EXACT SCIENCES CORPORATION, et al v. BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA
Filing
36
MEMORANDUM OPINION AND ORDER. Signed by JUDGE N. C. TILLEY, JR. on 3/27/2017. For the reasons stated herein, Defendant Blue Cross and Blue Shield of North Carolina's Motion to Dismiss (Doc. # 21 ) be GRANTED IN PART AND DENIED IN PART. It is GRANTED as to Counts 2, 4, 5, 6, 8, 9, 10, 11, 12, 13, and 14. It is DENIED as to Counts 1, 3, and 7. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
EXACT SCIENCES CORPORATION,
and EXACT SCIENCES
LABORATORIES, LLC
Plaintiffs,
v.
BLUE CROSS AND BLUE SHIELD OF
NORTH CAROLINA,
Defendant.
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1:16CV125
MEMORANDUM OPINION AND ORDER
Plaintiffs Exact Sciences Corporation (“Exact Sciences”) and Exact Sciences
Laboratories, LLC (“Exact Labs”) (collectively referred to as “Exact”) have sued
Defendant Blue Cross and Blue Shield of North Carolina (“BCBS-NC”) for BCBSNC’s alleged failure to pay Exact for the performance of its proprietary colorectal
cancer screening test on BCBS-NC Subscribers and have asserted fourteen claims
stemming from this alleged failure to pay. (See generally Am. Compl. [Doc. #16].)
BCBS-NC has moved to dismiss the entire Amended Complaint pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. [Doc. #21]. For the reasons
explained below, the motion is granted in part and denied in part. It is granted as
to Counts 2, 4, 5, 6, 8, 9, 10, 11, 12, 13, and 14. It is denied as to Counts 1, 3,
and 7.
I.
For purposes of evaluating a motion to dismiss, well-pled facts are accepted
as true and construed in the light most favorable to Exact. Nemet Chevrolet, Ltd.
v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009). Exact
Sciences, along with researchers at the Mayo Clinic, developed Cologuard®, a noninvasive colorectal cancer stool DNA (“sDNA”) screening examination. (Am.
Compl. ¶¶ 17, 20.) It is a proprietary test provided by and exclusively processed
at Exact Labs. (Id. ¶ 29.)
Cologuard®, the only multi-target sDNA screening test for colorectal cancer,
uses advanced sDNA technology to find elevated levels of altered DNA in abnormal
cells that have been shed from the lining of the colon and picked up by stool
passing through the colon. (Id. ¶¶ 18, 19, 28.) Cologuard® also uses a fecal
immunochemical test to find elevated levels of hemoglobin in these abnormal cells.
(Id. ¶ 19.) In the Multi-Target Colorectal Cancer Screening Test for the Detection
of Colorectal Advanced Adenomatous Polyps and Cancer (“DeeP-C”) Study,
involving over 10,000 subjects, Cologuard® demonstrated sensitivity at 92% of
that seen with colonoscopy in detecting colorectal cancer. (Id. ¶ 21.) It
demonstrated sensitivity significantly greater than that seen for the fecal
immunochemical test in detecting colorectal cancer and advanced adenomas. (Id.)
The results of the DeeP-C Study were published in the New England Journal of
Medicine in April 2014. (Id. ¶ 22.) These sensitivity and specificity results were
corroborated in a subsequent study involving over 600 Alaska natives. (Id. ¶ 23.)
2
Cologuard® received premarket approval from the U.S. Food and Drug
Administration (“FDA”) on August 11, 2014 and was the first DNA screening test
for colorectal cancer approved by the FDA. (Id. ¶¶ 24, 25.) Effective October 9,
2014, the Centers for Medicare and Medicaid Services (“CMS”) extended coverage
to Cologuard® across the Medicare Program by the National Coverage
Determination for Colorectal Cancer Screening Tests. (Id. ¶ 26.) As a result,
Cologuard® became the first medical product successfully to complete the joint
FDA-CMS parallel review process. (Id. ¶ 27.) Numerous commercial health plans
have extended coverage to Cologuard® such that seventeen months following FDA
approval, Cologuard® has a coverage footprint of 110 million or more Americans in
the Medicare Program and commercial health plans. (Id. ¶¶ 32, 33.) In addition,
the American Cancer Society (“ACS”) specifies sDNA tests and Cologuard® in its
current guidelines for colorectal screening. (Id. ¶ 34.) Not only do the guidelines
state, “Beginning at age 50, people at average risk with no symptoms should
follow one of the testing options below: . . . Stool DNA test (sDNA), every 3
years”, but the ACS endorses Cologuard® as “the test currently available” in its
recommendations. (Id. ¶¶ 35, 36.)
BCBS-NC provides healthcare insurance, administration, and/or benefits to
policyholders or plan participants pursuant to a variety of healthcare benefit plans
and insurance policies, including employer-sponsored benefit plans, governmentsponsored benefit plans, Medicare Advantage plans, and individual health benefit
plans (collectively referred to as “the Plans”). (Id. ¶ 2.) As of the date of the
3
Amended Complaint, since October 2014, Exact has performed approximately
1,341 Cologuard® tests for BCBS-NC Subscribers in at least nine different states
and billed BCBS-NC for those services. (Id. ¶¶ 4, 55.) These Subscribers
“generally provide Exact with a ‘Patient Assignment of Benefits Notice (AOB)’”.
(Id. ¶ 43.) Although the language of the AOBs has changed from time to time,
Subscribers assign to Exact their right to receive benefits and challenge benefit
denials under the applicable Plans for the Cologuard® test. (Id. ¶ 44; see also id.
¶¶ 45-47 (providing relevant language from three AOBs).) All BCBS-NC Plans
provide coverage for colorectal screening tests or examinations, unless the test or
examination fits within the definition of “Experimental” or “Investigational” under
the terms of the applicable Plan. (Id. ¶ 41.)
As of the date of the Amended Complaint, BCBS-NC has denied 507
Cologuard® claims under commercial plans, Medicare Advantage plan, and
otherwise, totaling in excess of $321,893 and has underpaid a number of claims.1
(Id. ¶¶ 1, 54, 62, 64 (citing Ex. 1 to Am. Compl.2 [Doc. #16-1]).) It has also
denied at least 65% of the claim denials that Exact has appealed. (Id. ¶ 64 (citing
1
The somewhat inconsistent and imprecise phrasing of the various allegations
throughout the Amended Complaint of denied claims, underpaid claims, and
appealed claims leaves the Court with questions. However, for purposes of BCBSNC’s instant challenges to the Amended Complaint, these questions need not be
addressed presently.
2
Exact cites to Exhibit 1 in support of several allegations of denied claims,
underpaid claims, and appeal denials. But, as presented and even in the context of
the various allegations, it is difficult to determine the import of the information
provided in the exhibit.
4
Ex. 1 to Am. Compl.).) According to Exact, regardless of the Plans’ language, N.C.
Gen. Stat. § 58-3-179, referred to as “the Coverage Mandate”, requires BCBS-NC
to cover costs for colorectal cancer screening tests recommended by the ACS for
colorectal screening. (Id. ¶¶ 3, 39.) The Coverage Mandate states
(a) Every health benefit plan, as defined in G.S. 58-3-167, shall provide
coverage for colorectal cancer examinations and laboratory tests for
cancer, in accordance with the most recently published [ACS]
guidelines or guidelines adopted by the North Carolina Advisory
Committee on Cancer Coordination and Control [(“NC Advisory
Committee”)] for colorectal cancer screening, for any
nonsymptomatic covered individual who is:
(1) At least 50 years of age, or
(2) Less than 50 years of age and at high risk for colorectal cancer
according to the most recently published colorectal cancer
screening guidelines of the [ACS] or guidelines adopted by the
[NC Advisory Committee].
The same deductibles, coinsurance, and other limitations as apply to
similar services covered under the plan apply to coverage for colorectal
examinations and laboratory tests required to be covered under this
section.
