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North Shore-Long Island Jewish Health Sys., Inc. v. Multiplan, Inc.

United States District Court, E.D. New York

February 13, 2015

NORTH SHORE-LONG ISLAND JEWISH HEALTH SYSTEMS, INC., Plaintiff,
v.
MULTIPLAN, INC., TEAMSTERS LOCAL 210 AFFILIATED HEALTH & INSURANCE FUND and LOCAL 812 HEALTH FUND, Defendants. MULTIPLAN, INC., Third-Party Plaintiff, TEAMSTERS LOCAL 210 AFFILIATED HEALTH & INSURANCE FUND and LOCAL 812 HEALTH FUND, Third-Party Defendants

For North Shore-Long Island Jewish Health Systems, Inc., Plaintiff: Timothy F. Butler, LEAD ATTORNEY, Tibbetts Keating & Butler, New York, NY; Thomas Bigley Noonan, Tibbetts, Keating & Butler, LLC, New York, NY.

For MultiPlan, Inc., Defendant, ThirdParty Plaintiff: James Edward Gross, LEAD ATTORNEY, Law Office of James Edward Gross, Albany, NY; Errol J. King, PRO HAC VICE, Malcolm L. Leatherman, Baker Donelson Bearman Caldwell & Berkowitz, PC, Baton Rouge, LA; Layna Cook, Baker Donelson, Baton Rouge, LA.

For Teamsters Local 210 Affiliated Health & Insurance Fund, ThirdParty Defendant: Thomas Albert Thompson, LEAD ATTORNEY, Law Offices of Thomas A. Thompson, Yarmouth, ME.

For Local 812 Health Fund, ThirdParty Defendant: Barry I. Levy, LEAD ATTORNEY, Brian Laurence Bank, Michelle A. Bholan, Rivkin Radler LLP, Uniondale, NY.

REPORT AND RECOMMENDATION

A. KATHLEEN TOMLINSON, United States Magistrate Judge.

I. Preliminary Statement

Plaintiff North Shore Long Island Jewish Health Care System (" Plaintiff" or " North Shore") operates health care facilities, including twelve hospitals in the State of New York. See Second Amended Complaint (" Compl.") [DE 54] ¶ 1. Defendant MultiPlan, Inc. (" MultiPlan") is a preferred provider organization, commonly referred to as a " PPO." Id. ¶ 2. According to the Second Amended Complaint, MultiPlan entered into a contract with North Shore providing, inter alia, for MultiPlan's clients to gain access to North Shore's healthcare network at discounted reimbursement rates. Id. ¶ 5. In turn, MultiPlan made these special rates available to other health plans for their respective members. Id. The crux of North Shore's allegations is that MultiPlan withheld the fact that a non-party called Crossroads Healthcare Management, LLC (" Crossroads") was not excluded from MultiPlan's network, despite North Shore's explicit directive that it would not renew its contract with MultiPlan if Crossroads was not excluded. Id. ¶ ¶ 14-29.

MultiPlan subsequently commenced a third-party action against Teamsters Local 812 Health Fund (" Local 812") and Teamsters Local 210 Affiliated Health & Insurance Fund (" Local 210"), asserting, inter alia, that, as subscribers with access to MultiPlan's Preferred Payment Rates, the Locals breached their respective contractual obligations to pay claims for services rendered by medical providers in MultiPlan's network within thirty (30) days, in compliance with the contract rates. Third-Party Plaintiff MultiPlan thus asserts that Local 812 and Local 210 breached their contracts with MultiPlan, compelling them to indemnify MultiPlan for any liability it incurs to North Shore and, moreover, to pay MultiPlan's attorneys' fees and costs in defending against North Shore's claims.

Subsequently, on February 13, 2014, Local 812 served a Fourth-Party Complaint against Crossroads, arising out of an indemnification clause contained within a 2002 Administrative Services Agreement executed between Local 812 and Crossroads. See DE 83. That fourth-party action was later voluntarily dismissed, without prejudice, by Local 812 on May 28, 2014. See DE 116.

Third-Party Defendant Local 812 has moved to sever and to stay MultiPlan's Third-Party Complaint, pursuant to Rules 14(a)(4) and 21, pending the resolution of Plaintiff's first-party claims against MultiPlan. MultiPlan opposes the motion. Separately, Proposed Intervenor Crossroads has moved to intervene as of right, pursuant to Rule 24(a) or, alternatively, for permissive intervention, pursuant to Rule 24(b). See DE 18. Judge Bianco referred both motions to this Court for a Report and Recommendation. For the reasons set forth below, the Court respectfully recommends to Judge Azrack[1] that Local 812's motion to sever and to stay Multiplan's third-party action be DENIED and that Crossroads' motion for intervention be GRANTED, in part, and DENIED, in part.

II. Background

A. The Second Amended Complaint

Plaintiff North Shore is a not-for-profit corporation which operates health care facilities, including 12 hospitals in the State of New York. See Compl. ¶ 1. Defendant MultiPlan is a Preferred Provider Organization, or PPO. Id. ¶ 2. Defendants - - Teamsters Local 210 Affiliated Health and Insurance Fund (" Local 210") and Local 812 Health Fund (" Local 812") - - are self-funded health insurance plans which provide health care coverage to their union members. Id. ¶ ¶ 3-4. The original action here involves North Shore's " contractual relationship with MultiPlan whereby [North Shore] agreed to provide health services to MultiPlan members at special rates." Id. ¶ 5. In turn, MultiPlan " made these special rates available to other health plans for their respective members." Id. North Shore alleges, upon information and belief, that MultiPlan charged a fee to the other health plans (hereafter, " MultiPlan's Clients") for access to North Shore's facilities at the special rates provided by North Shore to MultiPlan and for the use of MultiPlan's network. Id.

On or about June 1, 2007, North Shore entered into a contract with MultiPlan (" 2007 Participation Provider Agreement") which provided, inter alia, for MultiPlan's members and clients to access North Shore's health care network at agreed upon special rates (hereafter, " Preferred Payment Rates"). Id. ¶ 7. According to the 2007 Participation Provider Agreement, the Preferred Payment Rates were only available to MultiPlan's Clients if they paid North Shore within thirty days from the receipt of claims. Id. ¶ 8. Between May 8, 2008 and June 30, 2010, North Shore executed multiple amendments to the 2007 Participation Provider Agreement that were acknowledged by MultiPlan. Id. ¶ ¶ 9-13.

During the relevant period covered by this action, MultiPlan, upon information and belief, entered into an agreement with Crossroads. Id. ¶ 14. That agreement (hereafter, the " MultiPlan Network Agreement") permitted Crossroads to be eligible to access Preferred Payment Rates for its members. Id. Both Local 210 and Local 812 were, upon information and belief, members of Crossroads. Id. ¶ 15. Between 2007 and the present, Crossroads' members received health care services at North Shore hospitals, generating fees and charges. Id. ¶ 16.

However, North Shore alleges that during the period at issue, MultiPlan had " actual and constructive notice that Crossroads was in breach of the terms and conditions of the MultiPlan Network Agreement in that Crossroads failed to comply with the terms and conditions in the 2007 Participation Provider Agreement, which allowed Crossroads and its members, such as Local 210 and Local 812, to be eligible for Preferred Payment Rates." Id. ¶ 17. During this same period, North Shore's representatives had advised MultiPlan that Crossroads was " repeatedly underpaying claims for health care services rendered by [North Shore] and was failing to pay claims in a timely fashion and not within 30 days as required by the 2007 Participation Agreement as amended." Id. ¶ 18. Further, North Shore informed MultiPlan that if Crossroads and its members remained non-compliant by failing to pay claims, North Shore would then exercise its rights to exclude Crossroads from eligibility for Preferred Payments Rates, pursuant to the 2007 Participation Agreement. Id. ¶ 19.

On September 10, 2007, MultiPlan received written notification from North Shore (the " 9/10/07 Crossroads Exclusion Notification") that North Shore was henceforth excluding Crossroads and its members from eligibility for Preferred Payment Rates with North Shore, in compliance with the 2007 Participation Provider Agreement. Id. ¶ 20. Having received the 9/10/07 Crossroads Exclusion Notification, MultiPlan did not advise North Shore that " any further action or process was required of it in order for the exclusion of Crossroads and its members to become effective." Id. ¶ 22. In fact, MultiPlan's agent acknowledged that the 9/10/07 Crossroads Exclusion Notification was accepted and deemed effective as of September 10, 2007 and excluded Crossroads and its members from coverage. Id. ¶ 23. Thus, as of September 10, 2007, MultiPlan had " actual and constructive knowledge that Crossroads and its members would henceforth be considered by [North Shore] as out-of-network and thus would be charged North Shore's usual non-discounted rates." Id. ¶ 25.

Notwithstanding the foregoing factual allegations, " MultiPlan deliberately failed to advise Crossroads of the 9/10/07 Crossroads Exclusion Notification." Id. ¶ 27. As of the date of the Complaint, North Shore alleges that MultiPlan had failed to advise Crossroads or its members that it had accepted and deemed effective North Shore's request to exclude Crossroads and its members from eligibility for Preferred Payment Rates." Id. ¶ 28. Further, upon information and belief, North Shore claims that " MultiPlan failed to advise Crossroads or its members of their out-of-network status subject to North Shore's usual non-discounted rates." Id. ¶ 29.

