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June 2012

Los Angeles ERISA Team Prevails on Motion to Dismiss in Reimbursement Matter

Defendants Prevail on a Motion to Dismiss a Class Action Complaint for Federal and State Claims Related to the Reimbursement of Medical Treatment Costs

On June 18, 2012, Los Angeles attorneys Ronald K. Alberts and Michelle L. Steinhardt prevailed on a motion to dismiss in favor of Defendants The Rawlings Company LLC and Rawlings Financial Services, LLC in an Employee Retirement Income Security Act of 1974 (“ERISA”) health benefits case.  Judge Gary Klausner of the United States District Court for the Central District of California held that Plaintiffs’ state law claims related to the alleged interference and seizure of settlement payments are preempted by ERISA. 

This case arises from Plaintiffs’ injuries from automobile accidents and the cost of the resulting medical treatment paid for by their employer.  Plaintiffs filed a class action complaint against Defendants alleging that the Defendants attempted to interfere with third party personal injury settlements by placing an improper lien on the settlement proceeds for the costs associated with their medical treatment.  Based upon the language contained in the self-funded ERISA governed healthcare plan, the Defendants, working on behalf of Plaintiffs’ employer, informed the Plaintiffs and their attorneys prior to the time a settlement was reached, that the Plaintiffs would be required to reimburse the employer for the medical benefits paid on their behalf.  Despite the plan language requiring adherence to this arrangement, Plaintiffs continued to contend the employer was not entitled to reimbursement. 

Plaintiffs filed a lawsuit against the Defendants asserting the following claims: violations of the Knox Keene Act, the Unfair Competition Law and Federal Debt Collections Practices Act.  A motion to dismiss was filed on behalf of the Defendants on the grounds that the state law claims are preempted by ERISA because the claims “relate to” a self-funded ERISA governed benefit plan.  Defendants also asserted the timing of the lien prevented a valid claim under the Federal Debt Collections Practices Act. 

After an analysis of the motion to dismiss and plan documents, Judge Klausner held that the state law claims are preempted by ERISA and Plaintiffs did not assert a valid claim pursuant to the Federal Debt Collections Practices Act.  Defendants’ motion to dismiss was granted in its entirety. 

Ronald K. Alberts
Michelle L. Steinhardt