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Neurological Surgery, P.C. v. Northrop Grumman Systems Corp.

United States District Court, E.D. New York

January 26, 2017

NEUROLOGICAL SURGERY, P.C., MICHAEL H. BRISMAN, M.D., and JEFFREY A. BROWN, M.D., Plaintiffs,
v.
NORTHROP GRUMMAN SYSTEMS CORPORATION, Defendant.

          MEMORANDUM & ORDER ON DEFENDANT'S MOTION TO DISMISS

          DENIS R. HURLEY, SENIOR DISTRICT COURT JUDGE.

         I. Introduction Pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6), Defendant Northrop Grumman Systems Corporation (“NG-Systems”) moves this Court to dismiss, in its entirety and with prejudice, the complaint filed against it by Plaintiffs Neurological Surgery, P.C. (“Neurological Surgery”), Michael H. Brisman, M.D., and Jeffrey A. Brown, M.D. (hereafter and together with Neurological Surgery, the “Providers”). (See ECF No. 20.) Generally, the complaint seeks payments from NG-Systems, pursuant to the Employee Retirement Income Security Act (“ERISA”) and various New York state laws, for services rendered by the Providers - a neurosurgery practice and two of its doctors, which are “out-of-network” healthcare providers - to NG-Systems' employees and/or their beneficiaries, which the Providers allege have not been paid or have been paid at “dramatically reduced rate[s]”. (See ECF No. 8; hereafter, the “Complaint”.) The Providers oppose NG-Systems' motion to dismiss. (See ECF No. 20-9.) For the reasons that follow, NG-Systems' motion to dismiss is granted.

         II. Background[1]

         A. Factual Background

         The Providers are a private neurosurgery medical practice and two of its physicians. They have several office on Long Island, including in Queens, and in Manhattan. NG-Systems is a leading global security company. Through certain benefit plans funded and administered by NG-Systems (hereafter, “Plans”), it provides healthcare benefits to its employees and certain of their beneficiaries. NG-Systems contracts with Empire[2] to provide those healthcare benefits to persons covered by the Plans. Thus, Empire acts as NG-Systems' agent.

         The Providers generally allege they are out-of-plan providers who rendered medically necessary services to (1) “MM”, an employee of NG-Systems and to (2) “JS”, an NG-Systems employee beneficiary (hereafter, the “Patients”), both of whom were covered at all relevant times by the Plans. Under the Plans, the Patients may receive medical services from out-of-network providers, who are entitled to payments for those services. Despite the Patients providing the Providers with authorizations and assignments to receive payments directly from NG-Systems, and the Providers attempting to enter into a meaningful dialog with NG-Systems and Empire regarding prompt and proper payment for the outstanding claims, [3] which have either produced vague promises of payment or fallen on deaf ears, the Providers assert they were either not paid or paid substantially less than was owed them for services rendered to the Patients. The Court addresses those claims more specifically, below.

         1. Claims related to medical services provided to MM

         a. The December 10th claim (See Complaint at ¶¶50-57.)

         On December 10, 2013, the Providers rendered medically necessary health services, which were covered under the Plans, to MM. MM executed documents assigning Providers all rights to receive reimbursement from Empire for the health care services provided. The Providers billed Empire $105, 900 for the medical services rendered to MM, which “[p]ursuant to the terms of the relevant [NG-Systems] health plan documents and agreements, Empire . . . was obligated to reimburse to [the Providers] in full - or at the very least at a usual, customary, or reasonable rate . . . .” (Complaint at ¶53.) The Providers allege they “communicated” with NG-Systems and Empire “numerous times - including on 1/28/14, 2/27/14, 5/2/14, 5/12/14, 6/18/14, 7/31/14, 11/18/14, 11/25/14, and 12/16/14, and 2/9/15, 3/13/15, 3/14/15 - about the status of the pending claims.” (Complaint at ¶54.) However, the Providers have not received any payments on their $105, 900 claim. They assert that their “attempts to communicate” with Empire and NG-Systems regarding this unpaid claim “have fallen on deaf ears”. (Complaint at ¶¶56, 57.) The Providers did not allege any attempt to appeal Empire's or NG-Systems' non-payment of the $105, 900 claim.

         b. The December 13th claim (See Complaint at ¶¶58-65.)

