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United Benefit Fund, David Delucia, As Fund Administrator of the v. Magnacare Administrative Services LLC and Magnacare LLC

August 27, 2012

UNITED BENEFIT FUND, DAVID DELUCIA, AS FUND ADMINISTRATOR OF THE UNITED BENEFIT FUND, ANDREW TALAMO, AS TRUSTEE OF THE UNITED BENEFIT FUND, AND THOMAS D. AMBROSIO, AS TRUSTEE OF THE UNITED BENEFIT FUND, PLAINTIFFS,
v.
MAGNACARE ADMINISTRATIVE SERVICES LLC AND MAGNACARE LLC, DEFENDANTS.



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

MEMORANDUM & ORDER

Plaintiffs--an employee benefit fund, its administrator, and its trustees (collectively, the "Fund")--sued Defendants MagnaCare Administrative Services LLL and MagnaCare LLC (together, "MagnaCare") alleging a breach of fiduciary duty and other claims. MagnaCare moved to dismiss the Fund's Complaint in part (Docket Entry 9); for the following reasons, the motion is GRANTED IN PART.

BACKGROUND

The Fund is a multi-employer employee benefit plan, as defined by the Employee Retirement Income Security Act of 1974 ("ERISA"), that provides health benefits for individual members. (Compl. ¶ 4.) MagnaCare sells access to a network of medical and diagnostic providers (the "PPO Network"). The PPO Network's participating providers fall into three categories: preferred medical providers, preferred diagnostic providers, and preferred network hospitals. (Id. ¶ 12.)

In 2006, the Fund and MagnaCare entered into a contract (the "Agreement") whereby the Fund's members would have access to the PPO Network in exchange for a per-member monthly access fee. (Id. ¶¶ 9, 12-13.) When a Fund member received services from a medical provider, the doctor would submit a claim to MagnaCare. MagnaCare would "re-price" the claim and forward the re-priced claim to the Fund so that the Fund could pay the doctor directly. (Id. ¶ 14.) The arrangement was different for "diagnostic" providers. When a Fund member received services from a diagnostic provider, the Fund paid a fee (which was determined with reference to a schedule) directly to MagnaCare. MagnaCare, in turn, retained a portion of that money as a management fee and forwarded the balance directly to the diagnostic provider.*fn1 (Id. ¶¶ 15.) The management fee was different than the monthly fee that the Fund paid so that its members could access the PPO Network.

In March 2011, the Fund notified MagnaCare that it intended to terminate the Agreement in accordance with the contract's termination provisions. (See id. ¶ 24.) In May and June 2011, the Fund asked MagnaCare for copies of all bills that had been submitted for payment, the amount MagnaCare paid in response to those bills, and the amount charged to the Fund for each of those bills. MagnaCare refused to provide this information. Additionally, in May 2011, following the Fund's notification that it was canceling the contract, MagnaCare stopped processing and re-pricing claims for the Fund despite a contractual obligation to do so during the Agreement's ninety-day termination notice period. (See id. ¶¶ 25-31.)

DISCUSSION

The Fund asserts claims for: (1) breach of fiduciary duty; (2) breach of contract; (3) fraud; (4) unjust enrichment; and (5) injunctive relief. MagnaCare moves to dismiss all but the breach of contract claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

I. Legal Standard Governing Motions to Dismiss To survive a Rule 12(b)(6) motion, a plaintiff must

plead sufficient factual allegations in the complaint to "state a claim [for] relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929, 949 (2007). The complaint does not need "detailed factual allegations," but it demands "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. In addition, the facts pleaded in the complaint "must be enough to raise a right to relief above the speculative level." Id. Determining whether a plaintiff has met his burden is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009).

II. Application

The Court addresses the relevant claims in turn.

A. Breach of Fiduciary Duty

MagnaCare argues that it was not a fiduciary of the Fund and thus owed it no duty. The Court agrees. For the purposes of this motion, an ERISA fiduciary is one who "exercises any discretionary authority or discretionary control respecting management of such plan," "exercises any authority or control respecting management or disposition of its assets," or "has any discretionary authority ...


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