BRAINBUILDERS, INC. v. OPTUM, INC.

Filing 39

ORDER ADOPTING THE AMENDED REPORT AND RECOMMENDATIONS 35 in its entirely, and it is further Ordered that Plaintiff's motion 20 for Leave to File an amended complaint and remand is Granted. It is further Ordered that this matter is remanded to the New Jersey Superior Court, Law Division Bergen County. ***CIVIL CASE TERMINATED. Signed by Judge John Michael Vazquez on 5/31/2019. (JB, )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

BRAINBUILDERS, LLC,

Flaint(ff
Civil Action No. 18-638
V.

OPINION & ORDER
OPTUM, INC., et al.,
Defendants.

John Michael Vazguez. U.S.D.J.

This matter comes before this Court on the February 4, 2019 Amended Report and
Recommendation (the “R&R”) of Magistrate Judge James B. Clark. D.E. 35. The R&R addressed
a motion made by Plaintiff Brainbuilders, LLC (“Brainbuilders”) for leave to file an amended
complaint and to remand this matter. Among other things, the proposed amended complaint adds
fifteen additional defendants, one of which would defeat diversity jurisdiction.

D.E. 20.

Defendant Optum, Inc. (“Optum”) opposed Plaintiffs motion, D.E. 27, and Plaintiff filed a reply,
D.E. 32. The R&R recommends that this Court grant Plaintiffs motion to amend and accordingly,
that the case be remanded to the New Jersey Superior Court, Bergen County. D.E. 35. Optum
filed a timely objection to the R&R, D.E. 37, and Plaintiff filed a response, D.E. 38.’ The Court
reviewed all relevant documents and submissions, and for the reasons stated below, the Court

Defendant’s brief in support of its objection will be referred to herein as “Del’s Br.” and
Plaintiffs response will be referred to as “PIP s Br.”

adopts the R&R in its entirety. Accordingly, Plaintiffs motion to amend is GRANTED and this
matter shall be REMANDED to the New Jersey Superior Court, Bergen County.
I.

FACTUAL BACKGROUND & PROCEDURAL HISTORY

The factual details of this dispute are explained in detail in the R&R. In short, Plaintiff is
an out-of-network healthcare provider that offers services to children with autism related disorders
and their parents. Optum provides consulting services to insurance plans, administrators, and/or
healthcare providers. Plaintiff alleges that Optum and the additional proposed Defendants are
engaged in a scheme to target its patients in an attempt to induce the patients to switch to innetwork providers. See R&R at 1-2.
Plaintiff initially filed its five-count complaint in state court, and Opturn removed the
matter to this Court on January 16, 2018 on the basis of diversity jurisdiction. 28 U.S.C.

§ 1332.

See Notice of Removal ¶ 6-7, D.E. I. Optum then filed a motion to dismiss the complaint pursuant

to Fed. R. Civ. P. 12(b)(6) on March 30, 2018. D.E. 8. After the motion to dismiss was ftilly
briefed.2 Brainbuilders filed its motion for leave to file an amended complaint and to remand this
matter. In addition to adding two new claims, Brainbuilders seeks to join fifteen new defendants.
Oxford NJ, one of the proposed new defendants, is not diverse to Brainbuilders, thus granting
Plaintiffs motion to amend would divest this Court ofjurisdiction. D.E. 20. Optum filed a brief
in opposition, D.E. 27, to which Plaintiff replied, D.E. 32.
Judge Clark issued the R&R on February 4, 2019, recommending that Plaintiffs motion to
amend be granted and this case be remanded to state court. Judge Clark first considered the
Hensgens factors, which courts in this district use to analyze post-removal motions to amend that

2

On October 11, 2018. Optum’s motion to dismiss was administratively terminated pending
resolution of Plaintiffs motion to amend. D.E. 33.

