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Jordan S. Josephson and Jordan S. Josephson, M.D., P.C v. United Healthcare

September 28, 2012


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


Plaintiffs Jordan S. Josephson ("Dr. Josephson") and Jordan S. Josephson, M.D., P.C. (the "P.C." and with Dr. Josephson, "Plaintiffs") sued Defendants United Healthcare Corporation a/k/a United Health Care Group; United Healthcare Insurance Company; United Healthcare Insurance Company of New York, Inc.; United Healthcare Services, Inc.; United Healthcare Service Corporation; and Ingenix, Inc ("Defendants") in a case arising out of a health insurer's alleged failure to properly reimburse healthcare providers for the cost of care. For ease of reference, the Court will refer collectively to all Defendants except Ingenix as "United" and, to the extent necessary, refer to Ingenix by its name. Pending before the Court are Plaintiffs' motion to remand (Docket Entry 21) and Defendants' motion to dismiss and strike (Docket Entry 14). For the following reasons, the motion to remand is DENIED and the motion to dismiss and strike is GRANTED IN PART and DENIED IN PART and the Court RESERVES JUDGMENT IN PART.


Dr. Josephson is a renowned ear-nose-throat ("ENT") surgeon. (Compl. ¶¶ 4-18.) The P.C. is a New York professional corporation. (Id. ¶ 20.) United is a health insurer that provides health benefit plans primarily in New York, New Jersey, and Connecticut. (Id. ¶ 31.) Defendant Ingenix is a United subsidiary that develops and sells a database that helps insurers determine the "usual, reasonable, and customary rate" (the "UCR Rate") for medical services.

Part of Plaintiffs' practice focuses on performing Functional Endoscopic Sinus Surgery ("FESS") on patients with chronic or recurrent acute sinusitis. FESS restores normal sinus function and preserves patients' sinus structures. (Id. ¶ 33.) To help his patients recover from the procedure, Dr. Josephson administers a series of post-surgery "Debridements" which shorten the recovery time and reduce post-surgery complications. In Dr. Josephson's medical opinion, each debridement procedure is medically necessary. (Id. ¶ 39.)

United's members are permitted to seek medically necessary treatment from out-of-network providers, and although Dr. Josephson is not a member of United's networks, he often treats United's members. (Id. ¶ 40, 43.) Under United's agreements with its members, United is obligated to reimburse the member or the provider the UCR Rate for the services rendered, less any co-payment, co-insurance, out-of-pocket, or deductible amounts. (Id. ¶ 41.)

Plaintiffs "routinely" receive authorizations and assignments from United members so that they can be paid directly from United for their services. (Id. ¶ 45.) According to Plaintiffs, the services they rendered to United's members were covered by the members' policies. (Id. ¶ 50.) And, the members often presented Plaintiffs with insurance cards indicating that United was contractually obligated to pay for medically necessary services. (Id. ¶ 51.) Additionally, United was aware that Dr. Josephson was treating its members. (Id. ¶ 52.)

The thrust of Plaintiffs' case is that United failed to properly reimburse them for medically necessary services rendered to United's members. Their allegations include that United denied coverage to certain of Plaintiffs' patients (see id. ¶ 2), but mainly Plaintiffs argue that United manipulated the data in the database that governs UCR Rate determinations (id. ¶¶ 79-100). The flawed data allegedly led to a lower UCR Rate, which in turn caused Plaintiffs to be underpaid for their work. Plaintiffs assert six causes of action: (1) a breach of contract claim premised on alleged express contracts that arose between Plaintiffs and United (id. ¶¶ 101-108); (2) a claim that United breached an implied-in-fact contract between Plaintiffs and United (id. ¶¶ 109-118); (3) a contract claim premised on Plaintiffs receiving assignments of United's members' benefits (id. ¶¶ 119-129); (4) an unjust enrichment claim (id. ¶¶ 130-137); (5) a claim under New York Insurance Law Section 3224-a (the "Prompt Pay Law") (id. ¶¶ 138-143); and (6) a claim under New York General Business Law Section 349 (id. ¶¶ 144-155).


The Court will address Plaintiffs' motion to remand first and then turn to Defendants' motion to dismiss and strike.

I. Remand is Improper

Defendants removed this case from state court on the basis of federal question jurisdiction, arguing that Plaintiffs' common-law contract claims are preempted by the Employee Retirement Income Security Act ("ERISA"). Plaintiff now moves to remand. This motion is denied.

Under the ERISA preemption doctrine, even claims that a plaintiff characterizes as sounding in state law are subject to federal jurisdiction if they fall within the scope of ERISA's civil enforcement mechanism. Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 328 (2d Cir. 2011); see also Aetna Health Inc. v. Davila, 542 U.S. 200, 207, 124 S. Ct. 2488, 2494-95, 159 L. Ed. 2d 312 (2004). That mechanism, Section 502(a)(1)(B), provides in relevant part that: "A civil action may be brought - (1) by a participant or beneficiary . . . (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B) ("ERISA Section 502(a)(1)(B)").

The Second Circuit recently clarified the test, first outlined by the Supreme Court in Davila, for determining whether a state law claim is "within the scope" of Section 502(a)(1)(B). Montefiore, 642 F.3d at 328. There, the court concluded that claims by an in-network health care provider who has received a valid assignment from an ERISA plan beneficiary and whose claim involves the right to payment from the plan (as opposed to the amount of payment) fall within the scope of Section 502(a)(1)(B). The court found that these claims are completely preempted by federal law and thus they can be removed to federal court. Montefiore, 642 F.3d at 324-25. Because Plaintiffs' third cause of action asserts a claim for plan benefits on an assignment theory (see Compl. ¶¶ 119-129), the Court agrees with Defendants that the removal issue is governed by the result in Montefiore.

Under the Davila test, "claims are completely preempted by ERISA if they are brought (i) by 'an individual [who] at some point in time, could have brought his claim under ERISA § 502(a)(1)(B),' and (ii) under circumstances in which 'there is no other independent legal duty that is implicated by a defendant's actions.'" Montefiore, 642 F.3d at 328 (quoting Davila, 542 U.S. at 210) (alterations in original). In Montefiore, the Second Circuit unpacked Davila's first prong into two separate inquires: first, whether Plaintiffs are the "type of party" that can bring a claim under Section 502(a)(1)(B), 642 F.3d at 328 (emphasis omitted); and second, whether the "actual claim that [Plaintiffs] assert[] can be construed as a colorable claim for benefits pursuant to § 502(a)(1)(B)," id. (emphasis omitted). If the answer to these questions is ...

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