U.S. Renal Care v. Wellspan Health et al
Filing
46
MEMORANDUM re Mtns to dismiss 19 and 30 (Order to follow as separate docket entry)Signed by Honorable Sylvia H. Rambo on 9/10/15. (ma)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
U.S. RENAL CARE, INC. d/b/a U.S.
RENALCARE CENTRAL YORK,
DIALYSIS individually and as ASSIGNEE
OF PATIENT, WW,
:
:
:
:
:
Plaintiff/
:
Counter-Defendant
:
:
v.
:
:
WELLSPAN HEALTH, WELLSPAN
:
MEDICAL PLAN, THE PLAN
:
ADMINISTRATOR OF WELLSPAN
:
MEDICAL PLAN, and SOUTH CENTRAL :
PREFERRED, INC.,
:
:
Defendants/
:
Counter-Plaintiffs
:
Civil No. 1:14-CV-2257
Judge Sylvia H. Rambo
MEMORANDUM
This action is a dispute between a healthcare provider and an employee welfare
benefit plan regarding alleged overpayments to the healthcare provider made pursuant to the
plan, which is governed by the Employee Retirement Income Security Act of 1974
(“ERISA”). Plaintiff brings claims pursuant to ERISA, as well as other state law and federal
claims, regarding Defendants‟ recoupment of the alleged overpayments. Presently before
the court is Defendants‟ motion to dismiss Plaintiff‟s complaint, as well as Plaintiff‟s motion
to dismiss Defendants‟ counterclaims. For the reasons stated herein, the court will grant in
part and deny in part Defendants‟ motion to dismiss the complaint, and deny in its entirety
Plaintiff‟s motion to dismiss the counterclaims.
I.
Background
A court deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) may consider “the allegations in the complaint, exhibits attached to the complaint,
matters of public record, and documents that form the basis of a claim.” Lum v. Bank of
Am., 361 F.3d 217, 221 n.3 (3d Cir. 2004) (citations omitted). “A document forms the basis
of a claim if the document is „integral to or explicitly relied upon in the complaint.‟” Id.
(quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)).
Thus, for the purposes of the motion sub judice, the court considers and accepts as true all
well-pleaded allegations contained in the complaint (Doc. 1), see Trump Hotels & Casino
Resorts, Inc. v. Mirage Resorts, Inc., 140 F.3d 478, 483 (3d Cir. 1998) (citing Warth v.
Seldin, 422 U.S. 490, 501 (1975)), as well as exhibits attached to, and documents relied upon
in, the complaint, and such consideration does not convert the motion to dismiss into a
motion for summary judgment. Burlington Coat Factory, 114 F.3d at 1426 (quoting Shaw v.
Dig. Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996); see also Pension Benefit Guar. Corp.
v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993) (“a court may consider an
undisputedly authentic document that a defendant attaches as an exhibit to a motion to
dismiss if the plaintiff‟s claims are based on the document.”).
A.
Facts
Plaintiff U.S. Renal Care, Inc. d/b/a U.S. Renal Care Central York Dialysis
(“Plaintiff”) is a medical services provider that offers dialysis services. (Doc. 1, ¶¶ 20-21.)
2
Defendant Wellspan Health (“Wellspan”) is the parent organization of Defendant Wellspan
Medical Plan (the “Plan”), which is a self-funded employee welfare benefit plan within the
meaning of § 3(1) of ERISA, 29 U.S.C. § 1002(1), that provides medical benefits to eligible
employees and their eligible dependents. (Id., ¶¶ 6-8.) Defendant South Central Preferred,
Inc. (“SCP” and, collectively with Wellspan and the Plan “Defendants”), which is also
owned by Wellspan, acts as the claims administrator, Preferred Provider Organization, and
Third Party Administrator (“TPA”) for the Plan, and performs the fiduciary duties of plan
administration, including making initial benefits determinations. (Id., ¶¶10, 25.) Defendants
work with Pennsylvania Preferred Health Network (“PPHN”) as their healthcare network to
provide benefits to beneficiaries under the Plan. (Id., ¶ 12.)
According to the Plan Document and Summary Plan Description (“SPD”),1 the
Plan provides four tiers of benefits: Tier 1 applies to beneficiaries who elect to be treated at a
Wellspan provider or facility, and benefits are generally paid at 100%; Tier 2 applies to
beneficiaries who elect to be treated at a “Select” facility or provider from SCP, and benefits
are generally paid at 90%; Tier 3 applies to beneficiaries who elect to receive treatment from
an out-of-network provider that is outside the PPHN service area, and benefits are generally
paid at 80% of the Usual Customary and Reasonable Charge (“UCR”), which is based on a
calculation of average costs for medical services in that area; and Tier 4 applies to
1
While there are three versions of the SPD relevant to the instant dispute, one for each
year of coverage in 2012, 2013, and 2014 (id., ¶ 30 n.2), the terms of the SPDs are substantially similar and
therefore will be referred to as a single SPD for convenience.
3
beneficiaries who elect to receive care from an out-of-network provider that is inside the
PPHN service area, and benefits are generally paid at 50% of UCR. (Id., ¶¶ 30, 32-36.)
