MONTVALE SURGICAL CENTER, LLC. v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, INC. et al
Filing
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OPINION. Signed by Judge Dickinson R. Debevoise on 12/14/12. (dc, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MONTVALE SURGICAL CENTER, a/s/o
DANIEL ROSE
Plaintiff,
v.
Civ. No. 12-2842 (DRD)
OPINION
HORIZONE BLUE CROSS BLUE SHIELD
OF NEW JERSEY, INC., DISTRICT
COUNCIL IRONWORKERS FUNDS OF
NOTHERN NEW JERSEY, ABC CORP. 110,
Defendants.
Appearances by:
MASSOOD & BRONSNICK, LLC
By: Andrew R. Bronsnick, Esq.
50 Packanack Lake Road
Wayne, New Jersey 07479
Attorneys for Plaintiff
CONNELL FOLEY LLP
By: Edward S. Wardell, Esq.
Matthew A. Baker, Esq.
457 Haddonfield Rd., Ste. 230
Cherry Hill, New Jersey 08002
Attorneys for Defendant Horizon Blue Cross Blue Shield of New Jersey
CLEARY, JOSEM & TRIGIANI LLP
By: Regina C. Hertzig, Esq.
One Liberty Place, 51st Floor
1650 Market Street
Philadelphia, Pennsylvania 19103
Attorneys for Defendant District Council Ironworkers Funds of Northern New Jersey
DEBEVOISE, Senior District Judge
This matter arises out of Defendant District Council Ironworkers Funds of New Jersey’s
(“the Fund”) willingness to pay a fraction of the amount claimed by Plaintiff Montvale Surgical
Center (“Montvale”) for medical care. On March 7, 2012, Montvale filed a Complaint in New
Jersey Superior Court against the Fund and Horizon Blue Cross Blue Shield of New Jersey
(“Horizon”), setting forth claims for breach of contract, promissory estoppels, negligent
misrepresentation, and unjust enrichment, and seeking compensatory damages, costs, interest,
and attorney’s fees.
On May 11, 2012, Defendants removed the Complaint to this Court pursuant to 28 U.S.C.
§§ 1441 and 1446. Defendants now move to dismiss the Complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). For the reasons set forth below, Defendants’ motion is GRANTED.
I.
BACKGROUND
The Fund is a benefit plan for Northern New Jersey Ironworkers and their family
members that “is administered by a joint Board of Trustees” (Baker Cert., Ex. A) in accordance
with the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. The
Fund includes a self-funded health insurance plan (“the Plan”) that reimburses medical expenses
that the Fund deems reasonable, medically necessary, and appropriate, and that result from a
non-occupational illness or injury. Horizon, a non-profit health service corporation, serves as a
third-party that performs certain administrative services for the Plan. However, benefits under
the Plan are paid by the Fund, and the Fund makes all final claims decisions.
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The Fund provides a publicly available Summary Plan Description (“SPD”) on its
website.1 The SPD sets forth a two-level review process of post-service hospital and medical
claims. A claimant must first submit an appeal to Horizon, who will render a decision within
thirty days. If the claimant is “dissatisfied with the decision of the first appeal, [the claimant]
may submit a second appeal to the Board of Trustees within 180 days of the receipt of the first
decision.” (Baker Cert., Ex. A.) The Board of Trustees will render a decision “within thirty days
of receipt for the second level of appeal.” (Id.) In addition, the SPD expressly prevents parties
from bringing “a lawsuit to obtain benefits until after you have requested a review and a final
decision has been reached on review. . . .” (Id.)
On June 28, 2010, Daniel Rose, a subscriber to the Plan, had multiple paravertebral facet
joint injections under fluoroscopic guidance performed at Montvale, an outpatient ambulatory
surgery center (“ASC”). Upon receipt of this care, Mr. Rose executed an Assignment of Benefits
agreement with Montvale, “which transferred his contractual and legal rights under the policy of
group health” to Montvale. (Compl. ¶ 6.) The Fund deems Montvale an out of network medical
provider.
On July 7, 2010, Montvale sought payment from Horizon for Mr. Rose’s procedures in
the amount of $29,490.00, but was only reimbursed for $1,285.20. On August 12, 2010,
Montvale submitted an appeal to Horizon appealing the amount of reimbursement as neither
reasonable nor customary. Attached to the appeal was “a copy of [Mr. Rose’s] benefits for
ASC’s.” (Bronsnick Cert., Ex. C.) On October 17, 2010, Horizon submitted a letter to Montvale
denying the appeal and stating that the “claim [was] processed accurately based on your nonparticipating status and the patient’s benefit coverage.” (Bronsnick Cert., Ex. D.) On December
1
The SPD is available at http://www2.ironnj.com/uploads/pdf/welfare.pdf.
