MOTION TO DISMISS
MARGARET STRICKLAND UNITED STATES DISTRICT JUDGE
THIS MATTER is before the Court on Defendant Humana Insurance Company (“Humana”)'s Motion to Dismiss, ECF No. 40 (Nov. 8, 2024) [hereinafter Motion to Dismiss or Motion]. Plaintiff Michael Sellers responded, ECF No. 43 (Nov. 22, 2024), and Humana replied, ECF No. 45 (Dec. 6, 2024). Upon due consideration of the parties' submissions, the record, and the relevant law the Court will DENY the Motion.
I. FACTUAL BACKGROUND
This dispute arises out of Plaintiff's claim for benefits following the death of his spouse. Ms. Amber Sellers was tragically killed in an automobile accident in November 2022. Pl.'s First Am. Compl. (“Compl.”) ¶ 14, ECF No. 39. At the time of Ms. Seller [hereinafter Decedent]'s death she was insured under policies issued by Defendant Manhattan Life Insurance Company (“Manhattan”) and Defendant Humana. Id. ¶¶ 15-16. Plaintiff was appointed Personal Representative of Decedent's estate in February 2023. Id. ¶ 20. Plaintiff filed claims for benefits and submitted documentation to both Defendants. Id. ¶¶ 18-19, 21-24, 26-28. Both Defendants denied his claims. Id. ¶¶ 24, 28. Plaintiff appealed Defendant Manhattan's determination, id. ¶ 29; this claim is not at issue in the instant Motion. On July 3, 2023, Plaintiff's counsel (Mr. David Houliston) submitted a letter [hereinafter Notice of Appeal Letter] appealing Humana's decision, which advised that Mr. Houliston represented Plaintiff as Personal Representative of Decedent's estate and included reference to Decedent's Member ID, Group Number, and “medical information.” Id. ¶ 25. Neither Defendant provided benefits to Plaintiff. Id. ¶¶ 33-34.
The Humana policy is referred to throughout the parties' briefing as the “Plan.” The Court will follow suit herein.
II. PROCEDURAL BACKGROUND
Plaintiff filed suit in New Mexico state court on October 17, 2023, ECF No. 1-1, and Defendant Manhattan removed to this Court on February 16, 2024, ECF No. 1. Defendant Humana initially moved to dismiss on August 9, 2024, ECF No. 24. Following this Court's issuance of an Order to Show Cause regarding deficiencies in the Notice of Removal, ECF No. 30, and upon leave of the Court, Defendant Manhattan filed an amended Notice of Removal on October 14, 2024, ECF No. 34, in which Defendant Humana joined, ECF No. 35. On October 16, 2024, the Court granted Plaintiff leave to amend his complaint to re-style his claims as under ERISA, as opposed to state law, and denied Humana's first motion to dismiss as moot. ECF No. 36.
Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.
Plaintiff filed his First Amended Complaint on October 25, 2024. As amended, Plaintiff asserts two claims, one each against Manhattan and Humana. Each claim is styled as “Civil Enforcement” under ERISA § 502(a)(1)(B) (29 U.S.C. § 1132(a)). Compl. ¶¶ 37-56. As relevant to the instant Motion, Plaintiff asserts that he timely filed a claim for benefits, participated in Humana's claims process, and timely appealed Humana's denial, but Humana “failed to properly administer Plaintiff . . . benefits under the Plan.” Id. ¶¶ 37-46. Plaintiff seeks, on the behalf of Decedent's estate, damages, benefits due, pre- and post-judgment interest, and costs and expenses, as well as judgment to “enforce rights of [Decedent's estate] under the terms of the Plans” and to “clarify the rights of [Decedent's estate] to future benefits under the terms of the Plans.” Id. at 8 (Prayer for Relief). Defendant Humana then filed a Motion to Dismiss Plaintiff's claim against it pursuant to Federal Rule of Civil Procedure 12(b)(6), which Motion was fully briefed on December 6, 2024.
III. LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may move for dismissal if the complaint fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This pleading standard does not impose a probability requirement, but it demands “more than a sheer possibility that a defendant has acted unlawfully.” Id. Although the court must accept the truth of all properly alleged facts and draw all reasonable inferences in the plaintiff's favor, the plaintiff still “must nudge the claim across the line from conceivable or speculative to plausible.” Brooks v. Mentor Worldwide LLC, 985 F.3d 1272, 1281 (10th Cir. 2021).
