UNIVERSITY SPINE CENTER v. AETNA INC.

Filing 11

OPINION. Signed by Judge Claire C. Cecchi on 05/30/2018. (sms)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

UNIVERSITY
SPINE
assignment ofE.C.,

CENTER,

on

Civil Action No.: 17-8 161 (CCC)-(CLW)

Plaintiff,
V.

OPINION

AETNA, INC.,
Defendant.

CECCHI, District Judge.
I.

INTRODUCTION

This matter comes before the Court on the motion of Aetna, Inc. (“Defendant”) to dismiss the
complaint of University Spine Center (“Plaintiff’). (ECF No. 3-1 (“Mot.”)). The Court has considered
the submissions made in support of and in opposition to the instant motion. (ECF Nos. 5 (“Opp’n”), 6
(“Reply”), 9). The Court decides this matter without oral argument pursuant to Rule 78(b) of the Federal
Rules of Civil Procedure. For the reasons set forth below, Defendant’s motion is GRANTED.
II.

BACKGROUND

Plaintiff is a healthcare provider based in Passaic County, New Jersey, while Defendant is
“primarily engaged in the business of providing and/or administering health care plans.

.

or policies.”

(ECF No. 1-1 at 7). Plaintiff initially brought suit against Defendant on or about August 30, 2017 in the
Superior Court of New Jersey, Law Division, Passaic County. (Id.). Plaintiff avers that this action “arises
from Defendant’s failure to properly reimburse Plaintiff for the medically necessary and reasonable
services provided to Defendant’s participant or insured,” E.C. (the “Patient”), in the form of spinal surgery.
(Id. at 8). Plaintiff maintains that the Patient executed an “assignment of benefits,” upon which Plaintiff
filed claims with Defendant “demanding reimbursement in the amount of $588,765.00.” (Id.). Defendant,
1

however, reimbursed Plaintiff for only $9,882.39 of the claimed amount. (Id. at 9). Plaintiff states that it
thereafter “engaged in the applicable administrative appeals process maintained by Defendant,” but that
“Defendant failed to remit additional payment and failed to provide the documentation requested in
Plaintiffs appeal.” (Id.). Plaintiff accordingly contends that “Defendant’s reimbursement amounts to an
underpayment of $578,882.61” and brings an action for breach of contract in Count I, failure to make all
payments pursuant to a member’s plan in violation of the Employee Retirement Income Security Act
(“ERISA”) Section 502(a)(l)(B) in Count II, and breach of fiduciary duty in violation of ERISA Section
502(a)(3) in Count III. (See Id. at 9-14).
Defendant properly removed the action to this Court on October 12, 2017.

(ECF No. 1).

Defendant thereafter filed the instant motion to dismiss on October 19, 2017, contending that: (1) Plaintiff
lacks standing to bring its claims because Plaintiff does not have a valid assignment of benefits; and (2)
that Counts I and III of Plaintiffs complaint fail as a matter of law. (See generally Mot.). Plaintiff filed
an Opposition on November 6, 2017, in which Plaintiff agreed to voluntarily dismiss Count I of the
complaint. (Opp’n at 3 (“As Defendant has conceded that the Plan is indeed governed by ERISA, Plaintiff
agrees to voluntarily dismiss Count I.”)). Defendant then filed a Reply on November 9, 2017.
III.

LEGAL STANDARD

A.

Rule 12(b)(1)

A motion to dismiss for lack of standing is properly brought pursuant to Federal Rule of Civil
Procedure 12(b)(l), because standing is a matter ofjurisdiction. See Ballentine v. Un ited States, 486 F.3d
806, 810 (3d. Cir. 2007) (citing St. Thomas-St. John Hotel Tourism Ass’n v. Gov’t of the US. Virgin
Islands, 218 F.3d 232, 240 (3d. Cir. 2000)).
Article III of the Constitution limits the jurisdiction of federal courts to ‘Cases’ and
‘Controversies.”

