DENIS R. HURLEY, Senior District Judge.
Pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6), Defendant Northrop Grumman Systems Corporation ("NG-Systems") moves this Court to dismiss, in its entirety and with prejudice, the complaint filed against it by Plaintiffs Neurological Surgery, P.C. ("Neurological Surgery"), Michael H. Brisman, M.D., and Jeffrey A. Brown, M.D. (hereafter and together with Neurological Surgery, the "Providers"). (See ECF No. 20.) Generally, the complaint seeks payments from NG-Systems, pursuant to the Employee Retirement Income Security Act ("ERISA") and various New York state laws, for services rendered by the Providers—a neurosurgery practice and two of its doctors, which are "out-of-network" healthcare providers—to NG-Systems' employees and/or their beneficiaries, which the Providers allege have not been paid or have been paid at "dramatically reduced rate[s]". (See ECF No. 8; hereafter, the "Complaint".) The Providers oppose NG-Systems' motion to dismiss. (See ECF No. 20-9.) For the reasons that follow, NG-Systems' motion to dismiss is granted.
The Providers are a private neurosurgery medical practice and two of its physicians. They have several office on Long Island, including in Queens, and in Manhattan. NG-Systems is a leading global security company. Through certain benefit plans funded and administered by NG-Systems (hereafter, "Plans"), it provides healthcare benefits to its employees and certain of their beneficiaries. NG-Systems contracts with Empire
The Providers generally allege they are out-of-plan providers who rendered medically necessary services to (1) "MM", an employee of NG-Systems and to (2) "JS", an NG-Systems employee beneficiary (hereafter, the "Patients"), both of whom were covered at all relevant times by the Plans. Under the Plans, the Patients may receive medical services from out-of-network providers, who are entitled to payments for those services. Despite the Patients providing the Providers with authorizations and assignments to receive payments directly from NG-Systems, and the Providers attempting to enter into a meaningful dialog with NG-Systems and Empire regarding prompt and proper payment for the outstanding claims,
On December 10, 2013, the Providers rendered medically necessary health services, which were covered under the Plans, to MM. MM executed documents assigning Providers all rights to receive reimbursement from Empire for the health care services provided. The Providers billed Empire $105,900 for the medical services rendered to MM, which "[p]ursuant to the terms of the relevant [NG-Systems] health plan documents and agreements, Empire . . . was obligated to reimburse to [the Providers] in full — or at the very least at a usual, customary, or reasonable rate . . . ." (Complaint at ¶53.) The Providers allege they "communicated" with NG-Systems and Empire "numerous times — including on 1/28/14, 2/27/14, 5/2/14, 5/12/14, 6/18/14, 7/31/14, 11/18/14, 11/25/14, and 12/16/14, and 2/9/15, 3/13/15, 3/14/15 — about the status of the pending claims." (Complaint at ¶54.) However, the Providers have not received any payments on their $105,900 claim. They assert that their "attempts to communicate" with Empire and NG-Systems regarding this unpaid claim "have fallen on deaf ears". (Complaint at ¶¶56, 57.) The Providers did not allege any attempt to appeal Empire's or NG-Systems' non-payment of the $105,900 claim.
On December 13, 2013, the Providers provided further medically necessary health services to MM, which services were covered under the Plans. Again, MM executed documents assigning her right of reimbursement under the Plans to the Providers. The Providers billed Empire $23,000 for the December 13
On February 8, 2012, the Providers provided medically necessary health services to JS, which services were covered under the Plans. JS had executed documents assigning Providers all rights to receive reimbursement from Empire for the health care services provided. The Providers billed Empire $179,950 for the medical services rendered to JS, which "[p]ursuant to the terms of the relevant [NG-Systems] health plan documents and agreements, Empire . . . was obligated to reimburse to [the Providers] in full — or at the very least at a usual, customary, or reasonable rate . . . ." (Complaint at ¶69.) According to the Providers, they "communicated" with NG-Systems and Empire "numerous times — including on 3/21/12, 4/2/12, 4/17/12, 4/19/12, 4/27/12, 5/4/12, 5/21/12, 6/1/12, 6/7/12, 6/11/12, 6/20/12, 6/25/12, 7/9/12, 8/6/12, and 9/14/12 —about the status of the pending claims." (Complaint at ¶70.) However, the Providers received only $4,350.10 from Empire for the claim. It asserts its "attempts to communicate" with Empire and NG-Systems regarding the $179,950 claim "have fallen on deaf ears". (Complaint at ¶¶72.) The Providers did not allege any attempts to appeal Empire's or NG-Systems' minimal payment of the $179,950 claim.