In the event of an adverse benefit determination, the Plan states that the
administrator must provide written notice of the denial, which includes: the reasons for the
denial; a reference to the plan provisions upon which the denial was based; a description of
any additional information needed from the beneficiary to perfect the claim; notice that the
beneficiary is entitled to request a review of the claim denial and a description of the appeal
process, and; a statement that the beneficiary has a right to bring a civil action under ERISA
following any denial or appeal. (Id., ¶¶ 42-43.) The Plan defines an adverse benefit
determination as “any claim that is not paid at 100% . . . includ[ing] any amounts applied to
your deductible or co-insurance as well as any amount that exceeds a Plan limit.” (Id.)
Beginning on December 7, 2012 and continuing up to the present, Plaintiff has
provided life-sustaining dialysis services to patient WW, who is a beneficiary of the Plan
through his spouse. (Id., ¶¶ 11, 20-21.) In return for medical services, WW assigned all of
his benefits and rights under the Plan to Plaintiff pursuant to an Assignment of Benefits
(“AOB”), which included the assignment of any legal or administrative claims arising under
any ERISA or non-ERISA group health plan, and directed the Plan and its administrators,
fiduciaries, and attorneys to release all plan documents, summary benefit descriptions, and
insurance policies for the Plan to Plaintiff upon request. (Id., ¶¶ 27-29.) Throughout the
course of WW‟s treatment, the Plan was responsible for primary payment of WW‟s dialysis
4
treatments pursuant to the terms of the Plan Document and SPD, as well as the Medicare
Secondary Payer Provisions of the Social Security Act (“MSP”), and Medicare was
responsible for secondary payment. (Id., ¶ 22.) Because there was no participating provider
agreement or other contract between the Plan and Plaintiff, Plaintiff was considered an “outof-network” provider under the terms of the Plan. (Id., ¶ 26.)
Prior to treating WW, and then again for each new benefit year, Plaintiff verified
benefits with SCP, which represented that Plaintiff was an out-of-network provider and
benefits would be paid at 50% of UCR until WW‟s out-of-pocket maximum for each benefit
year had been met, and then at 100% of UCR. (Id., ¶ 54-56.) On March 27, 2013, Plaintiff
spoke with a representative of SCP regarding a payment Plaintiff had received that was
much lower than previous payments for similar claims, and the representative advised that
SCP would review payment of the claims. (Id., ¶ 58.) On April 1, 2013, SCP notified
Plaintiff that all of WW‟s claims from December 7, 2012 through January 14, 2013 had been
incorrectly paid at above UCR, and refund requests had been mailed to Plaintiff. (Id., ¶ 59.)
Those refund requests were made in varying amounts and stated that overpayment occurred
due to an “incorrect benefit/network level” and demanded repayment within thirty days.
(Id., ¶ 62-66, 68, 84-85.) On April 26, 2013, Plaintiff appealed the refund demands and
requested explanations of the overpayments, as well as a revised and itemized explanation of
benefits. (Id., ¶ 67.)
5
On July 3, 2013, SCP notified Plaintiff that due to the retirement of WW‟s spouse
on May 1, 2013, Medicare was the primary payer on all claims submitted after that date, and
a review of claims was pending the Medicare explanation of benefits. (Id., ¶¶ 60, 70.) On
August 29, 2013, SCP advised Plaintiff that Medicare rates for out-of-network services
provided the appropriate level of benefits under the terms of the Plan, and that all claims
from January 2013 up to that date had been referred to the claims department for payment
review. (Id., ¶ 71.) Between December 23, 2013 and February 27, 2014, Plaintiff engaged
in several conversations with representatives at SCP regarding missing or late payments on
claims that had been submitted. (Id., ¶¶ 72-75.)
By letter dated February 21, 2014, Defendants‟ attorneys notified Plaintiff that
two categories of overpayments had been made to Plaintiff: Category One overpayments
resulted from a clerical error on behalf of an employee of SCP, covered dates of service
from December 7, 2012 through January 13, 2013, and totaled $59, 752.16; and Category
Two overpayments resulted from a mathematical error on behalf of another SCP employee,
covered dates of service from January 16, 2013 through October 30, 2013, and totaled
$145,920.31. (Id., ¶¶ 78-80.) The letter further stated that if Plaintiff did not voluntarily
refund the total $205,672.47 of Category One and Two overpayments within ten days,
Defendants would recoup the overpayments by withholding then-current and future
allowable payments and possibly filing litigation. (Id., ¶ 81.) The letter did not include any
6
information related to Plaintiff‟s right to a review of the adverse benefits determination or
the appeals process in general. (Id., ¶ 93.)
Plaintiff responded via counsel in a letter letter dated March 5, 2014, wherein it
disputed the alleged overpayments and Defendants‟ right to recoup them, and requested the
methodology used to calculate the overpayment, any documents relied on in making such
calculation, and a complete fee schedule for dialysis services charged by Defendants‟ noncontracted payers. (Id., ¶¶ 94-96.) Plaintiff sent additional letters on April 15, 2014, May
27, 2014, and August 27, 2014, repeating the sentiments of its March 5, 2014 letter and
further requesting the underlying documents it was purportedly entitled to under ERISA,
such as the adverse benefit determination. (Id., ¶¶ 104-111, 118.) None of Defendants‟
responses included any information regarding fee schedules, the methodology used to
calculate the alleged overpayments, or any underlying documentation relied upon in
calculating the overpayments, but rather reiterated Defendants‟ intention to recoup the
overpayments. (Id., ¶ 99-103, 112-117.) According to the complaint, Defendants have in
fact proceeded to recoup the alleged overpayments, withholding nearly $35,000 of payments
to Plaintiff for services provided to WW between September 9, 2013 and the initiation of
this action. (Id., ¶ 83.)
