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Smith v. Walmart Stores, Inc.

United States District Court, S.D. Indiana, Terre Haute Division

October 9, 2014

JAMES E. SMITH, Plaintiff,


LARRY J. McKINNEY, District Judge.

This case began in the Vigo County Superior Court as a declaratory judgment action. Therein, Plaintiff James E. Smith ("Smith" or "Plaintiff") requested that the court declare that his insurance company could not seek reimbursement from his settlement amount because he was totally and permanently disabled. The case was removed to this court by Defendant Walmart Stores, Inc. Associates Health and Welfare Plan ("Defendant" or the "Plan"). Defendant asserted that because Smith was making a claim against the administrator of the plan (the "Plan Administrator") under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA"), the provisions of ERISA preempt any state claim.

Smith's claims do in fact arise out of his participation in the Plan, which is a selffunded employee welfare plan. Plaintiff Smith has not opposed this position and rightfully so. Pursuant to Aetna Health v. Davila, 532 U.S.200 (2004), this dispute is governed not by state law but by the provisions of ERISA. See Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 604, 612 (2013). Smith clearly could have brought his claim under 29 U.S.C. § 1132. Therefore, this suit is properly in federal court.


Smith was injured in an automobile accident. He incurred medical bills in the amount of $367, 820.26. At that time he was an insured participant in the Plan. The Plan provided him with benefits of at least $165, 398.00. The Plan Administrator learned of the settlement of the law suit between Smith and the driver of the other vehicle. Smith was notified on August 25, 2011 (the "Notice"), of the Plan Administrator's intention to seek reimbursement pursuant to the provisions of the Plan. The Administrator sent the 2011 Associates' Benefits Book's (the "Benefit Book's") Subrogation and Reimbursement provisions along with the Notice.

Under the terms of the Plan, if the insured is totally disabled, the Plan Administrator will not seek reimbursement. Also under the terms of the Plan, if Smith believed that his settlement was not subject to reimbursement, he had twelve months from the receipt of the Notice to submit his claim. Smith asserts both that he is disabled and that he notified the Plan Administrator with his claim of exemption from the reimbursement rule within the time limits required. Defendant asserts that Smith's response to its notice of reimbursement regarding Smith's claim was not received until July 31, 2013, with a cover letter dated May 21, 2013. Thus, Smith's response was more than nine months beyond the one-year deadline.

After the initial Notice of Lien was sent on August 25, 2011, setting out a lien amount of $26, 734.27, Smith's attorney sent a September 26, 2011, letter to the Plan acknowledging the Notice of Lien and asking for a detailed itemization of the claim. In June of 2012, at the request of the Plan Administrator, Smith's attorney agreed to protect the lien.

In February of 2013 Smith's attorney faxed the Plan asking for an update of the amount of the lien. Not until February 27, 2013, did Smith's attorney notify the Plan that Smith had been told by his doctor that he was totally and permanently disabled and reminded the Plan Administrator that the Benefits Book provided that the Plan would not seek reimbursement if the claimant was totally and permanently disabled. Smith's attorney did not provide the Plan Administrator with any written conclusions from the doctor.

Smith avers that his attorney additionally notified the Plan on April 8, 2013, that Smith was awaiting the disability determination from his doctor. The disability confirmation was received by Smith on May 5, 2013, and Smith's Attorney sent a note to the Plan Administrators in May 2013, which Defendant asserts it did not receive until July 31, 2013. The Plan responded to Smith's attorney on August 15, 2013, indicating that the claim was denied because it was untimely.

The initial August 15, 2013, denial was appealed and a final denial was issued on January 14, 2013. Smith acknowledges that his attorney received a Lien Update in the amount of $166, 780.25 on December 17, 2013. Smith's position is that the December 17, 2013, correspondence is in fact a Notice of Lien and should be considered as having triggered a new twelve-month claim period.


Defendant has moved to dismiss on the grounds that Smith failed to exhaust his administrative remedies under the Plan prior to filing this suit. The parties do not dispute any facts necessary to determine whether or not Smith's notice to the Plan was late and, in fact, both parties rely on matter outside of the pleadings to support their positions. See Dkt. Nos. 13 & 29. Although notice is usually required before conversion of a motion to dismiss to one for summary judgment, Fed.R.Civ.P. 12(d), here, each party has been given the opportunity to and did respond to the other's evidence. Therefore, it is clear that the parties considered this issue ripe for summary judgment and that would be the standard the Court would apply to the issue. Under these circumstances, the Court, sua sponte, converts Defendant's Motion to Dismiss to one for summary judgment. Cf. Fleischfresser v. Dirs. of Sch. Dist. 200, 15 F.3d 680, 684-85 (7th Cir. 1994) (discussing situations in which every party has reason to know when a court will convert a motion to dismiss to one for summary judgment); Hi-Way Dispatch, Inc. v. United States, 858 F.Supp. 880, 881 (N.D. Ind. 1994).

As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986); see also United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir. 1990). Motions for summary judgment are governed by Rule 56(a) of the Federal Rules of Civil Procedure, which provides in relevant part: "The court shall grant summary judgment 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."

Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials showing that a fact either is or cannot be genuinely disputed. Fed.R.Civ.P. 56(c)(1). A genuine issue of material fact exists whenever "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The nonmoving party bears the burden of demonstrating that such a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Goodman v. Nat'l Sec. Agency, Inc. . 621 F.3d 651, 654 (7th Cir. 2010). It is not the duty of the Court to scour the record in search of evidence to defeat a motion for ...

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