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LIEBERMAN v. NATIONAL POSTAL MAIL HANDLERS UNION

April 27, 1993

MARK A. LIEBERMAN, M.D., Plaintiff,
v.
NATIONAL POSTAL MAIL HANDLERS UNION, a DIVISION of the LABORERS' INTERNATIONAL UNION of NORTH AMERICA, AFL-CIO and CONTINENTAL ASSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: MIRIAM GOLDMAN CEDARBAUM

 CEDARBAUM, J.

 Plaintiff Dr. Mark A. Lieberman sues National Postal Mail Handlers Union (the "Union") and Continental Assurance Company ("Continental") for fees allegedly owed him under the Mail Handlers Benefit Plan (the "Plan"). Plaintiff, the assignee of Plan enrollees' claims, alleges that defendants owe him $ 296,024.15 for ophthalmology services provided to Plan enrollees at Journal Square Medical Center ("JSM") between November 18, 1986 and December 10, 1987. Plaintiff also claims that he is entitled to payment under the equitable doctrines of quantum meruit and estoppel (the "equitable claims").

 Plaintiff has moved to amend the complaint to assert a claim for punitive damages as well as for fees allegedly owed him for services provided to Plan enrollees at the Federal Plaza Medical Association ("FPMA").

 Defendants move for summary judgment dismissing the complaint on the grounds that (1) plaintiff's breach of contract claim is barred because he failed to exhaust his administrative remedies, (2) plaintiff's breach of contract claim is time-barred, and (3) federal law preempts plaintiff's equitable claims.

 For the reasons discussed below, this court lacks jurisdiction to hear plaintiff's breach of contract claim because he has not exhausted his administrative remedies. Therefore, this claim is dismissed without prejudice. Plaintiff's equitable claims are dismissed because they are preempted by the Federal Employees Health Benefits Act ("FEHBA"), 5 U.S.C. § 8901 et seq.

 BACKGROUND

 The Union is an unincorporated labor organization whose principal office is located in Washington, D.C. The Union sponsors the Plan, a Federal Employee Health Benefits plan established and operated pursuant to the FEHBA.

 Under the FEHBA, the United States Office of Personnel Management ("OPM") contracts with private carriers to provide health benefits for federal employees, and supervises the carriers.

 The Plan was established by procurement contract No. CS 1146 negotiated between the Union and OPM. In 1986 and 1987, information regarding the Plan's benefits and the procedure for administrative review of claims under 5 C.F.R. § 890.105 was contained in the Plan's contract statement of benefits (the "brochure") which is incorporated into the procurement contract.

 Continental is an Illinois corporation which maintains an office in Rockville, Maryland where it processes Plan claims. During 1986 and 1987, Continental underwrote and administered the Plan pursuant to subcontracts with the Union. Plaintiff is an ophthalmologist whose office is located in New York City.

 In 1986 and 1987, Continental, as administrator of the Plan, processed claims for payment of health benefits submitted to the Plan. Continental paid charges which it determined were covered under the Plan, and denied payment on those charges which it determined were not covered. When it determined that charges were not covered, Continental issued a letter to the Plan enrollee informing him that his claim had been denied, and stating the reason for the denial. (Def's 3-G Stmt P 4.)

 From September 21, 1987 through 1988, Continental pursued a program of prepayment review for all claims, whether assigned or unassigned, received from JSM and FPMA. It answered each claim form with a letter requesting back-up documentation and completion of a questionnaire by the Plan enrollee who received treatment. (Raymond Decl. P 5.) Under the prepayment review program, Continental did not pay the claim until it received both the back-up documentation and the Plan enrollee's response. (Id.) When it determined that Plan benefits were not payable on an assigned claim, Continental issued both to the Plan enrollee and to the provider a denial letter which stated the reason for the denial. (Id.) Continental adopted this program because it had detected a pattern of irregularities in claims received from JSM and FPMA. Pursuant to this program, Continental denied a number of claims submitted by plaintiff.

 During a March 20, 1989 meeting between plaintiff and Continental, plaintiff alleged that Continental owed him payment on claims that the Plan had denied. (Def's 3-G Stmt P 17.) Plaintiff repeated this allegation at a meeting with Continental held on May 11, 1989. In a May 15, 1989 letter to plaintiff, Continental responded by stating that it was defendants' position that "no sums currently are due or owing to ...


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