seek to join non-diverse defendants. Judge Clark determined that the

Hensgens

factors weighed

in favor of permitting Plaintiff to amend the Complaint. Moreover, in analyzing the Hensgens
factors, Judge Clark determined that because Plaintiff did not assert any causes of action pursuant
to the Employment Retirement Income Security Act (“ERISA”), there was no basis for federal
question jurisdiction. Because the Hensgens factors weighed in favor of granting the amendment,
Judge Clark determined that remand was appropriate. R&R at 7-Il. Judge Clark also determined
that in light of the remand, Defendant’s arguments as to futility should be left to the state court.
Id. at 12.
On February 19, 2019, Optum filed objections to the R&R. Optum argues that (1) the

Hensgens factors weigh against granting Plaintiffs motion to amend and remand; (2) the proposed
amended complaint is preempted by Section 502(a) of ERISA. 29 U.S.C.

§ 1132(a); and (3) the

proposed amended complaint is frmile. D.E. 37.
II. LEGAL STANDARD
Local Civil Rule 72.I(c)(2) allows a party to object to a Magistrate Judge’s report and
recommendation within 14 days of service. The district court “shall make a c/c now determination
of those portions to which objection is made and may accept, reject, or modify, in whole or in part,
the findings or recommendations made by the Magistrate Judge.” L. Civ. R. 72.1 (c)(2); see

Ec/elson V., L.P. v. Encore Networks, Inc., No. 11-5802, 2012 WL4891695, at *2 (D.N.J. Oct. 12,
2012). The district court “need not normally conduct a new hearing and may consider the record
developed before the Magistrate Judge, making his or her own determination on the basis of that
record.” L. Civ. R. 72.1(c)(2);seeEdelson V. L.P.. 2012 WL4891695, at *2. “As to uncontested
portions of the report, the district court has discretion to choose an appropriate standard of review.
At a minimum, what is not objected to, the district court reviews under the plain error or manifest

3

injustice standard.” Edelson V. L.P., 2012 WL 4891695, at *3 (internal quotations, citations, and
brackets omitted). “[W]here no objections are made in regard to a report or parts thercof the
district court will adopt the report and accept the recommendation if it is ‘satisf[iedj
is no clear error on the face of the record.” Sportscare ofAm., P.C

i’.

.

.

.

that there

Mzdtiplan, Inc., No. 10-

4414, 2011 WL 500195, at *1 (D.N.J. Feb. 10, 2011) (quoting Fed. R. Civ. P. 72 Advisory
Committee’s Notes).
H1.ANALYSIS
1. The Hensgens Factors
A motion to amend is ordinarily governed by Fed. R. Civ. P. 15(a)(2). Motions for leave
to amend pursuant to Rule I 5(a)(2) are liberally granted. Fed. R. Civ. P. 1 5(a)(2). When a party
seeks to add a non-diverse defendant that would destroy diversity jurisdiction, however, courts in
the Third Circuit apply 28 U.S.C.

§ 1447(e).

City ofPerth Amboy v. Scifeco Ins. Co. ofAm., 539

F. Supp. 2d 742, 746 (3d Cir. 2008). In such a scenario, “a court must scrutinize motions to amend

more carefully.” Id. While not addressed by the Third Circuit, district courts in the Circuit “have
adopted a flexible and equitable approach developed by the Fifth Circuit Court of Appeals in
Hensgens

Deere & Co., 833 F.2d 1179, 1182 (5th Cir. 1987).” City of Pert/i Amboy, 539 F.

