Summary
holding that the plaintiff's state-law libel claim was not preempted by ERISA, citing Mackey
Summary of this case from Murray v. S.O.L.O. Benefit FundOpinion
00 Civ. 2800 (LMM); 00 Civ. 7246 (LMM)
July 30, 2001
MEMORANDUM AND ORDER
The American Medical Association, The Medical Society of the State of New York, The Missouri State Medical Association, John Marcum, M.D., Michael J. Attkiss, M.D., Sandra Taylor, Edward F. Mitchell, Jr., Clifford E. and Michele S. Wilson, Matthew Crema, Peter Oborski, Helen Coull, Michael and Susie Grisham and Paul Steinberg bring this lawsuit against United HealthCare Corporation, United HealthCare Group Inc., United HealthCare Insurance Company, United HealthCare Insurance Company of New York, United HealthCare of the Midwest, Inc., United HealthCare Services, Inc., United HealthCare Service Corporation and Metropolitan Life Insurance Company under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), and under New York law for breach of contract, deceptive acts and practices pursuant to New York General Business Law § 349 and trade libel. Before the Court are plaintiffs' motion for partial remand and defendants' motion to dismiss for lack of personal jurisdiction and for failure to state a claim. For the following reasons, plaintiffs' motion for partial remand is denied and defendants' motion to dismiss is granted in part and denied in part.
Background
Plaintiffs are best categorized into three groups. Plan participants are Sandra Taylor, Edward F. Mitchell, Jr., Clifford E. Wilson, Michele Wilson, Matthew Crema, Peter Oborski, Helene Coull, Michael Grisham, Susie Grisham and Paul Steinberg. Taylor, the Wilsons, Oborski, Coull and the Grishams belong to American Airlines' health care benefit plan; Mitchell belongs to Osram Sylvania's health care benefit plan; and Crema belongs to the Empire Plan, which is a health care plan for New York State employees. Doctors Marcum and Attkiss are medical care providers who have treated the plan participants as "out-of-network providers," i.e. they have not agreed with any of the plans to treat plan participants at discounted rates. The remaining group is the medical association plaintiffs who consist of the American Medical Association, the Medical Society of the State of New York and the Missouri State Medical Association.
The three health care plans permit plan participants to choose either to receive medical services from "in-network" or "out-of-network" physicians. This lawsuit concerns reimbursement for treatment by out-of-network providers. All three plans provide that they will pay a specified percentage of the out-of-network provider's charge, as long as the fee is determined to be "usual, customary and reasonable" ("UCR") for that service. The UCR amount is determined by considering the nature of the service provided and the typical charge for such service by other doctors in the same or similar geographical area. (Fieldstein Aff. Ex. A at 119; Ex. D at 11-12; Ex. I at 52.) If the physician's fee is higher than the amount allocated for such service by UCR data, then the plan pays the specified percentage of the UCR amount.
The language for this concept varies from plan to plan; however, the Court adopts the parties' convention of referring to it as UCR. For example, the American Airlines plan uses "usual and prevailing fee limits;" the Osram Sylvania plan refers to the "reasonable charge for covered services and supplies;" and the Empire Plan labels it the "reasonable and customary charge." (Fieldstein Aff. Ex. A at 24; Ex. D at 11; Ex. I at 50.)
Plaintiffs name as defendants United HealthCare Corporation ("UHC"), United HealthCare Group, Inc. ("UHG"), United HealthCare Insurance Company ("UHIC"), United HealthCare Insurance Company of New York ("UHICNY"), United HealthCare of the Midwest, Inc. ("UHM"), United HealthCare Services, Inc. ("UHS") and United HealthCare Service Corporation ("UHSC") (collectively "United HealthCare"). UHIC is the claims processor or claims administrator for the American Airlines plan and the Osram Sylvania plan. (Fieldstein Aff. Ex. A. at 24; Ex. D at 3.) Until January 1, 2000, claims administration for the Empire Plan was performed by UHSC, previously named MetraHealth Service Corporation. Since January 1, 2000 the claims administrator for the plan has been UHICNY which also was assigned the group insurance contract by defendant Metropolitan Life Insurance Company ("Metropolitan Life") at the same time. (Fieldstein Aff. Exs. F-H.) The remainder of the United HealthCare defendants are named in their capacity as parent or affiliate companies. (Second Am. Compl. ¶ 168.)
Citations to the complaint are to the complaint filed in 00 Civ. 2800.
The basis for plaintiffs' lawsuit is that United HealthCare is obligated to reimburse plan participants for the full amount of their medical expenses under the terms of plans as long as the fee did not exceed the UCR rate for such services ("UCR fee"). The determination that a provider's fee for medical services is greater than the UCR fee for that service means that the plan participant is out-of-pocket for a greater amount than had their provider's fee been the same as the UCR fee. Plaintiffs claim that although United HealthCare is obligated to collect and maintain UCR data to support its benefit determinations in its role as claims administrator, it does not in fact possess UCR data to substantiate its claims that certain fees are greater than the usual and customary charge for such treatment and cannot justify reimbursement at the lower rate. Plaintiffs also claim that United HealthCare is obligated to disclose UCR data to plan participants and their physicians.
For out-of-network providers, each plan sets the reimbursement amount at a percentage of the fee, typically at eighty percent. When the Court refers to the reimbursement of fees, it means to the full amount allowed under the terms of each plan.
Plaintiffs' Motion for Partial Remand of State Claims
Plaintiffs argue that the Court should decline to exercise supplemental jurisdiction under 28 U.S.C. § 1367(a) over the state law claims for breach of contract (Second Am. Compl. ¶¶ 210-23), deceptive acts and practices under New York General Business Law § 349 (id. ¶¶ 224-39) and trade libel. (Id. ¶¶ 240-46.) Section 1367(a) provides, in relevant part, that in an action where the court has original jurisdiction, it "shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367(a). In order to constitute one "case or controversy" under Article III, plaintiff's federal and state law claims must possess "a common nucleus of operative fact." United Mine Workers v. Gibbs, 383 U.S. 715, 725(1966).
Plaintiffs argue that the Court should not exercise supplemental jurisdiction over the state law claims because they are not part of the same case or controversy as the ERISA claims. Plaintiffs' argument for why these two sets of claims are "completely distinct" erroneously focuses on the fact that they rest on independent legal grounds, as they must. (Pls.' Mem. Supp. Mot. Partial Remand at 4.) Plaintiffs also assert that because the Empire Plan is exempt from ERISA as a "government plan" under 29 U.S.C. § 1003(4)(b), state law claims concerning that plan cannot form the same case or controversy as claims arising under ERISA because they "invoke the specific substance of New York law — New York contract law, New York deceptive practices law, and New York trade libel law." (Pls.' Reply Supp. Mot. Partial Remand at 7.) However, the appropriate inquiry is whether the state and federal claims arise from the same common operative facts, not the same law. Lyndonville Sav. Bank Trust Co. v. Lussier, 211 F.3d 697, 704 (2d Cir. 2000). Here, the state and federal claims all arise from plaintiffs' allegations that it is defendants' practice to reimburse for less than what the patient was charged without the UCR data to support such determinations.
Plaintiffs next argue that the Court should decline to exercise supplemental jurisdiction under the factors identified in United Mine Workers v. Gibbs, 383 U.S. 715(1966) namely, judicial economy, convenience, fairness to the litigants and comity. Id. at 726. However, in Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442 (2d Cir. 1998), the Court found that 28 U.S.C. § 1367(c) altered the analysis under Gibbs so that the "discretion to decline supplemental jurisdiction is available only if founded upon an enumerated category of subsection of 1367(c)." Id. at 448. Thus, the four circumstances under which supplemental jurisdiction over a state law claim may be declined are: (1) the claim raises a novel or complex issue of state law, (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction. § 1367(c).
