Atrium Med. Ctr. v. UnitedHealthcare Ins. Co.

ATRIUM MEDICAL CENTER, Plaintiff, v. UNITEDHEALTHCARE INSURANCE COMPANY, et al., Defendants.

Case No. 19-cv-680

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

September 10, 2020

Dlott, J.

Litkovitz, M.J.

REPORT AND RECOMMENDATION

This matter is before the Court on defendant UnitedHealthcare Insurance Company (United)'s Motion to Dismiss (Doc. 21), plaintiff Atrium Medical Center (Atrium)'s response in opposition (Doc. 25), and United's reply (Doc. 26). The Court recommends that the motion be granted and that Atrium's claim against United be dismissed with prejudice.

I. Background¹

Atrium is a hospital that provided emergency medical services to United's insured, Khron Powell, between June 12, 2017 through June 18, 2017. Atrium was not an "in-network provider" or a "contracted provider" with United during this period. On June 12, 2017, Mr. Powell executed a document titled "General Consent and Agreement" (Doc. 19), which included a "FINANCIAL AGREEMENT AND ASSIGNMENT" provision.² Therein, Mr. Powell purported to "assign to [Atrium] all insurance and other benefits to which [he was] entitled for the services provided by [Atrium]." (Id. at PAGEID #: 64). The Certificate of Coverage, Riders, Amendments, and Notices for Mr. Powell's group policy (Policy) with United, however, contains an anti-assignment provision:

You may not assign your Benefits under the Policy to a non-Network provider without our consent. When an assignment is not obtained, we will send the reimbursement directly to you (the Subscriber) for you to reimburse them upon receipt of their bill. We may, however, in our discretion, pay a non-Network provider directly for services rendered to you. In the case of any such assignment of Benefits or payment to a non-Network provider, we reserve the right to offset Benefits to be paid to the provider by any amounts that the provider owes us.

(Doc. 21-1, Ex. 1 to Stalinski Aff. at PAGEID #: 131).³

Upon Mr. Powell's discharge from Atrium, a corresponding claim for $197,628.26 was billed to United. United unilaterally paid $51,371.53 of the claim and directed Atrium to seek the amounts of $4,462.85 and $1,242.32 directly from Mr. Powell (the Policy's coinsurance and deductible amounts, respectively). United then denied the $140,551.56 claim balance without reason or explanation despite Atrium's repeated inquiries.

On July 12, 2019, Atrium filed an action in the Court of Common Pleas for Warren County, Ohio. The state court complaint alleged that Atrium provided medical services to United's insured, United improperly denied $146,256.73 of the related claim, and United ignored Atrium's efforts to appeal. (Doc. 2 at PAGEID #: 18). United removed the case to this Court pursuant to 28 U.S.C. §§ 1331, 1332, and 1441 on the grounds that there is diversity of citizenship between the parties and Atrium's claim is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. (Doc. 1).

Following removal, the Court granted leave to Atrium to amend its complaint. (See Docs. 14, 15, 19). The amended complaint contains three counts, and only the first pertains to United. It does not invoke ERISA or any specific cause of action but generally alleges that United improperly denied $140,551.56 of Atrium's claim, that United is indebted to Atrium forthe unpaid services rendered to Mr. Powell, and that United has failed to pay this debt notwithstanding repeated appeals to United and requests for explanation regarding its calculations. United moved to dismiss the amended complaint with prejudice for lack of standing, failure to state a claim for relief, and failure to exhaust administrative remedies.

II. Standard of review

United argues that this matter should be dismissed because Atrium has neither direct nor derivative standing under § 502(a) of ERISA. While United frames the question of Atrium's standing as a matter of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1), the issue of standing raised by United is a question of "statutory standing" under ERISA (i.e., whether Atrium is a beneficiary or participant who may sue under 29 U.S.C. § 1132(a)(1)(B)) and not Article III standing under the Constitution. See Bridges v. American Elec. Power Co., Inc., 498 F.3d 442, 444 (6th Cir. 2007). Therefore, the appropriate standard of review is that for a motion to dismiss under Fed. R. Civ. P. 12(b)(6).⁴

In deciding a motion to dismiss under Rule 12(b)(6), the Court must accept all factual allegations as true and make reasonable inferences in favor of the non-moving party. Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012) (citing Harbin-Bey v. Rutter, 420 F.3d 571, 575 (6th Cir. 2005)). Only "a short and plain statement of the claim showing that the pleader isentitled to relief" is required. Id. (quoting Fed. R. Civ. P. 8(a)(2)). "[T]he statement need only give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Id. (internal quotation marks omitted) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)). Although the plaintiff need not plead specific facts, the "[f]actual allegations must be enough to raise a right to relief above the speculative level" and to "state a claim to relief that is plausible on its face." Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). "A plaintiff must 'plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

