Advanced Ambulatory Surgical Center, Inc. v. Cigna Healthcare of Illinois, Inc.
Filing
27
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 9/30/2014:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ADVANCED AMBULATORY SURGICAL
CENTER, INC.,
Case No. 13 C 7227
Plaintiff,
v.
Hon. Harry D. Leinenweber
CIGNA HEALTHCARE OF ILLINOIS,
Defendant.
MEMORANDUM OPINION AND ORDER
I.
BACKGROUND
Between December 2010 and November 2012, Plaintiff Advanced
Ambulatory
Surgical
Center,
Inc.
(“AASC”)
rendered
surgical
services to various patients who were insured under health plans
administered by Defendant Cigna Healthcare of Illinois (“Cigna”).
Prior to performing these services, AASC contacted Cigna to verify
each patient’s coverage.
In every case, Cigna assured AASC that
all claims would be reimbursed in full.
When AASC later billed
Cigna, however, Cigna refused to pay on the basis that it believed
AASC had engaged in “fee-forgiving,” a practice whereby certain
out-of-network
medical
providers,
in
an
effort
to
gain
a
competitive advantage over other providers, agree to overlook a
patient’s
deductible
or
co-payment
obligations
reimbursement under a plan as payment in full.
insurance
companies
disapprove
of
this
and
accept
Unsurprisingly,
practice
because
it
eliminates
any
incentive
for
patients
to
choose
providers over pricier out-of-network providers.
in-network
To discourage
fee-forgiveness, many benefit plans, including those administered
by Cigna, exclude coverage for any expenses that a plan member is
not obligated to pay personally.
On September 5, 2013, AASC initiated this action in the
Circuit Court of Cook County, seeking reimbursement for each of the
outstanding claims that Cigna refuses to pay.
In its Complaint,
AASC denies that it engaged in fee-forgiving and asserts that Cigna
determined incorrectly that it was entitled to withhold payment on
that basis. The Complaint advances state-law claims for promissory
estoppel, unjust enrichment, fraud, and violation of Section 155 of
the Illinois Insurance Code, 215 Ill. Comp. Stat. 5/155.
Cigna removed the action to this Court on grounds that (1)
AASC’s claims are preempted by the Employee Retirement Income
Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”), and (2) the Court
has diversity jurisdiction under 28 U.S.C. § 1332. Cigna now seeks
to dismiss the case in its entirety.
It also asks that AASC’s jury
demand be stricken in the event that all claims are not dismissed.
For the reasons stated herein, both Motions are granted in part and
denied in part.
- 2 -
II.
A.
ANALYSIS
Motion to Dismiss
The outstanding health insurance claims at issue in this case
relate to forty patients, twenty-six of whom are members of benefit
plans that are governed by ERISA (the “ERISA Patients”).
Cigna
seeks to dismiss the Complaint as it relates to payments for those
patients on the basis that AASC’s state-law theories are preempted
by ERISA.
As for the claimed payments relating to the remaining
fourteen patients who are not members of ERISA plans (the “NonERISA Patients”), Cigna has moved to dismiss those claims pursuant
to
Rule
12(b)(6)
of
the
Federal
Rules
of
Civil
Procedure.
(Actually, it is unclear whether or not one of those fourteen
patients is a member of an ERISA or non-ERISA plan.
Considering
the lack of discovery in the case, however, the Court will afford
AASC the benefit of the doubt and treat that patient as though his
plan is not governed under the more stringent ERISA standard.) The
Court evaluates each ground for dismissal in turn.
1.
ERISA Preemption
Federal law preempts state-law claims in three circumstances:
(1) where federal law states explicitly that it overrides relevant
state law (“express” preemption), (2) where federal law conflicts
with state law to such an extent that “it would be impossible for
a party to comply with both [state] and federal requirements or
where [state] law stands as an obstacle to the accomplishment and
- 3 -
execution
of
the
full
purposes
and
objectives
of
Congress”
(“conflict” preemption), and (3) where federal law “so thoroughly
occupies a legislative field as to make it reasonable to infer that
Congress left no room for the states to act” (“field” or “complete”
preemption).
Hoagland v. Town of Clear Lake, Ind., 415 F.3d 693,
696 (7th Cir. 2005) (quotation marks and citations omitted). Cigna
argues that AASC’s claims in this case are preempted expressly, by
virtue of ERISA’s express preemption provision, 29 U.S.C. § 1144(a)
(“ERISA § 514(a)”), and under the doctrine of complete preemption,
through ERISA’s comprehensive civil enforcement scheme, 29 U.S.C.