Plaintiffs argue that their state law claims present novel or complex issues of state law and principles of comity dictate that the Court should decline to exercise supplemental jurisdiction. Further, because Congress exempted government plans such as the Empire Plan from ERISA, it also intended to preclude federal courts from making decisions concerning such plans. The Court disagrees. The state law claims are for breach of contract, deceptive acts and practices under § 349 of New York General Business Practices Law and trade libel, all well trodden areas of state law. Cf. Hoffman v. Empire Blue Cross Blue Shield, No. 96 Civ. 5448, 1999 WL 782518, at *5-*7, *10 (S.D.N Y Sept. 30 1999) (declining to exercise supplemental jurisdiction over state law claims for a non-ERISA Plan because such claims raised novel and complex questions of state law, namely, whether the terms of the plan were void as against public policy under New York Insurance Law). Nor has the Court dismissed all of the federal claims. See Grace v. Rosenstock, 228 F.3d 40, 55 (2d Cir. 2000); Seabrook v. Jacobson, 153 F.3d 70, 72 (2d Cir. 1998). To the extent plaintiffs argue that other considerations weigh against the Court's exercise of supplemental jurisdiction, they are not those enumerated in § 1367(c).
For example, plaintiffs argue that their entitlement to a jury trial for their state law claims but not their federal claims should preclude supplemental jurisdiction over their state law claims. However, federal procedural law governs the right to a jury trial of supplemental state law claims. Davila v. New York Hospital, No. 91 Civ. 5992, 1995 WL 115598, at *1, *2 n. 1 (S.D.N.Y. Mar. 17, 1995); Resnick v. Resnick, 763 F. Supp. 760, 766 (S.D.N.Y. 1991).
In a separate argument, plaintiffs contend that because Crema does not assert any federal claim the Court cannot exercise supplemental jurisdiction over his state law claims. (Pls.' Reply at 3-6.) However, § 1367(a), which provides that "supplemental jurisdiction shall include claims that involve the joinder . . . of additional parties," is interpreted to "authorize federal courts to assert supplemental jurisdiction over claims arising out of the same transaction or occurrence as a claim within the court's federal-question jurisdiction, even when those claims require the joinder of additional nondiverse parties." Charles Alan Wright et al., 7 Federal Practice and Procedure § 1659 (3d ed. 2001). The Court has federal question jurisdiction over plaintiffs' ERISA claims, and therefore, supplemental jurisdiction over Crema's state law claims.
Plaintiffs' motion for partial remand is denied.
Defendants' Motion to Dismiss
I. Legal Standard
Defendants bring a motion to dismiss on the grounds that the Court lacks personal jurisdiction over some of the defendants under Fed.R.Civ.P. 12(b)(2) and for failure to state a claim under Fed.R.Civ.P. 12(b)(6).
Plaintiffs bear the burden of establishing this Court's jurisdiction over the defendants. See Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). Prior to discovery, a motion to dismiss pursuant to Rule 12(b)(2) may be defeated if the plaintiffs' complaint and affidavits contain sufficient allegations to establish a prima facie showing of jurisdiction. Id. Moreover, the Court must assume the truth of the plaintiffs' factual allegations, PDK Labs., Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997), even in light of defendants' "contrary allegations that place in dispute the factual basis of plaintiff[s'] prima facie case." Pilates, Inc. v. Pilates Inst., Inc., 891 F. Supp. 175, 178 (S.D.N.Y. 1995).
In considering a Rule 12(b)(2) motion, the Court may consider affidavits and documents submitted by the parties without converting the motion into one for summary judgment under Rule 56. See Laborers Local 17 Health Ben. Fund v. Philip Morris, Inc., 26 F. Supp.2d 593, 604 (S.D.N.Y. 1998).
Under Rule 12(b)(6), a complaint will be dismissed if there is a "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). The court must read the complaint generously accepting the truth of and drawing all reasonable inferences from well-pleaded factual allegations. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). A court should dismiss a complaint only "if `it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'"Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994) (quoting Conley v. Gibson, 355 U.S. 41, 45-46(1957)).
II. Personal Jurisdiction
Defendants argue that this Court lacks personal jurisdiction over United Health Group, Inc. ("UHG") and United HealthCare of the Midwest, Inc. ("UHM") because they do not have jurisdictional contacts with New York state. However,
Formerly known as United HealthCare Corporation. (Luis Aff. ¶ 3.)
ERISA provides that process "may be served in any district where a defendant resides or may be found." 29 U.S.C. § 1132(e)(2). Courts have construed this nationwide service provision to confer personal jurisdiction over a defendant without regard to state long-arm statutes, so long as the defendant has sufficient minimum contacts with the United States. This approach, colloquially referred to as the "national" contacts test, inquires whether the defendant has minimum contacts with the United States as a whole. In other words, the familiar "minimum contacts" analysis of International Shoe Co. v. Washington, 326 U.S. 310(1945), which examines the contacts between the defendant and the state where the federal court that would exercise jurisdiction sits, does not govern when Congress provides nationwide service of process in connection with a federal cause of action.Dittman v. Dyno Nobel, Inc., 97-CV-1724, 1998 WL 865603, at *2 (N.D.N.Y. Nov. 24, 1998) (citations omitted). UHG is a Minnesota corporation and UHM is a Missouri corporation. As corporations which reside in the United States, they are subject to nationwide service of process under ERISA and to the personal jurisdiction of this Court. See id. at *3-*4; Kingsepp v. Wesleyan Univ., 763 F. Supp. 22, 24-25 (S.D.N.Y. 1991). Further, because the Court has already determined that plaintiffs' state law claims derive from a common nucleus of operative fact, the Court also has personal jurisdiction over UHG pursuant to 28 U.S.C. § 1367(a) for the state law claims brought against it. Rubinbaum LLP v. Related Corporate Partners V, L.P., No. 00 Civ. 2715, 2001 WL 225242 at *5-*6 (S.D.N.Y. Mar. 2, 2001) (finding personal jurisdiction over state law claims against defendants where court had jurisdiction over defendants pursuant to nationwide service of process provision in federal statue); see IUE AFL-CIO Pension Fund v. Hermann, 9 F.3d 1049, 1052 n. 2, 1056 (2d Cir. 1993) (deciding case filed prior to enactment of § 1367(a), finding pendant personal jurisdiction for state law claims when defendant was subject to jurisdiction under nationwide service of process provision and noting that analysis would be the same if decided under § 1367(a)).
Defendants' motion to dismiss for lack of personal jurisdiction is denied.
III. ERISA CLAIMS
A. § 502(a)(1)(B)
In Count I of the complaint plaintiffs allege that pursuant to their agreements with subscribers and plan sponsors, "United Healthcare is required to pay an out-of-network provider's actual charges in the absence of data substantiating the appropriateness of a lesser payment." (Second Am. Compl. ¶ 115.) Plaintiffs claim that United Healthcare has breached these agreements by failing to make payments consistent with this obligation and by failing to "pay the specified percentage of the out-of-network provider's actual charges, causing [participants] to pay more than their specified copayment amounts." (Id. ¶¶ 116-17.) Plaintiffs assert that these breaches entitle participants to recover benefits in the form of "all of the unpaid amounts that are below their out-of-network providers' actual charges" and exemplary damages (id. ¶ 120); providers to recover compensatory and exemplary damages (id. ¶ 121); and the medical association plaintiffs to appropriate injunctive or equitable relief. (id. ¶ 122.)
As the Court already noted, (see supra n. 3) none of the benefit plans provide for the full reimbursement of out-of-network providers' fees; rather each plan reimburses a percentage of the fee, typically eighty percent. The Court assumes that is what plaintiffs mean when they refer to the provider's "actual charge."
ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), provides that a "civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." The Second Circuit has held that a § 502(a)(1)(B) claim for benefits can only be brought against the designated plan administrator or a plan trustee. Crocco v. Xerox Corp., 137 F.3d 105, 107-08 (2d Cir. 1998). Plaintiffs do not allege that defendants are plan administrators or trustees; rather, they argue that because defendants are fiduciaries, they can be held liable for benefits under § 502(a)(1)(B). (Pls.' Opp'n at 12.) However, Crocco rejects liability for benefits under § 502(a)(1)(B) for any entity other than the plan administrator or trustees. See 137 F.3d at 107 n. 2 (discussing ERISA claims that can be brought against plan fiduciaries under § 502(a)(2) and (a)(3)). Plaintiffs' claim for equitable relief under § 502(a)(1)(B) also must fail because there is no support for the argument that such relief is available from any entity other than the plan administrator or trustee under this section. Further, the providers and the medical associations appear to lack standing to bring a § 502(a)(1)(B) claim because they are neither participants nor beneficiaries, the only entities authorized pursuant the statute to bring such a claim.
Plaintiffs' § 502(a)(1)(B) claim is dismissed.
B. § 502(a)(2)
In Count II of the complaint plaintiffs claim that they are entitled to compensation under ERISA § 409, 29 U.S.C. § 1109, "for harm suffered as a result of United Healthcare's breaches of its fiduciary duties." (Second Am. Compl. ¶¶ 128-29.) plaintiffs argue that defendants breached their fiduciary duty by failing to comply with the terms and conditions governing the health care plans by failing to reimburse providers or participants for appropriate UCR amounts. (Pls.' Opp'n at 23.)
ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), provides that an "action may be brought . . . by a participant, beneficiary or fiduciary for appropriate relief under section 409" which in turn makes ERISA fiduciaries liable for breach of their duty that resulted in "any losses to the plan . . . and to restore to such plan any profits . . . which have been made through use of assets of the plan by the fiduciary." 29 U.S.C. § 1109(a).
In Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134(1985), the Supreme Court held that the fiduciary duty imposed by § 409 runs to the plan, not to individual beneficiaries and that liability under § 409 is only for losses to the plan. Id. at 139-44. Thus, individual beneficiaries can only seek relief under § 409 on behalf of the plan, not on their own behalf. Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir. 1993).
Although the complaint makes no mention of a loss of plan assets, and indeed, characterizes the relief sought as compensation for plaintiffs, in their brief plaintiffs characterize the lost plan assets as any profits defendants made by improperly reducing UCR payments which led to subscribers paying more out-of-pocket or providers being paid less than their fee. (Pls.' Opp'n at 23.) However, because the alleged harm only constitutes injury to the plan participants and the remedy plaintiffs seek can only be construed as individual relief, plaintiffs fail to state a claim under § 409. Russell, 473 U.S. at 142 ("A fair contextual reading of [§ 409] makes it abundantly clear that its draftsmen were primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan, rather than with the rights of an individual beneficiary."); see Varity Corp. v. Howe, 516 U.S. 489, 511(1996) ("[O]ne can read § 409 as reflecting a special congressional concern about plan asset management without also finding that Congress intended that section to contain the exclusive set of remedies for every kind of fiduciary breach.").
Thus, plaintiffs' claim pursuant to § 502(a)(2) is dismissed.
C. § 503
Plaintiffs also argue that United HealthCare is obligated under ERISA § 503, 29 U.S.C. § 1133, to disclose the specific reasons and the pertinent documents for each claim denial or UCR determination, and seek declaratory and injunctive relief requiring defendants to recalculate benefits and compelling disclosure of the underlying UCR data. (Pls.' Opp'n at 25-26.) Section 503 provides that
every employee benefit plan shall — (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial . . . and (2) 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. Regulations promulgated under § 503 provide for the type of information that must be given upon a denial of benefits and what constitutes a "full and fair review." 29 C.F.R. § 2560.503-1(f)-(g)(1999). Specifically, 29 C.F.R. § 2560.503-1(f) provides in relevant part that the adverse benefit determination notification shall set forth "(i) The specific reason or reasons for the denial; [and] (ii) Specific reference to the pertinent plan provisions on which the denial is based."
Plaintiffs erroneously cite 29 C.F.R. § 2569.503-1(g) (Pls.' Opp'n at 26.)
plaintiffs argue that § 503
requires [defendants] to disclose the `specific reasons' and the `pertinent documents' each and every time they deny a claim or make a UCR determination. UCR data clearly falls within the realm of `pertinent documents' that [participants] are entitled to receive when United HealthCare reduces reimbursements based on such UCR data.
(Pls.' Opp'n at 26.) In addition to denying that UCR data is the type of information that is obligated to be disclosed in connection with a denial of benefits, defendants also argue that § 503 only applies to a plan, not a claims administrator such as United HealthCare. (Defs.' Reply at 14-16.)
By its terms, § 503 imposes an obligation only on an "employee benefit plan." The two sections of the regulation at issue, 29 C.F.R. § 2560.503-1(f) and (g), apply to plan administrators and to employee benefit plans, respectively. plaintiffs have not alleged that United HealthCare is either a plan administrator or an employee benefit plan nor do plaintiffs address the question of whether either § 503 or the regulations can be interpreted to impose an obligation on a claims administrator. Section 503 has been interpreted as inapplicable to a plan administrator, Stuhlreyer v. Armco, Inc., 12 F.3d 75, 79 (6th Cir. 1993) ("[A] plan administrator cannot violate § 1133 . . . because § 1133 imposes obligations on the `plan' rather than the `plan administrator.'"), although at least one court found that a plan administrator could be liable under § 503 as a result of the obligations imposed by 29 C.F.R. § 2560.503-1(f).Kleinhaus v. Lisle Savs. Profit Sharing Trust, 810 F.2d 618, 624 (7th Cir. 1987); see Wilczynski v. Lumbermens Mut. Cas. Co., 93 F.3d 397, 406 (7th Cir. 1996) (limiting the Kleinhaus court's finding of a plan administrator's liability under § 503 to a violation of 29 C.F.R. § 2560.503-1(f)). This Court does not need, however, to address the question of whether a plan administrator is liable under § 503 because defendants here are neither employee benefit plans nor plan administrators, the only two entities that could be subject to liability under the statute or the regulations.
29 C.F.R. § 2560.503-1(f) applies to plan administrators or, if applicable, to plans administered by "an insurance company, insurance service, or other similar organization which is subject to regulation under the insurance laws of one or more states" where such plan provides "for the filing of a claim for benefits with and notice of decision by such company, service or organization." Id. § 2560.503-1(c). Plaintiffs do not claim that defendants satisfy this provision.
Therefore, plaintiffs' § 503 claim is dismissed.
Thus, the Court does not need to reach whether plaintiffs could bring a claim for a violation of § 503 under § 502(a)(3).
D. Breach of Fiduciary Duty
Plaintiffs make two arguments that United HealthCare breached its fiduciary duty by not disclosing the UCR data to subscribers. First, plaintiffs claim that United HealthCare is liable for misleading "its subscribers by representing that it was reducing reimbursements because the providers' charges were below `reasonable' or `customary' amounts, when, in fact, United HealthCare had no valid data supporting such a conclusion." (Pls.' Opp'n at 31.) Second, plaintiffs argue that as a fiduciary United HealthCare had an "affirmative duty to inform" and breached its fiduciary duty "each and every time [it] sent out a benefits determination to subscribers without the data supporting such determination . . . independently of whether of not the data ultimately supported their substantive determinations." (Pls.' Opp'n at 32-33.) This second breach is, plaintiffs argue, "independent of the violation that occurred if the data does not in fact support Defendants' UCR determinations." (Id.)
The Court assumes the plaintiffs mean "above."
Plaintiffs assert that United HealthCare is an ERISA fiduciary, which defendants do not dispute. ERISA § 404(a)(1), 29 U.S.C. § 1104(a)(1), sets forth the duties of an ERISA fiduciary and, in relevant part, mandates that such a fiduciary
shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and —
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan;
(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;
. . .
(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this Title and Title IV.29 U.S.C. § 1104(a)(1). Defendants argue, and plaintiffs concede, that the general fiduciary obligations set forth in § 404 do not on their face require defendants to disclose the UCR data. (Pls.' Opp'n at 26.) Rather, plaintiffs appear to argue that support for defendants' disclosure would derive from the common law of trusts that has been found to "inform, but not necessarily determine the outcome of, an effort to interpret ERISA's fiduciary duties." Varity Corp. v. Howe, 516 U.S. 489, 497(1997).
