1. Case Name: Daley v. Marriott Int’l, Inc., United States Court of Appeals for the Eighth Circuit, July 25, 2005; 415 F.3d 889

2. Type of Treatment Services Denied: Plaintiff’s claims for outpatient treatment for an unspecified mental illness were denied after she met the plan-year maximum of 30 visits.

3. Lawyers:

  • Counsel for Plaintiff: Michael Burdic Kratville, Kratville Law Firm
  • Counsel for Defendant: Christopher Early Hoyme, Nancy A. Wood, Rachel K, Alexander, Berens & Tate

4. Format: Published opinion and order

5. Outline:

  • ERISA Claim? Yes.
  • Class Action/or Individual Action: Class action
  • Defendant: Defendant is the sponsor and administrator of the plan
  • Type of Insurance Plan: Plan is self-funded ERISA
  • Type of Coverage Denial: Administrative denial
  • Causes of Action: Plaintiff argues that Defendant failed to provide coverage for mental health services in accordance with Nebraska’s mental health parity law

6. Legal Pointer: The Plaintiff was receiving in-network outpatient mental health visits. Her plan, a self-funded plan governed by ERISA, provided for an annual maximum of 30 visits and a lifetime maximum of 200 visits. Plaintiff’s treatment was covered until she exceeded the annual visit limitation.

7. Legal Issues and Causes of Action: The Plaintiffs argue that the Defendant’s actions violate the Nebraska Parity Act. The Defendants argue that the plan is not subject to the Parity Act because the law is preempted by ERISA. The trial court granted Defendant’s motion to dismiss and held that the Nebraska Parity Act is preempted by ERISA as to Defendant’s plan.

  • Ruling: The Court upholds the district court’s dismissal.

8. Narrative Case Description: The Plaintiff was receiving in-network outpatient mental health visits. Her plan, a self-funded plan governed by ERISA, provided for an annual maximum of 30 visits and a lifetime maximum of 200 visits. Plaintiff’s treatment was covered until she exceeded the annual visit limitation.  Plaintiff argues that the Parity Act prohibits the Plan from imposing limits on mental health coverage. The Defense argues that ERISA preempts the Parity Act from applying to the plan. The trial court granted Defendant’s motion to dismiss.

Plaintiff filed a second lawsuit against Defendant in its capacity as Plan administrator (Daley II). This suit is the same as Daley I but that Marriott, as opposed to the Plan and the claims administrator, Empire, are named defendants, it contains an additional allegation of claims denials, and contains allegations of untimely notices. The trial court granted the motion to dismiss Daley II based on res judicata.

In Daley I, the Plaintiff argues that the trial court erred in holding that the Parity Act is preempted by ERISA. In considering whether the Parity Act is preempted, the Court examines the express preemption clause in ERISA, and the subsequent savings clause. The Court finds that while the savings clause would preempt the Parity Act, the deemer clause, which exempts self-funded ERISA plans, ultimately governs. Thus, the deemer clause exempts the Plan from the Parity Act.

Next, the Court considers whether res judicata bars Daley II. The Plaintiff argues that the dismissal was improper because the claims in Daley II are broader and Marriott was not a defendant in Daley I. The test considered by the Court is whether the wrong for which redress is sought is the same in both actions. Here, the Court rejects the Plaintiffs argument that the additional allegations makes Daley II a new cause of action. Also, the Court finds that while Marriott was not a named defendant in Daley I, it stands in privity with the Plan as its interests as the administrator of the Plan were identical to the Plan’s interests. Thus, the Court affirms the district court’s dismissal.

9. Additional Comments: None

10. Website: http://caselaw.findlaw.com/us-8th-circuit/1102242.html

11. Practical Implications and Lessons Learned: The attorney in Daley I made three attempts to amend the complaint to add Marriott as a defendant. While it likely would not have changed the outcome of the Court’s decision, it is unclear what impact it would have had on the rest of the Court’s analysis.

12. All Legal Theories Presented in Case: ERISA preemption of Nebraska Parity Act for self-funded ERISA plan

13. Successful Legal Theories in Case: ERISA preemption of Nebraska Parity Act

 

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