On February 12, 2012, the Providers rendered further medically necessary health services—covered under the Plans—to JS. Again, JS executed documents assigning JS's right of reimbursement under the Plans to the Providers. The Providers billed Empire $60,000 for the February 12th services. They "communicated" with NG-Systems and Empire "numerous times — including on 3/4/14, 3/17/14, 4/24/14, 4/25/14, 5/1/14, and 6/11/14 — about the status of the pending claim." (Complaint at ¶77.) The Providers were paid only $1,117.68 on this claim. They did not allege any attempts to appeal Empire's or NG-Systems' minimal payment of the $60,000 claim. Rather, the Providers allege their "repeated attempts to communicate with [NG-Systems] and Empire about the status of [the $60,000 claim] . . . have fallen on deaf ears . . . ." (Complaint at ¶79.)
Additionally, on July 18, 2014, the Providers provided JS with medically necessary health services, which were covered under the Plans. As previously done, JS executed documents assigning JS's right of reimbursement under the Plans to the Providers. The Providers billed Empire $60,000 for the July 18
By a state-court summons dated June 11, 2015, Providers alleged NG-Systems violated ERISA, as well state common and statutory laws, with all alleged violations being predicated upon the Plans administered by NG-Systems for the benefit of its employees and their beneficiaries. (See ECF No. 1-3, Summons with Notice.) On July 16, 2015, and relying on the doctrine of complete preemption under ERISA, NG-Systems filed a Notice of Removal of the Providers' action to this Court. (See ECF No. 1, Notice of Removal.)
Thereafter, on September 17, 2015, the Providers filed their seven-count complaint. (See ECF No. 8, Complaint.) In its first cause of action, the Providers allege NG-Systems has violated ERISA by failing to pay them in full for the medically necessary, covered health care services provided to the Patients. Importantly, they state, inter alia:
(Complaint at ¶¶101-103.) Therefore, the Providers seek the benefits they have claimed, as well as prejudgment interest. In their second cause of action and pursuant to ERISA, the Providers seek their attorneys fees for bringing this action. Its remaining causes of action are state-law based, with: the third cause of action being for breach of contracts; the fourth cause of action being a breach of implied-in-fact contracts; the fifth cause of action being a claim of unjust enrichment; the sixth cause of action being a violation of New York Insurance Law § 3224-a (the "Prompt Pay Law"); and its seventh cause of action being a claim as a third-party beneficiary. Neither of the Plans were attached to the Complaint, nor were any of the Patients' referenced authorizations or assignments.
In response, NG-Systems filed its motion to dismiss. (See ECF No. 20.) It included summary plan descriptions ("SPD"s) for the Plans.
NG-Systems raises several arguments in support of its motion to dismiss. As to the ERISA causes of action, it contends: (1) it is not the proper party to the Providers' ERISA claims; (2) the Providers lack statutory standing; (3) the Providers have failed to exhaust their administrative remedies; (4) the ERISA claims are time-barred; (5) the Providers fail to state a plausible claim for benefits under ERISA; and (6) claims for attorneys' fees is a remedy, not a substantive claim. Regarding the Providers' state-law claims, NG-Systems asserts that ERISA preempts them all. Alternatively, it argues the Providers fail to state claims: for breach of contracts; for breach of implied-in-fact contracts; for unjust enrichment; under New York State's Prompt Pay Law; of being a third-party beneficiary.
The Providers oppose the dismissal motion on several basis. As to their ERISA causes of action, the Providers argue: (1) that to the extent NG-Systems is not the Plan Administrator, the Providers should be permitted to amend their complaint; (2) Second Circuit case law makes clear "that a healthcare provider has standing to bring a claim if a beneficiary has properly assigned it in exchange for health care," Simon v. Gen. Elec. Co., 263 F.3d 176, 177-78 (2d Cir. 2001)(further citation omitted); (3) as they have "amply" alleged in their Complaint, it would be futile to exhaust their administrative remedies, and they never saw the Plans (see Providers' Opp'n at 8); (4) NG-Systems' time-barred argument is an affirmative defense, not a basis for dismissal; and (5) under the Supreme Court's Twombly/Iqbal teachings, they have properly pled a claim for relief under ERISA. As to their state law causes of action, the Providers contend: (1) their breach of contract claim is properly pled as an alternative cause of action to their ERISA claim; (2) their causes of action for breach of implied contract and unjust enrichment are claims pled in the alternative to their breach of contract claim, which is permissible; (3) the Court should wait until after full discovery to decide whether the Providers state a claim under the New York Prompt Pay Law; and (4) they have properly pled all the elements of a third-party beneficiary claim. Importantly, the Providers have not indicated they have pursued the Plans' appeal procedures now that they have been provided the SPDs for the Plans.