Supp. 2d at 746. The Hensgens factors are as follows: “(I) whether the purpose of the plaintiffs
motion is to defeat diversity jurisdiction; (2) whether the plaintiff was dilatory in seeking to amend
the complaint; (3) whether plaintiff will be prejudiced if the motion is not granted; and (4) any
other equitable factors.” Stavitski v. Safrguard Props. Mgmt., LLC, No. 17-2033, 2018 WL
501646, at *2 (D.N.J. Jan. 22, 2018) (quoting Rodriguez v. Walmart, No. 16-9338, 2017 WL
6508357, at *2 (D.N.J. Dec. 20, 2017)). Here, Optum argues that Judge Clark incorrectly analyzed

4

each of the Hensgens factors such that Plaintiff’s motion to amend should be denied. Del s Br. at
3-S.
For the first factor, courts must focus on the specific facts of the case, and the panics’
actions “between the filing of the complaint and the motion to amend is an appropriate matter for
consideration.” Id. at *3 “Generally. if a proposed claim is viable, and there is a genuine intent
to prosecute the claim in good faith, the primary purpose of joinder is not to defeat federal
jurisdiction.” Winograd v. Mercedes-Benz U&4, LLC, No. 16-4914, 2017 WL 2926040, at *4
(D.N.J. June 14, 2017). Judge Clark determined that Brainbuilders’ primary purpose for amending
the Complaint was not to defeat federal jurisdiction. As a result, Judge Clark determined that the
first Hensgens factor weighed in favor of Plaintiff

R&R at 7-9. Specifically. Judge Clark

concluded that although Plaintiff was aware of Oxford NJ from the outset and that it may have had
claims against Oxford NJ since initially filing the Complaint, Plaintiffs allegations in the proposed
amended complaint demonstrated that Oxford NJ’s “conduct has continued and/or magnified.”
R&R at 9. As a result, Judge Clark found that Plaintiffs intent to name Oxford NJ at an early
juncture in the litigation pointed to “a genuine intent to prosecute the claim in good faith.” Id.
Optum argues that Judge Clark erred because Plaintiffs allegations of magnified conduct
are general, and not specific as to Oxford NJ. Moreover, Optum contends that the characterization
of Oxford NJ’s conduct as continued necessarily demonstrates that it existed when Plaintiff
initially filed suit. Del’s Br. at 4-5. But as recognized by Judge Clark, Plaintiffs proposed
amended complaint includes new factual allegations regarding conduct that occurred after the
original complaint was filed, and specifically identifies conduct of the Oxford Defendants, which

includes Oxford NJ.3 R&R at 9; see also Proposed Amended Complaint (the “PAC”)

¶fflJ

128-40,

D.E. 20-2. While not detailed, the level of specificity in the PAC is sufficient as to Oxford NJ,
especially given the fact that discoveiw has not yet begun.

Further, the fact that Plaintiffs

allegations include conduct that occurred after the Complaint was filed evidence a strategic
decision by Plaintiff to include additional defendants as a result of the alleged continuing conduct.
This Court “will not ascribe an improper purpose” to what likely amounts to a strategic litigation
decision without more specific evidence of wrongdoing. See Cit of Perth .4rnboy, 539 F. Supp.
2d at 753-54 (determining that there was no improper purpose for the plaintiffs failure to initially
name a non-diverse party as a defendant that it was aware of before filing suit).
Judge Clark also recognized that the timing of Plaintiffs motion at “this early juncture of
the litigation” also points to a genuine interest to prosecute a claim against Oxford NJ. R&R at 9.
Although the initial complaint was filed over a year ago, the case has not significantly progressed—
Optum has yet to file an answer, a Rule 16 conference has not occurred, and no discovery has been
exchanged.

Thus, it appears that in seeking to join the new defendants, Plaintiff is merely

attempting to assert viable claims against additional parties as it obtains additional information
about alleged wrongffil conduct.

Again, this Court will not ascribe an improper purpose to

Plaintiffs litigation tactics without more evidence of wrongdoing.

