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Villalobos v. Vision Graphics, Inc.

United States District Court, D. Colorado

March 8, 2019

ELADIO VILLALOBOS, Plaintiff,
v.
VISION GRAPHICS, INC./EAGLEXM BENEFIT PLAN, VISION GRAPHICS, INC., and EAGLEXM, LLC, Defendants. VISION GRAPHICS, INC., a Wyoming corporation, Third-Party Plaintiff,
v.
CYPRESS BENEFIT ADMINISTRATORS (LHS), LLC, a Delaware limited liability company, and CYPRESS BENEFIT ADMINISTRATORS, LLC, a Delaware limited liability company, Third-Party Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS, GRANTING IN PART AND DENYING IN PART MOTION TO AMEND, AND SUA SPONTE GRANTING PARTIAL LEAVE TO AMEND

          William J. Martinez United States District Judge

         Plaintiff Eladio Villalobos (“Villalobos”) was severely injured in a motorcycle accident while not wearing a helmet. Allegedly, he learned only after the accident that his employer-sponsored health plan does not cover injuries incurred in motorcycle accidents where the injured person was not wearing a helmet. Villalobos sues:

• his employer, Vision Graphics, Inc. (“Vision”),
• his employer-sponsored health plan, known as the Vision Graphics, Inc./Eagle:xm Benefit Plan (“Plan”), and
• another entity associated with Vision and the Plan, called Eagle:xm, LLC (“Eagle”), [1]

         under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., claiming various breaches of duty as to the no-helmet exclusion. Vision has, in turn, asserted third-party claims against two entities allegedly responsible for the formulation and administration of health benefits under the Plan, Cypress Benefit Administrators (LHS), LLC (“Cypress LHS”) and Cypress Benefit Administrators, LLC (“Cypress BA”). Broadly speaking, Vision alleges that the two Cypress entities are responsible for creating the problem that led to Villalobos's lawsuit. (ECF No. 15.)

         Currently before the Court is Cypress LHS's Motion to Dismiss the Amended Complaint (“Motion to Dismiss”). (ECF No. 43.) Cypress LHS addresses its motion to “the Amended Complaint”-as opposed to any third-party complaint-because, at the time Cypress LHS filed the Motion to Dismiss, the dispute between Vision and the Cypress entities was separate from the dispute between Villalobos, Vision, the Plan, and Eagle. Therefore, Vision was the plaintiff and the Cypress entities were the defendants. The Court has since consolidated the dispute and re-aligned the parties, as reflected in the caption, above. (ECF No. 46.)

         Cypress LHS's primary argument in the Motion to Dismiss is a Rule 12(b)(1) argument that the dispute, as originally filed by Vision, is unripe while the at-that-time-separate lawsuit brought by Villalobos remained to be adjudicated. (ECF No. 43-1 at 4- 6.) One week later, however, the Court issued its consolidation order. (ECF No. 46.) Apparently for this reason, Cypress LHS's reply brief says nothing about an unripe dispute, and focuses entirely on Rule 12(b)(6) arguments asserted alternatively in the Motion to Dismiss. (ECF No. 63.) As to those Rule 12(b)(6) arguments, Vision responded (ECF No. 58) but also filed a Motion for Leave to File Amended Third-Party Complaint (“Motion to Amend”) (ECF No. 59), which is also currently before the Court. Vision argues that the Court should deny as moot the Motion to Dismiss if it grants the Motion to Amend. (ECF No. 58 at 2.)

         The Court finds that the portion of the Motion to Dismiss claiming that the dispute is unripe is mooted by consolidation. As to the Rule 12(b)(6) arguments, the Court agrees that the Motion to Amend, if granted, moots the Motion to Dismiss. Accordingly, the primary question before the Court is whether to grant the Motion to Amend. For the reasons explained below, the Court finds that it should be granted as to Vision's claims for breach of fiduciary duty, breach of contract, and declaratory judgment. As to its claim for negligence, the Court finds that both the proposed amended version and the currently operative version fail to state a claim, so the Motion to Amend will be denied as to the proposed negligence claim and the Motion to Dismiss will be granted as to the current negligence claim. However, the Court will sua sponte grant leave to Vision to include a re-pleaded version of this claim in the amended third-party complaint otherwise authorized by this order.

         I. LEGAL STANDARD

         Under Rule 15(a), a court should allow a party to amend its pleadings “when justice so requires.” Fed.R.Civ.P. 15(a). “[T]he grant or denial of an opportunity to amend is within the discretion” of the Court, but an “outright refusal to grant the leave without any justifying reason” is an abuse of discretion. Foman v. Davis, 371 U.S. 178, 182 (1962). “Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.” Frank v. U.S. West, Inc., 3 F.3d 1357, 1366 (10th Cir. 1993).

         Cypress LHS primarily argues that amendment would be futile. (ECF No. 62 at 2.)[2] Proposed amendments are futile when the amended complaint “would be subject to dismissal for any reason.” Watson ex rel. Watson v. Beckel, 242 F.3d 1237, 1239-40 (10th Cir. 2001). “The futility question is functionally equivalent to the question whether a complaint may be dismissed for failure to state a claim.” Gohier v. Enright, 186 F.3d 1216, 1218 (10th Cir. 1999). Accordingly, the Court will “assume the truth of [Vision's] well-pleaded [proposed] factual allegations and view them in the light most favorable to [Vision].” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007).

         II. BACKGROUND

         The Court assumes the following to be true for purposes of the Motion to Amend. The Court derives this narrative from Villalobos's complaint (ECF No. 47) and Vision's proposed amended complaint (ECF No. 59-1).

         Vision is a Wyoming corporation with its principal place of business in Denver. (ECF No. 59-1 at 1.) It sponsors, and is the designated administrator of, the Plan, which provides health benefits to Vision's employees and is governed by ERISA. (Id. at 2, 6.) Vision contracted with Cypress BA in May 2015 to help Vision administer the Plan. (Id. at 6-7.) Cypress BA helped to design the Plan, evaluated claims, paid approved claims, and communicated required information to Plan participants. (Id. at 7.)

         In May 2016, Cypress BA created a new governing document for the Plan, which excluded medical coverage for injuries sustained in a motorcycle accident while not wearing a helmet, or in a car accident while not wearing a seatbelt (“Vehicle Accident Exclusion”). (Id. at 8.) This was a new exclusion. (Id.) Vision did not request it, Cypress BA did not call Vision's attention to it, and Cypress BA did not notify, or ensure that Vision notified, Vision's employees about the exclusion. (Id. at 8-9.)

         Villalobos, a Vision employee and Plan participant, was in a motorcycle accident on July 23, 2016. (ECF No. 47 ¶ 11.) He sustained multiple severe injuries. (Id. ¶ 14.) Cypress BA rejected coverage for these injuries in light of the Vehicle Accident Exclusion. (Id. ΒΆ ...


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