United States District Court, D. Nebraska
CENTRAL VALLEY AG COOPERATIVE, and CENTRAL VALLEY AG COOPERATIVE HEALTH CARE PLAN, Plaintiffs,
DANIEL K. LEONARD, SUSAN LEONARD, THE BENEFIT GROUP, INC., ANASAZI MEDICAL PAYMENT SOLUTIONS, INC., CLAIMS DELEGATE SERVICES, LLC, LINUS G. HUMPAL, and GMS BENEFITS, INC., Defendants.
MEMORANDUM AND ORDER
SMITH CAMP, CHIEF UNITED STATES DISTRICT JUDGE.
matter is before the Court on the Motion for Temporary
Restraining Order and for an Order to Show Cause Why a
Preliminary Injunction Should Not Be Granted, ECF No. 3,
filed by Plaintiffs Central Valley Ag Cooperative (Central
Valley), and Central Valley Ag Cooperative Health Care Plan
(the Plan). Also before the Court is Plaintiffs' Motion
for Hearing Regarding Temporary Restraining Order, ECF No.
Court held an evidentiary hearing on Plaintiffs' Motion
for Temporary Restraining Order (TRO) on October 17, 2017.
All parties were represented. Plaintiffs submitted a brief,
ECF No. 3-1, and evidence, ECF Nos. 4, 18, before the
hearing. Defendants Anasazi Medical Payment Solutions, Inc.
(AMPS), and its subsidiary Claims Delegate Services, LLC
(Claims Delegate), also submitted evidence before the
hearing. ECF No. 19. Defendants Linus G. Humpal and The
Benefit Group, Inc. (the Claims Administrator), submitted a
brief, ECF No. 22, and evidence, ECF No. 21. At the hearing,
Plaintiffs offered further evidence that lacked proper
foundation and was not received. No other party offered
further evidence. For the reasons stated below, the Motion
for TRO will be denied, and the Court concludes that no
further hearing for preliminary injunctive relief is
warranted at this time.
Plan is a self-funded group health and disability plan,
governed by the Employee Retirement Income Security Act
(ERISA), 29 U.S.C. §§ 1001-1461, administered by
Central Valley. The Plan identifies Central Valley as its
primary fiduciary under ERISA. ECF No. 21-1, Page ID 354,
Humpal is the President of the Claims Administrator, with
whom Central Valley contracted to perform certain
administrative services related to the Plan, including
processing of claims. The relationship between Central Valley
and the Claims Administrator was governed by an
Administrative Services Agreement, see ECF No. 21-3,
Page ID 484, that delineated the Claims Administrator's
services and set the fees for its services.
Plan designated Claims Delegate as a Plan fiduciary for
purposes related to hospital and facility claims, see ECF No.
21-1, Page ID 354, stating that Claims Delegate would review
and make benefit determinations on all post-service hospital
and facility claims. AMPS, Claims Delegate, the Claims
Administrator, Central Valley, and the Plan entered into an
Referenced Based Reimbursement (RBR) Services Agreement that
defined the duties of AMPS and Claims Delegate with respect
to the Plan.
Daniel K. Leonard, Susan Leonard, and GMS Health Benefits,
Inc. (collectively Brokers), brokered the initial agreements
between the Plaintiffs and the Claims Administrator. Counsel
for the Brokers represented that this was the extent of the
Brokers' relationship with the Plaintiffs.
Timeline of Events
to Plan documents, the Plan went into effect on January 1,
2013. ECF No. 21-1, Page ID 448. AMPS, Claims Delegate, the
Claims Administrator, Central Valley, and the Plan entered
into the RBR Services Agreement effective January 1, 2016.
