United States District Court, D. New Jersey
MEMORANDUM OPINION AND ORDER
MADELINE COX ARLEO UNITED STATES DISTRICT JUDGE
matter comes before the Court by way of motions to dismiss by
Defendant The Okonite Company, Inc. (“Okonite”),
Dkt. No. 57, and Defendants Novartis Pharmaceuticals
Corporation (“Novartis”), NRG Energy, Inc.
(“NRG”) and Public Service Electric and Gas
Company (“PGE&G”) (collectively, the
“Novartis Defendants”), Dkt. No. 62, against
Plaintiffs High Crest Functional Medicine, LLC, Immunogen
Diagnostics, LLC, Dr. Michael Segal, D.O., and Neelendu Bose
(“Plaintiffs”). For the reasons set forth below,
the motions are granted in part and denied in part.
several medical providers, bring this ERISA suit against a
group of employer-plan sponsors and Horizon Blue Cross Blue
Shield of New Jersey (“Horizon”), the
sponsors' third-party claims administrator, for wrongful
denial of claims payments and self-dealing.
2011, Plaintiffs performed out-of-network medical services
for ERISA plan participants (“Participants”) who
work for Okonite and the Novartis Defendants. Am. Compl.
¶¶ 1, 6, Dkt. No. 19. The Participants assigned
their rights to Plaintiffs, who submitted the medical claims
to Horizon. Id. ¶ 2. Horizon refused to pay.
Id. ¶ 8. Instead, it put Plaintiffs on
“prepayment review” while purporting to conduct
an investigation into Plaintiffs' business practices.
Id. Over the following months, Horizon repeatedly
requested new information about the claims, leaving the
claims pending past the ERISA-mandated claims review time
period. Id. ¶ 53. This practice continued for
over a year, so Plaintiffs sued Horizon in 2012 (the
“2012 Action”). Id. ¶ 89. Horizon
then began denying or underpaying the claims without a
legitimate reason. Id. ¶¶ 97-99. In 2015,
Plaintiffs and Horizon dismissed the 2012 Action without
prejudice pursuant to a tolling and case management
agreement. Id. ¶ 95. But that same year,
Plaintiffs filed the instant case (under a new case number)
against Horizon, also naming Okonite, the Novartis
Defendants, and several other alleged plan sponsors.
allege that Horizon had a financial motive for to delay,
deny, and underpay the claims. The motive stems from the
administrative services contracts (“ASCs”) that
Horizon entered into with Okonite and the Novartis
Defendants. Id. ¶ 9. The ASCs permit Horizon to
bill the employer-sponsors for the full amount of the
services rendered by the medical providers, but then
negotiate with the providers for a lower payment amount.
Id. ¶ 10. The ASCs permit Horizon to keep the
difference between the amount received from the sponsors and
the amount paid to the providers. Id. Horizon does
not have to disclose the negotiated difference to anyone.
Id. ¶ 11. Thus, Plaintiffs allege, Horizon
delayed, denied, and underpaid their claims because Horizon
could keep the money paid by the sponsors. See id.
¶ 12. According to Plaintiffs, this constituted a breach
of fiduciary duty and self-dealing on Horizon's part,
which also implicated Okonite and the Novartis Defendants as
co-fiduciaries of the plans.
relevant part, Plaintiffs assert claims for (1) wrongful
denial of benefits and unreasonable claims review under 29
U.S.C. § 1133 against only Horizon (Count One); (2)
breach of fiduciary duty against all defendants under 29
U.S.C. § 1104 (Count Two); (3) engaging in prohibited
transactions under 29 U.S.C. § 1106 against all
defendants (Count Three); and (4) failure to provide plan
documents under 29 U.S.C. § 1132(c) against all
defendants (Count Four). It appears from the Amended
Complaint that Plaintiffs assert Counts One and Four under
ERISA section 502(a)(1)(B) because they seek monetary damages
and penalties, and Counts Two and Three under section
502(a)(3) because they seek equitable relief. 29 U.S.C.
§ 1132(a)(1)(B), (a)(3).
and the Novartis Defendants filed two separate motions to
dismiss Counts Two, Three, and Four, the only counts asserted
Okonite's Motion to Dismiss
Counts Two (Breach of Fiduciary Duty) and Three (Prohibited
argues that Counts Two and Three must be dismissed because
they are duplicative of the relief sought under Count One.
Relying on Varity Corp. v. Howe, 516 U.S. 489
(1996), Okonite contends that equitable relief under §
502(a)(3) is not available because Plaintiffs' alleged
injuries can be addressed in a benefits claim under §
502(a)(1)(B). The Court disagrees.
Varity, the Supreme Court stated that §
502(a)(3) is a “catchall” provision that allows
“appropriate equitable relief for injuries caused by
[ERISA] violations that § 502 does not elsewhere
adequately remedy.” Id. at 512. However,
several courts in this district and circuit have found that
Varity “does not establish a bright line rule
precluding the assertion of alternative claims under sections
502(a)(1)(B) and 502(a)(3) at the motion to dismiss
stage.” See, e.g., Lipstein v. United
Healthcare Ins. Co., No. 11-1185, 2011 WL 5881925, at *3
(D.N.J. Nov. 22, 2011) ...