McCulloch Orthopedic Surgical Services,PLLC et al v.United Healthcare,et al

Filing 65

OPINION AND ORDER re: 8 MOTION to Remand filed by McCulloch Orthopedic Surgical Services, PLLC, 30 MOTION to Strike Document No. 25 filed by United Healthcare Insurance Company of New York, 42 MOTION to Remand to State Court filed by McCulloch Orthopedic Surgical Services, PLLC, 3 MOTION to Dismiss filed by United Healthcare Insurance Company of New York, 55 LETTER MOTION for Conference re: 54 Declaration in O pposition to Motion, 53 Memorandum of Law in Opposition to Motion addressed to Judge J. Paul Oetken from John T. Seybert dated 12/31/2014 filed by United Healthcare Insurance Company of New York: For the foregoing reasons, Mc Culloch's motion to remand the case to state court is DENIED and Oxford's motion to dismiss the Amended Complaint is GRANTED. The Clerk of Court is directed to close the motions at docket numbers 3, 8, 30, 42, and 55, and to close this case. (Signed by Judge J. Paul Oetken on 6/8/2015) (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------X
:
MCCULLOCH ORTHOPEDIC SURGICAL
:
:
SERVS., PLLC, a/k/a DR. KENNETH E.
MCCULLOCH,
:
:
Plaintiff,
:
-v:
:
UNITED HEALTHCARE INS. CO. OF
:
:
NEW YORK, a/k/a OXFORD (PATIENT
MARY BETH YARROW),
:
Defendant. :
-------------------------------------------------------------X

14-CV-6989 (JPO)
OPINION AND ORDER

J. PAUL OETKEN, District Judge:
Plaintiff McCulloch Orthopedic Surgical Services, PLLC, the practice of Dr. Kenneth E.
McCulloch (“McCulloch”), brought an action for promissory estoppel against a party identified
in the case caption as “United Healthcare Insurance Company of New York a/k/a Oxford (Patient
Mary Beth Yarrow)” (“Oxford”) in New York Supreme Court for New York County. Oxford
removed the action to this Court. McCulloch moves to remand and Oxford moves to dismiss.
For the reasons that follow, McCulloch’s motion is denied and Oxford’s motion is granted.
I.

Background
McCulloch performed arthroscopic knee surgery on Mary Beth Yarrow (“the Patient”) on

February 23, 2012. (See Dkt. No. 38, Amended Complaint ¶ 7 [“Amended Complaint”].) Prior
to performing the surgery, on February 15, 2012, McCulloch’s staff “contacted [Oxford] and was
assured that the Patient was covered by a health care plan administered by [Oxford], that such
plan provided for payment to out-of-network physicians, that the plan covered the surgical
procedures that [McCulloch] would be providing for the Patient, and that [Oxford] would
reimburse [McCulloch] at 70% of UCR [usual, customary, and reasonable] rates for such

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procedures.” (Id. ¶ 3.) After the surgery, McCulloch billed Oxford $34,024, allegedly the UCR
rate for the procedures it had performed. (Id. ¶ 8.) After certain “deductions and offsets,”
McCulloch claimed that Oxford should pay him $15,479.80 for the surgery. (Id. ¶ 10.) Oxford
paid $641.66. (Id.)
McCulloch, noting that $641.66 is “less than what [Oxford] spends on a set of tires for
the limousine of its CEO,” sued Oxford in New York Supreme Court on July 3, 2014. (Dkt. No.
4, Ex. 1; Dkt. No. 23, McCulloch’s Reply Memorandum of Law in Further Support of its First
Motion to Remand, at 3.) On July 15, 2014, McCulloch served a summons and complaint on the
New York Department of Financial Services (“NYDFS”), which insurers must appoint as agent
for service of process under New York Insurance Law § 1212. NYDFS forwarded the summons
and complaint to CT Corporation, Oxford’s designated agent for service of process, by regular
mail. CT Corporation received the papers on July 28, 2014. Oxford filed a notice of removal 30
days later, on August 27, 2014. (Dkt. No. 1.)
Shortly thereafter, Oxford filed a motion to dismiss the Complaint and McCulloch filed a
motion to remand the case to state court. (Dkt. Nos. 3, 8.) After both motions were fully
briefed, McCulloch—without seeking leave of the Court or opposing counsel—filed a putative
amended complaint. (Dkt. No. 38.) Although the filing was procedurally improper, the Court
granted McCulloch leave to amend nunc pro tunc and accepted the filing. (Dkt. No. 41.)
McCulloch again moved to remand the case to state court or, in the alternative, to dismiss the
Amended Complaint without prejudice. (Dkt. No. 42.) Oxford renewed its motion to dismiss.
(Dkt. No. 51.)
II.

