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March 2021

Nashville Partner Heather Gwinn Pabon and Senior Counsel Erin McDaniel Win Dismissal in ERISA Case

Gordon Rees Scully Mansukhani's Heather Gwinn Pabon, Managing Partner of the Nashville office, and Erin McDaniel, Senior Counsel, successfully obtained dismissal in the entirety with prejudice at the pleading stage of an ERISA action in favor of the firm's client in U.S. District Court for the Western District of Tennessee.

The action arose out of alleged non-payment of medical expenses incurred by the plaintiff as a result of treatment rendered to a patient covered by an ERISA benefits plan. The plaintiff is a long-term acute care hospital with its principal place of business in Memphis, Tennessee. It serves primarily critically ill patients who need longer term care than is typically provided in an acute care hospital. Plaintiff alleged that at the time of admission, the patient assigned his insurance benefits to the plaintiff's hospital.

The plaintiff asserted the Plan Defendants (an employer-sponsored health plan governed by ERISA (the “Plan”) and associated entities) were fiduciaries of the benefits Plan covering the patient. The plaintiff also asserted the third-party claims administrator for the Plan, along with a separate care-management vendor directly engaged by the Plan, were Plan fiduciaries.

The plaintiff argued that, in reliance on statements made by the third-party claims administrator, it provided medically necessary treatment to the patient and properly and timely submitted claims to Defendants. Defendants paid approximately $200,000 of the more than $1 million claims, determining the remainder of the claims were not covered by the Plan. The plaintiff asserted claims under the Tennessee and federal declaratory judgment acts, two separate ERISA claims, and four causes of action under Tennessee law, seeking remedies for breach of fiduciary duty, wrongful denial of benefits, and for attorney’s fees and costs and pre-judgment interest.

Gwinn Pabon and McDaniel filed a Motion to Dismiss and a Motion for Summary Judgment on behalf of the third-party claims administrator. U.S. District Court Judge Jon McCalla granted the dispositive motions finding:

1) Plaintiff’s state law claims are preempted by ERISA because Plaintiff only brought the claims in its capacity as an assignee of the patient’s rights to Plan benefits;

2) Plaintiff’s Tennessee and Federal Declaratory Judgment Act claims are preempted by ERISA;

3) Plaintiff’s breach of fiduciary duty claim is subsumed by it ERISA benefits claim; and

4) Plaintiff’s claim for benefits pursuant to 29 USC § 1132(a)(1)(B) is barred for failure to exhaust all administrative remedies.

Because these reasons existed for dismissal, the Court did not make a determination as to the third-party claims administrator’s additional arguments that Plaintiff’s claims were time-barred and the third-party claims administrator was not a fiduciary, nor whether the Plan wrongfully denied partial coverage.

Accordingly, the Court dismissed the action in its entirety with prejudice.  

Heather M. Gwinn Pabon
Erin P. McDaniel