(b) Reserved.
After Exact demanded that BCBS-NC provide benefits for Cologuard® as the
Coverage Mandate allegedly requires, BCBS-NC responded by letter dated
November 23, 2015. (Id. ¶ 57 (citing Ex. 2 to Am. Compl. (Letter from Janet L.
McCauley, M.D., Sr. Med. Dir. Med. & Reimbursement Policy, BCBS-NC to Michael
D. Dugan, M.D., Sr. V.P. Clinical Development & Med. Affairs, Exact Sciences)
[Doc. #16-2]).) After acknowledging that “[c]urrently, [BCBS-NC] does not provide
benefits for Cologuard”, BCBS-NC asserted that it was in compliance with the
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Coverage Mandate. (Nov. 23, 2015 Letter at 1.) BCBS-NC explained that its
“benefits for colorectal screening match what is recommended by the [NC
Advisory Committee] as well as the U.S. Preventive Services Task Force”. (Id.)
BCBS-NC further explained eligibility for benefits and the development of its
medical policies before stating, “[a]t this time, we find there is insufficient medical
and scientific evidence to permit BCBSNC to evaluate the therapeutic value of
Cologuard and to make conclusions regarding the efficacy and long-term effects on
the net health outcomes of this technology.” (Id. at 1-2.) At the time of the letter,
Blue Cross Blue Shield Association considered Cologuard® “to be investigational
due to the uncertainty of the diagnostic accuracy of stool DNA analysis and a lack
of demonstrated clinical utility.” (Id. at 2.) BCBS-NC explained that it “welcome[d]
and encourage[d] providers to forward any current peer-reviewed literature based
on well-designed studies that may not have been included in [its] own search” and
that it would “review and make any changes indicated.” (Id. at 2.) BCBS-NC
offered Exact the option to submit additional evidence-based references through
the Evidence Street program recently established by the Blue Cross Blue Shield
Association. (Id. at 2-3.)
On December 29, 2015, Exact responded by letter to BCBS-NC’s November
correspondence. (See Am. Compl. ¶ 58 (citing Ex. 3 to Am. Compl. (Letter from
Gary S. Qualls, Counsel for Exact Sciences to Lou Patalano, V.P. & Deputy Gen.
Counsel BCBS-NC) [Doc. #16-3]).) In sum, Exact contended that the Coverage
Mandate compelled coverage for two independent reasons. (Dec. 29, 2015 Letter
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at 3.) First, according to Exact, coverage is required if tests are included in either
the ACS guidelines or guidelines, if any, of the NC Advisory Committee. (Id.)
Second, the NC Advisory Committee’s statements do not purport to be guidelines.
(Id.) Because Cologuard® meets the ACS guidelines, BCBS-NC must cover
Cologuard®. (Id.)
BCBS-NC responded on January 29, 2016 by letter. (Am. Compl. ¶ 59
(citing Ex. 4 to Am. Compl. (Letter from Melissa K. Kaluzny, Managing Counsel
BCBS-NC to Gary S. Qualls, Counsel for Exact Sciences) [Doc. #16-4]).) It
acknowledged that the NC Advisory Committee document it had considered to be
guidelines were not, in fact, guidelines. (Jan. 29, 2016 Letter at 1.)
“Nevertheless,” BCBS-NC’s “position” was that it could “continue to deny stool
DNA tests even though they are referenced under the [ACS] Guidelines due to the
lack of clinical support for the test.” (Id.) BCBS-NC based this conclusion on
language in the Coverage Mandate that states, “The same . . . other limitations as
apply to similar services covered under the plan apply to coverage for colorectal
examinations and laboratory tests required to be covered under [the Coverage
Mandate].” (Id. at 1-2) According to BCBS-NC, “whether a service meets the
health plan’s definition of ‘medical necessity’ is a ‘limitation’ under the plan. As
such, BCBSNC may apply its medical necessity definition to colorectal
examinations and laboratory tests that may appear to be covered under [the
Coverage Mandate].” (Id. at 2.) Applying the definition of medical necessity from
BCBS-NC’s benefit booklets, it noted that medical services are not medically
7
necessary if, among other things, they are investigational. (Id.) Because BCBS-NC
had determined that there was insufficient medical and scientific evidence to
permit it to evaluate the therapeutic value of Cologuard® and to make conclusions
as to its efficacy and long-term effects on the net health outcomes, it found
Cologuard® to be investigational, as that term was defined in BCBS-NC’s benefit
booklets, and, thus, not medically necessary. (Id. at 3-4.)
According to Exact, it “has repeatedly and in good faith sought to exhaust
all known available appeal avenues under [the] Plans in an effort to convince
BCBS-NC to reimburse Exact properly on its claims for Cologuard® tests that it
provided to the BCBS-NC Subscribers.” (Am. Compl. ¶ 63.) “BCBS-NC has not
favorably responded to Exact’s demands or otherwise given any indication that it is
willing to reconsider” its “policy . . . to exclude all Cologuard® claims.” (Id. ¶¶ 68,
69.) In support of this allegation, Exact directs the Court to “a Sample Notice of
First Level Internal Adverse Benefit Determination” that “demonstrates that BCBSNC is entrenched in its general policy position for its Plans to exclude all
Cologuard® claims.” (Id. ¶ 71 & Ex. 6 to Am. Compl. [Doc. #16-6]; see also id.
¶ 72 (citing Exs. 2 & 4 in further support of this contention).)
As a result, Exact sued BCBS-NC and asserted fourteen claims: (1) Benefits
under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B); (2) Breach of Fiduciary
Duties under ERISA § 502(a)(3), 29 U.S.C. § 1332(a)(3); (3) Denial of Full and Fair
Review under ERISA § 503, 29 U.S.C. § 1133; (4) Declaratory Judgment for
Violation of Coverage Mandate, N.C. Gen. Stat. § 58-3-179; (5) Unfair and
8
Deceptive Trade Practices, N.C. Gen. Stat. § 75-1.1, Violation of Coverage
Mandate, and Violation of Insurance Claims Settlement Act, N.C. Gen. Stat. § 5863-15(11); (6) Unfair and Deceptive Trade Practices and Violation of Coverage
Mandate; (7) Breach of Contract (non-ERISA); (8) Breach of Contract as Third-Party
Beneficiary (non-ERISA); (9) Breach of Fiduciary Duty (non-ERISA); (10) Breach of
Duty of Good Faith and Fair Dealing (non-ERISA); (11) Declaratory Judgment for
Violation of Prompt Pay Act, N.C. Gen. Stat. § 58-3-225, (non-ERISA); (12) Unfair
and Deceptive Trade Practices and Violation of Prompt Pay Act (non-ERISA); (13)
Unfair and Deceptive Trade Practices, Violation of Coverage Mandate, and
Violation of Prompt Pay Act (non-ERISA); and (14) Quantum Meruit (non-ERISA).
II.
BCBS-NC presents a number of challenges to Exact’s ERISA claims. As to
each of them, it argues that Exact lacks standing to bring the claims. (Mem. of
Law in Supp. of Def.’s Mot. to Dismiss (“Def.’s Br. in Supp.”) at 4-11 [Doc. #26].)
In addition, as to Count 1, BCBS-NC argues that Exact failed to allege sufficiently a
claim for benefits and exhaustion of administrative remedies. (Id. at 3, 11-12.) As
to Count 2, BCBS-NC argues that § 502(a)(3) of ERISA does not afford equitable
relief, that Exact has not alleged a basis for a fiduciary duty owed to Exact other
than through the AOBs, and that Exact has failed to allege sufficiently exhaustion
of administrative remedies. (Id. at 11-13.) As to Count 3, BCBS-NC argues that
Exact has failed to allege any facts pertaining to BCBS-NC’s review process and,
9
even if it had, the appropriate remedy is remand, and that Exact has failed to allege
sufficiently exhaustion of administrative remedies. (Id. at 11-12, 13-14.)