The complaint must provide “more than labels and conclusions” or merely “a formulaic recitation of the elements of a cause of action,” because “courts are not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555 (citation omitted). Indeed, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable.” Id. at 556. The court's role when reviewing “a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991).
IV. DISCUSSION
A. Parties' Arguments
Humana moves to dismiss Plaintiff's claim against it on the basis that Plaintiff has failed to exhaust his administrative remedies under the Plan and the time to do so has expired. Mot. at 1. It asserts, therefore, that Plaintiff fails to state a claim upon which relief may be granted. Id. Administrative exhaustion, Humana argues, is a prerequisite to seeking judicial review under ERISA. Id. at 2-3 (first citing Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99, 105 (2013); and then citing Held v. Mfrs. Hanover Leasing Co., 912 F.2d 1197, 1206 (10th Cir. 1990)). Humana cites to the Plan documentation, which states that exhaustion is required prior to pursuing a judicial action, and completion of the appeals process (which must be initiated within 180 days of receipt of the adverse determination) is required for exhaustion. Id. at 8.
Humana asserts that Plaintiff's alleged appeal, via the Notice of Appeal Letter, was inadequate for failure to properly designate Mr. Houliston as an authorized representative. Id. at 4-5, 9-10. Humana points the Court to two cases from another district in the Tenth Circuit that it alleges are factually similar and instruct that where a plan participant fails to properly designate an authorized representative and therefore has not exhausted their administrative remedies, dismissal of their ERISA claims is appropriate. Id. at 12-13 (first citing C.L. ex rel. H.L. v. Newmont USA Ltd., No. 2:18-cv-00192, 2020 WL 3414807 (D. Utah June 22, 2020); and then citing L.E. v. Deseret Mut. Benefit Admrs., No. 2:20-cv-00707-RJS-DBP, 2023 WL 4083381 (D. Utah June 20, 2023)). Humana also argues that Plaintiff's alleged failure to exhaust should not be excused on grounds of futility or inadequacy. Id. at 13-15.
Plaintiff responds that Mr. Houliston's letter constituted a sufficient notice of appeal and therefore Plaintiff properly exhausted his administrative remedies. See generally Pl.'s Resp. Opp'n Def. Humana's Mot. Dismiss, ECF No. 43 (Nov. 22, 2024) [hereinafter Pl.'s Resp.]. In the alternative, Plaintiff argues that the “deemed exhausted” exception to exhaustion of administrative remedies is applicable here. Id. at 13-22. He asserts that Humana failed to comply with both its own claim procedures and ERISA regulations by failing to provide Plaintiff with any information about his appeal. Id. at 14-19. Furthermore, Plaintiff faults Humana for failing to dispel the notion that his appeal was proper, which he alleges constitutes a failure to participate in the “meaningful dialogue” required under ERISA. Id. at 19-23.
Humana argues in reply that Plaintiff's assertion that it failed to notify him of the Notice of Appeal Letter's deficiency is “patently false.” Reply Supp. Humana's Mot. Dismiss at 3, ECF No. 45 (Dec. 6, 2024) [hereinafter Humana's Reply]. Humana also argues that the “deemed exhausted” exception does not apply because Humana followed its own claims procedures, which comply with ERISA regulations. Id. at 10-11. Because Mr. Houliston's letter was deficient, no appeals process was ever initiated and no decision on such an appeal ever rendered. Id. at 11.
B. Analysis
The parties have likely waded too far into the weeds in their briefing. The issue is currently before the Court on a Rule 12(b)(6) motion to dismiss. To be sure, exhaustion is a requirement-but it is not a jurisdictional one, and Plaintiff was not required to allege facts demonstrating exhaustion in order to survive a motion to dismiss for failure to state a claim. Nor does the face of the Complaint admit sufficient facts to conclusively establish that Plaintiff has not exhausted his administrative remedies. Put simply, Humana's exhaustion argument has come too soon or in the wrong posture. Humana's Motion is therefore DENIED.