Motion to Remand
McCulloch moves to remand this case to state court on the grounds that this Court lacks

subject matter jurisdiction and that Oxford’s removal of the case to federal court was untimely.
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Oxford moves to dismiss on the ground that McCulloch’s claims, although styled as claims for
promissory estoppel, are completely preempted by section 502(a) of the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a), and also contends that the
removal was timely.
A.

Legal Standard

In order to remove a civil action to federal court, a defendant must file a notice of
removal “within thirty days after the receipt by the defendant, through service or otherwise, of a
copy of the initial pleading setting forth the claim for relief upon which such action or
proceeding is based.” 28 U.S.C. § 1446(b). This statute is “strictly construed against removal
and all doubts should be resolved in favor of remand.” Beatie & Osborn LLP v. Patriot Sci.
Corp., 431 F. Supp. 2d 367, 383 (S.D.N.Y. 2006) (internal quotation marks omitted).
Under 28 U.S.C. § 1441(a), a defendant may remove from state court to federal court
“any civil action . . . of which the district courts of the United States have original jurisdiction.”
In most cases, a defense that plaintiff’s claims are preempted by federal law will not confer
federal question jurisdiction under the well-pleaded complaint rule. See Beneficial Nat’l Bank v.
Anderson, 539 U.S. 1, 6 (2003). However, “[w]hen a federal statute wholly displaces the statelaw cause of action through complete pre-emption, the state claim can be removed to federal
court.” Arditi v. Lighthouse Int’l, 676 F.3d 294, 298 (2d Cir. 2012) (internal quotation marks
omitted). In order for a defendant to show that a claim is completely preempted by ERISA, the
defendant must demonstrate not only that “the state law cause of action is preempted by ERISA”
under the express preemption provision contained in ERISA section 514(a), 29 U.S.C. § 1144(a),
but also that “th[e] cause of action is ‘within the scope’ of the civil enforcement provisions of
ERISA § 502(a), 29 U.S.C. § 1132(a).” Plumbing Indus. Bd. v. E.W. Howell Co., 126 F.3d 61,
66 (2d Cir. 1997) (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63–67 (1987)); see also
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Sonoco Prods. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 371 (4th Cir. 2003) (“The fact
that a state law claim is ‘preempted’ by ERISA—i.e., that it conflicts with ERISA’s exclusive
regulation of employee welfare benefit plans—does not . . . provide a basis for removing the
claim to federal court. The only state law claims properly removable to federal court are those
that are ‘completely preempted’ by ERISA’s civil enforcement provision, § 502(a).”); Towne v.
Nat’l Life of Vt., Inc., 130 F. Supp. 2d 604, 608 (D. Vt. 2000) (“[T]he fact that a claim may
ultimately be pre-empted by ERISA § 514(a) can never—standing alone—give federal courts
removal jurisdiction over a case. At least one of the claims asserted by the plaintiff must be
completely pre-empted under ERISA § 502(a) in order for removal to federal court to be
proper.”).
The Supreme Court has clarified that an action is “within the scope” of § 502(a) “if an
individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and
where there is no other independent legal duty that is implicated by a defendant’s actions.”
Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004); see also Towne, 130 F. Supp. 2d at 607
(noting that only “claims that can properly be characterized as seeking to recover benefits,
enforce rights, or clarify rights to future benefits under a plan covered by ERISA are said to be
‘completely preempted” (citing Metro. Life, 481 U.S. at 62–67)).
B.

Discussion

McCulloch moves to remand the case to state court on the grounds that removal was
untimely and that the Court lacks jurisdiction over the case.
1.

