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West v. Health Net of the Northeast

August 7, 2003

CAROLE WEST, PLAINTIFF,
v.
HEALTH NET OF THE NORTHEAST, DEFENDANT.
DAVID COLLINS, PLAINTIFF,
v.
OXFORD HEALTH PLANS, DEFENDANT.



The opinion of the court was delivered by: Simandle, District Judge

OPINION

Presently before the Court are two motions for summary judgment filed by defendants Health Net of the Northeast ("Health Net") and Oxford Health Plans ("Oxford Health") in these related putative class actions arising under the Employee Retirement Income Security Act of 1974 ("ERISA"). After almost two years of motion practice in these cases, defendants seek summary judgment arguing that plaintiffs never had standing to bring their claims for compensatory relief and that plaintiffs' claims for injunctive relief became moot no later than November 2001.

The plaintiffs filed these actions after the New Jersey Supreme Court, in Perreira v. Rediger, 169 N.J. 399 (2001), held that health insurers who expended funds on behalf of an insured cannot seek to recover the funds from an insured's tort recovery through subrogation or reimbursement liens. Plaintiffs filed the present actions seeking compensation for the amounts that their health insurers had collected from their tort recoveries, injunctive relief declaring the subrogation and reimbursement liens void and enjoining all further collection efforts, and class relief for New Jersey insureds who were also subjected to subrogation and reimbursement liens.

This motion requires the Court to determine whether and when plaintiffs' compensatory and injunctive relief claims became moot, and whether mootness of their claims requires this Court to dismiss the entire action, including its asserted class-based relief claims. For the reasons explained herein, the Court finds (1) that neither plaintiff had standing to sue for compensatory relief because the defendants never collected any subrogation monies from them, (2) that plaintiff Collins did not have standing to sue for declaratory relief because he was not subject to a subrogation lien when he filed suit on October 4, 2001 because the lien had been abandoned on July 18, 2001, (3) that plaintiff West had standing to sue for declaratory relief when she filed suit on October 4, 2001 because she was subject to a subrogation lien, but that her claim for declaratory relief became moot on November 9, 2001 when the lien was abandoned, and (4) that the mootness of plaintiffs' claims prior to the filing of class certification motions in September, 2002, requires this Court to dismiss all claims of the uncertified putative class without prejudice to their reassertion by proper class representatives. Therefore, this Court will grant defendants' motions for summary judgment and will dismiss plaintiffs' complaints.

I. BACKGROUND

A. Procedural History

In January 2002, this Court consolidated, for the limited purpose of considering motions to remand and motions to dismiss, the present two actions and four other actions under the docket of the earliest-filed action, Carducci v. Aetna U.S. Healthcare, Civil No. 01-4675. *fn1 This Court has previously detailed the procedural history of these consolidated cases, which has involved the addition of three more cases. *fn2 See Carducci v. Aetna U.S. Healthcare, 247 F. Supp. 2d 596 (D.N.J. 2003); Carducci v. Aetna U.S. Healthcare, Civ. No. 01-4675, 2002 WL 31262100 (D.N.J. Jul. 24, 2002); Carducci v. Aetna U.S. Healthcare, 204 F. Supp. 2d 796 (D.N.J. 2002).

The cases were consolidated for the limited purposes of deciding their motions to remand and motions to dismiss because the motions dealt with similar issues arising under ERISA. Each case was originally filed as a class action complaint in New Jersey Superior Court based on Perreira v. Rediger, 169 N.J. 399 (2001), where the New Jersey Supreme Court held that, under New Jersey's collateral source statute N.J.S.A. 2A:15-97, a health insurer who expended funds on behalf of an insured may not recoup the funds through subrogation or reimbursement liens if the insured recovers from a third-party tortfeasor. In each case, the plaintiff was insured under an employee benefit health plan which paid health benefits for plaintiff's personal injuries, but which included a subrogation and reimbursement provision allowing the plan to recoup the benefits should the plaintiff recover from a third party tortfeasor. *fn3

