IJKG OPCO LLC v. GENERAL TRADING COMPANY et al

Filing 161

OPINION. Signed by Judge Kevin McNulty on 09/05/2018. (sms)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

IJKG OPCO LLC, d/b/a CAREPOINT
HEALTH-BAYONNE MEDICAL
CENTER,

Civ. No. 17-613 1 (1KM) (JBC)
OPINION

Plaintiff,
V.

GENERAL TRADING COMPANY,
CONSOLIDATED HEALTH PLANS
INC., CIGNA CORPORATION, INC.,
ZELIS HEALTHCARE, INC. a/k/a
PREMIER HEALTH EXCHANGE, INC.,
FIRST CHOICE INSURANCE
SERVICES, L.L.C., and STANDARD
SECURITY LIFE INSURANCE
COMPANY OF NEW YORK,
Defendants.

KEVIN MCNULTY, U.S.D.J.:

The plaintiff, IJKG Opco LLC, doing business as CarePoint Health—
Bayonne Medical Center (“BMC”), brings suit to recover the costs of medical
care it provided to “Patient 1,” who experienced severe renal complications and
was hospitalized for about three weeks. The defendants named in the Amended
Complaint’ are General Trading Company (“General Trading”), which provided
the patient’s employee welfare benefits plan; Cigna Corporation Inc. (“Cigna”);2
Consolidated Health Plans, Inc. (“CHP”), which was a third-party administrator
for the plan; Zeus Healthcare, Inc. (“Zelis”), also known as Premier Health

The Amended Complaint (ECF no. 51), will be cited herein as “AC”.
2
Cigna states that its name is pled improperly in the Amended Complaint; the
appropriate entity is Cigna Health and Life Insurance Company. Cigna’s role as a plan
administrator or fiduciary is disputed. See Section Il.C.3.b, infra.
1

1

Exchange, Inc. or PHX, which was the claims contract negotiator; and
Standard Security Life Insurance Company of New York (“SS Life”), which
provided General Trading with a stop-loss policy that insured losses in excess
of a deductible arising from specific plan beneficiaries.
I have already granted a motion to dismiss the Amended Complaint filed
by defendant SS Life, and denied motions to dismiss or for judgment on the
pleadings filed by General Trading and Zelis. (See Opinion (“Op.”), ECF no. 122,
as amended by Order, ECF no. 133.) Now before the court are motions for
judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), brought by CHP
(ECF no. l04) and Cigna (ECF no. 105). For the reasons stated herein, CHP’s
motion is denied, and Cigna’s motion is granted.
I.

Summary of Facts

I will incorporate by reference the summary of the allegations of the
Amended Complaint from my prior Opinion. (ECF no. 122)1 state only a few of
the most pertinent allegations here.
In November 2013, Patient 1 received treatment for a kidney ailment at
BMC. The bill was $771,191.58. General Trading, whose self-funded employee
welfare benefits plan provides coverage to Patient 1, reimbursed BMC for only
$175,358.05 of that total.
CHP, General Trading’s claim processor, issued an explanation of
benefits on January 29, 2014, which provided reasons for disallowed charges.
(Id.

¶ 28.) The majority of disallowances were labeled as “discount

negotiated through Premier Healthcare Exchange” or “[e]xceeds reasonable and
customary charge.” (Id.) On November 28, 2014, BMC filed an appeal with
CHP. (Id.

¶ 30.) CHP denied the appeal in its entirety and directed BMC to

balance-bill for the outstanding amount. (Id.)

CHP styles its motion as one to dismiss, but because CHP has already
answered the Amended Complaint (ECF no. 65), its motion is more properly viewed as
one for judgment on the pleadings. Under the circumstances of this case, the
distinction is purely technical.

3

2

On January 13, 2015, BMC filed a second-level appeal with CHP. (Id.