B.
Procedural History
Plaintiff initiated this action by filing a complaint on November 25, 2014,
wherein it asserted claims under both ERISA and Pennsylvania state law due to Defendants‟
7
recoupment of its purported overpayments. (Doc. 1.) Defendants filed a motion to dismiss
the complaint on February 18, 2015 (Doc. 19), along with a brief in support thereof on
February 23, 2015 (Doc. 20). On February 24, 2015, Defendants filed their own complaint
against Plaintiff containing related claims in a separate action, (Civ. No. 1:15-cv-0400,
Compl., Doc. 1) (hereinafter “counterclaims”), which the court consolidated into the instant
matter on March 16, 2015 (see Doc. 25). In their counterclaims, Defendants asserted
equitable claims under ERISA relating to the alleged overpayments as well as an unjust
enrichment claim under Pennsylvania state law. (Id., ¶¶ 104, 107-110.) On April 6, 2015,
Plaintiff filed a motion to dismiss Defendants‟ counterclaims. (Doc. 30.) Both motions to
dismiss have been fully briefed and are thus ripe for disposition.
II.
Legal Standard
Both of the motions to dismiss presently before the court challenge the opposing
party‟s claims pursuant to Federal Rule of Civil Procedure 12(b)(6). A Rule 12(b)(6) motion
tests the sufficiency of a complaint against the pleading requirements of Rule 8(a), which
requires that a complaint contain a short and plain statement of the claim showing that the
pleader is entitled to relief “in order to „give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests.‟” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S 41, 47 (1957)). While a complaint need not contain
detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to
8
„state a claim to relief that is plausible on its face.‟” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570).
Thus, when adjudicating a motion to dismiss for failure to state a claim, the court
must view all of the allegations and facts in the complaint in the light most favorable to the
plaintiff, and must grant the plaintiff the benefit of all reasonable inferences that can be
derived therefrom. Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v.
Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). However, the court need not accept inferences or
conclusory allegations that are unsupported by the facts set forth in the complaint. See
Reuben v. U.S. Airways, Inc., 500 F. App‟x 103, 104 (3d Cir. 2012) (quoting Iqbal, 556 U.S.
at 678); Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (stating that
district courts “must accept all of the complaint‟s well-pleaded facts as true, but may
disregard any legal conclusions”).
Ultimately, the court must determine whether the facts alleged in the complaint
are sufficient to show that the plaintiff has a “plausible claim for relief.” Iqbal, 556 U.S. at
679; see also Pension Benefit Guar. Corp., 998 F.2d at 1196. The “plausibility standard”
requires “more than a sheer possibility” that a defendant is liable for the alleged misconduct.
Reuben, 500 F. App‟x at 104 (citing Iqbal, 556 U.S. at 678). Rather, the complaint must
show the plaintiff‟s entitlement to relief with its facts. Steedley v. McBride, 446 F. App‟x
424, 425 (3d Cir. 2011) (citing Fowler, 578 F.3d at 211). “[W]here the well-pleaded facts
do not permit the court to infer more than the mere possibility of misconduct, the complaint
9
has alleged – but it has not „show[n]‟ – „that the pleader is entitled to relief.‟” Iqbal, 556
U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)) (alterations in original). “Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Id. at 678 (citing Twombly, 550 U.S. at 555).
To evaluate whether allegations in a complaint survive a Rule 12(b)(6) motion,
the district court must initially “take note of the elements a plaintiff must plead to state a
claim.” Connelly v. Steel Valley Sch. Dist., 706 F.3d 209, 212 (3d Cir. 2013) (citations
omitted). Next, the court should identify allegations that “are no more than conclusions” and
thus, “not entitled to the assumption of truth.” Id. Lastly, “where there are well-pleaded
factual allegations, the court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.” Id.
A complaint “may not be dismissed merely because it appears unlikely that the
plaintiff can prove those facts or will ultimately prevail on the merits.” Phillips v. Cnty. of
Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (citing Twombly, 550 U.S. at 588 n.8). Rule 8
“„does not impose a probability requirement at the pleading stage,‟ but instead „simply calls
for enough facts to raise a reasonable expectation that discovery will reveal evidence of‟ the
necessary element[s].” Id. at 234 (quoting Twombly, 550 U.S. at 545).
“Courts use the same standard in ruling on a motion to dismiss a counterclaim
under Federal Rule of Procedure 12(b)(6) as they do for a complaint.” PPG Indus., Inc. v.