The plaintiffs involved in the present motions filed identically-worded complaints in state court. In Count I of the West and Collins complaints, each alleges that his or her health insurance company was unjustly enriched because "Defendant required Plaintiff and the Class to reimburse Defendant for those funds expended on behalf of Plaintiff and Class members when Plaintiff and Class members recovered a judgment or settled any personal injury action against a tortfeasor." *fn4 In Count II, plaintiffs allege that "Defendant has taken, reserved, received, collected and converted thousands of dollars in subrogation and reimbursement payments from Plaintiff and the Class based on a false and illegal claim of right." *fn5 In Count III, plaintiffs seek an amendment of the terms of their health plans to comply with the Perreira decision. *fn6 In Count IV, plaintiffs seek a declaratory judgment that defendants be ordered to cease all collection efforts on reimbursement and subrogation liens.

Plaintiffs, thus, seek three types of relief: (1) compensatory relief "for damages in the amount of the reimbursements paid by Plaintiff to Defendant for payments made by Defendant to third parties on behalf of Plaintiff, together with interest thereon," (2) injunctive relief declaring all asserted reimbursement and subrogation liens void and enjoining further collection efforts by Defendants, and (3) class relief in the form of compensatory and injunctive relief. (See Complaints, Prayer for Relief.)

After hearing oral argument on the remand motions of the plaintiffs in January and April 2002, the Court denied the motions in a May 28, 2002 decision, finding that the monies that plaintiffs alleged were taken by the defendant insurers pursuant to the subrogation clauses in their employee benefit healthcare contracts were "benefits due" under ERISA section 502(a)(1)(B), meaning that the state law unjust enrichment claims were completely preempted by federal law and were properly removed to federal court. See Carducci, et al. v. Aetna U.S. Healthcare, 204 F. Supp. 2d 796 (D.N.J. 2002). *fn7 The Court explained that the relief was for "benefits due" because the "classification of the monies sought by plaintiff was addressed at length in oral argument," id. at 801, and that "[e]ssentially plaintiffs seek to regain the whole benefit provided to them by defendants, including those amounts paid in subrogation pursuant to the terms of the plans," id. at 803.

In September, 2002, the consolidated defendants, including Health Net and Oxford Health, filed a joint motion to dismiss the Complaint, asserting that plaintiffs' complaints should be dismissed because the claims were completely preempted by ERISA § 502(a)(1)(B), were conflict preempted by ERISA § 514(a), and were barred by the voluntary payment doctrine, the law regarding the retrospective application of court decisions, the standing doctrine or the mootness doctrine. The Court denied the motion to dismiss in a March 4, 2003 Opinion and Order. *fn8

In the motion to dismiss papers, the present defendants, Health Net and Oxford Health, argued that "Collins and West lack standing to pursue their compensatory claims (Counts I through III of their Complaints) because they have not suffered an `injury in fact' . . . neither alleges that he or she ever made a payment pursuant to those clauses." (Defs.' Mtn. to Dismiss Br. at 3.) Defendants then invited plaintiffs to show that they were "deprived of money by defendants related to subrogation and/or reimbursement clauses," (id. at 2 n. 1), but plaintiffs Collins and West did not respond to the standing argument in their submissions. The Court, therefore, "accept[ing] as true all material allegations of the complaint," Pennell v. City of San Jose, 485 U.S. 1, 7 (1988), accepted as true plaintiffs' allegations in their Complaints that the defendants had "taken, reserved, received, collected and converted thousands of dollars in subrogation and reimbursement payments from Plaintiff and the Class based on a false and illegal claim of right," (Complaints ¶ 19), and denied the motion to dismiss. *fn9

Defendants Health Net and Oxford Health then filed the present motions for summary judgment on May 14, 2003, arguing that there is no question that plaintiffs West and Collins are not owed "benefits due" under their plans because they never paid any monies pursuant to the reimbursement and subrogation liens and that there is no question that they do not need injunctive relief because defendants Health Net and Oxford Health have abandoned the liens. *fn10 The Court will consider these standing and mootness arguments herein and will grant the motions for summary judgment. *fn11