1. Documents Properly Considered
As a preliminary matter, the Court must first address which documents are properly considered as part of the complaint on this Rule 12(b)(6) motion. Humana urges the Court to consider three documents along with Plaintiff's Complaint, which it had attached to its prior motion to dismiss: the Plan documentation, the Notice of Appeal Letter, and the letter Humana asserts it sent in response thereto. Mot. at 2 n.1; see ECF No. 24-1. Under Rule 12(d) if “matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment.” Fed.R.Civ.P. 12(d). A district court's failure to convert a Rule 12(b)(6) motion to dismiss to one for summary judgment where the court does not exclude outside materials is ordinarily reversible error. Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215-16 (10th Cir. 2007). There are several exceptions, however, to the general rule that a court considers only the contents of the complaint on a Rule 12(b)(6) motion. Courts may consider “documents incorporated by reference in the complaint; documents referred to in and central to the complaint, when no party disputes its authenticity; and matters of which a court may take judicial notice.” Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1146 (10th Cir. 2013) (internal quotation omitted).
Humana argues that the Court may consider the three documents without converting the motion to one for summary judgment because “the plan documents and related correspondence concerning Plaintiff's request for and denial of benefits are referenced in the Amended Complaint.” Mot. at 2 n.1. The Court will address each document in turn. First, the Court may consider the Plan documentation (ECF No. 24-1 at 6-109). Under Federal Rule of Civil Procedure 10(c) “[a] copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.” Fed.R.Civ.P. 10(c). A contract, such as that between an insurance carrier and a participant, is clearly a written instrument. Plaintiff did not attach the Plan documentation as an exhibit to his Complaint. However, “if a plaintiff does not incorporate by reference or attach a document to its complaint, but the document is referred to in the complaint and is central to the plaintiff's claim, a defendant may submit an indisputably authentic copy to the court to be considered on a motion to dismiss.” GFF Corp. v. Assoc. Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir. 1997). The Plan documentation is clearly “central” to Plaintiff's claim, which seeks benefits under the terms of the Plan. Plaintiff refers to the Plan several times in his Complaint, Compl. ¶¶ 15, 24, 30-31, 33, 37-46, and in his response to the instant Motion he does not dispute the authenticity of the Plan documentation that Humana submitted, see Pl.'s Resp. at 6 n.1, 9-10, 17-18. Accordingly, the Court may consider the Plan documentation in deciding this Motion. See, e.g., Goodwill Indus. of Cent. Okla., Inc. v. Phila. Indem. Ins. Co., 21 F.4th 704, 709 (10th Cir. 2021) (considering insurance Plan documentation on 12(b)(6) motion to dismiss)
For similar reasons, the Court may also consider the Notice of Appeal Letter (ECF No. 24-1 at 115-16). Plaintiff quotes from the Notice of Appeal Letter in his Complaint with a direct cite to the document that Humana previously submitted in the record. Compl. ¶ 25 (citing “Doc. 24-1, Exhibit C, at p. 1”). Although Rule 10(c) by its plain terms refers only to “written instruments,” the Tenth Circuit has interpreted the term to encompass other materials, including letters. See, e.g., Prager v. LaFaver, 180 F.3d 1185, 1188-89 (10th Cir. 1999); GFF Corp., 130 F.3d at 1384-85; Williams v. McKee, 655 Fed.Appx. 677, 679 n.1 (10th Cir. 2016).
The Court may not, however, consider Humana's response letter. In this regard, Humana overreads GFF and related caselaw. As previously stated, GFF holds that on a motion to dismiss a court may consider a document submitted by a defendant that is “referred to in the complaint and is central to the plaintiff's claim.” 130 F.3d at 1384-85. Plaintiff nowhere refers to Humana's response letter in his Complaint. Humana points the Court to paragraphs 11, 24, 25, 33, and 41 of the Complaint. Mot. at 2 n.1. But these paragraphs refer, respectively, to the Plan generally, Humana's initial denial of benefits letter, the Notice of Appeal Letter, and Humana's generally having denied Plaintiff benefits. Compl. ¶¶ 11, 24-25, 33, 41. At no point does Plaintiff's Complaint mention the letter he allegedly received from Humana in response to the Notice of Appeal Letter. Accordingly, the Court will not consider that document in deciding the instant Motion. Cf. Prager, 180 F.3d at 1189 (holding that district court did not abuse its discretion in refusing to consider, inter alia, “two . . . letters . . . that [the plaintiff] did not refer to in his complaint”); Berneike, 708 F.3d at 1146 (holding that district court erred in considering a letter that the plaintiff did not “incorporate . . . by reference or mention . . . in her complaint”); Rael v. McKinley Cnty. Bd. of Cnty. Comm'rs, 706 F.Supp.3d 1298, 1313-14 (D.N.M. 2023).
