Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

McKennan v. Meadowvale Dairy Employee Benefit Plan

United States District Court, N.D. Iowa, Western Division

April 12, 2019

AVERA MCKENNAN, Plaintiff,
v.
MEADOWVALE DAIRY EMPLOYEE BENEFIT PLAN and MEADOWVALE DAIRY, LLC., Defendants.

          ORDER ON BENEFITS CLAIM REVIEW

          LEONARD T. STRAND, CHIEF JUDGE

         I. INTRODUCTION

         Plaintiff Avera McKennan (Avera), as assignee of Juan Pablo Garcia Marquez a/k/a Gilberto Fuentes (Marquez), seeks judicial review of the denial of Marquez's claim for benefits under the Meadowvale Dairy Employee Benefit Plan (the Plan), which is administered by Meadowvale Dairy, LLC (Meadowvale). This Court has jurisdiction to review Meadowvale's denial of Marquez's claim under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ et seq. Oral argument is not necessary. See N.D. Iowa L.R. 7(c).

         II. PROCEDURAL HISTORY

         Avera, a South Dakota nonprofit corporation that operates a hospital in Sioux Falls, South Dakota, filed its complaint (Doc. No. 1) on February 12, 2018. After I denied the defendants' motion to dismiss for lack of standing and failure to exhaust administrative remedies, the parties submitted merits briefs (Doc. Nos. 27, 40, 47) and filed a joint administrative record.[1] Doc. Nos. 22, 40-1. This matter is now ready for a decision.

         III. BACKGROUND FACTS

         The Plan is a self-insured employee benefits plan. Doc. No. 17 at ¶ 3. Meadowvale, an Iowa corporation with its principal place of business in Rock Valley, Iowa, sponsored the Plan on December 1, 2014. Id. at ¶ 6; Doc. No. 17-3. The Plan was subsequently amended and restated on February 10, 2016, with an effective date of December 1, 2015. Doc. Nos. 17 at ¶ 6; Doc. No. 17-1; Doc. No. 17-2. The Plan is intended to qualify as a welfare benefit plan under ERISA. Doc. No. 17-3 at 2. Under the terms of the Plan,

A full-time Employee of the Employer who regularly works 30 or more hours per week will be eligible for coverage under this Plan once he/she completes a waiting period of 60 days from the date he or she completes at least one hour of service with the Employer. Participation in the Plan will begin as of the first day of the month following completion of the waiting period provided all required election and enrollment forms are properly submitted to the Plan Administrator.

Doc. No. 17 at ¶ 7. Coverage begins “as of the first day of the month following completion of the waiting period provided all required election and enrollment forms are properly submitted to the Plan administrator.” Id. at ¶ 8.

         Marquez was employed by Meadowvale from September 30, 2015, until January 2016, when he began receiving treatment for Guillain-Barre Syndrome, a rapid-onset muscle weakness disease that ultimately left Marquez paralyzed. Id. at ¶¶ 9-11. Marquez was treated at Avera, where he incurred medical expenses in the amount of $760, 713.45, excluding interest, prior to his death. Id. at ¶ 12. As a full-time employee of Meadowvale, Marquez enrolled in the Plan. Id. at ¶ 10. As a result, the Plan submitted payment for some of Marquez' medical expenses. Id. at 14.

         While Marquez was being treated, it was discovered that he was an undocumented immigrant and that he had enrolled in the Plan using a false name and social security number. On April 12, 2016, the Administrator - through Meadowvale CFO Nathan Jansen - sent Marquez a letter stating “effective May 13 your coverage under the Plan will be rescinded retroactive to 9/30/15.” Id. at ¶ 15. The proffered reason for rescinding coverage was that Marquez had falsely misrepresented his identity to Meadowvale. Doc. No. 13-1 at 12.

         The Plan permits rescission of coverage on the following terms:

         Termination of Employee Coverage

         Coverage under the Plan will terminate on the earliest of the following dates:

(4) The end of the month in which you cease to be eligible for coverage under the plan.
(5) The end of the month in which you terminate employment or cease to be included in an eligible class of Employees.
(6) The date you (or any person seeking coverage on your behalf) performs an act, practice or omission that constitutes fraud.
(7) The date you (or any person seeking coverage on your behalf) makes an intentional misrepresentation of a material fact.

Doc. No. 17-1 at 14.

         Retroactive Termination of Coverage

Except in cases where you fail to pay any required contribution to the cost of coverage, the Plan will not retroactively terminate coverage under the Plan unless you (or a person seeking coverage on your behalf) performs an act, practice, or omission that constitutes fraud with respect to the Plan or unless the individual makes an intentional misrepresentation of material fact. In such cases, the Plan will provide at least 30 days advance written notice to the individual affected before coverage will be retroactively terminated. As provided above, coverage may be retroactively terminated in cases where required employee contributions have not been paid by the applicable deadline. In those cases, no advance written notice is required.

Id.

