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Wurtz v. Rawlings Co., LLC

United States District Court, E.D. New York

March 28, 2013


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For Plaintiffs: Frank R. Schirripa of Hach Rose Schirripa & Cheverie LLP, New York, NY, and Neil S. Torczyner, and Steven J. Harfenist of Friedman, Harfenist & Langer, Lake Success, NY.

For Defendants: Gerald Lawrence, Richard Wolfe Cohen, and Uriel Rabinovitz of Lowey Dannenberg Cohen & Hart, P.C., White Plains, NY, and Brian D. Boyle, Charles E. Bachman, and Theresa S. Gee of O'Melveny & Myers LLP, Washington, D.C.


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JOSEPH F. BIANCO, United States District Judge.


Plaintiffs Meghan Wurtz (" Wurtz" ) and Mindy Burnovski (" Burnovski" ) bring this class action on behalf of themselves and all others similarly situated (collectively, " plaintiffs" )[1] against The Rawlings Company, LLC (" Rawlings" ), Oxford Health Plans (NY), Inc. (" Oxford Health" ), and UnitedHealth Group, Inc. (" UnitedHealth" )

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(collectively, " defendants" ). Plaintiffs seek compensatory and punitive damages, restitution, attorneys' fees, and declaratory relief arising from defendants' allegedly improper enforcement of claims/liens for reimbursement following Oxford Health's payment of plaintiffs' medical expenses pursuant to its health benefit plans with plaintiffs' employers. In particular, plaintiffs assert that New York General Obligations Law § 5-335 (" NY GOL § 5-335" ) trumps any reimbursement rights that defendants might have under the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001, et seq., and/or the terms of their health benefit plans, and furthermore, that defendants are in violation of NY GOL § 5-335 by virtue of their assertion of such rights. Plaintiffs accordingly argue that (1) declaratory judgment is warranted because NY GOL § 5-335 bars reimbursement or subrogation under defendants' health benefit plans; (2) defendants' actions constitute deceptive acts and practices pursuant to Section 349 of New York's General Business Law (" NY GBL § 349" ); and (3) defendants wrongfully benefited from their unlawful acts, misrepresentations, and omissions, and accordingly, have been unjustly enriched at plaintiffs' expense.

Defendants move to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on the following grounds: (1) plaintiffs' claims are completely preempted pursuant to Section 502 of ERISA, as they directly concern rights under their ERISA-governed benefit plans and do not implicate a legal duty independent of the plans; (2) plaintiffs' claims are expressly preempted pursuant to Section 514 of ERISA; (3) even if plaintiffs were to try and bring their claims under ERISA § 502(a)(1)(B), their claims would be deficient, thereby requiring dismissal; and (4) plaintiffs' state law claims fail on their own terms.

After careful consideration of the parties' arguments, and for the reasons set forth herein, the Court grants defendants' motion to dismiss.

I. Facts

The following facts are taken from the complaint and are not findings of fact by the Court. The Court assumes these facts to be true for purposes of deciding the pending motion to dismiss. The Court construes the facts in the light most favorable to plaintiffs, the non-moving party.

A. Accidents, Legal Actions, Liens, and State Laws

Both Wurtz and Burnovski are participants in health benefit plans (" Plans" or " Oxford Health Plans" ) that are provided by their employers and insured by Oxford Health. Pursuant to the express terms of these Plans, Oxford Health is entitled to be reimbursed for health benefits provided to a member if he or she recovers the cost of those benefits from a third party. (Pls.' Opp'n to Defs.' Mot. to Dismiss (" Pls.' Opp'n" ) at 2.) As discussed in greater detail supra, Wurtz and Burnovski suffered injuries arising from separate accidents; each then received medical benefits from Oxford Health and brought suit against those parties allegedly responsible for their injuries. (Compl. ¶ ¶ 6-7.) Because of this, Rawlings, acting as Oxford Health's subrogation claims recovery vendor, corresponded with plaintiffs and/or their counsel, asserting " claims/liens" for reimbursement of Oxford Health's coverage of such expenses, and requesting notification prior to any settlement of their claims. ( Id. ¶ ¶ 18-19, 21.)

