United States District Court, N.D. Texas, Dallas Division
CONTINENTAL INSURANCE COMPANY, AS ASSIGNEE OF AETNA LIFE INSURANCE COMPANY, OF HARTFORD, CONNECTICUT, Plaintiff,
DAVID DAWSON, Defendant.
MEMORANDUM OPINION AND ORDER
BARBARA M. G. LYNN, CHIEF JUDGE
the Court are the following Motions filed by Plaintiff: a
Motion for Leave to File a Second Amended Complaint (ECF No.
71), a Motion for Partial Summary Judgment (ECF No. 75), and
a Motion to Dismiss Defendant's Counterclaims (ECF No.
83), which, having given notice pursuant to Fed.R.Civ.P.
12(d), the Court is treating as a motion for summary judgment
(ECF No. 143). For the reasons stated below, the Motions for
Summary Judgment are GRANTED and the Motion for Leave to File
a Second Amended Complaint is DENIED.
Factual and Procedural Background
November 16, 2007, Defendant David Dawson was severely burned
while working for Hill International, Inc. in Baghdad, Iraq.
Fluor Intercontinental, Inc. managed Dawson's living
quarters in Iraq. Hill had an employee benefit plan (the
“Plan”) which is governed by the Employee
Retirement Income Security Act (“ERISA”) and is
fully insured by Aetna Life Insurance Company of Hartford,
Connecticut. Plaintiff Continental Insurance Company was
Hill's workers' compensation carrier, and thus was
required to pay for Dawson's medical expenses under the
Longshore and Harbor Workers' Compensation Act
(“LHWCA”). Aetna was the company that provided
Dawson's group health insurance through Hill. Between
November 18, 2007, and January 24, 2008, Aetna paid $282,
774.51 in medical expenses incurred overseas on Dawson's
behalf. Continental paid Dawson's subsequent medical
expenses of $388, 457.67. The Plan states Aetna has the right
to be repaid for all benefits provided by the Plan on behalf
of the covered person for injuries caused by a third
2009, Dawson filed suit against Fluor in the 134th Judicial
District Court of Dallas County, Texas. Both Continental and
Aetna intervened in the state lawsuit, asserting liens
against any settlement or judgment Dawson obtained against
Fluor. In April 2010, Continental and Dawson executed a
settlement agreement pursuant to § 8(i) of the LHWCA.
Continental paid Dawson $260, 759.68 in exchange for a
complete discharge of its liability for compensation and past
medical care arising out of the injury. The agreement further
provided that Continental could recover from Dawson the full
amount of its asserted lien of $388, 457.67, if Dawson was
awarded more than $2 million in the state case against Fluor.
On May 24, 2010, the Department of Labor's Office of
Workers' Compensation Programs (“OWCP”)
approved the settlement between Continental and Dawson.
Dawson subsequently won a $20 million jury verdict and
judgment, but Dawson entered into a confidential settlement
with Fluor. At the request of the parties, the court of
appeals entered a judgment setting aside the trial
court's judgment and instead entered a take nothing
judgment. Fluor Intercontinental, Inc. v. Dawson,
05-13-00209- CV, 2014 WL 6466946 (Tex. App.-Dallas Nov. 19,
2014, no pet.). Dawson has since stipulated that the
settlement exceeded $2 million.
2012, Dawson executed an agreed judgment regarding
Continental's asserted lien rights for medical benefits
it paid on his behalf. He then satisfied the balance of
Continental's $388, 457.67 lien. On May 9, 2012, Aetna
filed with the OWCP a claim against Continental, seeking
reimbursement under § 8(i) for expenses it paid for
Dawson's overseas medical care. The parties refer to this
action as the San Francisco Longshore Proceeding
(“SFLP”). Aetna and Continental eventually
settled that dispute. Aetna agreed to assign the full value
of its $282, 774.51 lien against Dawson to Continental, and
agreed to assist Continental in enforcing the Plan's
subrogation and reimbursement provisions. In exchange,
Continental paid Aetna $219, 000. On April 23, 2013, OWCP
approved the § 8(i) settlement between Aetna and
Continental. Continental requested Dawson to stipulate that
Aetna's subrogation interest had been properly assigned
to Continental, but Dawson refused.