§ 1132(a) (“ERISA § 502(a)”).
ERISA § 514(a) provides, with some exceptions not relevant to
this case, that ERISA supersedes “any and all State laws insofar as
they may now or hereafter relate to any employee benefit plan.”
U.S.C. § 1144(a).
29
A state law “relates to” a benefit plan “if it
has a connection with or reference to such a plan.”
Pilot Life
Ins. Co. v. Dedeaux, 481 U.S. 41, 47 (1987).
ERISA § 502(a) allows an ERISA plan participant or beneficiary
to sue to recover benefits under the terms of the plan, enforce
rights under the terms of the plan, or clarify rights to future
benefits under the terms of the plan.
29 U.S.C. § 1132(a)(1)(B).
The Supreme Court has held that state-law claims that fall within
the
scope
of
ERISA
§
502(a)
are
completely
preempted
and,
therefore, come within the original jurisdiction of the federal
- 4 -
courts.
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66
(1987).
In assessing whether a particular state-law claim falls
within the scope of Section 502(a), courts first must determine
whether the plaintiff could have brought his claim under ERISA
§ 502(a) and, second, must examine whether the defendant’s actions
implicate a legal duty that is separate or independent from those
created by ERISA.
Aetna Health Inc. v. Davila, 542 U.S. 200, 209
(2004).
a.
Unjust Enrichment Claim
AASC’s unjust enrichment claim is premised on the allegation
that Cigna “received substantial monetary benefit, in the form of
premiums and/or fees” under the various healthcare plans at issue
but refused to pay AASC because it believed that AASC had been
engaged in fee-forgiving.
Claims of this sort merely recast under
state-law what otherwise would be a traditional challenge to an
ERISA plan administrator’s interpretation of the terms of a plan.
Access Mediquip L.L.C. v. UnitedHealthcare Ins. Co., 662 F.3d 376,
386-87
(5th
Cir.
2011).
Allowing
such
claims
to
proceed
unpreempted “would run afoul of Congress’s intent that the causes
of action created by ERISA be the exclusive means of enforcing an
ERISA plan’s terms.”
Id. at 387.
Here, AASC is a plan beneficiary by virtue of its status as
the assignee of each of the ERISA Patients; consequently, it could
have brought a claim to collect outstanding payments under ERISA
- 5 -
§ 502(a)(1)(B). Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698,
700 (7th Cir. 1991).
Further, the substance of AASC’s unjust
enrichment claim implicates no independent legal duty because the
claim “derives entirely from the particular rights and obligations
established by the benefit plans.”
Davila, 542 U.S. at 213.
Indeed, AASC itself cites Cigna’s “contractual obligations” under
the various plan terms as the basis for its claim.
ECF No. 1-1).
Davila,
542
(Compl. ¶ 17,
Accordingly, under the two-prong test set forth in
U.S.
at
209,
AASC’s
unjust
enrichment
claim
is
preempted by ERISA § 502(a). The Court declines to re-characterize
this claim as an ERISA claim and instead will afford AASC the
opportunity to replead its claims in an Amended Complaint in a
manner consistent
with
this
opinion.
Enigma
Mgmt.
Corp. v.
Multiplan, Inc., 994 F.Supp.2d 290, 305 (E.D.N.Y. 2014).
b.
Promissory Estoppel and Fraud Claims
AASC’s promissory estoppel and common law fraud claims are a
different matter, however, for such claims “arise not from [a
benefit]
plan
or
representations.”
its
terms,
but
from
[]
alleged
oral
Franciscan Skemp Healthcare, Inc. v. Central
States Joint Bd. Health & Welfare Trust Fund, 538 F.3d 594, 597
(7th Cir. 2008); see also, Access Mediquip, 662 F.3d at 386-87
(distinguishing unjust enrichment claims as ERISA preempted from
promissory estoppel and misrepresentation claims, which are not).
Indeed, both claims in this case are grounded in the allegation
- 6 -
that AASC relied upon Cigna’s false oral assurances that it would
approve coverage for the services AASC provided. These claims turn
not on the terms of any benefit plan but, rather, concern legal
obligations under state law that are separate and distinct from
those that could be enforced under ERISA § 502(a).
This is because
oral misrepresentations “exist completely independent of whatever
the plan’s language may be.”
Oak Brook Surgical Ctr., Inc. v.
Aetna, Inc., 863 F.Supp.2d 724, 730 (N.D. Ill. 2012).