2. ERISA Exhaustion
“Although ERISA contains no explicit exhaustion requirement, courts have uniformly required that participants exhaust internal claim review procedures provided by the plan before bringing a civil action.” Holmes v. Colo. Coal. for Homeless Long Term Disability Plan, 762 F.3d 1195, 1203-04 (10th Cir. 2014) (citing Heimeshoff, 571 U.S. at 105). Courts have done so as a matter of policy, comporting with “the exhaustion doctrine permeating all judicial review of administrative agency action” and “align[ing] with ERISA's overall structure of placing primary responsibility for claim resolution on fund trustees.” McGraw v. Prudential Ins. Co. of Am., 137 F.3d 1253, 1263 (10th Cir. 1998). The exhaustion requirement applies regardless of whether the plan itself explicitly requires exhaustion, “because ERISA exhaustion is a judicial, not contractual, doctrine.” Lane v. Sunoco, Inc. (R & M), 260 Fed.Appx. 64, 66-67 (10th Cir. 2008) (quoting Whitehead v. Okla. Gas & Elec. Co., 187 F.3d 1184, 1190 (10th Cir. 1999)).
i. Pleading Exhaustion
Although the Tenth Circuit has yet to directly decide the issue, other courts of appeals have held that the exhaustion requirement under ERISA is not jurisdictional. See, e.g., Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 627 n.2 (9th Cir. 2008); LeGras v. AETNA Life Ins. Co., 786 F.3d 1233, 1236 n.1 (9th Cir. 2015); Crowell v. Shell Oil Co., 541 F.3d 295, 308-09 (5th Cir. 2008); Metro. Life Ins. Co. v. Price, 501 F.3d 271, 278-80 (3d Cir. 2007); Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435, 444-45 (2d Cir. 2006). Because exhaustion is instead an affirmative defense, a plaintiff need not plead exhaustion in their complaint. Stampone v. Walker, 722 Fed.Appx. 246, 249 n.3 (3d Cir. 2018). Other districts in the Tenth Circuit have examined the caselaw and come to the same conclusion. See, e.g., Tronsgard v. FBL Fin. Grp., Inc., 312 F.Supp.3d 982, 1004-07 (D. Kan. 2018); Severine v. Anthem Blue Cross Life & Health Ins. Co., No. 19-cv-03301-RM-MEH, 2021 WL 1050008, at *2 (D. Colo. Mar. 19, 2021); L.D. v. UnitedHealthcare Ins., 684 F.Supp.3d 1177, 1202-03 (D. Utah 2023); Denney v. Humana Ins. Co., 704 F.Supp.3d 1262, 1266 (W.D. Okla. 2023).
The undersigned finds the reasoning of its sister courts persuasive. Cf. Jones v. Bock, 549 U.S. 199, 216 (2007) (holding that because failure to exhaust administrative remedies under the Prison Litigation Reform Act is an affirmative defense, plaintiffs need not plead exhaustion in their complaints). Although ERISA exhaustion is “an important legal rule,” it is nonetheless a judge-made one, not a statutory mandate. Metro. Life Ins. Co., 501 F.3d at 278-79. And, in the Tenth Circuit as elsewhere, ERISA exhaustion is subject to several exceptions within the district court's discretion. Holmes, 762 F.3d at 1204. These factors suggest that exhaustion is not a jurisdictional requirement mandating a plaintiff allege facts demonstrating exhaustion in their complaint. Although Plaintiff will have the ultimate burden of persuasion on the issue of exhaustion, he does not have the burden of pleading. Cf. Fernandez v. Clean House, LLC, 883 F.3d 1296, 1299 (10th Cir. 2018). A Rule 12(b)(6) motion, therefore, is not the proper vehicle to attack Plaintiff's alleged failure to exhaust.
District of New Mexico cases that may appear at first blush to be to the contrary are in fact inapposite or unpersuasive. See, e.g., Sawyer v. USAA Ins. Co., 912 F.Supp.2d 1118, 1144-45 (D.N.M. 2012) (converting motion filed under Rule 12(b)(6) to one for summary judgment); Dougherty v. MCI Worldcom Telecomm., No. 00-88 JP/DJS, 2000 WL 36739649, at *3 (D.N.M. Aug. 21, 2000) (relying on only one Eleventh Circuit case itself lacking in analysis for the proposition that exhaustion must be pled); Coonen v. Sandia Corp., No. CIV-04-1035 MCA/ACT, 2005 WL 3041341, at *5 (D.N.M. Aug. 30, 2005) (plaintiff conceded that he had not exhausted administrative remedies).
