FRITZKY v. AETNA HEALTH, INC. et al

Filing 20

LETTER OPINION. Signed by Judge William J. Martini on 9/3/09. (gh, )

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
M A R T I N LUTHER KING JR. FEDERAL BLDG. & U.S. COURTHOUSE 5 0 W A L N U T STREET, P.O. BOX 419 N E W A R K , NJ 07101-0419 ( 9 7 3 ) 645-6340

W I L L I A M J. MARTINI JUDGE

LETTER OPINION S e p te m b e r 2, 2009 P e te r E. Rhatican L a w Offices of Peter E. Rhatican 27 East Main Street Mendham, NJ 07945 D ia n e M. Acciavatti 77 Jefferson Place Totowa, NJ 07512 Attorneys for Plaintiff L iz a M. Walsh T ric ia B. O'Reilly C o n n e ll Foley, LLP 85 Livingston Avenue Roseland, NJ 07068 Attorneys for Defendant R e: R ic h a r d Fritzky v. Aetna Health, Inc., et al C iv il Action No. 08-5673 (WJM)

D e a r Litigants: T h is matter comes before the Court on a Motion to Dismiss brought by Defendants A e tn a Health, Inc. ("Aetna") and Dr. Ira Klein, M.D. ("Klein") pursuant to Rule 12(b)(6) o f the Federal Rules of Civil Procedure. Fed. R. Civ. P. 12(b)(6). Specifically, D e f e n d a n ts argue that Plaintiff's complaint fails to state a claim for which relief can be 1

granted, because all of Plaintiff's claims are preempted by the Employee Retirement In c o m e Security Act of 1974, 29 U.S.C. §§ 1001 et seq. ("ERISA"). Oral argument was h e ld on August 26, 2009. For the reasons stated below, Defendant's Motion to Dismiss is G R A N T E D without prejudice. BACKGROUND In March 2005, Plaintiff was employed as the Chief Executive Officer of the M e a d o w la n d s Regional Chamber of Commerce ("MRCC"). (Pl.'s Cmplt.¶ 1). At that tim e , the MRCC entered into a Small Group Health Maintenance Organization Point of S e rv ic e Contract (the "Plan" or the "Contract") with Defendant Aetna. (Pl.'s Cmplt.¶ 2). Pursuant to the Plan, Aetna was obligated to provide services and pay benefits to Plaintiff a s part of Plaintiff's employment relationship with MRCC. (Pl.'s Cmplt.¶ 3). However, th e Plan's coverage was limited to benefits that Aetna determined to be "medically n e c e s s a ry and appropriate."1 Plaintiff was covered by the Plan at all times relevant to this action. The Plan meets the statutory definition of an "employee welfare benefit plan" u n d e r ERISA. 29 U.S.C. § 1002(1). B e g in n in g in October 2005, Plaintiff was diagnosed with a series of medical c o n d itio n s including sepsis secondary to disseminated meningococcemia. (Pl.'s Cmplt.¶ 6 ). During his hospitalization, Plaintiff suffered from multiple "collateral conditions" that re q u ire d the amputation of several fingers and toes and one leg. (Id.). Later that same m o n th , Plaintiff was transferred to a different hospital and then to various rehabilitative c a re facilities. (Pl.'s Cmplt.¶ 7). He was re-admitted to the hospital on June 12, 2006. (Pl.'s Cmplt.¶ 8). Upon his discharge in late June 2006, Plaintiff's treating physician re c o m m e n d e d acute rehabilitation. (Pl.'s Cmplt.¶ 10). However, through its medical d e s ig n e e Dr. Ira Klein ("Klein"), Aetna determined that acute rehabilitation was not m e d ic a lly necessary and denied the request for coverage. (Pl.'s Cmplt.¶ 13). Instead, A e tn a approved coverage for subacute rehabilitative care. (Pl.'s Cmplt.¶ 11). Plaintiff a lle g e s that Klein's determination that Plaintiff would not benefit from acute care a m o u n te d to a wrongful denial of benefits for medically recommended treatment. (Pl.'s C m p lt.¶ 19). Plaintiff began receiving the subacute care on June 29, 2006. (Pl.'s Cmplt.¶ 12). Approximately seven weeks after the initial determination, Aetna reversed its decision a n d found that Plaintiff was entitled to acute care. (Pl.'s Cmplt.¶ 16). Plaintiff's
1 The Plan defines "medically necessary and appropriate" as "services or supplies provided by a health care Provider th a t [Aetna] determine[s] to be (a) necessary for the symptoms and diagnosis or treatment of the condition, Illness or I n j u r y ; (b) provided for the diagnosis or the direct care and treatment of the condition, Illness or Injury; (c) in a c c o r d a n c e with generally accepted medical practice; (d) not for a Member's convenience; (e) the most appropriate le v e l of medical care that a member needs; and (f) furnished within the framework of generally accepted methods of m e d ic a l management currently used in the United States.

