Staten Island Chiropractic Associates, PLLC et al v. Aetna, Inc. et al
Filing
50
ORDER granting 44 Motion to Dismiss Accordingly, the defendants motion to dismiss the complaint is granted in full. This dismissal is with prejudice, with the exception of the plaintiffs claims for benefits under 29 U.S.C. § 1132(a)(1)(B) and their claim for full and fair review, which are dismissed without prejudice. Ordered by Chief Judge Carol Bagley Amon on 3/12/2012. (Shnider, Ruth)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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STATEN ISLAND CHIROPRACTIC ASSOCIATES,
PLLC, DAVID C. ABRAMS, D.C., and JOHN P. PIAZZA,
D.C., and STATEN ISLAND CHIROPRACTIC
ASSOCIATES as Assignee of JOHN “DOE” and MARY
“DOE”, Nos. 1-63,
Plaintiffs,
-v-
NOT FOR PUBLICATION
MEMORANDUM & ORDER
09-CV-2276 (CBA) (VP)
AETNA, INC.; AETNA LIFE INSURANCE CO.,
AETNA HEALTH INSURANCE COMPANY OF NEW
YORK, AETNA HEALTH INC., CORPORATE HEALTH
INSURANCE COMPANY, and AETNA HEALTH INC.,
Defendants.
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AMON, United States District Judge:
The plaintiffs in this action are two chiropractors and their professional corporation, who
have received claims assignments from 63 of their patients under the patients’ non-party,
employer-sponsored health plans. The plaintiffs have brought suit against Aetna, Inc. and
several wholly owned subsidiaries (collectively “the defendants”), alleging various violations of
the Employee Retirement Income Security Act of 1974 (“ERISA”) and tortious interference with
business relations, arising primarily out of the defendants’ alleged refusal to pay the benefits
claims that the plaintiffs have submitted to them. The defendants now move to dismiss the
complaint in full. For the reasons stated below, the motion to dismiss is granted, although the
ERISA claims for benefits and for “full and fair review” are dismissed without prejudice.
I.
BACKGROUND
The following facts are alleged in the Second Amended Complaint (“Compl.”).
Certain health care providers enter into contracts with health insurance companies or
managed care organizations to become in-network or “participating” providers (“PARS”). As a
member of the insurer’s network, these PARS agree to provide services to the insurer’s enrollees
1
at a reduced rate in exchange for, inter alia, access to the insurer’s patient base. Enrollees who
visit PARS are required to pay only the applicable co-payment or co-insurance under their
benefits plan, plus any fees for non-covered services. By contrast, out-of-network or “nonparticipating” providers (“Non-PARS”) do not have a contract with the particular insurer. NonPARS may require their patients to pay the full service charge up front, after which the patients
can submit for reimbursement from their benefits plan, subject to the terms of coverage for NonPAR services. Alternatively, Non-PARS may agree to accept an assignment of benefits from the
patient, which allows the Non-PAR provider to submit requests for payment directly from the
plan or its insurer on the patient’s behalf. The Non-PAR provider may then be entitled to bill the
patient for any amount exceeding what the benefits plan will cover.
The plaintiff chiropractors in this case are Non-PARS for the health plans at issue, and
have this latter benefits-assignment arrangement with their patients. Thus, they have received
claims assignments from 63 of their patients who are members of employer-sponsored health
plans insured or serviced by the defendants, and have submitted these claims directly to the
defendants for payment for the chiropractic services rendered. Although the parties dispute the
exact role that the defendants played in these health plans, the defendants appear to concede at
this stage that the patient-assignors are members of plans governed by ERISA, and that one of
the defendants insures or services these plans in some manner. The defendants also do not
appear to contest the validity of the assignments, or that the plaintiffs have standing to bring suit
under ERISA to collect benefits that they were assigned.
The plaintiffs allege that under the terms of the plans at issue, the defendants agree to pay
for services performed by Non-PARS at the lesser of the billed charge or the so-called “usual,
customary and reasonable” (“UCR”) rate, which is essentially the market rate for comparable
services in a particular area. (Compl. ¶ 19.) The plaintiffs claim that chiropractic services are
2
covered when they are “medically necessary,” which means that three criteria are met, “subject
to some plan limitations or exclusions”: the member has a neuromusculoskeletal disorder, the
medical necessity for the treatment has been clearly documented, and improvement is shown
within a certain amount of time after starting treatment. (Compl. ¶ 35.)
The complaint does not specify the precise role that any of the defendants play in the
health plans at issue, which are never identified by name, and it does not cite to or incorporate
the specific terms of any plan documents. Rather, the plaintiffs allege generally that “[i]n
offering and administering its health care plans, AETNA assumes the role of ‘Plan
Administrator,’ as that term is defined under ERISA, in that it interprets and applies the plan
terms, makes all coverage decisions, and provides for payment to members and/or their
providers.” (Compl. ¶ 30.)
The plaintiffs claim that the defendants have “engaged in a pattern and practice of
denying benefits for Non-PAR services as part of [their] effort to increase the costs to [their]
members of going out-of-network, thereby pressuring them to use in-network providers, subject
to discounted rates and reduced services.” (Compl. ¶ 20.) The plaintiffs attribute most of the
defendants’ actions to their alleged “policy of ‘pre-action review,’ in which virtually every claim
submitted by plaintiffs to defendants for chiropractic services to defendants’ members [is]
initially denied, additional records are requested, and either no decision is made on the claim, the
denial is affirmed, or months later only a small portion of the claim is paid.” (Compl. ¶ 36.)
The plaintiffs claim that as part of this “pre-action review” procedure, the defendants sent
questionnaires to the patients “requiring them to complete answers to lengthy interrogatories”
about the treatment they received. (Compl. ¶ 37.) The plaintiffs also allege that these
questionnaires were “designed to impute the good reputation of the plaintiffs and insinuate
disparaging remarks about them. (Id.)