Based on the actions stated above, North Shore asserts the following claims against Defendants: (1) breach of contract against MultiPlan, id. ¶ ¶ 30-37; (2) breach of the covenant of good faith and fair dealing against MultiPlan, id. ¶ ¶ 38-43; (3) fraud against MultiPlan, id. ¶ ¶ 44-75; (5) breach of contract against Local 210 and Local 812, id. ¶ ¶ 76-82; [2] (6) unjust enrichment against Local 210 and Local 812, id. ¶ ¶ 83-90; (7) quantum meruit against Local 210 and Local 812, id. ¶ ¶ 91-99; (8) third-party beneficiary claim against Local 210 and Local 812, id. ¶ ¶ 100-108; (9) failure to abide by the terms of a plan in violation of the Employee Retirement Insurance Security Act (" ERISA") against Local 210 and Local 812, id. ¶ ¶ 109-116.

B. MultiPlan's Third-Party Complaint

In 1997, MultiPlan and Local 812 entered into an " Agreement for Client Access to Facility and Practitioner Networks, " (the " Local 812 Agreement"), effective November 1, 1997. See Third-Party Complaint annexed to the Notice of Removal as Ex. " E" (" Third-Party Compl.") ¶ 3 [DE 1]. According to the Local 812 Agreement, MultiPlan agreed to provide Local 812 access to MultiPlan's network of health care providers, including MultiPlan facilities and practitioners, and for those providers to provide health care services to individuals covered by the self-funded health plan sponsored by Local 812. Id. ¶ 4. Further, Local 812 " expressly agreed to certain obligations in the Local 812 Agreement, including but not limited to, paying MultiPlan providers for covered services rendered to participants within thirty (30) business days from receipt of a clean claim." Id. ¶ 5. Local 812 was also contractually obligated to pay MultiPlan providers in compliance with contract rates, as defined in the Local 812 Agreement. Id. ¶ 6.

In 1999, MultiPlan and Local 210 entered into an " Agreement for Client Access to Facility and Practitioner Networks" (the " Local 210 Agreement"), effective October 1, 1999. Id. ¶ 7. The terms of the Local 210 Agreement were similar to those contained in the Local 812 Agreement, providing Local 210 access to MultiPlan's network of health care providers and requiring Local 210 to pay those providers within thirty (30) business days from receipt of a clean claim. Id. ¶ ¶ 8-9. Local 210 was also required to pay MultiPlan providers in accordance with contract rates as defined in the Local 210 Agreement. Id. ¶ 10.

On or about June 1, 2007, MultiPlan entered into the 2007 Participation Provider Agreement with North Shore. Id. ¶ 11. Between 2007 and the present, members of both Local 210 and Local 812 have received health care services at North Shore hospitals, resulting in fees and charges being submitted for payment by North Shore to Local 210 and Local 812. Id. ¶ 12. Third-Party Plaintiff MultiPlan asserts, upon information and belief, that beginning in 2007, North Shore notified MultiPlan that medical claims which North Shore believed were subject to payment by Local 210 and Local 812 were either " not being paid timely, correctly or not being paid at all." Id. ¶ 13.

MultiPlan, upon information and belief, alleges that it " used its best efforts to work with Local 812 and Local 210 and its third party administrator company [Crossroads] to resolve the claims being put forth by North Shore." Id. ¶ 14. Some of these claims were resolved to North Shore's satisfaction. Id. ¶ 15. However, other claims have remained unsatisfied according to North Shore. Id. In the first-party action, North Shore alleges that " MultiPlan owes North Shore for the claims which were either not correctly paid or not paid at all by Local 812 and Local 210." Id. ¶ 16. MultiPlan has previously demanded that Local 210 and Local 812, through their third party administrator Crossroads, resolve the claims of North Shore. Id. ¶ 17. These efforts have not been successful. Id. North Shore has initiated a separate lawsuit against Crossroads to recover the " medical claims of North Shore that it contends have not been properly paid or not paid at all by Local 210 and Local 812." Id. ¶ 18. MultiPlan claims that the 2007 Participation Provider Agreement does not hold MultiPlan financially responsible for the payment of North Shore's claims. Id. ¶ 19.

As a consequence of the foregoing allegations, MultiPlan asserts that Third-Party Defendants Local 210 and Local 812 are in breach of their contract and in breach of the covenant of good faith and fair dealing. Id. ¶ ¶ 20-31. Under the first cause of action in the Third-Party Complaint, MultiPlan alleges that both Third-Party Defendants violated their respective agreements with MultiPlan in failing to resolve claims within 30 business days as required. Id. ¶ ¶ 20-22. The first-party action claims that MultiPlan is liable to North Shore for Local 210 and Local 812's unpaid, mispaid, or untimely paid claims. Id. ¶ 23. However, in light of the Local 812 Agreement and the Local 210 Agreement with MultiPlan, MultiPlan alleges that " any amounts allegedly owed to North Shore on the claims of North Shore for medical services rendered to the participants of the Local 812 and Local 210 self-funded insurance plans are amounts owed not by MultiPlan, but by Local 812 and Local 210 as plan sponsors." Id. ¶ 24. In particular, MultiPlan points out, the Local Agreements entered into by Local 210 and Local 812 " contain an indemnification provision at § C.3 that obligates Local 812 and Local 210 to indemnify and hold MultiPlan harmless for any claims, liabilities, losses, damages and/or expenses as a result of the other party's breach of the Agreements, or proximately caused by the negligent omission or commission of the indemnifying party in connection with any obligation set forth in the Local Agreements." Id. ¶ 25. In accordance with this indemnification provision, MultiPlan argues that Third-Party Defendants Local 210 and Local 812 owe MultiPlan for the claims of North Shore in this litigation as well as for costs and attorneys' fees incurred by counsel for MultiPlan in defending the first-party action and prosecuting the third-party action. Id. ¶ ¶ 26-27.

Under the second cause of action in the Third-Party Complaint, MultiPlan alleges that Third-Party Defendants Local 210 and Local 812 violated the covenant of good faith and fair dealing which is implied in all contracts between parties entered into in the State of New York. Id. ¶ ¶ 28-29.[3] The Third-Party Defendants' failure to timely pay or fully pay the claims of North Shore, MultiPlan asserts, was the direct cause of the breach of this covenant. Id. ¶ ¶ 30-31.

C. Local 812's Fourth-Party Complaint

On or about November 1, 2002, Local 812 and Crossroads entered into an Administrative Services Agreement. See Fourth-Party Complaint (" Fourth-Party Compl.") ¶ 5 [DE 83]. In the Administrative Services Agreement, Crossroads " represented 'itself as an expert in the health care industry providing to its clients, among other things, services related to providing or arranging administrative, claim payment, managed care, utilization review, and other services, and under which payment for medical care and treatment is provided to an employee or member, in whole or in part by an employer, labor union, association, or trust.'" Id. ¶ 6. Under the Administrative Services Agreement, Crossroads was required to manage and provide third-party administrative services in managing and remitting payments for healthcare claims for persons covered by Local 812's plan. Id. ¶ 7. More specifically, the Administrative Services Agreement obligated Crossroads to provide a variety of duties and services. Id. ¶ 8. These included, but are not limited to, " the timely processing on behalf of Local 812 of all claims for medical and/or hospital benefits and the issuance of checks on behalf of Local 812 in a timely manner to entitled provider payees of that portion of amounts due under Local 812's plan for each claim of a covered person that qualifies for payment under the terms of Local 812's plan." Id. ¶ 8.

There is also an indemnification provision in the Administrative Services Agreement between Local 812 and Crossroads. Id. ¶ 9. That provision reads, in relevant part, as follows:

Crossroads shall indemnify, defend, and hold harmless [Local 812] and its Trustees, employees, agents, successors, and assigns from and against any and all claims, actions, demands, costs, and expenses, including reasonable attorney fees and disbursements, as a result of a breach by Crossroads of any of its obligations under this Agreement or arising out of the negligent act or omission or willful misconduct of Crossroads.

Id. The indemnification provision further requires the parties to " provide prompt notice in the event of a notices [sic] of claim that could give rise to a claim for indemnification under this Agreement." Id. ¶ 10.

As against Crossroads, Fourth-Party Plaintiff Local 812 asserted a single cause of action for breach of contract. Id. ¶ ¶ 29-37. Specifically, Local 812 contends that the Administrative Services Agreement was in effect during the relevant time period. Id. ¶ 30. Pursuant to its terms, " Crossroads, as Local 812's third-party administrator, was required to timely process all claims for medical, hospital, laboratory tests, diagnostic and drug benefits." Id. ¶ 31. Further, Local 812 claims that Crossroads was " further bound by the Administrative Services Agreement to issue checks on behalf of Local 812 in a timely manner to entitled provider payees of that portion of amounts due under Local 812's plan for each claim of a covered person that qualifies for payment under the terms of Local 812's plan." Id. ¶ 32. In MultiPlan's third-party action, Local 812 is alleged to be liable for " untimely paid, mispaid, underpaid, or fail[ure] to pay certain claims submitted to it by [North Shore]." Id. ¶ 33.

