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Hulkenberg v. Anabaptist Healthshare

United States District Court, W.D. Virginia, Charlottesville Division

October 17, 2019

WILLIAM RICHARD HULKENBERG, SR., et al., Plaintiffs
v.
ANABAPTIST HEALTHSHARE, et al., Defendants

          MEMORANDUM OPINION

          Hon. Glen E. Conrad, Senior United States District Judge.

         Plaintiffs William Richard Hulkenberg, Sr., Ronald Jones, Larry Bowen, William Richard Hulkenberg, Jr., Jeremy Hulkenberg, and Andrew Hall (the "Former Employees") filed a one-count Virginia-law claim of wrongful termination against Anabaptist Healthshare, Kingdom Healthshare Ministries LLC, Unity Healthshare LLC, OneShare Health, LLC, Alex Cardona, and Tyler Hochstetler. The case is currently before the court on Defendants' motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, ECF No. 35, and the Former Employees' motion to amend their complaint. The motion to amend attaches a proposed amended complaint adding Eldon Hochstetler, Tyler Hochstetler's father, as a defendant. ECF No. 49-3. Defendants oppose this motion arguing that amendment would be futile and that adding Eldon Hochstetler as a defendant would be a bad faith amendment. In addition, the Former Employees moved for leave to file a reply in support of their motion to amend, which attached a proposed reply. ECF No. 51. The court considered the Former Employees' proposed reply when deciding Defendants' motion. For the reasons set forth below, the court will grant in part Defendants' motion to dismiss, grant the Former Employees' motion for leave to amend their complaint, and deny as moot the motion for leave to file a reply.

         Background

         The following facts are taken from the complaint and the exhibits attached thereto. Before delving into the facts of this case, however, the court summarizes the statutory context in which these claims developed. The allegations require some understanding of a health care cost sharing arrangement that Congress used to allow certain religious organizations to avoid the so-called individual mandate of the Affordable Care Act. See generally 26 U.S.C. §§ 5000A(a), (d)(1), & (d)(2)(B).

         Under Virginia law, a health care sharing ministry ("HCSM") is "a health care cost sharing arrangement among individuals of the same religion based on their sincerely held religious beliefs, which arrangement is administered by a" § 501(c)(3) non-profit organization, and complies with other requirements. Va. Code Ann. § 38.2-6300. These requirements include that an HCSM:

3. Provides for the financial or medical needs of a member through payments directly from one member to another. The requirements of this subdivision [] may be satisfied by a trust established solely for the benefit of members, which trust is audited annually by an independent auditing firm; [and]
5. Provides written monthly statements to all members that list the total dollar amount of qualified needs submitted to the organization by members for their contribution.

Id. By following these requirements, HCSMs are not "considered to be engaging in the business of insurance" for purposes of Virginia's insurance statutes. Va. Code Ann. § 38.2-6301.

         The Parties

         The Former Employees are all former at-will[1] employees of defendant Kingdom Health Care Ministries LLC ('"Kingdom"), now known as OneShare Health, LLC ("OneShare") or Unity Health Care Ministries, LLC ("Unity"). Compl. ¶¶ 4-9, 12. Bowen was fired at some point in late 2018. Id. ¶¶ 55-57. The other Former Employees were placed on paid administrative leave on November 3, 2018 and were terminated on January 7, 2019. Id. ¶¶ 61-62.

         Defendants Anabaptist Healthshare and Unity were predecessor entities to Kingdom. Alex Cardona serves as OneShare's CEO, and Tyler Hochstetler is a board member.[2] Unity, Kingdom, and OneShare are or were all HCSMs. Id. ¶¶ 10-14.

         The Former Employees' Allegations

         A non-party, Aliera Healthcare, Inc ("Aliera"), factors heavily in the Former Employees' allegations. Aliera is a for-profit company founded by Timothy Moses, which entered into a partnership with Unity in 2016-2017. Under the Aliera/Unity agreement, "Unity had no control over its finances fueled by Membership dues." Id. ¶ 25. Rather, "Moses controlled all the finances for Unity through Aliera," and purportedly violated IRS regulations by rendering the partnership a for-profit enterprise. Id. ¶¶ 26-29. The Former Employees allege that Moses is a convicted felon who eventually embezzled funds from the Aliera/Unity partnership and engaged in self-dealing. Id. ¶¶ 16, 26-27.

         In February 2018, a publicly traded third-party, apparently a potential business partner called HealthMarkets, Inc., refused to do business with Aliera/Unity without conducting some form of diligence. HealthMarkets had concerns about the partnership's financial solvency and commission structures. Id. ¶¶ 34-35. In response, Cardona retained a consulting firm, Milliman, Inc., to provide an audit of Aliera/Unity. RL In April 2018, Cardona and Hochstetler discovered Moses' embezzlement in the course of the Milliman audit. Id. ¶¶ 39-40. By June 2018, Moses "admitted" to having "pilfered" funds from the Aliera/Unity partnership. Cardona and Hochstetler removed Moses' access to certain accounts, but they did not report his actions to any legal authorities. Id. ¶¶ 41-42. The Former Employees also allege that Cardona and Hochstetler acted in concert with Moses to some extent, and thereby profited from Moses' behavior. In addition, Cardona allegedly created sham sales positions for his wife and niece, extracted large sales commissions, and both Cardona and Hochstetler took in purportedly illegal "per member/per month" fees. Id. ¶¶ 28-32.

         On August 9, 2018-after Cardona and Hochstetler had discovered Moses' actions-Unity hired William Hulkenberg, Sr. and Ronald Jones as Chief Ministry Officer and Chief Sales Officer, respectively. Id. ¶¶ 43-44. The Former Employees allege that Hulkenberg, Sr. and Jones owed fiduciary duties to Kingdom and its HCSM members in their respective roles as Chief Ministry Officer and Chief Sales Officer. Id. ¶¶ 4-5. The remaining Former Employees were involved in business development, product design, interaction with third party administrators, working with on-line webcasts and product demonstrations, as well as administration. Id. ¶¶ 6-9.

         At some point, Hulkenberg, Sr. became suspicious of "foul play" on the part of Moses and Cardona. Id. ¶¶ 45-46. Between October 25 and November 3, 2018, Hulkenberg, Sr. alerted the other Former Employees, had discussions with Hochstetler and Cardona to no avail, and met with a Kingdom board member regarding his concerns. Id. ΒΆΒΆ 45-50. On ...


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