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The upshot, the plaintiffs contend, is that the defendants have improperly denied valid
claims for benefits, have breached the terms of the relevant health plans, and have thereby also
violated various provisions of ERISA. The plaintiffs also allege that in processing the claims for
benefits, the defendants followed improper procedures and provided inadequate disclosures, such
as by failing to explain the reason for adverse determinations and failing to include information
about how to appeal benefits denials. (Compl. ¶¶ 38, 39.) The plaintiffs submit that “appeals of
the defendant’s denials are futile, since the internal appeal process does not result in a fair or
reasonable review of the services and charges, and the defendants do not provide adequate
information concerning the external appeal process.” (Compl. ¶ 40.)
As a result of the defendants’ actions, the plaintiffs claim that they have been steadily
losing patients who participate in the defendants’ health plans and have expended many
additional resources on disputing the benefits denials, causing “significant loss of revenue and
income.” (Compl. ¶ 42.) The plaintiffs also allege that the defendants’ actions have interfered
with their ability to “establish business relations with . . . patients and other sources of referrals.”
(Compl. ¶ 93.)
Although the plaintiffs’ precise causes of action are at times difficult to discern, they are
asserting various claims for unpaid benefits and equitable relief under ERISA, plus a claim for
tortious interference with business relations under New York state law.
II.
STANDARD OF REVIEW
To withstand a motion to dismiss for failure to state a claim, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). A complaint that contains only “labels and conclusions” or “a formulaic
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recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Neither
will a complaint that contains only “naked assertion[s]” without “further factual enhancement.”
Id. at 557.
Iqbal identifies a “two-pronged” approach to determining the sufficiency of a complaint.
129 S. Ct. at 1950. First, courts can “begin by identifying pleadings that, because they are no
more than conclusions, are not entitled to the assumption of truth.” Id.; see Harris v. Mills, 572
F.3d 66, 72 (2d Cir. 2009) (“[A]lthough a court must accept as true all of the allegations
contained in a complaint, that tenet is inapplicable to legal conclusions, and [t]hreadbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
(internal quotation marks omitted)). Second, they can then identify whether the complaint,
stripped of its conclusory pleadings, “plausibly give[s] rise to an entitlement to relief.” Id. “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. The
plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.” Id. A court’s consideration on a motion to
dismiss is “limited to facts stated on the face of the complaint, in documents appended to the
complaint or incorporated in the complaint by reference, and to matters of which judicial notice
may be taken.” Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991).
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III.
DISCUSSION
A. ERISA Claims
i. Claims for Benefits under 29 U.S.C. § 1132(a)(1)(B)
All five of the plaintiffs’ ERISA claims appear to be pursuing “unpaid benefits” as the
primary form of relief, although nowhere in the complaint do the plaintiffs cite to the relevant
ERISA provision for the recovery of benefits, 29 U.S.C. § 1132(a)(1)(B). (See Compl. ¶¶ 54,
64, 71, 78, 85.) However, plaintiffs have stated clearly in their opposition brief that “one . . . of
the claims for relief plaintiffs seek is essentially section 1132(a)(1)(B) claims for plan benefits,
that is, payment for services already rendered to the Patient members by the Chiropractors.”
(Pls. Opp. at 6.) Moreover, the defendants themselves concede that “the essence of plaintiffs’
[ERISA] claims . . . is the recovery of plan benefits under 29 U.S.C. § 1132(a)(1)(B) . . . .”
(Defs. Mem. 14.) For the reasons that follow, to the extent that any or all of the plaintiffs’ claims
for “unpaid benefits” are brought under § 1132(a)(1)(B), they are dismissed.
Under 29 U.S.C. § 1132(a)(1)(B), “[a] civil action may be brought . . . 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.”
The statute also expressly provides that an action may be brought against an “employee benefit
plan . . . as an entity,” and that “[a]ny money judgment under this subchapter against an
employee benefit plan shall be enforceable only against the plan as an entity.” Id. at § 1132(d);
see Chapman v. Choicecare Long Island Disability Plan, 288 F.3d 506, 509-10 (2d Cir. 2002).
The Second Circuit has repeatedly stated that “[i]n a recovery of benefits claim, only the plan
and the administrators and trustees of the plan in their capacity as such may be held liable.” Id.
at 509; Leonelli v. Pennwalt Corp., 887 F.2d 1195, 1199 (2d Cir.1989) (citing 29 U.S.C. §
1132(d)(2)); see also Crocco v. Xerox Corp., 137 F.3d 105, 107-08 (2d Cir. 1998) (only the plan,
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“the designated Plan administrator” or “a Plan trustee” can be liable for benefits due under §
1132(a)(1)(B)). Under ERISA, the plan “administrator” is a term of art, referring to “the person
specifically so designated by the terms of the instrument under which the plan is operated,” or “if
an administrator is not so designated, the plan sponsor.” 29 U.S.C. § 1002(16)(A).
Here, none of the plans at issue are named as defendants, and the plaintiffs have not
argued that any of the defendants is a plan trustee. Further, the complaint does not appear to
allege that any of the defendants are specifically named as the plan administrator in any of the
plan instruments themselves, and the plaintiffs have not appended to the complaint any plan
documents to that effect. Rather, the complaint vaguely asserts that “AETNA assumes the role
of ‘Plan Administrator,’ as that term is defined under ERISA, in that it interprets and applies the
plan terms, makes all coverage decisions, and provides for payment to members and/or their
providers.” (Compl. ¶ 30.) At oral argument, where defense counsel argued repeatedly that the
defendants are not the named plan administrator, the plaintiffs indicated that they were not
bringing a claim based on the plan documents’ formal designation, but rather were asserting that
it is immaterial “what they call themselves” because “as the company with the discretion to
review and decide and ultimately pay the claims” the defendants meet a more substantive
definition of plan administrator. (Transcript of Oral Argument, July 26, 2011, at 14:20-18:11.)
The plaintiffs’ opposition brief draws upon case law reflecting “that there is some disagreement
among courts in this circuit regarding the proper parties to a recovery of benefits claim under
ERISA.” Schnur v. CTC Comm’ns Corp., 621 F. Supp. 2d 96, 109 (S.D.N.Y. 2008) (internal
quotation marks omitted).
