Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_14-cv-08099/USCOURTS-azd-3_14-cv-08099-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

MedCath Incorporated Employee Health 

Care Plan, 

Plaintiff, 

v. 

Dustin Stratton, et al., 

Defendants.

No. CV-14-08099-PCT-NVW

ORDER 

Before the Court is Defendants Dustin Stratton, et al.’s Motion to Dismiss First 

Amended Complaint (Doc. 42), which seeks dismissal under Rules 12(b)(1) and 12(b)(6) 

of the Federal Rules of Civil Procedure. Two of the five counts of the First Amended 

Complaint and four of the Defendants were dismissed after the Motion was filed, 

rendering portions of the Motion moot. Plaintiff has filed a response in opposition to the 

Motion, and Defendant Dustin Stratton has filed a reply in support of the Motion. (Docs. 

53, 59.) 

I. UNDISPUTED MATERIAL FACTS 

Plaintiff MedCath Incorporated Employee Health Care Plan (the “Plan”) is a selffunded employee welfare benefit plan governed by the Employee Retirement Income 

Security Act of 1974 (“ERISA”). From approximately September 2009 to November 

2011, Tracie Stratton was employed by MedCath Incorporated, became a participant in 

the Plan, and received health benefits under the Plan. Ms. Stratton enrolled her four 

children as dependents under the Plan. 

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On July 25, 2011, Ms. Stratton filed a professional negligence action in the 

Superior Court of the State of Arizona, Mohave County, related to medical care she had 

received under the Plan. Plaintiff alleges that it paid medical expenses totaling 

$506,769.62 arising from the negligence alleged by Ms. Stratton. On September 12, 

2011, Plaintiff notified Ms. Stratton’s counsel regarding its right to recover its expenses 

from any future recovery in the negligence action. On February 15, 2012, Ms. Stratton’s 

counsel acknowledged the Plan’s right to recovery. 

On September 11, 2013, shortly after Ms. Stratton’s death on July 10, 2013, her 

surviving son, Defendant Dustin Stratton (“Defendant”), intervened as plaintiff and filed 

an amended complaint for himself and on behalf of his minor siblings and Ms. Stratton’s 

surviving mother. On September 24, 2013, Defendant filed a notice stating that the 

amended complaint asserted an Arizona Wrongful Death Act claim on behalf of Ms. 

Stratton’s four surviving children and one surviving parent.1

 The notice also stated that 

no claim under the Arizona Survival Act or any other Arizona statute had been or will be 

asserted by or on behalf of Ms. Stratton’s estate. The amended complaint was brought 

pursuant to A.R.S. § 12-612 and seeks monetary judgment on behalf of each of the 

statutory beneficiaries as compensation for grief and sorrow and for the loss of Ms. 

Stratton’s love, affection, companionship, tutelage, and guidance. It does not seek to 

recover any damages incurred by Ms. Stratton. 

In April 2014, Defendant reached a settlement agreement with two of the 

defendants in the Mohave County wrongful death action. Plaintiff intervened in the 

action, asserted a counterclaim, and objected to the proposed allocation of settlement 

proceeds. 

On June 18, 2014, Plaintiff filed the present federal court action to adjudicate its 

subrogation claim under ERISA and additional state law claims. On July 18, 2014, 

 1

 Plaintiff does not address whether its claims would apply to proceeds received by 

Ms. Stratton’s mother. 

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Plaintiff withdrew its motion for temporary restraining order and preliminary injunction 

based on Defendant’s counsel’s representation that the settlement monies to which 

Plaintiff claims a subrogation interest will be held in trust and not distributed until 

Plaintiff’s claim in this court is adjudicated. 

On September 24, 2014, Plaintiff filed a First Amended Complaint, which among 

other things added the Estate of Tracie Stratton as a defendant “solely to the extent that 

the Estate may have a right to receive monies subject to the Health Plan’s claims asserted 

herein.” (Doc. 37.) The Court had previously granted Plaintiff leave to file the First 

Amended Complaint and ordered that Plaintiff serve it on all parties under Rule 5 of the 

Federal Rules of Civil Procedure. (Doc. 35.) Plaintiff has not filed proof of service on 

the Estate, and the Estate has not appeared in this matter. 