Timeliness

The parties agree that if the 30-day period for removal runs from the date the
Superintendent of Financial Services received the Complaint, then the notice is untimely and the
case must be remanded; if the period runs from the date Oxford’s actual agent received the
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pleading, the removal is timely. Thus, the first question is when the clock starts running for
removal.
Although the Second Circuit has not ruled on this question, the weight of authority
(both within the circuit and elsewhere) holds that actual receipt by the defendant (or the
defendant’s actual agent) starts the clock for removal. See, e.g., Fernandez v. Hale Trailer Brake
& Wheel, 332 F. Supp. 2d 621, 624 (S.D.N.Y. 2004); Cygielman v. Cunard Line Ltd., 890 F.
Supp. 305, 307 (S.D.N.Y. 1995); see also CHARLES ALAN WRIGHT, ET AL., 14C FEDERAL
PRACTICE & PROCEDURE § 3731 & n.23 (4th ed. 2013) (collecting cases). And that makes sense,
because “statutory agents are not true agents but merely are a medium for transmitting the
relevant papers.” WRIGHT ET AL., supra, § 3731. Therefore, the Court concludes that the 30-day
period began on July 28, 2014, when Oxford’s true agent—CT Corporation—received the
pleadings. Removal was timely. 1
2.

Which Complaint?

McCulloch contends that the Court should not consider certain attachments to the original
Complaint in evaluating the motion to remand because the Amended Complaint has superseded
the Complaint and rendered the latter a “dead letter.” (Dkt. No. 43, Plaintiff’s Memorandum of
Law in Support of Its Second Motion to Remand at 2.) These attachments include (1) a benefits
claim form, (2) a letter from Oxford to McCulloch explaining the terms of the Patient’s
healthcare plan and detailing which procedures were authorized under that plan, and (3) a letter

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McCulloch’s argues that the “mailbox rule” of Federal Rule of Civil Procedure 6(d) requires
that Oxford be deemed to have received the complaint on July 25, 2014, three days after NYDFS
mailed it. (Dkt. No. 43, Memorandum of Law in Support of McCulloch’s Second Motion to
Remand, at 12 (citing Fed. R. Civ. P. 6(d)).) This argument is unmeritorious because Rule 6(d)
does not apply to the 30-day deadline for filing a notice of removal. That period is triggered
when defendant actually receives the initial pleading, not when the pleading is mailed. See, e.g.,
Daniel v. United Wis. Life Ins. Co., 84 F. Supp. 2d 1353, 1355–56 (M.D. Ala. 2000) (Thompson,
J.) (citing 28 U.S.C. § 1446(b)).
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from Oxford to McCulloch explaining that Oxford no longer makes direct payments to out-ofnetwork physicians. (See Dkt. No. 4, Ex. A.)
It is settled law that a motion to remand is evaluated on the basis of the allegations as
pleaded at the time of removal. Vera v. Saks & Co., 335 F.3d 109, 116 n.2 (2d Cir. 2003) (per
curiam). Post-removal amendments to the pleadings should not be considered. Pullman Co. v.
Jenkins, 305 U.S. 534, 537 (1939) (“The second amended complaint should not have been
considered in determining the right to remove, which in a case like the present one was to be
determined according to the plaintiffs’ pleading at the time of the petition for removal.”) Thus,
although the Amended Complaint is operative for all other purposes, for the purposes of the
motion to remand, the Court considers only the original Complaint.2
3.

ERISA Preemption

A “health care provider’s [state law] claims against a benefit plan established pursuant to
[ERISA]” are, under certain circumstances, “completely preempted by federal law under the
two-pronged test for ERISA preemption established in” Davila, 542 U.S. 200. Montefiore Med.
Ctr. v. Teamsters Local 272, 642 F.3d 321, 324 (2d Cir. 2011). In the Second Circuit, Davila’s
first prong, which asks whether the plaintiff could have brought her state law claim as an ERISA
§ 502(a)(1)(B) claim, is broken into two steps. Id. at 328. First, the Court asks “whether the
plaintiff is the type of party that can bring a claim pursuant to § 502(a)(1)(B).” Id. (emphasis
omitted). Second, the Court asks “whether the actual claim that the plaintiff asserts can be
construed as a colorable claim for benefits pursuant to § 502(a)(1)(B).” Id. (emphasis omitted).