1. Background on the Health Care Entities

UnitedHealth is a self-described " leader in the health benefits and services industry," offering various services in the health care field. ( Id. ¶ 10.) Oxford Health is a health insurance company that provides health insurance benefit plans. ( Id.¶ 11.)

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In 2004, Oxford Health and UnitedHealthcare (an operating division of defendant UnitedHealth) joined forces and merged. ( Id.)[2]

Rawlings is a self-described " recognized leader in the healthcare subrogation services field." ( Id. ¶ 8.) The company acts as a collection agent, or subrogation claims recovery vendor, on behalf of Oxford Health,[3] helping it to process claims and recover money for debts owed for prior healthcare services. ( Id.) For purposes of the underlying dispute, these companies' respective roles in the healthcare industry all became intertwined following events involving Wurtz, Burnovski, and incidents leading to their individual personal injuries and damages. Before addressing the events leading to the underlying dispute, the Court addresses NY GOL § 5-335.

2. New York Statutory Law

On November 10, 2009, Senate Bill S66002 was passed by both the New York State Senate and Assembly; it became effective on November 12, 2009. ( Id. ¶ 13.) Senate Bill S66002, in effect, amended New York's General Obligations Law by adding a new section, Section 5-335, around which this dispute centers. The relevant portions of Section 5-335, at least for purposes of this dispute, are as follows:

§ 5-335. Limitation of Non-Statutory Reimbursement and Subrogation Claims in Personal Injury and Wrongful Death Actions.
(a) When a plaintiff settles with one or more defendants in an action for personal injuries . .., it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by a benefit provider, except for those payments as to which there is a statutory right of reimbursement . By entering into any such settlement, a plaintiff shall not be deemed to have taken an action in derogation of any nonstatutory right of any benefit provider that paid or is obligated to pay those losses or expenses; nor shall a plaintiff's entry into such settlement constitute a violation of any contract between the plaintiff and such benefit provider.
Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider.

( Id. ¶ 14 (emphasis added).)

3. Wurtz and Burnovski

Wurtz is a resident of Little Rock, Arkansas who, on April 4, 2008, sustained personal injuries and damages in an accident. (Compl. ¶ 6.)[4] Due to her injuries, Wurtz received medical benefits from her Oxford Health Plan, entitled " Freedom

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Plan Metro Access." ( Id.) Similarly, Burnovski is a resident of Long Beach, New York who was in a motor vehicle accident on July 5, 2008. ( Id. ¶ 7). Burnovski sustained both personal injuries and damages from the accident, for which she received medical benefits from her fully insured Oxford Health Plan, entitled the " Oxford Exclusive Plan Metro," or the " Oxford Freedom EPO Plan." ( Id.)

On December 9, 2008, Wurtz filed a lawsuit in the Supreme Court of the State of New York, seeking to recover for the injuries and damages she suffered from the April 2008 accident. ( Id. ¶ 6.) She later settled this action on October 28, 2011. ( Id.)

Although the chronological nature of events is unclear from the pleadings, it appears that sometime between the enactment of NY GOL § 5-335 and Wurtz's settlement, Rawlings, pursuant to its subrogation responsibilities with Oxford Health, contacted both Wurtz and Burnovski (via mail or fax) asserting a claim/lien that sought reimbursement for Oxford Health's coverage of Wurtz and Burnovski's respective medical expenses, the former of which totaled $1,316.87 ( id. ¶ ¶ 6, 18-19), and the latter of which totaled $78,991.48 ( id. ¶ 7).[5]

On receiving notice from Wurtz that her personal injury action settled on October 28, 2011, Rawlings again sent Wurtz a letter informing her that its lien on behalf of Oxford Health remained in effect. ( Id. ¶ 19.) Rawlings included with this letter the Company's November 2009 position statement. ( Id.) In addition, Rawlings also stated:

This letter shall serve as notice that our client has a claim/lien for medical benefits paid on behalf of the patient for the above-referenced loss. These medical expenses were paid pursuant to an ERISA plan governed by federal law. There are differing legal viewpoints regarding the application of New York law CPLR § 4545 and General Obligations Law 5-335 as amended by Governor's Program Bill 95/S66002 effective November 12, 2009. This claim/lien applies to any amount now due or which may hereafter become payable out of a recovery collected or to be collected, whether by judgment, settlement, or compromise, from any party hereby notified. No settlement of any claim should be made prior to notifying our office of the potential settlement and reaching an agreement for satisfaction of our client's interest.

