Neuroaxis Neurosurgical Assocs., PC v. Costco Wholesale Co.

• Decision Date: 23 January 2013
• Docket Number: Nos. 11 Civ. 8350(DLC), 11 Civ. 8516(DLC), 11 Civ. 8756(DLC).,s. 11 Civ. 8350(DLC), 11 Civ. 8516(DLC), 11 Civ. 8756(DLC).
• Citation: 919 F.Supp.2d 345
• Parties: NEUROAXIS NEUROSURGICAL ASSOCIATES, PC, Plaintiff, v. COSTCO WHOLESALE COMPANY, Defendant. Neuroaxis Neurosurgical Associates, PC, Plaintiff, v. Sprint Nextel Corporation, Defendant. Neuroaxis Neurosurgical Associates, PC, Plaintiff, v. Aetna Health, Inc. and Aetna Health Insurance Company of New York, Defendants.
• Court: U.S. District Court — Southern District of New York

919 F.Supp.2d 345

NEUROAXIS NEUROSURGICAL ASSOCIATES, PC, Plaintiff,

v.COSTCO WHOLESALE COMPANY, Defendant.

Neuroaxis Neurosurgical Associates, PC, Plaintiff,

v.Sprint Nextel Corporation, Defendant.

Neuroaxis Neurosurgical Associates, PC, Plaintiff,

v.Aetna Health, Inc. and Aetna Health Insurance Company of New York, Defendants.

Nos. 11 Civ. 8350(DLC), 11 Civ. 8516(DLC), 11 Civ. 8756(DLC).

United States District Court, S.D. New York.

Jan. 23, 2013.

Mario David Commetti, Timothy F. Butler, Tibbetts, Keating & Butler, LLC, New York, NY, for Plaintiff.

Jodie L. Ousley, Kimberly A. O'Toole, d'Arcambal Ousley & Cuyler Burk, LLP, New York, NY, for Defendants.

OPINION AND ORDER

DENISE COTE, District Judge:

In these three coordinated actions, neurosurgeons associated with the plaintiff Neuroaxis Neurosurgical Associates, PC (“Neuroaxis”) seek payment from welfare benefit plans for close to 200 surgical procedures performed on plan members. Neuroaxis has sued Sprint Nextel Corporation (“Sprint”) and Costco Wholesale Company (“Costco”), private sector welfare plan sponsors, as well as Aetna Health Insurance Company of New York (“Aetna”), the plans' administrator. The defendants have moved to dismiss the plaintiff's claims on several grounds, three of which are addressed in this Opinion. As described below, in many instances Neuroaxis will be unable to recover against the plans because the benefit plans bar the assignment of claims by plan participants. On the other hand, two of the other issues raised by the defendants do not preclude the plaintiff's claims. Specifically, these suits are not barred by a 2003 settlement agreement (“2003 Settlement Agreement”), and upon proper application of the parties' tolling agreement, a number of the plaintiff's claims are timely under the plans' timing provisions. With the guidance given in this Opinion, the parties will be invited to identify which remaining issues require discovery or are ripe for further motion practice.

BACKGROUND

Aetna is an insurance company that administers the welfare benefits plans at issue here (“Plans”), including plans sponsored by Sprint and Costco. The majority of the Plans are sponsored by private sector employers like Sprint and Costco and as a result are governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”). The remainder of the Plans are administered by Aetna for government agencies and are not governed by ERISA. The Neuroaxis physicians performed approximately 182 surgeries after June 1, 2004, as out-of-network healthcare providers to patients covered by the Plans. Of these 182 surgeries, 105 were performed during the period covered by the Amended Complaints, that is, before December 31, 2007.

Neuroaxis contends that the Plans obligate the defendants to pay the doctors for the healthcare services at a “reasonable and customary rate,” calculated on the basis of “the type of service provided, and the fee most commonly charged for that service” in the relevant geographic area. Neuroaxis further contends that the defendants improperly used other measures in calculating repayment rates, thereby unreasonably reducing the payments to the doctors. For instance, its complaint against Aetna asserts that Aetna ignored the “reasonable and customary” standard and used other factors to calculate payments such as “charges received by Aetna for the same service.” Between the three complaints, the plaintiff claims to be owed approximately $8,481,753.

PROCEDURAL HISTORY

This litigation began on December 20, 2010, when Neuroaxis commenced an action against Aetna seeking recovery for health services provided by it from June 1, 2004 through December 31, 2007 to patients covered by employer-sponsored benefit plans administered by Aetna. The suit was filed in state court and was removed to federal court by Aetna. The parties then entered into a tolling agreement (the “Tolling Agreement”), agreed to engage in settlement negotiations, and dismissed the action. The Tolling Agreement provided that, should negotiations fail, “the Parties shall have the right to file and pursue any and all Claims in Federal Court.”