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14, 2010, Montvale submitted a letter entitled “2nd LEVEL APPEAL” to Horizon, which again
disputed the amount of reimbursement as neither reasonable nor customary and stated that “there
are no limitations in the patient’s plan description that would limit an ASC reimbursement.”
(Bronsnick Cert., Ex. E.) The letter also requested a copy of the SPD on behalf of Mr. Rose. On
January 16, 2011, Horizon issued a letter to Montvale stating that “[t]here are no second level
appeal rights under the terms and conditions of the subscriber’s Administrative Services
Account.” (Bronsnick Cert., Ex. F.)
II.
DISCUSSION
Defendants now move to dismiss Montvale’s Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6). In doing so, they argue that (1) ERISA preempts Montvale’s state law
claims; and (2) Montvale failed to exhaust the mandatory administrative appeals process under
the Plan. Montvale argues that (1) the Plan’s appeals process was not mandatory; (2) it
nonetheless exhausted two levels of review; and (3) further appeals would have been futile.
A.
Standard of Review
In assessing the parties’ arguments, the Court must apply the standard of review
applicable to requests for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6). That
rule permits a court to dismiss a complaint for failure to state a claim upon which relief can be
granted. When considering a Rule 12(b)(6) motion, the Court must accept the factual allegations
in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Morse v.
Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). The Court’s inquiry, however, “is
not whether plaintiffs will ultimately prevail in a trial on the merits, but whether they should be
afforded an opportunity to offer evidence in support of their claims.” In re Rockefeller Ctr.
Prop., Inc., 311 F.3d 198, 215 (3d Cir. 2002).
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The Supreme Court recently clarified the Rule 12(b)(6) standard in two cases: Ashcroft
v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic Corporation v. Twombly, 550 U.S. 544
(2007). The decisions in those cases abrogated the rule established in Conley v. Gibson, 355
U.S. 41, 45-46 (1957), that “a complaint should not be dismissed for failure to state a claim
unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim,
which would entitle him to relief.” In contrast, Bell Atlantic, 550 U.S. at 545, held that
“[f]actual allegations must be enough to raise a right to relief above the speculative level.” Thus,
the assertions in the complaint must be enough to “state a claim to relief that is plausible on its
face,” id. at 570, meaning that the facts alleged “allow[] the court to draw the reasonable
inference that the defendant is liable for the conduct alleged.” Iqbal, 129 S. Ct. at 1949; see also,
Phillips v. County of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008) (In order to survive a
motion to dismiss, the factual allegations in a complaint must “raise a reasonable expectation that
discovery will reveal evidence of the necessary element,” thereby justifying the advancement of
“the case beyond the pleadings to the next stage of litigation.”).
When assessing the sufficiency of a complaint, the Court must distinguish factual
contentions – which allege behavior on the part of the defendant that, if true, would satisfy one
or more elements of the claim asserted – from “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements.” Iqbal, 129 S. Ct. at 1949. Although for the
purposes of a motion to dismiss the Court must assume the veracity of the facts asserted in the
complaint, it is “not bound to accept as true a legal conclusion couched as a factual allegation.”
Id. at 1950. Thus, “a court considering a motion to dismiss can choose to begin by identifying
pleadings that, because they are no more than conclusions, are not entitled to the assumption of
truth.” Id.
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B.
ERISA Preemption
“Congress enacted ERISA to ‘protect . . . the interests of participants in employee benefit
plans and their beneficiaries’ by setting out substantive regulatory requirements for employee
benefit plans and to ‘provid[e] for appropriate remedies, sanctions, and ready access to the
Federal courts.’” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. §
1001(b)). “The purpose of ERISA is to provide a uniform regulatory regime over employee
benefit plans.” Id. “To this end, ERISA includes expansive pre-emption provisions . . . which
are intended to ensure that employee benefit plan regulation would be exclusively a federal
concern.” Id. (quotation and citations omitted).
“Therefore, any state-law cause of action that duplicates, supplements, or supplants the
ERISA civil enforcement remedy conflicts with the clear congressional intent to make the
ERISA remedy exclusive and is therefore pre-empted.” Id. at 209 (citations omitted). Indeed,
“the ERISA civil enforcement mechanism is one of those provisions with such extraordinary preemptive power that it converts an ordinary state common law complaint into one stating a federal
claim for purposes of the well-pleaded complaint rule.” Id. (quotation omitted).