         On December 13, 2013, the Providers provided further medically necessary health services to MM, which services were covered under the Plans. Again, MM executed documents assigning her right of reimbursement under the Plans to the Providers. The Providers billed Empire $23, 000 for the December 13th services. They “communicated” with NG-Systems and Empire “numerous times - including on 1/28/14, 2/27/14, 5/2/14, 5/12/14, 6/18/14, 7/31/14, 11/18/14, and 12/16/14, and 2/9/15, 3/13/14, and 3/14/15 - about the status of the pending claim.” (Complaint at ¶62.) The Providers were not paid on the claim. Therefore, in April 2015, they appealed the nonpayment, but the “appeal has gone unanswered.” (Complaint at ¶64.) Thus, like their $105, 900 claim, the Providers allege their “repeated attempts to communicate with [NG-Systems] and Empire about the status of [the $23, 000 claim] . . . have fallen on deaf ears . . . .” (Complaint at ¶65.)

         2. Claims related to medical services provided to JS

         a. The February 8th claim (See Complaint at ¶¶66-72.)

         On February 8, 2012, the Providers provided medically necessary health services to JS, which services were covered under the Plans. JS had executed documents assigning Providers all rights to receive reimbursement from Empire for the health care services provided. The Providers billed Empire $179, 950 for the medical services rendered to JS, which “[p]ursuant to the terms of the relevant [NG-Systems] health plan documents and agreements, Empire . . . was obligated to reimburse to [the Providers] in full - or at the very least at a usual, customary, or reasonable rate . . . .” (Complaint at ¶69.) According to the Providers, they “communicated” with NG-Systems and Empire “numerous times - including on 3/21/12, 4/2/12, 4/17/12, 4/19/12, 4/27/12, 5/4/12, 5/21/12, 6/1/12, 6/7/12, 6/11/12, 6/20/12, 6/25/12, 7/9/12, 8/6/12, and 9/14/12 - about the status of the pending claims.” (Complaint at ¶70.) However, the Providers received only $4, 350.10 from Empire for the claim. It asserts its “attempts to communicate” with Empire and NG-Systems regarding the $179, 950 claim “have fallen on deaf ears”. (Complaint at ¶¶72.) The Providers did not allege any attempts to appeal Empire's or NG-Systems' minimal payment of the $179, 950 claim.

         b. The February 12th claim (See Complaint at ¶¶73-79.)

         On February 12, 2012, the Providers rendered further medically necessary health services - covered under the Plans - to JS. Again, JS executed documents assigning JS's right of reimbursement under the Plans to the Providers. The Providers billed Empire $60, 000 for the February 12th services. They “communicated” with NG-Systems and Empire “numerous times - including on 3/4/14, 3/17/14, 4/24/14, 4/25/14, 5/1/14, and 6/11/14 - about the status of the pending claim.” (Complaint at ¶77.) The Providers were paid only $1, 117.68 on this claim. They did not allege any attempts to appeal Empire's or NG-Systems' minimal payment of the $60, 000 claim. Rather, the Providers allege their “repeated attempts to communicate with [NG-Systems] and Empire about the status of [the $60, 000 claim] . . . have fallen on deaf ears . . . .” (Complaint at ¶79.)

         c. The July 18th claim (See Complaint at ¶¶80-86.)

         Additionally, on July 18, 2014, the Providers provided JS with medically necessary health services, which were covered under the Plans. As previously done, JS executed documents assigning JS's right of reimbursement under the Plans to the Providers. The Providers billed Empire $60, 000 for the July 18th services. They “communicated” with NG-Systems and Empire “numerous times - including on 2/26/15, 5/1/12, 5/13/15, 6/19/15, and 9/15/15 - about the status of the pending claim.” (Complaint at ¶77.) The Providers were not paid any monies on this claim. They did not allege any attempts to appeal Empire's or NG-Systems' non-payment of the $60, 000 claim. Instead, the Providers allege their “repeated attempts to communicate with [NG-Systems] and Empire about the status of [the $60, 000 claim] . . . have fallen on deaf ears . . . .” (Complaint at ¶86.)