¶

31.) By letter dated February 23, 2015, that appeal was denied. (Id. ¶ 32.)
BMC sues to recover the unreimbursed balance of its bill, in the amount
of $595,833.53. Count One of the Amended Complaint claims that defendants
General Trading and Cigna violated § 502(a)(1)(B) of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C.
underpaying the claim. (AC

§ 1 132(a)(1)(B).

et seq., by

¶J 47-6 1) Count Two is a claim under ERISA §

§ 1 132(a)(3), that defendants General Trading, Cigna, CHP,
and Zeus (PHX) breached their fiduciary duties to Patient 1. (AC 9 62—73)
Count Three is a claim under ERISA § 502(a) (3) that the same four defendants
denied BMC full and fair review of the claim, in violation of ERISA § 503.
502(a)(3), 29 U.S.C.

(AC

¶J 74—79)”

II.

Discussion
a. Standard of Review
Rule l2(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
defendants, as the moving parties, bear the burden of showing that no claim
has been stated. Animal Science Prods., Inc. v. China Minmetals Corp., 654 F.3d
462, 469 n.Y (3d Cir. 2011). For the purposes of a motion to dismiss, the facts
alleged in the complaint are accepted as true and all reasonable inferences are
drawn in favor of the plaintiff. N.J. Carpenters & the Tmstees Thereof v.
Tishman Const. Corp. of N.J., 760 F.3d 297, 302 (3d Cir. 2014).
Fed. R. Civ. P. 8(a) does not require that a complaint contain detailed
factual allegations. Nevertheless, “a plaintiffs obligation to provide the
‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell AtI. Corp. u. Twombly, 550 U.S. 544, 555 (2007). Thus, the
complaint’s factual allegations must be sufficient to raise a plaintiffs right to
Count Four, a claim of breach of contract asserted on a third-party beneficiary
theory against defendant SS Life, has been dismissed. (Op. 5—8)
3

relief above a speculative level, so that a claim is “plausible on its face.” Id. at
570; see also W. Run Student Housing Assocs., LLC v. Huntington Nat. Bank,
712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met
“when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcrofi v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
While “[tjhe plausibility standard is not akin to a ‘probability requirement’.
it asks for more than a sheer possibility.” Iqbal, 556 U.S. at 678.
A Rule 12(c) motion for judgment on the pleadings is often
indistinguishable from a motion to dismiss, except that it is made after the
filing of a responsive pleading. Fed. R. Civ. P. 12(h)(2) “provides that a defense
of failure to state a claim upon which relief can be granted may also be made
by a motion for judgment on the pleadings.” Thrbe v. Gov’t of Virgin Islands,
938 F.2d 426, 428 (3d Cir. 1991). Accordingly, when a Rule 12(c) motion
asserts that the complaint fails to state a claim, the familiar Rule 12(b)(6)
standard applies, making due allowance, of course, for any factual allegations
that are admitted in the responsive pleading. Thus, 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 general, review is confined to the allegations in the pleadings. I am
permitted, however, to consider “extraneous documents that are referred to in
the complaint or documents on which the claims in the complaint are based”
without converting this motion into one for summary judgment. Morano v.
BMW ofN. Am., LLC, 928 F. Supp.2d 826, 830 (D.N.J. 2013) (citing In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997); Pension
Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1996 (3d Cir.

1993)).
b. CHP’s Motion
CHP has filed a letter (ECF no. 104) joining General Trading’s earlier-filed
motion to dismiss the Amended Complaint. Specifically, CHP cites General
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Trading’s arguments that the action was not timely filed and that plaintiff BMC
lacks standing because of an invalid assignment from its patient. In my earlier
Opinion (ECF no. 122)1 denied General Trading’s motion. Specifically, I held
that the Amended Complaint adequately alleged a valid assignment (Op. 8—10)
and that it adequately alleged that the action was timely under the terms of the
plan. (Op. 10—12) For the reasons expressed in my earlier Opinion, then, CHP’s
motion for judgment on the pleadings (ECF no. 104) is denied, without
prejudice to renewal of these contentions in the context of summary judgment.
c. Cigna’s Motion
Cigna has filed a separate motion (ECF no. 105) for judgment on the
pleadings with respect to the Amended Complaint. Some of the grounds are
new or unique to Cigna, and 1 discuss them in Parts 1II.c. 1 and 2. Some of the
grounds overlap with those already decided, or might otherwise be regarded as
redundant. I nevertheless discuss them in Parts III.c.3—5, because Cigna is
entitled to assert such grounds to preserve its rights.
1. Counts One and Three