A.
BCBS-NC argues, and Exact seemingly concedes, that Exact lacks direct
standing as a health care service provider to bring a claim under ERISA. (Id. at 4.)
Further, BCBS-NC contends that Exact lacks derivative standing for its ERISA
claims because the AOBs are ineffective pursuant to the anti-assignment provision
in BCBS-NC Plans, it has only vaguely alleged “that some of [its] patients signed
one of three different AOBs”, and two of the AOBs do not assign to Exact the right
to bring this lawsuit while the third is an unconscionable contract of adhesion. (Id.
at 4-11.)
1.
In support of its argument that the AOBs are ineffective pursuant to the antiassignment provision in BCBS-NC Plans, BCBS-NC attached to its Memorandum of
Law in Support of its Motion to Dismiss “[a] sample of a BCBS-NC ERISA and a
non-ERISA plan’s cover page and anti-assignment clause”, both of which “contain
BCBS-NC’s standard anti-assignment clause”. (Id. at 4 (referring to Ex. A. [Doc.
#26-1]).) It also argues that, in its anti-assignment clause, it specifically
manifested its intent not to waive the assignment prohibition. (Id. at 5-6). BCBSNC focuses on this Court’s opinion in Total Renal Care of NC, L.L.C. v. The Fresh
Market, Inc., No. 1:05CV00819, 2008 WL 623494 (M.D.N.C. Mar. 6, 2008), in
support of its argument that, “Under federal law in North Carolina, the content of
10
an assignment need not even be considered when, as is the case here, a valid antiassignment provision is in place.” (Def.’s Reply Br. in Further Supp. of Mot. to
Dismiss the Am. Compl. at 3-4 [Doc. #35]; see also Def.’s Br. in Supp. at 5.) Yet,
BCBS-NC fails to recognize that before the Court in Total Renal Care of NC, L.L.C.
were motions for summary judgment, not a motion to dismiss, as here.
Exact contests the Court’s consideration of the sample anti-assignment
clauses because the terms of all relevant Plans are not in the Amended Complaint,
not attached to the motion, and not known to Exact. (Pls.’ Br. Opposing Def.’s
Mot. to Dismiss (“Pls.’ Br. in Opp’n”) at 4-5 [Doc. #31].) While a court may
consider documents attached to a motion to dismiss, it may do so only when they
are integral to the complaint and authentic. Philips v. Pitt Cty. Mem’l Hosp., 572
F.3d 176, 180 (4th Cir. 2009). Although BCBS-NC argues that the antiassignment language reflected in the sample anti-assignment clauses it attached to
its Memorandum of Law is its standard anti-assignment language, even BCBS-NC
acknowledges that it only attached a sample ERISA Plan cover page and antiassignment clause and a sample non-ERISA Plan coverage page and antiassignment clause. Exact argues that there has been no discovery thus far and, at
this stage, “[r]eliance on these purported clauses is misplaced”. (Pls.’ Br. in Opp’n
at 5.) The Court agrees. For purposes of this motion to dismiss, the two sample
anti-assignment clauses that BCBS-NC attached to its Memorandum of Law as
Exhibit A and its associated arguments based on those anti-assignment clauses are
not considered at this time.
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2.
Nevertheless, the question remains whether Exact has sufficiently alleged
derivative standing, at least at this stage of the proceedings, to pursue its ERISA
claims against BCBS-NC. It is presumed “that a statutory cause of action extends
only to plaintiffs whose interests ‘fall within the zone of interests protected by the
law invoked.’” Lexmark Int’l, Inc. v. Static Control Components, Inc., ___ U.S.
___, 134 S. Ct. 1377, 1388 (2014) (concluding that the zone-of-interests test was
“an appropriate tool for determining who may invoke the cause of action” under
the relevant statute). “Statutory standing applies only to legislatively-created
causes of action and concerns whether a statute creating a private right of action
authorizes a particular plaintiff to avail [itself] of that right of action.” CGM, LLC v.
Bellsouth Telecomms., Inc., 664 F.3d 46, 52 (4th Cir. 2011). The Fourth Circuit
Court of Appeals “has framed the statutory standing inquiry as whether the
plaintiff ‘is a member of the class given authority by a statute to bring suit . . . .’”
Id. (quoting In re Mutual Funds, 529 F.3d 207, 216 (4th Cir. 2008)). In addition,
for a plaintiff to have Article III standing, it “must have suffered or be imminently
threatened with a concrete and particularized ‘injury in fact’ that is fairly traceable
to the challenged action of the defendant and likely to be redressed by a favorable
judicial decision.” Lexmark Int’l, Inc., 134 S. Ct. at 1386 (citing Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560 (1992)).
Only a “participant” or “beneficiary” may bring an action under ERISA “to
recover benefits due him under the terms of his plan, to enforce his rights under
12
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). “Healthcare providers . . . are generally not
‘participants’ or ‘beneficiaries’ under ERISA and thus lack independent standing to
sue under ERISA.” Kearney v. Blue Cross & Blue Shield of N.C., No. 1:16-cv-191,
2017 WL 530521, *4 (M.D.N.C. Feb. 9, 2017) (quoting Gables Ins. Recovery, Inc.
v. Blue Cross & Blue Shield of Fla., Inc., 813 F.3d 1333, 1338 (11th Cir. 2015)).
Although the Fourth Circuit Court of Appeals has not addressed the question
of derivative standing for ERISA benefits, it has acknowledged with approval that
its “sister circuits have consistently recognized such standing when based on the
valid assignment of ERISA health and welfare benefits by participants and
beneficiaries.” See Brown v. Sikora & Assocs., Inc., 311 F. App’x 568, 570 (Apr.
16, 2008) (unpublished). The court described those circuit court cases as
“represent[ing] a careful balance of competing concerns, in part grounded on the
recognition that extending derivative standing to health care providers serves to
further the explicit purpose of ERISA in a number of distinct ways.” Id. Courts
within the Fourth Circuit have found “that a healthcare provider may acquire
derivative standing under ERISA by obtaining a written assignment from a
participant or beneficiary of his right to payment of medical benefits.” Feldman’s
Med. Ctr. Pharmacy, Inc. v. CareFirst, Inc., 723 F. Supp. 2d 814, 819 (D. Md.
2010); see also, e.g., Kearney, 2017 WL 530521, at *5 (concluding, at the
motion to dismiss stage, that the plaintiff medical practice plausibly alleged that
derivative standing as the assignee of plan participants or beneficiaries to sue for
13
unpaid benefits under ERISA); Conn. Gen. Life Ins. Co. v. Advanced Surgery Ctr.
of Bethesda, LLC, No. DKC 14-2376, 2015 WL 4394408, *27 (D. Md. July 15,
2015) (finding, at the motion to dismiss stage, that the counter-claimant
ambulatory surgical centers plausibly alleged derivative standing to bring ERISA
claims on behalf of plan members “who specifically assigned them in writing their
‘rights and benefits under their Cigna health insurance plan,’ including the ‘right to
appeal benefit denials and to sue’”).
Here, Exact alleges that “Patients prescribed Cologuard®, including BCBS-NC
Subscribers, generally provide Exact with a ‘Patient Assignment of Benefits Notice
(AOB)’”. (Am. Compl. ¶ 43.) Even though Exact used different language in its
AOBs from time to time, it alleges that in the AOBs, Subscribers “assign to Exact
their right to receive benefits and challenge benefit denials under the applicable
Plans for [Cologuard®].” (Id. ¶ 44.) Indeed, the quoted language allegedly from
three AOBs confirms this assignment. One AOB reads, in relevant part,
“Authorization to assign benefits, accept financial responsibility, and disclose
health records: I authorize [Exact] to bill my insurance/health plan . . . for
reimbursement, to appeal any reimbursement denial . . . .” (Id. ¶ 45.) The second
AOB similarly reads, in relevant part, “I authorize [Exact] to bill my insurance/health
plan . . . for reimbursement. I assign all rights & benefits under my insurance plans
to Exact & authorize Exact to appeal & contest any reimbursement denial, including
in any administrative or civil proceedings necessary to pursue reimbursement.” (Id.