Local 812 asserts that " [t]o the extent that MultiPlan's third-party claims against Local 812 are sustained, Local 812's liability to MultiPlan will be premised on Crossroads' breach of its contractual obligations to Local 812 regarding the processing and payment of claims, and/or Crossroads' negligent acts and/or omissions, and/or willful misconduct." Id. ¶ 34. Local 812 has provided Crossroads with " prompt notice" of the third-party claims asserted by MultiPlan. Id. ¶ 35. Consequently, Local 812 submits that, in compliance with the indemnification provision, " Crossroads is thus obligated to indemnify, defend, and hold harmless Local 812 against MultiPlan's third-party claims, including any reasonable attorney's fees and disbursements incurred by Local 812 in defending against those claims." Id. ¶ 36. Due to Crossroads' breach of the Administrative Services Agreement and/or negligent acts, omissions, or willful conduct, " Local 812 has been damaged in the amount of any judgment(s) entered in MultiPlan's favor against Local 812, as well as in the amount of the attorney's fees and disbursements incurred by Local 812 in defending against MultiPlan's claims, which is to be determined at trial." Id. ¶ 37.

D. Local 812's Motion to Sever and to Stay the Third-Party Complaint

Third-Party Defendant Local 812, for the following reasons, argues that the Court should sever MultiPlan's third-party action: (1) " MultiPlan's third-party claim against Local 812 does not arise out of the same transaction or occurrence and/or present common questions of law and fact as North Shore's claims against MultiPlan; " (2) " severance of MultiPlan's third-party claim would serve the interests of judicial economy; " (3) " severance of MultiPlan's third-party claim would prevent prejudice to Local 812; " (4) " MultiPlan's third-party claim against Local 812 requires witnesses and proof that are separate and distinct from those relevant to North Shore's claim against MultiPlan." See Def. Local 812 Health Fund's Mem. of Law in Supp. of Mot. to Sever (" Local 812's Mot. to Sever") at 1 [DE 98]. Local 812 claims that " [c]onsidering that any one of these factors alone can justify severance, these factors collectively militate in favor of granting Local 812's motion in its entirety." Id.

MultiPlan opposes the motion, contending that " Local 812's actions or inactions form the basis of this entire lawsuit." See MultiPlan, Inc.'s Mem. of Law in Opp'n to Local 812 Health Fund's Mot. to Sever (" MultiPlan's Opp'n") at 8 [DE 106]. MultiPlan claims that there are " common eviden[tiary] and legal issues between the primary claims by North Shore against MultiPlan and MultiPlan's claims against Local 812." Id. at 8-9. Local 812 will suffer no prejudice if the request to sever is denied, according to MultiPlan, whereas MultiPlan " stands to suffer substantial prejudice in the form of multiple trials and significantly increased litigation costs if its claims against Local 812 are severed." Id. at 9.

E. Crossroads' Motion for Intervention

Proposed Intervenor Crossroads maintains that it satisfies the requirements for intervention as of right, pursuant to Rule 24(a), as well as permissive intervention, pursuant to Rule 24(b). See Crossroads Healthcare Mgmt. LLC's Mem. of Law in Supp. of Mot. to Intervene (" Crossroads' Mot. to Intervene") [DE 119]. In asserting intervention as of right, Crossroads claims that it has a direct, substantial, and legally protectable interest in the subject matter of this action insofar as Local 812's " potential liability to MultiPlan will be premised upon Crossroads' alleged breach of its contract with Local 812 regarding the processing and payment of claims, and/or Crossroads' negligent acts, admissions or willful conduct." Id. at 9. Further, Crossroads argues that " [i]t cannot be disputed that this Court's adjudication of the merits of this action will serve as precedent in any other action that may be brought against Crossroads." Id. Neither, Crossroads maintains, do the remaining parties adequately protect its interests. Id. at 10-11. Finally, Crossroads submits that its request is timely, having filed the motion for intervention only a few weeks after being put on notice that its interests in this action are unrepresented. Id. at 11-12.

Alternatively, Crossroads argues the Court should grant its motion under Rule 24(b) for permissive intervention, which is a more flexible standard and only requires that potential intervenors show a question of law or fact in common with the primary action. Id. at 12-13. Here, Crossroads argues that " the questions of fact and law in the first-party and the third-party actions are similar to the fourth-party claims previously filed against Crossroads." Id. at 13.

Local 812 opposes Crossroads' motion. See Def. Local 812 Health Fund's Mem. of Law in Opp'n to Crossroads Healthcare Mgmt. LLC's Mot. to Intervene (" Local 812's Opp'n") [DE 136]. The health fund argues that Crossroads' motion is defective in light of its failure to include a proposed pleading, as required under Rule 24(c), making it " impossible to actually determine the purpose for which it seeks to intervene in this action." Id. at 5. More substantively, Local 812 maintains that the " interest Crossroads purports to protect -- avoiding future litigation by preventing an adverse determination against Local 812 -- is too remote to constitute a basis for intervention as a matter of law." Id. Moreover, Local 812, itself, has an incentive to adequately prevent the very determination that Crossroads seeks to prevent. Id.

Permissive intervention, Local 812 points out, is also unwarranted because, contrary to Crossroads' contentions, Local 812 is not legally obligated to raise its third-party indemnification claims against Crossroads since third-party practice under Rule 14(a) is permissive - - not compulsory. Id. at 6. Neither would intervention conserve any judicial resources but, rather, would further complicate and delay the resolution of this matter. Id. In any event, Local 812 believes that any disputes with Crossroads are subject to arbitration in compliance with the parties' Administrative Services Agreement. Id.

F. Relevant Procedural History

The original complaint in this action was filed against MultiPlan in the Supreme Court of the State of New York, County of Nassau, on May 12, 2011. See DE 1. On November 20, 2011, MultiPlan filed its Third-Party Complaint against Local 210 and Local 812 in that same forum. Id. On April 3, 2012, Local 812 removed this action to the Eastern District of New York. Id. Plaintiff then moved to remand the action to Nassau County Supreme Court by Notice of Motion dated April 9, 2012. See DE 5. This Court issued a Report and Recommendation on November 8, 2012, recommending that Plaintiff's motion to remand be granted. See DE 14. Having completed a de novo review of this Court's Report and Recommendation on the motion to remand and having considered the parties' additional submissions, made after the issuance of the Report and Recommendation, Judge Bianco denied Plaintiff's motion to remand on July 12, 2013. See DE 37.

On August 15, 2013, the parties appeared for a Rule 16 Initial Conference and this Court implemented an Initial Case Management and Scheduling Order (" CMSO"). See DE 46, 47. On October 18, 2013, Plaintiff filed a Second Amended Complaint, adding Local 812 and Local 210 as defendants in this action. See DE 54. Three days later, on October 21, 2013, Plaintiff filed a voluntary dismissal of all claims asserted against Local 812 in the Second Amended Complaint, pursuant to Rule 41(a)(1)(i). See DE 59.[4]

By Notice of Motion dated October 21, 2013, Local 812 moved to dismiss MultiPlan's Third-Party Complaint. See DE 56. On that same date, Local 210 also moved to dismiss the Third-Party Complaint as well as North Shore's Second Amendment Complaint. See DE 58. Judge Bianco heard oral argument on the motions on December 12, 2013 and reserved decision. See DE 66. On January 15, 2014, Judge Bianco issued an Order denying Local 210's motion to dismiss the Second Amended Complaint. See DE 70. Further, Judge Bianco denied Local 210 and Local 812's motions to dismiss MultiPlan's Third-Party Complaint as to the first cause of action but granted the motions as to the second cause of action for breach of the covenant of good faith and fair dealing. Id.

After the parties appeared for a Discovery Status Conference on January 29, 2014 and the Court implemented a Final Scheduling Order, see DE 78, Local 812 filed a Fourth-Party Complaint against Crossroads on February 13, 2014, see DE 83. On April 21, 2014, Local 812 filed its motion to sever and to stay MultiPlan's third-party action pending the resolution of North Shore's Second Amended Complaint. See DE 97. Judge Bianco referred the motion to this Court on May 1, 2014 for a Report and Recommendation. See May 1, 2014 Electronic Order.

On May 28, 2014, Local 812 filed a voluntary dismissal, without prejudice, of the Fourth-Party Complaint previously filed against Crossroads, pursuant to Rule 41(a)(1)(A)(i). See DE 116. Crossroads filed a motion for intervention as of right as a Fourth-Party Defendant on June 24, 2014, pursuant to Rule 24(a), or, alternatively, for permissive intervention, pursuant to Rule 24(b). See DE 118. On September 12, 2014, Judge Bianco referred that motion to this Court for a Report and Recommendation. See Sept. 12, 2014 Electronic Order.

On October 31, 2014, the Court, having received the parties' October 1, 2014 discovery status report, issued an Electronic Order " putting a hold on discovery until the motions to sever and to intervene are decided." See Oct. 31, 2014 Electronic Order.