-

Adequacy of pleading

Count One of the Amended Complaint alleges that “General Trading and
Cigna” underpaid the claim. Count Three alleges that Cigna and others failed
to provide a full and fair review of the claim. The Amended Complaint fails to
allege factually, however, that Cigna was involved in the underpayment, or that
it played any role in the processing of the claim.
The Amended Complaint variously alleges that “CHP is the third-Party
plan administrator for the Plan, and, together with Cigna, jointly administers
the General Trading Plan” (AC ¶ 13); that “Cigna is the claims administrator for
the General Trading Plan” (AC

14); that “General Trading and Cigna are the

¶

insurers, obligors, fiduciaries, and/or relevant parties-in-interest for the Plan”
(AC ¶ 49; accord ¶ 64); and that “General Trading, Cigna, CHP and IZelis] PHX
exercise discretionary authority

.

.

.

[and] are all fiduciaries of the Plan”

(

68).5

In my earlier Opinion, deciding motions brought by other defendants (not
Cigna), I made a passing reference to Cigna as a plan administrator, along with CHP.

5

5

These allegations are conclusory and in some cases compound, so that
individual roles cannot be discerned.6
Here are the very few allegations in the Pacts section of the Amended
Complaint that mention Cigna:
Upon information and belief, the Plan provides
24.
coverage for “in-network benefits” for “preferred providers” and for
“out-of-network benefits” for “nonpreferred providers” with Cigna.
BMC is an out-of-network provider with respect to Cigna and a
“nonpreferred provider” within the meaning of the Plan.
.

.

.

31. [In a followup telephone call from BMC to a CHP
The CHP representative
representative regarding its appeal]
advised BMC that while General Trading was a self-funded Plan
that used the Cigna network, CHP was the Plan payor and
administrator, and [Zelisi PHX was CHP’s third-party re-pricing
company. The CHP representative stated that Patient l’s claim was
paid by CHP based on the out-of-network coverage provided by the
Cigna network and that no further payment would be made.
.

40. On September 9, 2015, Mr. [Douglas Boyle (identified in
AC ¶ 39 as “owner” of General Trading] sent Cigna a letter, stating
that BMC was appealing a large claim and “as the plan
administrator for the insured, General Trading Company, I am
trying to find someone to handle this appeal as both Consolidated
Health Plans and the broker, First Choice, will not return my calls
or get involved in this process.”
42. [In an email exchange with BMCI Mr. Boyle stated that
the Plan was self-funded with an individual stop-loss limit of
$50,000 and therefore, had no exposure above that amount. He
again reiterated that BMC re-submit [sic] the bill to the other
Defendants, namely, SS Life and Cigna.
(AC

fl 24, 31, 40, 42)

In a subsequent Order I clarified that I had been summarizing the allegations of the
Amended Complaint (see AC ¶ 13), not making a finding to that effect. (See ECF no.
133 (clarifying reference).)
6
They axe also in some tension with other allegations of the complaint, which
state plainly that “CHP and [Zelis] PHX serve as the Plan Administrator and contract
negotiator of the Plan.” (AC ¶ 65; see also ¶ 51)
6