46.) The third AOB reads, in relevant part,
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I authorize [Exact] to bill my insurance/health plan . . . for
reimbursement. I irrevocably assign all rights & benefits under any
insurance policy(ies) or employee benefit plan(s) under which I am
insured or covered as a participant, beneficiary, dependent, or
otherwise . . . to Exact. THIS IS A DIRECT ASSIGNMENT TO EXACT
OF ANY AND ALL OF MY RIGHTS TO RECEIVE THE INSURANCE
BENEFITS. . . . This assignment of benefits fully and completely
encompasses any and all rights and legal claims I may have, under
[ERISA], or otherwise, under any applicable plan or policy of insurance
to receive the Insurance Benefits. These legal rights and legal claims
include, but are not limited to: (1) my rights to make a claim for
and/or appeal any denial of . . . Insurance Benefits on my behalf; (2)
my rights to pursue legal action against the applicable third-party
payer for unpaid benefits or for violating any contractual, statutory,
legal or equitable duties to me, including, but not limited to, any and
all claims I may have for unpaid benefits, breach of contract, breach
of covenant of good faith and fair dealing, breach of fiduciary duty,
denial of a full and fair review, quantum meruit, or unjust enrichment;
. . . and (4) my rights to file a complaint with any applicable federal
. . . agency against any applicable third-party responsible for providing
Insurance Benefits. . . . I hereby appoint Exact . . . as my authorized
representative(s) to pursue any claims, penalties, and administrative
and/or legal remedies on my behalf for collection against any
responsible payer or third party liability carrier of any and all benefits
due to me for the payment of charges associated with my treatment.“
(Am. Compl. ¶ 47.)
BCBS-NC argues that “[c]onspicuously absent from the first AOB is language
assigning [Exact] the right to bring a lawsuit against BCBS-NC.” (Def.’s Br. in
Supp. at 7.) It also argues that “[t]he second AOB gives [Exact], if anything, the
right to file suit demanding payment for services, not the right to file any and all
claims.” (Id. at 9.) Finally, BCBS-NC argues that “[t]he third AOB is an
unconscionable adhesion contract and is therefore invalid” (id.), yet BCBS-NC
provides no legal support for its own standing to challenge the third AOB on this
ground. The second and third alleged AOBs certainly assign the right to sue BCBS15
NC for reimbursement; therefore, at this stage of the proceedings, Exact has
plausibly alleged that it has derivative standing to pursue its ERISA claims (Counts
1 through 3). BCBS-NC’s motion to dismiss the ERISA claims based on lack of
standing is denied. BCBS-NC’s additional challenges to Exact’s ERISA claims are
addressed below.
B.
In Count 1, Exact seeks benefits under § 502(a)(1)(B) of ERISA, 29 U.S.C.
§ 1132(a)(1)(B). BCBS-NC argues that Exact has failed to allege sufficiently a
claim for denial of benefits and that each and every subscriber exhausted his
administrative remedies. Pursuant to § 502(a)(1)(B), a civil action may be brought
to recover benefits due to a plan participant under the terms of his plan. 29 U.S.C.
§ 1132(a)(1)(B). Here, Exact has alleged that “BCBS-NC provides healthcare
insurance, administration, and/or benefits to . . . plan participants pursuant to a
variety of healthcare benefit plans and policies of insurance, including employersponsored benefit plans . . . (the ‘Plans’).” (Am. Compl. ¶ 2.) North Carolina’s
Coverage Mandate allegedly requires BCBS-NC to cover costs for colorectal cancer
screening tests like Cologuard®, and, “[u]pon information and belief, all BCBS-NC
Plans provide coverage for colorectal screening tests or examinations, unless the
test or examination fits within the definition of ‘Experimental or Investigational’
under the terms of the applicable Plan.” (Id. ¶¶ 3, 41, 50-53.) “Upon information
and belief, BCBS-NC Plans require reimbursement of medical expenses incurred by
BCBS-NC Subscribers at usual, customary, and reasonable rates”, and “BCBS-NC
16
is obligated to pay for medically necessary services, covered services, and covered
benefits as defined under its Plans.” (Id. ¶¶ 84, 85.) Exact has allegedly
performed approximately 1,341 Cologuard® tests since October 2014, but BCBSNC has denied 507 of those claims. (Id. ¶¶ 1, 4.) According to Exact, BCBS-NC
breached the terms of the Plans by refusing to reimburse Exact, an assignee of
Subscribers’ rights to reimbursement, for charges covered by the Plans. (Id. ¶ 4347, 86.) BCBS-NC allegedly denied these claims for various reasons, including that
Cologuard® is “Experimental or Investigational”, and has adopted a policy of doing
so, even though Cologuard® is allegedly not experimental or investigational. (Id.
¶¶ 5, 6, 17-37, 56-60.) According to Exact, “BCBS-NC has violated its duties
under [ERISA] . . . by failing and refusing to pay Plaintiffs promptly and in full for
the tests that Exact has performed for patients covered by the Plans provided or
administered by BCBS-NC”. (Id. ¶ 3.) In sum, Exact has plausibly alleged a claim
for benefits due under the terms of the ERISA Plans.
Furthermore, “failure to exhaust administrative remedies under ERISA is an
affirmative defense.” Rogers v. Unitedhealth Grp., Inc., 144 F. Supp. 3d 792, 802
(D.S.C. 2015) (citing Taylor v. Oak Forest Health & Rehab., LLC, No. 1:11-CV471, 2013 WL 4505386, *3 (M.D.N.C. Aug. 22, 2013)). “[T]he burden of
establishing the affirmative defense rests on the defendant” such that “a motion to
dismiss filed under Federal Rule of Civil Procedure 12(b)(6), which tests the
sufficiency of the complaint, generally cannot reach the merits of an affirmative
defense”. Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc);
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see also West v. Cont’l Auto., Inc., No. 3:16-cv-00502-FDW-DSC, 2016 WL
6543128, *1 (W.D.N.C. Nov. 2, 2016) (“ERISA plaintiffs are not obligated to
plead exhaustion or futility because failure to exhaust is an affirmative defense that
must be pled and proven by the defendant.”). “[I]n the relatively rare
circumstances where facts sufficient to rule on an affirmative defense are alleged
in the complaint, the defense may be reached by a motion to dismiss filed under
Rule 12(b)(6)”, but “[t]his principle only applies . . . if all facts necessary to the
affirmative defense ‘clearly appear[] on the face of the complaint.” Id. This is not
one of those rare circumstances. Nevertheless, even though Exact is not required
to plead exhaustion, it has done so sufficiently and plausibly as to at least some of
the denied claims. BCBS-NC’s motion to dismiss Count 1 is denied.
C.
In Count 2, Exact alleges breach of fiduciary duty pursuant to § 502(a)(3) of
ERISA, 29 U.S.C. § 1132(a)(3). BCBS-NC argues that § 503(a)(3) does not afford
Exact equitable relief because ERISA elsewhere provides Exact an adequate
remedy. (Def.’s Br. in Supp. at 12-13.) The Court agrees. Section 502(a)(3)
provides, in relevant part, that a civil action may be brought “(A) to enjoin any act
or practice which violates any provision of [Subchapter I] or the terms of the plan,
or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii)
to enforce any provisions of [Subchapter I]”. 29 U.S.C. § 1132(a)(3). The
Supreme Court has interpreted § 502(a)(3) as providing relief “only for injuries that
do not find adequate redress in ERISA’s other provisions.” Korotynska v. Metro.
