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Our Lady of Lourdes Health System v. MHI Hotels

December 1, 2009


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


This matter is before the Court on Defendant MHI Hotels, Inc. Health and Welfare Fund's motion to dismiss [Docket Item 4], in which Defendant argues that this action is both completely preempted under § 502(a) of the Employee Retirement Income Security Act ("ERISA"), as well as expressly preempted, under § 514(a) of ERISA. Plaintiff Our Lady of Lourdes Health System replies that its claims against Defendant, admittedly an ERISA Plan, arise entirely from third-party contracts executed by the ERISA Plan and independent of the ERISA Plan and so are not preempted by either ERISA provision. For the reasons set forth below, the Court finds that Plaintiff's claims are not subject to complete preemption, but are expressly preempted by ERISA § 514(a).


A. Facts

Plaintiff is a medical services provider that serves, among others, persons insured by Defendant, a group health care coverage benefits provider. (Compl. at 1.) The parties do not dispute that Defendant is an ERISA employee welfare benefit plan pursuant to 29 U.S.C. § 1002(1).*fn1 Plaintiff entered a contract with Intergroup Preferred Network Services, Corp. ("Intergroup") or Beech Street*fn2 to become a member of a Participating Provider Organization ("PPO") network and to accept discounted payments for group health coverage subject to the conditions in the contract, which included a requirement that discounted payments be made within a certain specified time period. (Compl. at 1-2; Grogan Certification ¶ 5.) Defendant contracted with Beech Street in order to access the discounted rates to be paid to Plaintiff, subject to the conditions of Plaintiff's contract with Intergroup or Beech Street, including the time limit for discounted payments. (Compl. at 2; Grogan Certification ¶¶ 4-6.)

For two periods of time, from November 15, 2002 through December 4, 2002, and then from December 17, 2002 through January 31, 2003, Plaintiff provided heath care services to Robert J Giorgi, a subscriber of Defendant's health care plan. (Compl. at 3-4.) The total amounts for services provided to Mr. Giorgi were $130,135.00 and $490,625. (Id.) Defendant paid $15,641.33 and $72,450.00, respectively, leaving $113,282.00 and $418,175.00 unpaid. (Id.) Plaintiff alleges that Defendant submitted these discounted payments outside the required time period, thereby breaching a condition precedent of their contractual obligation. (Id.) Plaintiff asserts that Defendant has been unjustly enriched to the detriment of Plaintiff and that Plaintiff is entitled to recover the remaining costs of medical service provided to Mr. Giorgi. (Id.)

B. Procedural History

On March 19, 2009, Plaintiff brought suit in New Jersey Superior Court, Camden County. On April 20, 2009, Defendant removed the action to this Court, asserting diversity jurisdiction pursuant to 28 U.S.C. § 1332, and federal question jurisdiction pursuant to 28 U.S.C. § 1331. Defendant then moved to dismiss asserting complete preemption under § 502(a) of ERISA, as well as express preemption, under § 514(a) of ERISA.


A. Standard of Review

In its review of Defendants' motion to dismiss pursuant to Rule 12(b)(6), Fed. R. Civ. P., the Court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). Thus, "to survive a motion to dismiss, 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, ---U.S. ---, 129 S.Ct. 1937, 1949 (2009); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Furthermore, "In deciding motions to dismiss pursuant to Rule 12(b)(6), courts generally consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim." Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004) (citation omitted).

B. Complete Preemption Under § 502(a)

ERISA's civil enforcement mechanism, § 502(a), has "such extraordinary pre-emptive power" that all state law causes of action that are within its scope are completely preempted. Pascack Valley Hosp. v. Local 464A UFCW Welfare, 388 F.3d 393, 399-400 (3d Cir. 2004) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004)). In Pascack the Third Circuit outlined the test, provided by the Supreme Court in Davila, for determining whether a claim falls within the scope of § 502(a). A claim is completely preempted if (1) the plaintiff could have brought the action under § 502(a) and (2) no other legal duty supports the plaintiff's claim. Pascack, 388 F.3d at 400.

The Pascack decision is dispositive as to Defendant's assertion of complete preemption. In Pascack, as here, the plaintiff was a medical services provider seeking to enforce contractual obligations of an ERISA plan. Id. at 396. In Pascack, as here, the hospital entered into a contract in which it agreed to accept discounted payment for medical services provided to beneficiaries of group health plans, conditioned on the timely payment of those costs. Id. In Pascack, as here, the ERISA plan entered into a contract binding it to timely payment in order to take advantage of the plaintiff's discounted rates. Id. Finally, in Pascack, as here, the hospital alleged "that the Plan breached this contract by improperly taking a discount on the services provided to [beneficiaries] despite the Plan's failure to make timely payment under the Subscriber Agreement." Id. at 397. The Third Circuit concluded that the hospital's claim was not completely preempted under § 502(a), first because there was no evidence that the beneficiaries had assigned their § 502(a) claims to the hospital, id. at 400-02, and second because the hospital's right to recovery "depend[ed] entirely on the operation of third-party contracts executed by the Plan that are ...

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