         B. Procedural Background

         By a state-court summons dated June 11, 2015, Providers alleged NG-Systems violated ERISA, as well state common and statutory laws, with all alleged violations being predicated upon the Plans administered by NG-Systems for the benefit of its employees and their beneficiaries. (See ECF No. 1-3, Summons with Notice.) On July 16, 2015, and relying on the doctrine of complete preemption under ERISA, NG-Systems filed a Notice of Removal of the Providers' action to this Court. (See ECF No. 1, Notice of Removal.)

         Thereafter, on September 17, 2015, the Providers filed their seven-count complaint. (See ECF No. 8, Complaint.) In its first cause of action, the Providers allege NG-Systems has violated ERISA by failing to pay them in full for the medically necessary, covered health care services provided to the Patients. Importantly, they state, inter alia:

101. . . . [the Providers] ha[ve] exhausted all available administrative remedies or appeal rights. Additionally, further appeals or administrative proceedings would be futile.
102. Specifically, Empire routinely denies or ignores [the Providers'] appeals, and all appeals and other administrative remedies have either been denied, or have been outstanding for such a long time that the only reasonable conclusion that can be drawn is that they are deemed denied.
103. Additionally, . . . so many unsuccessful attempts have been made by [the Providers] to inquire about the status [of] claims, to obtain payment, and to secure a reasonable and legal decision on the health care claims at issue, that they [sic] only conclusion that can be drawn is that further administrative proceedings would be futile.

(Complaint at ¶¶101-103.) Therefore, the Providers seek the benefits they have claimed, as well as prejudgment interest. In their second cause of action and pursuant to ERISA, the Providers seek their attorneys fees for bringing this action. Its remaining causes of action are state-law based, with: the third cause of action being for breach of contracts; the fourth cause of action being a breach of implied-in-fact contracts; the fifth cause of action being a claim of unjust enrichment; the sixth cause of action being a violation of New York Insurance Law § 3224-a (the “Prompt Pay Law”); and its seventh cause of action being a claim as a third-party beneficiary. Neither of the Plans were attached to the Complaint, nor were any of the Patients' referenced authorizations or assignments.

         In response, NG-Systems filed its motion to dismiss. (See ECF No. 20.) It included summary plan descriptions (“SPD”s) for the Plans.[4] (See Sholinsky Decl. In Support of Mot. Dismiss, ECF No. 20-4, and accompanying Ex. A (ECF No. 20-5), and Ex. B (ECF No. 20-6).) The Plans have two levels of appeals. (See, e.g., Ex. A at 159, attached to Sholinsky Decl (ECF No. 20-5); Ex. B at 55, attached to Sholinky Decl. (ECF No. 20-6).)

         NG-Systems raises several arguments in support of its motion to dismiss. As to the ERISA causes of action, it contends: (1) it is not the proper party to the Providers' ERISA claims; (2) the Providers lack statutory standing; (3) the Providers have failed to exhaust their administrative remedies; (4) the ERISA claims are time-barred; (5) the Providers fail to state a plausible claim for benefits under ERISA; and (6) claims for attorneys' fees is a remedy, not a substantive claim. Regarding the Providers' state-law claims, NG-Systems asserts that ERISA preempts them all. Alternatively, it argues the Providers fail to state claims: for breach of contracts; for breach of implied-in-fact contracts; for unjust enrichment; under New York State's Prompt Pay Law; of being a third-party beneficiary.

         The Providers oppose the dismissal motion on several basis. As to their ERISA causes of action, the Providers argue: (1) that to the extent NG-Systems is not the Plan Administrator, the Providers should be permitted to amend their complaint; (2) Second Circuit case law makes clear “that a healthcare provider has standing to bring a claim if a beneficiary has properly assigned it in exchange for health care, ” Simon v. Gen. Elec. Co., 263 F.3d 176, 177-78 (2d Cir. 2001)(further citation omitted); (3) as they have “amply” alleged in their Complaint, it would be futile to exhaust their administrative remedies, and they never saw the Plans (see Providers' Opp'n at 8); (4) NG-Systems' time-barred argument is an affirmative defense, not a basis for dismissal; and (5) under the Supreme Court's Twombly/Iqbal teachings, they have properly pled a claim for relief under ERISA. As to their state law causes of action, the Providers contend: (1) their breach of contract claim is properly pled as an alternative cause of action to their ERISA claim; (2) their causes of action for breach of implied contract and unjust enrichment are claims pled in the alternative to their breach of contract claim, which is permissible; (3) the Court should wait until after ...


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