SPECIALTY SURGERY OF MIDDLETOWN v. AETNA et al
OPINION. Signed by Judge Jose L. Linares on 6/24/2014. (nr, )
lA i'"l ••
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
Civil Action No.: 12-4429 (JLL)
SPECIALTY SURGERY OF
AETNA, JOHN/JANE DOES 1-10; ABC
CORP. 1-10; and ABC PARTNERSHIPS 110,
LINARES, District Judge.
This matter comes before the Court by way of Defendant Aetna's motion for summary
judgment pursuant to Federal Rule of Civil Procedure 56(c). Defendant seeks summary
judgment as to Plaintiff Specialty Surgery ofMiddletown's suit for recovery ofbenefits under 29
U.S.C. § 1132(a)(1)(b) of the Employee Retirement Income Security Act of 1974 ("ERISA").
Defendant's motion is unopposed and no oral argument has been heard on this matter pursuant to
Federal Rule ofCivil Procedure 78. Based on the reasons that follow, Defendant's motion is
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Defendant has submitted a Statement of Undisputed Material Facts as required by Local
Civil Rule 56.l("Def's Stmt. ofUndisp. Facts"). In accordance with Local Rule 56.1,
Defendant's assertions of undisputed material fact are each supported with evidence contained in
the record. Because Plaintiff has failed to oppose this motion, and has thus failed to submit a
responsive 56.1 Statement, Defendant's statements of fact "shall be deemed undisputed for
purposes" of this summary judgment motion. 1 See L. Civ. R. 56.1 ("The opponent of summary
judgment shall furnish, with its opposition papers, a responsive statement of material facts ... ;
any material fact not disputed shall be deemed undisputed for purposes of the summary judgment
Plaintiff Specialty Surgery of Middletown is an outpatient Ambulatory Surgical Center in
Middletown, New Jersey. (See Def's Stmt. ofUndisp. Facts ,-r 1, ECF No. 33.) Defendant
Aetna, Inc. ("Aetna") is a health benefits provider and administrator for ERISA-covered
employee benefit plans. (!d. at ,-r 2.)
Between 2010 and 2011, five Aetna employee benefit plan members received treatment
at Plaintiff's facility. (!d. at ,-r 3.) These members-named Rebecca S., Andrew F., Patrick R.,
Carolyn B., and David C.-were each denied full coverage for their procedures by Defendant,
acting as the ERISA benefit plan administrator of their respective plans. (!d. at ,-r,-r 6, 24, 38, 50,
67.) In each case, the reason given for the denial was that the procedure was "experimental or
investigational" as defined by the benefit plans, and thus was not covered under the terms of the
plans. (!d. at ,-r,-r 15, 30, 45, 60, 74.)
Although each of Defendant's statements of fact are deemed undisputed for the purposes of this
motion, this Court has, in any event, carefully reviewed the evidence in the record and has
viewed the facts and all reasonable inferences therefrom in the light most favorable to the
Plaintiff, in-keeping with the appropriate summary judgment standard.
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Plaintiff claims that the five Aetna members assigned their rights to benefits under their
respective Aetna healthcare plans to Plaintiff prior to receiving medical treatment. (!d. at ,-r 4.)
On that basis, Plaintiff filed five separate lawsuits in state court seeking to recover benefits for
services rendered to the five Aetna members. (Jd. at ,-r 3.) Each suit consisted of six claims:
breach of contract, third party beneficiary, promissory estoppel, breach of fiduciary duty, breach
of the covenant of good faith and fair dealing, and a federal claim under ERISA's civil
enforcement provision. (Id. at ,-r 3.) The five separate suits were subsequently removed to
federal court and consolidated into the present action. (See Notice of Removal, ECF No. 1;
Order Grant'g Mot. to Consolidate, ECF No.9.) On May 23, 2014, Defendant filed the present
motion for summary judgment. (See Defs Mem. in Supp. of Mot., ECF No. 31.)
Federal Rule of Civil Procedure 56( c) requires that a court grant a motion for summary
judgment if the moving party has shown ( 1) the absence of a genuine dispute as to any material
fact, and (2) that it is "entitled to judgment as a matter oflaw." If the moving party successfully
makes this showing, then the burden shifts onto the nonmoving party to present evidence
sufficient to create a genuine dispute as to a material fact. See Celotex Corp. v. Catrett, 477 U.S.