Generon IGS, Inc., 760 F. Supp. 2d 520, 524 (W.D. Pa. 2011) (citing United States v. Union
10
Gas Co., 743 F. Supp. 1144, 1150 (E.D. Pa. 1990)). Therefore, the court must “„accept as
true all of the allegations in the [Defendant's counterclaims] and all reasonable inferences
that can be drawn therefrom, and view them in the light most favorable to the non-moving
party.‟” Wawrzynski v. H.J. Heinz Co., Civ. No. 11-cv-1098, 2012 WL 726500, *2 (W.D.
Pa. Mar. 6, 2012) (quoting Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir. 1989)
(alterations in original).
III.
Discussion
A.
Defendants’ Motion to Dismiss the Complaint
In their motion to dismiss the complaint, Defendants argue that Plaintiff‟s state
law claim for conversion in Count I is preempted under §§ 502(a) and 514 of ERISA. (Doc.
20, pp. 6-10.) Specifically, Defendants argue that Plaintiff‟s conversion claim is preempted
by § 502(a) of ERISA because the claim is nothing more than a disguised claim for Plan
benefits which is not supported by any legal duty independent of the Plan. (Id., pp. 8-10.)
Defendants further argue that § 514(a) of ERISA preempts Plaintiff‟s conversion claim
because it “relates to” the Plan. (Id., pp. 6-8.) The court will address each argument in turn.
1.
ERISA Preemption of State Law Conversion Claim
ERISA provides for uniform federal regulation of welfare benefit plans. 29
U.S.C. § 1002(3). “Congress enacted ERISA to ensure that benefit plan administration was
subject to a single set of regulations and to avoid subjecting regulated entities to conflicting
11
sources of substantive law.” N.J. Carpenters & Trustees v. Tishman Constr. Corp. of N.J.,
760 F.3d 297, 303 (3d Cir. 2014) (citing N.Y. State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., 514 U.S. 645, 657 (1995)). As such, state law claims are often
preempted by ERISA. ERISA preemption comes in two forms: complete preemption under
§ 502(a), and defensive or conflict preemption under § 514(a).
A state law claim is completely preempted under § 502(a) of ERISA where “(1)
the plaintiff could have brought the claim under § 502(a); and (2) no other independent legal
duty supports the plaintiff‟s claim. Id. (citing Pascack Valley Hosp. Inc. v. Local 464A
UFCW Welfare Reimbursement Plan, 388 F.3d 393, 400 (3d Cir. 2004)). Here, the first
prong of this test is clearly met because Plaintiff not only could have brought a claim for
plan benefits under § 502(a), but, in fact, did bring such a claim. Although Plaintiff does not
specifically cite to § 502(a) in its complaint, the court easily construes Count II of the
complaint, titled “ERISA Claim for Plan Benefits,” as one brought pursuant to §
502(a)(1)(B). (Doc. 1, ¶¶ 128-29.) Therefore, the court must determine whether a legal duty
independent of ERISA supports Plaintiff‟s state law conversion claim brought in Count I.
An independent legal duty exists for purposes of ERISA preemption where the
legal duty “would exist whether or not an ERISA plan existed,” Marin Gen. Hosp. v.
Modesto & Empire Traction Co., 581 F.3d 941, 950 (9th Cir. 2009), or where there is no
need “to interpret the plan to determine whether that duty exists,” Gardner v. Heartland
Indus. Partners, LP, 715 F.3d 609, 614 (6th Cir. 2013). Here, Plaintiff‟s claim for
12
conversion is simply the flipside of the coin to its claim for benefits under ERISA. The
funds Plaintiff claims Defendants have converted in Count I of the complaint are the same
funds Plaintiff claims are owed for dialysis services it rendered to WW pursuant to the terms
of the Plan in Count II. Thus, rather than being independent of the Plan, the question of
whether Defendants had the right to recoup alleged overpayments for past services provided
to WW from current and future claims for the same patient is entirely dependent upon the
terms of the Plan. See Shatzer v. Conn. Gen. Life Ins. Co., Civ. No. 06-cv-2296, 2007 WL
1227693, *3 (M.D. Pa. Apr. 25, 2007); see also Metro. Life Ins. Co. v. Taylor, 481 U.S. 58,
62-63 (1987) (“[A] suit by a beneficiary to recover benefits from a covered plan . . . falls
directly under § 502(a)(1)(B) of ERISA, which provides an exclusive federal cause of action
for resolution of such disputes.”) (citation omitted). Stated more plainly, Plaintiff‟s
conversion claim is actually a claim for benefits pursuant to the Plan. See Levine v. United
Healthcare Corp., 402 F.3d 156, 163 (3d Cir. 2005) (“Where, as here, plaintiffs claim that
their ERISA plan wrongfully sought reimbursement of previously paid health benefits, the
claim is for „benefits due‟ and federal jurisdiction under [§] 502(a) of ERISA is
appropriate.”). Because no legal duty independent of ERISA or the Plan supports Plaintiff‟s
state law claim for conversion, the court finds that it is completely preempted by § 502(a) of
ERISA.
Likewise, Plaintiff‟s state law claim is also preempted by § 514(a) of ERISA,
which preempts “any and all State laws insofar as they may now or hereafter relate to any
13
employee benefit plan” governed by ERISA. 29 U.S.C. § 1144(a). “Its broad preemptive
scope reflects Congress's intent to lodge regulation of employee benefit plans firmly in the
federal domain.” Nat’l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 83 (3d Cir. 2012) (citing N.Y.
