HUMC OPCO LLC v. UNITED BENEFIT FUND, et al

Filing 78

MEMORANDUM OPINION & ORDER denying 20 Aetna's Motion to Dismiss ; denying 26 Omni Motion to Dismiss. Defendants shall answer the Second Amended Complaint on or before November 30, 2016. Signed by Judge Kevin McNulty on 11/7/16. (cm )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

Civ. No. 16-168 (KM)

HUMC OPCO LLC, d/b/a
CarePoint Health-Hoboken
University Medical Center,

MEMORANDUM OPINION and
ORDER

Plaintiff,
V.

UNITED BENEFIT FUND, AETNA
HEALTH INC., and OMNI
ADMINISTRATORS INC.,
Defendants.

MCNULTY, U.S.D.J.:
The plaintiff, HUMC Opco LLC (“HUMC”), brings this ERISA action
against Aetna Health Inc. (“Aetna”), United Benefit Fund (“UBF”), and Omni
Administrators Inc. (“Omni”). The action is one to recover health care benefits
allegedly assigned to HUMC by “Patient 1.” Aetna and Omni (but not UBF)
move to dismiss the complaint for failure to state a claim, pursuant to Fed. R.
Civ. P. 12(b)(6). For the reasons stated herein, the motions to dismiss are
denied.
I.

THE COMPLAINT
The allegations of the Second Amended Complaint (“2AC”, ECF no. 74),

taken as true for the purposes of this motion to dismiss only, may be briefly
summarized as follows.

The motions to dismiss were originally directed to the First Amended
Complaint. Magistrate Judge Hammer, by order and opinion dated October 25, 2016
(ECF nos. 72, 73), permitted the filing of the Second Amended Complaint, which
I

1

HUMC operates an acute care hospital in Hoboken, New Jersey. (2AC

¶

9) UBF is an employee welfare benefits plan that provides medical and other
benefits (it is called the “Plan” or the “Fund” in the parties’ papers). (2AC

¶ 10)

Omni is the Plan Administrator. (2AC

¶ 11) Aetna is a third party claims
administrator; it administers the Plan jointly with Omni. (2AC ¶ 12)
From May 29, 2014, through May 22, 2015, HUMC provided care to a
person designated in the complaint as “Patient 1.” (2AC ¶j 16, 17) The charges
totaled $7,702,491.32. (2AC

¶

3)

UBF, as Patient l’s insurer, is allegedly liable for at least $789,446.88 at
the so-called “Medicare Rate.” (2AC
2

¶J 2 1—23) UBF, through Omni and Aetna,

has declined to reimburse HUMC for any more than $12,907.18. (2AC ¶j 24—
26) Defendants’ conduct is claimed to violate ERISA, 29 U.S.C.

§ 1001

et seq.

Patient 1 was initially comatose. On his behalf, his spouse executed an
assignment of benefits to HUMC. After Patient 1 died on May 30, 2015, his
spouse as beneficiary of his estate executed a second assignment of benefits to
HUMC. (2AC

¶J

¶J 27—43)3 Internal appeals remedies have been exhausted. (2AC

44—54)

count i of the Second Amended complaint (2AC ¶J 55—68), directed
against UBF only, is not addressed by the pending motions to dismiss. In

count i, UBF is alleged to be the insurer, obligor, fiduciary, and/or relevant
party-in-interest for the Plan, which is an employee welfare benefits plan within
added allegations about the assignment of benefits. In considering the motions to
amend, Judge Hammer applied a Rule 12(b)(6) standard to the new allegations. The
old allegations, however, except for the correction of a statutory citation in Count II,
remained similar. Accordingly, after ascertaining that the parties had no objection (see
Text Order, ECF no. 75), I opted to decide the pending motions to dismiss in relation
to the currently operative Second Amended Complaint. Because I deny the motions,
defendants shall answer the Second Amended Complaint on or before November 30,
2016, the extended date requested in a letter filed November 2, 2016 (ECF no. 76).
2
The total may be higher if the Plan is a not a “grandfathered” plan under the
Affordable Care Act. See 42 U.S.C. § 18011; 42 C.F.R. § 147. 140. HUMC says that
without discovery it cannot ascertain whether that is the case.

Issues surrounding the assignment, which are not discussed in this opinion,
are covered in in Judge Hammer’s opinion on the motion to amend. (ECF no. 72)
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2

the meaning of ERISA. UBF’s failure to pay benefits due under the plan is
alleged to render it liable under ERISA

§ 502(a)(1)(B), 29 U.S.C. § 1 132(a)(1)(B).