October 14, 2013, Continental filed suit against Dawson in
this Court, alleging claims under ERISA as a derivative
fiduciary of the Plan, seeking to enforce, as an assignee,
Aetna's subrogation and reimbursement rights. Continental
also sought a declaratory judgment that it has an equitable
lien on Dawson's recovery in the Fluor suit, and a
permanent injunction prohibiting Dawson from retaining any
recovery from the Fluor settlement without first reimbursing
Continental. Dawson maintained that Continental could not
recover as Aetna's assignee because Continental and
Dawson's 2010 agreement discharged him of any further
liability to Continental.
March 31, 2015, this Court granted Dawson summary judgment on
the ground that the 2010 agreement precluded Continental from
recovering as Aetna's assignee. On April 6, 2016, the
United States Court of Appeals for the Fifth Circuit
reversed, and held that Continental could recover for
subrogation and reimbursement rights assigned to it by Aetna.
then answered and counterclaimed, alleging that Continental
breached its fiduciary duty under ERISA, by intentionally
misrepresenting to Dawson that he owes Continental $282,
774.51. Dawson also alleges Continental aided and abetted a
breach of fiduciary duty by Aetna. On April 13, 2016,
Continental filed a Motion for Leave to File its Second
Amended Complaint, seeking to add claims for breach of
contract and a claim alleging failure to reimburse it under
the LHWCA (ECF No. 71). On April 22, 2016, Continental filed
a Motion for Partial Summary Judgment on its declaratory
judgment claim to recover its first-money lien (ECF No. 75).
On May 11, 2016, Continental filed a Motion to Dismiss
Dawson's Counterclaims (ECF No. 83). On September 1,
2016, the Court held a Rule 16 conference, and directed
Dawson to file a proffer to explain what he hoped to prove in
his counterclaims. On September 8, 2016, Dawson filed a
Proffer of Proof, to which Continental responded (ECF Nos.
137, 138, 139). Because the Court is now considering the
Proffer of Proof, and all other evidence in the record, the
Court gave notice and converted Continental's Motion to
Dismiss into a Motion for Summary Judgment (ECF No. 143).
Fed.R.Civ.P. 56, summary judgment is proper “if the
movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law.” Fed.R.Civ.P. 56(a). A factual issue is
material “if its resolution could affect the outcome of
the action.” Weeks Marine, Inc. v. Fireman's
Fund Ins. Co., 340 F.3d 233, 235 (5th Cir. 2003). A
factual dispute is “‘genuine, ' if the
evidence is such that a reasonable [trier of fact] could
return a verdict for the non-moving party.” Crowe
v. Henry, 115 F.3d 294, 296 (5th Cir. 1997). If the
moving party seeks summary judgment as to his opponent's
claims or defenses, “[t]he moving party bears the
initial burden of identifying those portions of the pleadings
and discovery in the record that it believes demonstrate the
absence of a genuine issue of material fact, but is not
required to negate elements of the non-moving party's
case.” Lynch Props., Inc. v. Potomac Ins.
Co., 140 F.3d 622, 625 (5th Cir. 1998).
Court is required to view all facts and draw all reasonable
inferences in the light most favorable to the non-moving
party and resolve all disputed factual controversies in favor
of the non-moving party-but only if both parties have
introduced evidence showing that an actual controversy
exists. See Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255 (1986). The non-moving party must allege
genuine issues of fact concerning the essential components of
its case. Morris v. Covan World Wide Moving, Inc.,
144 F.3d 377, 380 (5th Cir. 1998). If the non-movant has been
given an opportunity to raise a genuine factual issue but the
record could not lead a rational trier of fact to find for
the non-moving party, then there is no genuine issue for
trial. DIRECTV, Inc. v. Minor, 420 F.3d 546, 549
(5th Cir. 2005); Steadman v. Texas Rangers, 179 F.3d
360, 366 (5th Cir. 1999). If the non-moving party fails to
offer proof concerning an essential element of its case, all
other facts are immaterial and no genuine issue of fact
exists. Adams v. Travelers Indem. Co. of Conn., 465
F.3d 156, 164 (5th Cir. 2006).