One line of authority indicates that only the named plan administrator, the plan itself, or
the plan trustees may be sued for benefits under § 1132(a)(1)(B). In Lee v. Burkhart, 991 F.2d
1004 (2d Cir. 1992), the Second Circuit held that an insurance company could not be liable under
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§ 1132(a)(1)(B) for failing to provide participants with accurate plan descriptions because it was
not named as the plan “administrator” under § 1002(16)(A), and thus did not incur the duty to
provide plan descriptions to participants.1 Id. at 1010-11. In a footnote, the court expressly
noted its disagreement with the 1st and 11th Circuits, which had held “that under certain
circumstances a party not designated as an administrator may be liable for failing to furnish a
plan description.” Id. at 1010 n. 5. The Lee court also observed that one “potential impediment”
to the plaintiffs’ claims was that “ERISA permits suits to recover benefits only against the Plan
as an entity.” Id. at 1009 (internal quotation marks omitted).
Later, in Crocco, the Second Circuit addressed whether an employer could be liable in an
ERISA suit for the recovery of benefits where the employer, while not named as the
“administrator” by the plan, had “control, indirectly, over the administration of the plan” and
thus was a sort of “de facto co-administrator.” 137 F.3d at 107.
The court answered this
question in the negative, holding that “the reasoning—if not necessarily the holding—of Lee
precludes employer liability, as a de facto co-administrator, in a suit brought under [§
1132(a)(1)(B)], where the employer has designated a plan administrator in accordance with 29
U.S.C. § 1002(16)(A).” 137 F.3d at 107.
In light of this Second Circuit guidance, several district courts have effectively applied a
bright-line rule that only the specifically designated “plan administrator”—or the plan itself or its
trustees—can be liable in an ERISA suit for benefits. For example, in Schnur, the court held that
an insurance company could not be liable in an ERISA benefits claim, even though it “apparently
exercised some discretion and authority in making benefits determinations,” because it was not
the designated plan administrator. 621 F. Supp. 2d at 106-07. In Del Greco v. CVS Corp., 354
F. Supp. 2d 381 (S.D.N.Y. 2005), the court noted that “[a]n entity that provides services to a plan
1
The duty to provide summary plan descriptions is likewise placed only on the plan’s “administrator” as defined in
29 U.S.C. § 1002(16)(A). See 29 U.S.C. §§ 1021, 1024; Lee, 991 F.2d at 1010.
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does not become a de facto plan administrator liable under ERISA,” and held that “[s]ince [the
defendant] was not the named plan administrator, [it] could not be sued for denial of benefits.”
Id. at 384; see also Warren Pearl Const. Corp. v. Guardian Life Ins. Co. of America, 639 F.
Supp. 2d 371, 380 (S.D.N.Y. 2009); Stevenson v. Tyco Int’l (US) Inc. Supplemental Executive
Retirement Plan, 2006 WL 2827635, at *4 (S.D.N.Y. 2006).
Several decisions in this circuit, however, have held that a claim for benefits may survive
a motion to dismiss where the complaint alleges that an insurer “actually controlled the
distribution of funds and decided whether or not to grant benefits,” even where that insurer was
not the named plan administrator. American Medical Assoc. v. United Healthcare Corp., 2002
WL 31413668, *6 (S.D.N.Y.2002); see also Sheehan v. Met. Life Ins. Co2002 WL 1424592, at
*2 (S.D.N.Y. June 28, 2002); Cole v. Aetna Life & Cas., 70 F. Supp. 2d 106, 115 (D. Conn.
1999).
This Court finds more persuasive the view of the court in Schnur. That court observed
that it had “considered these authorities and finds that the better view, consistent with the
language of the statute, is that an insurer to an ERISA plan is generally not a proper defendant in
a recovery of benefits claim unless it meets the statutory definition of ‘administrator’ under the
Act.” Schnur, 621 F. Supp. 2d at 109. The Second Circuit has asserted that liability for the
recovery of benefits extends only to the plan and to “administrators and trustees of the plan in
their capacity as such,” Chapman, 288 F.3d at 509, and Crocco appears clear enough in its
conclusion that liability for benefits extends only to those “plan administrators” who meet the
technical definition of 29 U.S.C. §1002(16)(A). Although the Second Circuit may one day wish
to revisit the limitations it has placed on the proper defendants to § 1132(a)(1)(B) benefits
claims, see Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202 (9th Cir. 2011) (en banc)
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(reversing prior precedent and holding that § 1132(a)(1)(B) liability extends to non-administrator
insurance company), that task is not properly before this Court.
The Court is also mindful that in much of the case law supporting its analysis the
designated plan administrator was identified, which is not the case here. See, e.g., Crocco, 137
F.3d at 106, 107-08; Schnur 621 F. Supp. 2d at 106; Del Greco, 354 F. Supp. 2d at 384.
However, it is sufficiently clear from the wording of the Complaint, the plaintiffs’ opposition
brief, and the statements made during oral argument that the plaintiffs are not asserting that
discovery of plan documents would reflect that the defendants meet the ERISA definition of
“plan administrator” to which the Court is adhering. The plaintiffs also have not requested leave
to amend their complaint so as to clearly allege that one or more of the defendants meet that
definition. Rather, the plaintiffs are urging this Court to adopt a different definition of “plan
administrator” that lies outside §1002(16)(A).
The Court declines to do so. Dismissal of these claims is therefore appropriate on the
grounds that a benefits claim under § 1132(a)(1)(B) against a so-called “plan administrator”
must, at a minimum, offer factual allegations that the defendant meets the particular definition of
that term under ERISA’s statutory standards as outlined above.
Given the somewhat unusual posture of this case, however, in which none of the relevant
plan documents have been placed before the Court, a dismissal without prejudice is appropriate
on these claims.2 Although the plaintiffs may have effectively conceded that they do not believe
the plan documents name any of the defendants as the “administrator,” it is somewhat unclear
2
In support of their motion, the defendants have submitted an example agreement between one of the defendants
and one of the assignor’s employers which specifically states that the employer remains the sponsor and
administrator of the self-funded plan at issue. (See Domurad Aff., Ex. B). Since the plaintiffs have not expressly
relied on the terms of this agreement in the complaint—indeed, the plaintiffs’ argument has been that the terms
formally designating the “plan administrator” do not matter—the Court is not certain that it could properly consider
this document as “integral” to the complaint on a 12(b)(6) motion, and that issue has not been adequately briefed.
