Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-02126/USCOURTS-azd-2_07-cv-02126-0/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

Matthew Seckinger, 

Plaintiff, 

vs.

CNIC Health Solutions, Inc.; PCL

Construction, Inc.; 1-5 ABC

Corporations,

Defendants. 

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No. CV-07-2126-PHX-DGC

ORDER

Defendants have filed a motion to dismiss Plaintiff’s amended complaint. Dkt. #17.

The Court will grant the motion in part and deny it in part. 

I. Background.

Plaintiff Matthew Seckinger held a health insurance policy provided by his employer,

PCL Construction Enterprises, Inc., and administered by CNIC Health Solutions, Inc. See

Dkt. #16 ¶3. On October 1, 2006, while covered by the policy, Plaintiff sustained injuries

in a motor vehicle accident. See id. at ¶8. On October 15, 2006, CNIC informed Plaintiff

that he was not eligible to receive reimbursement for certain medical services because CNIC

believed he had been drinking at the time of the accident and “charges for services received

as a result of injury occurring directly or indirectly, as a result of a serious illegal act are

excluded from” the policy. Dkt. #19 Ex. A at 1. CNIC informed Plaintiff that he had the

right to challenge the coverage decision on appeal. See id.

On January 19, 2007, Plaintiff submitted “an appeal [of] the decision made by CNIC

on Mr. Seckinger’s claim dated October 1, 2006[.]” Id. Ex. B at 1. Plaintiff conceded that

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the policy bars coverage for illegal acts, but argued that while “[t]here’s an allegation that

Mr. Seckinger was drinking while driving” on the day of the accident, “there has been no

finding that he violated the law.” Id. Plaintiff also argued that drinking while driving does

not constitute “felonious behavior.” Id.

On February 21, 2007, CNIC “acknowledge[d] receipt of [the] appeal regarding Mr.

Seckinger’s medical claims resulting from his motor vehicle accident on October 1, 2006.”

Id. Ex. C at 1. CNIC’s letter reproduced the policy provision containing the exclusion of

coverage for a “serious illegal act,” which is defined to include an act that would produce a

prison sentence of more than one year if criminally prosecuted. Id. This, of course, is a

common definition of a felony, see Black’s Law Dictionary at 633 (7th ed. 1999) (defining

felony as “[a] serious crime usually punishable by imprisonment for more than one year”),

and Plaintiff had asserted in his appeal that his conduct was not felonious. CNIC’s letter then

stated: “[a]ccording to the policy report, Mr. Seckinger was ‘long formed’ for driving under

the influence, a serious illegal act. Therefore, claims in connection with his motor vehicle

accident injuries are not a covered benefit.” Dkt. #19 Ex. C at 1. 

Plaintiff asserts that he sent a subsequent letter to CNIC, dated March 6, 2007, in

which he sought copies of all relevant documents and other information relied on in denying

his claims. Id. Ex. D at 1. On May 4, 2007, Plaintiff wrote again to CNIC, noting that he

had received no response. Id. Ex. E at 1. CNIC asserts that it did not receive Plaintiff’s

March 6 letter. See Dkt. #17. On May 14, 2007, CNIC provided copies of documents relied

on to deny the claim. Dkt. #19 Ex. F at 1.

Plaintiff then filed this lawsuit. See Dkt. #1 Ex. 1. Plaintiff’s amended complaint

alleges that Defendants breached their fiduciary obligations under the Employee Retirement

Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., by refusing to pay

Plaintiff’s medical bills. See Dkt. #16. Defendants urge the Court to dismiss the amended

complaint on two grounds: (1) Plaintiff failed to exhaust his administrative remedies before

seeking relief in federal court, and (2) Plaintiff cannot obtain his claimed benefits through

an ERISA breach of fiduciary duty claim. See Dkt. #17. 

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According to Defendants, “plaintiff alleges he appealed and the plan did not rule on his

appeal.” Dkt. #17 at 2. Plaintiff does state in his amended complaint that CNIC “failed to

rule on the appeal,” Dkt. #16 ¶14, but he asserts in his response that CNIC “denied the appeal

on February 21, 2007,” Dkt. #19 at 2 (citing id. Ex. C). In ruling on Defendants’ exhaustion

argument, the Court must determine what actually occurred.

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II. Legal Standards.

“[T]he failure to exhaust nonjudicial remedies . . . should be treated as a matter in

abatement, which is subject to an unenumerated Rule 12(b) motion[.]” Wyatt v. Terhune, 315

F.3d 1108, 1119 (9th Cir. 2003). This aspect of Defendants’ motion will therefore be

addressed under traditional Rule 12(b) principles. 

Defendants also assert that Plaintiff cannot obtain policy benefits through a breach of

fiduciary duty claim. A court may dismiss a complaint for failure to state a claim if “it

appears beyond doubt that the plaintiff can prove no set of facts in support of his claims

which would entitle him to relief.” Barnett v. Centoni, 31 F.3d 813, 816 (9th Cir. 1994)

(citation omitted). When analyzing a complaint for failure to state a claim, “[a]ll allegations

of material fact are taken as true and construed in the light most favorable to the non-moving

party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). The Court must also assume

that all general allegations “embrace whatever specific facts might be necessary to support

them.” Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994) (citations

omitted). 