Since the
issues that are central to AASC’s promissory estoppel and fraud
claims – namely, reliance and intent – can be resolved independent
of the terms of any patient’s healthcare plan, these causes of
action are not displaced by ERISA § 502(a) under the doctrine of
complete preemption.
See, e.g., Conn. Gen. Life Ins. Co. v. Grand
Ave. Surgical Ctr., Ltd., No. 13 C 4331, 2014 WL 151755 (N.D. Ill.
Jan. 14, 2014) (holding promissory estoppel claim not preempted by
ERISA); Oakbrook, 863 F.Supp.2d at 730 (“[A] court considering a
misrepresentation claim would not need to consider the plan terms
to resolve the misrepresentation claim since the plan terms have no
bearing on the resolution of that claim.”).
Nor are AASC’s promissory estoppel and fraud claims preempted
expressly by ERISA § 514(a).
Although ERISA’s express preemption
provision is broad, § 514(a) does not preempt state-law claims
“that make[] no reference to, or indeed function[] irrespective of,
the existence of an ERISA plan.”
Ingersoll–Rand v. McClendon, 498
- 7 -
U.S. 133, 139 (1990).
Where, as here, “a court can resolve the
merits of a claim without interpreting or applying the terms of any
ERISA-regulated health plan, ERISA § 514(a) does not preempt the
claim.”
Conn. Gen. Life., 2014 WL 151755, at *5 (citing Kolbe v.
Kolbe Health & Welfare benefit Plan v. Med. Coll. of Wisc., Inc.,
657
F.3d
496,
504-5
(7th
Cir.
2011)).
Accordingly,
AASC’s
promissory estoppel and fraud claims are not preempted by ERISA.
c.
Illinois Insurance Code Claim
Lastly, AASC seeks relief pursuant to Section 155 of the
Illinois Insurance Code, which provides for an award of attorneys’
fees, other costs, and punitive damages in cases where an insurer’s
delay in paying a claim is “vexatious and unreasonable.”
Comp. Stat. 5/155.
215 Ill.
Courts have held consistently that Section 155
claims are preempted by ERISA § 514(a). See, e.g., Nordahl v. Life
Ins. Co. of N. Am., No. 09 C 7253, 2010 WL 3893833, at *2 (N.D.
Ill. Sept. 24, 2010); Langworthy v. Honeywell Life and Acc. Ins.
Plan, No. 09 C 2177, 2009 WL 3464131, at *3-4 (N.D. Ill. Oct. 22,
2009); Jacobson v. Humana Ins. Co., No. 05 C 1011, 2005 WL 1563154,
at *2-6 (N.D. Ill. June 6, 2005); Dwyer v. Unum Life Ins. Co. of
Am., No. 03 C 1118, 2003 WL 22844234, at *5 (N.D. Ill. Dec. 1,
2003); Estate of Cencula v. John Alden Life Ins. Co., 174 F.Supp.2d
794, 799 (N.D. Ill. 2001).
Consequently, AASC’s Section 155 claim
is barred to the extent that it relates to the alleged non-payment
for services rendered to the ERISA Patients.
- 8 -
2.
Failure to State a Claim
The Court next turns to the aspect of Cigna’s Motion to
Dismiss that concerns AASC’s claims as they relate to the alleged
amounts owed for the various services AASC provided to the NonERISA Patients.
the
Federal
A motion to dismiss pursuant to Rule 12(b)(6) of
Rules
of
Civil
sufficiency of a complaint.
Procedure
challenges
the
legal
Hallinan v. Fraternal Order of Chi.
Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009).
To survive a
motion to dismiss, a complaint must contain sufficient factual
allegations that, when accepted as true, state a claim that is
plausible on its face.
(2009).
Ashcroft v. Iqbal, 556 U.S. 662, 678
The Court accepts all well-pleaded facts and draws any
reasonable inferences from those facts in favor of the plaintiff.
Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009).
a.
Promissory Estoppel Claim
To state a claim for promissory estoppel under Illinois law,
a plaintiff must show that:
(1) the defendant made an unambiguous
promise to the plaintiff, (2) the plaintiff relied on the promise
to his detriment, and (3) the plaintiff’s reliance was expected and
foreseeable.
Newton Tractor Sales, Inc. v. Kubota Tractor Corp.,
906 N.E.2d 520, 523-24 (Ill. 2009).
Cigna contends that AASC’s
claim is deficient in two respects.
First, Cigna argues that AASC’s Complaint fails to disclose
allegations demonstrating that Cigna promised to pay the amounts
- 9 -
AASC now claims it owes.