Thus, the Court must decide whether the allegations that United HealthCare relied on faulty UCR data in justifying reduced benefit determinations breaches the general fiduciary duties provided for under § 404 as informed by the common law of trusts. In Varity, the Supreme Court found that an employer acting as a fiduciary breached its duty when it made misrepresentations regarding the security of benefits if employees transferred divisions. Id. 506 ("As other courts have held, `Lying is inconsistent with the duty of loyalty owed by all fiduciaries and codified in section 404(a)(1) of ERISA.'" (quoting Peoria Union Stock Yards Co. v. Penn Mut. Life Ins. Co., 698 F.2d 320, 326 (7th Cir. 1983)). The Second Circuit has held that a plan administrator has a fiduciary duty to not make affirmative material misrepresentations to plan participants regarding the availability of future plan benefits.Mullins v. Pfizer, Inc., 23 F.3d 663, 669 (2d Cir. 1994) (quoting Fischer v. Philadelphia Elec. Co., 994 F.2d 130, 135 (3d Cir. 1993)). More recently in Ballone v. Eastman Kodak Co., 109 F.3d 117 (2d Cir. 1997), the Second Circuit elaborated on its holding in Mullins and again reiterated that a fiduciary may not "actively misinform its plan beneficiaries about the availability of future retirement benefits." Id. at 124. Although the Court is not aware of any decision directly on point, relevant Supreme Court and Second Circuit case law has found a breach of fiduciary duty by an employer or plan administrator for misrepresentations regarding the availability of future benefits under a plan, Mullins, 23 F.3d 663 (2d Cir. 1994); Ballone, 109 F.3d 117 (2d Cir. 1997), and non-disclosure of information concerning a current plan when information was necessary to an employee's intelligent decision about employment, Becker v. Eastman Kodak Co., 120 F.3d 5 (2d Cir. 1997), and there is no indication in those decisions that the duty of disclosure informed by the common law of trusts cannot be applied to the misrepresentations plaintiffs allege here. Cf. Flanigan v. Gen. Elec. Co., 242 F.3d 78, 84-85 (2d Cir. 2001) (reviewing what ERISA fiduciaries are not obligated to disclose).
Thus, plaintiffs' allegations that United HealthCare denied benefits on the basis of incorrect or nonexistent UCR data suffices to state a claim for breach of fiduciary duty.
As for plaintiffs' claim that even if UCR data was accurate United HealthCare was obligated to disclose it, there is scant support for an obligation on ERISA fiduciaries to disclose truthful information beyond what they are statutorily obligated to disclose. Plaintiffs do not address why the Court should construe the common law fiduciary duty to include a duty to disclose information such as accurate UCR data when courts have clearly refused to find that the fiduciary duty provided for in § 404 expands the statutory disclosure obligations on ERISA fiduciaries. Bd. of Trs. of the CWA/ITU Negotiated Pension Plan v. Weinstein, 107 F.3d 139, 147 (2d Cir. 1997) ("[W]e think it inappropriate to infer an unlimited disclosure obligation on the basis of general provisions that say nothing about disclosure."). Further, plaintiffs do not allege any harm running from the omission of accurate UCR data. See Weiss v. Cigna Healthcare, Inc., 972 F. Supp. 748, 754-55 (S.D.N.Y. 1997) (declining to impose a duty to disclose truthful information regarding a plan's financial arrangements with participating physicians without allegations of harm to plan participants). Thus, to the extent plaintiffs' breach of fiduciary duty claim rests on the argument that defendants had an obligation to disclose accurate UCR data under § 404, the claim is dismissed.
E. Whether Plaintiffs Can Bring the Breach of Fiduciary Duty Under § 502(a)(3)
Because the Court finds that plaintiffs have stated a claim for breach of fiduciary duty, it must address whether in fact plaintiffs' claim can be brought under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3).
Section 502(a)(3) provides that civil action may be brought
by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title 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 this title or the terms of the plan.
In Varity Corp. v. Howe, 516 U.S. 489(1996), the Supreme Court held that an action can be brought against a fiduciary under § 502(a)(3) for equitable relief unless "Congress elsewhere provided adequate relief . . ., in which case [§ 502(a)(3)] relief normally would not be appropriate." Id. at 515. Numerous courts have dismissed § 502(a)(3) claims on the grounds that the relief sought is available pursuant to a claim for benefits under § 502(a)(1)(B). See, e.g., Selby v. Principal Mut. Life Ins. Co., No. 98 Civ. 5282, 2000 WL 178191, at *4-*5 (S.D.N.Y. Feb. 16, 2000).
Plaintiffs' § 502(a)(3) breach of fiduciary duty claim concerns United HealthCare's alleged misrepresentations regarding UCR data supporting benefit determinations lower than the medical fees paid by plan participants. plaintiffs seek equitable relief in the form of an injunction requiring defendants to recalculate benefits and to disclose the UCR data underlying benefit determinations. (Pls.' Opp'n at 25.) InVarity, the Court characterized the relief available under § 502(a)(1)(B) as "a remedy for breaches of fiduciary duty with respect to the interpretation of plan documents and the payment of claims." 516 U.S. at 512. As discussed above, because defendants are not "plans," plaintiffs cannot bring a § 502(a)(1)(B) claim against them. Thus, adequate relief against these defendants is not available under § 502(a)(1)(B), and can be brought under § 502(a)(3). However, just as a claim for benefits cannot be brought against any entity other than a plan, Crocco v. Xerox Corp., F.3d 105, 107-08 (2d Cir. 1998), injunctive relief regarding the payment of claims similarly must be limited to claims against plans under § 502(a)(1)(B). Therefore, plaintiffs cannot seek the recalculation of benefits as relief for their § 502(a)(3) claim; plaintiffs' relief for their § 502(a)(3) claim is limited to the disclosure of UCR data.
Defendants cite numerous cases for the proposition that plaintiffs are precluded from bringing a § 502(a)(3) claim by virtue of having pursued a claim under § 502(a)(1)(B). Those cases, however, involved employee benefit plans as defendants. See, e.g., Tolson v. Avondale Indus., Inc., 141 F.3d 604 (5th Cir. 1998); Selby v. principal Mut. Life Ins. Co., No. 98 Civ. 5283, 2000 WL 178191 (S.D.N.Y. Feb. 16, 2000);Prince v. American Airlines, Inc., No. 97 Civ. 7231, 1999 WL 796178 (S.D.N.Y. Oct. 6, 1999); Kennedy v. United HealthCare of Ohio, 186 F.R.D. 364 (S.D.Ohio 1999); Dittman v. Dyno Nobel, Inc., No. 97-CV-1724, 1998 WL 865603 (N.D.N.Y. Nov. 24, 1998).
Defendants' motion to dismiss plaintiffs' claim under § 502(a)(3) is denied in part and granted in part.
F. Liability for Breach of Fiduciary Duty by a Co-fiduciary Under § 405
Count III of the complaint seeks penalties pursuant to ERISA § 502(c), 29 U.S.C. § 1132(c), which provides that a plan administrator who fails to make a disclosure required under ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4), to a participant or beneficiary within 30 days after a request for information may be held personally liable for up to $100 a day from the date of failure. Although defendants are not plan administrators, plaintiffs seek to hold them liable as co-fiduciaries for the plan administrators' violation of § 104(b)(4) for failure to provide the UCR data.
Plaintiffs argue that "UCR data are required to be disclosed under section 504 of ERISA. As a result, defendants, who are responsible for the plan administrator's failure to disclose required information, are liable as co-fiduciaries." (Pls.' Opp'n at 34.) For this theory of liability to succeed, the Court must first determine whether § 104(b)(4) obligates a plan administrator to disclose UCR data. Section 104(b)(4) provides, in relevant part, that
The Court assumes that plaintiffs intended to rely on § 104(b)(4) as § 504 provides for the investigative authority of the Secretary of the Department of Labor.