State Conference of Blue Cross & Blue Shield Plans, 514 U.S. at 656-57); see also IngersollRand Co. v. McClendon, 498 U.S. 133, 138 (1990). “The structure and legislative history
indicate that the words „relate to‟ are intended to apply in their broadest sense.” Cent.
States, Se. & Sw. Areas Health & Welfare Fund v. Neurobehavioral Assocs., P.A., 53 F.3d
172, 174 (7th Cir. 1995) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983). “A
law „relates to‟ an employee benefit plan, in the normal sense of the phrase, if it has a
connection with or reference to such a plan.” Delta Air Lines, 463 U.S. at 96-97. As stated
above, Plaintiff‟s state law conversion claim is in actuality a claim for benefits under an
ERISA plan. As such, the claim clearly “relates to” an ERISA plan and is preempted by §
514(a) of ERISA. See Dorn v. Int’l Bhd. of Elec. Workers, 211 F.3d 938, 948 (5th Cir.
2000) (“A state law claim, such as [plaintiff]‟s claim for conversion, addressing the right to
receive benefits under the terms of an ERISA plan necessarily „relates to‟ an ERISA plan
and is thus preempted.”) (citations omitted); see also Minnis v. Baldwin Bros., 150 F. App‟x
118, 120 n.1 (3d. Cir. 2005) (citing § 514(a) and stating that “because [Plaintiff] alleged an
ERISA plan in his complaint, any state law claims contained therein were preempted by
ERISA.”); Ferry v. Mut. Life Ins. Co., 868 F. Supp. 764, 770 (W.D. Pa. 1994) (stating that
14
state law tort claims such as conversion fall under “the broad sweep of ERISA
preemption.”).
Accordingly, Plaintiff‟s state law conversion claim in Count I of the complaint is
preempted by both § 502(a) and § 514 (a) of ERISA and will be dismissed.
2.
ERISA Claims
Counts II to IV of Plaintiff‟s complaint assert claims under ERISA for plan
benefits, failure to provide proper notice of an adverse benefits determination, and breach of
fiduciary duty. (Doc. 1, ¶¶ 127-37.) Defendants argue that those counts should be dismissed
because Plaintiff failed to exhaust its administrative remedies before filing suit, and,
additionally, Counts III and IV fail as a matter of law. (Doc. 20, pp. 10-23.) In response,
Plaintiff argues that exhaustion of administrative remedies was futile and that it has properly
pleaded its claims in Counts III and IV. (Doc. 24.)
a.
Futility Exception to Exhaustion
Generally, a plaintiff may only bring a civil action to recover benefits under an
ERISA plan after the plaintiff has “exhausted the remedies available under the plan.”
Bennett v. Prudential Ins. Co., 192 F. App‟x 153, 155 (3d Cir. 2006) (citing Weldon v. Kraft,
896 F.2d 793, 800 (3d Cir. 1990)). “The exhaustion requirement is waived, however, where
resort to the plan remedies would be futile.” Id. (citing Berger v. Edgewater Steel Co., 911
F.2d 911, 916 (3d Cir. 1990)). Because futility is an exception to the exhaustion
requirement, “[the] party invoking this exception must provide a clear and positive showing
15
of futility before the District Court.” D’Amico v. CBS Corp., 297 F.3d 287, 290 (3d Cir.
2002). As the Third Circuit has explained:
“Whether to excuse exhaustion on futility grounds rests upon
weighing several factors, including: (1) whether plaintiff diligently
pursued administrative relief; (2) whether plaintiff acted reasonably in
seeking immediate judicial review under the circumstances; (3)
existence of a fixed policy denying benefits; (4) failure of the
[defendant] to comply with its own internal administrative procedures;
and (5) testimony of plan administrators that any administrative
appeal was futile. Of course, all factors may not weigh equally.”
Cottillion v. United Ref. Co., 781 F.3d 47, 54 (3d Cir. 2015) (quoting Harrow v. Prudential
Ins. Co. of Am., 279 F.3d 244, 250 (3d Cir. 2002)).
Here, Plaintiff received notice of the initial adverse benefits determination, i.e.,
Defendants‟ assertion that it had overpaid on previous claims for patient WW and demand
for reimbursement, by letter in March 2013. (Doc. 1, ¶ 62.) That letter from SCP, as well as
several others relating to additional payments for services provided to patient WW, provided
that the overpayments occurred because the claims were “paid at the incorrect
benefit/network level” and demanded that Plaintiff refund the alleged overpayments within
thirty days. (Id., ¶¶ 62-66, 68, 84-85.) Plaintiff initially responded to the adverse benefits
determination by letter dated April 26, 2013, wherein it refused to refund the purported
overpayments and requested, inter alia, the underlying documentation relied upon by
Defendants in arriving at their decision. (Id., Ex. 5.) Plaintiffs allege that they received no
response. Instead, nearly a year later, Defendants sent a letter dated February 21, 2014,
wherein they again demanded a refund of the overpayments and included a second adverse
16
benefits determination relating to an additional set of purported overpayments. (Id., ¶¶ 8990.) The letter also included summary plan descriptions for 2012 and 2013.2 (Id., ¶¶ 89-90.)