III. Exhaustion of Administrative Remedies.

CNIC’s November 15, 2006, denial of coverage advised Plaintiff of his right to

appeal. On January 19, 2007, Plaintiff submitted a letter to CNIC that stated, in the first

sentence, that it was “an appeal” of the claim decision. See id. Ex. B at 1. The letter

challenged CNIC’s conclusion that Plaintiff committed an illegal act and therefore was

barred from receiving coverage for medical bills related to the act. In addition to asserting

that Plaintiff had not been found guilty of an illegal act, the letter asserted that drinking and

driving was not felonious behavior. Id.

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On February 21, 2007, CNIC “acknowledge[d] receipt of [Plaintiff’s] appeal,” id. Ex.

B at 1, thus confirming that the January 19, 2007 letter was an appeal of the November 15,

2006, benefit determination. CNIC then clearly rejected the merits of Plaintiff’s appeal.

CNIC quoted the policy language that governed its decision, including the definition of a

“serious illegal act” – which requires conduct tantamount to a felony – and asserted that

Plaintiff “was ‘long formed’ for driving under the influence, a serious illegal act.” Id. This

determination effectively rejected Plaintiffs arguments that he had not been found guilty of

anything and that his conduct could not be considered felonious. The letter then stated its

conclusion: “[t]herefore, claims in connection with [Plaintiff’s] motor vehicle accident

injuries are not a covered benefit.” Id. The letter clearly ruled on Plaintiff’s appeal.

Defendants contend that Plaintiff’s appeal letter discussed an outdated version of the

policy and therefore failed to exhaust his administrative remedies. See Dkt. #21. But

Defendants have cited no authority suggesting that the appeals process restarts or is

incomplete where a plan participant submits an appeal based on an incorrect citation to the

plan. Nor have Defendants explained how reliance on different policy language in this case

might change the nature of Plaintiff’s appeal or Defendants’ ruling on it. Plaintiff’s appeal

presented arguments that went directly to the terms of the exclusion Defendants were relying

on, and Defendants’ response to the appeal rejected those arguments. The Court concludes

that Plaintiff exhausted his administrative remedies. The fact that Plaintiff subsequently

sought to obtain information through the March 6 and May 4 letters does not change the fact

that Defendants clearly denied Plaintiff’s appeal. 

IV. Breach of Fiduciary Duty.

Defendants contend that the amended complaint demands improper relief under

ERISA. See Dkt. #17. In particular, Defendants argue that ERISA contains an exclusive

remedy to obtain plan benefits in court – 29 U.S.C. § 1132(a)(1)(B) – and Plaintiff therefore

cannot seek an award of benefits through the fiduciary duty provision found in 29 U.S.C.

§ 1109. But Plaintiff’s amended complaint does not cite specifically to § 1109 or any other

part of ERISA. True, the inartfully drafted claim is labeled “breach of fiduciary duty,” but

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it clearly identifies what Plaintiff seeks: “pay for Seckinger’s outstanding medical bills.”

Dkt. #16 at 3. Plaintiff’s complaint thus gives Defendants fair notice that he seeks an award

of benefits under ERISA. Construing the complaint in a manner consistent with Rule 8’s

notice pleading requirement, the Court cannot say that “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claims which would entitle him to relief.”

Barnett, 31 F.3d at 816. The Court therefore will not dismiss the amended complaint for

Plaintiff’s failure to state a claim upon which relief may be granted.

Defendants assert that Plaintiff may not obtain a 20% civil penalty for violations of

ERISA. See Dkt. #17. Plaintiff does not respond to this argument. See Dkt. #19.

Extracontractual or punitive damages are not available under ERISA. Bast v. Prudential Ins.

Co. of Am., 150 F.3d 1003, 1009 (9th Cir. 1998); see also Massachusetts Mut. Life Ins. Co.

v. Russell, 473 U.S. 134, 144 (1985). As Defendants note, Plaintiff appears to be seeking a

civil penalty under 29 U.S.C. § 1132(l). See Dkt. #17. This provision authorizes the

Secretary of Labor, not plan participants, to obtain civil penalties for a breach of fiduciary

obligations. Mertens v. Hewitt Associates, 948 F.2d 607, 611 (9th Cir. 1991). The Court

therefore will dismiss the amended complaint to the extent that it seeks civil penalties under

ERISA.

IT IS ORDERED:

1. Defendants’ motion to dismiss (Dkt. #17) is granted in part and denied in

part. The motion is granted with respect to Plaintiff’s claim for a civil penalty

under ERISA and is denied in all other respects. 

2. The Court will schedule a Rule 16 Case Management Conference by separate

order.

DATED this 19th day of February, 2008.

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