Amending a Complaint
trial court should grant leave to amend unless there is
evidence of undue delay, bad faith or dilatory motive,
repeated failure to cure deficiencies in previous amendments,
undue prejudice to the opposing party, or if the amendment
would be futile. Rosenzweig v. Azurix Corp., 332
F.3d 854, 864 (5th Cir. 2003). To determine whether adding
new claims would be futile, courts “apply the same
standard of legal sufficiency as applies under Rule
12(b)(6).” Stripling v. Jordan Prod. Co., LLC,
234 F.3d 863, 873 (5th Cir. 2000) (citations and internal
quotations omitted). A futility finding is warranted if
“the amended complaint would fail to state a claim upon
which relief could be granted.” Id.
Continental's Lien and Dawson's Affirmative
Preemption and Colorado Law
parties do not dispute that Aetna paid $282, 774.51 for
Dawson's overseas medical expenses, and that as a result
of the assignment from Aetna, Continental has a claim and
lien against Dawson in that amount. Dawson asserts two
affirmative defenses: first, that under a Colorado statute,
C.R.S. § 10-1-135, the lien must be offset or reduced,
and second, that the lien must be offset or negated because
of either Continental's breach of fiduciary duty or its
aiding and abetting Aetna's breach of fiduciary duty
under 29 U.S.C. § 1132(a)(3). Continental argues as a
matter of law that Colorado law is completely preempted by
ERISA, and that neither Continental nor Aetna breached their
fiduciary duties to Dawson.
contains a broad preemption provision declaring that the
statute shall “supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit
plan.” Metro. Life Ins. Co. v. Massachusetts,
471 U.S. 724, 732 (1985) (citing 29 U.S.C. § 1144(a)).
The broad preemption by ERISA is, however, qualified by 29
U.S.C. § 1144(b)(2)(A), which states that nothing in
ERISA “shall be construed to exempt or relieve any
person from any law of any State which regulates insurance,
banking, or securities.” Id. at 732-33.
are two types of preemption that must be considered in the
context of ERISA: conflict preemption and complete
preemption. See Arana v. Ochsner Health Plan, 338
F.3d 433, 439 (5th Cir. 2003). Even if a state law is not
conflict preempted because it regulates insurance, it may
still be completely preempted if a claim “fall[s]
within the scope of an ERISA [29 U.S.C. § 1132]
remedy.” Aetna Health Inc. v. Davila, 542 U.S.
200, 206 (2004); see also Arana, 338 F.3d at 440.
Dawson argues that fully insured plans, like Aetna's, are
not conflict preempted by ERISA because they are subject to
state laws that regulate insurance. However, Dawson does not
address complete preemption.
completely preempts state law when a claim falls within the
scope of 29 U.S.C. § 1132(a)(1)(B), which provides that:
“a civil action may be brought-by a participant or
beneficiary…to recover benefits due to him under the
terms of his plan, to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under
the terms of the plan.” The Fifth Circuit addressed a
fact pattern similar to that found here in Arana v.
Ochsner Health Plan, 338 F.3d 433 (5th Cir.
2003). There, the plan sought reimbursement for medical
expenses it had paid. The plaintiff argued the health
plan's subrogation and reimbursement terms violated a
Louisiana statute, thereby nullifying the terms of the ERISA
plan, and that, therefore he was not seeking relief under
ERISA. In finding complete preemption, the Fifth Circuit
Arana's [Louisiana law] claim can be fairly characterized
either as a claim to recover benefits due to him under the
terms of his plan or as a claim to enforce his rights under
the terms of the plan. As it stands, Arana's benefits are
under something of a cloud, for OHP is asserting a right to
be reimbursed for the benefits it has paid for his account.
It could be said, then, that although the benefits have
already been paid, Arana has not fully recovered them because
he has not obtained the benefits free and clear of OHP's
claims. Alternatively, one could say that Arana seeks to
enforce his rights under the terms of the plan, ...