North Cypress Med. Ctr. Operating Co. v. Healthcare

• Decision Date: 02 March 2011
• Docket Number: Civil Action No. 4:09–cv–2556.
• Parties: NORTH CYPRESS MEDICAL CENTER OPERATING CO. et al, Plaintiffs,v.CIGNA HEALTHCARE et al, Defendants.
• Court: U.S. District Court — Southern District of Texas

782 F.Supp.2d 294

NORTH CYPRESS MEDICAL CENTER OPERATING CO. et al, Plaintiffs,

v.CIGNA HEALTHCARE et al, Defendants.

Civil Action No. 4:09–cv–2556.

United States District Court,S.D. Texas,Houston Division.

March 2, 2011.

J. Douglas Sutter, Kelly Sutter et al, Houston, TX, Neil L. Prupis, Lampf Lipkind et al., West Orange, NJ, for Plaintiffs.Alan W. Harris, Attorney at Law, Dallas, TX, Andrew Dunlap, Pro Hac Vice, for Defendants.

MEMORANDUM AND ORDER

KEITH P. ELLISON, District Judge.

Pending before the Court is Defendants Connecticut General Life Insurance Company and CIGNA Healthcare's (collectively, “Defendants” or “CIGNA”) Motion to Dismiss Plaintiffs' First Amended Complaint and to Strike Jury Demand. (Doc. No. 57.) After considering the parties' filings, all responses and replies thereto, and the applicable law, the Court finds that CIGNA's motion should be GRANTED in part and DENIED in part.

I. BACKGROUND

Plaintiffs North Cypress Medical Center Operating Co., LTD and North Cypress Medical Center Operating Company GP, LLC (collectively, “North Cypress”) own and operate an approximately 150–bed general acute care hospital in Houston, Texas. North Cypress is a full service hospital offering a range of medical care facilities, such as an emergency room, surgery center, and oncology and pediatrics units. The hospital does not maintain contracts with healthcare insurance carriers and, thus, is considered “out-of-network” for purposes of reimbursement for medical treatment and services it renders to patients.

North Cypress alleges that CIGNA insures and/or administers various employers' ERISA-governed healthcare plans. North Cypress treats thousands of patents, including those covered by plans CIGNA administers and/or insures. According to North Cypress, the Preferred Provider Organization (“PPO”) and Point of Service (“PSO”) ERISA plans at issue permit subscribers/members to obtain healthcare services from out-of-network facilities like North Cypress. Further, Health Maintenance Organization (“HMO”) plans insured and/or administered by CIGNA are at issue because CIGNA subscribers utilize North Cypress' emergency room facilities, and that care is covered under the respective HMO plans.

North Cypress alleges that, following medical treatment and services provided to plan members/subscribers, CIGNA is obligated by the terms of the various plans to pay benefits for such out-of-network and emergent care services based on the usual, customary, and reasonable (“UCR”) rate for that service in the relevant market. Notwithstanding this legal duty, North Cypress alleges, first, that CIGNA has underpaid North Cypress considerably for out-of-network and emergency services it provided to patients participating in health plans insured and/or administered by CIGNA.¹ North Cypress alleges that this significant underpayment has resulted, in part, from CIGNA's intentional or reckless use of flawed or inadequate data to calculate UCR amounts. Secondly, CIGNA has allegedly failed to promptly pay North Cypress' reimbursement claims. Third, North Cypress contends that CIGNA entered into “Discount Agreements” with North Cypress via a re-pricing agent, through which CIGNA agreed to pay a discounted price of North Cypress' invoices for CIGNA's members. According to North Cypress, CIGNA failed to pay even the discounted amount agreed to in the contracts. As a result of CIGNA's acts, North Cypress claims that it has been damaged in the amount of at least $20 million. To remedy these alleged violations, North Cypress has brought claims against CIGNA pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. § 1001 et seq., as well as Texas state law.