18
Life Ins. Co., 474 F.3d 101, 102 (4th Cir. 2006) (citing Varity Corp. v. Howe, 516
U.S. 489, 515 (1996)). For example, the plaintiffs in Varity could not find
adequate redress elsewhere in ERISA. 516 U.S. at 515. They had no benefits due
them under the plan’s terms because they were no longer members of the plan, so
they could not pursue relief under § 502(a)(1). Id. Section 502(a)(2) does not
provide a remedy for individual beneficiaries. Id. Therefore, the only relief for the
plaintiffs was found in § 502(a)(3) – equitable relief. Id.
However, “where Congress elsewhere 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.’” Varity Corp., 516 U.S. at
515 (noting that “the statute authorizes ‘appropriate’ equitable relief”). Therefore,
when “adequate relief is available for the plaintiff’s injury through review of [its]
individual benefits claim under § 1132(a)(1)(B), relief under § 1132(a)(3) will not
lie.” Korotynska, 474 F.3d at 102-03. This is because allegations relating to
claims procedures and determinations “are routinely taken up in appeals of benefits
denials, and[, as such,] they do not constitute special circumstances for which
equitable relief is uniquely appropriate.” Id. at 108. Accordingly, courts dismiss
the § 503(a)(3) claim even at the motion to dismiss stage. See, e.g., id. at 102
(affirming dismissal of § 503(a)(3) claim on a motion for judgment on the
pleadings); Batten v. Aetna Life Ins. Co., No. 3:15cv513, 2016 WL 4435681, *4
(E.D. Va. Aug. 17, 2016) (granting motion to dismiss § 502(a)(3) claim because
§ 502(a)(1)(B) provided adequate relief for the plaintiff’s injury, denial of disability
19
benefits); Wright v. Hartford Life & Accident Ins. Co., No. 5:14-CV-00126-RLVDSC, 2015 WL 4488656, *8 (W.D.N.C. July 23, 2015) (granting motion to
dismiss § 502(a)(3) claim as duplicative of the plaintiff’s § 502(a)(1)(B) claim for
disability benefits); Conn. Gen. Life Ins. Co., 2015 WL 4394408, at *30 (granting
motion to dismiss § 502(a)(3) claim because the denial of benefits was redressable
under § 502(a)(1)(B)).
Exact initially argues that “Varity does not preclude concurrent pleading of
such claims.” (Pls.’ Br. in Opp’n at 14.) Yet, that is precisely how the Fourth
Circuit Court of Appeals and courts within the Fourth Circuit have interpreted
Varity. See, e.g., Korotynska, 474 F.3d at 106-07 (explaining that circuit courts
with which the Fourth Circuit would join “have not allowed claimants to proceed
with § 1132(a)(3) claims where relief was potentially available to them under
§ 1132(a)(1)(B)” because of Varity) (emphasis added); Batten, 2016 WL 4435681,
at *3 (finding “that Batten is precluded from raising a claim under § 502(a)(3),
either in the alternative or conjunctively”). Exact then argues that its
§ 502(a)(1)(B) and § 502(a)(3) claims are not redundant because the § 502(a)(3)
claim seeks prospective injunctive and declaratory relief and because “this case is
about Blue Cross’ continuing policy, not an isolated issue involving non-recurring
benefit determinations.” (Pls.’ Br. in Opp’n at 14.)
In support of its § 502(a)(3) claim, Exact alleges, among other things, that
BCBS-NC “violated its fiduciary duty of loyalty to Plaintiffs by . . . refusing to make
reimbursements for Cologuard® tests, to its own advantage, at the expense of
20
BCBS-NC Subscribers” and “by failing to inform Plaintiffs, assignees of the BCBSNC Subscribers, of material information, by misrepresenting requirements for
reimbursement under the Plans.” (Am. Compl. ¶ 97.) Exact additionally alleges
that BCBS-NC violated its fiduciary duty by “refusing to cover Cologuard® tests;
refusing to allow Plaintiffs an opportunity to negotiate coverage beyond the unduly
burdensome terms it has wrongfully required in contravention of applicable law and
Plan terms and the Coverage Mandate; and failing to inform Plaintiffs of material
information.” (Id. ¶ 100.)
These allegations and those for benefits under § 502(a)(1)(B) are not that
different than the allegations the counter-claimant ambulatory surgical centers
made in Connecticut General Life Insurance Co. The surgical centers sought
benefits under § 502(a)(1)(B) and alleged that the counter-defendant Cigna entities
breached the terms of the plans by “arbitrarily denying or reducing payments due
to the [surgical centers] based on [their] misconstruction and/or misapplication of
[their] plans’ exclusion[.]” 2015 WL 4394408, at *28 (first alteration added). In
support of their § 502(a)(3) claim, the surgical centers alleged that the Cigna
entities “breached their fiduciary duties by denying or reducing benefits payable to
the [surgical centers] for the services they rendered to the Cigna entities’ plan
members” and that the “claim denials were not only based on their misconstruction
and misapplication of the plan language, but also were done to ‘(a) allow [them] to
avoid [their] obligations to pay benefits, (b) discourage [their] insureds from using
out-of-network services, and (c) coerce out-of-network providers into becoming in21
network providers.” Id. The court found that “the crux of the [surgical centers’]
allegations supporting the breach of fiduciary duty claim” were that the surgical
centers sought plan benefits on behalf of the plan participants and “the Cigna
entities improperly denied the . . . claims for benefits based on their
misconstruction or misapplication of the plan terms and their alleged self-interested
motive of retaining increased compensation and profits.” Id. at *30. The court
found that this alleged injury was redressable under § 502(a)(1)(B), “which is likely
why the [surgical centers] . . . also brought a claim under that provision.” Id.
Because “[t]he Fourth Circuit does not permit ‘plaintiffs to seek relief
simultaneously under § [502](a)(1)(B) and § [502](a)(3),’ when the injury alleged
creates a cause of action under § 502(a)(1)(B)”, the court dismissed the
§ 502(a)(3) claim. Id.
Such is the case here. Despite its superfluous allegations of failure to inform
Plaintiffs of material information and misrepresentation which have no factual
support in the Amended Complaint, Exact’s alleged injuries resulting from the
alleged breach of fiduciary duties are redressable under § 502(a)(1)(B) pursuant to
which Exact is seeking, in Count 1, the benefits it claims that BCBS-NC has
improperly denied. BCBS-NC’s motion to dismiss Count 2 is granted. There is no
need to address BCBS-NC’s other bases for dismissing Count 2.
D.
In Count 3, Exact alleges a denial of full and fair review of denied claims
under § 503 of ERISA, 29 U.S.C. § 1133. BCBS-NC argues that Exact has not
22
alleged any facts about BCBS-NC’s claims review process and, instead, offers only
speculation. (Def.’s Br. in Supp. at 13.) In response, Exact contends that it is
BCBS-NC’s “across-the-board policy of refusing to pay for Cologuard® [that] has
denied Exact full and fair review of each claim.” (Pls.’ Br. in Opp’n at 15.)
Section 503 of ERISA provides, in relevant part, that “every employee
benefit plan shall . . . 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(2).
Although many of the allegations within Count 3 appear to be speculative,
elsewhere in the Amended Complaint the factual allegations state a plausible claim
that BCBS-NC has denied Exact a full and fair review of the denied claims.
According to BCBS-NC’s representatives in January 2016, BCBS-NC does
not cover Cologuard® because BCBS-NC considers Cologuard® to be
“Investigational” because “there is insufficient medical and scientific evidence to
permit BCBSNC to evaluate the therapeutic value of Cologuard and to make
conclusions regarding the efficacy and long-term effects on the net health
outcomes of this technology.” (Am. Compl. Ex. 4.) Exact alleges that it “has
repeatedly demanded that BCBS-NC reverse its previous benefit denials, promptly
pay all previously submitted Cologuard® claims and conform its medical policies so
that BCBS-NC’s entire organization recognizes its obligation to pay for Cologuard®
as a covered service”, but that “BCBS-NC has failed to comply in full with these
demands or provide sufficient assurances that [it] would not repeat its conduct.”