III. Discussion

A. Local 812's Motion to Sever and to Stay the Third-Party Action

Rule 21 states that, " [o]n motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party." Sons of the Revolution in N.Y., Inc. v. Travelers Indemnity Co. of America et al., No. 14 Civ. 03303, 2014 WL 7004033, at *2 (S.D.N.Y. Dec. 11, 2014) (quoting Fed.R.Civ.P. 21). " Motions to sever under Rule 14 are committed to the sound discretion of the district court and are '[c]onsidered virtually unreviewable.'" United States v. Graham, 477 F.App'x 818 (2d cir. May 1, 2012) (summary order) (quoting United States v. Diaz, 176 F.3d 52, 102 (2d Cir. 1999). " Federal courts view severance as a 'procedural device to be employed only in exceptional circumstances.'" Certain Underwriters at Lloyd's London v. Art Crating, Inc., No. 12 Civ. 5078, 2014 WL 123488, at *21 (E.D.N.Y. Dec. 16, 2013), adopted by 2014 WL 123488 (E.D.N.Y. Jan. 10, 2014) (quoting William A. Gross Const. Assocs., Inc. v. Am. Manufacturers Mut. Ins. Co., No. 07 Civ. 10639, 2009 WL 427280, at *17 (S.D.N.Y. Feb. 23, 2009)). " In deciding a severance motion, the court should consider '(1) whether the claims arise out of the same transaction or occurrence; (2) whether the claims present some common questions of law or fact; (3) whether settlement of the claims or judicial economy would be facilitated; (4) whether prejudice would be avoided if severance were granted; and (5) whether different witnesses and documentary proof are required for the separate claims.'" Id. (quoting Gusinski v. Genger, No. 10 Civ. 4506, 2010 WL 4877841, at *4-5 (S.D.N.Y. Nov. 30, 2010)).

1. Whether the Claims Arise out of the Same Transaction or Occurrence

As to the first factor, Local 812 submits that " MultiPlan's third-party claims arise out of separate incidents by separate actors which are distinct from those implicated by North Shore's claims and, as such, severance of MultiPlan's third-party action is appropriate." See Local 812's Mot. to Sever at 7. The core claims in the primary action, as understood by Local 812 are: " (i) MultiPlan's failure to exclude Crossroads, upon North Shore's demand, from access to the discount arrangement that was established in the contract between North Shore and MultiPlan; and (ii) MultiPlan's alleged fraudulent conduct in concealing this failure from North Shore." Id. By contrast, the third-party action filed by MultiPlan " seeks contractual indemnification from Local 812 for any liability that it incurs to North Shore based on Local 812's purported failure to resolve claims submitted by North Shore for medical services provided to Local 812 Plan Beneficiaries pursuant to the terms of Local 812's contract with MultiPlan." Id. These represent two separate and distinct issues, according to Local 812, and arise out of separate transactions by separate actors, thus compelling severance of the third-party action. Id. at 8 (citing Cestone v. Gen. Cigar Holdings, Inc., No. 00 Civ. 3686, 2002 WL 424654, at *3 (S.D.N.Y. Mar. 18, 2002)).

In opposition, MultiPlan contends that Local 812 - - as it previously did in moving to dismiss - - is attempting to " characterize North Shore's claims against MultiPlan as arising solely out of MultiPlan's independent conduct, " which is " simply erroneous." See MultiPlan's Opp'n to Local 812's Mot. to Sever (" MultiPlan's Opp'n") at 5 [DE 106]. MultiPlan points out that, as determined by Judge Bianco in denying Plaintiff's motion to remand [DE 37] and Local 812's motion to dismiss [DE 70], at least some of the damages Plaintiff seeks to recover against MultiPlan stem from claims which were either not paid at all or not fully paid in light of Local 812's " own errors." MultiPlan's Opp'n at 6. In fact, the " very non-payment of claims by Local 812...forms the genesis of this suit, " according to MultiPlan. Id.

Crossroads also submitted opposition to Local 812's motion to sever and to stay the third-party action, prior to being voluntarily dismissed as a fourth-party defendant by Local 812. See Crossroads Healthcare Mgmt. LLC's Mem. of Law in Opp'n to Local 812 Health Fund's Mot. to Sever (" Crossroads' Opp'n") [DE 113]. Crossroads argues that the " first-party, third-party and fourth-party claims are intertwined, and involve the same parties and transactions." Id. at 5. Relying on MultiPlan's argument in opposition, Crossroads similarly asserts that Local 812's liability to MultiPlan would be triggered upon Crossroads' breach of its respective contractual obligations. Id.

Having reviewed Plaintiff's Second Amended Complaint and MultiPlan's Third-Party Complaint, the Court finds that the primary and third-party claims asserted arise out of the same transaction or occurrence. As alleged in the Second Amended Complaint, the 2007 Participation Provider Agreement executed between Plaintiff and MultiPlan provided for, inter alia, MultiPlan's members and clients to access Plaintiff's health care network at Preferred Payment Rates. See Compl. ¶ 7. This agreement provided for Preferred Payment Rates to MultiPlan's clients on the condition that these clients ( i.e., Crossroads) paid the Plaintiff within 30 days of the receipt of claims. Id. ¶ 8. In or about 2007, MultiPlan entered into an agreement with Crossroads permitting the latter access to the Preferred Payment Rates for its members. Id. ¶ 14. Among these members were Local 812 and Local 210. Id. ¶ 15. According to the Second Amended Complaint, " MultiPlan had actual and constructive notice that Crossroads was in breach of the terms and conditions of the MultiPlan Network Agreement in that Crossroads failed to comply with the terms and conditions in the 2007 Participation Provider Agreement, which allowed Crossroads and its members, such as Local 210 and Local 812, to be eligible for Preferred Payment Rates." Id. ¶ 17.

At all relevant times, Plaintiff's representatives informed MultiPlan that Crossroads was " repeatedly underpaying claims for health care services rendered by North Shore-LIJ and was failing to pay claims in a timely fashion and not within 30 days as required by the 2007 Participation Agreement as amended." Id. ¶ 18. Plaintiff alleges that MultiPlan deliberately failed to advise Crossroads of its exclusion from the 2007 Participation Provider Agreement." Id. ¶ 27. MultiPlan thus failed to advise Crossroads or its members ( e.g., Local 812, Local 210) of the fact that Crossroads and its members were considered to be " out-of-network patients" by Plaintiff - - patients who should have been subjected to Plaintiff's usual non-discounted rates. Id. ¶ 29.

The third-party action initiated by MultiPlan against co-Defendants Local 812 and Local 210 arises from the same transaction and occurrence described above. See generally Third-Party Compl. " [B]eginning in 2007, North Shore notified MultiPlan that medical claims which North Shore believed were subject to payment by Local 812 and Local 210 were either not being paid timely, correctly or not being paid at all." Id. ¶ 13. MultiPlan alleges that it " used its best efforts to work with Local 812 and Local 210 and its third party administrator company, [Crossroads] to resolve the claims being put forth by North Shore." Id. ¶ 14. Although some of these claims were, in fact, resolved, other claims remain unsatisfied according to Plaintiff. Id. ¶ 15. Both the claims asserted by Plaintiff and those asserted by MultiPlan stem from the failure to pay claims by Crossroads' members ( e.g., Local 812, Local 210) in light of MultiPlan's failure to exclude Crossroads from the Preferred Payment Agreement. The claims set forth in the third-party action, therefore, are premised on the same transaction and occurrence discussed in the Second Amended Complaint.

Moreover, the Court finds Local 812's reliance on Cestone misplaced. 2002 WL 424654, at *3. In Cestone, the court found that severance was warranted where the two co-plaintiff employees who alleged sexual harassment against their employer " did not work at the same location or with the same people, they were employed in entirely different capacities, they did not know each other prior to meeting at their depositions and they did not know of each other's claims prior to a newspaper article describing Cestone's complaints." Id. Here, by contrast, the claims set forth by Plaintiff and MultiPlan arise from the same chain of events and are not simply intertwined because of an overlap in the parties. See Kully v. Aircraft Serv. Int'l Group, Inc., 662 F.Supp.2d 259, 261 (E.D.N.Y. 2009) (declining to sever third-party claims where " liability on the third-party claims [were] integrally related to the main action"); cf. In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., 214 F.R.D. 152, 154-55 (S.D.N.Y. 2003)) (granting motion to sever claims involving different actors and different transactions).

2. Whether the Claims Present Some Common Questions of Law or Fact

Next, Counsel for Local 812 contends that no common questions of law or fact exist to warrant keeping the third-party action within the instant litigation. See Local 812's Mot. to Sever at 8. Local 812 reasons that MultiPlan's failure to comply with North Shore's notification to exclude Crossroads from its network of subscribers and fraudulently concealing that failure is immaterial to the question of whether Local 812 failed to resolve claims submitted by North Shore for medical services in compliance with MultiPlan's contract, and vice versa. Id. Conversely, Local 812's acts, through Crossroads, in administering the claims at issue " could not plausibly offset MultiPlan's liability to North Shore for its purported non-compliance and fraud, and vice versa." Id.

MultiPlan takes issue with Local 812's contention that there is no risk of duplicative litigation or inconsistent judgments if the Court grants the request to sever. See MultiPlan's Opp'n at 6. Counsel maintains that " if MultiPlan is found to be liable for Local 812's claims that were never paid - which damages are specifically sought by North Shore - MultiPlan will be forced to litigate again whether those payments were made." Id. Local 812's own conduct forms the basis for MultiPlan's potential liability, according to counsel for MultiPlan. Id.

Crossroads argues that Local 812's failure to pay is a " common thread between the first-party, third-party, and fourth-party actions." See Crossroads Opp'n at 5. Severance, according to Crossroads, " would create re-litigation of the same factual and legal issues and result in the waste of judicial time and resources and also create the potential for inconsistent verdicts or judgments on the same issues." Id.