Cf. Int’l Audiotext Network Inc. v. AT&T, 62 F.3d 69, 71-72 (2d Cir. 1995); Canal+ Image UK Ltd. v. Lutvak, 773
F. Supp. 2d 419, 427 (S.D.N.Y. 2011). Regardless, as the plaintiffs have not properly pled that the defendants are
the named plan administrator, the Court need not consider this document.
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why the defendants did not simply submit evidence containing the identity of the relevant plan
administrators and move for summary judgment. Thus, in an abundance of caution and in light
of many benefits claims underlying the complaint, the Court dismisses the claims for benefits
under § 1132(a)(1)(B) without prejudice.3
Since dismissal of the benefits claims is without prejudice, the Court will address the
defendants’ other proposed grounds for dismissal. The defendants argue that, even setting aside
the issue of the proper definition of “plan administrator,” the plaintiffs’ claims cannot survive
Iqbal/Twombly review because “the benefits claims suffer from complete lack of specificity as
to the terms of the plan applicable to even one of the 63 assignors; the nature of the chiropractic
services that were rendered; and whether such services were covered under the terms of the
particular participant’s plan.” (Defs. Reply Mem. at 6.)
Although the complaint here is no model of clarity, and the plaintiffs seemingly could
have provided some detail regarding the types of services rendered and how those services fell
within the plans’ terms of coverage, the complaint does appear to allege that the relevant benefits
plans provide coverage of chiropractic services rendered by Non-PARS at the UCR rate when
“medically necessary,” meaning “(a) the member has a neuromusculoskeletal disorder; (b) the
medical necessity for treatment is clearly documented; and (c) improvement is documented
within the first two weeks or within 30 days after modification of treatment is there is no
improvement within two weeks.” (Compl. ¶ 35.) The plaintiffs also allege that defendants have
“unreasonably den[ied] plaintiffs’ claim submissions” and “failed to pay valid claims.” (Compl.
¶¶ 50, 60.) The complaint can be read to allege that the plaintiffs have submitted claims for
chiropractic treatment that met the coverage criteria of the plans at issue, and those claims were
improperly denied. Further, the plaintiffs have appended to the complaint the names and policy
3
Neither the parties nor the Court address whether, in a properly pleaded claim for benefits, the plaintiffs would also
be entitled to “coinsurance amounts and interest back to the date their claims were originally submitted.” (Compl. ¶
54.)
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numbers of their patient-assignors, which would make it perfectly easy for the defendants to
ascertain the claims history and plan coverage for each patient from their internal records.
The Court is mindful that a plaintiff should not be able to force a defendant into a fishing
expedition of costly discovery involving multitudes of claims and beneficiaries on the basis of a
poorly pleaded and confusing complaint. However, the law does not require that an ERISA
plaintiff append voluminous materials to their complaint simply to state a valid claim. The Court
would not be inclined to dismiss these claims simply because the complaint does not allege
sufficient facts regarding whether the services offered to these patients were covered by the
terms of the plans. Such a matter would be better left for summary judgment.
The defendants also argue that the plaintiffs have not adequately alleged that they have
exhausted their administrative remedies. “[T]he federal courts--including this Circuit--have
recognized a ‘firmly established federal policy favoring exhaustion of administrative remedies in
ERISA cases.’” Paese v. Hartford Life and Accident Ins. Co., 449 F.3d 435, 443 (2d Cir. 2006)
(quoting Kennedy v. Empire Blue Cross & Blue Shield, 989 F.2d 588, 594 (2d Cir. 1993)).
However, “[d]efendants who give inadequate notice of the right to administratively appeal a
denial of benefits are thus precluded from . . . asserting failure to exhaust administrative
remedies as a defense.” Veltri v. Building Service 32B-J Pension Fund, 393 F.3d 318, 324 (2d
Cir. 2004). Here, the complaint alleges, for example, that “[r]equests to defendants for . . .
instructions on how to initiate standard internal and external appeals . . . have been denied.”
(Compl. ¶ 38.) The Court believes that this allegation is sufficient to survive a motion to dismiss
on exhaustion grounds.
In sum, the Court will dismiss the benefits claims without prejudice on the grounds that
they are not properly brought against “the plan [or] the administrators [or] trustees of the plan in
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their capacity as such.” Leonelli, 887 at 1199. The Court will now turn to the remaining claims
that can be construed as something other than a claim for benefits under § 1132(a)(1)(B).
ii. “Summary Plan Description” Claim
The first cause of action asserts a claim for failing to “provide accurate plan documents in
violation of 29 U.S.C. § 1022.” (Compl. Header Preceding ¶ 43.) Defendants argue that the
plaintiffs withdrew any claim relating to SPDs at a May 28, 2010 conference before Magistrate
Judge Pohorelsky, where plaintiffs’ counsel stated: “I have no problem saying at this point we
have no problem with the summary plan description because we’re not making that claim in the
complaint.” (Transcript of Status Conference before Magistrate Judge Pohorelsky, May 28,
2010, at 20:14-16.) In the plaintiffs’ opposition, they acknowledge that “plaintiffs have
withdrawn that part of the First Cause of Action referring to the summary plan descriptions set
forth in 29 U.S.C. § 1022.” (Pls. Opp. 6.)
Accordingly, any other claim with respect to the SPDs is deemed withdrawn.
iii. Breaches of Fiduciary Duty
The plaintiffs’ second, third, fourth, and sixth causes of action allege breaches of
fiduciary duty under ERISA, specifically, “failure to act in accordance with plan documents in
violation of 29 U.S.C. § 1104(a)(1)(D),” “violating the fiduciary duty of care imposed [by] 29
U.S.C. § 1104(a)(1)(B),” and “violating the fiduciary duty of loyalty imposed by 29 U.S.C. §
[1104(a)(1)].” (Compl. ¶¶ 55-78.) The plaintiffs claim that as a result of these alleged breaches,
they are entitled to “unpaid benefits,” as well as “declaratory and injunctive relief” and “removal
of AETNA as a breaching fiduciary.” (Compl. ¶¶ 64, 71, 78, 88.)