Count 11 of the Second Amended Complaint (2AC j 69—80), directed
against all defendants, alleges breach of fiduciary duty. “Omni and/or Aetna”
are alleged to serve as the Administrators of the Plan. (2AC

¶ 72) UBF, Omni,

and Aetna are alleged to exercise discretionary authority or control over the
management and administration of the Plan and its assets. They also allegedly
exercised discretion in determining the nature of benefits that would be
supplied. They therefore are fiduciaries who owed a duty of care and loyalty to
beneficiaries. (2AC ¶j 75—77) They allegedly violated their fiduciary duties “by,
among other things: basing their reimbursement decisions on maximizing
profits to Defendants rather than on the terms of the Plan and applicable
statutes and regulations; failing to make decisions in the interests of
beneficiaries; and failing to act in accordance with the Plan documents” (2AC

¶

78), as well as by failing to inform HUMC (as assignee of benefits) of material
information, by misrepresenting requirements for reimbursement under the
Plan, and imposing unduly burdensome preconditions to payment. (2AC
Count II specifically seeks damages, citing ERISA
ERISA

¶ 79).

§ 404, 29 U.S.C. § 1104, and

§ 502(a)(3), 29 U.S.C. § 1 132(a)(3) (2AC ¶ 80), although the general

prayer for relief is broader.
Count III of the Second Amended Complaint (2AC ¶j 8 1—86), directed
against all defendants, alleges denial of full and fair review. Defendants, it
alleges, are obligated to provide a “full and fair review” of denied claims
pursuant to ERISA

§ 503, 29 U.S.C. § 1133, and applicable regulations. What

they did, however, was provide an EOB paying $12,000 on a $700,000 claim,
with inadequate explanation. This defective review also included refusing to
provide the specific reason or reasons for the substantial underpayment on
HUMC’s claims on behalf of Patient 1; refusing to provide the specific plan
provisions relied upon to support denial; refusing to provide the specific rule,
guideline, or protocol relied upon; refusing to describe any additional material
or information necessary to perfect a claim; refusing to notify the relevant
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parties that they are entitled to free copies of relevant records; refusing to
provide a statement describing any appeals procedure; and refusing to provide
information necessary to enable HUMC to ascertain whether the Plan is
grandfathered under the ACA. Count III seeks relief, including declaratory and
injunctive relief, under ERISA
II.

§ 502(a)(3), 29 U.S.C. § 1 132(a)(3).

APPLICABLE STANDARD
FED.

R. Civ. P. 12(b)(6) provides for the dismissal of a complaint, in whole

or in part, if it fails to state a claim upon which relief can be granted. The
moving party bears the burden of showing that no claim has been stated.
Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion
to dismiss, a court must take all allegations in the complaint as true and view
them in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S.
490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140
F.3d 478, 483 (3d Cir. 1998); see also Phillips v. County of Allegheny, 515 F.3d
224, 231 (3d Cir. 2008) (traditional “reasonable inferences” principle not
undermined by Supreme Court Twombly case, infra).
FED.

R. Civ. P. 8(a) does not require that a complaint contain detailed

factual allegations. Nevertheless, “a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the factual
allegations must be sufficient to raise a plaintiff’s right to relief above a
speculative level, such that it is “plausible on its face.” See id. at 570; see also
Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). A claim has
“facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 556). While “[t]he plausibility standard is not akin to a
‘probability requirement’

...

it asks for more than a sheer possibility.” Iqbal, 556

U.S. at 678 (2009).

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III.

DISCUSSION
Aetna’s Motion to Dismiss

A.

Aetna seeks to dismiss Count II because it is not a Plan fiduciary. See
29 U.S.C.

§ 1002(21)(A). Aetna seeks to dismiss Count III because it is not a

Plan fiduciary or administrator for review of denied claims. See id.; 29 U.S.C.

§

1002(16)(A).
There does not seem to be any quarrel about the general legal principle
that fiduciary status will attach to an entity that “exercises any discretionary
authority or discretionary control respecting management of such plan or
exercises any authority or control respecting management or disposition of its
assets.” See 29 U.S.C.

§ 10012(21)(A); National Sec. Sys. v. lola, 700 F.3d 65,

97 (3d Cir. 2012); Cohen v. Indep. Blue Cross, 820 F. Supp. 2d 594 (D.N.J.
2011). The Second Amended Complaint clearly does allege that Aetna exercised
such discretionary authority and control, both as to the Plan generally, and as
to the allegedly inadequate review process. See summary of allegations, supra.
In arguing that it does not exercise discretionary authority with respect
to the Plan, Aetna relies heavily on the Customer Administrative Services
Agreement (“CASA”) between Aetna and UBF, as well as the Administrative
Services Agreement (“ASA”) between Aetna and Omni. Of course Aetna
acknowledges the general rule that the Rule 12(b)(6) analysis is confined to the
allegations of the complaint. Nevertheless, “an exception to the general rule is
that a ‘document integral to or explicitly relied upon in the complaint’ may be
considered ‘without converting the motion to dismiss into one for summary
judgment.”’ Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (quoting In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)). Accord
In re Asbestos Products Liability Litigation (No. VI), 822 F.3d 125, 134 & n.7 (3d
Cir. 2016).
I do not think that it would be prudent to apply that exception here. The
cited contracts are not attached to HUMA’s complaint, and are not cited in the