317, 323 ( 1986). In determining whether a genuine dispute exists, a court must "view the
underlying facts and all reasonable inferences therefrom in the light most favorable to the party
opposing the motion." Pennsylvania Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995).
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Benefit Recovery Action under 29 U.S.C. § 1132(a)(l)(B)
The civil enforcement provision of ERISA provides a cause of action for a healthcare
plan "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 under the
terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Courts review administrative denials of ERISA
plan benefits under a de novo standard unless the benefits plan grants the administrator
"discretionary authority to determine eligibility for benefits." Metro. Life Ins. Co. v. Glenn, 554
U.S. 105, 111 (2008). Where the terms of the benefit plan give the administrator "discretionary
authority," courts use a deferential standard of review, referred to as an "arbitrary and
capricious" standard or an "abuse of discretion" standard. See Miller v. Am. Airlines, Inc., 632
F.3d 837, 844 (3d Cir. 2011); Viera v. Life Ins. Co. ofN Am., 642 F.3d 407,413 (3d Cir. 2011)
("In the ERISA context, an 'abuse-of-discretion' standard of review is used interchangeably with
an 'arbitrary and capricious' standard of review.") (citing Howley v. Mellon Fin. Corp., 625 F.3d
788, 793 n. 6 (3d Cir.2010)). "The plan administrator bears the burden of proving that the
arbitrary and capricious standard of review applies." Viera, 642 F.3d at 413 (quoting Kinstler v.
First Reliance Std. Life Ins. Co., 181 F.3d 243,249 (2d Cir.1999)).
In the present case, Defendant has demonstrated that it was granted discretionary
authority under the terms of the relevant employee benefits plans. (See Cert. of Michael
4-8, ECF No. 35.) The Court therefore reviews the Defendant's decision under a
deferential standard, and will only disturb the Defendant's administrative decision if it
constituted an abuse of discretion.
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Plaintiff has no Standing to Sue for Benefits Denied to Rebecca S., Andrew F., and
Defendant argues that Plaintiff has no standing to sue for benefits relating to its treatment
of Rebecca S. and Andrew F. because Plaintiffhas failed to show that those members assigned
their benefits to Plaintiff. (See Defs Mem. in Supp. of Mot. 15.) Additionally, Defendant
argues that Plaintiff has no standing to sue for benefits relating to its treatment of Patrick R.
because Patrick R.'s benefits plan contains a valid and enforceable anti-assignment provision.
As an initial matter, this Court discusses whether an assignment of benefits under an
ERISA plan can confer derivative standing onto a Plaintiff. On its face, the civil enforcement
provision of ERISA (29 U.S.C. § 1132(a)(l)(b)) only gives standing to plan participants and plan
beneficiaries. See Pascack Valley Hasp., Inc. v. Local 464A UFCW Welfare Reimbursement
Plan, 388 F.3d 393, 400 (3d Cir. 2004). This Court has previously recognized that,
[a]lthough the Third Circuit has not specifically addressed whether an assignment
of benefits confers ERISA standing on a non-participant or a non-beneficiary, it has
observed that '[a]lmost every circuit to have considered the question has held that
a healthcare provider can assert a claim under § 502(a) where a beneficiary or
participant has assigned to the provider that individual's right to benefits under the
Cohen v. Horizon Blue Cross Blue Shield ofNew Jersey, 2:13-CV-03057 JLL, 2014 WL 268686
(D.N.J. Jan. 23, 2014) (quoting Pascack, 388 F.3d at 401 n. 7). As such, this Court has generally
recognized the ability of a healthcare provider to attain derivative standing "by virtue of a valid
assignment of benefits by the plan beneficiary." Cohen, 2014 WL 268686; see, e.g., Atlantic
Spinal Care v. Highmark Blue Shield, No. 13-3159, 2013 WL 3354433, *4 (D.N.J. July 2,
2013); Edwards v. Horizon Blue Cross Blue Shield ofNJ, No. 08--6160, 2012 U.S. Dist. LEXIS
105266, at *17 (D.N.J. June 4, 2012).
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Plaintiff has No Standing to Sue for Benefits Relating to Rebecca S. and
Defendant argues that there is no evidence that an assignment of benefits ever existed
with regard to Rebecca S. and Andrew F., and that Plaintiff therefore does not have standing to
sue for benefits due to Rebecca S. and Andrew F. (See Defs Mem. in Supp. of Mot. 15.)