These paragraphs allege that Mr. Boyle emailed Cigna and others seeking
relief from BMC’s claims, and urging BMC to bill someone other than General
Trading. But Cigna does not attain the status of plan or claims administrator,
take on a fiduciary role, or even become factually involved, merely because
General Trading sent it an email. The contents of those communications
suggest that Boyle himself was the internal plan administrator, and that CHP,
not Cigna, was the third-party administrator.
The allegations, even if generously read, suggest at best that the Plan
“used” the Cigna network in some unspecified way. Cigna is not the insurer in
the usual sense; the Plan is self-funded. (See ECF no. 69-2 at 12) CHP, as
claims administrator, and Zeus (PHX), as “third-party re-pricing company” or
“claims contract negotiator,” are alleged to have adjusted and processed this
claim. They did so, it is alleged, “based on the out-of-network coverage provided
by the Cigna network.” The meaning of that phrase (attributed to a “CHP
representative”) is opaque; while I can perhaps imagine an explanation, one is
not alleged.
Nor does the Amended Complaint allege factually that Cigna had any
involvement in processing this claim. To the contrary, it alleges very clearly
that this claim was processed by CHP and Zelis (PHX). (AC ¶9 28—33, 65)
Count One will therefore be dismissed, without prejudice, for failure to
plead with the factual specificity required by Twombly/Iqbal, supra, that Cigna
bears any responsibility for the underpayment of which plaintiff complains. For
the same reasons, Count Three must be dismissed as against Cigna; because
Cigna is not alleged to have had any involvement in the processing of this
claim, it cannot be liable for failing to provide adequate “review.”
2. Counts Two and Three Adequacy of pleading
-

Cigna, like Zelis in its earlier motion, asserts that Count Two (and, more
ambiguously, Count Three) of the Amended Complaint, alleging a fiduciary
breach, must be dismissed because they fail to allege factually that Cigna acted
in a fiduciary capacity.

7

the
“In every case charging breach of fiduciary duty lunder ERISAJ
threshold question is not whether the actions of some person em1oyed to
.

.

.

provide services under the plan adversely affected a plan beneficiary’s interest,
but whether that person was acting as a fiduciary (that is, was performing a
fiduciary function) when taking the action subject to the complaint.” Pegram v.
Herdhch, 530 U.S. 211, 226 (2000). Under ERISA, “an entity isafiducian’ with
respect to a plan if it (i) ‘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’ or (ii) ‘renders
or has any authority or
investment advice for a fee or other compensation
.

.

.

responsibility to do so,’ or (iii) ‘has discretionary authority or discretionary
responsibility in the administration of such plan.”’ National Sec. Sys., Inc. v.
lola, 700 F.3d 65, 98 (3d Cir. 2012) (quoting 29 U.S.C.

§ 1002(2lflA)). An entity

can be a fiduciary with respect to certain plan activities, but not with respect to
others; thus, the threshold question is whether some person or entity was
acting as a fiduciary (that is, was performing a fiduciary function) when taking
the particular action at issue. Id. (citations omitted).
BMC concedes that the Plan formally confers discretionary authority on
General Trading alone. (See Plan at 69, 85.) BMC argues, however, that the
Amended Complaint adequately alleges that Cigna functioned as a fiduciary.7 I
therefore look to Cigna’s role as alleged in the Amended Complaint and the
indisputably authentic documents relied upon by the Complaint. In doing so, I

Under ERISA, a person is a fiduciary if
(I) he exercises any discretionary authority or discretionary control
respecting management of such plan or exercises any authority or
control respecting management or disposition of assets
or
(iii) he has any discretionary authority or discretionary responsibility in
the administration of such plan.
29 U.S.C. § 1002(21)(A). See Edmonson ii. Lincoln Nat. LVe Ins. Co., 725 F.3d 406, 413
(3d Cir. 2013) (defining fiduciary status in functional, not formal, terms).
8