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Even if the Court considered the remand motion on the basis of the Amended Complaint, the
Court could still consider the attachments to the original Complaint because “it [i]s proper for the
District Court to look beyond the mere allegations of the complaint to the claims themselves
(including supporting documentation) in conducting its analysis.” Montefiore Med. Ctr. v.
Teamsters Local 272, 642 F.3d 321, 331 (2d Cir. 2011).
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At Davila’s second prong, the Court asks “whether there is an independent legal duty that is
implicated by the defendant’s actions.” Id. (internal brackets and quotation marks omitted).
a.

Davila Prong One, Step One

The first question is whether Oxford is the type of party that can bring an ERISA
§ 502(a)(1)(B) claim. McCulloch contends that it is not the type of party that can bring a
§ 502(a)(1)(B) claim because it cannot bring suit under ERISA. Oxford, in response, argues that
McCulloch is the type of party that can assert an ERISA claim because it received an assignment
of benefits from the Patient and, therefore, has a derivative right to sue as a beneficiary of the
Patient’s healthcare plan.
Attachment B to McCulloch’s Complaint is a health insurance claim form on which the
checkbox labeled “YES” for the question “Accept Assignment?” is marked affirmatively. (Dkt.
No. 4, Declaration of John T. Seybert, Ex. A, [“Complaint”], Attachment B.) In other words,
McCulloch sent Oxford a claim form on which McCulloch purported to have received an
assignment of benefits from the Patient. McCulloch argues that, because the benefits plan
forbade assignments to out-of-network providers like McCulloch, it does not have the derivative
ability to sue and, therefore, is not the type of party who can bring an ERISA claim. Oxford does
not dispute that the assignment was invalid.
Nonetheless, McCulloch’s argument is unavailing because it conflates two distinct
inquires. The relevant inquiry asks only whether the entity bringing suit is the “type of party”
that can sue under ERISA § 502(a)(1)(B), and the Second Circuit has held that, in general,
parties with assignments of benefits have a derivative ability to sue under ERISA. See
Montefiore, 642 F.3d at 328-29 (holding that in-network providers who receive valid
assignments of benefits can sue under ERISA § 502(a)(1)(B)); see also Simon v. Gen. Elec. Co.,
263 F.3d 176, 177–78 (2d Cir. 2001) (stating that “healthcare providers to whom a beneficiary
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has assigned his claim in exchange for health care” may sue under ERISA); McCulloch
Orthopaedic Surgical Servs., PLLC v. Aetna U.S. Healthcare, No. 15-CV-2007 KBF, 2015 WL
2183900, at *5 (S.D.N.Y. May 11, 2015). The fact that McCulloch’s purported assignment may
have been ineffective under the terms of the benefits plan does not mean that McCulloch is not
the type of entity that has the ability to sue under ERISA. See Kennedy v. Connecticut Gen. Life
Ins. Co., 924 F.2d 698, 700 (7th Cir. 1991) (“[A]n assignee cannot collect unless he establishes
that the assignment comports with the plan. But . . . subject-matter jurisdiction depends on an
arguable claim, not on success.); Neuroaxis Neurosurgical Associates, PC v. Costco Wholesale
Co., 919 F. Supp. 2d 345, 351 (S.D.N.Y. 2013) (Cote, J.) (relying on, inter alia, Kennedy to hold
that invalid assignments confer standing to sue); see also City of Hope Nat. Med. Ctr. v.
HealthPlus, Inc., 156 F.3d 223, 228 (1st Cir. 1998) (holding that the district court erred in
“den[ying Plaintiff] standing to sue because it found the assignment . . . invalid.”). McCulloch
is, therefore, the type of party that can assert an ERISA § 502(a)(1)(B) claim.
b.