Under ERISA, “a ‘person is a fiduciary with respect to a plan,’ and therefore subject to
ERISA fiduciary duties, ‘to the extent’ that he or she ‘exercises any discretionary authority or
discretionary control respecting management’ of the plan, or ‘has any discretionary authority or
13
discretionary responsibility in the administration’ of the plan.” Varity Corp. v. Howe, 516 U.S.
489, 498 (1996) (quoting 29 U.S.C. § 1002(21)(A)). An ERISA fiduciary has a duty of loyalty,
which requires that he “discharge his duties with respect to a plan solely in the interest of the
participants and beneficiaries.” 29 U.S.C. § 1104(a)(1). An ERISA fiduciary also has a duty of
prudence, which requires that the fiduciary act “with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of a like character and with like
aims.” 29 U.S.C. § 1104(a)(1)(B). ERISA fiduciaries must also act “in accordance with the
documents and instruments governing the plan insofar as such documents and instruments are
consistent with” various ERISA provisions. 29 U.S.C. § 1104(a)(1)(D). The defendants
conceded at oral argument that “[i]n certain respects, they are a fiduciary” under the plans they
service. (Transcript of Oral Argument, at 18:21-22.) The defendants make a persuasive
argument that these plaintiffs have not properly stated a claim for relief under ERISA.
The Court has already dismissed plaintiffs’ claims for benefits under § 1132(a)(1)(B),
and that conclusion holds true even if the claims are styled as breaches of fiduciary duties. See
Varity, 516 U.S. at 512 (noting that § 1132(a)(1)(B) “specifically provides a remedy for breaches
of fiduciary duty with respect to the interpretation of plan documents and the payment of
claims”); Keir v. Unumprovident Corp., 2010 WL 3566878, at *8 (S.D.N.Y. 2010). Thus, the
only other provisions under which the plaintiffs could claim relief for fiduciary breaches are
§ 1132(a)(2) and (a)(3). See Crocco, 137 F.3d at 107 n.2.
ERISA § 1132(a)(2) provides that an “action may be brought . . . by a participant,
beneficiary or fiduciary for appropriate relief under [29 U.S.C. § 1109],” which in turn makes
ERISA fiduciaries who breach their duties “personally liable to make good to [the] plan any
losses to the plan resulting from each such breach, and to restore to such plan any profits of such
14
fiduciary which have been made through use of assets of the plan by the fiduciary,” and which
authorizes “such other equitable or remedial relief as the court may deem appropriate, including
removal of such fiduciary.” 29 U.S.C. § 1109(a). In Massachusetts Mutual Life Insurance Co.
v. Russell, 473 U.S. 134 (1985), the Supreme Court held that the fiduciary duty imposed by §
1109 runs to the plan, not to individual beneficiaries, and that “recovery for a violation of §
[1109] inures to the benefit of the plan as a whole.” Id. at 139; see also id. at 144 (“[T]he entire
text of § [1109] persuades us that Congress did not intend that section to authorize any relief
except for the plan itself.”). Thus, individual beneficiaries can only seek relief under §
1132(a)(2) and § 1109 on behalf of the plan as a whole, not on their own behalf. Lee, 991 F.2d
at 1009 (“Russell therefore bars plaintiffs from suing under Section [1132](a)(2) because
plaintiffs are seeking damages on their own behalf, not on behalf of the Plan.”); Schnur, 621 F.
Supp. 2d at 111-12 (under § 1132(a)(2) “Plaintiff may be entitled to bring suit to enforce
fiduciary duties owed to the Plan and its beneficiaries as a group, but any appropriate monetary
relief is owed to the Plan, not Plaintiff as an individual”).
Here, the complaint speaks only of individual losses to the plaintiffs arising out of
defendants’ alleged actions in failing to pay benefits, placing plaintiffs’ claims into pre-payment
review, and providing plaintiffs with improper notice of the right to appeal denied claims. There
is “no effort to align [the plaintiffs’] cause with that of other Plan participants or beneficiaries or
to suggest that Defendants’ misconduct harmed the Plan as a whole.” McGuigan v. Local
295/Local 851 I.B.T. Employer Group Pension Plan, 2011 WL 3421318, at *3 (E.D.N.Y. 2011);
see Russell, 473 U.S. at 142 n.9 (noting “Congress' intent that actions for breach of fiduciary
duty be brought in a representative capacity on behalf of the plan as a whole”); L.I. Head Start
Child Development Servs v. Economic Opportunity Comm., 634 F. Supp. 2d 290, 298 (E.D.N.Y.
2009) (“Courts have interpreted this provision to mean that in the case of a fixed benefits plan,
15
any recovery for a violation under section [1109] inures to the benefit of the plan as whole, and
thus, such actions must be brought in a representative capacity on behalf of the plan rather than
for the benefit of any particular individual”). Accordingly, to the extent they seek relief under §
1132(a)(2), the plaintiffs’ claims are dismissed.
The plaintiffs also claim to seek “declaratory and injunctive relief related to enforcement
of the plan terms” under § 1132(a)(3), in order “to clarify rights to future benefits or
reimbursements” and “to prevent defendants from not paying Plaintiffs in the future.” (See
Compl. ¶¶ 64, 71, 78; Pls. Opp. at 6.) Under § 1132(a)(3), a participant, beneficiary or fiduciary
may bring an action “(A) to enjoin any act or practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief.” See
Frommert v. Conkright, 433 F.3d 254, 269 n.13 (2d Cir. 2006) (“[C]laims by plan participants
for breach of fiduciary duties arise under § [1132](a)(3).”)
