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IJKG Opco LLC v. General Trading Co.

United States District Court, D. New Jersey

June 18, 2018



          KEVIN McNULTY. U.S.D.J.

         The plaintiff, IJKG Opco LLC, doing business as CarePoint Health-Bayonne Medical Center ("BMC"), brings suit to recover the costs of medical care it provided to a patient who experienced severe renal complications and was hospitalized for about three weeks. Defendants are General Trading Company ("General Trading"), which provided the patient's employee welfare benefits plan; Cigna Corporation Inc. ("Cigna"), which was the claims administrator for the plan; Consolidated Health Plans, Inc. ("CHP"), which, along with Cigna, jointly administered the plan and was the third-party administrator for the plan; Zelis Healthcare, Inc. ("Zelis"), also known as Premier Health Exchange, Inc. or PHX, which was the claims contract negotiator; and Standard Security Life Insurance Company of New York ("SS Life"), which provided General Trading with a stop-loss policy that insured losses in excess of a deductible arising from specific plan beneficiaries. Several defendants have brought motions to dismiss and for judgment on the pleadings.[1] For the reasons outlined below, I will grant SS Life's motion to dismiss, deny General Trading's motion to dismiss, and deny Zelis's motion for judgment on the pleadings.

         I. Summary of Facts[2]

         BMC operates a fully-accredited, 278-bed hospital in Bayonne, New Jersey, which provides health care services to more than 70, 000 patients annually. (AC ¶¶ 1, 22.) On November 2, 2013, "Patient l", [3] who is insured by General Trading, entered BMC's emergency department and, after testing, showed abnormally elevated levels of creatine and potassium. (Id. ¶ 21.) She was diagnosed with acute renal failure and received medical treatment from BMC from her admission to the hospital until November 24, 2013. (Id.) This inpatient care, which lasted for 22 days, included testing to determine the progress of Patient l's kidney disease, treatment to stabilize the abnormal levels of blood urea nitrogen and creatine, treatment for Goodpasture Syndrome, which was a result of the kidney failure, plasmapheresis, hemodialysis, as well as other care. (Id.)

         Patient 1 incurred a charge of $771, 191.58 for the treatment of her kidney disease and her nearly stay at BMC. (Id.) General Trading, whose employee welfare benefits plan provides coverage for "in-network benefits" for "preferred providers" and for "out-of-network benefits" for "nonpreferred providers, " has reimbursed BMC, an "out-of-network" provider, for only $175, 358.05. (Id. ¶ 27.) CHP, General Trading's claim processor, issued an explanation of benefits on January 29, 2014, which provided reasons for disallowed charges. (Id. ¶ 28.) The majority of disallowances were labelled as "discount . . . negotiated through Premier Healthcare Exchange" or "[e]xceeds reasonable and customary charge." (Id.)

         On November 26, 2014, BMC received a letter from PHX stating that "[t]he Payor has forwarded your letter for additional payment dated November 7, 2014 for our review and consideration" and that the bill would be reimbursed in the amount of $175, 358.05. (Id. ¶ 29.) On November 28, 2014, BMC filed an appeal with CHP. (Id. ¶ 30.) CHP denied the appeal in its entirety and directed BMC to balance-bill the patient for the outstanding amount. (Id.)

         On January 13, 2015, BMC filed a second-level appeal within CHP. (Id. ¶ 31.) On February 9, 2015, BMC and CHP discussed the status of the appeal in a telephone call, in which a CHP representative advised BMC that appeals had to be filed directly with PHX. (Id.) The representative also explained that the claim was paid by CHP based on the out-of-network coverage provided by Cigna and that no further payment would be made. (Id.) On February 23, 2015, BMC received a letter from CHP that stated "[b]ased on the Plan benefits and policy language it has been determined that the above listed claim was paid appropriately and no additional payment shall be made." (Id. ¶ 32.) According to BMC, this letter effectively signaled die exhaustion of its appeals process. (Id. ¶ 37.)

         BMC sues to recover the unreimbursed balance of its bill, in the amount of $595, 833.53. It claims that defendants General Trading and Cigna have violated § 502(a)(1)(B) of die Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., (AC ¶¶ 47-61); that all defendants (except SS Life) have acted as fiduciaries to die employee welfare benefits plan that cover die patient and breached their fiduciary duties under § 502, (AC ¶¶ 62-73), that all defendants (except SS Life) denied BMC a full and fair review of their claim as mandated by § 503 of ERISA (AC ¶¶ 74-79); and that SS Life breached its contractual obligations to BMC, as a purported third-party beneficiary to the stop-loss policy. (AC ¶¶ 80-86.) Several motions are now before the court. SS Life has moved to dismiss the breach-of-contract claims against it (ECF no. 63.), while General Trading has also moved to dismiss the claims under ERISA against it. (ECF no. 69.) In addition, Zelis has moved for judgment on the pleadings. (ECF no. 91.)