Plaintiff, in tum, provides no argument or evidence supporting the existence of a valid
assignment of benefits as to said patients.
"The party invoking federal jurisdiction bears the burden of establishing [standing]."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). Although Defendant removed this
case to federal court, Plaintiff now bears the burden of establishing ERISA standing. See
Freeman v. Corzine, 629 F.3d 146, 153 (3d Cir. 2010) (holding that, on a motion for summary
judgment, the plaintiff must set forth evidence demonstrating standing). In cases where
derivative standing is predicated upon an assignment of benefits under an ERISA plan, "failure
to establish that an appropriate assignment exists is fatal to ... standing." Cmty. Med. Ctr. v.
Loca/464A UFCW Welfare Reimbursement Plan, 143 Fed. Appx. 433, 436 (3d Cir. 2005).
In the absence of any evidence tending to show the existence of a valid assignment, the
Court is compelled to dismiss the claims relating to Rebecca S. and Andrew F. for lack of
standing. See, e.g., Cmty. Med. Ctr., 143 Fed. Appx. at 436; (dismissing for lack of jurisdiction
where the Plaintiff failed to show the existence of a valid assignment of benefits); Pascack
Valley Hosp., Inc., 388 F.3d at 400-02 (holding that, in the absence of any evidence of a valid
assignment, a hospital has no standing to sue under the ERISA civil enforcement provision).
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Plaintiff has No Standing to Sue for Benefits Relating to Patrick R.
Defendant concedes that Plaintiff has produced a document purporting to assign Patrick
R.'s benefits under the ERISA benefits plan to Plaintiff. (See Defs Mem. in Supp. of Mot. 16.)
However, Defendant argues that Plaintiff has no standing to sue for benefits relating to Patrick R.
because of a valid and enforceable anti -assignment provision contained in Patrick R.' s benefits
"Although the Third Circuit has not addressed the issue of anti-assignability clauses, a
number of federal and state courts have found that unambiguous anti-assignment provisions in
group health care plans are valid." Briglia v. Horizon Healthcare Servs., Inc., CIV.A.03-6033
FLW, 2005 WL 1140687 at *4 (D.N.J. May 13, 2005). Courts in the District ofNew Jersey have
thus far held that unambiguous anti-assignment provisions in group healthcare plans are valid
and enforceable. See, e.g., Cohen, 820 F. Supp. 2d at 605 ("Having concluded that the antiassignment clause in the Plan is not barred under ERISA, the Court fmds the unambiguous
language of that clause prohibits the Subscriber from assigning his benefits."); Glen Ridge
Surgicenter, LLC v. Horizon Blue Cross Blue Shield ofNew Jersey, Inc., CIV.A.08-6160 (JAG),
2009 WL 3233427 at *4 (D.N.J. Sept. 30, 2009) ("[T]he presence of an anti-assignment
provision in the Horizon plans at issue could negate GRS's standing to sue Horizon for unpaid
benefits, unless GRS submits evidence demonstrating that the anti-assignment provision is
unenforceable."); Gregory Surgical Servs., LLC v. Horizon Blue Cross Blue Shield ofNew
Jersey, Inc., CIV.A.06-0462(JAG), 2007 WL 4570323 at *3 (D.N.J. Dec. 26, 2007) ("[T]he
presence of an anti-assignment provision in the Horizon plans at issue could negate GSS's
standing to sue Horizon for unpaid benefits, unless GSS submits evidence demonstrating that the
anti-assignment provision is unenforceable.").
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In this case, the anti-assignment provision contained in Patrick R.'s benefits plan clearly
applies to the purported assignment now at issue. Specifically, the anti-assignment provision
Coverage may be assigned only with the written consent of Aetna. To the extent
allowed by law, Aetna will not accept an assignment to an out-of-network
provider, including but not limited to, an assignment of:
The benefits due under this contract;
The right to receive payments due under this contract; or
Any claim you make for damages resulting from a breach or alleged breach, of
the terms of this contract.
(See Def's Mem. in Supp. of Mot. Ex. E.)