Although styled as requests for equitable relief, however, the plaintiffs are simply
recasting their claims for the provision of benefits. In Varity Corp. v. Howe, 516 U.S. 489
(1996), the Supreme Court noted that §§ 1132(a)(3) and (5), ERISA’s “catchall” provisions, “act
as a safety net, offering appropriate equitable relief for injuries caused by violations that § [1132]
does not elsewhere adequately remedy.” Id. at 512. The Court went on to state that “we should
expect that where Congress provided adequate relief for a beneficiary's injury, there will likely
be no need for further equitable relief, in which case such relief normally would not be
‘appropriate.’” Id. at 515. Thus, courts have consistently refused to order injunctive relief that
has the practical effect of ordering the provision of benefits under the plan, because such relief is
available under § 1132(a)(1)(B). In Frommert, for example, the Second Circuit held that where
plaintiffs essentially seek “recalculation of their benefits consistent with the terms of the Plan,”
such a claim “falls comfortably within the scope of § [1132](a)(1)(B) . . . [and] there is no need .
16
. . to also allow equitable relief under § [1132](a)(3).” 433 F.3d at 270. The court noted that
“[w]hile the plaintiffs seek to expand the nature of their claim by couching it in equitable terms
to allow relief under § 502(a)(3), the gravamen of this action remains a claim for monetary
compensation and that, above all else, dictates the relief available.” Id.; see also Kendall v.
Employees Retirement Plan of Avon Products, 561 F.3d 112, 119 (2d Cir. 2009)(“despite
Kendall's assertions to the contrary, many of Kendall's claims are effectively claims for money
damages outside the scope of § 1132(a)(3)”); Krauss v. Oxford Health Plans, Inc., 517 F.3d 614,
630 (2d Cir. 2008) (“In order to state a claim under ERISA section [1132](a)(3), ‘the type of
relief a plaintiff requests must . . . be equitable.’ Claims for money damages are therefore not
cognizable under [that section].” (quoting Coan v. Kaufman, 457 F.3d 250, 264 (2d Cir.2006));
Gerosa v. Savasta & Co., Inc., 329 F.3d 317, 321 (2d Cir. 2003) (“In determining the propriety
of a remedy, we must look to the real nature of the relief sought, not its label.”) (citations
omitted).
The thrust of the complaint in this case is that the defendants have “failed to follow
proper procedures in denying the [plaintiffs’] claim[s] for benefits, which resulted in an improper
denial of benefits owed . . . under the terms of the Plan.” Biomed Pharmaceuticals, Inc. v.
Oxford Health Plans (N.Y.), Inc., 775 F. Supp. 2d 730, 738 (S.D.N.Y. 2011). “[A]dequate relief
for these claims is plainly available under Section [1132](a)(1)(B).” Id. The fact that the
plaintiffs have currently brought their § 1132(a)(1)(B) claims against the wrong defendant does
not alter the fact that relief was available to them under that section. See Keir, 2010 WL
3566878 at *8 (“The fact that the Plaintiffs have not brought a § [1132](a)(1)(B) claim does not
alter the fact that benefits are the gravamen of Plaintiffs' remaining request for relief and that
redress is available under § [1132](a)(1)(B).”); Schnur, 621 F. Supp. 2d at 112 (also rejecting
fiduciary duty claim against insurer because “claims for damages payable directly to the plan
17
beneficiary must be sought under 29 U.S.C. 1132(a)(1)(B), and not on a breach of fiduciary duty
theory”); Klecher v. Metro. Life Ins. Co., 331 F. Supp. 2d 279, 288 (S.D.N.Y. 2004) (rejecting
plaintiff’s attempt to “repackage her unsuccessful breach of fiduciary duty claim to evade both §
1132(a)(1)(B)’s . . . and § 1132(a)(2)’s requirement[s]”). The plaintiffs certainly should not be
allowed to evade the requirements of § 1132(a)(1)(B), including the rules regarding proper
defendants, simply by parroting the language of § 1132(a)(3). Accordingly, the plaintiffs’ vague
requests for declaratory and injunctive relief under § 1132(a)(3) are dismissed.
Finally, the plaintiffs request the defendants’ “removal as breaching fiduciary,” also
purportedly under § 1132(a)(3). As an initial matter, in claiming that the Court should remove a
fiduciary, the plaintiffs appear to be invoking language from § 1132(a)(2). The Court has
already held, supra, that because the plaintiffs are not acting on behalf of the plan as a whole,
they are not entitled to relief under that provision. The plaintiffs cite to no authority whereby a
court may order the removal of a fiduciary under § 1132(a)(3) on behalf of individual plan
beneficiaries—let alone with respect to several dozen benefit plans at once. Indeed, as the
defendants point out, it would seem that the employers and plans entities would be necessary
parties to any such action. The plaintiffs have not made any arguments in support of this
requested relief in their opposition papers, and thus the claim must be dismissed.
In fact, the plaintiffs have made no effort to clarify any of the equitable relief they are
seeking, but rather focus their briefing almost entirely on their claims for past benefits. “[I]t is
not for the Court to speculate as to what declaratory or injunctive relief” a represented party is
seeking under this complex statutory scheme. Biomed Pharmaceuticals, 775 F. Supp. 2d at 736.
The Court therefore need not consider hypothetical circumstances under which an entity in the
defendants’ position might be liable for some form of equitable relief under § 1132(a)(3), as the
plaintiffs have not articulated any such claim here.
18
The Court dismisses the claims for equitable relief in Counts Two through Six of the
complaint. To the extent the allegations in those counts are relevant to a claim for benefits under
§ 1132(a)(1)(B) they are dismissed without prejudice as provided above.
iv. “Full and Fair Review”
The fifth cause of action alleges that the defendants denied the plaintiffs a “full and fair
review” of their claims under 29 U.S.C. § 1133. As described previously, the plaintiffs allege
that the defendants “placed plaintiffs’ claims into pre-payment review, sent onerous and
unnecessary questionnaires . . . to unsuspecting patients, provided improper notice of the right to
review of denied claims, made appeals of valid claims futile, and ultimately failed to pay valid
claims.” (Compl. ¶63.) The plaintiffs also allege that the defendants “fail[ed] to disclose the
‘specific reasons’ for benefits denials,” “fail[ed] to disclose data and/or methodology used to
determine . . . reimbursement,” and “provid[ed] boilerplate explanations, if any at all, for claim
denial.” (Compl. ¶¶ 69, 82.)