The Court finds that the first-party and third-party actions present common questions of law or fact. Notwithstanding Local 812's attempt to re-frame North Shore's lawsuit as isolated from the claims against and between MultiPlan and Local 812, there is no question that MultiPlan's liability hinges on Local 812's liability for its unpaid claims. Local 812 does not dispute that MultiPlan has the right to seek indemnification in the event that MultiPlan is held liable for its own alleged misdeeds. Moreover, in its Second Amended Complaint, Plaintiff has asserted causes of action against Local 812 and Local 210 for breach of contract, unjust enrichment, and for quantum meruit arising from amounts due to North Shore for health care services rendered to patients insured by Local 812 and Local 210 at the stipulated non-participating provider rates. The Second Amended Complaint also asserts a third-party beneficiary claim. Referencing the third-party action filed by MultiPlan, Plaintiff maintains that " [i]n the event that it is determined that MultiPlan did enter into a contract with Local 210 and Local 812, [North Shore] was the intended beneficiary." See Compl. ¶ 103. North Shore claims that the Locals breached their contract with MultiPlan by repeatedly underpaying claims for health care services rendered by North Shore and failing to resolve those claims in a timely fashion. Id. ¶ 105. North Shore is asserting a claim for any of the damages recovered as a result of the breach between MultiPlan and the Locals. Id. ¶ ¶ 106-108. Notwithstanding Local 812's assertions, the claims between the primary and third-party actions include common questions of law or fact. Certain Underwriters at Lloyd's London, 2014 WL 123488, at *21-22 (finding that the factors set forth in Gusinski weigh in favor of denying severance of the third-party action since, inter alia, the claims set forth in the primary and third-party actions involve common questions of law and fact).

3. Whether Settlement of the Claims or Judicial Economy Would be Facilitated

Local 812 argues that severance is favored since the resolution of North Shore's claims against MultiPlan will " limit or streamline the remaining issues" asserted by MultiPlan in the third-party action. See Local 812's Mot. to Sever at 9 (quoting Gusinski, 2010 WL 4877841, at *6). Local 812 submits that if MultiPlan prevails in defending itself from claims brought by North Shore, the parties and the Court will conserve judicial resources by not having to address the indemnification claims asserted by MultiPlan against Local 812 in the third-party action. Id. By severing and staying the Third-Party Complaint, Local 812 argues, the Court can deal with the primary issues involved with MultiPlan's liability first, before having to address the contingent issues of indemnification arising from a finding of liability against MultiPlan. Id.

MultiPlan, in opposition, argues that its claims against Local 812 are not premised solely on indemnification. See MultiPlan's Opp'n at 6-7. Moreover, severance would be an inefficient way to proceed with litigation, subjecting MultiPlan to two independent trials with duplicative discovery, unnecessarily increasing litigation costs for all parties. Id. at 7. Local 812 has already engaged in discovery and motion practice in this case and severing at this stage is neither justified nor cost-efficient according to MultiPlan. Id. Further, MultiPlan contends that keeping the third-party action within the confines of the instant litigation would more likely facilitate a global settlement of all claims at issue. Id.

Crossroads relies upon the same arguments raised by MultiPlan with respect to this factor and adds that " collateral estoppel would likely bar re-litigation of the fourth-party claim[5] against Crossroads" should the request to sever be denied. See Crossroads' Opp'n at 6. Severance of the matters would, according to Crossroads, force it to defend Local 812's claims for breach of contract and/or negligence in a second trial with duplicative discovery. Id.

Local 812, in reply, contends that MultiPlan can only recover attorneys' fees and costs - - not for North Shore's underlying claims - - in its indemnification agreement with Local 812 in the event it is found liable in the primary action. See Def. Local 812 Health Fund's Reply Mem. of Law in Further Supp. of Mot. to Sever (" Local 812's Reply") at 2 [DE 114]. Both the language of the indemnification clause and public policy prohibit MultiPlan from seeking indemnification on any potential damages arising from its fraudulent conduct. Id. Consequently, Local 812 argues that no duplicative discovery would result from a severance of this action since the discovery relevant to North Shore's claims differs drastically from which is relevant to MultiPlan's third-party claim. Id. at 3.

The Court has considered the arguments raised by the parties and finds that judicial economy (and a prospective global settlement) is better facilitated with the third-party claims remaining in this litigation. Although the Court acknowledges that certain claims raised against MultiPlan cannot be indemnified in the third-party action against Local 812 ( i.e., fraud), there are nonetheless claims for attorneys' fees and costs which MultiPlan can recover from Local 812 in the event MultiPlan is found liable, as Local 812 itself has acknowledged. Further, there is no dispute that the claims which MultiPlan has raised in its third-party action against Local 812 in failing to pay, or timely pay, amounts owed to North Shore have their origins in the failure by MultiPlan to exclude Crossroads from the Preferred Payment Rates. As MultiPlan points out, " MultiPlan's defense is in part based upon the failures of Local 812 and Crossroads to pay claims properly or at all, such that MultiPlan has no liability." See MultiPlan's Opp'n at 7. Finally, the Court recognizes that a settlement conference has already been held in this action and although no global resolution of the claims was achieved, keeping all claims within the confines of this litigation is more likely to encourage the parties to settle without the prospect of contingent or future claims looming for another day.

4. Whether Prejudice Would be Avoided if Severance Were Granted

Local 812 maintains that " forcing Local 812 to incur the time and expense of conducting depositions and completing discovery when it may bear no liability to MultiPlan is both inefficient and prejudicial." See Local 812's Mot. to Sever at 9. MultiPlan argues in opposition that Local 812 would be prejudiced by a severance since " [d]iscovery is ongoing and there will likely be facts or legal arguments raised throughout the course of these proceedings that directly impact Local 812's own defenses." See MultiPlan's Opp'n at 7. MultiPlan also argues that Local 812's argument regarding prejudice " rings hollow" since it delayed moving to sever the action until a month before the close of discovery. Id. at 7-8. Similarly, Crossroads argues in opposition that Local 812's argument is undermined by the fact that it " waited over two years, after the filing of the third-party action by MultiPlan, to move to sever" on the eve of the May 30, 2014 fact discovery deadline. See Crossroads' Opp'n at 6-7. In reply, Local 812 states that MultiPlan would not even be eligible to recover attorneys' fees and costs against Local 812 for MultiPlan's alleged misdeeds since these fall outside the scope of the indemnification clause. Thus, Local 812 claims that MultiPlan's third-party claims will " depend on evidentiary proof that is separate and distinct from that necessary for North Shore to prosecute its claims against MultiPlan" and would thus prejudice Local 812. See Local 812's Reply at 5-6.

The Court does not find that Local 812 would be prejudiced by denying the motion to sever the third-party action. Local 812 fails to acknowledge that MultiPlan commenced the third-party action on November 20, 2011 and that Local 812 waited until the eve of the discovery cut-off before moving to sever. The Court does not find any prejudice to Local 812 here where it has defended itself from the claims asserted by North Shore and MultiPlan and participated in discovery for over two and one-half years before moving to sever. Local 812 argues that the claims in the first-party and third-party actions will involve " separate and distinct" evidence and thus cause Local 812 prejudice. Recognizing that severance is an extraordinary remedy to be granted only in exceptional circumstances, however, the Court does not find that a lack of overlap of some evidentiary proof between the first and third-party claims will prejudice Local 812, particularly since there exist common legal and factual issues between these claims.

5. Whether Different Witnesses and Documentary Proof are Required for the Separate Claims

Finally, Local 812 claims that the fifth and last factor also supports its application to sever MultiPlan's third-party action. See Local 812's Mot. to Sever at 10. Specifically, Local 812 notes that " North Shore, for example, will require witnesses and documentary evidence from MultiPlan representatives that were privy to North Shore's purported notification of the exclusion, as well as those individuals that were involved in the making of any alleged fraudulent representations to North Shore concerning same." Id. According to Local 812, MultiPlan " will need to solicit testimony and documentary evidence from Local 812 representatives and/or Crossroads representatives to determine how the claims submitted by North Shore were administered." Id. The testimony North Shore and/or MultiPlan will require from the designated Local 812 representative for their first and third-party claims, respectively, will therefore be different and perhaps require different designations altogether. Id.

In opposition, MultiPlan submits that " if joinder required that the totality of evidence and witnesses be common between all claims, it is likely that no claims would ever be joined." See MultiPlan's Opp'n at 8. Further, MultiPlan's counsel emphasizes that " what may be the most compelling evidence in this case - evidence related to Local 812's improper payment of claims - is relevant to both MultiPlan's indemnification and independent breach of contract claims against Local 812 as well as to North Shore's claims against MultiPlan." Id.

Crossroads argues in opposition that overlapping issues remain between the first and third-party claims. See Crossroads' Opp'n at 7. Citing the now-dismissed Fourth-Party Complaint, Crossroads explains that " Local 812 concedes that any potential liability to MultiPlan will be premised upon Crossroads' alleged breach of its contract with Local 812 regarding the processing and payment of claims, and/or Crossroads' negligent acts, admissions or willful conduct." Id. (citing Fourth-Party Compl. ¶ 34). Moreover, those fourth-party claims, Crossroads argues, allegedly arise out of an indemnification provision within the Administrative Services Agreement between Local 812 and Crossroads. Id. (citing Fourth-Party Compl. ¶ 36). There is, therefore, a commonality of evidence and witnesses " with respect to the processing and payment of healthcare claims." Id. Crossroads states further that the crux of the claims lies in MultiPlan's failure to exclude Crossroads (a third-party administrator for Local 812) from the Preferred Payment Rates designated for MultiPlan's subscribers. Id. The decision to exclude Crossroads from MultiPlan's network, Crossroads contends, stems from its allegedly repeated failure to pay or timely pay claims in accordance with the agreement between North Shore and MultiPlan. Id. at 7-8. Local 812, moreover, acknowledges that " North Shore's claim centers on MultiPlan's failure to advise Crossroads of its exclusion from MultiPlan's network of subscribers." Id. at 8 (citing Local 812's Mot. to Sever at 7). As such, Crossroads contends that it will be prejudiced if it cannot conduct discovery regarding its exclusion from MultiPlan's network of subscribers, and its alleged failure to pay and/or failure to timely pay claims, which is the heart of the litigation." Id.