The two primary cases Humana relies on as analogous to the instant case, C.L. and L.E., were both decided on motions for summary judgment. See C.L., 2020 WL 3414807, at *1; L.E., 2023 WL 4083381, at *1.
ii. Affirmative Defense Clear on Complaint's Face
Notwithstanding the above, a defendant may utilize an affirmative defense on a Rule 12(b)(6) motion to dismiss where “there is no disputed issue of fact raised by an affirmative defense, or the facts are completely disclosed on the face of the pleadings, and realistically nothing further can be developed by pretrial discovery or a trial on the issue raised by the defense.” Frost v. ADT, LLC, 947 F.3d 1261, 1267 (10th Cir. 2020) (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1277 (3d ed. 2002) (August 2019 update); see also Fernandez, 883 F.3d at 1299 (“[O]n occasion it is proper to dismiss a claim on the pleadings based on an affirmative defense. But that is only when the complaint itself admits all the elements of the affirmative defense by alleging the factual basis for those elements.”).
The instant Motion and Complaint do not present those circumstances. Humana argues that Plaintiff failed to exhaust his administrative remedies under the Plan because the Notice of Appeal Letter did not properly designate his counsel as an authorized representative and therefore did not actually effectuate an appeal. Under the Plan, a person “may designate an authorized representative to act on his or her behalf in pursuing a benefit claim or appeal,” which authorization “must be in writing and authorize disclosure of health information.” ECF No. 24-1 at 101. As Humana points out, in order to effectively “authorize disclosure of health information,” under HIPAA, the authorization must include the relevant individual's signature. Mot. at 11-12; Humana's Reply at 7, 9. The Notice of Appeal Letter contains only Plaintiff's counsel's, Mr. Houliston's, signature; Plaintiff did not sign the Notice of Appeal Letter. ECF No. 24-1 at 115. Under the terms of the Plan, therefore, the Notice of Appeal Letter did not properly designate Mr. Houliston as Plaintiff's authorized representative, and thus did not in fact initiate an appeal.
Plaintiff argues that “[t]here was no possible ‘member signature' as the member, Ms. Sellers, was deceased,” Pl.'s Resp. at 8, and that “there is no requirement for Plaintiff's signature,” id. at 10 n.7. Plaintiff is mistaken and misunderstands the HIPAA regulations. Under 45 C.F.R. § 164.502(g)(4), a covered entity (such as Humana) “must treat” a person authorized to act “on behalf of a deceased individual or of the individual's estate . . . as a personal representative . . . with respect to personal health information relevant to such personal representation.” Section 164.502(g)(1) states that a covered entity must “treat a personal representative as the individual.” (emphasis added). And section 164.502(c)(1)(vi) states that an authorization for disclosure of personal health information must contain the “signature of the individual and date.” Plaintiff was appointed Personal Representative of Decedent's estate, Compl. ¶ 20; Humana was required to treat him as a personal representative, which in turn required it to treat him as the individual (Decedent); and thus, Humana needed Plaintiff's signature to disclose protected health information.
But that fact proves only itself. That is, what is clear is that the Notice of Appeal Letter did not initiate an appeal. It is not clear that Plaintiff did not otherwise appeal the benefit denial and exhaust his administrative remedies. Hypothetically, Plaintiff could have taken any number of additional actions that are not revealed in the Complaint. Cf. Leterski v. Kingfisher Cnty. Jail, No. CIV-06-451-W, 2007 WL 1039224, at *2 (W.D. Okla. Apr. 3, 2007); Denney v. Humana Ins. Co., 704 F.Supp.3d 1262, 1266 (W.D. Okla. 2023); Tronsgard, 312 F.Supp.3d at 1006-07; SNL Workforce Freedom All. v. Nat'l Tech. & Eng'g Solutions of Sandia, LLC, No. 1:22-cv-1-KWR-SCY, 2022 WL 3715858, at *14 (D.N.M. Aug. 29, 2022). The absence of evidence here cannot be taken as evidence of absence-Plaintiff did not plead facts ruling out the possibility of exhaustion and thus did not “admit[] all the ingredients of an impenetrable defense.” Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901 (7th Cir. 2004) (cited in Fernandez, 883 F.3d at 1299).
V. CONCLUSION
For the foregoing reasons, Defendant Humana's Motion to Dismiss, ECF No. 40, is hereby DENIED.