Aetna Life Ins. Co. v. Found. Surgery Affiliates, LLC

• Decision Date: 13 December 2018
• Docket Number: CIVIL ACTION NO. 13-3101
• Citation: 358 F.Supp.3d 426
• Parties: AETNA LIFE INSURANCE COMPANY, Plaintiff v. FOUNDATION SURGERY AFFILIATES, LLC, et al., Defendants
• Court: U.S. District Court — Eastern District of Pennsylvania

358 F.Supp.3d 426

AETNA LIFE INSURANCE COMPANY, Plaintiff

v.FOUNDATION SURGERY AFFILIATES, LLC, et al., Defendants

CIVIL ACTION NO. 13-3101

United States District Court, E.D. Pennsylvania.

Filed December 13, 2018

James C. Crumlish, III, Gregory S. Voshell, John M. Elliott, John P. Elliott, Mark Joseph Schwemler, Elliott Greenleaf & Siedzikowski PC, Union Meeting Corporate Center V, Blue Bell, PA, for Plaintiff.

Richard M. Simins, David Dormont, Joseph Coleman Monahan, Miriam Straus, Montgomery McCracken Walker & Rhoads, LLP, Grace Dowell Greenhall, Robert J. Fitzgerald, Buchanan Ingersol & Rooney, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION¹

NITZA I. QUIÑONES ALEJANDRO, District Judge.

INTRODUCTION

Presently before this Court is a motion to dismiss for lack of subject matter jurisdiction filed by Defendants Foundation Surgery Management, LLC, and Foundation Surgery Affiliates, LLC (collectively, the "Foundation Defendants"). [ECF 208]. The Foundation Defendants seek the dismissal of the action filed by Plaintiff Aetna Life Insurance Company ("Plaintiff" or "Aetna Life") premised on their contention that this Court must consider the non-diverse citizenships of the purported real parties-in-interest which destroy diversity jurisdiction over this matter. Plaintiff has opposed the motion. [ECF 211].²

Subsequent to the parties' respective briefing on the Foundation Defendants' motion to dismiss, this Court directed Aetna Life to file a detailed list identifying: (1) the name of all self-insureds on behalf of whom Aetna Life seeks damages in this case and the citizenship of each of these entities for jurisdiction purposes; and (2) the names of the Aetna entities which paid the fully insured claims at issue in this case and the citizenship of these entities for jurisdiction purposes. [ECF 216]. The parties were also directed to address whether any claim belonging to any of the entities identified in Aetna Life's list can and/or should be severed from this matter pursuant to Federal Rule of Civil Procedure ("Rule") 21 in order to preserve diversity jurisdiction. [Id. ]. Both parties complied with said Order.

The issues raised in the Court's Order and the Foundation Defendants' motion to dismiss have been fully briefed and are now ripe for adjudication. Pursuant to Rule 21 and for the reasons set forth, Defendant Huntingdon Valley Surgery Center ("Defendant Huntingdon") is dropped from this matter, as are all claims asserted by Aetna Life on behalf of the self-insureds for whom Aetna Life has not provided citizenship. As a result of this Court's ruling, diversity jurisdiction is maintained, and the Foundation Defendants' motion to dismiss for lack of subject matter jurisdiction is denied.

BACKGROUND³

On June 5, 2013, Aetna Life filed its initial complaint against Defendant Huntingdon Valley Surgery Center ("Defendant Huntingdon"), invoking diversity jurisdiction under 28 U.S.C. § 1322(a), as the basis for federal jurisdiction. Aetna Life is a Connecticut corporation with its principal place of business in Connecticut. Defendant Huntingdon is a Pennsylvania limited partnership with twenty-two limited partners in Pennsylvania and/or New Jersey. Thus, Defendant Huntingdon is deemed a citizen of both Pennsylvania and New Jersey. On December 2, 2013, Aetna Life filed an amended complaint (the operative complaint) which added the Foundation Defendants as parties. The Foundation Defendants are deemed citizens of Oklahoma. All parties agree that on the face of the amended complaint, complete diversity exists with respect to the actual entities named as parties to this litigation. However, as will be discussed below, diversity jurisdiction is destroyed if this Court is required to consider the citizenships of the numerous self-insureds on whose behalf Aetna Life asserts many of its claims since some of these self-insureds are citizens of Pennsylvania and/or New Jersey.