The administrator shall, upon written request of any participant or beneficiary, furnish 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). Because UCR data is not of any of the types of documents specified in § 104(b)(4), in order for a plan administrator to be liable for its non-disclosure, UCR would have to be another instrument under which the plan is established or operated.
In Board of Trustees of the CWA/ITU Negotiated Pension Plan v. Weinstein, 107 F.3d 139 (2d Cir. 1997), the Second Circuit interpreted this provision and held that "instruments" refers to "formal legal documents that govern or confine a plan's operations, rather than the routine documents with which or by means of which a plan conducts its operations." Id. at 142. In Weinstein, the Court concluded that actuarial valuation reports, documents describing "a plan's `current funded status and future funding obligations'" were not "other instruments" under § 104(b)(4). Id. at 144 (citation omitted). In addition to statutory interpretation principles, the Second Circuit considered that ERISA requires actuarial valuation reports to be prepared and disclosed in summary form and whether such reports are sources plan administrators are obligated to use. Id. at 144-45. Neither party has provided the Court with any context in which to understand how UCR data informs the way the plans at issue here are governed. The Weinstein Court also found that actuarial valuations do not "establish [rights and obligations], or the policies or procedures for calculating the benefits . . ., or the duties, obligations, or contracts of the plan fiduciaries." Id. Although UCR data does impact the calculation of benefits, whether it establishes a right to benefits or a policy regarding benefit calculation cannot be determined at this stage in the proceedings. Thus, the Court cannot rule out that UCR data is information a plan administrator is obligated to disclose under § 104(b)(4).
Even if § 104(b) requires the disclosure of UCR data, plaintiffs must have requested the UCR data in writing in order to trigger § 502(c) penalties. Lidoshore v. Health Fund 917, 994 F. Supp. 229, 235 (S.D.N.Y. 1998). One plaintiff, Sandra Taylor, alleges that she requested UCR data from her plan in writing (Second Am. Compl. ¶¶ 68, 70) and satisfies § 104(b)(4). Two provider plaintiffs, Drs. Attkiss and Marcum, and one plan participant, Edward F. Mitchell, allege that they made "direct" or "specific" requests for UCR data from United HealthCare. (Id. ¶¶ 49, 58, 85.) Liberally construing these allegations, these three plaintiffs sufficiently allege that they made the requests required by § 104(b)(4). However, their § 104(b)(4) claims fail because they allege that they requested the information from United HealthCare, which, as discussed, is not a plan administrator, and has no obligation to disclose UCR data, even if such information is required to be disclosed under § 104(b)(4). Nor do they allege that the plans knew of these plaintiffs' requests or were placed on notice regarding their requests. See Lidoshore, 994 F. Supp. at 235. As for the remaining plaintiffs who made no allegations with respect to their requests for UCR data, their claims for § 104(b)(4) penalties also must fail. Therefore, only Sandra Taylor states a claim under § 104(b)(4).
It remains to be seen, however, whether Taylor can bring a claim against United HealthCare under § 405 as a co-fiduciary for the breach of fiduciary duty by her plan for its violation of § 104(b)(4). Section 405 provides, in relevant part:
[A] fiduciary with respect to a plan shall be liable for a breach of fiduciary responsibility of another fiduciary with respect to the same plan in the following circumstances:
(1) if he participates knowingly in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach;
. . .
(3) if he has knowledge of a breach by such other fiduciary, unless he makes reasonable efforts under the circumstances to remedy the breach.29 U.S.C. § 1105(a). Plaintiffs claim that
the inability and failure of the plaintiffs' respective plan administrators to provide the underlying UCR data is a direct result of United HealthCare's refusal to provide such data to them . . . . As such, United HealthCare is clearly responsible for the failure of the plan administrators to comply with their responsibilities under ERISA, making United HealthCare directly liable for the breach.
(Pls.' Opp'n at 37.) To state a claim under § 405, Taylor must allege that (1) United HealthCare had knowledge of the plans' failure to disclose the UCR data and (2) that United HealthCare failed to make reasonable efforts to remedy the plans' breach. See Silverman v. Mut. Ben. Life Ins. Co., 138 F.3d 98, 104 (2d Cir. 1998). The complaint alleges that United HealthCare was aware of Taylor's plan's failure to disclose UCR data because it was United HealthCare who refused to give the plan this information. (Second Am. Compl. ¶¶ 68-71, 78.) These same allegations are also sufficient to show that United HealthCare did not make any efforts to remedy the alleged breach. Thus, Sandra Taylor has stated a claim against United HealthCare under § 405 as a co-fiduciary liable for the breach of § 104(b)(4) by her plan for the failure to disclose UCR data.
In Silverman, the Court considered co-fiduciary liability under § 405 where the claim had been brought under § 502(a)(2), 29 U.S.C. § 1132(a)(2), for relief under § 409, 29 U.S.C. § 1109. Because § 409 requires that the losses sought to be recovered are losses to the plan resulting from a breach of fiduciary duty, in order to state a claim under § 405(a)(3), the Court required plaintiff to demonstrate that the plan's losses resulted from the co-fiduciary's inaction. Id. at 104. Because the breach here is the violation of § 104(b)(4), the Court sees no basis for a requirement that plaintiffs show that the plan's loss resulted from defendants' failure to make reasonable efforts to remedy the breach. (See Defs.' Reply at 17.)
Recovery under § 502(c), however, is limited to penalties assessed against plan administrators. 29 U.S.C. § 1132(c)(1). Because Taylor cannot recover under § 502(c) from defendants, this section cannot be the jurisdictional basis for her § 405 claim. Although not addressed by the parties, § 502(a)(3) may be available as the means for Taylor to bring her § 405 claim, thus, to the extent it survives, Taylor's § 405 claim is limited to equitable relief under § 502(a)(3).
Thus, plaintiffs' ERISA claims that survive defendants' motion to dismiss are (1) breach of fiduciary duty for knowingly relying on inaccurate UCR in determining benefits and which seeks the disclosure of UCR data as equitable relief under § 502(a)(3) and (2) Sandra Taylor's § 405 claim for co-fiduciary liability for her plan administrator's failure to supply her with UCR data as required under § 104(b)(4) which also seeks the disclosure of UCR data as equitable relief under § 502(a)(3).
IV. State Law Claims
1. Dr. Attkiss
A. Lack of Standing
Defendants argue that Dr. Attkiss lacks standing to assert state law claims for breach of contract as a third-party beneficiary or as an assignee of benefits. Dr. Attkiss alleges that he received written assignments from subscribers of the Empire Plan (Second Am. Compl. ¶¶ 182, 205) and that he is a third-party beneficiary of the Empire Plan. (Id. ¶ 213.)
The Empire Plan provides in bold letters that "Assignment of benefits to a non-participating provider is not permitted." (Fieldstein Aff. Ex. I at 56.) Dr. Attkiss is a nonparticipating provider under the Empire Plan. Plaintiffs argue that this language does not serve as an anti-assignment clause because such a clause must "expressly state than an assignment is void to be enforceable against an assignee." (Pls.' Opp'n at 50.) plaintiffs rely on the decision in Pro Cardiaco Pronto Socorro Cardiologica S.A. v. Trussell, 863 F. Supp. 135 (S.D.N Y 1994), where the court held that a clause stating "[b]enefits for hospital and medical care in foreign countries are payable only to you" did not operate as an anti-assignment clause because it lacked "the clear language required to make the assignment void." Id. at 136 n. 1, 137. plaintiffs interpret this holding as requiring all anti-assignment clauses to use the term "void" to be operable. The Court, however, agrees with the decision in Cole v. Metropolitan Life Insurance Co., 708 N.Y.S.2d 789 (App.Div. 200 0), where the Court found a clause identical to the one at issue here to contain the "clear, definite and appropriate language declaring the invalidity" of assignments necessary to be a valid ant-assignment clause. Id. at 790 (quoting Macklowe v. 42nd St. Dev. Corp., 566 N.Y.S.2d 606, 607 (App.Div. 1991)). Thus, Dr. Attkiss cannot have standing to bring a claim for breach of contract by virtue of an assignment of benefits under the Empire Plan.