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condition deteriorated, and on August 24, 2006, he was readmitted to the hospital to u n d e rg o amputation of his remaining leg.2 (Pl.'s Cmplt.¶ 15). Plaintiff alleges that the a m p u ta tio n was rendered necessary as a result of Defendants' wrongful failure to grant h im acute rehabilitative care in June 2006. (Pl.'s Cmplt.¶ 23). Plaintiff initially filed his Complaint in New Jersey state court on October 9, 2008. The Complaint contains seven counts: (1) breach of contract; (2) breach of the covenant o f good faith and fair dealing with respect to the contracts made with MRCC and its e m p lo ye e s ; (3) breach of fiduciary duties owed to Plaintiff; (4) wrongful preclusion from th e pursuit of day to day affairs and wrongful failure to provide documentation;3 (5) u n ju s t enrichment; (6) breach of the covenant of good faith and fair dealing; and (7) to rtio u s interference with medical care. Plaintiff also requested compensatory, c o n s e q u e n tia l, and exemplary damages, punitive damages, damages for pain and s u f f e rin g , costs, and a jury trial. O n November 18, 2008, Defendants removed the action to this Court, based upon f e d e ra l question jurisdiction arising out of ERISA. Presently before the Court is D e f e n d a n ts ' motion to dismiss the complaint for failure to state a claim for which relief c a n be granted, pursuant to Fed. R. Civ. P. 12(b)(6), on the grounds that Plaintiff's claims a re completely preempted under ERISA § 502(a), 29 U.S.C. § 1132(a). A N A L Y S IS I. S ta n d a r d of Review In deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), all allegations in th e complaint must be taken as true and viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. M ira g e Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). Further, when considering a 1 2 (b )(6 ) motion to dismiss, a court may take into account only the complaint, exhibits a tta c h e d to the complaint, matters of public record, and undisputedly authentic documents if the plaintiff's claims are based upon those documents. See Pension Benefit Guar. C o r p . v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after viewing the a lle g a tio n s in the complaint in the light most favorable to the plaintiff, it appears that no re lie f could be granted "under any set of facts that could be proved consistent with the a lle g a tio n s ," a court may dismiss a complaint for failure to state a claim. Hishon v. King
2 Note that in the parties' briefs, there was some confusion over the exact timeline with respect to when Aetna r e v e r s e d its decision and when Plaintiff's second leg was amputated. However, Defendants clarified at oral a r g u m e n t, and Plaintiff did not refute, that Aetna reversed its decision before the amputation took place, such that P la in tiff did receive the acute rehabilitation for at least some period of time. 3 Note that the entire page containing this Count was omitted from the Complaint as it was initially filed. Plaintiff n e v e r moved to amend the Complaint. Rather, Plaintiff re-served Defendant with a complete copy of the Complaint in December 2008, two months after the action was initiated and one month after it was removed to this Court. Plaintiff never directly provided the Court with a complete copy.