Plaintiff has come forward with no evidence showing Aetna's written consent to Patrick
R.' s purported assignment of benefits to the plaintiff. In light of the clear applicability of the
benefit plan's anti-assignment provision, and in the absence of any argument whatsoever against
the enforceability of the provision, 2 the Court concludes that Plaintiff has no derivative standing
to sue for benefits relating to Patrick R. See, e.g., At/. Spinal Care v. Highmark Blue Shield,
CIV. A. 13-3159 JLL, 2013 WL 3354433 at *3 (D.N.J. July 2, 2013) (holding that Plaintiff had
no standing to sue where anti-assignment provision applied to the attempted assignment of
benefits); Cohen, 820 F. Supp. 2d at 603 (describing a plan's anti-assignment clause as "fatal" to
a derivative standing argument based on assignment ofbenefits). 3
To be clear, this Court's holding in this regard is based, in part, on the absence of any
compelling argument by Plaintiff that the anti-assignment provision at issue is unenforceable or
Even if Plaintiff had established that it had standing to sue Defendant for benefits allegedly due
to Rebecca S., Andrew F., and/or Patrick R under their respective ERISA plans, such claims
would in any event be dismissed for the reasons set forth subsections B and C of this Opinion.
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Plaintiffs State Law Claims are Completely Preempted by ERISA
Having determined that Plaintiff has no standing to sue for benefits relating to Rebecca
S., Andrew F. and Patrick R., the Court proceeds to discuss Plaintiffs remaining claims relating
to Carolyn B. and David C. With respect to the benefits due to Carolyn B. and David C.,
Plaintiff asserts five state law claims: "breach of contract, third party beneficiary, promissory
estoppel, breach of fiduciary duty and breach of the covenant of good faith and fair dealing."
(See Defs Mem. in Supp. of Mot. 13.) Defendant argues that all five of Plaintiffs state law
claims are preempted by ERISA. Based on the reasons that follow, this Court agrees with the
The civil enforcement provision of ERISA, located at 29 U.S.C. § 1132, preempts "any
state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement
remedy." Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004). This is so "even when the
claim is couched in terms of common law negligence or breach of contract." Pryzbowski v. US.
Healthcare, Inc., 245 F.3d 266,278 (3d Cir. 2001). A suit brought for the purpose of
"rectify[ing] a wrongful denial of benefits promised under an ERISA-regulated plan" falls within
the scope ofERISA's civil enforcement provision, "and [is] therefore completely pre-empted."
Davila, 542 U.S. at 214. "[T]he ultimate distinction to make for purposes of complete
preemption is whether the claim challenges the administration of or eligibility for benefits, which
falls within the scope of§ 502(a) and is completely preempted, or the quality of the medical
treatment performed, which may be the subject of a state action." Pryzbowski, 245 F.3d at 273.
Plaintiff, as the healthcare provider in each instance, does not challenge the quality of the
medical treatments performed in each case. (See Defs Mem. in Supp. of Mot. Ex. A.) Instead,
each of Plaintiffs five state law claims challenges an administrative decision regarding
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eligibility for benefits, and seeks to recover benefits under the respective ERISA-covered plans.
(See id.) For example, Plaintiff's claim for breach of contract seeks only to recover additional
benefits under the terms of the respective benefits plans. (See id.) Additionally, Plaintiff's claims
for third party beneficiary and breach of the covenant of good faith and fair dealing relate to the
terms of the respective benefits plans, and do not challenge the quality of the medical treatments
performed. (See id.) Plaintiffs state law claims are therefore completely preempted by ERISA's
civil enforcement provision, and must be dismissed. See, e.g., Metro. Life Ins. Co., 481 U.S. at
62 (holding common law contract and tort claims for recovery of benefits under an ERISA plan
to be completely preempted under the ERISA civil enforcement provision); Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 43, 52 (1987) (holding that state law claims for breach of contract, breach
of fiduciary duty and fraud in the inducement are preempted by the ERISA civil enforcement
provision). Plaintiff has given the Court no reason to fmd otherwise.
Plaintiff fails to show any Evidence Demonstrating a Genuine Dispute as to
Arbitrariness or Capriciousness.
Having dismissed Plaintiffs preempted state law claims, the only remaining claim is
Plaintiffs claim for benefits under 29 U.S.C. § 1132(a)(l )(B). In support of that claim, Plaintiff
alleges that Defendant acted arbitrarily and capriciously in denying coverage, but provides no
evidence or argument to substantiate its claim. Defendant, on the other hand, argues that its
denials of coverage were founded on proper reasoning, and were neither arbitrary nor capricious.