Section 1133 requires “every employee benefit plan” to “provide adequate notice in
writing” regarding the specific reasons for benefits denials, and to “afford a reasonable
opportunity to any participant whose claim for benefits has been denied for a full and fair review
by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1133.
Allegations that the defendant has “mishandled” benefits claims “through nondisclosure,
misleading statements, and untimely responses” are appropriately characterized as claims for a
full and fair review under § 1133. Krauss, 517 F.3d at 630. “A full and fair review concerns a
beneficiary's procedural rights, for which the typical remedy is remand for further administrative
review.” Id.; see also Pastore v. Witco Corp. Severance Plan, 196 Fed. App’x 18, 21 (2d Cir.
2006) (remedy for inadequate explanation of decision to deny benefits is remand (citing Quinn v.
Blue Cross and Blue Shield Ass’n, 161 F.3d 472, 477 (7th Cir. 1998)). Here, however, the
19
plaintiffs make clear that they are not seeking to have their claims remanded, because they argue
remand would be “futile.” (Compl. ¶ 84; Pls. Opp. at 11.)
Courts have in some instances held that where remand would be futile, it is not necessary.
However, futility has seemingly been applied in this context to mean that remand is not
necessary because the claimant is clearly not entitled to benefits. See Krauss, 517 F.3d at 630;
Giordano v. Thomson, 564 F.3d 163, 167 (2d Cir. 2009); Wagner v. Metropolitan Life Ins. Co.,
2011 WL 2638143, *18 (S.D.N.Y. 2011). The Court is aware of no comparable authority, and
the parties have cited none, suggesting that in such circumstances § 1133 creates a remedy for
damages against the insurer. See Smith v. Champion Inter. Corp., 220 F. Supp. 2d 124, 128-29
(D. Conn. 2002) (“Defendant correctly notes that § 1133 does not give rise to a private cause of
action for compensatory or punitive relief. . . . [T]he usual remedy for a violation of § 1133
would be equitable in nature, such as remanding plaintiffs' claims for benefits to the LTD Plans
administrator or fiduciary for a ‘full and fair’ review.”)
Accordingly, because the plaintiffs seek monetary relief, rather than a remand, the Court
concludes that such a cause of action is not tenable. The claim for “full and fair review” is
therefore dismissed. However, the Court will dismiss this claim without prejudice, given that the
defendants appear to concede that, were the plaintiffs to seek a remand remedy, one or more of
them might be the proper party to such an action in their capacity as “designee[s]” of the plan
administrator. (Defs. Mem. at 24.)
B. State Law Cause of Action
The seventh and final cause of action alleges a claim for “tortious interference with
business relations.” (Compl. ¶¶ 91-94.) The plaintiffs allege that in preemptively denying
claims and seeking pre-payment review the defendants interfered with their ability to treat and
establish business relations with patients and other sources of referrals. Defendants argue that
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this claim is preempted by ERISA and that, in any event, the amended complaint fails to
establish a cause of action under state law.
Both the parties have requested that, even if the Court decides that the state claim is not
ERISA preempted, it nevertheless retain supplemental jurisdiction over this claim under 28
U.S.C. § 1367 and decide it on the merits of New York state law. See Mauro v. Southern New
England Telecomm., Inc., 208 F.3d 384, 388 (2d Cir. 2000) (district court did not err in
exercising supplemental jurisdiction over state law claims even after dismissing federal claims
because “[d]eclining jurisdiction over the state-law claims in this case would have furthered
neither fairness nor judicial efficiency, nor did those causes of action require the district court to
resolve any novel or unsettled issues of state law”); Kashelkar v. Bluestone, 2007 WL 2809874,
at *2 (S.D.N.Y. 2007) (“[I]t is appropriate to exercise supplemental jurisdiction to rule on the
merits of Plaintiff's state claims notwithstanding the dismissal of the federal claims, because all
of the claims arise from the same set of operative facts . . . and because the interests of justice
would not be served by requiring Defendants oppose those claims in a new state court
litigation.”).
i. ERISA Preemption
According to its preemption clause, “[ERISA] shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a).
As the Supreme Court has stated, “any state-law cause of action that duplicates, supplements, or
supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to
make the ERISA remedy exclusive and is therefore pre-empted.” Aetna Health Inc. v. Davila,
542 U.S. 200, 209 (2004). Accordingly, “[a] state common law action which merely amounts to
an alternative theory of recovery for conduct actionable under ERISA is preempted.” Diduck v.
Kaszycki & Sons Contractors Inc., 974 F.2d 270, 288 (2d Cir.1992), abrogated on other grounds,
21
Gerosa, 329 F.3d at 322-23, 327-28. ERISA's preemption provision does not, however,
foreclose every state action that has some effect on an ERISA plan. See, e.g., Geller v. County
Line Auto Sales, Inc., 86 F.3d 18, 23 (2d Cir.1996) (“The plaintiffs' common law fraud claim,
which seeks to advance the rights and expectations created by ERISA, is not preempted simply
because it may have a tangential impact on employee benefit plans.”); Connecticut General Life
Ins. v. Pataki, 1997 WL 128492, at *4 (S.D.N.Y. 1997) (finding no preemption because “the
[ERISA-governed] plan [is] only the context in which this garden variety [state law cause of
action] . . . occurred”).
To the extent that the plaintiffs seek “unpaid benefits” as relief for the tortious
interference claim, they are clearly preempted. (See Compl. ¶94.) The Supreme Court has
emphasized that where plaintiffs “bring suit only to rectify a wrongful denial of benefits
promised under ERISA-regulated plans,” such actions are preempted by ERISA’s section 1132.
Davila, 542 U.S. at 214; see Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987) 56 (“[T]he
civil enforcement scheme of ERISA makes clear its intention that all suits brought by
beneficiaries or participants asserting improper processing of claims under ERISA-regulated
plans be treated as federal questions governed by § [1132](a).”); Aetna Life Ins. Co. v. Borges,
869 F.2d 142, 146 (2d Cir. 1989) (“[L]aws that have been ruled preempted are those that provide
an alternative cause of action to employees to collect benefits protected by ERISA.”).