II. SUBJECT MATTER JURISDICTION 

A. Legal Standard 

On a motion to dismiss under Federal Rule of Civil Procedure Under Rule 

12(b)(1), a defendant may challenge the plaintiff’s jurisdictional allegations by either (1) 

attacking the plaintiff’s allegations as insufficient on their face to invoke federal 

jurisdiction or (2) contesting the truth of the plaintiff’s factual allegations, usually by 

introducing evidence outside the pleadings. Leite v. Crane Co., 749 F.3d 1117, 1121 (9th 

Cir. 2014). The first, a facial attack, is resolved by the district court as it would be under 

Rule 12(b)(6), i.e., accepting the plaintiff’s allegations as true and drawing all reasonable 

inferences in the plaintiff’s favor, the court determines whether the allegations are legally 

sufficient to invoke the court’s jurisdiction. Id. The second, a factual attack, requires the 

plaintiff to support its jurisdictional allegations with competent proof, under the same 

evidentiary standard applied in the summary judgment context. Thus, the plaintiff bears 

the burden of proving by a preponderance of the evidence that each of the requirements 

for subject matter jurisdiction has been met. Id. Here, Defendant’s jurisdictional 

challenge is a facial attack, and the Court determines whether Plaintiff’s allegations are 

legally sufficient to invoke the court’s jurisdiction. 

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B. The Employee Retirement Income Security Act of 1974 (“ERISA”) 

An employee benefit plan may sue or be sued under ERISA as an entity. 29 

U.S.C. § 1132(d)(1). A civil action may be brought under ERISA by a fiduciary to (a) 

enjoin any act that violates the terms of the plan or (b) obtain appropriate equitable relief 

to redress such violations or to enforce the terms of the plan. 29 U.S.C. § 1132(a)(3). 

Section 1132(a)(3) does not authorize equitable relief generally, but only such relief as 

will enforce the terms of the plan or the statute. U.S. Airways, Inc. v. McCutchen, __ 

U.S. __, 133 S. Ct. 1537, 1548 (2013). 

C. The Court Has Original Jurisdiction Over Plaintiff’s ERISA Claims. 

The First Amended Complaint alleges subject matter jurisdiction under 28 U.S.C. 

§ 1331 based on a federal question arising under ERISA. Defendant contends that there 

is no federal question in this dispute because Plaintiff asserts a contractual right of 

subrogation, not a subrogation right granted by ERISA, and the only question for 

adjudication is a state law contract issue, i.e., whether terms of the Plan preempt the 

Arizona Wrongful Death Act’s prohibition against subjecting recovery in a wrongful 

death action to debts or liabilities of the deceased. 

ERISA’s principal function is to protect contractually defined benefits. U.S. 

Airways, 133 S. Ct. at 1548. ERISA authorizes Plaintiff to bring an action under 29 

U.S.C. § 1132(a)(3) to enjoin any act that violates the terms of the plan or to obtain 

appropriate equitable relief to redress such violations or to enforce the terms of the plan. 

Count 1 seeks equitable relief under 29 U.S.C. § 1132(a)(3) in the form of a constructive 

trust. Count 2 seeks declaratory judgment that Plaintiff possesses an equitable 

subrogation lien on certain funds under the terms of the plan and ERISA law. 

Defendants’ state law defense does not convert Plaintiff’s ERISA claims to state 

law claims. Therefore, under 28 U.S.C. § 1331, the Court has original jurisdiction over 

Counts 1 and 2 of the First Amended Complaint because they arise under ERISA. 

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III. FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE 

GRANTED 

A. Legal Standard 

On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), all 

allegations of material fact are assumed to be true and construed in the light most 

favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 

2009). Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal 

theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” 

Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To avoid 

dismissal, a complaint need contain only “enough facts to state a claim for relief that is 

plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The 

principle that a court accepts as true all of the allegations in a complaint does not apply to 

legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 566 U.S. 662, 678 

(2009). 