Davila Prong One, Step Two

The second question is whether McCulloch’s claims present a “colorable” claim for
benefits under ERISA § 502(a)(1)(B). Montefiore, 642 F.3d at 328. A crucial component of this
question is whether McCulloch’s claims concern a “right to payment,” rather than the “amount
of payment.” Id. at 331. Importantly—and contrary to McCulloch’s repeated insistence—the
mere fact that McCulloch’s claims might not succeed under ERISA does not mean that they are
not preempted by ERISA. The claim need only be “colorable.” Id.
McCulloch’s claims concern a “right to payment.” Id. In Montefiore, the court explained
the
common distinction in the case law between claims involving the “right to
payment” and claims involving the “amount of payment”—that is, on the one
hand, claims that implicate coverage and benefits established by the terms of the
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ERISA benefit plan, and, on the other hand, claims regarding the computation of
contract payments or the correct execution of such payments. The former are said
to constitute claims for benefits that can be brought pursuant to § 502(a)(1)(B),
while the latter are typically construed as independent contractual obligations
between the provider and . . . the benefit plan.
Id.
Here, McCulloch’s claims implicate the coverage and benefits established by the terms of
the plan because the claims are, in fact, based on Oxford’s alleged representations about the
plan. (See Complaint ¶¶ 4–5 (“At all times relevant, the plan which Defendant administered and
which covered Ms. Yarrow (a) provided for payment of benefits to out-of-network providers, (b)
at the usual and customary rates or at a percentage of such rates, and (c) the plan covered the
procedures that Plaintiff performed for Ms. Yarrow. In the instance described hereafter, prior to
operating on Ms. Yarrow, Plaintiff and/or his staff verified the elements set forth in the
paragraph above. Furthermore, Plaintiff’s staff was told that the reimbursement rate would be
70% of the usual and customary rates for the procedures that were proposed for Ms. Yarrow.”
(emphasis added).)
Indeed, the letter Oxford sent to McCulloch—which letter McCulloch itself specifically
cites as evidence of Oxford’s promissory representations—shows that Oxford denied
McCulloch’s requests for payments because of the terms of the plan. Compare Complaint,
Attachment A (letter explaining that payment is “based on . . . [the t]erms, conditions,
exclusions, and limitations of the Member’s health benefits plan . . . .”), with Complaint, at 2
(“On February 15, 2012, prior to performing the surgery on Ms. Yarrow, Plaintiff contacted
Defendant and was assured that the surgery procedures were covered by the Defendant’s plan,
that Ms. Yarrow was a covered plan participant or beneficiary, and that Defendant would pay
Plaintiff as an out-of-network provider as per the above provisions for this procedure.
Specifically, Defendant submitted a Requested Services Summary in which it approved two out
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of the three procedures to be provided by Plaintiff.”) (emphasis added), and Montefiore, 642
F.3d at 331 (finding that a claim is a “right to payment” claim where it was denied because
“services were not covered under the plan” (internal brackets omitted)), and McCulloch, 2015
WL 2183900, at *6 (“Indeed, when [McCulloch] telephoned Aetna to ascertain coverage, it
received no more than a summary of the terms of the plan as it applies to out-of-network
providers; it was told (1) ‘that the Patient was covered by a health care plan administered’ by
Aetna, (2) ‘that such plan provided for payment to out-of-network physicians’ like plaintiff, (3)
‘that the plan covered the surgical procedures that Plaintiff would be providing,’ and (4) ‘that
Defendant would reimburse Plaintiff at 70% of usual and customary reasonable rates for such
procedures.’) (citing McCulloch’s Complaint against Aetna).).
c.