According to the amended complaint, Aetna Life is a managed care company offering insurance and administrative services to employer and pension-sponsored health benefit plans and their members nationwide. It also provides administrative services to health plans that are self-funded by employers or other groups. For its "fully insured" plans, Aetna Life administers health benefit claims and bears the financial risk of paying claims. For its "self-insured" plans, Aetna Life pays claims from the employer's own assets and provides third-party administrative services, such as the processing of claims and the recovery of overpayments. In a fully-insured health plan, premiums are paid to an insurance company, like Aetna Life, in exchange for insurance coverage. In turn, the insurer directly pays covered claims. In a self-funded or self-insured health benefit plan, the organization itself assumes the risk of the cost of health care services for its employees, and typically contracts with an entity, like Aetna Life, to provide administrative services. Aetna Life, serving as a plan administrator, oversees and manages the self-funded plans. As the plan administrator, Aetna Life may advance funds to pay claims, but those funds are reimbursed by the plans.

In the amended complaint, Aetna Life alleges that Defendants violated a Pennsylvania anti-kickback statute, committed insurance fraud, and tortiously interfered with contracts between Aetna Life and Defendant Huntingdon's physician-owners. Aetna Life's accusations stem from Defendants' alleged unlawful and fraudulent business policies and practices contrived and implemented by them to the financial detriment of Aetna Life and to its self-insureds. Briefly, Aetna Life contends that Defendants established an "out-of network" scheme to pay kickbacks to physicians to induce their referral of patients to Defendant Huntington⁴ rather than to less costly in-network facilities in the same geographic area. Aetna Life contends that these allegedly fraudulent referrals violate Pennsylvania law and public policy interest in containing healthcare costs; and that Defendants unlawfully inflated healthcare costs payable by Aetna Life and/or its self-insureds when Defendants waived co-payments that Aetna Life's insureds were required to pay for services provided at an out-of-network facility, such as Defendant Huntingdon, without advising Aetna Life of the waiver, while at the same time, billing for the full costs of the provided services.⁵

Notably, over the course of this litigation, Aetna Life has acknowledged that the majority of the damages that it seeks in this litigation were actually incurred by Aetna Life's self-insureds, rather than by Aetna Life. In addition, some of the damages sought were suffered by other Aetna entities, rather than by Aetna Life.

As noted, an appeal was taken on this matter, and a remand was ordered. See supra note 5. Upon remand, the Foundation Defendants filed the underlying motion to dismiss for lack of subject matter jurisdiction. [ECF 208]. Following the parties' briefing on the Foundation Defendants' motion to dismiss, Aetna Life was ordered to identify for diversity jurisdiction purposes: (1) all of the self-insureds on behalf of whom Plaintiff seeks damages in this case and the citizenship of each of these self-insureds; and (2) the Aetna entities which paid fully insured claims at issue in this case, and the citizenship of each such entity. [ECF 216]. The parties were also ordered to address whether any claim belonging to any of the self-insureds and/or Aetna entities identified could and/or should be severed from this matter. [Id. ].

In response to the Order, Aetna Life identified ninety-five (95) entities which held citizenship in either Pennsylvania or New Jersey. None of the entities identified held citizenship in Oklahoma. Aetna Life has admittedly failed to identify the citizenship of ten to fourteen entities. Regardless, in light of Aetna Life's identification of self-insured entities with citizenship in either Pennsylvania or New Jersey, if the citizenship of these Pennsylvania and/or New Jersey self-insured entities is considered for the purpose of jurisdiction, this Court would lack diversity jurisdiction over this matter because of the presence of Defendant Huntingdon, a citizen of both Pennsylvania and New Jersey. As such, this Court must determine whether the citizenship of these self-insureds must be considered for jurisdiction purposes and, if so, whether Rule 21 can and/or should be applied to save this Court's jurisdiction.

STANDARD OF REVIEW

It is well-settled that "federal courts have an ever-present obligation to satisfy themselves of their subject matter jurisdiction and to decide the issue sua sponte ," if necessary. Liberty Mut. Ins. Co. v. Ward Trucking Corp. , 48 F.3d 742, 750 (3d Cir. 1995). If a federal court determines at any stage of a civil action that it lacks subject matter jurisdiction, it generally must dismiss the matter. See Arbaugh v. Y & H Corp. , 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) ; In re Caterbone , 640 F.3d 108, 111 (3d Cir. 2011). When challenging a court's subject matter jurisdiction, a party may do so by way of either a facial or a factual attack. See Petruska v. Gannon University , 462 F.3d 294, 302 n.3 (3d Cir. 2006). Here, the Foundation Defendants make a factual attack. The Third Circuit explained a factual attack as follows:

The factual attack, however, differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed. R. Civ. P. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction – its very power to hear the case – there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional

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