This Court, therefore,

concludes that Judge Clark correctly determined that the first Hensgens factor weighs in favor of
Plaintiff.
Judge Clark determined that the second Hensgens factor was neutral because while
Plaintiff was aware of some of Oxford NJ’s alleged wrongthl action before it filed the initial

According to Plaintiff, the Oxford Defendants include Oxford Health Plans LLC; Oxford NJ;
Oxford NY; Oxford Health Insurance, Inc.; and UnitedHealthCare Services, tiC. PAC ¶21.
6

complaint, Optum failed to demonstrate any prejudice relating to Plaintiffs delay in seeking to
join Oxford NJ. R&R at 9-10. Optum argues that this factor weighs against granting leave to
amend because there are no new allegations in the PAC with respect to Oxford NJ. Del’s Br. at 5
n.1 (citing Parson r. Home Depot USA, Inc., No. 13-4817, 2013 WL 6587316, at *3 (D.N.J. Dec.
13, 2013)). In Parson. Judge Clark determined that the plaintiffs attempt to add a new, nondiverse defendant without asserting any new facts suggested an attempt to defeat diversity.
Parson. 2013 WL 6587316, at *3 .As discussed, in this instance the PAC includes factual
allegations regarding conduct that occurred after the initial complaint was filed. Thus, Optum’s
reliance on Parson is misplaced. Moreover, as recognized by Judge Clark, Optum fails to identify
how it was prejudiced by Plaintiffs delay. As a result, the Court agrees with Judge Clark’s
conclusion that the second factor is neutral.
As for the third factor, Judge Clark determined that the expense of litigating its claims in
two forums and the risk of inconsistent judgments favors permitting joinder here. R&R at 10-Il.
Optum argues that this prejudice does not constitute a significant injury that warrants leave to
amend. Del’s Br. at 6-7. Although Optum cites to two cases to support its argument, many courts
in this district have also determined that litigating in two forums may constitute a sufficient injury
for the third Hensgens factor to weigh in favor of granting leave to amend. See. e.g., City ofPerth
Amboy, 539 F. Supp. 2d at 749; Rodriguez, 2017 WL 6508357, at *4; C’oqfessore v. AGCO Coip.,
No. 14-7262, 2015 WL 4430472, at *6 (D.N.J. July 20, 2015); Fields v. Zubkov. No. 08-20 16,
2008 \‘/L 4447098, at *6 (D.N.J. Sept. 26,2008). Therefore, the Court concludes that in this case,
Judge Clark appropriately determined that the third factor favors joinder.
Finally. in concluding that the fourth factor weighed in favor of remand, Judge Clark
discounted Optum’s argument that if remanded, Optum would seek to remove the matter again

7

based on ERISA preemption. R&R at 11. As discussed at length below, Opium’s complete
preemption argument is unfounded because Upturn does not have standing to assert an ERISA
claim and Plaintiff is not bringing ERISA-based claims. Thus, the Court also rejects Optum’s
position that Judge Clark erred by failing to consider ERISA preemption as an equitable factor that
warrants denying Plaintiffs motion.
Optum also argues that it will be prejudiced by the amendment because it will cause
unnecessary delay while Plaintiff serves new defendants and the new defendants answer or
othenvise respond to the PAC. Defs Br. at 7. Optum, however, did not raise this argument in
opposition to Plaintiffs motion to amend. Instead. Optum raises this argument for the first time
in its opposition to the R&R. A party objecting to an R&R “shall specifically identify the portions
of the proposed findings, recommendations or report which an objection is madc and the basis of
such objection.” L. Civ. R. 72.1 (c)(2). Moreover, a court is not ‘requircd to consider objections
that were not presented before the magistrate.” Annindi r. Kerni Univ., No. 15-2887. 2015 WL
5138648, at *3 (D.N.J. Aug. 31. 2015).

Accordingly. the Court will not consider Upturn’s

argument regarding prejudice at this time.4
In sum, the Court concurs with Judge Clark’s findings for each of the f[ensgens factors.
Accordingly, this Court adopts Judge Clark’s conclusion that the Hensgens factors weigh in favor
of permitting Plaintiff to amend its Complaint and that remand to the Superior Court of New
Jersey, Bergen County is therefore appropriate.