23
(Id. ¶¶ 65, 66.) Instead, “BCBS-NC’s policy for its Plans is to exclude all
Cologuard® claims.” (Id. ¶ 68.) Combined with these allegations of a policy to
deny all Cologuard® claims are the allegations that BCBS-NC has not actually
excluded all Cologuard® claims (id. ¶¶ 54, 55, 64), despite its contention that
Cologuard® is investigational for reasons not on their face differently applicable to
individual Subscribers. Accordingly, Exact has plausibly alleged denial of full and
fair review of its denied claims. BCBS-NC’s motion to dismiss Count 3 is denied.
If this claim progresses further, though, appropriate relief appears to be
remand, unless the evidence establishes that BCBS-NC’s denial of the claims was
an abuse of discretion as a matter of law. See Gagliano v. Reliance Standard Life
Ins. Co., 547 F.3d 230, 240-41 (4th Cir. 2008) (noting that in cases of a
procedural ERISA violation, the “proper remedy [is] to remand to the plan
administrator for the ‘full and fair review’ to which [the claimant] is entitled
regarding the denial of benefits”).
III.
The next question is whether Exact has sufficiently alleged standing, at least
at this stage of the proceedings, to pursue its non-ERISA claims against BCBS-NC.
Standing as to each of these claims will be addressed below, along with BCBSNC’s additional bases for dismissal, as is necessary.
A.
In Count 4, Exact seeks declaratory relief pursuant to 28 U.S.C. § 2201 for
BCBS-NC’s alleged violation of the Coverage Mandate. Despite Exact’s arguments
24
to the contrary, there is no private right of action under the Coverage Mandate.
Exact presents no case that has opined on the issue of whether there is an implied
right of action under the Coverage Mandate, and the Court has found none. Under
North Carolina law, “generally . . . a statute allows for a private cause of action
only where the legislature has expressly provided a private cause of action within
the statute.” Lea v. Grier, 577 S.E.2d 411, 415 (N.C. Ct. App. 2003). A statute
may “enunciate[s] an explicit or implicit intent on the part of the General
Assembly” to afford a private right of action. Id. at 416. For example, in Williams
v. Alexander County Board of Education, 495 S.E.2d 406, 409 (N.C. Ct. App.
1998), the court analyzed the intent of the General Assembly in enacting teacher
incentive statutes. The Attorney General’s opinion provided to the Board of
Education conceded that the “obvious intent” of the statute was to provide
incentives to teachers. Id. at 408-09. The language of one of the statutes itself
stated in part that “[I]t is the intent of the General Assembly that any reductions in
appropriations not result in teachers receiving less . . . than they received” before.
Id. at 409. The court found that “[t]he statutes without doubt enunciate the intent
of the General Assembly in enacting” the applicable statutes. Id. (finding that the
statutory language was “unambiguous, direct, imperative and mandatory”). On the
other hand, the Lea court found that, unlike the relevant statutes in Williams, the
applicable statutes in Lea did not “enunciate an explicit or implicit intent on the
part of the General Assembly to create” a private right of action. 577 S.E.2d at
416.
25
Here, the Coverage Mandate does include language that requires every
health benefit plan to provide coverage for colorectal cancer examinations and
laboratory tests. See N.C. Gen. Stat. § 58-3-179. However, the statute falls under
Chapter 58, “Insurance”, of the North Carolina General Statutes. Pursuant to
§ 58-2-40(5), the Commissioner of Insurance “shall . . . [r]eport in detail to the
Attorney General any violations of the laws relative to insurance companies . . .;
and the Commissioner may institute civil actions or criminal prosecutions either by
the Attorney General or another attorney whom the Attorney General may select,
for any violation of the provisions of Articles I through 64 of this Chapter [58:
Insurance].” This statute appears to contradict Exact’s argument that the language
of the Coverage Mandate creates an implied private right of action.
Furthermore, the Fourth Circuit Court of Appeals has held that “federal
courts should be reluctant to read private rights of action into state laws where
state courts and state legislatures have not done so.” Am. Chiropractic Ass’n v.
Trigon Healthcare, Inc., 367 F.3d 212, 229 (4th Cir. 2004). “Without clear and
specific evidence of legislative intent, the creation of a private right of action by a
federal court abrogates both the prerogatives of the political branches and the
obvious authority of states to sculpt the content of state law.” Id. at 229-30
(finding that a Virginia statute stating “[i]f an accident and sickness insurance
policy provides reimbursement for any service that may be legally performed by a
person licensed in this Commonwealth as a chiropractor . . . reimbursement under
the policy shall not be denied because the service is rendered by the licensed
26
practitioner” did not explicitly create a private right of action and there was no
evidence of a legislative intent to create one). Therefore, it is determined that the
language of the Coverage Mandate does not explicitly create a private cause of
action and there is no evidence of legislative intent to do so.
Even if there were a private right of action, the alleged injury (Am. Compl.
¶ 115) and relief sought (id. ¶ 117) are based on BCBS-NC’s failure to provide its
Subscribers coverage for Cologuard®. That is an injury sustained by the
Subscribers, not Exact. Because the Declaratory Judgment Act, 28 U.S.C.
§ 2201, is “remedial only and neither extends federal courts’ jurisdiction nor
creates any substantive rights”, CGM, LLC, 664 F.3d at 55, it does not save Count
4. BCBS-NC’s motion to dismiss this claim is granted. There is no need to
address BCBS-NC’s other challenges to Count 4.
B.
In Count 5, Exact alleges that BCBS-NC has engaged in unfair and deceptive
trade practices “by refusing to pay for Cologuard® tests as required by the
Coverage Mandate” and by engaging in acts prohibited by the Insurance Claims
Act, N.C. Gen. Stat. § 58-63-15(11), including by violating the Coverage
Mandate.3 (Am. Compl. ¶¶ 121, 123, 125, 129.) In other words, BCBS-NC
3
BCBS-NC argues that “to the extent that Counts Five through Fourteen seek
redress based on ERISA, they are preempted and should be dismissed.” (Def.’s Br.
in Supp. at 15-16.) Exact responds that ERISA does not preempt the Coverage
Mandate and Prompt Pay Act and that, otherwise, its non-ERISA claims apply to
non-ERISA Plans. (Pls.’ Br. in Opp’n at 15-17.) BCBS-NC’s preemption challenge
focuses, though, on the unfair and deceptive trade practices, breach of contract,
27
allegedly violated the Coverage Mandate, which violated N.C. Gen. Stat. § 58-6315(11), which constituted unfair and deceptive trade practices.
Exact alleges that BCBS-NC’s violation of the Coverage Mandate caused
“actual injury to Exact by not paying for such tests which Exact provided to BCBSNC Subscribers.” (Id. ¶ 121.) Similarly, Exact alleges that BCBS-NC’s violation of
N.C. Gen. Stat. § 58-63-15(11) caused “actual injury to Exact by BCBS-NC’s
refusal to pay for the Cologuard® tests as required by the Coverage Mandate.” (Id.
¶ 124.) Exact also alleges that BCBS-NC’s violation of § 58-63-15(11) “has
deprived Exact of its reasonable expectations and benefits” both “regardless of its
status as an assignee of benefits under the Plans” (id. ¶ 130) and “as an assignee
of benefits under the Plans” (id. ¶ 129).
As was the case in Count 4, Exact does not have standing to assert a
violation of the Coverage Mandate because there is no private right of action. In
addition, the Court has not located a case finding that a violation of the Coverage
Mandate violates one of the provisions of N.C. Gen. Stat. § 58-63-15(11).