In reply, Local 812 refers again to opposing counsel's arguments as a " gross mischaracterization" of the claims and disputes that its own alleged failure to pay claims properly is at the " crux of the litigation." See Local 812's Reply at 6. Local 812 takes issue with MultiPlan's claim that it would be prejudiced by severance since the claims asserted against Crossroads have nothing to do with the claims of fraud asserted against MultiPlan. Id. According to Local 812, Crossroads has been " embroiled" in a state court action filed against it by North Shore which has been pending since 2009. Id. at 6-7 (citing North-Shore Long Island Jewish Health Care Sys., Inc. v. Crossroads Healthcare Mgmt., LLC, Index No. 023843/2009). As such, Local 812 maintains that Crossroads' contention it would be prejudiced if it cannot engage in discovery directly with North Shore is unsupported by the record.

Although the Court acknowledges that differences exist between the fraud claims raised by first-party Plaintiff North Shore and Third-Party Plaintiff MultiPlan which may require some particularized discovery, the Court nevertheless does not find that those differences warrant severance of the entire third-party action. First, Local 812's argument that entirely different discovery and witnesses would be needed in the third-party action is based primarily on speculation. The Court cannot predict, nor can the parties know with certainty at this stage, what discovery and testimony will be necessary in the pending actions. Moreover, despite Local 812's consistent attempt to distinguish the first and third-party actions, the Court points out that MultiPlan would not have asserted failure to pay claims against Local 812 but for North Shore's initial first-party lawsuit. Thus, the relatedness of these actions persuades the Court to recommend against severance. Further, to the extent that Local 812 argues that Crossroads cannot assert prejudice since it has availed itself of discovery in a related state court action, Crossroads would still be entitled to discovery in this separate and independent federal action.

Thus, for all of the foregoing reasons, the Court respectfully recommends to Judge Azrack that Local 812's motion to sever and to stay MultiPlan's Third-Party Complaint be DENIED.

B. Crossroads' Motion for Intervention

At the outset, Local 812 asserts that Crossroads' motion for intervention is deficient since Crossroads has failed to annex supplemental pleadings in support of its motion. See Local 812's Opp'n at 14. Rule 24(c) states that a motion to intervene " must state the grounds for intervention and be accompanied by a pleading that sets out the claim or defense for which intervention is sought." Fed.R.Civ.P. 24(c). Thus, Local 812 argues that " it is entirely unclear exactly what Crossroads intends to do in this action, other than conduct discovery, upon being permitted to intervene." See Local 812's Opp'n at 14. To the extent Crossroads refers to the Fourth-Party Complaint, Crossroads cannot submit an answer to that pleading since that action has been voluntarily dismissed, without prejudice, by Local 812. Id. Local 812 argues that Crossroads' true motivation to intervene is to gain access to secure a copy of the Local 812/North Shore agreement, which the concerned parties agreed to maintain confidential. Id. at 14-15 n. 5. Based on such conclusion, Local 812 states that " [w]hile there may come a time in the future during the course of the prosecution of a claim for indemnity against Crossroads when that agreement may become relevant, that time is not now." Id. (emphasis in original).

According to Local 812, " [t]he only remaining claims in the first party action between North Shore and MultiPlan are for breach of contract, fraud and breach of the covenant of good faith and fair dealing." Id. at 14-15. Local 812 asserts that these claims are premised on the following facts: " (1) MultiPlan failed to notify Crossroads and its members of the 2007 exclusion letter; (2) MultiPlan failed to notify North Shore that it was not accepting the 2007 exclusion letter; (3) MultiPlan fraudulently induced North Shore to...entering [ sic ] into renewal agreements." Id. at 15 (internal citation omitted). In Local 812's reasoning, the " vague interest" asserted by Crossroads consequently has no " relation to whether MultiPlan's actions constitute a breach of the contract between North Shore and MultiPlan." Id.

To intervene solely to conduct discovery, Local 812 argues, is improper. Id. Statutory and constitutional roadblocks exist to such intervention and, moreover, Crossroads has already been afforded discovery in the state action filed against it by North Shore which has been pending since 2009. Id. Nothing in this action, Local 812 contends, will inhibit Crossroads' ability to conduct discovery in a " hypothetical future action." Id. Thus, Local 812 assumes that Crossroads seeks to answer MultiPlan's Third-Party Complaint in order to " prevent a finding of liability against Local 812, which could lead to future litigation between Local 812 and Crossroads under an indemnity provision in a separate agreement." Id. As a result, Local 812 maintains that the motion to intervene must be dismissed, first and foremost, on the basis of Crossroads' failure to annex supplemental pleadings. Id. at 15-16. To the extent the Court finds otherwise, Local 812 argues that Crossroads is not entitled to intervene as of right or by permission in order to answer the Third-Party Complaint. Id.

Crossroads, in reply, asserts that it " planned to file its Answer prior to the notice of dismissal without prejudice by Local 812." See Reply Brief in Supp. of Def. Crossroads Healthcare Mgmt. LLC's Mot. to Intervene (" Crossroads' Reply") at 10 (emphasis in original) [DE 138]. To that end, Crossroads has annexed to its reply a proposed Answer to serve as the responsive pleading to Local 812's Fourth-Party Complaint should the instant motion be granted. Id. (citing Crossroads' Proposed Answer to the Fourth-Party Complaint, annexed to the Declaration of Dianna D. McCarthy in Supp. of Crossroads Healthcare Mgmt. LLC's Mot to. Intervene as Ex " A" [DE 138-2]).

" In general, Rule 24(c) requires the submission of a formal motion and supplemental pleadings in order to trigger the motion. Where, however, the position of the movant is apparent from other filings and where the opposing party will not be prejudiced, Rule 24(c) permits a degree of flexibility with technical requirements." Bano v. Union Carbide Corp., No. 99 Civ. 11329, 2005 WL 6800401, at *14 (S.D.N.Y. Aug. 12, 2005), adopted as modified by 2005 WL 2464589 (S.D.N.Y. Oct. 5, 2005) (quoting Tachiona v. Mugabe, 186 F.Supp.2d 383, 393 n.8 (S.D.N.Y. 2002)); accord EEOC v. Int'l Ass'n of Bridge, Structural & Ornamental Ironworkers, Local 580, 139 F.Supp.2d 512, 518 (S.D.N.Y. 2001); SEC v. Downe, 92 Civ. 4092, 1993 WL 22126, at *12 n.8 (S.D.N.Y. Jan. 26, 1993) (collecting cases).

Here, the Court finds that the position of the movant, Crossroads, is apparent in light of the arguments raised in its moving papers and with the filing of its proposed Answer to the Fourth-Party Complaint as part of its reply papers. Although Crossroads seeks to submit a responsive pleading to Local 812's Fourth-Party Complaint, that action has already been voluntarily discontinued. Crossroads' request to submit an answer to a discontinued pleading is therefore a nullity.

Recognizing that Crossroads cannot answer the Fourth-Party Complaint, Local 812 assumes that Crossroads is seeking to answer the Third-Party Complaint filed by MultiPlan against Local 812 and Local 210. However, nowhere in its moving papers does Crossroads suggest that this is the specific relief it is seeking in pursuing intervention. The Court will therefore assess Crossroads' request to intervene for the limited purpose of engaging in discovery. See Thai-Lao Lignite (Thail.) Co. v. Gov't of the Lao People's Democratic Republic, No. 10 Civ. 05256, 2012 WL 6053937, at *1 (S.D.N.Y. Nov. 29, 2012) (granting proposed intervenor's motion to intervene under Rule 24(b) for the limited purpose of objecting to the court's discovery Orders). Viewed under these circumstances, the Court finds that Crossroads initial failure to annex supplemental pleadings under Rule 24(c) was not fatal to its motion. See also New York News Inc. v. Newspaper & Mail Deliverers' Union of New York, 139 F.R.D. 291, 293 (S.D.N.Y. 1991) (recognizing that the failure to comply with Rule 24[c] alone is not fatal to a motion to intervene); In re Parr, 17 B.R. 801, 804, n.3 (Bankr. E.D.N.Y. 1982) (" The failure to attach such a proposed pleading, however, is not fatal to the motion to intervene and may be waived by a failure to object."); McCausland v. Shareholders Mgmt. Co., 52 F.R.D. 521, 524 (S.D.N.Y. 1971) (excusing failure to file proposed pleading in intervention because counsel stated that each of the proposed intervenors would adopt for his complaint the present complaint subject only to the modifications necessary to establish their individual claims).

The Court now addresses whether Proposed Intervenor Crossroads' motion should be granted for the limited purposing of participating in discovery.

