HCA Health Servs. of Va. v. CoreSource, Inc.
| Decision Date | 17 July 2020 |
| Docket Number | Civil Action No. 3:19-cv-406 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | HCA HEALTH SERVICES OF VIRGINIA, INC., d/b/a HENRICO DOCTORS' HOSPITAL, Plaintiff, v. CORESOURCE, INC., et al., Defendants. |
In 2015, a premature infant died at Henrico Doctors' Hospital (the "Hospital"). After providing healthcare services to the infant, the Hospital sought reimbursement from CoreSource, Inc. ("CoreSource"). CoreSource is a claims processer for Delaware American Life Insurance Company ("DelAm"), which issued an insurance policy to the infant's father. The Hospital alleges that CoreSource underpaid it for the services it provided to the infant and wrongfully imposed an "authorization penalty" on the Hospital. Multiplan, Inc. ("Multiplan"), organizes a network of healthcare providers, including the Hospital, and connects them with third-party administrators and insurers, including CoreSource and DelAm.
The Hospital has sued CoreSource, DelAm, and Multiplan, asserting claims for breach of contract against all three entities. The defendants have moved to dismiss for failure to state a claim, arguing that the Hospital's claims are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), and that the Hospital has otherwise failed to state a claim for relief. For the reasons set forth below, the Court concludes that ERISA does not preempt the Hospital's claims. The Hospital, however, has failed to state a claim against DelAm in Count Six. Accordingly, the Court will grant in part and deny in part the defendants' joint motion to dismiss.
This case involves a complex web of contracts, healthcare providers, insurance companies, and claims administrators. Because at least three different contracts are at issue in this case, the Court begins by briefly explaining the nature of the parties and their contractual relationships.
The first contract—the Participating Facility Agreement (the "PFA")—governs the relationship between the Hospital and Multiplan. (Second Amend. Compl. ¶ 12.) The Hospital and Multiplan entered into the PFA on August 1, 2002. (Id.) In exchange for access to Multiplan's network, the Hospital provides healthcare services at a discounted rate to Multiplan's "Payors" or "Clients." (Id. ¶ 14.) The Hospital alleges that Multiplan breached the PFA by failing to require CoreSource to pay the Hospital at the agreed upon discounted rates. (Id. ¶ 39.)
The second contract—the Client Services Agreement (the "CSA")—governs the relationship between CoreSource and Multiplan. (Id. ¶ 43; Dk. No. 72-3.) CoreSource and Multiplan entered into the CSA on October 1, 2013. Under the CSA, CoreSource became a Multiplan "Client." (Second Amend. Compl. ¶ 43.) The Hospital asserts that CoreSource breached the CSA "[b]y failing to pay the Hospital or ensure compliance with the terms set forth in the PFA for the services rendered by the Hospital." (Id. ¶ 46.) Although the Hospital is not a party to the CSA, it contends that it qualifies as a third-party beneficiary under that contract. (Id. ¶ 44.) In the alternative, the Hospital asserts claims against CoreSource for breach of oral contract, breach of an implied-in-fact contract, and unjust enrichment. (Id. ¶¶ 48-70.)
The third contract—the Administrative Services Agreement ("ASA")—governs the relationship between CoreSource and DelAm. (Second Amend. Compl. ¶ 72; Dk. No. 72-4.) CoreSource, a third-party claims processor, and DelAm, an insurance provider, entered into theASA on June 1, 2015. The ASA sets forth the terms under which DelAm pays CoreSource. (See Dk. No. 72-4, at 7, 37-40.) The Hospital contends that DelAm breached the ASA by "[f]ailing to pay the Hospital in accordance with the terms set forth in the PFA for the services rendered by the Hospital." (Second Amend. Compl. ¶ 75.) Although the Hospital is not a party to the ASA, it says that it qualifies as a third-party beneficiary under that contract. (Id. ¶ 73.)
In 2015, an infant died in the Hospital's neonatal intensive care unit. (Second Amend. Compl. ¶ 21.) The infant's father's health insurance plan with DelAm, administered by CoreSource, covered the Hospital's services. (Id. ¶ 23.) When the Hospital sought reimbursement from CoreSource, CoreSource significantly underpaid the Hospital. (Id. ¶¶ 27-31.) The Hospital alleges that CoreSource underpaid it by $276,675.08 for unspecified billing errors and by $365,134.97 for an "authorization penalty." (Id. ¶¶ 29, 30.) CoreSource also reduced the Hospital's reimbursement pursuant to a "PHCS Discount," which was "greater than and inconsistent with the discount provided by the PFA for timely payment." (Id. ¶ 31.)