Plaintiff alleges that, in response, it sent multiple requests for the documents underlying
Defendants‟ calculations, but again never received them. (Doc. 24, p. 7 of 15.)
Turning to the factors used to determine futility, it appears from the complaint
that Plaintiff pursued administrative relief through letters to Defendants disputing the
purported overpayments and requesting the documents relied upon by Defendants in
calculating the overpayments. (Doc. 1, ¶¶ 58-59, 61, 67-77, 84-118.) Although Plaintiff
may have failed to act in strict compliance with Defendants‟ administrative procedures, it
appears clear from the face of its letters that Plaintiff was taking an appeal of the adverse
benefits determinations. By failing to provide Plaintiff with information relating to the
appeals process and not furnishing the documents underlying their rationale for, and
calculation of, the adverse benefits determinations, Defendants also failed to act in
accordance with their own internal administrative procedures. As such, further pursuit of
administrative remedies may have been futile. Furthermore, because it appears that
Defendants had no policy in place for denying present and future benefits to recoup prior
2
In their reply, Defendants allege that they responded with the required information via
letter dated May 20, 2013, and include the letter as an attachment to their brief. (Doc. 29, p. 5 of 15.)
However, Plaintiff did not include any mention of a May 20, 2013 letter in the complaint. Rather, Plaintiff
alleges that the February 21, 2014 letter from Defendants was the first response Plaintiff received to its letter
of April 2013. (Doc. 24, p. 6 of 15.) Because there is an apparent dispute as to the authenticity of the May
20, 2013 letter, and taking into account “the Third Circuit‟s reluctance to convert motions to dismiss into
motions for summary judgment,” the court will not consider the May 20, 2013 letter at this stage in the
litigation. In re Shop-Vac Mktg. & Sales Practices Litig., Civ. No. 12-md-2380, 2014 WL 3557189, *3
(M.D. Pa. July 17, 2014) (citing Pryor v. NCAA, 288 F.3d 548, 559-60 (3d Cir. 2007)).
17
overpayments, the court cannot find that Plaintiff acted unreasonably in seeking judicial
review in the present circumstances in light of Defendants withholding payments for claims
to which Plaintiff would otherwise be entitled, in excess of $34,000. (Doc. 1, ¶ 83.)
Therefore, the court finds that Plaintiff has alleged sufficient facts in the
complaint to support a finding that exhaustion of administrative remedies prior to filing a
claim for benefits under ERISA would have been futile, and, accordingly, the court will not
dismiss Count II of the complaint.
b.
Violation of § 502(c)(1) of ERISA
Plaintiff also asserts a claim for failure to produce required documents pursuant
to § 502(c)(1) of ERISA. (Doc. 1, ¶¶ 131-32.) Under § 502(c)(1), a plan administrator:
. . . who fails or refuses to comply with a request for any information
which such administrator is required by this subchapter to furnish to a
participant or beneficiary . . . within 30 days after such request may in
the court‟s discretion be personally liable to such participant or
beneficiary in the amount of up to $100 a day from the date of such
failure or refusal, and the court may in its discretion order such other
relief as it deems proper.
29 U.S.C. § 1132(c)(1). The information that a plan administrator must furnish to a plan
participant or beneficiary upon request includes “a copy of the latest updated summary plan
description, and the latest annual report, any terminal report, the bargaining agreement, trust
agreement, contract, or other instruments under which the plan is established or operated.”
29 U.S.C. § 1024(b)(4).
18
In the complaint, Plaintiff alleged that by letter dated April 26, 2013, it requested,
inter alia, copies of the explanation of benefits for each claim related to the alleged
overpayments and did not receive a written response until February 21, 2014. (Doc. 1, ¶¶
67, 78; see also Doc. 24, p. 6 of 15.) Because a plan administrator must furnish summary
plan descriptions, which include explanations of benefits, within thirty days of a written
request for such information under § 502(c)(1) of ERISA, and Plaintiff alleges that it did not
receive such information within thirty days, Plaintiff has properly pleaded a plausible claim
for relief. Accordingly, the court will not dismiss Count III.
c.
Breach of Fiduciary Duty Under § 502(a)(3) of ERISA
Plaintiff‟s final claim, contained in Count IV of the complaint, alleges that
Defendants breached their fiduciary duty in violation of § 502(a)(3) of ERISA. (Doc. 1, ¶¶
133-36.) In Count IV, Plaintiff alleges that Defendants failed to act solely in the interests of
participants and beneficiaries of the Plan for the exclusive purpose of providing benefits,
failed to comply with the terms of the Plan, failed to properly pay claims made under the
Plan, improperly calculated the rate at which claims were paid, and failed to notify Plaintiff
that claims for benefits under the Plan had been denied. (Id., ¶ 136.) Defendants contend
that Plaintiff‟s purported breach of fiduciary duty claim is simply an impermissible
repleading of its claim for benefits under Count II, and must therefore be dismissed. (Doc.
20, pp. 19-21 of 24.) The court agrees.