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complaint. HUMA is not itself a party to either agreement. Indeed, HUMA
claims that it is now seeing these documents for the first time. The
interpretation and significance of these contracts as they bear on, e.g., the
discretion exercised by the contractual parties, may present issues not easily
dealt with on a motion to dismiss. See NeurosurgicalAssoc. of NJ, P.C. v.
QualCare Inc., 2015 WL 4569792, at *2 (D.N.J. July 28, 2015) (discretionary
authority issue commonly decided with benefit of discovery); In re Schering—
Plough Corp. ERISA Litig., 2007 WL 2374989, at *7 (D.N.J. Aug. 15, 2007)
(“Fiduciary status is a fact sensitive inquiry and courts generally do not
dismiss claims at this early stage where the complaint sufficiently pleads
defendants’ ERI SA fiduciary status.”).
The Second Amended Complaint adequately alleges that Aetna exercises
discretionary authority. For now, that is enough. Aetna’s motion to dismiss the
Second Amended Complaint is denied.
B.

Omni’s Motion to Dismiss

Omni originally sought to dismiss Count II of the First Amended
Complaint because HUMC asserts only that it was underpaid, whereas the

§ 502(a)(2), 29 U.S.C. § 1 132(a)(2), authorizes only planwide relief. HUMC responded that it had meant to cite § 502(a)(3), not (a)(2)
section cited, ERISA

(HUMC Brf. at p. 10 n.5, ECF no. 30 at 14 n.5), and it corrected that
miscitation in the Second Amended Complaint. In response to HUMC’s
concession of error, Omni argued that amending Count II to cite

§ 502(a)(3)

would be futile—i.e., that such a claim would not survive a motion to dismiss
under Rule 12(b)(6). The issue as to Count II has therefore been briefed on the
basis of ERISA

§ 502(a)(3). Having ascertained that there is no objection (see

n.1, supra), I too proceed on that basis.
Omni seeks to dismiss both Counts II and III as being duplicative of
Count I (which is asserted against UBF alone). There is case law, having its
origin in Varity, supra, which disallows redundant claims under

§ 502(a)(1)(B)

and 502(a)(3). But I cannot simply assume the viability of Count I, which has

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not been challenged, and force an election at this preliminary pleading stage.
That concern is particularly acute where, as here, the issue is not merely
election of remedies; Omni seeks to exit from the case and force plaintiff to
proceed solely against UBF.
A plaintiff may plead in the alternative, or plead causes of action against
parties who may be jointly or solely liable. See generally Fed. R. Civ. P. 8(d).
This claim of redundancy may be dealt with more soundly on a developed
factual record, whether on summary judgment or in connection with focusing
the issues preliminary to trial. See Shah v. Horizon Blue Cross Blue Shield, Civ.
No. 15-8590, 2016 WL 4499551 at *10 (D.N.J. Aug. 25, 2016) (finding
dismissal premature, and holding that Varity does not create a rule precluding
the assertion of alternative claims or requiring dismissal at the Rule 12(b)(6)
stage of duplicative claims under FDRISA

§ 502(a)(1)(B) and 502(a)(3)). The

motions to dismiss are therefore denied on this ground, but without prejudice
to renewal of these contentions in the context of summary judgment.
Omni next seeks to dismiss Count III because ERISA

§ 503, 29 U.S.C. §

1133, does not grant an independent cause of action. I do not read Count III as
attempting to assert a right of action under ERISA

§ 503 as such. It does allege

§ 503 is the source of the duty to provide full and fair review in the claims
procedure, and alleges that the procedure here fell short of that § 503
that

standard. The actual claim, however, is asserted under the catchall civil
enforcement provision, ERISA

§ 502(a)(3), 29 U.S.C. § 1 132(a)(3). I cannot say

at this stage that such a theory is precluded as a matter of law. See Varity
Corp. v. Howe, 516 U.S. 489, 507-15, 116 5. Ct. 1065 (1986); see also CIGNA
Corp. v.Amara, 131 5. Ct. 1866 (2011).
Omni makes the related contention that ERISA

§ 502(a)(3), an equitable

provision, cannot encompass all of the relief sought by HUMC. I will not, in
advance of discovery or any finding of liability, prematurely limit the availability
of the relief sought in the broad prayer for relief. (See 2AC at pp. 27—29)
Omni’s motion to dismiss Counts II and III is therefore denied.

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ORDER
Accordingly, IT IS this 7th day of November, 2016
ORDERED that the motions of Aetna (ECF no. 20) and Omni (ECF no.
26) to dismiss the Second Amended Complaint for failure to state a claim,
pursuant to Fed. R. Civ. P. 12(b)(6), are DENIED; and it is further
ORDERED that defendants shall answer the Second Amended Complaint
on or before November 30, 2016.

)
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TON. KEVIN MCNULTY, U.S.

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