ERISA § 502(a)(1)(B) provides that “[a] civil action may be brought—(1) by a
participant or beneficiary—. . . (B) 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 under the
terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). Consequently, “[u]nder the civil enforcement
provisions of § 502(a), a plan participant or beneficiary may sue to recover benefits due under
the plan, to enforce the participant's rights under the plan, or to clarify rights to future benefits.”
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53 (1987). “Relief may take the form of accrued
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benefits due, a declaratory judgment on entitlement to benefits, or an injunction against a plan
administrator's improper refusal to pay benefits.” Id.
Here, it is undisputed that the Plan is part of an employee benefit plan that is governed by
ERISA. It is also undisputed that all of Montvale’s state law claims in the Complaint arise out of
Defendants’ failure to pay the reasonable and customary rate for medical services. These are
precisely the types of claims that are wholly preempted by ERISA’s civil enforcement provision.
See Pryzbowski v. U.S. Healthcare, Inc., 245 F.3d 266, 272 (3d Cir. 2001) (“[C]laims
challenging the quantum of benefits due under an ERISA-regulated plan are completely
preempted under § 502(a)'s civil enforcement scheme.” (citation omitted)). Consequently,
Montvale’s claims are preempted by ERISA and must be dismissed.
C.
Exhaustion
Defendants further argue that the Complaint should be dismissed without granting
Montvale leave to reassert its claims under ERISA because it failed to exhaust the mandatory
administrative appeals process under the SPD, and therefore any attempt to amend the Complaint
to assert ERISA claims would be futile. Montvale argues that (1) the SPD’s administrative
appeals process was voluntary, and Defendants’ are therefore required to waive their exhaustion
defense; (2) even if the Court finds the SPD’s administrative appeals process to be mandatory,
Montvale exhausted two levels of appeals; and (3) further appeals would have been futile.
“Except in limited circumstances, a federal court will not entertain an ERISA claim
unless the plaintiff has exhausted the remedies available under the plan.” Harrow v. Prudential
Ins. Co. of Am., 76 F. Supp. 2d 558, 561 (D.N.J. 1999) (citations omitted). One such
circumstance is where the plan “offers voluntary levels of appeal,” in which case “[t]he plan
waives any right to assert that a claimant has failed to exhaust administrative remedies because
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the claimant did not elect to submit a benefit dispute to any such voluntary level of appeal
provided by the plan.” 29 C.F.R. § 2560.503-1(c)(3)(i).
Under the SPD’s two-level appeals process, Montvale must first submit an appeal to
Horizon, who will render a decision within thirty days. If Montvale is “dissatisfied with the
decision of the first appeal, [it] may submit a second appeal to the Board of Trustees within 180
days of the receipt of the first decision.” (Baker Cert., Ex. A.) The Board of Trustees will render
a decision “within thirty days of receipt for the second level of appeal.” (Id.)
This language clearly requires Montvale to first appeal to Horizon and then to the Board
of Trustees before filing a lawsuit for benefits. Montvale makes much of the fact that the Fund
states that a claimant “may submit a second appeal to the Board of Trustees.” However, use of
the word may in this context does not render the second-level appeal optional; rather it merely
presents claimants with the next step in the administrative appeal process, should they want to
pursue it. Moreover, the SPD expressly prevents parties from bringing “a lawsuit to obtain
benefits until after you have requested a review and a final decision has been reached on review.
. . .” (Id.) Consequently, the Fund’s administrative appeals process is clearly mandatory, and
Defendants’ need not waive any defenses regarding the failure to exhaust administrative
remedies.
Montvale’s argument that the Court should find that it exhausted the administrative
appeals process because it “exhausted two levels of review” and “substantially complied with the
internal appeals procedures” (Pl.’s Br. 6) is unpersuasive. There is no case law in this Circuit
applying the doctrine of substantial compliance to the issue of whether a beneficiary satisfied its
obligation to exhaust an administrative appeals process under an ERISA-governed benefit plan.2
2
Courts have applied the doctrine of substantial compliance to the issue of whether an
ERISA plan administrator complied with certain ERISA regulations, see, e.g., Nichols v.