Even if the Court were to consider Uptum’s argument, the delay would not be so prejudicial that
it would serve as a basis to deny Plaintiffs motion.
8

2. ERISA Preemption
Optum argues that this Court must conduct a

c/c novo

review of its ERISA preemption

argument because Judge Clark provided no reasoning or analysis. Def’s Br. at 8. In the R&R,
Judge Clark rejected Opwm’s argument regarding ERISA preemption because the PAC does not
assert an ERISA claim. R&R at II. Optum is correct, however, that Judge Clark did not address
complete preemption pursuant to Section 502(a).

Consequently, this Court will consider

Defendant’s complete preemption argument.
In determining whether a complaint alleges a federal question, courts are generally guided
by the well-pleaded complaint rule, which provides that b4federal jurisdiction exists only when a
federal question is presented on the face of the plaintiff’s properly pleaded complaint.” Cateipillar
Inc.

Williams, 482 U.S. 386, 392 (1987). There is an exception to the well-pleaded complaint

rule when complete preemption exists. “[C]omplete preemption operates to confer original federal
subject matter jurisdiction notwithstanding the absence of a federal cause of action on the face of
the complaint.” In re US. Healthcare, 193 F.3d 151, 160 (3d Cir. 1999). State law claims that
fall into the scope of ERISA Section 502(a), 29 U.S.C.

§ 1132(a), are completely preempted. See

Progressive Spine & Orthopaedics, LLC v. Empire Blue Cross Blue Shield, No. 16-1649, 201 7
WL 751851, at *6 (D.N.J. Feb. 27, 2017).
A claim may be brought under Section 502(a) by a 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); see also
Pilot L(fe Ins. Co. v. Dedeaux, 481 U.S. 41, 53 (1987). There is a two-part test to determine
whether a state law claim is completely preempted under Section 502(a). A federal court has
jurisdiction over a state law claim, such that the claim is preempted, when (1) the plaintiff could

9

have brought the action under Section 502(a) and (2) no independent legal duty supports the
plaintiffs claim. Pascack Valley Hosp. v. Local 464A UFCW Welfare Reimbursement Plan, 388
F.3d 393, 400 (3d Cir. 2004); see also Aetna Health Inc.

i’.

Davila, 542 U.S. 200, 210 (2004)

(holding that a state law claim is completely preempted when the action could have been brought
under Section 502(a)(l)(B) and no other legal duty independent of ERISA exists). The test is
fashioned in the conjunctive so that “a state-law cause of action is completely preempted only if
both of its prongs are satisfied.” N.J C’arpenters & the Trs, Thereof v. Tishman Constr. C’orp. of
N.J., 760 F.3d 297, 303 (3d Cir. 2014) (emphasis added). Here, Optum fails to demonstrate that
either prong is satisfied.
Opturn argues that Brainbuilders could have brought its conspiracy and unjust enrichment
claims under Section 502(a) pursuant to an assignment of benefits from its patients. Generally,
only a participant or beneficiary under a plan has standing to bring an ERISA claim. 29 U.S.C.

§

I 132(a)(l). A healthcare provider such as Plaintiff is neither a participant nor a beneficiary. See
Pascack Valley Hosp., 388 F.3d at 400. A healthcare provider, however, may have standing to
assert an ERISA claim if it has received a valid assignment of benefits. See Am. OrthopedIc &
Sports Med. v. Indep. Blue Cross Blue Shield, 890 F.3d 445, 450 (3d Cir. 2018) (citing N. Jersey
Brain & Spine Cm v. Aetna, hic., 801 F.3d 369, 372 (3d Cir. 2015)), But here, Plaintiff does not
allege that it had a valid assignment from any of its patients in the PAC,5 As a result, Plaintiff