NG-Systems filed a reply brief, reiterating its arguments for dismissal. (See ECF No. 20-10.)
NG-Systems presents two basis for dismissing the Complaint: lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), and failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6). As to the Providers' ERISA causes of action, the Court shall focus on NG-Systems' failure-to-exhaust argument. Regarding the Providers' state law causes of action, the Court shall focus on NG-Systems' preemption argument.
JTE Enters., Inc. v. Cuomo, 2 F.Supp.3d 333, 337-38 (E.D.N.Y. 2014) (internal quotation marks omitted; citations to Makarova v. United States, 201 F.3d 11, 113 (2d Cir. 2000) omitted; brackets added); see also Harrison v. New York, 95 F.Supp.3d 293, 311 (E.D.N.Y. 2015)(citing, inter alia, Makarova).
In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court should "draw all reasonable inferences in Plaintiff['s] favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief." Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted).
The plausibility standard is guided by two principles. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)); accord Harris v. Mills, 572 F.3d 66, 71-72 (2d Cir. 2009). First, the principle that a court must accept all allegations as true does not apply to legal conclusions. Thus, "threadbare recitals of the elements of a cause of action supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Although "legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 679. Therefore, a plaintiff must provide facts which are sufficient to allow each named defendant to have a fair understanding about what it is the plaintiff is complaining and as to whether there is a legal basis for recovery. See Twombly, 550 U.S. at 555.
Second, only complaints that state a "plausible claim for relief" can survive a Rule 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at 679. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a `probability requirement,' but asks for more than a sheer possibility that defendant acted unlawfully. Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it `stops short of the line' between possibility and plausibility of `entitlement to relief.'" Id. at 678 (quoting Twombly, 550 U.S. at 556-57) (internal citations omitted); see In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007). Determining whether a complaint plausibly states a claim for relief is "a context specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679; accord Harris, 572 F.3d at 72.
Further, "[i]n making its Rule 12(b)(6) determinations, the court `may consider any written instrument attached to the complain, statements or documents incorporated into the complaint by reference . . . and documents possessed by or known to the plaintiff and upon which [he] relied in bringing the suit.'" Live Face on Web, LLC v. Five Boro Mold Specialist Inc., et al., No. 15-cv-4779 (LTS)(SN), 2016 WL 1717218, at *2 (S.D.N.Y. Apr. 28, 2016) (quoting ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)); see also Steger v. Delta Airlines, Inc., 382 F.Supp.2d 382, 385 (E.D.N.Y. 2005) (in ERISA case where plan is directly referenced in the complaint, not attached to the complaint, but annexed to the Rule 12(b)(6) motion to dismiss, the Court will consider the plan in ruling on the motion).
"ERISA itself does not contain an exhaustion requirement; the requirement is instead judge-made." Kirkendall v. Halliburton, Inc., 707 F.3d 173, 170 (2d Cir. 2013)(citing Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435, 445 (2d Cir. 2006)). In turn, this judge-made requirement is based on the Second Circuit's recognition of "`the firmly established federal policy favoring exhaustion of administrative remedies in ERISA cases,'" Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993) (quoting Alfarone v. Bernie Wolff Constr., 788 F.2d 76, 79 (2d Cir.), cert. denied, 479 U.S. 915 (1986)); see also Diamond v. Local 807 Labor Mgmt. Pens. Fund, 595 Fed. App'x 22, 24 (2d Cir. 2014)(further citation omitted), which fulfill[s] the following purposes:
Kirkendall, 707 F.3d at 179 (block quoting Paese, 449 F.3d at 445; alterations in Paese omitted; further citations omitted). However, "exhaustion in the context of ERISA requires only those administrative appeals [procedures] provided for in the relevant plan or policy." Kennedy, 989 F.2d at 594 (citation omitted); see also Bohl v. Constr. & Gen. Laborers Local Union 190, 1:11-cv-0699, — WL 1312047, *4 (N.D.N.Y. Mar. 31, 2014) (quoting Kennedy). Where an ERISA claimant "fails to allege that he or she has exhausted administrative remedies, the claim must be dismissed." Greifenberger v. Hartford Life Ins. Co., No. 03-cv-3238, 2003 WL 22990093, at *4 (S.D.N.Y. Dec. 18, 2003), aff'd, 131 Fed. App'x 756, 758 (2d Cir. 2005).