Lance v. Coffman, 549 U.S. 437, 439 (2007). One key aspect of this case and

controversy requirement is standing. Id. at 439. “The standing inquiry focuses on whether the party
2

invoking jurisdiction had the requisite stake in the outcome when the suit was filed.” Constitution Party
ofPa. v. Aichele, 757 f.3d 347, 360 (3d Cir 2014) (citing Davis v. FEC, 554 U.S. 724, 734 (2008)).
To establish standing, a plaintiff must establish: (1) an “injury in fact,” i.e., an actual or imminently
threatened injury that is “concrete and particularized” to the plaintiff; (2) causation, i.e., traceability of the
injury to the actions of the defendant; and (3) redressability of the injury by a favorable decision by the
Court. Nat’l Collegiate AthieticAss ‘n v. Gov. ofN.i, 730 f.3d 208, 218 (3d. Cir. 2013) (citing Summers
v. Earth Island Inst., 555 U.S. 488, 493 (2009)). “The party invoking federal jurisdiction bears the burden

of establishing these elements.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). Although a
plaintiffbears the burden of establishing the elements of standing, at the motion to dismiss stage, the Court
“must accept as true all material allegations set forth in the complaint, and must construe those facts in
favor of the nonmoving party.” Baltentine, 486 f.3d at 810.
B.

Rule 12(b)(6)

For a complaint to survive dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6), it “must
contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”
Ashcroftv. Iqbal, 556 U.S. 662 (2009) (quotingBellAtL Corp. v Twombly, 550 U.S. 544, 570 (2007)). In

evaluating the sufficiency of a complaint, the Court must accept all well-pleaded factual allegations in the
complaint as true and draw all reasonable inferences in favor of the non-moving party. See Phillips v.
City ofAllegheny, 515 F.3d 224, 234 (3d Cir. 2008). “Factual allegations must be enough to raise a right
to relief above the speculative level.” Twombly, 550 U.S. at 555. “A pleading that offers labels and
conclusions will not do. Nor does a complaint suffice if it tenders naked assertion[s] devoid of further
factual enhancement.” Iqbal, 556 U.S. at 678 (internal citations omitted). However, “the tenet that a court
must accept as true all allegations contained in a complaint is inapplicable to legal conclusions.
Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. Thus, when reviewing complaints for failure to state a claim, district courts should engage
3

in a two-part analysis: “First, the factual and legal elements of a claim should be separated.

.

.

.

Second,

a District Court must then determine whether the facts alleged in the complaint are sufficient to show that
the plaintiff has a ‘plausible claim for relief.” Fowler v. UPMC Shadpside, 578 F.3d 203, 210-11 (3d
Cir. 2009) (citations omitted).
Where, as here, a plaintiffs claims are based on extraneous documents that are referenced in or
integral to a complaint, a court may consider these documents without converting a motion to dismiss into
a motion for summary judgment. See In re Burlington C’oat factory Sec. Litig. 114 f.3d 1410, 1426 (3d
Cir. 1997). The complaint in this matter is based on the assignment terms of the Patient’s plan and,
accordingly, the Court relies on these documents in deciding the present motion.
IV.

DISCUSSION

Defendant contends that Plaintiff lacks a valid assignment of benefits upon which to bring its
claims in Counts II and III because “the [P]atient’s health benefit plan expressly precludes an assignment
of benefits.” (Mot. at 5). Plaintiff, in turn, maintains that: (1) “the plain language of the ‘anti-assignment
clause’ does not actually prohibit the assignment of benefits[;]” (2) “the Plan’s ‘anti-assignment clause’
is inapplicable to Plaintiff as Patient’s healthcare provider[;]” and (3) “Defendant waived enforceability
of the ‘anti-assignment clause’ through its direct course of dealing with Plaintiff.” (Opp’n at 3-8). The
Court will address each of these contentions in turn.
A. The Anti-Assignment Clause Prohibits the Assignment of Benefits and Is Enforceable

“Under

§ 502(a) of ERISA

‘a participant or beneficiary’ may bring a civil action to, inter a/ia,

‘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.” Univ. Spine Ctr. v. B/tie Shield of
California, No. 17-8673, 2017 WL 5513688, at *2 (D.N.J. Nov. 16, 2017) (quoting 29 U.S.C.

§ 1132(a)).

“By its terms, ERISA’s civil enforcement provision thus limits standing to plan participants or
beneficiaries.” AtI. Plastic & Hand Surgery, PA v. Anthem Blue Cross Life & Health Ins. Co., No. 174

4600, 2018 WL 1420496, at *4 (D.N.J. Mar. 22, 2018) (citations omitted). However, “[t]he Third Circuit
has recently made clear that, where there is a valid assignment of benefits by the plan participant, a
healthcare provider may obtain a derivative right to sue under the patient’s plan.”