B. Facts Specific to West v. Health Net

As will be seen, and contrary to the allegations of her own Complaint, plaintiff Carole West never had any money taken by Health Net or its agent by way of subrogation upon her personal injury recovery or otherwise. Plaintiff Carole West was injured on August 1, 1998, (Pirtle Decl. ¶2), and, as a beneficiary of Health Net's Guardian & Physician Health Services Healthcare Solutions Plan, her covered medical services were paid by Health Net, (Stmt. of Undisputed Facts ¶1). Her Health Net plan included a "right to recovery" clause which provided Health Net with subrogation and reimbursement rights. *fn12 Health Net did not pursue these claims directly, but contracted with collection agent, Primax Recoveries, Inc. *fn13 (Moffa Aff., Ex. A, Pirtle Dep. at 15:3-17:11.) Prior to the Perreira decision on June 26, 2001, Health Net's "general policy regarding the assertion of subrogation rights and liens" was to send "anything relating to subrogation" to Primax with directions to "pursue the right for recoveries." (Moffa Aff., Ex. A, Pirtle Dep. at 15:3-17:11.)

After the Perreira decision, Health Net had "continuing discussions" with Primax about the Perreira decision and its effect on their collection efforts. *fn14 (Moffa Aff., Ex. C, Romano Dep. at 42:8-43:18.) Initially Health Net "needed time to discuss it and confer with their outside counsel," (id. at 44:25-45:11), and instructed Primax "to continue pursuit of active cases until such time as they reached a decision on how to handle the matter," (id. at 45:7-11). *fn15

Ms. West's attorney was sent a "Notice of Lien" on April 17, 2001, before the Perreira decision was issued. *fn16 (Id. at 24:1-6.) There is no record that she corresponded with Primax or Health Net about the Notice. Then, following Perreira, on October 4, 2001, plaintiff Carole West filed the present action. *fn17 On October 18, 2001, Leean Pirtle, Supervisor of Claims Recovery at Health Net, requested that Primax copy the West file and send Health Net the original file documents. (Moffa Aff., Ex. D at 43.) She also instructed Primax to "[p]ut this file on hold until further direction from [Health Net]." (Id.; Moffa Aff., Ex. C, Romano Dep. at 35:23-36:25.) On November 9, 2001, Ms. West's file at Primax was closed "at the client's request due to New Jersey laws." (Id. at 26:10-11; 39:2-13; Moffa Aff., Ex. D at 45.) The lien was abandoned when the file was closed on November 9th, (Moffa Aff., Romano Dep. at 40:19-21), with no payments ever made by West, (id. at 26:4-11).

Plaintiff was likely not given notice in November 2001 that the lien had been abandoned, (id. at 40:22-41:4), because the file was closed in Primax's Client Services Department where the employees are not required to write lien-withdrawal letters, (id. at 41:5-22). On April 28, 2003, however, Leean Pirtle of Health Net made clear that "HNNJ [Health Net New Jersey] will not pursue any reimbursement/subrogation claim against Ms. West." (Pirtle Decl. ¶5.)

C. Facts Specific to Collins v. Oxford Health

Like Carole West above, plaintiff David Collins never actually lost any health care benefits, nor did he ever repay defendant for these benefits, contrary to his own allegations, as plaintiff now admits. Mr. Collins was injured in an automobile accident on May 20, 1998, (Carr Decl. ¶2), and, as a beneficiary of Oxford Health's New Jersey Small Group Freedom Plan, his medical expenses were paid by Oxford Health, (Stmt of Facts ¶1; Solomon Aff., Ex. B.) His Oxford Health plan included the subrogation and reimbursement rights, which Oxford Health pursued through collection agent, Healthcare Recoveries, Inc. ("HRI"). *fn18 (Carr Decl. ¶3; Id., Ex. A.)

Prior to the June 26, 2001 Perreira decision, Oxford Health allowed HRI to pursue subrogation claims as it wished. (Solomon Aff., Ex. A, Widomski Dep. at 14:15-25.) Plaintiff Collins, as a result, received letters from HRI on October 16, 2000, December 12, 2000, February 2, 2001, April 17, 2001, and May 4, 2001, requesting ...


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