1. Intervention as of Right

With regard to intervention as of right, Rule 24(a)(2) of the Federal Rules of Civil Procedure provides that

[u]pon timely application anyone shall be permitted to intervene in an action . . . when the applicant claims an interest relating to the property or transaction which is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant's ability to protect that interest, unless the applicant's interest is adequately represented by existing parties.

East End Eruv Ass'n, Inc. v. Town of Southampton, No. 13 Civ. 4810, 2014 WL 4773989 at *3 (E.D.N.Y. Sept. 24. 2014) (citing Fed.R.Civ.P. 24(a)(2)). Therefore, to intervene as of right pursuant to Rule 24(a)(2), a movant must show that (1) the application is timely; (2) the applicant claims an interest relating to the subject matter of the action; (3) the protection of the interest may as a practical matter be impaired by the disposition of the action; and (4) the interest is not adequately protected by an existing party. See R Best Produce, Inc. v. Shulman-Rabin Mktg. Corp., 467 F.3d 238, 240 (2d Cir. 2006); Brennan v. N.Y.C. Bd. of Educ., 260 F.3d 123, 128-29 (2d Cir. 2001); St. John's Univ., N.Y. v. Bolton, 450 Fed.App'x 81, 83 (2d Cir. 2011) (summary order). Local 812 does not dispute the timeliness of the application. Accordingly, the Court assesses whether Crossroads claims an interest relating to the subject matter of the action.

Here, Crossroads argues that " Local 812's alleged failure to pay, or timely pay claims is a core issue in the instant litigation." See Crossroads Mot. to Intervene at 9. Local 812's previously asserted fourth-party claims, according to Crossroads, arise out of an indemnification provision in the Administrative Services Agreement between Local 812 and Crossroads. Id. (citing Fourth-Party Compl. ¶ 36). Based on a reading of the discontinued fourth-party action, Crossroads maintains that Local 812 has conceded that any potential liability to MultiPlan will be premised upon Crossroads' alleged breach of its contract with Local 812 regarding the processing and payment of claims, and/or Crossroads' negligent acts, admissions or willful conduct. Id. Being the third-party administrator that is alleged to have processed and paid healthcare claims for individuals covered by Local 812's plan, Crossroads submits that it is " uniquely situated to address First-Party Plaintiff North Shore's claims that medical claims were not properly or timely paid." Id. at 9 n.1 (citing Fourth-Party Compl. ¶ 7). If Crossroads is not permitted to intervene, counsel argues that " Crossroads will be prejudiced if it cannot conduct discovery regarding its alleged failure to pay and/or failure to timely pay claims." Id. at 9.

Local 812 argues in opposition that Crossroads lacks a " direct, substantial and legally enforceable interest" in the " subject matter" of the action. See Local 812's Opp'n at 16 (citing Fed.R.Civ.P. 24(a)(2)). Local 812 claims that the " subject matter" of the third-party action is MultiPlan's cause of action for breach of contract against Local 812, stemming from Local 812's alleged failure to pay for claims owed to North Shore. Id. Local 812 is alleged to have breached its agreement with MultiPlan and is obligated to indemnify the latter for its violations. Id. at 16-17. However, the claims for non-payment or untimely payment between Local 812 and North Shore have been resolved, which, consequently, " relieves MultiPlan of any liability to pay [North Shore] on such claims because [North Shore] could not recover twice on those same claims." Id. at 17. Thus, Local 812 contends that the only link between the third-party action and any interest of Crossroads is no longer at issue. Id.

What remains to be litigated involving Local 812 in this matter, counsel for Local 812 maintains, is far too remote to qualify as a " direct, substantial and legally protectable interest" of Crossroads since it is based on a number of contingencies. Id. Crossroads will only be prejudiced, according to Local 812's reasoning, if " (i) Multi[P]lan is found liable to [North Shore] based on some theory that would implicate Local 812..., (ii) Local 812 is found to be liable to Muli[P]lan based on some breach of its contract with MultiPlan which is due to some failure by Crossroads, and (iii) Local 812 commences a proceeding seeking indemnification from Crossroads based upon a breach of the contract between Crossroads and Local 812." Id. at 17-18. Since there is no certainty of these events actually occurring, Local 812 contends that Crossroads lacks the necessary interest in the third-party action. Id. at 18. In support of this proposition, Local 812 cites Washington Elec. Co-op., Inc. v. Massachusetts Mun. Wholesale Elec. Co., 922 F.2d 92, 97 (2d Cir. 1990), where the Second Circuit held that a proposed intervenor's interest was not direct or substantial when its motion was predicated on a double contingency, namely, a finding that a contract between a public utility and a public corporation was void followed by a finding that a state agency was entitled to recover damages from that contract on behalf of state ratepayers. Id. at 18-19 (citing Washington Elec. Co-op., Inc., 922 F.2d at 97). Similarly here, Local 812 maintains that Crossroads' purported interest is " entirely contingent upon two subsequent events that may not occur and is therefore too remote to form the basis for intervention." Id. at 18.

In reply, Crossroads reiterates that it has a " cognizable interest in this action because any potential liability to MultiPlan will be premised upon Crossroads' alleged breach of its contract with Local 812 regarding the processing and payment[] of claims." See Crossroads' Reply at 4. In responding to Local 812's claim that the North Shore/Local 812 agreement moots any direct interest held by Crossroads, Crossroads argues that it is presently unaware of the contents of the " secret" side agreement and thus unable to discern whether its potential liability to Local 812, Local 210 or any other party has been impacted by the agreement. Id. at 4-5. Crossroads states that it may still be liable to indemnify Local 812 based on either the MultiPlan/Local 812 agreement or the outcome of this litigation. Id.

Further, Crossroads takes issue with Local 812's reliance on Washington Elec. Co-op., Inc. Id. at 5. That case is distinguishable, Crossroads argues, because the court there held that the motion brought by a state intervenor, who represented several contract signatories, to intervene as a plaintiff would " radically alter" the scope of the case by multiplying the damages at stake and complicating the proceedings. Id. (emphasis in original). By contrast, Crossroads' motion involves a proposed intervenor's request to be joined in a (now discontinued) fourth-party action, whose interests may be triggered if Local 812 revives its Fourth-Party Complaint (since it was dismissed without prejudice) or, as it has indicated, initiates a claim in arbitration. Id. at 6-7. Unlike Washington Elec. Co-op., Inc., Crossroads' intervention as a fourth-party defendant will not " radically alter" or " change the complexion of the case" since the claims asserted against Crossroads involve the same parties and transactions and does not change the damages claims. Id. at 7.

Here, the Court points out generally that Crossroads' interest in the subject matter of the action is reflected by the fact that Local 812 itself previously initiated a Fourth-Party Complaint against the proposed intervenor. The voluntary discontinuance of that fourth-party action, by Local 812's own admission, appeared to be strategic and not indicative of a lack of potential liability to Crossroads. As counsel for Local 812 explains:

The Fourth-Party Complaint was withdrawn without prejudice because Local 812 believed that I had reached an agreement in April 2014 to arbitrate with Crossroads. More specifically, Roland Acevedo, Esq. has been counsel for Crossroads in regard to these issues for approximately four years. Shortly after the Fourth-Party Action was filed, I contacted Mr. Acevedo and, after a series of discussions between us and between our clients directly, we reached an agreement to have the dispute between Local 812 and Crossroads resolved through arbitration at the conclusion of this action. The underlying premise for the agreement was that (i) the parties were better served by having the dispute between them resolved through arbitration, and (ii) litigation between Local 812 and Crossroads could potentially cause a disruption of the business relationship between the parties. I reduced the parties' agreement to writing, but Crossroads ultimately refused to sign it citing a conflict with its insurer that did not exist at the time that the parties agreed to the material terms.

See Decl. of Barry I. Levy in Supp. of Local 812's Opp'n to Mot. to Intervene (" Levy Decl.") ¶ 11 [DE 137]. Attorney Levy added that Local 812 ultimately filed its Notice of Dismissal because " it was concerned that procedurally it would not be in a position to enforce its agreement with Crossroads once issue was joined." Id. ¶ 12. Thus, the dismissal was based upon business and litigation strategy as opposed to an outright resolution of Crossroads' liability. Further, merely because Local 812 and North Shore have reached an agreement regarding their dispute does not necessarily relieve Crossroads of any potential liability. As Crossroads points out, it is not privy to the private agreement between Local 812 and North Shore and cannot accept Local 812's representation at face value.