Ctr.for Orthopedics &

Sports Med. v. Anthem Blue cross Ltfe &Health Ins. Co., No. 16-8876, 201$ WL 1440325, at *3 (D.N.J.
Mar. 22, 2018) (citing N.J Brain & Spine Ct. v. Aetna, Inc., 801 F.3d 369, 372 (3d Cir. 2015); American
chiropractic Ass ‘a v. American Specialty Health Inc., 625 F. App’x. 169, 175 (3d Cir. 2015)). The Third
Circuit has also recently clarified “that anti-assignment clauses in ERISA-governed health insurance plans
as a general matter are enforceable,” in keeping with the majority of the circuit courts that have addressed
the issue. Am. Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield, No. 17-1663, 2018 WL
2224394, at *6 (3d Cir. May 16, 2018); see also Kaval Orthopaedic Ctr., P.C. v. Empire Blue Cross Blue
Shield, No. 16-9059, 2017 WL 4179813, at *3 (D.N.J. Sept. 21, 2017) (“This Court and others in the Third
Circuit have routinely held that an unambiguous anti-assignment provision in a health benefits plan bars
an alleged assignee’s standing to bring claims under ERISA.”).
Here, the Patient’s “health plan states the following: ‘All coverage may be assigned only with the
written consent ofAetna.” (Mot. at 6) (citation omitted). Defendant therefore maintains that “becduse
no such consent was obtained” with respect to the Patient’s assignment of benefits to Plaintiff, the
“attempted assignment is a legal nullity.” (Id. at 2). Plaintiff does not contest that the assignment was
made without Defendant’s consent. Rather, Plaintiff argues that the anti-assignment clause “does not

Plaintiff does not include a copy of Patient’s insurance policy as an attachment to its complaint. On a
motion to dismiss, however, the Court may consider the allegations in the complaint, any exhibits attached
to the complaint, matters of public record, and undisputedly authentic documents upon which the
plaintiffs complaint is based. See Pension Benefit Gitar. Corp. v. White Consol. Indits., Inc., 998 F.2d
1192, 1196 (3d Cir. 1993). A document falls into the latter category even where the complaint does not
cite or “explicitly rely[]” on it; “[r]ather, the essential requirement is that the plaintiffs claim be ‘based
on that document.” Brttsco v. Harleysville Ins. Co., No. 14-914, 2014 WL 2916716, at *5 (D.N.J. June
26, 2014) (quoting In re Burlington Coat factory Sec. Litig., 114 F.3 d 1410, 1426 (3d Cir. 1997)). Here,
Plaintiffs complaint explicitly relies on Patient’s insurance policy. (ECF No. 1-1). As such, the Court
will properly consider the Patient’s insurance policy with Defendant’s motion to dismiss.
5

prohibit either the assignment of rights or benefits due under the terms of the plan... [but only] prohibits
the assignment of ‘coverage’ without the written consent of Aetna.” (Opp’n at 4). Essentially, Plaintiff
contends that “coverage” is an independent term which “simply means at what point the terms of the Plan
itself will be deemed to be effective as to both Aetna and the participant with regard to when a member
can receive medical services and expect the Plan to cover some or all of the expense.” (Id.). Defendants,
on the other hand, assert that the terms “coverage” and “benefits” are synonymous, “and [that] the two
terms are used interchangeably throughout the plan.” (Reply at 2).
The Court disagrees with Plaintiffs construction of the anti-assignment provision. Plaintiff cites
to no precedent or specific contractual provision in making its distinction between the terms “coverage”
and “benefits” and/or “rights.” Plaintiff instead relies on “contextual clues as to the term’s meaning”
including that: (1) the term “coverage” is not defined in the plan’s glossary; (2) the introductory pages of
the plan focus on “to whom and under what circumstances ‘coverage’ will be deemed effective[;]” and
(3) “there is no apparent reason that the right to receive payment for services which had already been
rendered

.

.

