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Burnovski v. Rawlings Company, LLC

United States District Court, E.D. New York

October 3, 2014

MEGHAN WURTZ AND MINDY BURNOVSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiffs,
v.
THE RAWLINGS COMPANY, LLC, OXFORD HEALTH PLANS (NY), INC., AND UNITEDHEALTH GROUP, INC., Defendants.

Plaintiffs are represented by Frank R. Schirripa of Hach Rose Schirripa & Cheverie LLP, New York, NY, and by Neil S. Torczyner and Steven J. Harfenist of Harfenist Kraut & Perlstein, LLP, Lake Success, NY.

Defendant Rawlings is represented by Gerald Lawrence, Richard Wolfe Cohen, and Uriel Rabinovitz of Lowey Dannenberg Cohen & Hart, P.C., White Plains, NY.

Defendants Oxford Health and United Health are represented by Brian D. Boyle and Theresa S. Gee of O'Melveny & Myers LLP, NW, Washington, DC, and by Charles E. Bachman of O'Melveny & Myers LLP, New York, NY.

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge.

Plaintiffs Meghan Wurtz ("Wurtz") and Mindy Burnovski ("Burnovski") bring this putative clans action on behalf of themselves and all others similarly situated (collectively, "plaintiffs") against The Rawlings Company, LLC ("Rawlings"), Oxford Health Plans (NY), Inc. ("Oxford Health"), and UnitedHealth Group, Inc. ("UnitedHealth") (collectively, "defendants"). In the main, plaintiffs claim that New York General Obligations Law § 5-335 ("NY GOL § 5-335") vitiates defendants' right of subrogation or reimbursement against individuals who, like plaintiffs, have settled claims for personal injuries, medical, dental, or podiatric malpractice, or wrongful death. Plaintiffs seek the following relief: (1) a declaratory judgment that defendants "do not have a right to assert and/or collect on any lien and/or right of subrogation and/or right of reimbursement under fully insured health insurance plans against other plaintiffs and/or claimants that have settled personal injury, medical, dental, podiatric malpractice, or wrongful death cases or claims arising and/or pending in New York" (Compl. ¶ 41); (2) damages based upon defendants' alleged violations of New York General Business Law § 349 ("NY GBL § 349"); and (3) restitution based upon defendants' allegedly unjust enrichment.

By Memorandum and Order dated March 28, 2013, the Court granted defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), on the grounds that plaintiffs' claims were completely and expressly preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. ("ERISA"). Because the Court determined that plaintiffs' claims were completely and expressly preempted by ERISA, the Court did not address whether, if plaintiffs' claims were not preempted, they "would prevail on their own terms" Wurtz v. Rawlings Co., LLC, 933 F.Supp.2d 480, 509 (E.D.N.Y. 2013). On July 31, 2014, the Second Circuit vacated the judgment of this Court and remanded the case to this Court, holding that plaintiffs' claims are neither expressly nor completely preempted by ERISA. See generally Wurtz v. Rawlings Co., LLC, 761 F.3d 232 (2d Cir. 2014).

Presently before the Court on remand from the Second Circuit is the portion of defendants' motion to dismiss contending that plaintiffs' claims should be dismissed even though they are not preempted by ERISA. For the reasons that follow, the Court grants the motion to dismiss Burnovski's NY GBL § 349 and unjust enrichment claims, and denies the motion in all other respects. First, the Court rejects defendants' argument that NY GOL § 5-335 violates the Contracts Clause of the United States Constitution. Assuming arguendo that NY GOL § 5-335 substantially impairs the contracts between the parties, the Court concludes that the statute serves a legitimate public purpose, and that the means chosen to accomplish this purpose were reasonable and necessary. Second, the Court cannot conclude at this juncture that the voluntary payment doctrine bars Wurtz's claims. Third, the Court determines that Wurtz has alleged a viable NY GBL § 349 claim, but that Burnovski's claim must be dismissed for failure to allege actual injury. However, because better pleading may cure this defect, the Court grants Burnovski leave to re-plead this claim. Fourth, the Court holds that Burnovski's unjust enrichment claim must be dismissed because Burnovski concedes that she never paid defendants anything. However, Wurtz's unjust enrichment claim may proceed because, if the voluntary payment doctrine does not bar Wurtz's claim, then equity and good conscience would require restitution to Wurtz in the amount that she has already paid to defendants.

I. BACKGROUND

A. Facts

1. Allegations of the Complaint

The Court has set forth the allegations of the complaint in its March 28, 2013 Memorandum and Order, see Wurtz, 933 F.Supp.2d at 486-88, and does not repeat those facts here. The Court reserves recitation of certain facts for its analysis of the specific issues raised by the present motion. The Court assumes these facts to be true for purposes of deciding the pending motion, and construes those facts in the light most favorable to plaintiffs.

2. New York Statutory Law

At the time defendants filed their motion to dismiss, NY GOL § 5-335(a) read as follows:

When a plaintiff settles with one or more defendants in an action for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, 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.

N.Y. Gen. Oblig. Law § 5-335(a) (2009) (emphasis added).

The New York Legislature amended NY GOL § 5-335 on November 13, 2013. See 2013 N.Y. Sess. Laws Ch. 516 (McKinney). The 2013 act removed the language emphasized supra and added a new subsection (c) to the statute, which provides that NY GOL § 5-335 "shall not apply to a subrogation or reimbursement claim for recovery of benefits provided by Medicare or Medicaid, specifically authorized pursuant to article fifty-one of the insurance law, or pursuant to a policy of insurance or an insurance contract providing workers' compensation benefits." As amended, NY GOL § 5-335(a) states:

When a person settles a claim, whether in litigation or otherwise, against one or more other persons for personal injuries, medical, dental, or podiatric malpractice, or wrongful death, 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 an insurer. By entering into any such settlement, a person shall not be deemed to have taken an action in derogation of any right of any insurer that paid or is obligated to pay those losses or expenses; nor shall a person's entry into such settlement constitute a violation of any contract between the person and such insurer.
No person entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by an insurer and an insurer shall have no lien or right of subrogation or reimbursement against any such settling person or any other party to such a settlement, with respect to those losses or ...

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