The Court similarly rejects Dr. Attkiss' claim that he is a third-party beneficiary under the Empire Plan. Dr. Attkiss argues that because the plan covers medical services rendered by non-participating providers, defendants "could not . . . have performed under the subscriber agreements without benefitting Dr. Attkiss as a provider of these benefits," thus making Dr. Attkiss an intended beneficiary. (Pls. Opp'n at 46.) Under New York law,
[o]ne is an intended beneficiary if one's right to performance is "appropriate to effectuate the intention of the parties" to the contract and either the performance will satisfy a money debt obligation of the promisee to the beneficiary or "the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance."Cole, 708 N.Y.S.2d at 790 (quoting Lake Placid Club Attached Lodges v. Elizabethtown Bldrs., 521 N.Y.S.2d 165 (App.Div. 198 7)). Again, this Court agrees with the decision in Cole where the court held that there is no intent to benefit non-participating providers under the Empire Plan. The Cole court found that the Empire Plan was intended to benefit the State employees by providing them with health insurance and that non-participating providers "have no relationship with the insurance provider." 708 N.Y.S.2d at 833. Similarly, the court in Home Intensive Care. Inc. v. Metropolitan Life Insurance Co., slip op., July 30, 1993 N.Y.L.J. 21 (N.Y.Sup.Ct. 1993), in addressing the same argument under the same plan, found that a non-participating provider under the Empire plan has a relationship "specifically and exclusively with the patient" and is at most an "incidental beneficiary with no right to enforce the contract." Id. (citing Aires Alloy Div., Airio, Inc. v. Niagra Mohawk Power Corp. 430 N.Y.S.2d 179, 185(1980)). This Court agrees and finds Dr. Attkiss as a non-participating provider lacks standing to bring his claim for breach of contract.
Because the Court concludes that Dr. Attkiss, who is a member of the Medical Society of the State of New York (Second Am. Compl. ¶ 162), lacks standing to bring a breach of contract claim, that medical association also lacks standing to bring such a claim on behalf of its members. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC). Inc., 528 U.S. 167, 169(2000) ("An association has standing to bring suit on behalf of its members when its members would have standing to sue in their own right.")
Although plaintiffs do not allege that Dr. Attkiss is a member of the American Medical Association or that any of that association's members treat patients who belong to the Empire Plan, the same reasoning that leads the Court to conclude that the Medical Society of the State of New York lacks standing to bring a claim on behalf of its members for breach of contract would also apply to the American Medical Association.
2. Medical Associations
Two of the medical association plaintiffs, the American Medical Association and the Medical Society of the State of New York, assert state law claims both on behalf of their members and on their own behalf. Exactly which claims they assert in which posture is remarkably difficult to determine. In their brief, plaintiffs state "[a]s the [Second Amended Complaint], in fact, make [sic] clear, the medical associations . . . seek injunctive and declaratory relief on behalf of their members under their state-law breach of contract Count II and III and state-law Count I (breach of contract)." (Pls.' Opp'n at 42.) Although Count I of the state law claims is for breach of contract, Count II and III are for deceptive acts and practices under New York General Business Law § 349 and for trade libel, respectively. The Court has already found that the medical associations do not have standing to bring a claim for breach of contract on behalf of their members by virtue of the fact that the individual providers do not have standing to bring such a claim. To the extent the medical association plaintiffs intended to assert claims under § 349 or for trade libel on behalf of its members, assuming arguendo that the Court did find the associations to have standing, their claims fail in light of the Court's conclusion below that the provider plaintiffs, presumably the members on whose behalf the medical association plaintiffs are asserting claims, fail to state a claim under § 349 or for trade libel.
The Court has already determined that the ERISA claim brought by all three of the medical association plaintiffs on behalf of their members under § 502(a)(1)(B) fails because, inter alia, they lack standing to bring such a claim. See discussion supra Part III.A.
With respect to the medical association plaintiffs' standing to bring claims on their own behalf, the medical associations "must show actual or threatened injury in fact that is `fairly traceable to the alleged illegal action and likely to be redresses by a favorable court decision.'" Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898, 904 (2d Cir. 1993) (quoting Spann v. Colonial Vill., Inc., 899 F.2d 24, 27 (D.C. Cir. 1990)). Thus, "an organization's abstract concern with a subject that could be affected by an adjudication does not substitute for the concrete injury required by Art. III." Id. at 905 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40(1976)). The medical associations state that they are "adversely affected by the acts, policies and practices of United HealthCare" and that they have had to "devote . . . resources to countering such practices," and have been "thereby distracted from pursuing other issues," (Second Am. Comp. ¶¶ 25-27, 161-62) namely, "their critical mission to educate providers, medical students, and members of the public concerning principles of professional conduct and pressing issues of public health and medical care, by the necessity of devoting their resources to countering United HealthCare's UCR practices." (Pls.' Opp'n at 39-40.)
In National Congress for Puerto Rican Rights v. City of New York, 75 F. Supp.2d 154 (S.D.N.Y. 1999), the Court found that the allegation that the plaintiff organization had to divert financial and other resources to combat the defendant's alleged constitutional abuses was insufficient to confer standing. Id. at 164-65. The Court distinguishedHavens Realty Corp. v. Coleman, 455 U.S. 363(1982), and Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898 (2d Cir. 1993), two cases the medical associations rely on here, concluding that standing was granted in those cases because the organizations offered counseling and referral services that were directly affected by the defendants' actions at issue in the lawsuits. Id. at 165. Here, the medical associations offer no services to its members that are affected by defendants' actions and its interests in ending defendants' practices regarding UCR data must be tied to a "concrete and demonstrable injury to the organization[s'] activities . . . more than simply a setback to the organization[s'] abstract social interests." Havens Realty, 455 U.S. at 379 (citing Sierra Club v. Morton, 405 U.S. 727, 739(1972)). The medical associations do not even identify the specific interest they have regarding the defendants' UCR data; indeed, they only state that they are "adversely affected." (Second Am. Compl. ¶¶ 25-27, 161-62.) This is insufficient to confer standing.
B. ERISA Preemption
Defendants seek to dismiss plaintiffs' claims for unjust enrichment and trade libel as preempted under ERISA. plaintiffs bring a federal common law claim for unjust enrichment alleging that United HealthCare has been unjustly enriched by its UCR determinations because it "obtained benefits that it would not have obtained had it properly determined payment for medical services rendered to subscribers by out-of-network providers." (Second Am. Compl. ¶ 136.) Although courts may develop a federal common law under ERISA if appropriate, courts have uniformly held that there is no need to supplement ERISA with a common law claim of unjust enrichment because the statute already provides adequate relief for an injury such as the losses claimed by plaintiffs. Amato v. W. Union Int'l, 773 F.2d 1402, 1419 (2d Cir. 1985), abrogated on other grounds, Mead Corp. v. Tilley, 490 U.S. 714(1989); accord Jordan v. Fed. Express Corp., 116 F.3d 1005, 1018 (3d Cir. 1997); Weiner v. Klais Co., 108 F.3d 86, 92 (6th Cir. 1997); In re Smithkline Beechham Clinical Labs., Inc. Lab. Test Billing Practices Litig., 108 F. Supp.2d 84, 109-110 (D.Conn. 1999).
Plaintiffs' libel claim under state law, however, is not preempted by ERISA. In Mackey v. Lanier Collection Agency Serv., 486 U.S. 825(1988), the Supreme Court cited a libel case brought by a doctor against an ERISA plan, Abofreka v. Alston Tobacco Co., 341 S.E.2d 622 (S.C. 1986), as an example of a tort claim not preempted by ERISA. 486 U.S. at 833 n. 8. Thus, the Court cannot find plaintiffs' libel claim preempted by ERISA. See Grand Park Surgical Ctr., Inc. v. Inland Steel Co., 930 F. Supp. 1214, 1219 (N.D.Ill. 1996).