19
Section 502(a)(3) of ERISA allows plaintiffs in civil actions to “obtain other
appropriate equitable relief” for violations of ERISA. 29 U.S.C. § 1132(a)(3). An equitable
claim for breach of fiduciary duty, however, is generally not available where another section
of ERISA provides an adequate remedy for a plan beneficiary‟s injury. Varity Corp. v.
Howe, 516 U.S. 489, 515 (1996) (“[I]n which case such relief normally would not be
„appropriate‟”). The “great majority of circuit courts have interpreted Varity to hold that a
claimant whose injury creates a cause of action under § [502](a)(1)(B) may not proceed with
a claim under § [502](a)(3).” Korotynska v. Metro. Life Ins. Co., 474 F.3d 101, 106 (4th Cir.
2006) (citing decisions from the Fifth, Sixth, Eighth, Ninth, and Eleventh Circuits); cf.
Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 89-90 (2d Cir. 2001) (holding that
plaintiffs may simultaneously seek relief under § [502](a)(1)(B) and § [502](a)(3)). As this
court has stated, “[c]ourts have interpreted ERISA to mean that a plaintiff cannot sue for
breach of fiduciary duties to obtain denied benefits.” Hartman v. Wilkes-Barre Gen. Hosp.,
237 F. Supp. 2d 552, 557 (M.D. Pa. 2002); see also Harrow, 279 F.3d at 254 (finding that
breach of fiduciary duty claim was merely a disguised claim for benefits); D’Amico, 297
F.3d at 292 (same). Furthermore, the United States Supreme Court has held that a claim for
money due and owing does not constitute equitable relief and is not available under §
502(a)(3). Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210-11 (2002).
Here, Plaintiff‟s breach of fiduciary duty claim seeks the same relief as its claim
for benefits in Count II. Specifically, Plaintiff seeks, inter alia, money damages from
20
Defendants for the services Plaintiff provided to patient WW pursuant to the Plan, money
which Defendants have not paid in order to recoup the alleged overpayments previously
made pursuant to the Plan. Plaintiff alleges in Count IV that Defendants breached their
fiduciary duties by “fail[ing] to pay proper reimbursement for WW‟s medical expenses per
[the] Plan‟s clear and unambiguous language.” (Doc. 1, ¶ 136a.) As the Third Circuit has
held, however, “[a] claim for breach of fiduciary duty is „actually a claim for benefits where
the resolution of the claim rests upon an interpretation and application of an ERISAregulated plan rather than upon an interpretation and application of ERISA.‟” Harrow, 279
F.3d at 254 (quoting Smith v. Sydnor, 184 F.3d 356, 362 (4th Cir. 1999)). Plaintiff‟s claim
for breach of fiduciary duty is simply a disguised benefits claim as it relies on the terms of
the Plan and rests on the same set of facts and seeks the same relief as its claim for benefits.
Accordingly, Count IV will be dismissed because Plaintiff is provided adequate relief
through its claim for benefits under § 502(a)(1)(B) of ERISA.
B.
Counterclaims
Defendants assert two equitable counterclaims arising out of the alleged
overpayments to Plaintiff, one under § 502(a)(3) of ERISA for “other equitable relief” in the
form of an equitable lien by agreement, and one under common law for unjust enrichment.
(Counterclaims.) Plaintiff responded with a motion to dismiss both counterclaims,
contending that the first counterclaim is legal, rather than equitable, in nature, and therefore
not proper under § 502(a)(3), and that Defendants failed to properly plead the elements of
21
unjust enrichment for the second counterclaim. (Doc. 31.)3 The court will address these
arguments in turn.
1.
Equitable Lien by Agreement Under § 502(a)(3) of ERISA
In Count I of their counterclaims, Defendants assert that the terms of the Plan
created an equitable lien by agreement, mandating that Plaintiff return to Defendants any
overpayment of benefits pursuant to the Plan. (Counterclaims, ¶¶ 103-04.) The terms of the
Plan state, in relevant part:
If, due to a clerical error [by the Plan Administrator or an agent of the
Plan Administrator], an overpayment occurs in a Plan reimbursement
amount, the Plan retains a contractual right to the overpayment. The
person or institution receiving the overpayment will be required to
return the incorrect amount of money.
(Id., ¶ 19.) Defendants argue that this language created an equitable right to the
overpayment itself, rather than just a legal claim for monetary damages. (Doc. 39, pp. 8-9 of
18.) Plaintiff argues that the claim is not equitable because the actual funds representing the
overpayment are not traceable and have been exhausted. (Doc. 41, pp. 4-5 of 10.) The court
agrees with Defendants.
The United States Supreme Court held in Sereboff v. Mid Atlantic Medical
Services, Inc., 547 U.S. 356 (2006), that there is no “tracing requirement” for an equitable
3
Plaintiff also disputes the fact that it received timely notice of the Plan Document and
SPD, and therefore did not have actual knowledge of the rate of payment to which it was entitled pursuant to
the Plan. However, Defendants allege in their counterclaims that they did provide such notice via letter
dated May 20, 2013. (Counterclaims, ¶ 71.) At this stage of the litigation, the court accepts as true all
factual allegations contained in a complaint or counterclaim, PPG Indus., 760 F. Supp. 2d at 524, and
declines to convert Plaintiff‟s motion to dismiss into a motion for summary judgment.