am guided by the following principles. The determination of whether an entity
or person performs as a fiduciary is highly fact-based and dependent on the
particular tasks they perform. NeurosurgicalAssocs. Of N.J., P.C. v. QualCare
Inc., No. 12-3236, 2015 WL 4569792, at *2 (D.N.J. July 28, 2015). “Thus
rulings on this issue have tended to occur after discovery rather than at the
pre-discovery motion to dismiss stage.” Id. (citing In re Schering-Plough Corp.
*7 (D.N.J. Aug. 15, 2007)
ERISA Litig., No. 03-1204, 2007 WL 2374989, at
(“Fiduciary status is a fact sensitive inquiry and courts generally do not
dismiss claims at this early stage”.) Still, for the case to go forward, the
complaint must “sufficiently plead[] defendants’ ERISA fiduciaiw status.” Id.
That means that the complaint’s allegations of fiduciary status must meet the
Twombly/Iqbal threshold of factuality and plausibility.
In the previous section, I reviewed the allegations of the Amended
Complaint that mention Cigna. It is true that the complaint alleges generally,
in conclusory terms, that Cigna was a fiduciary. That conclusion, however, is
not backed by any factual allegations. As stated above, emails from Mr. Boyle
attempting to get the plaintiff off his back do not suffice to shift fiduciary status
to Cigna. The Amended Complaint alleges that, although the Plan was selffunded and the relevant claim was processed entirely by CHP and Zeles, it was
processed “based on” the out-of-network coverage provided by the Cigna
network. That allegation is simply too vague to establish that Cigna acted as a
fiduciary. See, e.g., Cohen a Horizon Blue Cross Blue Shield of N.J., No. 1303057, 2013 WL 5780815, at *8 (D.N.J. Oct. 25, 2013) (Allegation that a thirdparty administrator was a fiduciary, without supporting facts, was not
sufficient); Surgical Ctr. V

HOrIZOn

Blue Cross Blue Shield of N.J., No. 12-2478,

2012 WL 6089814, at *23 (D.N.J. Dec. 6, 2012).
For these reasons, Count Two is dismissed as against Cigna, without
prejudice.

9

*

*

*

The remaining sections discuss grounds that are redundant in light of
the above rulings, or that were already decided in my earlier opinion. I will
therefore be brief.
3. Duplicative claims
Cigna, like General Trading, argues that I must also dismiss Count Two
(fiduciary breach) and (somewhat ambiguously) Count Three (denial of full and
fair review), because they are duplicative of Count One (underpayment, ERISA
might be
§ 502(a)(1)(B)). As in my earlier Opinion, I agree that duplicative relief
inappropriate. See Varity Corp. v. Howe, 516 U.S. 489, 512 (1996). Varity does
not, however, prohibit a party from pleading alternative claims. (See Op. 13
r the
(citing cases).) Cigna objects that the real thrust of this litigation is whethe
claim was underpaid, that the mere presence of a fiduciary claim will alter the
course of the litigation, and that I should exercise my discretion to dismiss it. A
party is permitted, however, to plead in the alternative, see Fed. R. Civ. P. 8(d),
and the answer to the question of whether the claims are duplicative would
depend on further factual development. Therefore, I would deny Cigna’s motion
to dismiss Count Two or Count Three on these grounds.
4. Standing
Cigna, like General Trading before it, argues that BMC does not possess
a valid assignment of rights from Patient 1, and therefore lacks standing to
pursue an ERISA claim. For the reasons expressed in my earlier Opinion
grounds would be denied
(Op. 8—10), Cigna’s motion to dismiss on these
without prejudice.
5. Timeliness
Cigna also echoes General Trading’s assertion that this action was not
filed within the time frame dictated by the Plan. The Amended Complaint
alleges, inter cilia, that General Trading cannot invoke the Plan deadline
because it failed to fulfill the precondition of informing it of the contractual
my
limitations provision and the deadline for judicial review. (AC § 72, 76) In

10

earlier Opinion, I denied the motion to dismiss on these grounds, because the
application of the time bar depended on facts not apparent from the face of the
complaint. The same reasoning applies here, and I would therefore deny
Cigna’s motion to dismiss on timeliness grounds.
flY. Conclusion

For the foregoing reasons, CHP’s motion for judgment on the pleadings
(ECF no. 104) is DENIED, and Cigna’s motion for judgment on the pleadings
(ECF no. 105) is GRANTED.
An appropriate order follows.

Dated: September 5, 2018

Kevin McNulty
United States District Judge

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