Generally, material beyond the pleadings may not be considered in deciding a 

Rule 12(b)(6) motion. However, a court may consider evidence on which the complaint 

necessarily relies if (1) the complaint refers to the document, (2) the document is central 

to the plaintiff’s claim, and (3) no party questions the authenticity of the copy of the 

document submitted to the court. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006). 

B. The Arizona Wrongful Death Act 

The Arizona Wrongful Death Act provides: 

An action for wrongful death shall be brought by and in the name of the 

surviving husband or wife, child, parent or guardian, or personal 

representative of the deceased person for and on behalf of the surviving 

husband or wife, children or parents, or if none of these survive, on behalf 

of the decedent’s estate. 

A.R.S. § 12-612(A). Under the Act, claims by all statutory beneficiaries are consolidated 

in a single action brought by a designated plaintiff for and on behalf of the statutory 

beneficiaries to obtain compensation for their loss resulting from the victim’s death. 

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Wilmot v. Wilmot, 203 Ariz. 565, 569, 58 P.3d 507, 511 (2002). The survivors’ right of 

action is not derived from, nor does it continue, claims which formerly existed in the 

injured party. James v. Phoenix General Hosp., Inc., 154 Ariz. 594, 603, 744 P.2d 695, 

705 (1987). It is an independent claim, seeking not to recover for the personal injuries 

sustained by the party injured, but instead to recover for damages sustained by the 

survivors upon the death of the injured party. Id. 

Where medical malpractice results in the death of a patient, the cause of action for 

medical malpractice survives, and may be asserted by the personal representative of the 

deceased. Id.; A.R.S. § 14-3110. A survival claim compensates the decedent’s estate; a 

wrongful death claim compensates statutory beneficiaries for their losses. Gandy v. 

United States, 437 F. Supp. 2d 1085, 1087 (D. Ariz. 2006). A survival claim and a 

wrongful death claim are separate and distinct even when they originate from the same 

wrongful act: 

The former permits recovery for the wrong to the injured person and is 

confined to his personal loss while the latter is for the wrong to the 

beneficiaries, confined to their loss because of the death. The latter begins 

where the former ends and recovery on both is not a double recovery for a 

single wrong but rather separate recoveries for different wrongs. 

Gartin v. St. Joseph’s Hosp. & Med. Ctr., 156 Ariz. 32, 34. 749 P.2d 941 (Ct. App. 1988) 

(quoting Barragan v. Superior Court, 12 Ariz. App. 402, 404-05, 470 P.2d 722, 724-25 

(1970)). 

The Arizona Wrongful Death Act further provides: 

The amount recovered in an action for wrongful death shall be distributed 

to the parties provided for in subsection A in proportion to their damages, 

and if recovery is on behalf of the decedent’s estate the amount shall be an 

asset of the estate. 

A.R.S. § 12-612(C). A jury may award damages that it deems to be fair and just for the 

injury to the surviving parties resulting from the death. A.R.S. § 12-613. The individual 

interests of the persons entitled to be compensated for the loss of the decedent likely will 

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be different, and the judge should instruct the jury to find the amount of damages 

sustained by each beneficiary. Wilmot, 203 Ariz. at 571, 58 P.3d at 513. 

The Arizona Wrongful Death Act provides that the amount recovered in a 

wrongful death action “shall not be subject to debts or liabilities of the deceased, unless 

the action is brought on behalf of the decedent’s estate.” A.R.S. § 12-613; see Gartin, 

156 Ariz. at 34, 36, 749 P.2d at 943, 945 (where the entire settlement proceeds were paid 

for a wrongful death claim and not for a survival action, the proceeds were not subject to 

the debts or liabilities of the decedent, a hospital lien did not attach to the proceeds, and 

the hospital was not entitled to relief against the wrongful death statutory beneficiaries). 

