Opinion ID: 3013023
Heading Depth: 2
Heading Rank: 4

Heading: The Nature of Horvath’s Claim

Text: In asserting that the District Court erred in granting summary judgment to Keystone, Horvath’s counsel struggled mightily, both in their briefs and at oral argument, to persuade us that her breach of fiduciary duty claim is based on allegations of affirmative misrepresentation rather than on a failure to disclose material facts. In so doing, they harshly criticized the District Court for failing to address the misrepresentation issue and argued that it misconstrued the true essence of her claim. We reject this argument, which fails at the most basic level because it finds no support in the plain language of Horvath’s complaint. Rather, an analysis of the text of the complaint reveals that the ERISA fiduciary duty claim, which is the only count asserted therein, is clearly premised on Keystone’s alleged failure to disclose material information. See, e.g., Compl. at ¶ 36 (“Keystone breaches its fiduciary duty to plaintiff and the class by failing to fully and accurately disclose the material facts [regarding 5. Because the three factors outlined in Contractors Ass’n of Eastern Pa. provide ample grounds for affirming the District Court’s decision not to delay its summary judgment ruling, we need not consider additional factors. Similarly, because we conclude that Horvath’s Rule 56(f) motion fails even with the aid of Dr. Klionsky’s affidavit, we do not address Keystone’s argument that Horvath failed to make the required expert disclosures with respect thereto. 14 physician incentives]”); id. at ¶ 37 (“Keystone is liable to make restitution to plaintiff and each other member of the Class for an amount by which plaintiffs over paid [sic] Keystone because of Keystone’s failure to disclose the above-described material facts”); id. at ¶ 38 (“As a result of defendant’s breaches of fiduciary duty, Keystone is also liable to disgorge the amounts by which it was unjustly enriched as a result of its failure to disclose the material facts set forth above regarding the true nature of the health insurance it sold to plaintiff and the members of the class”). Moreover, a misrepresentation-based breach of fiduciary duty claim cannot, as Horvath argues, be implied from a fair reading of her complaint. In order to state a claim for misrepresentation by an ERISA fiduciary, Horvath must allege (1) that Keystone was acting as a fiduciary, (2) that Keystone made a misrepresentation, (3) that the misrepresentation was material, and (4) that Horvath relied on the misrepresentation to her detriment. See Daniels v. Thomas & Betts Corp., 263 F.3d 66, 73 (3d Cir. 2001). Although Horvath satisfies the first element listed above,6 there is no reasonable reading of her complaint — even under the liberal pleading requirements contained in Rule 8 of the Federal Rules of Civil Procedure — pursuant to which Horvath can be said to have alleged a material misrepresentation by Keystone upon which she relied to her detriment.7 6. See footnote 2 supra. 7. Indeed, nowhere in the complaint does Horvath use the term “misrepresent” or any variation thereof. Instead, the primary basis for her assertion that her complaint may be read to state a misrepresentation-based breach of fiduciary duty claim is her allegation that the plan documents distributed by Keystone “uniformly represent or imply that the primary care physician’s gatekeeper function will be exercised by each primary care physician on the basis of that physician’s independent medical judgment, and that the medical care recommended or prescribed for each member by that member’s primary care physician will be consistent with his or her physician’s independent medical judgment.” Specifically, she argues that, in light of her accompanying assertion that the existence of financial incentives may potentially cause physicians to prescribe less care than called for by their independent professional judgment, the representation described above must be false. 15 Accordingly, having carefully reviewed the complaint, we conclude that the breach of fiduciary duty claim presented to the District Court was premised on Keystone’s alleged failure to disclose material information. If Horvath desired to change her theory of the case subsequent to her initial filing, she could have sought leave to amend her complaint, which is liberally granted when appropriate. See In re Paoli R.R. Yard PCB Litig., 916 F.2d 829, 863 (3d Cir. 1990) (citing Fed. R. Civ. P. 15(a)). Having failed to do so, she will not now be heard to argue that the District Court erred by ruling on the only claim properly before it.8 We disagree. Contrary to Horvath’s assertion, the mere existence of financial incentives does not, ipso facto, render false Keystone’s representation that its physicians will recommend treatment that is consistent with their independent medical judgment. Cf. Pegram, 530 U.S. at 219, 120 S. Ct. at 2149 (noting that a physician’s “professional obligation to provide covered services with a reasonable degree of skill and judgment in the patient’s interest” serves as a check on the influence of financial incentives). Accordingly, the incompatibility between the existence of financial incentives and the rendering of competent medical care, suggested by Horvath, has not been demonstrated. Furthermore, because this case comes to us on her appeal of the District Court’s grant of summary judgment to Keystone, Horvath must prove not only that she has successfully stated a misrepresentationbased claim for breach of fiduciary duty, but also that there is sufficient evidence to create a triable issue as to this claim. She has clearly failed to do so. See Horvath, 2002 WL 265023, at  (noting the lack of support for Horvath’s assertions “that physician incentives cause doctors to prescribe less care than is medically necessary,” or “that physicians’ financial interests eclipse their professional obligation to provide competent care or causes physicians to abandon their independent medical judgment, forego directing patients to specialists or fail to prescribe medical[ly] necessary treatments, tests or hospitalizations, for the purpose of receiving a larger bonus payment from their managed health care organization”). We therefore reject Horvath’s argument that the juxtaposition of independent medical judgment and financial incentives, as stated in her complaint, provides sufficient support for a claim that Keystone breached its fiduciary duty by making a material misrepresentation. 8. In light of this conclusion, our analysis of Horvath’s claim is not, as she contends, governed by Varity Corp. v. Howe, 516 U.S. 489, 116 S. 16