The Hospital seeks to hold CoreSource, Multiplan, and DelAm liable for the underpayment under the three contracts described above and under alternative theories of liability. The Hospital asserts the following claims in the second amended complaint: breach of the PFA against Multiplan (Count One); breach of the CSA against CoreSource (Count Two); in the alternative, breach of oral contract against CoreSource (Count Three); in the alternative, breach of implied-in-fact contract against CoreSource (Count Four); unjust enrichment against CoreSource (Count Five); and breach of the ASA against DelAm (Count Six).
The defendants have moved to dismiss the second amended complaint for failure to state a claim, arguing that ERISA preempts the Hospital's claims. In the alternative, the defendants arguethat the Hospital has failed to state a claim against CoreSource in Counts Two to Five and against DelAm in Count Six.
First, the defendants argue that ERISA preempts the Hospital's claims. Congress enacted ERISA to protect the interests of participants in employee benefit plans by providing a "uniform regulatory regime over [such] plans." Aetna Health Inc. v. Davila, 54 U.S. 200, 208 (2004). To that end, ERISA "includes expansive pre-emption provisions . . . to ensure that employee benefit plan regulation would be 'exclusively a federal concern.'" Id. Thus, "ERISA preempts state law, including state common law." Phx. Mut. Life Ins. Co. v. Adams, 30 F.3d 554, 563 (4th Cir. 1994). Two types of preemption exist under ERISA: (1) complete preemption under § 502 of ERISA, 29 U.S.C. § 1132, and (2) conflict preemption under § 514 of ERISA, 29 U.S.C. § 1144(a).
The complete preemption doctrine arises under § 502 of ERISA. Section 502 presents an "integrated enforcement mechanism" for employee benefit plans, representing "careful balancing" of policy choices by Congress. Davila, 542 U.S. at 208-09. Section 502 has "such 'extraordinarypre-emptive power' that it 'converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'" Id. at 209 (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66 (1987)).
"In other words, complete preemption is 'properly understood as a jurisdictional doctrine' which 'gives rise to removal jurisdiction.'" Allen v. Unum Life Ins. Co., No. 3:15-cv-219-JAG, 2015 WL 5560072, at *2 (E.D. Va. Sept. 17, 2015) (quoting Moon v. BMW Techs., Inc., 498 F. App'x 268, 272 (4th Cir. 2012) (per curiam)). Accordingly, when a state law claim falls within § 502's scope as a claim "to . . . recover benefits, enforce rights conferred by an ERISA plan, remedy breaches of fiduciary duty, clarify rights to benefits, and enjoin violations of ERISA," "the state law claim is converted into a federal cause of action removable to federal court." Marks v. Watters, 322 F.3d 316, 323 (4th Cir. 2003). "By logical extension, a court does not need to evaluate a state law claim brought in federal court under complete preemption, as the issue of removal does not apply." Allen, 2015 WL 5560072, at *2.
Here, the Hospital initially sued CoreSource and Multiplan in state court. (See Dk. No. 1-4, at 6.) CoreSource and Multiplan removed the case to this Court "on the basis of diversity jurisdiction under 28 U.S.C. § 1332." (Dk. No. 1, at 1.) CoreSource and Multiplan did not invoke federal question jurisdiction under 28 U.S.C. § 1331 or argue that § 502 of ERISA completely preempted the Hospital's claims. Instead, the defendants have invoked § 502 months after Multiplan and CoreSource filed their notice of removal and in the midst of ongoing litigation in this Court. Moreover, neither party challenges the Court's subject matter jurisdiction. Cf. Chau v. Hartford Life Ins. Co., 167 F. Supp. 3d 564, 570 (S.D.N.Y. 2016) (). Because the removability of the Hospital's claims from statecourt is not at issue, the doctrine of complete preemption does not apply here. See Allen, 2015 WL 5560072, at *3.2
Unlike complete preemption, a defendant may invoke conflict preemption "as a 'federal defense to the plaintiff's suit.'" Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 186-87 (4th Cir. 2002) (quoting Taylor, 481 U.S. at 63). The conflict preemption doctrine arises under § 514 of ERISA. Under § 514, ERISA preempts state laws that "relate to" any employee benefit plan covered by ERISA. 29 U.S.C. § 1144(a); see also Darcangelo, 292 F.3d at 187. The Fourth Circuit has adopted a "pragmatic approach" to conflict preemption, emphasizing that courts should consider the "objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive preemption." Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir. 1996).
"[T]he Supreme Court has explained that Congress intended to preempt at least three categories of state law under § 514: (1) laws that mandate employee benefit structures or theiradministra...
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