Contrary to that assertion, however, the
Complaint clearly states that AASC verified coverage for each
patient and that Cigna “unambiguously assur[ed]” it that its claims
would be honored.
for
purposes
That allegation satisfies the promise element
of
stating
a
promissory
estoppel
claim.
Rehabilitation Institute of Chicago v. Group Administrators, Ltd.,
844 F.Supp. 1275, 1278-79 (N.D. Ill. 1994).
Second, Cigna argues that, because AASC “knew” – at least as
of August 25, 2011 (the date Cigna first accused AASC of engaging
in fee-forgiveness) – that it intended to withhold payment of
certain
claims,
any
alleged
reliance
on
verifications could not have been reasonable.
wholly speculative.
future
benefit
The argument is
Although Cigna may have objected to certain
claims on the basis that AASC had looked the other way on patients’
cost-share obligations, this entire suit is premised on the notion
that Cigna’s determinations in that regard were wrong.
In AASC’s
view, Cigna simply had made a clerical mistake, which it believed
would be corrected once Cigna had an opportunity to review the
relevant patient records. Thus, AASC had no way of predicting that
Cigna would continue to deny future claims on this same erroneous
basis or that it would decline to correct any of its prior
determinations. If AASC’s allegations are taken as true, which for
purposes of this Motion they must, Cigna acted arbitrarily in its
- 10 -
continued refusal to honor the claims at issue in this case – and
arbitrary behavior rarely is foreseeable.
For
these
reasons,
the
Court
finds
AASC’s
allegations
sufficient to state a claim for promissory estoppel.
b.
Fraud Claim
To state a claim for common law fraud in Illinois, a plaintiff
must demonstrate that (1) the defendant made a false statement of
material fact, which he knew or believed to be false, (2) the
defendant intended his statement to induce the plaintiff to act,
(3) the plaintiff relied justifiably upon the statement, and (4)
the
plaintiff
suffered
damages
resulting
from
that
reliance.
Connick v. Suzuki Motor Co., Ltd., 675 N.E.2d 584, 591 (Ill. 1996).
Where, as here, the fraud alleged involves “a false statement of
intent regarding future conduct,” the plaintiff also must prove
that the act was part of a “scheme to defraud.”
Ass'n Ben. Servs.,
Inc. v. Caremark RX, Inc., 493 F.3d 841, 853 (7th Cir. 2007).
scheme
to
defraud
requires
either
a
“pattern
of
A
fraudulent
statements” or “one particularly egregious fraudulent statement.”
BPI Energy Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131,
136 (7th Cir. 2011) (collecting Illinois cases).
Cigna argues that AASC’s allegations fail to give rise to a
plausible claim for promissory fraud because the Complaint does not
implicate Cigna in any scheme to defraud.
The Court disagrees.
AASC alleges that Cigna, on multiple occasions, misrepresented that
- 11 -
it
would
reimburse
AASC
for
its services,
despite
having
no
intention of ever making good on its promises. Under Illinois law,
“where a plaintiff pleads merely that the defendant made a promise
that
[it]
never
intended
to
keep,
the
‘intentional
misrepresentation amounts to a scheme to defraud,’ and the claim is
actionable.”
Andrews v. Gerace, No. 13 C 1521, 2014 WL 4627383, at
*9 (N.D. Ill. Sept. 15, 2014) (quoting Gagnon v. Schickel, 983
N.E.2d 1044, 1054 (Ill. App. Ct. 2012)).
Accordingly, the facts
alleged in AASC’s Complaint are sufficient to demonstrate a scheme
to defraud.
Cigna also argues that AASC’s fraud claims lack the necessary
particularity required under Federal Rule of Civil Procedure 9(b).
Rule 9(b) requires that “a party must state with particularity the
circumstances constituting fraud.”
These circumstances include
“the identity of the person who made the misrepresentation, the
time, place and content of the misrepresentation, and the method by
which the misrepresentation was communicated to the plaintiff.”
Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin.
Servs., Inc., 536 F.3d 663, 668 (7th Cir. 2008).
Malice, intent,
knowledge, and other such mental states “may be averred generally.”
Hefferman v. Bass, 467 F.3d 596, 601 (7th Cir. 2006).
Here,
fraudulent
AASC
alleges
assurances
insurance claims.
that
Cigna’s
concerning
representatives
reimbursement
for
made
various
AASC specifies that these representations were
- 12 -
made between 2010 and 2012.
Although AASC does not name the
specific individuals who verified coverage for each patient, only
the institutional identity is required for fraud claims where “the
only defendant is a corporation or institution.” AAR Intern., Inc.
v. Vacances Heliades S.A., 202 F.Supp.2d 788, 799 (N.D. Ill. 2002).