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& Spalding, 467 U.S. 69, 73 (1984). Although a complaint does not need to contain detailed factual allegations, "the `g ro u n d s ' of [the plaintiff's] `entitlement to relief' requires more than labels and c o n c lu s io n s , and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007). Thus, th e factual allegations must be sufficient to raise a plaintiff's right to relief above a s p e c u la tiv e level. See id. at 1964-65. Furthermore, although a court must view the a lle g a tio n s as true in a motion to dismiss, it is "not compelled to accept unwarranted in f e re n c e s , unsupported conclusions or legal conclusions disguised as factual a lle g a tio n s ." Baraka v. McGreevey, 481 F. 3d 187, 211 (3d Cir. 2007). II. P R E E M P T IO N UNDER ERISA E R IS A is a federal statute designed to "`protect... the interests of participants in e m p lo ye e benefit plans and their beneficiaries'" by establishing "substantive regulatory re q u ire m e n ts for employee benefit plans and to `provide for appropriate remedies, s a n c tio n s , and ready access to the Federal courts." Aetna Health v. Davila, 124 S.Ct. 2 4 8 8 , 2495 (quoting ERISA, 29 U.S.C. § 1001(b)). Congress sought to create a uniform a n d exclusive regulatory regime for employee benefit plans. Therefore, ERISA contains p ro v is io n s enacted to preempt state common law actions against benefit plans as well as s ta te attempts at plan regulation. There are two types of preemption under ERISA, c o m p le te and express. A. C o m p le te Preemption Under ERISA § 502(a) E R IS A § 502(a) provides in pertinent part that a "civil action may be brought... by a participant or beneficiary... to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits u n d e r the terms of the plan." 29 U.S.C. § 1132(a). This is referred to as ERISA's civil e n f o rc e m e n t scheme. It is designed to be comprehensive as well as exclusive. Therefore, a n y state law cause of action that attempts to replicate, supplement, or replace this s u b s e c tio n is completely preempted. Aetna, 542 U.S. at 209. Furthermore, the p re e m p tiv e effect of the civil enforcement provision is so extraordinary that it "converts a n ordinary state common law complaint into one stating a federal claim for purposes of th e well pleaded complaint rule." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65 (1 9 8 7 ). Therefore, causes of action that fall within the scope of § 502(a) are properly re m o v a b le to federal court. Once removed, however, they must be dismissed because of c o m p le te preemption or converted into a proper ERISA claim. DiFelice v. Aetna U.S. H e a lth c a r e , 346 F.3d 442, 446 (3d Cir. 2003). T o determine whether a claim alleging medical negligence is preempted by ERISA § 502(a), a court must distinguish between decisions related to the administration of or 4

eligibility for benefits, which "turn on the plan's coverage of a particular condition," and d e c is io n s related to medical treatment, which relate to choices made in "diagnosing and tre a tin g " a condition. Pegram v. Herdich, 530 U.S. 211, 228 (2001) (as qtd. in P ry z b o w s k i, 245 F.3d at 273); DiFelice, 346 F.3d at 447. Claims related to eligibility and a d m in is tra tiv e decisions are preempted, whereas claims related to treatment decisions are n o t. DiFelice, 346 F.3d at 447. H o w e v e r, not all claims fall neatly under one of the two poles. When a claim a p p e a rs to challenge a mixed eligibility and treatment decision, then the court must c o n s id e r whether the claim falls within the scope of ERISA § 502(a). DiFelice, 346 F.3d a t 447; Pryzbowski v. U.S. Healthcare, 245 F.3d 266, 273 (3d Cir. 2001). If the claim f a lls within the scope of § 502(a) and therefore could have been brought as an action p u rs u a n t to that subsection, it is completely preempted. See Aetna, 542 U.S. at 209 (s ta tin g that "[i]n other words, if an individual, at some point in time, could have brought h is claim under ERISA § 502(a)(1)(B)... then the individual's cause of action is c o m p le te ly pre-empted by ERISA § 502(a)(1)(B).") T o determine whether a claim could have been brought under § 502(a), it is n e c e s s a ry to break claims down into their most basic elements to determine the precise n a tu re of the alleged harm and to be wary of "artful pleading." DiFelice, 346 F.3d at 448. Even if a claim is couched in the language of negligence or tort, if the actual harm c o m p la in e d of by the plaintiff is a denial of benefits, then the claim falls within the scope o f § 502(a) and is completely preempted. See Aetna, 542 U.S. at 214 (finding that d is tin g u is h in g between "pre-empted and non-pre-empted claims based on the particular la b e l affixed to them [by the plaintiff] would elevate form over substance and allow p a rtie s to evade the preemptive scope of ERISA simply by relabeling their contract c la im s as claims for tortious breach of contract."); see also Pryzbowski, 245 F.3d at 274 (f in d in g that a federal court may look beyond the face of a complaint to determine w h e th e r a plaintiff has artfully pleaded his suit so as to couch a federal claim in terms of s ta te law). A ls o important in this analysis is determining whether the insurance company d ire c tly provided the plaintiff's medical treatment. Aetna, 542 U.S. at 220. If the c o m p a n y did not provide any of the treatment itself and did not hold itself out as doing so, th e n it was acting in an administrative capacity only. Id. Therefore, any decisions it m a d e were purely administrative in nature, even if they required the use of medical d is c re tio n . Pryzbowski, 245 F.3d at 274; see also DiFelice, 346 F.3d at 449 (finding that b e c a u s e the defendant insurance company did not directly provide any medical care, its " u s e of medical judgment could only have led to an eligibility, not a treatment, d e c is io n ." ) H e re , although Plaintiff's Complaint contains allegations of negligence, tort, and b re a c h of contract, it is clear that underlying each count is a challenge to Defendant's 5