Specifically, North Cypress brings the following ERISA claims: (1) a claim to recover benefits under ERISA § 502(a)(1)(B); (2) claims for breach of fiduciary duty under ERISA § 502(a)(3); (3) a claim for failure to provide a full and fair review under ERISA § 502(a)(3); (4) a claim for violations of claims procedures regulations under ERISA § 502(a)(3); and, (5) a claim for failure to comply with a request for information under ERISA § 502(c)(1) (B). North Cypress also alleges that CIGNA failed to promptly pay benefits in violation of Texas Insurance Code §§ 843.338 and 843.351, and that it breached contracts with North Cypress.

CIGNA has brought the present motion to dismiss challenging the sufficiency of various aspects of North Cypress' first amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).² CIGNA also moves to strike North Cypress' amended jury demand as untimely and improper pursuant to Federal Rule of Procedure 38(b).

CIGNA argues that all of North Cypress's ERISA claims must be dismissed for lack of standing, as North Cypress “does not plead facts showing that it received valid assignments from its patients, that its patients suffered the injury-in-fact required for them to have assignable claims, or that it exhausted the available administrative remedies.” ³ (Mot. at 3.) North Cypress' ERISA claims must also be dismissed for substantive flaws, CIGNA argues, including that CIGNA is not a proper defendant for two of North Cypress' claims, and that North Cypress cannot seek money damages under ERISA § 502(a)(3). CIGNA further argues that North Cypress' state law claims are preempted by ERISA, and that even if they were not, North Cypress did not adequately plead them.

CIGNA also objects to the extent that North Cypress' complaint amends its jury demand to include its ERISA claims. North Cypress' original jury demand was limited to its state law, non-ERISA claims. Because North Cypress' complaint does not raise any new claims or materially different allegations, and because North Cypress does not have a right to a jury trial for its ERISA claims, CIGNA argues, the demand is untimely and improper, and should be struck.

II. LEGAL STANDARD

“To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need detailed factual allegations,’ but must provide the plaintiff's grounds for entitlement to relief—including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.’ ” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir.2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). That is, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). A claim has facial plausibility “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). The plausibility standard is not akin to a “probability requirement,” but asks for more than a sheer possibility that a defendant has acted unlawfully. Id. A pleading need not contain detailed factual allegations, but must set forth more than “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted).

Ultimately, the question for the court to decide is whether the complaint states a valid claim when viewed in the light most favorable to the plaintiff. The court must accept well-pleaded facts as true, but legal conclusions are not entitled to the same assumption of truth. Iqbal, 129 S.Ct. at 1950 (citation omitted). The court should not “ ‘strain to find inferences favorable to the plaintiffs' ” or “accept ‘conclusory allegations, unwarranted deductions, or legal conclusions.’ ” R2 Investments LDC v. Phillips, 401 F.3d 638, 642 (5th Cir.2005) (quoting Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 362 (5th Cir.2004)). A district court can consider the contents of the pleadings, including attachments thereto, as well as documents attached to the motion, if they are referenced in the plaintiff's complaint and are central to the claims. Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir.2000). Furthermore, a Court may refer to matters of public record when deciding a motion to dismiss. Chauhan v. Formosa Plastics Corp., 212 F.3d 595, 595 (5th Cir.2000). Importantly, the court should not evaluate the merits of the allegation, but must satisfy itself only that plaintiff has adequately pled a legally cognizable claim. United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370, 376 (5th Cir.2004). “Motions to dismiss under Rule 12(b)(6) are viewed with disfavor and are rarely granted.” Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 231 (5th Cir.2009) (internal citation omitted).

“A motion under 12(b)(1) should be granted only if it appears certain that the plaintiff cannot prove a plausible set of facts that establish subject-matter jurisdiction.” Castro v. United States, 560 F.3d 381 (5th Cir.2009), rev'd en banc on other grounds, 608 F.3d 266 (5th Cir.2010). “[U]nder Rule 12(b)(1), the court may find a plausible set of facts supporting subject matter jurisdiction by considering any of the following: ‘(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.’ ” Id. (quoting Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir.2008)). “A ‘facial attack’ on the complaint” challenging the court's subject matter jurisdiction pursuant to Rule 12(b)(1) “requires the court merely to look and see if [a] plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion.” Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.1980) (citing Mortensen v....