C. The Summary Plan Description 

Exhibit A to the First Amended Complaint is the Medical, Prescription Drug and 

Vision Plan of MedCath Incorporated, dated November 1, 2008 (“Summary Plan 

Description”). (Doc. 37-1.) The Summary Plan Description includes an Adoption 

Agreement that states that the benefits provided under the Plan and the general terms and 

conditions governing provision of benefits are contained in the Summary Plan 

Description and may also be governed by provisions of certain insurance contracts 

purchased on behalf of the Plan, which are incorporated by reference in the Summary 

Plan Description. It also states that the Employer is the Plan Sponsor and has certified 

that the Summary Plan Description represents the terms and conditions of the Plan. (Doc. 

37-1 at 4.) Although the copy of the Adoption Agreement attached to the First Amended 

Complaint is unsigned, Defendants do not dispute that the Summary Plan Description 

accurately represents the terms and conditions of the Plan. 

The Summary Plan Description defines “Covered Person” as “A person who is 

eligible for coverage under this Plan, or becomes eligible at a later date, and for whom 

the coverage provided by this Plan is in effect.” Because Ms. Stratton and her four 

children were eligible for and received coverage by the Plan, all of them are considered 

Covered Persons under the Plan. 

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In a section titled “Right of Subrogation/Right to Reimbursement/ Equitable 

Lien,” the Summary Plan Description states: 

Subrogation applies to situations where the Covered Person is injured and 

another party is responsible for payment of health care expenses (s)he 

incurs because of the injury. 

This section applies to Ms. Stratton because she was a Covered Person who, allegedly, 

was injured by another party (or parties) who are responsible for payment of her health 

care expenses. Although Ms. Stratton’s children were Covered Persons, they did not 

incur health care expenses for which another party is responsible.2

 Thus, the section of 

the Plan titled “Right of Subrogation/Right to Reimbursement/ Equitable Lien” does not 

apply to them.3

This section of the Summary Plan Description explains: 

The Subrogation provision allows for the right of recovery for certain 

payments. Any payments made for the Covered Person’s injuries under the 

Plan may be recovered from the other party. Any payments made for the 

Covered Person’s injuries under the Plan may be recovered from the 

Covered Person from any judgment or settlement of his or her claims 

against the other party or parties. 

By accepting Coverage under the Plan, the Covered Person automatically 

assigns to the Plan any rights the Covered Person may have to recover all or 

part of any payments made by the Plan from any other party, including an 

insurer or another group health program. Therefore, the Plan Administrator 

may act as the Covered Person’s substitute in the event any payment made 

 2

 Although Ms. Stratton’s children suffered from the loss of their mother, Plaintiff 

does not allege that they incurred health care expenses because of their loss and the 

expenses were covered by Plaintiff. If another party compensated them for their loss, it 

was not because the other party was responsible for payment of any health care expenses 

incurred because of their loss. 

3

 Contrary to Plaintiff’s assertion, Norstan v. Lancaster, No. CV-12-00481-PHXGMS, 2014 WL 2921656 (D. Ariz. June 27, 2014), did not address a “nearly identical 

situation.” In Norstan, the court ruled that the estate of the deceased was a “covered 

person,” and the ERISA plan’s right of subrogation and reimbursement applied only to 

proceeds the estate recovered in a malpractice action for the same condition or injury for 

which the plan had paid medical expenses. 

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by this Plan for health care benefits . . . is or becomes the responsibility of 

another party. . . . This assignment allows the Plan to pursue any claim 

that the Covered Person may have, whether or not the Covered Person 

chooses to pursue that claim. 

Plaintiff, therefore, is authorized to pursue any claim Ms. Stratton had to recover 

payments it made for her health care. 

The Summary Plan Description further provides: 

. . . if the Covered Person receives . . . any recovery . . . the Covered Person 

must repay the Plan in full for any medical, dental, vision, or disability 

benefits which have been paid or which will in the future be payable under 

the Plan for expenses already incurred or which are reasonably foreseeable 

at the time of such Recovery. . . . The Plan shall also be entitled to seek 

any other equitable remedy against any party possessing or controlling such 

monies or properties. 