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Indeed, other courts have rejected such an application. See Edwards v. Briggs & Stratton
Retirement Plan, 639 F.3d 355, 363 (7th Cir. 2011) (beneficiary’s “failure to file a timely
administrative appeal from the Plan’s initial denial of benefits is not excused on grounds of
substantial compliance.”); Brown v. J.B. Hunt Transp. Servs., Inc., No. 4:08CV00089, 2008 WL
4079822, at *2 (E.D.Ark. Aug. 28, 2008) (rejecting “Plaintiff’s argument that substantial
compliance satisfies a beneficiary’s obligation to exhaust administrative remedies.”).
Moreover, Montvale—a sophisticated medical services provider—offers no explanation
why it failed to submit a second level appeal to the Board of Trustees in accordance with the
SPD’s clear terms and conditions.3 Thus, Montvale’s submission of two appeals to Horizon does
not exhaust Montvale’s administrative remedies under ERISA.
Finally, Montvale’s argument that it should be excused from exhaustion because further
appeals would be futile is without merit. “Whether to excuse exhaustion on futility grounds rests
upon weighing several factors, including: (1) whether plaintiff diligently pursued administrative
relief; (2) whether plaintiff acted reasonably in seeking immediate judicial review under the
circumstances; (3) existence of a fixed policy denying benefits; (4) failure of the insurance
company to comply with its own internal administrative procedures; and (5) testimony of plan
administrators that any administrative appeal was futile.” Harrow v. Prudential Ins. Co. of Am.,
Prudential Ins. Co. of Am., 406 F.3d 98 (2d Cir. 2005), and whether a party properly designated
a new beneficiary of an ERISA plan, see, e.g., Davis v. Combes, 294 F.3d 931 (7th Cir. 2002);
BankAmerica Pension Plan v. McMath, 206 F.3d 821 (9th Cir. 2000). To be sure, neither of
these issues arises in this matter.
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Montvale suggests that Horizon had an obligation to either redirect the second level
appeal to the Board of Trustees or tell Montvale that it filed that appeal with the wrong
administrative body. However, ERISA does not require parties to an administrative appeals
process help claimants cure defective attempts to exhaust that process. Moreover, here,
Montvale had easy access to the SPD, as it was publicly available on the Fund’s website. And
Montvale’s citations to certain terms of the SPD in its appeal letters to Horizon suggests that
Montvale was familiar with the SPD.
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279 F.3d 244, 250 (3d Cir. 2002). “Of course, all factors may not weigh equally.” Id. However,
a plaintiff must make “a clear and positive showing of futility.” Id. at 249 (quotation and citation
omitted).
Here, the first factor weighs against Montvale because it carelessly filed a second appeal
with the wrong administrative body. Similarly, the second factor weighs against Montvale
because it sought judicial review without appealing to the final administrative decision maker.
The third, fourth, and fifth factors weigh heavily against Montvale because it offers no evidence
of (1) a fixed policy denying benefits; (2) Defendants’ failure to comply with their own internal
administrative procedures; or (3) any testimony of plan administrators that a second level appeal
to the Board of Trustees would be futile. Furthermore, Montvale fails to provide any evidence
outside of these factors suggesting that an appeal to the Board of Trustees would have been
denied. Therefore, Montvale’s Complaint is dismissed with prejudice.4
III. CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is GRANTED. Montvale’s
Complaint is dismissed in its entirety with prejudice.
The Court will enter an order implementing this opinion.
4
To the extent Montvale seeks to assert claims premised on Horizon’s failure to provide a
copy of the Fund’s SPD in response to its request in the second level appeal, those claims must
fail. ERISA provides that “[a]ny administrator . . . who fails or refuses to comply with a request
for any information which such administrator is required . . . to furnish to a participant or
beneficiary . . . within 30 days after such request may in the court's discretion be personally
liable to such participant or beneficiary in the amount of up to $100 a day from the date of such
failure or refusal, and the court may in its discretion order such other relief as it deems proper.”
29 U.S.C. § 1132 (c)(1)(A), (B). Horizon’s failure to provide a copy of the SPD to Montvale is
not actionable because Horizon is not the Fund’s administrator; rather the Board of Trustees is
clearly designated as the administrator. Furthermore, Montvale’s request for the SPD is curious
because, as previously discussed, the SPD is publicly available on the Fund’s website, and
Montvale appears to cite to it in both its first and second level appeal letters to Horizon.
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_/s/ Dickinson R. Debevoise__________
DICKINSON R. DEBEVOISE, U.S.S.D.J.
Dated: December 14, 2012
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