         Avera is the assignee of Marquez' rights under the Plan. Doc. No. 17 at ¶ 1. On May 10, 2016, Marquez purported to assign “all of [his] rights, remedies, benefits . . .as well as any and all causes of action that [he] might have now or in the future against any Payer to the extent of [his] medical charges, the right to prosecute such cause of action either in [his] name or in the name of Avera” by signing a document entitled “Partial Assignment of Cause of Action, Assignment of Proceeds, Contractual Lien and Treatment Agreement” (the Assignment). Id. at ¶ 15; see also Doc. No. 17-4. The relevant language of the assignment is as follows:

Partial Assignment of the Cause of Action, Assignment of Proceeds and Contractual Lien: I hereby assign, in so far as permitted by law, all of my rights, remedies, benefits to the office as well as any and all causes of action that I might have now or in the future against any Payer to the extent of my medical charges, the right to prosecute such cause of action either in my name or in the name of Avera, and the right to settle or otherwise resolve such causes of action for my medical charges as Avera sees fit. I further assign my right to receive any proceeds from any Payer to Avera and further grant a contractual lien to Avera with respect to any medical charges. . . . I understand these assignments of rights and contractual lien may effectuate, automatically or otherwise, a secured interest under the applicable uniform commercial code. I intend for this agreement to effectuate such a lien and hereby authorize Avera to file the form(s) normally filed with the secretary of state and other governmental agency in order to perfect such lien. Except as provided herein, nothing in this agreement shall be construed as an election or waiver by Avera to a secured interest under any other statutory lien law.

Doc. No. 17-4 at 1.

         The Assignment is signed “Juan Pablo x GM.” Id. at 4. The Assignment was actually signed by Marquez' mother, Graciela Marquez, either pursuant to a medical power of attorney or at Marquez' direction. Marquez additionally signed a Durable Power of Attorney for Health Care Decisions granting Graciela the ability to make health care decisions (Id. at 5); an Authorization for Release of Protected Health Information to Nominated Health Care Attorney-In-Fact (Id. at 6); and a form granting Marquez' “agent, ” among other powers, “the power and authority to serve as my personal representative for all purposes of the Health Insurance Portability and Accountability Act of 1996.”[2] Id. at 7.

         Following assignment, Avera attempted to comply with the internal appeals process. Doc. Nos. 18-1. Avera first contacted the Administrator on July 21, 2016, to request, in accordance with 29 U.S.C. § 1024(b), the documents it would need to appeal the adverse benefit determination. Id. at 16-18. It appears that Avera's representative did not identify to Meadowvale that he was acting on behalf of Avera at that time. Id. at 16 (“Our firm has been retained by [Marquez] . . .”). The Administrator denied the request for documentation, citing a lack of proper written authorization by the beneficiary. Id. at 21.

         The Plan provides that beneficiaries such as Marquez may appoint a representative to contact the administrator to resolve a claim dispute:

A Covered Person is permitted to appoint an authorized representative to act on his or her behalf with respect to a benefit claim or appeal of a denial. An assignment of benefits by a Covered Person to a provider will not constitute appointment of that provider as an authorized representative. To appoint such a representative, the Covered Person must complete a form which can be obtained from the Plan Administrator or the Third-Party Administrator. However, in connection with a claim involving urgent care, the Plan will permit a health care professional with knowledge of the Covered Person's medical condition to act as the Covered Person's authorized representative without completion of this form.

AR 48. Avera responded on September 12, 2016, with a copy of the Assignment as well as all other documents referenced above, arguing that it did in fact have authorization to request the documentation on behalf of Marquez. Id. at 23. Although the Administrator denied that the Assignment was valid or enforceable, it produced the documents on September 30, 2016. Id. at 44-45. There is a dispute as to whether the production of documents was timely. Nevertheless, Avera submitted an appeal to the Administrator within the Plan's 180-day deadline on October 6, 2016. Id. at 2-9. Meadowvale denied the appeal on October 31, 2016, and denied a secondary appeal on December 16, 2017.

         According to the denial of benefits appeal decision, authored by Meadowvale CEO Sjerp Ysselstein, Avera's appeal was denied for three reasons:

First, Avera has no right to pursue this appeal because it is not an authorized representative of Mr. Marquez/Fuentes. An authorized representative is one who “has been authorized to act on behalf of a claimant . . .” 29 C.F.R. § 2560.503-1(b)(4) (emphasis added). The Plan states that assignment of benefits to a medical provider does not constitute appointment of that provider as an authorized representative. See Meadowvale Dairy Employee Benefit Plan, Plan Document and Summary Plan Description p. 57. Instead, the Covered Person must complete a form to designate an authorized representative. Id. Since no form was completed, Avera is not authorized to act on behalf of Mr. Marquez/Fuentes or his estate.
Second, the assignment that Avera has submitted as part of this appeal is not valid. It was not signed by Mr. Marquez/Fuentes, and the person who allegedly signed it on his behalf did not have the power to do so. The power of attorney submitted by Avera in support of this assignment was limited to health care decisions only, and was only effective if Mr. Marquez/Fuentes was “unable, in the judgment of [his] attending physician, to make . . . health care decisions.” Further, Meadowvale believes this power of attorney is invalid under Iowa law because it was witnessed by an Avera employee. See Iowa Code. Ann. § 144B.3.
Finally, the appeal is denied because Mr. Marquez/Fuentes submitted a false name and social security number to Meadowvale. The Plan specifically states that coverage will be terminated on the date that an employee “performs an act, practice, or omission that constitutes fraud” or “makes an intentional misrepresentation of a material fact. See Meadowvale Dairy Employee Benefit Plan, Plan Document and Summary plan Description p. 21. Retroactive rescission under these circumstances is permitted under federal law. 45 C.F.R. 147.128(a)(1).
Mr. Marquez/Fuentes' lack of proper documentation also means that Meadowvale could not have legally employed him. As the Meadowvale Dairy Employee Benefit Plan only covers employees of Meadowvale, it is clear that Mr. Marquez/Fuentes made an intentional misrepresentation of a material fact that constitutes fraud.

Doc. No. 18-3 at 1-2. The resolution of the second appeal, authored by Ysselsteins' wife, Natalie Ysselstein, was substantially identical.

         According to the Plan's provisions, the Plan was required to follow these ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.