Notwithstanding the foregoing information, the Court finds that the Second Circuit's holding in Washington Elec. Co-op., Inc . and its progeny precludes Crossroads from intervening as of right. As held in that line of cases, " [a]n interest that is remote from the subject matter of the proceeding, or that is contingent upon the occurrence of a sequence of events before it becomes colorable, will not satisfy the rule." Freydl v. Meringolo, No. 09 Civ. 7196, 2012 WL 1883349, at *1 (S.D.N.Y. May 22, 2012) (quoting Washington Elec. Co-op., Inc., 922 F.2d at 97). For example, in Fryedl, the court found that the intervenor's interests were not related to the subject matter of the litigation since the intervening party sought to enforce a judgment allegedly obtained from another matter. Id. Although Crossroads' interest here is not " remote, " it is contingent upon the occurrence of a series of events. As a potential fourth-party defendant, a number of events must occur before Crossroads may be held liable. First, MultiPlan must be found liable to North Shore on some basis which would impute liability to Local 812. Second, Local 812 must be found liable to MultiPlan based on a breach of its contract with MultiPlan which is occasioned by a failure exhibited by Crossroads. Third, Local 812 must then commence a proceeding seeking indemnification against Crossroads based upon a breach of the Administrative Services Agreement between Crossroads and Local 812. Contrary to Crossroads' assertion, there is currently no fourth-party action pending and, therefore, Crossroads does not have a direct and immediate interest in the subject matter of this case. Under these circumstances, Crossroads has not sufficiently demonstrated a direct and substantial interest in the subject matter of the existing litigation. See SEC v. CKB168 Holdings Ltd., No. 13 Civ. 5584, 2014 WL 4904917, a t *2 (S.D.N.Y. Sept. 30, 2014) (noting that movant's " interest in this case is contingent upon a sequence of events and issues including a disposition on the merits, establishment of a fair fund and/or receivership, and the amount of recoverable assets") (quoting Washington Elec. Corp., Inc., 922 F.2d at 97)); United States v. $7, 206, 157, 717 on Deposit at JP Morgan Chase Bank, N.A., 274 F.R.D. 125, 126 (S.D.N.Y. 2011) (noting that the movant had a contingent interest in the forfeited funds which was insufficient to grant intervention as of right).

Having found that Crossroads lacks a direct and substantial interest in the subject matter of the litigation, the Court need not address the remaining factors under Rule 24(a). Therefore, the Court respectfully recommends to Judge Azrack that Proposed Intervenor Crossroads' motion for intervention as of right be DENIED. See XL Specialty Ins. Co. v. Lakian, No. 14 Civ. 5225, 2015 WL 273660, at *10 (S.D.N.Y. Jan. 15, 2015) (" Having determined that Knox and DJW have failed to establish the requisite interest in this litigation, the Court need not address the balance of the Rule 24(a) analysis...") (internal citation omitted).

2. Permissive Intervention

With respect to permissive intervention, under Rule 24(b), a court may " [o]n a timely motion . . . permit anyone to intervene who . . . has a claim or defense that shares with the main action a common question of law or fact, " but the Court " must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties' rights." Fed.R.Civ.P. 24(b)(1), (3); see MASTR Adjustable Rate Mortgages Trust 2006-A3 v. UBS Real Estate Securities, No. 12 Civ. 7332, 2013 WL 139636, at *2 (S.D.N.Y. Jan. 11, 2013). " In exercising its broad discretion under Rule 24(b), a court considers the same factors that it considers for intervention as of right." See MASTR Adjustable, 2013 WL 139636, at *2; see also Peterson v. Islamic Republic of Iran, 290 F.R.D. 54, 57 (S.D.N.Y. 2013) (" Courts typically consider the same four factors whether a motion for intervention is 'of right' under Fed.R.Civ.P. 24(a) or 'permissive' under Fed.R.Civ.P. 24(b).") (citing R Best Produce, 467 F.3d at 240 and Hnot v. Willis Group Holdings, Ltd., 234 Fed.App'x 13, 14 (2d Cir. 2007) (summary order)).

Emphasizing the more " flexible" nature of permissive intervention, Crossroads argues that it does not " need to show interest in the action, but rather need only show a question of law or fact in common with the action." See Crossroads' Mot. to Intervene at 12-13 (citing Fed.R.Civ.P. 24(b)(1)(B)). Crossroads reasserts that the first-party, third-party, and dismissed fourth-party claims are 'intertwined, as they involve the same parties and transactions." Id. at 13. Local 812's failure to pay or timely pay claims remains, according to Crossroads, a " core issue in the instant litigation." Id. Crossroads again references Local 812's voluntarily dismissed fourth-party claims, explaining that those claims " allegedly arise out of an indemnification provision within the Administrative Services Agreement between Local 812 and Crossroads." Id. (citing Fourth-Party Compl. ¶ 36). Local 812, therefore, concedes that " any potential liability to MultiPlan will be premised upon Crossroads' alleged breach of its contract with Local 812 regarding the processing and payment of claims, and/or Crossroads' negligent acts, admissions or willful conduct." Id. (citing Fourth-Party Compl. ¶ 34). The questions of fact and law in the first, third, and fourth-party claims, are thus linked, according to Crossroads. Id. Finally, Crossroads adds that permissive intervention may be granted even in cases where parties are adequately represented. Id.

Local 812 points out that one of the purposes of intervention is to prevent an unnecessary multiplicity of lawsuits. See Local 812's Opp'n at 23. In opposing permissive intervention, Local 812 suggests that granting Crossroads' request to intervene in this case will not conserve any judicial resources. Id. First, Local 812 submits that its indemnification claims against Crossroads have yet to accrue and Local 812 is therefore not yet legally obligated to assert its claims for indemnification under Rule 14(a). Id. at 24. Further, it is Local 812's position that any dispute arising under the indemnity clause in the agreement between Local 812 and Crossroads is subject to arbitration, rendering Court intervention unnecessary. Id.

Moreover, Local 812 argues that Crossroads has failed to present any common questions of law or fact. Id. The first-party action, according to Local 812, will revolve around " whether MultiPlan's failure to exclude Local 812 and Crossroads violated the contract between MultiPlan and North Shore, and whether MultiPlan engaged in fraud to cover up this failure." Id. The third-party action involves a question of whether Local 812 violated its contract with MultiPlan by failing to pay North Shore." Id. Although Local 812 acknowledges that " there is a chance that actions by Crossroads might be relevant to that inquiry, such relevance is not a basis for intervention, " as Local 812 sees the issue. Id.

Finally, Local 812 claims that to the extent Crossroads is seeking to intervene to prevent an adverse judgment against Local 812, those efforts would be duplicative of Local 812's which has " every interest in preventing an adverse judgment against itself." Id. at 24-25. The Court would thus be burdened by Crossroads' unnecessary intervention which, if granted, would require additional discovery without " providing any corresponding advantage in terms of judicial economy." Id. at 25.

In reply to Local 812's opposition, Crossroads points out that even Local 812 concedes that Crossroads' claims are relevant, thus satisfying the requirement under Rule 24(b) that permissive intervention may be granted where the intervenor has a claim or defense which shares with the main action a common question of law or fact. See Crossroads' Reply at 10. Secondly, Crossroads takes issue with Local 812's position that judicial resources will not be conserved with its intervention in this case. Id. at 11. Counsel argues that " allowing Crossroads to intervene would actually conserve judicial resources as it would essentially consolidate two proceedings (the instant proceeding and the threatened arbitration proceeding) into one matter that would also prevent the parties from incurring additional costs associated [with] being participants in multiple proceedings." Id. Finally, Crossroads maintains that some of Local 812's claims against Crossroads are not subject to arbitration and therefore require judicial intervention. Id. at 11-12.

The Court, in its discretion, finds that Crossroads has sufficiently stated a case for permissive intervention under Rule 24(b). As noted above, the standard for permissive intervention is more liberal than that for intervention as of right, and requires at a minimum that the proposed intervenor has " a claim or defense that shares with the main action a common question of law or fact." Fed.R.Civ.P. 24(b)(1)(B). Here, Crossroads has shown that the question of its failure to pay, or timely pay, claims is germane to the main litigation. Even Local 812 acknowledges that actions taken by Crossroads " may be relevant to the inquiry" whether Local 812 violated its agreement with MultiPlan by failing to pay North Shore. Moreover, notwithstanding Local 812's assertions to the contrary, permitting Crossroads to intervene for the limited purpose of participating in discovery would not prejudice the rights of any other parties to the litigation nor unduly delay the resolution of this case. Discovery remains outstanding and the inclusion of Crossroads in that process ensures that it has access to documents and testimony to defend itself from any potential liability arising from a finding against Local 812. The parties have, moreover, already incorporated Crossroads into their discussions regarding discovery as they await the Court's determination on the instant motion. Crossroads should therefore be granted permission to intervene in this litigation for the limited purpose of engaging in discovery, pursuant to Rule 24(b).

Accordingly, the Court respectfully recommends to Judge Azrack that Proposed Intervenor Crossroads' motion for intervention be GRANTED, in part, and DENIED, in part, to the extent set forth here.

V. Conclusion

For the foregoing reasons, the Court respectfully recommends to Judge Azrack that Third-Party Defendant Local 812's motion to sever and stay MultiPlan's Third-Party Complaint be DENIED. The Court further recommends to Judge Azrack that Proposed Intervenor Crossroads' motion for intervention be GRANTED, in part, and DENIED, in part, to the extent set forth in this Report and Recommendation.

Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72 of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from service of this Report and Recommendation to file written objections. See also Fed.R.Civ.P. 6(a), (e). Such objections by an attorney of record shall be filed with the Clerk of the Court via ECF. A courtesy copy of any objections filed is to be sent to the Chambers of the Honorable Joan M. Azrack, and to the Chambers of the undersigned. Any requests for an extension of time for filing objections must be directed to Judge Azrack prior to the expiration of the fourteen (14) day period for filing objections. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 155, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Beverly v. Walker, 118 F.3d 900, 901 (2d Cir. 1997), cert. denied, 522 U.S. 883, 118 S.Ct. 211, 139 L.Ed.2d 147 (1997); Savoie v. Merchants Bank, 84 F.3d 52, 60 (2d Cir. 1996).

Plaintiff's counsel is directed to serve a copy of this Report and Recommendation upon the non-party movant Crossroads Healthcare Management, LLC forthwith by overnight mail and first class mail and to file proof of such service on ECF.

SO ORDERED.


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