Furthermore, unlike cases finding that a violation of N.C. Gen. Stat. § 58-6315(11) constitutes an unfair and deceptive trade practice, thereby permitting a
claim for unfair and deceptive trade practices even though there is no private right
of action under § 58-63-15(11), the Court has located no case finding that a
breach of the duty of good faith and fair dealing, and breach of fiduciary duty
claims. (See Def.’s Br. in Supp. at 15 (specifically identifying these causes of
action as preempted by ERISA).) As Exact explained, it asserts those claims for
the Plans not covered by ERISA, and that is how the Court has proceeded.
28
violation of the Coverage Mandate is an unfair and deceptive trade practice
permitting a claim for the latter.
Even if there were a private right of action, the alleged injuries are those of
the Subscribers, not Exact. In addition, “[i]t is well settled that claims for unfair
and deceptive trade practices under N.C. Gen. Stat. section 75-1.1 are not
assignable.” Horton v. New South Ins. Co., 468 S.E.2d 856, 858 (N.C. Ct. App.
1996). Furthermore, claims that “seek damages based on tort, not merely on
simple breach of contract” are not assignable, because such assignments are “void
as against public policy because they promote champerty.” Id. Such personal torts
include bad faith refusal to settle, tortious breach of contract, and violations of
North Carolina General Statutes § 58-63-1 et seq., among others. Id. BCBS-NC’s
motion to dismiss Count 5 is granted. There is no need to address its other
challenges to Count 5.
C.
In Count 6, Exact alleges that BCBS-NC engaged in unfair and deceptive
trade practices by violating the Coverage Mandate, allegations that mirror those in
Count 5 but for the omission in Count 6 of references to N.C. Gen. Stat. § 58-6315(11). For the reasons explained above, Exact lacks both direct and derivative
standing to bring this claim. BCBS-NC’s motion to dismiss Count 6 is granted.
There is no need to address its other challenges to Count 6.
29
D.
In Count 7, Exact alleges that BCBS-NC breached the terms of the nonERISA Plans when it “failed to make payment of benefits to Exact [as the assignee]
in the manner and amounts required under the terms of the Plans, the Coverage
Mandate, and other applicable state and federal laws”. (Am. Compl. ¶ 152.)
Under North Carolina law, “[a]n action ‘arising out of contract’ generally can be
assigned.” Horton, 468 S.E.2d at 858. The terms of at least two of the AOBs
evidence the Subscribers’ assignment to Exact of their contractual right to benefits
under the Plans. (See supra § II.A.2.) Accordingly, it is determined that Exact has
standing as the Subscribers’ assignee to bring this claim.
Count 7 having withstood the standing challenge, BCBS-NC next argues that
Exact has failed to state a claim for breach of contract because it is not a party to
the contract “and the anti-assignment clause contained in BCBS-NC’s plans
demonstrates that BCBS-NC’s subscribers are the only parties intended to obtain
benefits under the contract.” (Defs.’ Br. in Supp. at 17-18.) That may well be the
case, but, at this stage of the proceedings, the Court is not considering the
purported sample anti-assignment clauses provided by BCBS-NC, as explained
earlier. According to the language in at least two of the AOBs, the Subscribers
assigned to Exact their rights to pursue benefits due under the Plans. As a result,
Exact may assert a claim for breach of contract in so doing. BCBS-NC’s motion to
dismiss Count 7 is denied.
30
E.
In Count 8, Exact alleges breach of contract as a third-party beneficiary. On
the one hand, it appears as though Exact alleges standing as a result of its status
as an assignee. (Am. Compl. ¶¶ 162-63.) Yet, derivative standing to bring a thirdparty beneficiary claim does not make sense, as the BCBS-NC Subscribers were
not third-party beneficiaries to their BCBS-NC Plans who then assigned those rights
to Exact. On the other hand, though, Exact seems to allege direct standing as a
third-party beneficiary to the BCBS-NC Plans. (Id. ¶¶ 159-61.)
“North Carolina recognizes the right of a third-party beneficiary . . . to sue
for breach of contract executed for his benefit”, but “plaintiffs must show they
were an intended beneficiary of the contract.” Town of Belhaven, NC v. Pantego
Creek, LLC, 793 S.E.2d 711, 719 (N.C. Ct. App. 2016) (quoting Babb. v. Bynum
& Murphrey, PLLC, 643 S.E.2d 55, 57 (N.C. Ct. App. 2007)). To do so, plaintiffs
must show that a valid, enforceable contract exists between two parties and “that
the contract was executed for the direct, and not incidental, benefit of the [third
party].” Id. (quoting Babb, 643 S.E.2d at 57). “A person is a direct beneficiary of
the contract if the contracting parties intended to confer a legally enforceable
benefit on that person. It is not enough that the contract, in fact, benefits the
[third party], if, when the contract was made, the contracting parties did not
intend it to benefit the [third party] directly.” Id. (quoting Babb, 643 S.E.2d at 57).
“[C]ircumstances surrounding the transaction” and “the actual language of the
contract” inform the analysis. Id. (quoting Babb, 643 S.E.2d at 57-58).
31
Exact alleges that it is a third-party beneficiary because “BCBS-NC intended
to reimburse providers under the Plans and insurance contracts for services
provided to BCBS-NC Subscribers” (Am. Compl. ¶ 159), but there is no factual
support for the allegation that Exact is a third-party beneficiary to the Plans
executed between BCBS-NC and its Subscribers. Instead, Exact actually alleges
that “BCBS-NC provides healthcare insurance, administration, and/or benefits to
policyholders or plan participants”. (Id. ¶ 2.) “[A]ll of the Plans require
reimbursement of medically necessary medical expenses incurred by BCBS-NC
Subscribers”, and, “under the terms of the Plans, BCBS-NC Subscribers are entitled
to coverage for the services that they received from Exact.” (Id. ¶ 150.) These
allegations, as opposed to Exact’s conclusory allegation that it is a third-party
beneficiary of the Plans, make sense. Individuals enter into contracts for health
insurance coverage so that they may receive medical benefits for healthcare
services they receive. It is not plausible that they enter into contracts for health
insurance coverage intending the healthcare provider to be the direct beneficiary
and conferring a legally enforceable right on the provider, instead of the individual.
BCBS-NC’s motion to dismiss Count 8 is granted.
F.
In Count 9, Exact alleges that BCBS-NC breached its fiduciary duty to its
Subscribers and Exact, as their assignee. BCBS-NC argues that Exact has “failed
to allege any facts that would place BCBS-NC in a fiduciary relationship with
Plaintiffs.” (Def.’s Br. in Supp. at 18.) The Court agrees. “For a breach of
32
fiduciary duty to exist, there must first be a fiduciary relationship between the
parties.” Green v. Freeman, 749 S.E.2d 262, 268 (N.C. 2013) (quoting Dalton v.
Camp, 548 S.E.2d 704, 707 (N.C. 2001)). “A fiduciary relationship may arise
when there has been a special confidence reposed in one who in equity and good
conscience is bound to act in good faith and with due regard to the interests of the
one reposing confidence.” Id. (quoting Dalton, 548 S.E.2d at 707). Moreover, a
“claim for breach of fiduciary duty is . . . personal to the insured because it
concerns a special relationship of trust and confidence” and, therefore, “cannot be
assigned.” Horton, 468 S.E.2d at 858). Exact has alleged no facts to support a
fiduciary relationship between it and BCBS-NC. Had it alleged facts to support
such a relationship between BCBS-NC and its Subscribers, such a claim would not
be assignable. BCBS-NC’s motion to dismiss Count 9 is granted.
G.
In Count 10, Exact alleges that BCBS-NC breached the duty of good faith
and fair dealing and alleges both direct and derivative standing. (Am. Compl.