(See Defs Mem. in Supp. of Mot. 13.)
As discussed above, the Court reviews Defendant's decision under the deferential "abuse
of discretion," or "arbitrary and capricious" standard. "A[n] [administrator] abuses his discretion
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by failing to use his judgment, when he acts 'without knowledge of or inquiry into the relevant
circumstances and merely as a result of his arbitrary decision or whim."' Metro. Life Ins. Co.,
554 U.S. at 131 (quoting Restatement (Second) ofTrusts § 187 cmt. f(l959)). "Under a
traditional arbitrary and capricious review, a court can overturn the decision of the plan
administrator "only if it is 'without reason, unsupported by substantial evidence or erroneous as a
matter oflaw."' Viera, 642 F.3d at 413 (quoting Miller v. Am. Airlines, Inc., 632 F.3d 837, 845
(3d Cir.2011)). The scope of this review is narrow, and "the court is not free to substitute its
own judgment for that of the defendants in determining eligibility for plan benefits." Doroshow
v. Hariford Life & Accident Ins. Co., 574 F.3d 230, 234 (3d Cir. 2009) (citation omitted).
Moreover, any conflict of interest on the part of the administrator should be considered as a
factor when determining whether the administrator abused its discretion. See Estate of Schwing
v. The Lilly Health Plan, 562 F.3d 522, 525 (3d Cir. 2009) (discarding the "sliding scale"
approach to conflicts, and holding that "courts reviewing the decisions of ERISA plan
administrators or fiduciaries in civil enforcement actions ... [should] consider any conflict of
interest as one of several factors in considering whether the administrator or the fiduciary abused
In the present case, Defendant has demonstrated that its denials of coverage were based
on the language of the various plans, and were therefore neither arbitrary nor capricious.
Defendant points to appeal responses issued with relation to each denial. (SeeDers Mem. in
Supp. ofMot. 13-14, ECF No. 31.) The appeal responses issued by Defendant lay out the
reasons underlying each administrative denial. For example, with respect to Carolyn B.,
Defendant issued an appeal response explaining that spinal manipulation under anesthesia
("MUA") is not considered by the Defendant to be safe or effective for the treatment of neck and
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back problems, and is only considered medically necessary under particular circumstances not
present in Carolyn B.'s case. (See Defs Mot. in Supp. of Mot. Ex. B.) Similarly, with regard to
David C.'s partial denial of benefits, Defendant's appeal response explained that "[f]acetjoint
injections are considered experimental and investigational" when used to treat "back and neck
pain," and lays out the circumstances under which facet joint injections would be considered
medically necessary. (!d. Ex. F.)
Both appeal responses point to an absence of peer-reviewed studies regarding the safety
and effectiveness of the particular procedure, and cite to published Clinical Policy Bulletins
("CPBs") which support Defendant's policies. (See Defs Mem. in Supp. of Mot. Ex's B, F.)
Having considered the language contained in the relevant plans and CPBs, the Court concludes
that the administrator's interpretation of that language was reasonable. These facts, unopposed
as they are, are sufficient to establish the absence of a genuine dispute regarding any material
fact relating to arbitrariness or capriciousness. See, e.g., Dowden v. Blue Cross & Blue Shield of
Texas, Inc., 126 F.3d 641, 644 (5th Cir. 1997) (holding that denial ofbenefits was neither
arbitrary nor capricious where the decision was based on the written policy of the administrator
and was informed by "learned writings"); Guild v. Cont'l Cas. Co., 25 F. App'x 753, 756 (lOth
Cir. 2001) (holding that administrative denial was not arbitrary or capricious where evidence of
permanent disability was ambiguous, and administrator's interpretation of it was reasonable).
Defendant's motion for summary judgment as to these claims is therefore granted. See Flanagan
v. First Unum Life Ins., 170 F. App'x 182, 184 (2d Cir. 2006) (affirming administrator's decision
to deny benefits where the denial was based on the administrator's "interpretation of the treating
physician's records and correspondence").
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For the foregoing reasons, Defendant's motion for summary judgment is GRANTED.
An appropriate Order accompanies this Opinion.
sf Jose L. Linares
Jose L. Linares, U.S.D.J.
Date: June 24, 2014
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