The Tolling Agreement also provided that “the Timing Defenses applicable to the Claims shall be tolled during the Tolling Period,” but that the Tolling Agreement would “have no effect on any Timing Defenses that may be available to Aetna or Neuroaxis” either prior to or after the expiration of the Tolling Period. The Tolling period ran from December 20, 2010 to September 16, 2011.

On October 20, 2011, Neuroaxis initiated the instant action against Aetna and on October 27, 2011, Neuroaxis filed two lawsuits against Costco and Sprint. ¹ Neuroaxis filed each action in state court, and the defendants removed the actions to this Court. At a conference held on March 9, 2012, the plaintiff's motions to remand were denied since the plaintiff's claims were preempted by ERISA and properly removed.

In Montefiore Med. Center v. Teamsters Local 272, 642 F.3d 321, 328 (2d Cir.2011), the Second Circuit outlined a three step test, derived from Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004), for determining when a plaintiff's state law claims are completely preempted by ERISA. Applying this framework, this Court determined that Neuroaxis's state law claims were completely preempted by ERISA. Following the conference, Neuroaxis was given an opportunity to amend all of its complaints to plead ERISA causes of action.

Neuroaxis filed amended complaints that included ERISA claims in the Aetna and Costco matters on April 6, 2012. No amended complaint has been filed in the Sprint matter.² The amended complaints against Aetna and Costco assert five causes of action: 1) Failure to Abide by the Terms of ERISA-governed benefits plans in violation of 29 U.S.C. § 1104(a)(1)(D); 2) Breach of Contract; 3) Third Party Beneficiary Rights; 4) Unjust Enrichment; 5) Quantum Meruit. Neuroaxis also asserts that Aetna breached its fiduciary duties under 29 U.S.C. §§ 1022, 1104(a)(1)(A)(i), and 1106. The complaint against Sprint asserts only the four state law causes of action.

In a series of conferences, Aetna described several legal defenses that it contends bar most if not all of the claims in these actions. Since decisions on these issues will impact the scope of discovery, the Court ordered the defendants to file a motion addressed to those defenses.

Following limited discovery on threshold issues, on August 3, 2012, the defendants filed motions to dismiss in all three of these actions. The motions to dismiss address four threshold issues: 1) Whether the plaintiff has standing to sue under ERISA; 2) Whether the plaintiff's claims are barred by the timing provisions of the Plans; 3) Whether the plaintiff's claims were released under the 2003 Settlement Agreement; and 4) Whether the plaintiff has exhausted administrative remedies. The parties have attached numerous affidavits and exhibits to their motion papers. Neuroaxis filed its opposition to the motions on September 24, 2012. Briefing on the motions to dismiss was fully submitted on October 9, 2012. This Opinion addresses only the first three issues raised by the motions to dismiss.

DISCUSSION

When presented with a motion to dismiss, the court may not consider mattersoutside of the pleadings without converting the motion into a motion for summary judgment. Friedl v. City of New York, 210 F.3d 79, 83–84 (2d Cir.2000). A district court must ordinarily give notice to the parties before converting a motion to dismiss to a motion for summary judgment, but a party “is deemed to have notice that a motion may be converted ... if that party should reasonably have recognized the possibility that such a conversion would occur.” Sira v. Morton, 380 F.3d 57, 68 (2d Cir.2004) (citation omitted); see also Hernandez v. Coffey, 582 F.3d 303, 307 (2d Cir.2009); see also Aetna Cas. & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 573 (2d Cir.2005). Where represented parties attach to a motion to dismiss or to the opposition thereto “extensive materials that were not included in the pleadings,” they “plainly should [be] aware of the likelihood of” conversion, and “cannot complain that they were deprived of an adequate opportunity to provide the materials they deemed necessary to support their” position. Sira, 380 F.3d at 68;see also Aetna Cas. & Sur. Co., 404 F.3d at 573. In light of the parties' extensive factual submissions, it is appropriate to convert the defendants' motions to dismiss to motions for summary judgment.

Summary judgment may not be granted unless all of the submissions taken together “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination, the court must view all facts in the light most favorable to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 169 (2d Cir.2006). When the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the non-movant must “set forth specific facts showing that there is a genuine issue for trial,” and cannot rest on the “mere allegations or denials” of the movant's pleadings. Fed.R.Civ.P. 56(e); accord Sista, 445 F.3d at 169. Only disputes over material facts, facts that might affect the outcome of the suit under the governing law, will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

1. Standing to Sue under ERISA

The defendants argue that, with respect to most of the claims at issue, Neuroaxis lacks standing to sue under ERISA. More specifically, the defendants contend that most of...