( Id.) Rawlings sent Burnovski a letter containing this same language on November 30, 2011. ( Id. ¶ 21.)

On January 10, 2012, Wurtz paid Rawlings $1,316.87 to release its lien under the Oxford Health Plan. ( Id. ¶ ¶ 6, 20.) Burnovski does not allege that she has settled her personal injury lawsuit or satisfied the reimbursement claim.

II. Procedural History

On February 2, 2012, plaintiffs filed the instant action against defendants in the Supreme Court of the State of New York for the County of Nassau. Defendants removed the action to this Court on March 9, 2012. On May 30, 2012, defendants submitted a motion to dismiss. On June 29, 2012, plaintiffs filed their opposition to defendants' motion to dismiss. Defendants submitted their reply on July 16, 2012. On December 26, 2012, the case was

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reassigned to the undersigned, and oral argument was subsequently held on January 22, 2013. On January 29, 2013 and February 6, 2013, the parties submitted letters addressing issues raised during oral argument. This matter is fully submitted and the Court has considered all of the party's submissions.

III. Standard of Review

A. Motion to Dismiss

Motions to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure probe the legal, not the factual, sufficiency of a complaint. See, e.g., Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000). Stated differently, when assessing the viability of a complaint's pleadings at the Rule 12(b)(6) stage, " the issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims." Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998) (internal alternation omitted). Thus, when reviewing a motion to dismiss, " the [c]ourt must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the plaintiff." Volpe v. Nassau Cnty., 12-CV-2416 (JFB)(AKT), 915 F.Supp.2d 284, 2013 WL 28561, at *5 (E.D.N.Y. Jan. 3, 2013); see also Erickson v. Pardus, 551 U.S. 89, 93-94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). However, " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

To survive a motion to dismiss, a complaint must set forth " a plausible set of facts sufficient 'to raise a right to relief above the speculative level.'" Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595 F.3d 86, 91 (2d Cir. 2010) (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Generally, this standard for survival does not require " heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570.

Where a motion to dismiss presents itself before the court, a court may examine the following: " (1) facts alleged in the complaint and documents attached to it or incorporated in it by reference, (2) documents 'integral' to the complaint and relied upon in it, even if not attached or incorporated by reference, (3) documents or information contained in defendant's motion papers if plaintiff has knowledge or possession of the material and relied on it in framing the complaint, (4) public disclosure documents required by law to be, and that have been, filed with the Securities and Exchange Commission, and (5) facts of which judicial notice may properly be taken under Rule 201 of the Federal Rules of Evidence." Nasso v. Bio Reference Labs., Inc., No. 11-cv-3480(JFB)(ETB), 892 F.Supp.2d 439, 2012 WL 4336429, at *3 (quoting In re Merrill Lynch & Co., 273 F.Supp.2d 351, 356-57 (S.D.N.Y. 2003)) (internal citations omitted).

IV. Discussion

Defendants contend that plaintiffs are attempting to use state law to negate their obligations to reimburse their respective employers' benefit Plans from proceeds recovered from third party tortfeasors. Defendants argue that plaintiffs' claims, grounded in NY GOL § 5-335, are superseded under two parallel and independent principles of preemption: (1) complete preemption under ERISA § 502(a), and (2) express preemption under ERISA § 514.[6] For this reason, defendants

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assert that this Court should dismiss plaintiffs' claims, even if NY GOL § 5-335 may be deemed applicable to the governing ERISA-regulated plans (which defendants claim it cannot). As set forth below, the Court agrees with defendants.

A. Complete Preemption

1. Legal Standard

ERISA was enacted to " 'protect . . . the interests of participants in employee benefit plans and their beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and to 'provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts.'" Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (quoting 29 U.S.C. § 1001(b)) (alteration in original). Its main objective " is to provide a uniform regulatory regime over employee benefit plans." Id.; see also also N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656-57, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) (" Congress intended 'to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government . .., [and to prevent] the potential for conflict in substantive law . . . ...

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