.

could not be assigned from one party to another.” (Opp’n at 4-5). The Court finds these

contentions amount to little more than speculation on Plaintiffs part. ‘Indeed, as Defendant contends,
“[t]he entire purpose of the health plan is to define what type of medical services are ‘covered’ and,
correspondingly, what portion of the costs associated with those services will be paid—i.e., ‘covered’—
by Aetna.” (Reply at 2). It is therefore entirely unsurprising that the term “coverage” is not defined in
the plan’s glossary as “the plan itself is a 144-page definition of ‘coverage.” (Id. at 4). The Court
accordingly agrees with Defendant that Plaintiffs “strained distinction is one without a difference,” and
that the anti-assignment clause is clear, enforceable, and prevented the Patient from assigning benefits
absent Defendant’s consent. (Id. at 2).
In sum, “[t]he anti-assignment provision is clear on its face and contains specific and express
language stating that the health plan’s benefits cannot be assigned,” and the Court accordingly finds that
6

it is enforceable. Kayal, 2017 WL 4179813, at *3; see also Univ. Spine Ctr. v. Aetna, Inc., No.17-7823,
201$ WL 2332226, at *3 (D.N.J. May 23, 201$) (finding an identical anti-assignment provision “to be
clear and unambiguous, and thus valid and enforceable”). Neither party disputes that Defendant has not
consented to the assignment of benefits herein. Plaintiff therefore lacks a valid assignment upon which to
bring its ERISA claims, which accordingly must be dismissed for lack of standing. See Univ. Spine Ctr.,
2018 WL 2332226, at *3 (citing Neurological Surgeiy Assocs. P.A. v. Aetna Life Ins. Co., No.12-5600,
2014 WL 2510555, at *4 (D.N.J. June 4, 2014)).
B. Plaintiff Has Not Shown that Public Policy Concerns Render the Anti-Assignment
Clause Inapplicable

In the alternative, Plaintiff raises what appears to be a public policy argument that the antiassignment clause cannot apply to Plaintiff as the “Patient’s healthcare provider.” (Opp’n at 5). In other
words, Plaintiff contends that “an anti-assignment clause cannot be used to frustrate the provider’s ability
to recover payment from the plan whose very purpose is to provide payment to such providers.” (Id. at
6). Plaintiff relies on the Fifih Circuit decision in Herrnann Hosp. v. MEBA Med. & Benefits Plan, 959
F.2d 569 (5th Cir. 1992), overruled on other grounds by Access Mediquip, L.L. C. v. UnitedHealthcare
Ins. Co., 698 F.3d 229 (5th Cir. 2012). In that case, the Fifih Circuit found that “[w]e interpret the anti-

assignment clause as applying only to unrelated, third-party assignees—other than the health care provider
of assigned benefits,” reasoning that “[t]he anti-assignment clause should not be applicable, however, to
an assignee who, as here, is the provider of the very services which the plan is maintained to furnish.” Id.
at 575.
Plaintiffs argument has, however, been explicitly rejected by courts within this district.

In

University Spine Center v. Horizon Blue Cross B/tie Shield of New Jersey, 262 F. Supp. 3d 105 (D.N.J.

2017), the court noted as a threshold matter “[t]hat [the] 25—year—old case is not binding and has otherwise
been limited.” Id. at 111; see also LeTourneau Lifelike Orthotics & Prosthetics, Inc. v. Wa/-Mart Stores,

Inc., 298 F.3d 348, 352 (5th Cir. 2002) (“Neither Herrnann I nor Herrnann II stands for the proposition
7

that all anti-assignment clauses are per se invalid vis-à-vis providers of health care services.”). The court
went on to reason that “[t]he Anti—Assignment clause, whatever its policy merits, is a bargained-for part
of the Plan,” and that “New Jersey, for its part, has declined to invalidate anti-assignment clauses as a
policy matter.” (Id.). The court therefore declined to endorse Plaintiffs policy argument. Similarly, the
Third Circuit has also rejected Plaintiffs reading of Hermann, noting that “in a subsequent decision, the
[Fifth Circuit] clarified that it had declined to enforce the anti-assignment clause in Hermann only because
the clause there did not, by its terms, cover healthcare providers and, consistent with the other Courts of
Appeals, it viewed explicit anti-assignment clauses as enforceable. Am. Orthopedic & Sports Med., 2018
WL 2224394, at *5•
The Court is persuaded by this reasoning and accordingly rejects Plaintiffs policy argument that
the anti-assignment clause is void for reasons of public policy under Hermann. See Kaul v. Horizon Blue
Cross Blue Shield, No. 15-8268, 2016 WL 4071953, at *3 (D.N.J. July 29, 2016) (“Accordingly, the Court
finds no basis in ‘federal public policy’ to invalidate the Alent Plan’s anti-assignment provisions.”).
C. Plaintiff Has Not Shown Defendant Waived the Anti-Assignment Clause

finally, Plaintiff contends that “Defendant waived enforceability of the ‘anti-assignment clause’
through its direct course of dealing with Plaintiff.” (Opp’n at 7). More specifically, Plaintiff maintains
that “[t]he payment made by Defendant as well as their appeal response was prompted solely by Plaintiffs
actions.. and constitutes a waiver of the ‘anti-assignment clause’ on the part of Defendant.” (Id. at 8).
.