III. Analysis

A. Statutory standing

United first argues that Atrium does not have statutory standing to bring an ERISA claim because there is no contractual relationship between United and Atrium, and therefore Atrium is neither a plan participant nor a beneficiary who may bring suit to recover benefits under the Policy. (Doc. 21 at 7) (citing Brown v. BlueCross BlueShield of Tenn., Inc., 827 F.3d 543, 545-46 (6th Cir. 2016)). United also argues that Atrium does not have derivative standing under ERISA because there has been no valid assignment of Mr. Powell's benefits to Atrium as the Policy expressly prohibits an assignment of benefits without United's consent. While Atrium does not mention ERISA in its complaint or response in opposition, it nevertheless argues that to the extent that the Policy's anti-assignment provision is enforceable, equitable doctrines prevent United's assertion thereof.

As a threshold matter, the Court must address whether ERISA preempts Atrium's cause of action against United. The Court then turns to the standing issues raised by United and Atrium's defenses thereto.

1. Preemption

ERISA allows for complete preemption. Loffredo v. Daimler AG, 500 F. App'x 491, 495 (6th Cir. 2012) (citing Aetna Health, Inc. v. Davila, 542 U.S. 200, 209 (2004)). A claim is completely preempted by section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), if both prongs of a two-factor test are satisfied: "(1) the plaintiff complains about the denial of benefits to which he is entitled 'only because of the terms of an ERISA-regulated employee benefit plan'; and (2) the plaintiff does not allege the violation of any 'legal duty (state or federal) independent of ERISA or the plan terms.'" Hogan v. Jacobson, 823 F.3d 872, 879 (6th Cir. 2016) (quoting Gardner. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (6th Cir. 2013)).

Atrium's claim against United satisfies both prongs. As to the first, its claim lacks any state-law label and, "in essence[,]" seeks "the recovery of an ERISA plan benefit." S. Ohio Med. Ctr. v. Griffith, No. 1:19-cv-261, 2019 WL 5884280, at *5 (S.D. Ohio Nov. 12, 2019), report and recommendation adopted, 2020 WL 581836 (S.D. Ohio Feb. 6, 2020) (quoting K.B. by & through Qassis v. Methodist Healthcare - Memphis Hosps., 929 F.3d 795, 800-01 (6th Cir. 2019)). The sole relationship between Atrium and United is the Policy and whether and to what extent United must pay the benefits delineated therein to Atrium. As to the second, Atrium makes no argument that its claim is based on a legal duty independent of ERISA. It readily acknowledges that "[t]he crux of [its] claim is that United has failed to act in accordance with the Certificate of Coverage." (Doc. 25 at PAGEID #: 262). Atrium's claim is completely preempted by ERISA. See Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 699(6th Cir. 2005) ("[B]ecause the contract at issue in the breach-of-contract claim is the ERISA plan itself, the claim is clearly preempted.") (quoting Darcangelo v. Verizon Commc'n, Inc., 292 F.3d 181, 194 (4th Cir. 2002)).

While the prevailing practice in the context of a completely preempted claim is to grant leave to amend the complaint accordingly, this is not a requirement. See Ackerman v. Fortis Benefits Ins. Co., 254 F. Supp. 2d 792, 818 (S.D. Ohio 2003) (citation omitted). Some courts have "simply recognized the existence of the ERISA claim." Id. (citations omitted). Cf. Loffredo, 500 F. App'x at 495 ("[C]omplete preemption amounts to an exception to the well-pleaded complaint rule that converts a state-law claim that could have been brought under § 1132 into a federal claim . . . and makes the recharacterized claims removable to federal court. . . .") (citations omitted) (emphasis added). The parties take no position on this point. For purposes of its Report and Recommendation, the Court recasts Atrium's claim against United as one arising under 29 U.S.C. § 1132.

2. Derivative standing

Only plan participants and beneficiaries have standing to sue for civil enforcement of benefit plans. Brown, 827 F.3d at 545 (citing 29 U.S.C. § 1132(a)(1)(B)). Merely having a right to payment does not confer standing, derivative or otherwise. Id. at 545-46. See also Merrick, 175 F. Supp. 3d at 116 ("'[R]ight to payment' under the plan 'does not a beneficiary make.'") (quoting Rojas v. Cigna Health and Life Ins. Co.,...