At this stage, the Court is satisfied that AASC’s fraud claim
contains sufficient particularity to meet the requirements of
Rule 9(b).
c.
Unjust Enrichment Claim
In Illinois, a claim for unjust enrichment exists where “the
defendant has unjustly retained a benefit to the plaintiff’s
detriment, and that defendant’s retention of the benefit violates
the
fundamental
conscience.”
principles
of
justice,
equity,
and
good
HPI Health Care Servs., Inc. v. Mt. Vernon Hosp.,
Inc., 545 N.E.2d 672, 679 (Ill. 1989).
A claim for unjust
enrichment allows courts to imply the existence of a contract where
none exists. Prudential Ins. Co. of Am. v. Clark Consulting, Inc.,
548
F.Supp.2d
619,
622
(N.D.
Ill.
2008).
However,
unjust
enrichment is not an appropriate remedy when a claim actually falls
within the terms of an express agreement.
See, Util. Audit, Inc.
v. Horace Mann Serv. Corp., 383 F.3d 683, 688–89 (7th Cir. 2004)
(“When two parties’ relationship is governed by contract, they may
not bring a claim of unjust enrichment unless the claim falls
outside the contract.”).
- 13 -
AASC concedes in its Complaint that its unjust enrichment
claim arises out of Cigna’s “contractual obligations” pursuant to
each patient’s individual benefit plan.
(Compl. ¶ 17).
Because
those obligations are the source from which AASC derives its
entitlement to reimbursement, unjust enrichment is not the proper
avenue for
relief
in
this
case.
Accordingly,
AASC’s unjust
enrichment claim as it relates to payment for services rendered to
the Non-ERISA patients is dismissed.
d.
Illinois Insurance Code Claim
In order to bring a claim under Section 155 of the Illinois
Insurance Code, the dispute must involve “[a] policy or policies of
insurance.”
215 Ill. Comp. Stat. 5/155(1).
Cigna contends that
AASC’s Section 155 claim as it relates to the Non-ERISA Patients
must be dismissed because several of the policies at issue were
funded by insurers other than Cigna.
Although that assertion
perhaps may turn out to be true, the Court fails to see how it
serves as a basis for dismissal, since Cigna admits that it issued
at least some of the policies involved in this case.
If discovery
proves that some of the plans were not issued by Cigna, the issue
may be raised when it comes time to assess damages.
At this early
stage, however, the Court declines to dismiss AASC’s Section 155
claim with respect to the Non-ERISA Patients.
- 14 -
B.
Motion to Strike the Jury Demand
Cigna also has moved to strike AASC’s demand for a jury trial
“insofar as it applies to services that AASC allegedly furnished to
members of benefit plans governed by ERISA.”
Strike Jury Demand ¶ 5, ECF No. 11).
(Def.’s Mot. to
Because the ERISA statute is
equitable in nature, courts have held that there is no right to a
trial by jury in ERISA cases.
Mathews v. Sears Pension Plan, 144
F.3d 461, 468 (7th Cir. 1998).
Since AASC’s unjust enrichment and
Section 155 claims are preempted by ERISA, the jury demand is
stricken as to those claims.
However, the Motion to Strike is
denied as to the non-preempted claims of promissory estoppel and
fraud and as to all claims insofar as they relate to the Non-ERISA
Patients.
III.
CONCLUSION
What should have been a very straightforward case has been
complicated immeasurably by the manner in which Cigna has insisted
on proceeding in this Court.
Motions to dismiss are helpful when
they narrow the issues in a case or prevent the advancement of a
plainly spurious suit.
things.
Cigna’s Motion has done neither of those
Instead, all that Cigna has accomplished is the further
discombobulation of a set of state-law claims already fractured by
the happenstance that some of the benefit plans at issue are
governed by ERISA and some are not.
Even after this Motion, all of
AASC’s claims have remained intact in one way or another.
- 15 -
Little
has been removed from the table; even less has been simplified for
discovery.
The Motion was not a worthy use of judicial resources
and has not contributed at all to a meaningful and efficient
resolution of this dispute.
Cigna should think long and hard
before filing another such motion in this case.
Cigna’s Motion to Dismiss [ECF No. 13], and Motion to Strike
the jury demand in this case [ECF No. 11] are each granted in part
and denied in part.
AASC shall have twenty-one (21) days from the
date of this Order to file an Amended Complaint.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Date:9/30/2014
- 16 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?