Furthermore, even as to the plaintiffs’ claims for damages beyond benefits—such as
damages caused by the loss of business revenue—the cause of action alleged in this case still
“relate[s] to” the employee benefits plans at issue. The plaintiffs are in essence alleging that the
defendants improperly reviewed and denied their claims, which were submitted under ERISAgoverned plans, for the purpose of discouraging Aetna members from seeking chiropractic
treatment at Non-PAR providers. To find the defendants liable in this context would necessarily
22
require analyzing the propriety of the actions they took in processing claims for benefits under
the terms of the plans, thus clearly implicating the arena of ERISA. See Stevenson v. Bank of
New York Co., Inc., 609 F.3d 56, 61 (2d Cir. 2010) (noting that considerations in preemption
analysis include whether resolution of the claim “require[s] a court to review the propriety of [a]
. . . determination of benefits under such a plan” or would effect “the actual administration” of a
plan). Although styled as interference into the relationship between the chiropractors and their
patients, the claim is still fundamentally linked to the denials of benefits and the defendants’
methods of handling claims. Accordingly, “interpretation of the terms of [the] benefit plans
forms an essential part” of the cause of action, and potential liability would be inextricably
bound up with “the particular rights and obligations established by” those plans and by ERISA
itself. Davila, 542 U.S. at 213. The Court does not here hold that tortious interference claims
will always be preempted by ERISA. In this case, since the plaintiffs’ claim is targeted at the
same substantive and procedural concerns that ERISA addresses, it is preempted.
ii. Validity Under New York Law
Even if the Court were to find that the tortious interference claim were not preempted, it
clearly fails under state law. The plaintiffs concede that they have not pleaded interference with
existing contractual relations, but rather “tortious interference with prospective business
relations.” (Pls. Opp. at 12) (emphasis added). To make out such a claim under New York law,
a plaintiff must prove that “(1) it had a business relationship with a third party; (2) the defendant
knew of that relationship and intentionally interfered with it; (3) the defendant acted solely out of
malice, or used dishonest, unfair, or improper means; and (4) the defendant's interference caused
injury to the relationship.” Carvel Corp. v. Noonan, 350 F.3d 6, 17 (2d Cir.2003). In all but the
most egregious circumstances, “dishonest, unfair, or improper means” must amount to
misconduct that constitutes either a crime or an independent tort. See Carvel Corp. v. Noonan, 3
23
N.Y.3d 182, 190-91 (2004). If the conduct at issue is not “criminal or independently tortious,” a
plaintiff must typically prove that the “defendant engage[d] in conduct for the sole purpose of
inflicting intentional harm.” Id. at 190; see M.V.B. Collision. Inc. v. Allstate Ins. Co., 728 F.
Supp. 2d 205, 215 (E.D.N.Y. 2010) (“In the years since Carvel, courts have been reluctant to
find non-criminal or non-tortious conduct nonetheless sufficiently malicious or culpable to
satisfy the ‘wrongful means’ element.”); Friedman v. Coldwater Creek Inc., 551 F. Supp. 2d 164,
170 (S.D.N.Y. 2008). A motive of “normal economic self-interest” is inconsistent with a sole
purpose of inflicting intentional harm. Carvel Corp., 3 N.Y.3d at 190. Moreover, the New York
Court of Appeals has emphasized that the type of wrongful economic pressure that may give rise
to tortious interference liability must be “directed not at the plaintiff itself, but at the party with
which the plaintiff has or seeks to have a relationship.” Id. at 192.
Here, the plaintiffs’ allegations themselves show that, at most, the defendants acted to
further their own economic self-interest by paying out fewer claims or encouraging patients to
use in-network providers. (See, e.g., Compl. ¶ 77.) The plaintiffs do not argue that the
defendants’ conduct was somehow criminal. In their opposition papers, they cursorily assert that
the defendants’ conduct may have amounted to the tort of “fraud or misrepresentation,” but make
no effort to support that claim. In any event, the complaint does not establish a claim for
common law fraud, as there are no allegations that the defendants misrepresented a material fact
or that the plaintiffs relied on such a misrepresentation. See Abu Dhabi Commercial Bank v.
Morgan Stanley & Co. Inc., 651 F.Supp.2d 155, 170 (S.D.N.Y. 2009) (reciting elements of
common law fraud).
Furthermore, most of the conduct that the plaintiffs are contesting, namely the manner in
which the defendants processed the plaintiffs’ benefits claims, was only directed at the plaintiffs
themselves. The complaint itself implies that the plaintiffs’ patients have not been harmed at all:
24
instead, the plaintiffs rendered the chiropractic services and then assumed the obligations of
obtaining payment directly from the insurance companies. The patients do not appear to have
incurred any additional obligations or hardships beyond their normal co-payment. The only
conduct directed at the patients were the follow-up questionnaires that allegedly required the
patients “to complete answers to lengthy interrogatories designed to impute the good reputation
of the plaintiffs and insinuate disparaging remarks about them.” (Compl. ¶ 37.) The plaintiffs
do not argue, and the complaint does not establish, that these questionnaires constitute the tort of
defamation, and requiring patients to fill out interrogatories concerning the basis for treatment
does not rise to the level of “wrongful means” that would constitute tortious interference.
In sum, the Court holds that the plaintiffs’ state law claim is preempted. Alternatively, it
fails as a matter of law, and is dismissed.
C. Conclusion
Accordingly, the defendants’ motion to dismiss the complaint is granted in full. This
dismissal is with prejudice, with the exception of the plaintiffs’ claims for benefits under 29
U.S.C. § 1132(a)(1)(B) and their claim for “full and fair review,” which are dismissed without
prejudice. The Clerk of Court is directed to enter judgment and close this case.
SO ORDERED.
Dated: Brooklyn, New York
March 12, 2012
___________/s/______________
Hon. Carol B. Amon
Chief United States District Judge
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