22
lien by agreement. Id. at 365. Rather, an equitable lien by agreement attaches to the
specified property changing hands, and that property may be converted into other property
without invalidating the lien. Id. at 364-65. The Court‟s decision in Sereboff distinguished
its prior holding in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204
(2002), that the relief sought was not equitable where an insurer attempted to impose a lien
over funds which were not in the insured‟s possession and effectively sought recovery from
the insured‟s general assets. Id. at 213-14.
In Funk v. Cigna Group Insurance, 648 F.3d 182 (3d Cir. 2011), the Third
Circuit applied the holding in Sereboff to facts very similar to the instant action. In Funk,
the plaintiff filed an ERISA action for benefits pursuant to a long term disability plan, and
defendants counterclaimed for an overpayment that was discovered when the plaintiff
received a retroactive award of Social Security benefits. Id. at 189-90. Relying on Sereboff,
the Third Circuit held that the relevant language of the agreement between the parties, which
stated the plaintiff would be responsible for “„reimburse[ment of] the full amount of any
overpayment,‟” was sufficient to create an equitable lien by agreement and ordered plaintiff
to reimburse the overpayment to defendants, even though plaintiff no longer had the funds in
his possession. Id. at 194-95 (alterations in original). Significantly, the Plan‟s language
analyzed by the Funk court is nearly identical to the language contained here in the terms of
the Plan. Therefore, the court finds that whether Plaintiff exhausted the exact funds is
“immaterial,” and that Defendants have sufficiently pleaded that the language of the Plan
23
created an equitable lien by agreement. Id. at 194. Accordingly, the court will not dismiss
Count I of the counterclaims.
2.
Unjust Enrichment
Defendants plead an alternative basis for relief in Count II of their counterclaims
under a common law theory of unjust enrichment pursuant to Pennsylvania law.
(Counterclaims, ¶ 106-10.) Plaintiff argues that Defendants have failed to properly plead a
claim for unjust enrichment because they do not allege that Plaintiff was paid more than its
billed fees for the medical services to WW, and therefore Plaintiff did not receive a benefit
for which it did not provide value. (Doc. 41, p. 8 of 10.)
Under Pennsylvania law, a claim for unjust enrichment is made up of the
following elements: “„(1) benefits conferred on defendant by plaintiff; (2) appreciation of
such benefits by defendant; and (3) acceptance and retention of such benefits under such
circumstances that it would be inequitable for defendant to retain the benefit without
payment of value.‟” Sovereign Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162, 180 (3d
Cir. 2008) (quoting Limbach Co. LLC v. City of Phila., 905 A.2d 567, 575 (Pa. Commw. Ct.
2006)). A party asserting a claim for unjust enrichment “must show that the party against
whom recovery is sought either „wrongfully secured or passively received a benefit that it
would be unconscionable for her to retain.‟” Torchia v. Torchia, 499 A.2d 581, 582 (Pa.
Super. Ct. 1985) (quoting Roman Mosaic & Tile Co., Inc. v. Vollrath, 313 A.2d 305, 307
(Pa. Super. Ct. 1973)). A claim for unjust enrichment is not supported, however, merely
24
because the party against whom recovery is sought may have received some benefit from the
claimant. Walter v. Magee-Womens Hosp. of UPMC Health Sys., 876 A.2d 400, 407 (Pa.
Super. Ct. 2005).
Here, Defendants have alleged that Plaintiff received and appreciated a benefit in
the form of the overpayment of claims and that retention of the overpayment would be
inequitable or unconscionable. (Counterclaims, ¶¶ 107-10.) Defendants further allege that
Plaintiff‟s possession of the Plan Document and SPD as well as the multiple phone
conversations by which Plaintiff verified with SCP the rate of payment it would receive
pursuant to the Plan establishes that Plaintiff knew Defendants‟ had overpaid and that
Plaintiff was not entitled to keep the full amount of the payments. (Counterclaims, ¶¶ 14,
17, 48-49, 58-61.) Although Plaintiff did provide services in exchange for the benefit it
received from Defendants, Defendants have pleaded that Plaintiff‟s knowing receipt and
retention of an amount far in excess of what Plaintiff was entitled to under the Plan
Document and SPD could be inequitable. At this stage of the litigation, Defendants have
met their pleading burden and shown that they have a plausible claim for relief. Iqbal, 556
U.S. at 679. As such, the court will not dismiss Count II of Defendants‟ counterclaims.
IV.
Conclusion
In conclusion, Plaintiff‟s state law conversion claim in Count I of the complaint
is preempted by §§ 502(a) and 514(a) of ERISA and will be dismissed. Plaintiff‟s claim for
breach of fiduciary duty under ERISA in Count IV of the complaint will likewise be
25
dismissed because the court finds it is an improper repleading of Plaintiff‟s claim for plan
benefits found in Count II of the complaint. However, Plaintiff has properly stated claims
for benefits under an employee benefit plan governed by ERISA in Count II, as well as an
inadequate notice claim under ERISA in Count III, and those claims will not be dismissed.
As to Defendants‟ counterclaims, both counts have been properly pleaded and neither will be
dismissed.
An appropriate order will issue.
s/Sylvia H. Rambo
United States District Judge
Dated: September 10, 2015
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