C. Failure to State a Claim for Breach of Contract, Deceptive Trade Practices Under § 349 and Trade Libel
1. Breach of Contract
Plaintiff Crema asserts a claim for breach of contract of the Empire Plan against United HealthCare for United HealthCare's violation of its contractual obligation to pay for treatment by out-of-network providers' "actual charges in the absence of data substantiating the appropriateness of a lesser payment," against Metropolitan Life for permitting "United HealthCare to assume control and the operation of the group health benefit programs for Metropolitan Life customers," and against defendants for failing "to provide information and data," and for "refusing to pay anything at all for sclerotherapy." (Second Am. Compl. ¶¶ 211, 214, 218-19.)
Defendants argue that because the Empire Plan clearly states that it will reimburse for medical services provided by out-of-network providers at "80 percent of the reasonable and customary charges for covered services, or the actual billed charges, whichever is less" (Fieldstein Aff. Ex. I at 50), "no defendant can be in breach of contract for making a determination that an out-of-network provider's actual charge is greater than charges made by other physicians for the same services." (Defs.' Mem. at 49-50.) plaintiff's breach of contract claim is not that United HealthCare reimbursed claims based on UCR data, but that the UCR data United HealthCare relied upon was faulty. However, the Plan gives the claims administrator the authority to determine reasonable and customary charges for supplies and service (Fieldstein Aff. Ex. I at 52), thus, plaintiff's breach of contract claim must rest on the use of that authority. Although plaintiff fails to elaborate as to the legal basis for a claim with respect to a breach of such authority, the Court cannot find that the allegation that defendants relied on faulty data could not constitute a breach of the plan. Thus, defendants' motion to dismiss plaintiff Crema's breach of contract claim is denied.
Defendants argue that the appropriate standard for review of the claim administrator's decision is "arbitrary and capricious." (Defs.' Mem. at 50-52.) The Court declines to decide whether that standard of review is appropriate to such a claim without the benefit of additional facts concerning the claim administrator's authority. Further, a decision defendants rely on, Maloney v. Pension Committee of the Joint Industry Board of the Electrical Industry, 500 N.Y.S.2d 559 (App.Div. 1986), provides that it is only absent a showing that the defendant's benefit determination was arbitrary because of an impropriety that the arbitrary and capricous standard is applied. Id. at 560.
2. Failure to State a Claim Under New York General Business Law § 349 for Deceptive Trade Practices
New York General Business Law ("GBL") § 349 prohibits the use of "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service." N Y Gen. Bus. Law § 349 (McKinney's 1999). To state a claim under GBL § 349, "a plaintiff must allege that the defendant has engaged `in an act or practice that is deceptive or misleading in a material way and that plaintiff has been injured by reason thereof.'" Small v. Lorillard Tobacco Co., 698 N.Y.S.2d 615, 620 (1999) (quoting Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank. N.A., 623 N.Y.S.2d 529, 532-33(1995)). Further, the conduct charged must be "consumer-orientated," which is conduct that "potentially affect[s] similarly situated consumers." Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank. N.A., 623 N.Y.S.2d 529, 532-33(1995) Plaintiffs claim that with respect to the Empire Plan "[d]efendants systematically paid less than the proper UCR charges for out-of-network medical care, and routinely failed to disclose to plaintiffs the data purportedly underlying their UCR determinations, thus forcing Empire Plan [participants] to pay out-of-pocket for treatment for out-of-network providers or forego receiving such treatment entirely." (Pls.' Opp'n at 53-54.) Specifically, plaintiffs allege that defendants pay participants less than the amount they are entitled to for out-of-network provider services under the Plan; that defendants misrepresent the amounts they will pay for out-of-network provider services; that defendants misrepresent the copayment amount participants are obligated to pay when they receive treatment from an out-of-network provider; that "[d]efendants' conduct is materially deceptive and is `consumer oriented;'" that defendants acted deceptively "[t]o the extent defendants relied on data that they failed to disclose or intentionally excluded appropriate data;" that in furtherance of their deception, defendants "deliberately withheld information and data from [participants] and their providers regarding payment amounts;" that defendants were deceptive "when they determined that sclerotherapy was not `medically necessary,' as such a determination was arbitrary and capricious and unfairly punishes Matthew Crema and Dr. Attkiss for contesting defendants' payment determinations;" that Metropolitan Life's representation that it made payment determinations for participants was false and misleading because it had "delegated responsibility for making such determinations to United HealthCare;" and that United HealthCare engaged in deceptive practices by not disclosing to Crema that it either did not have the data to substantiate payment for less than the out-of-network provider's charge or by applying the data in an arbitrary manner. (Second Am. Compl. ¶¶ 229-37.) Although plaintiffs' allegation that defendants' practices are "consumer-oriented" is conclusory and defendants' acts regarding Crema's sclerotherapy treatment cannot be construed as a practice having a "broader impact on consumers at large," Oswego, 623 N.Y.S.2d at 532, the remainder of plaintiffs' allegations sufficiently depict practices that would "potentially affect similarly situated consumers." Id. at 533. If true, defendants' alleged practice of reducing benefit reimbursements for out-of-network provider services by manipulating UCR determinations, either by relying on non-existent data or withholding or excluding data, deceives any participant in the Empire Plan, in other words, the public at large. See Riordan v. Nationwide Mut. Fire Ins. Co., 756 F. Supp. 732, 739 (S.D.N Y 1990). plaintiffs' allegations do not describe a practice unique to plaintiff, or a "single-shot transaction," Oswego, 623 N YS.2d at 533 (quoting Geneseco Entm't v. Koch, 593 F. Supp. 743, 752 (S.D.N.Y. 1984)), and surpass those found to be insufficient in Grand General Stores, Inc. v. Royal Indemnity Co., No. 93 Civ. 3741, 1994 WL 163973 (S.D.N.Y. Apr. 22, 1994) and Tinlee Enterprises, Inc. v. Aetna Casualty Surety Corp., 834 F. Supp. 605 (E.D.N.Y. 1993). In these two cases, the plaintiffs made highly conclusory allegations that the insurance company defendants treated other claimants similarly. Grand General, 1994 WL 163973, at *4 (finding plaintiff's allegation that "[s]uch conduct is part and parcel of a scheme to cause low payment of claims by economic duress and unfair claims practices" insufficient to allege a claim under § 349); Tinlee, 834 F. Supp. at 610 ("The Court draws particular attention to the fact that the most significant contentions made by [plaintiff] are alleged on the basis of "information and belief.'") Here, the complaint, read as a whole in a light most favorable to plaintiffs, sufficiently supports the allegation that defendants in this case regularly limit reimbursement for out-of-network services on the grounds that the UCR fee is less than the provider's fee without the data to support such a determination.
Although the complaint could be more precise, the parties treat this claim as brought by Crema as a plan participant, Dr. Attkiss as a provider and the medical associations.
Finally, plaintiff must show that defendants' allegedly deceptive acts caused "actual, although not necessarily pecuniary, harm." Oswego, 623 N.Y.S.2d at 533. Defendants argue that Crema cannot allege any harm other than being reimbursed less than what his out-of-network provider charged which defendants claim is permitted under the terms of the Plan and therefore any such losses cannot be recovered for under § 349. (Defs.' Mem. at 48.) Defendants do not direct the Court to any authority for the proposition that relief under § 349 is precluded if contractual relief is also available. Further, in Small v. Lorillard Tobacco Co., 698 N.Y.S.2d 615(1999), the Court of Appeals discussed harm under § 349 and whether there was a causal link between the alleged harm and the deceptive acts that allegedly caused that harm. Id. at 621. Here, Crema's allegations regarding UCR data directly lead to his harm of being reimbursed for less than what he may have been entitled to had the UCR data been accurate. Thus, Crema has adequately alleged harm to state a claim under § 349.