ECF No. 4-1, Page ID 76. Central Valley and the Claims
Administrator also entered into the Administrative Services
Agreement, effective January 1, 2016. Plaintiffs allege that
shortly after Claims Delegate's retention, claims
payments to health care providers under the Plan virtually
ceased. Providers complained the Plan was not paying them for
services rendered to Plan participants, and Plan participants
were subjected to collection efforts by physicians and other
providers. Several providers refused to render further
services to Plan participants, their spouses, and their
dependents. Plaintiffs allege the Plan also lost benefits
from its stop-loss insurance carrier due to the extended
19, 2016, Nebraska Methodist Hospital filed a lawsuit
captioned The Nebraska Methodist Hospital et al. v.
Cooperative Producers Inc. Group Benefit Plan et
al., Case No. CI 16-4230, in the District Court of
Douglas County, Nebraska (the “Nebraska Methodist
Lawsuit”). At issue in that lawsuit are claims
submitted to the Plan. A similar lawsuit has been pending in
the District Court of Douglas County, Nebraska, since 2015.
On November 28, 2016, counsel for AMPS, Claims Delegate, and
the Claims Administrator contacted counsel for Central Valley
to answer questions about the Nebraska Methodist Lawsuit. On
June 21, 2017, counsel for AMPS, the Claims Delegate, and the
Claims Administrator issued a report on the Nebraska
Methodist Lawsuit to Carl Dickinson, Central Valley's
CEO. Counsel issued a follow-up report to Dickinson on
October 3, 2017. Neither Dickinson nor any agent or
representative of Central Valley responded to the reports.
January 1, 2017, Central Valley terminated the Administrative
Services Agreement with the Claims Administrator. However,
Central Valley asked the Claims Administrator to handle
claims for health care services provided before January 1,
2017, during what the parties refer to as a “run-out
period, ” lasting through September 30, 2017. On
October 2, 2017, Central Valley and the Claims Administrator
extended their Run-Out Services Agreement, through December
31, 2017. ECF No. 21-1, Page ID 451.
October 11, 2017, Plaintiffs filed this lawsuit and their
Motion for Temporary Restraining Order. ECF Nos. 1, 3.
Plaintiffs allege that the Defendants breached their
fiduciary duty to the Plan. Plaintiffs also allege that
Defendants engaged in a criminal enterprise, in violation of
the Racketeer Influenced Corrupt Organizations Act (RICO), 18
U.S.C. § 1961 et seq. Plaintiffs seek to recover Plan
assets; to acquire restitution for lost Plan assets resulting
from Defendants' actions in breach of fiduciary duties;
to receive payment for damages arising from prohibited and
party-in-interest transactions; and to receive damages for
Defendants' RICO violations.
Request for Injunctive Relief
their Motion, Plaintiffs request a TRO and preliminary
injunction with the following provisions:
1. Order to prohibit Defendants from exercising any power or
authority over any bank accounts containing Plan assets;
2. Order to enjoin each Defendant from performing any
services on behalf of CVA, the Plan, or Plan participants;
3. Order to Prohibit Defendants from representing CVA and the
Plan in any litigation, including Nebraska Methodist
Hospital, et. al. v. Cooperative Producers, Inc. Group
Benefit Plan, et. al., Case No. CI 16-4230, District
Court of Douglas County, Nebraska;
4. Order to expedite discovery;
5. Order that Bill Kenedy and Taylor Pugh of Lutz accounting
firm will immediately commence a forensic audit of the
Plan's monetary transactions (including medical claims
payments) at Defendants' cost and that Defendants shall
cooperate with such forensic audit;
6. Order to Compel Defendants to immediately provide all
documents listed in Exhibit 4 to the forensic auditor as per
7. Order that such forensic audit be presented to this Court
for review and approval;
8. Order that Robert M. Slovek, Kutak Rock LLP, be appointed
as counsel for CVA and the Plan to represent these Plaintiffs
in the Nebraska Methodist litigation; to identify
and appropriately direct payment of outstanding and
unresolved participant claims from Plan Years 2015 and 2016;
to negotiate stop-loss insurance coverage with regard to
these claims; and, to take whatever ...