¶¶ 175-77, 178-79, 182.) Exact asserts that the Plans are “valid and enforceable
insurance contracts” and “[a]s such, the Plans contain an implied duty of good
faith and fair dealing.” (Id. ¶ 174.) It further alleges that “BCBS-NC’s conduct in
derogation of its duty of good faith and fair dealing under the Plans has deprived
Plaintiffs of their reasonable expectations and benefits directly”. (Id. ¶ 182.) It is
unclear how Exact has suffered direct injury when its allegations of the existence
of a duty of good faith and fair dealing rest on a contract to which Exact was not a
33
party nor a third-party beneficiary. However, Exact does sufficiently allege
derivative standing. “[A]s the obligor under the Plans, [BCBS-NC] owed [its]
Subscribers a duty of good faith and fair dealing with respect to said Plans.” (Id.
¶ 176.) While the first two AOBs assigned Exact only the right to pursue benefits
under the Plans, the third AOB did explicitly assign the right to pursue a claim for
breach of the duty of good faith and fair dealing. (See supra § II.A.2.)
Nevertheless, BCBS-NC argues that “North Carolina does not recognize an
independent cause of action for breaching the implied duty of good faith and fair
dealing under the circumstances alleged by Plaintiffs.” (Def.’s Br. in Supp. at 1819.) In response, Exact contends that this claim is “not duplicative of its breach of
contract claim due to Blue Cross’s special relationship with insureds.” (Pls.’ Br. in
Opp’n at 20.) North Carolina courts have recognized that “[t]here is implied in
every contract a covenant by each party not to do anything which will deprive the
other parties thereto of the benefits of the contract”. Bicycle Transit Auth. v. Bell,
333 S.E.2d 299, 305 (N.C. 1985) quoted in Arnesen v. Rivers Edge Golf Club &
Plantation, Inc., 781 S.E.2d 1, 9 (N.C. 2015). However, “the weight of North
Carolina authority holds that a claim for breach of covenant of good faith and fair
dealing based on facts identical to those supporting a breach of contract claim
should not be pursued separately.” B. Lewis Prods., Inc. v. Maya Angelou,
Hallmark Cards, Inc., No. 01Civ.0530MBM, 2005 WL 1138474, *11 (S.D.N.Y.
May 12, 2005).
34
Here, Exact alleges that BCBS-NC breached its duty of good faith and fair
dealing “in a number of ways, described more fully above [in the Amended
Complaint], including wrongfully denying claims for costs associated with
Cologuard® tests in violation of the Plans, state and federal law [including the
Coverage Mandate], and under false pretenses.” (Am. Compl. ¶ 180, 181.) These
allegations are nearly identical to the allegations in support of BCBS-NC’s breach of
contract: “BCBS-NC failed to make payments of benefits to Exact in the manner
and amounts required under the terms of the Plans, the Coverage Mandate, and
other applicable state and federal laws, and thus breached such contracts.” (Id.
¶ 152.) This is not surprising because Exact essentially grounds its allegation of
breach of the duty of good faith and fair dealing on the breach of an express term
of the contract. Because Exact bases its breach of the duty of good faith and fair
dealing on the same factual allegations as form its breach of contract claim, the
former cannot be pursued independently. BCBS-NC’s motion to dismiss Count 10
is granted.
H.
In Count 11, Exact seeks declaratory relief pursuant to 28 U.S.C. § 2201 for
BCBS-NC’s alleged violation of the Prompt Pay Act, N.C. Gen. Stat. § 58-3-225,
which allegedly requires BCBS-NC to “respond promptly to a beneficiary’s
coverage claims and provide adequate written explanations for a failure to pay all
or a portion of such claims within statutorily prescribed time frames.” (Am. Compl.
¶¶ 185.) As with the Coverage Mandate, there is no private right of action under
35
the Prompt Pay Act. Kearney, 2017 WL 530521, at *6-7 (providing a thorough
analysis of why the Prompt Pay Act does not authorize a private right of action);
(see also supra § III.A. (explaining the process for determining if a statute affords a
private right of action)). Because the Declaratory Judgment Act is remedial and
grants no substantive rights, it cannot save the claim. BCBS-NC’s motion to
dismiss Count 11 is granted.
I.
In Count 12, Exact alleges unfair and deceptive trade practices resulting
from BCBS-NC’s violation of the Prompt Pay Act.4 Because of the references to
Exact’s actual injuries resulting from BCBS-NC’s violation of the Coverage
Mandate, rather than the Prompt Pay Act, it is difficult to determine precisely what
type of standing Exact alleges. The injuries are alleged to be those caused by
BCBS-NC’s “not paying for [Cologuard®] tests”, “wrongfully denying claims for
costs associated with Cologuard® tests in violation of the Plans, state and federal
law, and under false pretenses; refusing to allow Plaintiffs any opportunity to
negotiate coverage beyond the unduly burdensome terms it has wrongfully required
in contravention of applicable law and Plan terms; and failing to inform Plaintiffs of
material information.” (Am. Comp. ¶¶ 197, 209.) These are injuries sustained by
the Plan Subscribers, not Exact. To the extent that Exact alleges derivative
4
Most of the allegations in Count 12 are the same allegations as in Count 5 in
which Exact alleges unfair and deceptive trade practices resulting from BCBS-NC’s
violation of the Coverage Mandate. (Compare Am. Compl. ¶¶ 135-47 with id.
¶¶ 196-204.)
36
standing as an assignee of benefits under the Plans, as explained above (supra
§ III.B.), claims for unfair and deceptive trade practices are not assignable. BCBSNC’s motion to dismiss Count 12 is granted. There is no need to address its other
challenges to Count 12.
J.
In Count 13, Exact alleges unfair and deceptive trade practices resulting
from BCBS-NC’s violation of the Coverage Mandate and resulting Prompt Pay Act
violation. (See Pls.’ Br. in Opp’n at 19.) For the same reasons as explained above,
(see supra §§ III.B., III.C., III.I.), Exact lacks standing to bring this claim. BCBSNC’s motion to dismiss Count 13 is granted. There is no need to address BCBSNC’s other challenges to Count 13.
K.
In Count 14, Exact alleges a claim for quantum meruit because it “has
conferred upon BCBS-NC the benefit of providing treatment to BCBS-NC
Subscribers” and “reasonably expected remuneration from BCBS-NC in the form of
its full billed charges minus any applicable patient responsibilities.” (Am. Compl.
¶¶ 232, 233.) “By refusing to pay Exact for the treatment that Exact provided to
BCBS-NC, BCBS-NC has been unjustly enriched.” (Id. ¶ 234.)
“Quantum meruit a measure of recovery for the reasonable value of services
rendered in order to prevent unjust enrichment.” Whitfield v. Gilchrist, 497 S.E.2d
412, 414 (N.C. 1998). However, it “does not apply where no benefit accrues to
the party from whom compensation is sought.” Wing v. Town of Landis, 599
37
S.E.2d 431, 433 (N.C. Ct. App. 2004). Such is the case here. BCBS-NC did not
receive services from Exact such that it was unjustly enriched. Exact does not
even allege as much. Instead, as it must, it alleges that it provided treatment to
BCBS-NC Subscribers, but that does not lead to the conclusion that Exact
conferred a benefit upon BCBS-NC for having done so. As such, quantum meruit
is not applicable to the facts as alleged in the Amended Complaint. BCBS-NC’s
motion to dismiss Count 14 is granted. There is no need to discuss BCBS-NC’s
other challenges to Count 14.
IV.
In sum, BCBS-NC’s motion to dismiss is granted as to Counts 2, 4, 5, 6, 8,
9, 10, 11, 12, 13, and 14. It is denied as to Counts 1, 3, and 7.
V.
For the reasons stated herein, IT IS HEREBY ORDERED that Defendant Blue
Cross and Blue Shield of North Carolina’s Motion to Dismiss [Doc. #21] be
GRANTED IN PART AND DENIED IN PART. It is GRANTED as to Counts 2, 4, 5,
6, 8, 9, 10, 11, 12, 13, and 14. It is DENIED as to Counts 1, 3, and 7.
This the 27th day of March, 2017.
/s/ N. Carlton Tilley, Jr.
Senior United States District Judge
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