Davila Prong Two

The final question is whether Oxford’s actions implicate a legal duty independent of its
obligations under the benefits plan. McCulloch argues that the phone call with Oxford’s
representative, on which McCulloch contends it reasonably relied, occasioned an independent
legal duty under the common law of promissory estoppel. Even assuming that McCulloch states
a claim for promissory estoppel, its argument is squarely foreclosed by Second Circuit precedent.
Montefiore, 642 F.3d at 332 (specifically rejecting the precise contention that “verbal
communications . . . gave rise to an independent legal duty.”).
Still, it is worth noting that several cases with similar facts have concluded that there is
no ERISA preemption where a confirmatory communication could create a basis for an
independent legal duty, even if it is evident that the communication is plan-related. See
Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health & Welfare Trust Fund, 538
F.3d 594, 599 (7th Cir. 2008); In Home Health, Inc. v. Prudential Insurance Co. of America, 101
F.3d 600, 604–07 (8th Cir.1996); Hospice of Metro Denver v. Group Health Insurance of
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Oklahoma, Inc., 944 F.2d 752 (10th Cir. 1991); Oak Brook Surgical Centre, Inc., v. Aetna, Inc.,
863 F. Supp. 2d 724, 730 (N.D. Ill 2012) (“[I]f an insurer incorrectly tells a provider ‘the plan
says that the moon is made of green cheese,’ the provider’s misrepresentation claim turns on the
representation made by the insurer. If the representation is false, the provider may be able to
prevail on a misrepresentation claim regardless of what the plan actually says as the plan’s
language is irrelevant.”). The Ninth Circuit, in Marin Gen. Hosp. v. Modesto & Empire Traction
Co., 581 F.3d 941 (9th Cir. 2009), held that a confirmatory phone call created an independent
legal duty. And the Second Circuit cited Marin in Montefiore. 642 F.3d at 328. Nonetheless, it
is clear that the Second Circuit specifically rejected the argument that confirmatory phone calls
create an independent legal duty. This Court is, accordingly, bound to do the same. See also
McCulloch, 2015 WL 2183900, at *6 n.6.
McCulloch’s claim is, therefore, completely preempted by ERISA § 502(a)(1)(B).
d.

McCulloch’s Other Arguments

McCulloch offers several additional arguments regarding its motion to remand. These
arguments lack merit. First, McCulloch argues that the Court has “discretionary power to
remand.” (Memorandum of Law at 2.) McCulloch’s argument is based on the contention that
“there are no longer any federal claim [sic] asserted in [this] action.” (Id.) As the previous three
sections made clear, this contention is false. Even if it were true, McCulloch has offered no
persuasive reason why the Court should exercise any discretionary power it might have in
McCulloch’s favor.
Second, McCulloch asks that the Court dismiss the case without prejudice so that it can
refile the case in state court. McCulloch offers no support for this argument. Even assuming the
Court has discretion to dismiss the case without prejudice, McCulloch has offered no reason why

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it should do so—apart from noting that the many “motions [pending before the Court] do not
have to be decided if the Court . . . dismisses [the Amended Complaint] without prejudice.” (Id.)
McCulloch’s motions to remand and to dismiss the case without prejudice are denied.3
III.

Motion to Dismiss
Oxford moves to dismiss the Amended Complaint. McCulloch’s opposition

memorandum of law requests only that the case be remanded to state court or dismissed without
prejudice. It is, with the exception of one page, identical to McCulloch’s memorandum of law in
support of its motion to remand the case. McCulloch therefore concedes that, if its claim for
promissory estoppel is preempted by ERISA § 502(a)(1)(B), then it cannot state a claim for
benefits under ERISA § 502(a)(1)(B). Indeed, the general thrust of all of McCulloch’s
arguments is that it cannot state any federal claim.
McCulloch is correct to concede this point. It has not alleged an ERISA claim for
benefits. Therefore, Oxford’s motion to dismiss the Amended Complaint is granted on the
ground that the claim for promissory estoppel is completely preempted by ERISA § 502(a)(1)(B)
and the Amended Complaint does not state a claim for benefits under that statute. Nonetheless,
if McCulloch believes that it can state an ERISA § 502(a)(1)(B) claim, it may amend its
Amended Complaint to do so no later than June 22, 2015.
IV.

Conclusion
For the foregoing reasons, McCulloch’s motion to remand the case to state court is

DENIED and Oxford’s motion to dismiss the Amended Complaint is GRANTED.

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McCulloch’s request for attorney’s fees in connection with the motion to remand is, therefore,
denied a fortiori. Oxford’s motion for a conference is denied as moot. Oxford’s motion to strike
the Amended Complaint (still pending on the docket) has already been denied.
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The Clerk of Court is directed to close the motions at docket numbers 3, 8, 30, 42, and
55, and to close this case.
SO ORDERED.
Dated: June 8, 2015
New York, New York
____________________________________
J. PAUL OETKEN
United States District Judge

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