If Crema's § 349 claim is successful, the statute provides for relief in the form of "actual damages or fifty dollars. . . . The court may, in its discretion, increase the award of damages to an amount not to exceed three times the actual damages up to one thousand dollars, if the court finds the defendant willfully or knowingly violated this section." § 349(h).
The Court finds, however, that Dr. Attkiss fails to allege any harm that is the result of the allegedly deceptive acts. The complaint alleges that "had providers been accurately advised by defendants, providers could have taken steps, such as declining to treat [participants] whose claims are determined by United HealthCare." (Second Am. Compl. ¶ 238.) However, the complaint does not identify the inaccurate representations made to out-of-network providers. The Court assumes that what Dr. Attkiss is getting at is that as a result of accepting benefit assignments from Empire Plan participants, he stands in the shoes of a plan participant who is reimbursed for less than the fee charged on the basis of UCR data. However, because the Court has concluded that the plan prohibits such assignments, Dr. Attkiss cannot be found to have been injured as a result of accepting those assignments. Thus, Dr. Attkiss fails to state a claim under § 349.
3. Trade Libel
Plaintiffs Drs. Marcum and Attkiss allege that their trade reputations were harmed by United HealthCare's statements to subscribers that these doctors' charges exceed those charged by others for the same services. Defendants' statements allegedly include: "[the physician's charge] exceeds the amount determined to be the reasonable and customary allowance for this service;" "the amount allowed for these services was based on the amount usually charged by other local providers for similar services or supplies;" and "[b]enefits are not available for that portion of the charge that exceeds the reasonable charge determined for this service." (Second Am. Compl. ¶ 244.) Defendants' statements, plaintiffs contend, "disparaged the value of the medical services rendered by the members of the Provider Class, and thereby constitute a trade libel. Such libel . . . undermines the provider-patient relationship which lies at the heart of sound medical treatment." (Id. ¶ 245.)
Defendants argue that these statements are not defamatory as libel per se because plaintiffs' characterization of the statements, that the service was not being paid for in full because Drs. Marcum and Attkiss were overcharging for their services (Pls.' Opp'n at 61 n. 35), is a strained and artificial construction. (Defs.' Reply at 21.) Defendants rely on Aronson v. Wiersma, 493 N.Y.S.2d 1006 (App.Div. 1985), where the court found defendants's statements that he had to fire one of his employees, that "I can't get her to do anything," and that "this person is neglectful in her job," could not as a matter of law be read as defamatory. Id. at 1007-08. Under Aronson, "[w]hether particular words are defamatory presents a legal question to be resolved by the court in the first instance." Id. at 1007. In doing so, the Court must construe the disputed language in the context of the statement as a whole, "and if not reasonably susceptible of a defamatory meaning, they are not actionable and cannot be made so by a strained or artificial construction." Id. Plaintiffs rely on Chiavarelli v. Williams, 681 N.Y.S.2d 276 (App.Div. 1998), for the proposition that a claim for libel per se exists "where the defendant attributed to [plaintiff] specific acts suggesting the plaintiff's unfitness for his professional role." Id. at 277. In Chiavarelli, the defendant doctor wrote a letter to plaintiff doctor's supervisors enumerating purported acts of sexual advances to and harassment of defendant, and the court found these statements to constitute libel per se because they reflected adversely on plaintiff's integrity as a physician and professor. Id.
Usually a plaintiff in a libel action must plead special damages, or specific instances of pecuniary loss due to damage to his reputation. However, if statement is libelous per se by disparaging a person in the way of his office, profession or trade, then plaintiffs are not required to plead special damages. Celle v. Filipino Reporter Enters., Inc., 209 F.3d 163, 179-80 (2d Cir. 2000).
The Court, however, finds the statements at issue here to be more similar to those in Lian v. Sedgwick James, 992 F. Supp. 644 (S.D.N.Y. 1998), where an e-mail defendant distributed to other employees concerning plaintiff's termination was found not to be libelous per se. The court held that "[t]he mere statement of discharge or termination from employment, even if untrue, does not constitute libel. . . . `It is only when the publication contains an insinuation that the dismissal was for some misconduct that it becomes defamatory.'" Id. at 649 (quotingNicols v. Item Publishers, 309 N.Y. 596, 601(1956)). Similarly, a reasonable reading of defendants' statements here does not "reflect in any way on [plaintiffs'] personal or professional integrity or ability," because no reason in the explanation of benefits is given that could be said to disparage plaintiffs in their profession by implying that they are overcharging their patients as a result of incompetency or misconduct. See id. Thus, plaintiffs fail to state a claim for libel per se. Further, because they also failed to plead special damages, plaintiffs' claim for trade libel must be dismissed. Aronson, 493 N.Y.S.2d at 1008.
V. Misjoinder
Defendants also argue that UHG has been improperly joined in this action and should be dismissed pursuant to Fed.R.Civ.P. 21. Rule 21 provides that "[p]arties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just." Misjoinder of parties arises when they fail to satisfy any of the conditions of permissive joinder under Fed.R.Civ.P. 20(a). Glendora v. Tele-Communications. Inc., No. 96 Civ. 4270, 1996 WL 721077, at *1 (S.D.N.Y. Dec. 13, 1996) (citations omitted). "Therefore, parties are misjoined if the claims asserted against them `do not arise out of the same transaction or occurrence or do not present some common question of law or fact.'" Glendora v. Malone, 917 F. Supp. 224, 227 (S.D.N Y 1996) (quoting Am. Fid. Fire Ins. Co. v. Construcciones Werl, Inc., 407 F. Supp. 164, 190 (D.V.I. 1975)).
Rule 20(a) provides in relevant part that:
All persons . . . may be joined in one action as defendants if there is asserted against them jointly, severally, or in the alternative, any right to relief in respect of or arising out of the same transaction, occurance, or series of transactions or ocurrances and if any question of law or fact common to all defendants will arise in the action.
UNG is a holding company that is unlicenced and does not "write insurance." (Luis Aff. ¶ 2.) Defendants argue that UHG has a "distant relationship to its subsidiaries which are the entities that administer the claims for health care benefit plans . . . and . . . perform utilization reviews and various administrative functions for the affiliated corporations." (Defs.' Mem. at 57.) Defendants rely uponGlendora v. Malone, 917 F. Supp. 224 (S.D.N.Y. 1996), for the holding that a distant relationship between parent and subsidiary suffices to find misjoinder. There, the court stated that it would not "dismiss any defendant unless it is clear that discovery would not likely reveal facts demonstrating that the [parent company] participated in" the acts forming the basis for plaintiff's complaint. Id. at 227. In Malone, the court found that plaintiff must have "inadvertently" named the parent corporation based on the complaint's description of its geographical operations. Id. Although the defendants represent that UHG does not "write insurance," defendants in this case are not being sued for writing insurance. Rather, plaintiffs allege mismanagement of claims processing, and it is not at all clear to the Court that discovery will not reveal that UHG participated in such decisions. Thus, defendants' motion to dismiss UHG on the grounds of misjoinder is denied.
Conclusion
Plaintiffs' motion for partial remand is denied.
Defendants' motion to dismiss is granted in part and denied in part. The claims that survive defendants' motion to dismiss are Sandra Taylor, Edward F. Mitchell, Jr., Clifford E. and Michele S. Wilson, Peter Oborski, Helen Coull, Michael and Susie Grisham and Paul Steinberg's claim for breach of fiduciary duty under ERISA § 503(a)(3) for knowingly relying on inaccurate UCR in determining benefits and which seeks the disclosure of UCR data as equitable relief under § 502(a)(3); Sandra Taylor's ERISA § 405 claim for co-fiduciary liability for her plan administrator's failure to supply her with UCR data as required under § 104(b)(4) and which seeks the disclosure of UCR data as equitable relief under § 502(a)(3); and Matthew Crema's state law claims for breach of contract and deceptive acts and practices under GBL § 349.
Should they desire to do so, plaintiffs have 45 days from the date of this Order to file a motion for leave to replead.
SO ORDERED.