determination that acute rehabilitation was not medically necessary, and that Plaintiff is a c tu a lly complaining about the denial of benefits.4 Therefore, the Court must at the outset c o n s id e r whether Defendant's medical determination was either clearly an eligibility d e c is io n or clearly a medical treatment decision. Because Aetna's decision involved m e d ic a l discretion and also eligibility for benefits, it appears that Plaintiff's claims do not f a ll neatly under either pole but rather contain aspects of both treatment and coverage. H o w e v e r, Plaintiff does not make any allegations that Defendant directly provided a n y medical care or held itself out as doing so. Therefore, even though Aetna was re q u ire d to use medical discretion in its determination, any decision it reached could only h a v e related to treatment. Moreover, once Plaintiff's claims are properly viewed as c h a lle n g e s to a medical necessity determination, it is apparent that they could have been b ro u g h t under § 502(a) as an action for benefits. Plaintiff could have filed a claim in f e d e ra l court pursuant to that subsection to require Aetna to provide the acute re h a b ilita tio n . Alternatively, Plaintiff could have paid for the treatment himself and sued f o r reimbursement afterwards. The claim is therefore completely preempted by ERISA § 5 0 2 (a ). P la in tif f argues that because ERISA and the Plan both contain an exhaustion re q u ire m e n t, he never had the opportunity to file a § 502(a) action and therefore that his c la im s should not be preempted. Under this argument, because the terms of ERISA § 5 0 3 (2 ) and the Plan prevent a party from filing a lawsuit until after turning to all internal a d m in is tra tiv e remedies, Plaintiff could not have filed a § 502(a) action until after the re s u lts of his administrative appeal, at which point his leg had already been amputated a n d it was too late. However, this argument is unavailing because Plaintiff overlooks the e x c e p tio n s to the exhaustion requirement contained with the caselaw and the Plan itself. T h e re are three exceptions to the exhaustion requirement: (1) when a plaintiff is th re a te n e d with irreparable harm; (2) when exhaustion would be futile; and (3) when a p la in tif f has been denied meaningful access to the administrative procedures. Majka v. P ru d e n tia l, 171 F.Supp.2d 410, 414 (D.N.J. 2001). Moreover, the plan itself provides for a n exception when "serious or significant harm to Member has occurred or will im m in e n tly occur." (The Plan, Section C entitled "Claim Determination Procedures/ C o m p la in ts and Appeals" at 36, attached as Ex. B to the Certification of Tricia B. O 'R e illy 12/05/08). Given the gravity of Plaintiff's medical condition, a court would lik e ly have excused Plaintiff's failure to satisfy the exhaustion requirement. Even if it did n o t, the very existence of the exceptions demonstrates that a § 502(a) claim can be filed p rio r to exhaustion, regardless of whether the claim will ultimately be successful.
4At oral argument on August 26, 2009, Plaintiff's counsel conceded that the Complaint had been artfully pled in an e ffo r t to allege negligence and obtain damages for pain and suffering. The Court notes that the Complaint contains r e q u e s ts for compensatory, consequential, and exemplary damages, punitive damages, damages for pain and s u ffe r in g , and a jury trial, none of which are available under ERISA.

