Cheruvu v. Healthnow N.Y., Inc.

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SREEKRISHNA CHERUVU, Plaintiff, v. HEALTHNOW NEW YORK INC., et al., Defendants.

No. 20-CV-808-LJV-LGF

United States District Court, W.D. New York

August 12, 2022

DECISION & ORDER

LAWRENCE J. VILARDO UNITED STATES DISTRICT JUDGE

On May 27, 2020, the plaintiff, Sreekrishna Cheruvu, commenced this action in New York State Supreme Court, Erie County, alleging violations of his civil rights under 42 U.S.C. §§ 1981, 1982, 1983, and 1985. Docket Item 1-1. He also brings claims for malicious prosecution, common law fraud intentional infliction of emotional distress, and negligent infliction of emotional distress under New York law. Id. Cheruvu's claims stem from his criminal prosecution and the associated investigation for his alleged use of incorrect billing codes. See id. He has sued HealthNow New York, Inc., doing business as Blue Cross and Blue Shield of Western New York (“BCBS”) Independent Health Association, Inc. (“IHA”) Individual Practice Association of Western New York, Inc. (“IPA”), an affiliate of IHA; Excellus Health Plan, Inc., doing business as Univera Healthcare (“Univera”); and a BCBS employee, Susan Schultz, who is also known as Susan Nason (“Schultz”). Id.

On June 29, 2020, the defendants removed the case to this Court based on federal question jurisdiction, Docket Item 1, and about a month later, the defendants moved to dismiss, Docket Items 11 (BCBS's and Schultz's motion); 13 (IHA's and IPA's motion); 14 (Univera's motion). The next day, this Court referred the case to United States Magistrate Judge Leslie G. Foschio for all proceedings under 28 U.S.C. § 636(b)(1)(A) and (B). Docket Item 15. On September 9, 2020, Cheruvu responded to the motions to dismiss, Docket Items 23, 24, 25; and about three weeks later, the defendants replied, Docket Items 30 (IHA's and IPA's reply); 31 (Univera's reply); 32 (BCBS's and Schultz's reply). On March 23, 2022, Judge Foschio issued a Report and Recommendation (“R&R”) finding that the defendants' motions should be granted. Docket Item 33.

On April 20, 2022, Cheruvu objected to the R&R. Docket Item 36. On July 15, 2022, the defendants responded to the objections. Docket Items 39 (BCBS's and Schultz's response); 40 (Univera's response); 41 (IHA's and IPA's response). And two weeks later, Cheruvu replied. Docket Item 42.

A district court may accept, reject, or modify the findings or recommendations of a magistrate judge. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3). The court must review de novo those portions of a magistrate judge's recommendation to which a party objects. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3).

This Court has carefully and thoroughly reviewed the R&R; the record in this case; the objection, response, and reply; and the materials submitted to Judge Foschio. Based on that de novo review, the Court accepts and adopts Judge Foschio's recommendation to grant the defendants' motion to dismiss the federal claims. But for the reasons that follow, the Court declines to exercise supplemental jurisdiction over Cheruvu's state-law claims and remands those claims to state court.

FACTUAL BACKGROUND^[1]

In 1985, Cheruvu “obtained his New York medical license.” Docket Item 1-1 at ¶ 23. In the years that followed, BCBS, IHA, IPA, and Univera all granted Cheruvu credentials as a participating physician and approved him as an in-network provider. See id. at¶¶ 7-11, 14. But in early 2013, Cheruvu resigned as a BCBS participating provider, id. at ¶ 12. And in 2014, BCBS terminated Cheruvu in his capacity as a nonparticipating provider, id. at ¶ 15; Univera suspended Cheruvu as provider, id. at ¶ 14; and IHA terminated Cheruvu as a participating provider, id. at ¶ 13.

From 2009 until 2014, Cheruvu focused his practice on addiction medicine. Id. at ¶ 29. To treat patients with opioid addictions, Cheruvu sometimes prescribed Suboxone. See id. at ¶¶ 36-37. In addition to closely monitoring patients' Suboxone treatment, Cheruvu ensured that his patients received substance abuse counseling, sometimes including group counseling. Id. Cheruvu's treatment protocol followed the recommendation of several medical organizations, including the Substance Abuse and Mental Health Services Administration; the American Society of Addiction Medicine; and the New York Department of Health Office of Alcoholism and Substance Abuse. Id. at ¶ 37.

As part of his practice in addiction medicine, Cheruvu employed Barry Herman, M.D., and Bidappa G. Maneyapanda, M.D., to provide backup coverage when Cheruvu was away or otherwise unable to see patients. Id. at ¶ 55. In addition, Cheruvu employed several licensed counselors and therapists. Id.