"While the ERISA exhaustion requirement is not jurisdictional, neither is it an insignificant procedural hurdle," Am. Med. Ass'n v. United HealthCare Corp., No. 00-cv-2800, 2007 WL 1771498, at *5 (S.D.N.Y. June 18, 2007).
Zupa v. General Electric Co., No. 3:16-cv-0217, 2016 WL 3976544, at *2 (D. Conn. July 22, 2016)(brackets in Zupa; boldface added).
In the instant case, the Providers' Complaint fails to establish exhaustion of remedies or the futility of exhaustion. Generally, the Court finds the Providers' allegations that they have "exhausted all available administrative remedies or appeal rights" (Complaint at ¶101), that Empire "routinely denies or ignores [the Providers'] appeals . . . or [they] have been outstanding for such a long time that the only reasonable conclusion that can be drawn is that they are deemed denied" (id. at ¶ 102); and that "so many unsuccessful attempts have been made . . . to inquire about the status of claims, to obtain payment, and to secure a reasonable and legal decision on the . . . claims at issue that they [sic] only conclusion that can be drawn is that further administrative proceedings would be futile" (id. at ¶ 103), all to be mere conclusory statements which are not supported by plausible factual allegations. More specifically, as to each claim, the Court finds the following.
1.a.
Even assuming nonpayment to be an informal denial of the claim, significantly, the Providers' do not allege any appeal of such denial of the December 10
1.b.
Again, reading the Complaint regarding the December 13
2.a.
Reading the Providers' complaint in the light most favorable to them, the Court finds they have not alleged plausible facts that they have exhausted their administrative remedies. Nor does their bald conclusion that their communications with NG-Systems and Empire have "fallen on deaf ears" excuse the Providers from following the appeal process outlined in the Plans. Such an assertion falls short of a clear and positive showing that pursuing available administrative remedies would be futile. See Kirendall, 707 F.3d at 179; see also Greifenberger, 131 Fed. App'x at 759 (allegations of initial denial of benefit claim is "insufficient to establish futility, particularly where a plaintiff has made no attempt to file an administrative claim or to notify the insurer that she disputes its denial of benefits" (emphasis added)).
2.b.
2.c.
Accordingly, as to each of the five claims for which the Providers seek payments, they have failed to exhaust their administrative remedies as required under the Plans. Furthermore, they have failed to clearly and positively demonstrate futility in pursuing those remedies. Therefore, the Providers have failed to sufficiently plead plausible ERISA causes of action, warranting their dismissal. Having reached this conclusion, the Court need not address other arguments in support of, or in opposition to, dismissal of the ERISA causes of action.
In order to determine whether the Providers' state law claims are completely preempted by ERISA, the Court must engage in the Supreme Court's two-pronged Davila analysis:
Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 328 (2d Cir. 2011) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. § 1001(b)); alteration in original)); see also Star Multi Care Services, Inc. v. Empire Blue Cross Blue Shield, et al., 6 F.Supp.3d 275, 284-86 (E.D.N.Y. 2014). The Second Circuit has clarified that Davila's first prong requires a two-part showing:
See Arditi v. Lighthouse Intern., 676 F.3d 294, 299 (2d Cir. 2012) (citing Montefiore, 642 F.3d at 328). "Where both of Davila's factors are satisfied — including the two sub-parts to Davila's first prong — ERISA will preempt the sate law claim." Star Mutli, 6 F. Supp.3d at 286; see also id. at 286-88.
At the outset, there is no apparent dispute that the subject Plans are ERISA plans (see Complaint at ¶5; see also Ex. A, attached to Sholinsky Decl (ECF No. 20-5); Ex. B, attached to Sholinky Decl. (ECF No. 20-6)). Moreover, in the context of this dismissal motion, it is assumed to be true that the Patients assigned their rights to reimbursement under the Plans to the Providers (see Complaint at ¶¶30, 52, 60, 68, 75, & 82). With that fact and assumed allegation, the Court turns to the two-pronged Davila analysis.