“[A]n anti-assignment clause ‘may be waived by a written instrument, a course of dealing or even
passive conduct, i.e. taking no action to invalidate the assignment vis-à-vis the assignee.” Am. Orthopedic
& Sports Med. v. Indep. Blue Cross, LLC, No. 16-8988, 2017 WL 1243147, at *4 (D.N.J. Feb. 24, 2017)
(quoting Garden State Bldgs., L.F. v. First fid. Bank, NA., 702 A.2d 1315, 1322 (N.J. App. Div. 1997)).
However, merely alleging that Plaintiff submitted a claim to Defendant and Defendant issued partial
payment is insufficient to show waiver in this context. See Kaid, 2016 WL 4071953, at *3 (“In general,
8

a direct payment to a healthcare provider does not constitute waiver of an anti-assignment provision where
the plan at issue authorizes such payment.”). Numerous courts in this district have also declined to find
waiver under the accepted pleading standards where “the Complaint merely asserts that Plaintiff submitted
a claim to Defendants and that Defendants failed to remit a proper payment despite Plaintiffs appeal.”
Am. Orthopedic & Sports Med., 2017 WL 1243147, at *4; see also Univ. Spine Ctr., 2017 WL 5513688,
at *4; Cohen v. Horizon Blue Cross Blue Shield ofNew Jersey, No. 15-4525, 2015 WL 6082299, at *4

(D.N.J. Oct. 15, 2015). Indeed, the Third Circuit has recently held that “routine processing of a claim
form, issuing payment at the out-of-network rate, and summarily denying the informal appeal do not
demonstrate ‘an evident purpose to surrender’ an objection to a provider’s standing in a federal lawsuit.”
Am. Orthopedic & Sports Med., 2018 WL 2224394, at *6.

Here, the Court finds that Plaintiffs Complaint, which simply avers that Defendant paid only a
partial amount of Plaintiff s claim and engaged in the appeals process, is likewise insufficient to establish
waiver. “Again, this type of conclusory pleading is prohibited under Iqbal and Twombly, and Plaintiffs
cannot supplement the Complaint through their opposition brief.”2 Am. Orthopedic & Sports Med., 2017
WL 1243147, at *4• Indeed, the Court notes that Plaintiffs complaint states that “Defendant has failed to
provide the requested.

.

.

Plan Policy and identification of the Plan Administrator/Plan Sponsor.” (ECF

No. 1-1 at 9). This hardly evidences that Defendant actively engaged in a direct course of conduct with
Plaintiff as the Patient’s valid assignee. The Court accordingly finds that Plaintiff has not pled sufficient
factual allegations to show Defendant waived the anti-assignment clause in this instance. See Kayat, 2017
WL 4179813, at *5 (D.N.J. Sept. 21, 2017) (finding waiver inapplicable where “[o]utside of Defendant’s

2

While Plaintiffs opposition includes certain additional factual allegations concerning various
communications with Defendant and Defendant’s alleged failure to raise the anti-assignment clause in the
early days of the appeal process, (Opp’n at 8), they are not included in Plaintiffs complaint. It is,
moreover, axiomatic that “a pleading may not be amended through briefing.” fado v. Kimber Mfg., Inc.,
No. 11-4772, 2016 WL 3912852, at *11 (D.N.J. July 18, 2016). To the extent Plaintiff wishes to replead,
such factual allegations must be included in any amended complaint.
9

direct payment to Plaintiff, the only conduct which Plaintiff asserts demonstrates a course of conduct
sufficient to constitute waiver was Defendant’s written response to Plaintiffs appeal effort”).
V.

CONCLUSION

For the reasons stated above, the Court will dismiss Plaintiffs complaint. To the extent the
pleading deficiencies identified by the Court can be cured by way of amendment, Plaintiff is hereby
granted thirty (30) days to file an amended pleading. An appropriate Order accompanies this Opinion.
Date:

20

CLAIRE C. CECCHI, U.S.D.J.

10