         II. Discussion

         a. Standard of Review

         Rule 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails to state a claim upon which relief can be granted. The defendants, as the moving parties, bear the burden of showing that no claim has been stated. Animal Science Prods., Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. N.J. Carpenters & the Trustees Thereof v. Tishman Const. Corp. of N.J., 760 F.3d 297, 302 (3d Cir. 2014).

         Fed. R. Civ. P. 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiffs obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the complaint's factual allegations must be sufficient to raise a plaintiffs right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also W. Run Student Housing Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 16 (3d Cir. 2013). That facial-plausibility standard is met "when the plaintiff pleads factual content Fiat allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement'... it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.

         A Rule 12(c) motion for judgment on the pleadings is often indistinguishable from a motion to dismiss, except that it is made after the filing of a responsive pleading. Fed.R.Civ.P. 12(h)(2) "provides that a defense of failure to state a claim upon which relief can be granted may also be made by a motion for judgment on the pleadings." Turbe v. Gov't of Virgin Islands, 938 F.2d 426, 428 (3d Cir. 1991)). Accordingly, when a Rule 12(c) motion asserts that the complaint fails to state a claim, the familiar Rule 12(b)(6) standard applies. Id. (making due allowance, of course, for any factual allegations that are admitted in the responsive pleading). Thus, the moving party bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005).

         I am permitted to consider "extraneous documents that are referred to in the complaint or documents on which the claims in the complaint are based" without converting this motion into one for summary judgment. Morano v. BMW of N. Am., LLC, 928 F.Supp.2d 826, 830 (D.N.J. 2013) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997); Pension Benefit Guar. Corp. v. White Consol Indus., 998 F.2d 1192, 1996 (3d Cir. 1993)).

         b. Motion to Dismiss by SS Life

         SS Life moves to dismiss the claims by BMC against it on two grounds. First, SS Life argues that BMC is not a third-party beneficiary of the stop-loss policy between SS Life and General Trading. (ECF no. 63, at 1.) Second, even if BMC is a third-party beneficiary, BMC's claim is time barred by the terms of that policy. (Id. at 1-2.)

         Under New Jersey law, contract liability to a third party depends on "whether the contracting parties intended that a third party should receive a benefit which might be enforced in the courts." Fackelman v. Lac d'Amiante du Quebec, 398 N.J.Super. 474, 488 (App. Div. 2008) (quoting Wermann v. Aratusa, Ltd., 266 N.J.Super. 471, 476 (App. Div. 1993)). For contract liability to a third party to exist, a court must find that the parties to the contract intended and contemplated that the contract would benefit a third party. Id. (citing Gold Mills, Inc. v. Orbit Processing Corp., 121 N.J.Super. 370, 373 (Law Div. 1972)). Conversely, parties to a contract may expressly negate any legally enforceable right in a third party. Broadway Maint Corp. v. Rutgers, State Univ., 90 N.J. 253, 260 (1982).

         SS Life states that its policy with General Trading explicitly disclaims any enforceable rights on behalf of third parties. It has attached SS Life's policy with General Trading as an exhibit to a certification by Jonathan R. Pepin, an attorney for SS Life.[4] (ECF no. 63, Certification of Jonathan R. Pepin, ex. A). The relevant portions of the policy state:

This Policy does not create any right or legal relationship whatsoever between Us and a Covered Person or beneficiaries under the Plan. We shall not have any responsibility or obligation under this Policy to directly reimburse any Covered Person, or provider of professional or medical services for any benefits which are provided under the terms of the Plan. Our only liability under this Policy is You. Only one of Our officers may change this Policy. No change shall be valid unless the change is agreed to by Our President, Vice President or Secretary in writing. . . . [Id. at 7, § 8 (Entire Contract).)
Except as specifically provided in any rider or endorsement, attached to and forming part of the Policy, We have no obligation to any third party. Our liability under this Policy is limited to reimbursing You, pursuant to the terms of this Policy, for payments You make on behalf of Covered Person for expenses covered under the Plan. You hold Us harmless for damages, of any kind, which are not cause by Our own acts or omissions. We are not responsible for any liability You assume under any contract of agreement other than the Plan. [Id. at 8, § 8 (Liability and Indemnification).)

         Based on the explicit and unambiguous language of this provision, it was General Trading and SS Life's intent that no party except General Trading would benefit from the stop-loss coverage of the policy. Likewise, the "surrounding facts and circumstance" do not support BMC's argument that it is a third-party beneficiary. [See ECF no. 75, at 12.) As to any person covered by the policy, SS Life promised to reimburse losses that exceeded the deductible. (ECF no. 63, at 4, § 3 (Specific Excess Loss Insurance).) This provision, similar to most stop-loss policies, merely provides General Trading with a means to recover excessive losses arising from specific plan beneficiaries and does not function as a guarantee to any particular plan beneficiary.

         Because BMC was explicitly not intended to be a third-party beneficiary of the stop-loss policy issued by SS Life, BMC cannot pursue a claim of breach of contract against SS Life. Because BMC cannot pursue a claim as a third-party beneficiary, I need not decide whether BMC's claims against SS Life are ...

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