In arguing that Plaintiffs patients have assigned their rights to Plaintiff, Optum relies on the
Declaration of Laura Hanson, which includes claim forms Brainbuilders submitted for several of
its patients that purportedly demonstrate that Brainbuilders’ obtained an assignment of benefits for
these patients, and incomplete plan documents for the patients. Dccl. of Laura Hanson, D.E. 272. The Court does not find a valid assignment as to the patients based on this limited information.
See, e.g., Vaimakis i’. United Healthcare/Oxford, No. 07-5 184, 2008 WL 3413853, at *4 (D.N.J.
Aug. 8, 2008) (concluding that there was not enough information before the court through which
the court could conclude that a valid assignment existed).
10

could not have brought the action under Section 502(a) because it does not have standing to do so.
Plaintiffs claims, therefore, are not completely preempted by Section 502(a).
Importantly, Plaintiff is not seeking to recover benefits due under an ERISA plan or to
enforce its rights under a plan.

Instead, the PAC is focused on Optum and the proposed

Defendants’ alleged wrongftd plan to divert patients from Brainbuilders to other healthcare
providers. As a result, Plaintiff is asserting claims pursuant to an independent legal duty. See

Colic,, v. Horizon Blue Cross B/tie Shield of VJ, No. 15-4525, 2017 WL 685101, at *4 (D.N.J.
Feb. 21, 2017) (“A legal duty is ‘independent’ if it ‘would exist whether or not an ERISA plan
existed.” (quoting Mann Gen. Hosp. v. Modesto & Empire Traction Co.. 581 F.3d 941, 950 (9th
Cir. 2009). And the fact that Plaintiff is an out-of-network provider and that Optum is allegedly
trying to divert patients to in-network providers is incidental to Plaintiffs claims. Defendant,
therefore, also fails to establish that the second prong is satisfied.
In sum, the PAC asserts solely state law claims against non-diverse defendants. As pled,
the Court sees no basis to remove because of federal question or diversity jurisdiction.
Accordingly, Opwm’s argument that it would remove this matter for a second time is baseless and

does not provide any justification for denying Plaintiffs motion.
3. Futility
Finally, Optum argues that this Court should not adopt the R&R because Plaintiff fails to
state a claim for either of the new counts alleged in the PAC, thus the PAC is futile. Defs Br. at
9-1 I. Because Judge Clark determined that Plaintiff should be permitted to amend the Complaint
and that remand was therefore appropriate, Judge Clark did not conduct a futility analysis and
recommended that the state court conduct the analysis instead. R&R at 11 n.6.

11

A motion to amend may be denied if the proposed amendment is futile. The futility of a
proposed amended pleading is evaluated under the same standard of legal sufficiency as a motion
to dismiss under Rule 12(b)(6). Travelers Indem. Co. v Dammann & Co., 594 F.3d 238, 243 (3d
Cir. 2010). However, “[g]iven the liberal standard for the amendment of pleadings, ‘courts place
a heavy burden on opponents who wish to declare a proposed amendment futile.” High 5 Games,
LLCv. Marks, No. 13-7161, 2017 WL 349375, at *5 (D.N.J. Jan. 24, 2017) (quoting Pharm. Sales
& Consulting Corp. v J WS. Delavau Co., Inc., 106 F. Supp. 2d 761, 764 (D.N.J. 2000)).
Therefore, “[i]f a proposed amendment is not clearly futile, then denial of leave to amend is
improper.” High 5 Games, LLC, 2017 WL 349375, at *5 (quoting Harrison Beverage Co. v.
Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990)), Here, Plaintiffs claims are not
clearly futile. As a result, this Court concurs with Judge Clark’s conclusion that a futility analysis
is better left to the state court, and will not conduct an independent futility analysis.
IV. CONCLUSION AND ORDER
For the foregoing reasons, and for good cause shown,
IT IS on this 31st day of May, 2019,
ORDERED that the Court adopts the Amended Report and Recommendation (D.E. 35) in
its entirety; and it is further
ORDERED that Plaintiffs motion for leave to file an amended complaint and remand
(D.E. 20) is GRANTED; and it is further
ORDERED that this matter is remanded to the New Jersey Superior Court, Law Division,
Bergen County.

c\NQQN-, /
John Michael Vazque%, 9.DJ.

12