Therefore, the Summary Plan Description required Ms. Stratton to repay Plaintiff for the 

medical benefits it paid if she received any recovery for her injuries. It also entitles 

Plaintiff to seek equitable remedy against any party possessing or controlling any 

recovery obtained by Ms. Stratton. 

But Plaintiff’s contractual rights of subrogation and reimbursement do not apply to 

Ms. Stratton’s children who did not incur health care expenses for which another party is 

responsible and did not receive compensation for Ms. Stratton’s injuries. 

D. The First Amended Complaint Fail to State Any ERISA Claim Upon 

Which Relief Can Be Granted. 

ERISA “is built around reliance on the face of written plan documents.” U.S. 

Airways, 133 S. Ct. at 1548. ERISA permits Plaintiff to seek equitable relief to enforce 

the terms of the Plan, but the written plan documents authorize Plaintiff to recover 

payments for health care expenses incurred by Ms. Stratton only from proceeds paid in 

compensation for Ms. Stratton’s injuries. They do not entitle Plaintiff to recover from 

proceeds received in the wrongful death action for the losses suffered by Ms. Stratton’s 

children. Plaintiff’s subrogation and reimbursement rights do not apply in the 

circumstances of this action. 

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The Estate of Tracie Stratton was not a party to the wrongful death action and did 

not continue Ms. Stratton’s professional negligence action after her death. Plaintiff does 

not allege that the Estate has received any proceeds that would be subject to Plaintiff’s 

subrogation and reimbursement rights, i.e., compensation for Ms. Stratton’s injuries. 

Therefore, Counts 1 and 2 of the First Amended Complaint fail to state a claim 

upon which relief can be granted, and the question of whether an ERISA plan preempts 

the Arizona Wrongful Death Act does not arise. 

E. Leave to Amend 

Although leave to amend should be freely given “when justice so requires,” Fed. 

R. Civ. P. 15(a)(2), the Court has “especially broad” discretion to deny leave to amend 

where the plaintiff already has had one or more opportunities to amend a complaint. 

Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1161 (9th Cir. 1989). “Leave to 

amend need not be given if a complaint, as amended, is subject to dismissal.” Moore v. 

Kayport Package Exp., Inc., 885 F.2d 531, 538 (9th Cir. 1989). “Futility of amendment 

can, by itself, justify the denial of a motion for leave to amend.” Bonin v. Calderon, 59 

F.3d 815, 845 (9th Cir. 1995). 

For the reasons stated above, the Court finds that further amendment of Plaintiff’s 

federal claims would be futile. 

F. Supplemental Jurisdiction Over Count 3 of the First Amended 

Complaint Is Declined. 

A district court may decline to exercise supplemental jurisdiction over a claim if it 

has dismissed all claims over which it has original jurisdiction. 28 U.S.C. § 1367(c). 

Count 3 of the First Amended Complaint alleges breach of contract and/or request for 

restitution based on state law. The Court has dismissed all claims over which it has 

original jurisdiction and under § 1367(c) declines to exercise supplemental jurisdiction 

over Count 3 or any other state law claims in this action. 

IT IS THEREFORE ORDERED that Defendants’ Motion to Dismiss First 

Amended Complaint (Doc. 42) is granted to the extent that Counts 1 and 2 of the First 

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Amended Complaint are dismissed with prejudice for failure to state a claim upon which 

relief can be granted. 

IT IS FURTHER ORDERED that Defendants’ alternative motion to dismiss 

Counts 4 and 5 of the First Amended Complaint (Doc. 42) is denied as moot. 

IT IS FURTHER ORDERED that Count Three of the First Amended Complaint is 

dismissed because the Court declines to exercise supplemental jurisdiction. The Clerk 

shall close this case. 

Dated this 16th day of January, 2015. 

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