SLEEP AND WELLNESS MEDICAL ASSOCIATES, LLC v. HORIZON HEALTHCARE SERVICES, INC.

Filing 61

ORDER denying 42 Motion to Dismiss. Signed by Judge Madeline C. Arleo on 10/30/2015. (jr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SLEEP AND WELLNESS MEDICAL
ASSOCIATES, LLC
Plaintiff,

Civil Action No. 14-6640

v.

ORDER

HORIZON HEALTHCARE SERVICES,
INC.,
Defendant.

This matter comes before the Court by way of Defendant Horizon Healthcare Services,
Inc.’s Motion to Dismiss Plaintiff Sleep and Wellness Medical Associates, LLC’s Amended
Complaint, Dkt. No. 42;
And it appearing that Plaintiff seeks (1) declaratory and injunctive relief that Defendant’s
reversals of benefits determinations made between 2009 and April 2014 and Defendant’s
attempts to recover payments made are unlawful, pursuant to ERISA, Am. Compl. ¶ 87; (2) to
recover benefits for a variety of ERISA-governed claims Horizon failed to pay since April 2014,
id. ¶ 104; and (3) to recover benefits for a variety of PPACA-governed claims Horizon failed to
pay from 2009 to April 2014, id. ¶ 126;
And it appearing that Defendant seeks to dismiss the entire case, arguing that Plaintiff has
no standing to sue under ERISA as either a common law assignee or as a statutory beneficiary;
And it appearing that Plaintiff pled the existence of at least one assignment of benefits
and right to sue by a patient, id. ¶ 20, Ex. B;
And it appearing that the Third Circuit recently held that “as a matter of federal common
law, when a patient assigns payment of insurance benefits to a healthcare provider, that provider
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gains standing to sue for that payment under ERISA § 502(a). An assignment of the right to
payment logically entails the right to sue for non-payment.” N. Jersey Brain & Spine Ctr. v.
Aetna, Inc., No. 14-2101, 2015 WL 5295125, at *2 (3d Cir. Sept. 11, 2015); and
Therefore, the Court denies Defendant’s motion to dismiss based on whether the
assignments actually grant ERISA standing at this stage; 1
And it appearing that Defendant also seek to dismiss Plaintiff’s request for a declaratory
judgment that Defendant’s prior reversals of benefits and attempts to recover payments made on
those benefits is unlawful pursuant to ERISA, arguing that “ERISA does not preempt state law
fraud claims,” Defs.’ Mot. to Dismiss at 20;
And it appearing that at least some common law fraud claims may not be preempted by
ERISA, see Geller v. County Line Auto Sales, Inc., 86 F.3d 18, 23 (2d Cir. 1996);
And it further appearing that some prior reversals of benefits may be unlawful pursuant to
ERISA;
And it appearing that Defendant seeks recoupment for arguably thousands of claims from
2009 to 2014 comprising $3.8 million, Am. Compl. at 4, and whether a particular claim may be
barred by ERISA or the basis of a common law fraud claim cannot be determined at this stage
from the pleadings;
Therefore the Court denies Defendant’s motion to dismiss Plaintiff’s claim for
declaratory judgment as premature;
And it appearing that Defendant also seeks to dismiss Plaintiff’s state law claims
concerning patients “covered under Plans where a State or the U.S. Government is the employer”
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To the extent this challenge is a factual challenge to ERISA standing, rather than a facial one,
the challenge may be renewed at summary judgment. The Court will not entertain a factual
challenge concerning what the disputed contracts say without discovery into all applicable
contracts here.
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(“PPACA-Governed claims”) on the basis that those state claims are attempts to create a private
cause of action pursuant to the claims regulations, which should not be permitted;
And it appearing that whether some or all of the contracts at issue contain terms that
require compliance with the claims regulations, including any implied terms and assurances on
formation, is not clear from the pleadings at this stage;
Therefore, the Court therefore denies Defendant’ motion to dismiss breach of contract
claims at this stage, see Am. Compl. ¶¶ 116-30;
And it appearing that Defendant also argues that Plaintiff’s claim for non-ERISA claims
are preempted by sovereign immunity under the Eleventh Amendment;
And it appearing that Defendant is not a sovereign;
And it appearing that whether Defendant was acting as an agent for the Federal and state
governments, and acting within its authority pursuant to any such relationship, is an issue of fact
that cannot be resolved at this stage; 2
And Defendant finally argues that a variety of controlling contracts, including the Federal
Service Benefit Plan and the OPM-BCBSA contract, expressly give Horizon the right to recoup
overpayments;

2

Defendant cites to Shands Teaching Hosp. and Clinics, Inc. v. Beech St. Corp., 208 F.3d 1308
(2000), for the proposition that non-state actors can be immune to suit under Eleventh
Amendment sovereign immunity. For one, Shands explicitly says “[t]his is not to say that an
agent of the government, be it federal or state, is totally immune to liability either in tort or in
contract, or for actions exceeding their authority to act on the government’s behalf.” Id. at 1311.
Plaintiff’s alleges that Defendant violated its contractual obligations, entered into with the
federal and state governments. If so, Defendant exceeded its authority to act on the
government’s behalf. Furthermore, Campo v. Kennedy, 517 F.3d 1070, 1080-81 (9th Cir. 2008),
states that “state sovereign immunity does not extend to private entities.” Defendant has not
persuaded the Court that, based on the pleadings, it is clearly immune from suit as an agent of the
state.
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But it is not clear at this stage how or when such a right to recoup overpayments may be
used, and whether Defendant recouped overpayments in a manner that was permissible under the
contracts, so resolution of the contract disputes is premature without discovery;
Therefore, having considered the arguments of the parties and for good cause shown,
IT IS on this 30th day of October, 2015,
ORDERED that Defendant’s Motion to Dismiss, Dkt. No. 42, is hereby DENIED.
/s Madeline Cox Arleo
MADELINE COX ARLEO
UNITED STATES DISTRICT JUDGE

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