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Therefore, the exhaustion requirement did not prevent Plaintiff from filing a lawsuit. Plaintiff's Complaint is completely preempted and must be dismissed or converted into an E R IS A claim. B. E x p r e s s Preemption under ERISA § 514(a) B e c a u s e Plaintiff's claims are completely preempted by § 502(a), this matter can b e resolved without an examination of § 514(a), ERISA's second preemption provision. However, it is worth briefly noting that all of Plaintiff's claims are also preempted by § 5 1 4 (a ). A state law claim is expressly preempted by ERISA § 514(a) if the claim "relates to " an employee benefit plan. 29 U.S.C. § 1144(a). The Supreme Court has given the p h ra s e "relates to" the broadest common-sense meaning, holding that a state law relates to a benefit plan if it has any "connection with or reference to" such a plan. Metropolitan L ife Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985). This extends to include even s ta te laws that were not intended to affect employee benefit plans. Pilot Life Ins. Co. v. D e d e a u x , 481 U.S. 41, 47-48 (1987). However, preemption by § 514(a) does not give rise to federal subject matter jurisdiction. Pryzbowski, 245 F.3d at 275.Therefore, a claim th a t is preempted by § 514(a) cannot be removed to federal court unless there is an a lte rn a te source of jurisdiction. Alternate sources are most often supplemental ju ris d ic tio n or preemption by § 502(a). To determine if a specific claim is preempted by § 514(a), a court must undertake th e same analysis described above and determine whether Plaintiff is challenging a d e c is io n related to the administration of or eligibility for benefits or whether Plaintiff is c h a lle n g in g a medical treatment decision. The Third Circuit has routinely held that c la im s against healthcare companies for denial of benefits, regardless of the particular la n g u a g e or label used by the plaintiff, are expressly preempted. See Pryzbowski v. U.S. H e a lth c a r e , Inc., 245 F.3d 266, 278 (3d Cir. 2001) ("suits against insurance companies f o r denial of benefits, even when the claim is couched in terms of common law n e g lig e n c e or breach of contract" are preempted by § 514(a)"); Pilot Life, 481 U.S. at 48 (a plaintiff's claims for tortious breach of contract and bad faith related to the denial of b e n e f its and without a doubt were preempted by § 514(a)); Majka v. Prudential, 171 F. S u p p .2 d 410, 413 (2001) ("there is no question that ERISA [§ 514(a)] preempts P la in tif f 's state law claims for breach of contract and breach of the implied duty of good f a ith and fair dealing."). The reason for this is that the decision whether a requested b e n e f it or service is covered by the ERISA plan falls within the scope of the a d m in is tra tiv e responsibilities of the insurance company and therefore "relates to" the e m p lo ye e benefit plan. Id. at 278. H e re , for the reasons described above, it is clear that regardless of the precise la n g u a g e used, Plaintiff is in fact complaining about the denial of benefits. Therefore, the 7

challenged decision was administrative in nature. Due to the nature of Plaintiff's claims, th e y necessarily all "relate to" the Plan. Thus the claims are expressly preempted by § 5 1 4 (a ). This court has jurisdiction to make this determination because the claims are also p re e m p te d by § 502(a) and therefore were properly removed to federal court.5 The claims m u s t be dismissed. C O N C L U S IO N F o r the reasons stated above, Defendants' Motion to Dismiss is GRANTED. Plaintiff's Complaint is dismissed without prejudice. Further, Plaintiff's requests for c o m p e n s a to ry, consequential, and exemplary damages, punitive damages, damages for p a in and suffering, costs, and a jury trial are denied. Plaintiff has 30 days to file an a m e n d e d complaint.

/s/ William J. Martini WILLIAM J. MARTINI, U.S.D.J.

5 N o te that even if all of Plaintiff's counts were not preempted by § 502(a), as long as there was one count preempted b y § 502(a), the Court could choose to exercise supplemental jurisdiction to consider the remaining counts. 28 U .S .C . § 1367 authorizes a district court to exercise "supplemental jurisdiction over all other claims that are so r e la te d to claims in the action within such original jurisdiction that they form part of the same case or controversy u n d e r Article III of the United States Constitution." Thus, the requirements for supplemental jurisdiction are: (1) the fe d e r a l claims must have substance sufficient to confer subject matter jurisdiction; (2) the state and federal claims m u s t derive from a common nucleus of operative fact; and (3) the plaintiff's claims must be such that he would o r d in a r ily be expected to try them all in one judicial proceeding. These requirements are met in the present c ir c u m sta n c e s .

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