Baptist Memorial Hospital-Desoto Inc. v. Crain Automotive Inc.

392 F. App'x 288
Court of Appeals for the Fifth Circuit·Decided August 19, 2010·No. 08-60949, 08-61119·Unpublished·Cited by 8 cases

Opinions

PER CURIAM: *

Defendant Crain Automotive, Inc. (“Crain Automotive”) appeals from the district court’s judgment, following a bench trial, that it wrongfully denied benefits due under an employer-funded employee health plan, in violation of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a). The district court awarded damages to plaintiff Baptist Memorial Hospital — DeSoto, Inc. (“BMHD”), as assignee of the participant’s rights under plan, in the amount of $39,751.08 (plus prejudgment interest) and attorney’s fees and costs in the amount of $110,961.48. We affirm.

I. BACKGROUND

Crain Automotive established and maintained a self-funded, ERISA-covered employee health plan (the “Crain Plan”). Crain Automotive operates a series of automobile dealerships and related businesses in central Arkansas, and employs approximately 400 people. The Crain Plan provides health benefits to Crain Automotive’s employees, their spouses, and their dependents. Larry Crain serves as Crain Automotive’s Chairman and, due to that position, had ultimate authority for administering the Crain Plan.

Crain Automotive contracted with Nova-Sys Health Network (“NovaSys”) to serve as the plan’s preferred provider organization. NovaSys in turn contracted with Baptist Health Services Group and its participant, Baptist Memorial Hospital — DeSoto, Inc. (“BMHD”) to serve as a preferred provider. Under this arrangement, Baptist Memorial Hospitals in Shelby County, Tennessee and DeSoto County, Mississippi (including BMHD) agreed to discount charges for all inpatient and outpatient services by 15%. These contractual relationships made BMHD a preferred provider under the terms of the Crain Plan. Crain Automotive contracted with yet another entity, CoreSource, to serve as the Crain Plan’s claims processor.

[291] Dennis Brown was a spouse of a Crain Automotive employee and a participant in the Crain Plan. He received medically necessary inpatient treatment, involving the surgical implantation of two cardiac stents, at BMHD from November 6 to November 8, 2003. This treatment resulted in charges of $41,316.95. Before discharge, Brown signed an agreement assigning his rights under the Crain Plan to BMHD, thereby allowing BMHD to make claims for benefits under the Crain Plan and to bring the instant suit.

BMHD submitted a claim to CoreSource on December 3, 2003, in the amount of $41,316.95, minus the 15% preferred-provider discount. CoreSource forwarded the explanation of benefits to the Crain Automotive in late January 2004. Thereafter, on January 28, 2004, CoreSource informed BMHD that it would receive checks for the entire amount of the claim. When BMHD failed to receive the checks, however, it followed up with CoreSource as to the status of the claim. On February 11, 2004, CoreSource notified BMHD that it was still waiting for Crain Automotive to release the payment. CoreSource asked BMHD for an additional thirty days to make payment, to which BMHD agreed. After that thirty-day period expired, Core-Source again informed BMHD that it was still awaiting Crain Automotive’s authorization to release the payment.

As the district court found, Larry Crain called BMHD’s billing office on April 12, 2004, and informed it that he believed the charges were excessive (or, as he called them, “price gouging”) and stated that “he wanted to make an offer to settle this.” BMHD refused to negotiate the charges, explaining that it had already applied the preferred-provider discount and that there would be no further discounts. BMHD followed up on the status of the claim with CoreSource and Larry Crain on May 24, 2004. The next day, Larry Crain called BMHD’s billing office and stated that “he [was] not going to pay” until BMHD “answered] all his questions.” BMHD informed him that it “provided the services and have billed them” and that it was “not going to give any more discounts].” Larry Crain conveyed to BMHD that he felt BMHD was “taking advantage,” and he advised BMHD to contact its attorney. On June 21, 2004, BMHD noted in its files that “the key person does not want to pay this bill” and began billing the patient directly.

BMHD followed up on the status of the claim with CoreSource on July 21st and again on July 27th. On July 28, 2004, CoreSource informed BMHD that it had returned the payment checks to Crain Automotive, which prompted BMHD to contact Crain Automotive directly by telephone (there was no answer, and BMHD left a message). Larry Crain contacted BMHD on August 10, 2004, and stated that he was holding the payment checks until BMHD reviewed the claim because he still believed the charges were too high. He stated that he was willing to pay the claim, but that he wanted to negotiate a payment settlement. According to BMHD’s records, Larry Crain “stated that one of [BMHD’s] reps was very rude and disconnected the call while he was trying to negotiate a discount settlement.” BMHD followed-up on the status of the claim on September 22, 2004, and again attempted to contact Core Source on October 13, 2004.

There were no further communications between the parties until, on August 25, 2005, BMHD filed the instant suit against Crain Automotive (as well as NovaSys and CoreSource, which have since been dismissed) for recovery of plan benefits under 29 U.S.C. § 1132(A)(1)(B). BMHD also sought fees and costs under 29 U.S.C. [292] § 1132(g)(1). Following a bench trial, the district court found: (1) BMHD was not required to exhaust its administrative remedies because the defendant failed to properly deny the claim; (2) BMHD’s suit was not barred by the plan’s contractual statute of limitations because its requirement that any suit must be brought within one year of filing a claim was unreasonable; (3) the administrator’s interpretation of the plan was legally incorrect and the denial of the claim was an abuse of discretion; and (4) BMHD was entitled to prejudgment interest. Thus, the district court found for BMHD in the amount of $39, 751.08 plus prejudgment interest.

BMHD subsequently moved for attorneys’ fees and costs. After reviewing the relevant factors, the district court found that BMHD was entitled to fees and costs. The district court awarded BMHD half of its requested fees and all of its requested costs, for a total award of fees and costs of $110, 961.48.

Crain Automotive timely appealed.

II. STANDARD OF REVIEW

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Baptist Memorial Hospital-Desoto Inc. v. Crain Automotive Inc., 392 F. App'x 288 (5th Cir. 2010).

392 F. App'x 288 (Baptist Memorial Hospital-Desoto Inc. v. Crain Automotive Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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