The first sub-part of prong one is satisfied since the Providers are the type of party who can bring an ERISA § 502(a)(1)(B) claim because "[a] healthcare provider may stand in place of the beneficiary to pursue an EIRSA claim if the beneficiary has assigned his or her rights to the provider in exchange for medical care," Star Multi, 6 F. Supp.3d at 286 (quoting Neuroaxis Neurosurgical Assocs., PC v. Cigna Healthcare of N.Y., Inc., No. 11-cv-8517, 2012 WL 4840807, at *3 (S.D.N.Y. Oct. 4, 2012)), which is what has occurred in this case.
A fair reading of the Providers' Complaint compels the conclusion that their disputes with NG-Systems emanate from obligations derived from the Plans, and not other sources, to wit: the Patients' assignments of their rights to reimbursement in exchange for the Providers rendering medically necessary health services. See Montefiore, 642 F.3d at 331 (where complaint "implicate[s] coverage and benefits established by the terms of the ERISA [Plans]," the second subpart of Davila's prong one analysis is satisfied); Ciampa v. Oxford Health Ins., Inc., No. 15-cv-6451, 2016 WL 7392014, * 2 (E.D.N.Y. Dec. 21, 2016)(quoting Montefiore, 642 F.3d at 325). That is, the five claims are "colorable claims" under ERISA "to recover benefits due" under the Plans. 29 U.S.C. § 1132(a)(1)(B); see also Star Multi, 6 F. Supp.3d at 287. Hence, the Court finds the second sub-part of Davila's first prong is met.
In making a Davila prong two determination, "[t]he Second Circuit has made clear that the `key words' in conducting this analysis are `other' and `independent'.' Star Multi, 6 F. Supp.3d at 288 (citing Montefiore, 642 F.3d at 332 (internal quotation marks omitted in Star Multi)). Thus, where a claim is inextricably intertwined with the interpretation of plan coverage and benefits, no other, independent cause of action will be had. See Star Multi, 6 F. Supp.3d at 289 (block quoting Montefiore, 642 F.3d at 322).
In their Complaint, the Providers assert that it is "[t]hrough the assignments of benefits . .. [that] Neurological Surgery obtained the right to enforce the [Plans]," (Complaint at ¶111), that the Plans obligated NG-Systems "to make reimbursements for the . . . services provided to" the Patients (id. at ¶112), and that NG-Systems "breached its obligations under these [Plans] by failing to timely and properly pay Neurological Surgery for the medically necessary, covered services . . ." (Id. at ¶ 115.) Read in the light most favorable to the Providers, the Complaint does not state any other, independent cause of action against NG-Systems. Rather, the Providers' breach of contracts claim clearing are inextricably intertwined with the Plans, and their rights, if any, to payment under those Plans.
A fair reading of the Providers' Complaint supports the finding that the Providers' other state common law claims are no more than alternative causes of action to collect medical benefits pursuant to the Plans. Since the Court has found the breach-of-contracts cause of action is inextricably intertwined with the Plans, and not based on an other, independent ground, it likewise makes the same finding regarding the Providers' alternative causes of action.
At least two sister courts within the Second Circuit have ruled that a plaintiff's attempt to circumvent ERISA by stating a claim for recovery under New York's Prompt Payment Law are preempted by ERISA. See Weisenthal v. United Health Care Ins. Co., Nos. 07-cv-1175, 07-cv-0945, 2007 WL 4292039, at *7 (S.D.N.Y. Nov. 29, 2007); Berry v. MVP health Plan, Inc., No. 1:06-cv-120, 2006 WL 4401478 (N.D.N.Y. Sept. 30, 2006).; cf., e.g., Ciampa, 2016 WL 7392014, * 2 (claims under NY Gen. Bus. Law statute preempted by ERISA because that claim raised colorable claim for benefits which directly concerned issue of benefits under ERISA § 502(a)(1)(B), ERISA's enforcement provision). In the present case, this Court agrees. As in Berry:
Berry, 2006 WL 4401478, at *5 (emphasis added; internal quotations and citations omitted). In other words, there is no other, independent basis upon which the Providers can rest their New York Prompt Pay Law claim. Thus, the second prong of the Davila analysis is satisfied.
In sum, having read the Providers' state law causes of action in the light most favorable to them, the Court finds both prongs of the Davila analysis are satisfied. That finding warrants the conclusion that all of the Providers' state law claims are completely preempted by ERISA. Having reached that conclusion, the Court declines to address other arguments in support of, or in opposition to, dismissal of the state law causes of action.
Accordingly,