Two disputes arose about Cheruvu's billing practices, and those disputes ultimately led to both a criminal prosecution for insurance fraud and civil forfeiture proceedings. See id. at ¶¶ 35, 55, 58, 59. The first dispute centered on the billing codes Cheruvu used when patients were seen in group counseling. See id. at ¶ 36. The second concerned whether Cheruvu improperly billed for services provided by Dr. Herman and Dr. Maneyapanda when Cheruvu was traveling outside the country. See id. at ¶ 55.

Both the Federal Bureau Investigation (“FBI”) and the Western New York Health Care Joint Task Force Work Group (the “Task Force”) investigated the billing disputes. See id. at ¶¶ 35, 36, 43, 53. The Task Force works with federal and state law enforcement officials to investigate allegations of insurance fraud, and BCBS, IHA, and Univera are on the Task Force. Id. at ¶ 53. Schultz was BCBS's representative on the Task Force. Id. at ¶ 6. BCBS, IHA, and Univera also had internal Special Investigation Units (“SIU”) that investigated allegations of insurance fraud,^[2] see, e.g., id. at ¶¶ 44, 61, 70, 71, and Schultz was a BCBS SIU investigator as well, see id. at ¶¶ 44, 64.

On November 11, 2011, Schultz and another BCBS SIU investigator, Janette Siuta, “arrived unannounced” at Cheruvu's office to discuss Cheruvu's billing code practices. Id. at ¶ 38. Five days after that meeting, Cheruvu asked BCBS a billing question, and Siuta responded by email that Cheruvu should “go forward and bill [the services] as [he] previously ha[d,] and once . . . [the] issue [was] resolved [they would] make adjustments.” Id. at ¶ 44.

But at the same time BCBS was advising Cheruvu to continue billing as he had previously, “BCBS took steps to initiate a criminal investigation” with the Task Force. Id. at ¶ 43. More specifically, on December 5, 2011, BCBS met with the FBI “to discuss the case,” id., and at some point, Schultz “requested” that the Task Force and the FBI investigate Cheruvu, id. at ¶ 53. Throughout the investigation, the Task Force and the defendants “exchanged information.” Id.

In 2013, the FBI and the New York State Attorney General Medicaid's Fraud Unit raided Cheruvu's medical office. Id. And on May 29, 2014, the United States Attorney for the Western District of New York filed criminal and civil forfeiture complaints charging Cheruvu with insurance fraud for “billings [that] were improperly coded and made improperly for patient treatment while Cheruvu was out of the country.”^[3] Id. at ¶ 55; see Case No. 14-mj-80, Docket Item 1 (criminal complaint); Case No. 14-cr-130 (criminal proceedings); Case No. 14-cv-248 (civil forfeiture proceedings). That same day, federal agents arrested Cheruvu.^[4] Docket Item 1-1 at ¶ 54.

Shortly after Cheruvu's arrest, David Dawson, another BCBS SIU employee, emailed FBI Special Agent Thomas Provost, Schultz, and other BCBS employees. Id. at ¶ 56. The email read: “I know this case was brought to the [T]ask [F]orce by [Schultz] and [BCBS's] former [i]nvestigators so it is nice to see these results, and that every[]one[']s hard work i[s] paying off. Thanks for the update.” Id. On December 12, 2014, the United States Attorney for the Western District of New York filed a superseding indictment against Cheruvu. Id. at ¶ 58. Two days later, BCBS again celebrated the success of the criminal proceedings: Jared Gross, a senior vice president at BCBS, “exclaimed[,] ‘Congrats to all. Getting this guy out of practice would be a big win for the community. Thanks!'” Id.

After lengthy criminal and civil forfeiture proceedings,^[5] on August 21, 2019, the prosecutor advised Hon. William M. Skretny, the United States District Judge presiding over the federal cases against Cheruvu, that the parties had reached a pretrial resolution. Case No. 14-cr-130, Docket Item 314. More specifically, the prosecutor filed the “Government's Notice Regarding Dismissal” stating that the parties had resolved both the criminal and civil forfeiture proceedings “by way of a non-prosecution agreement between the government and the business through which Dr. Cheruvu practiced medicine.” Case No. 14-cr-130, Docket Item 315. The next day, Judge Skretny dismissed the criminal proceedings. Case No. 14-cr-130, Docket Item 317. A stipulation filed in the forfeiture case provides that a portion of the seized funds were to be returned to BCBS, IHA, and Univera. Docket Item 11-5; see also 14-cv-248, Docket Item 47.

Cheruvu also faced criminal charges in state court: He was indicted in January 2015 by a grand jury sitting in New York State Supreme Court, Erie County. Docket Item 1-1 at ¶ 59. On November 13, 2019-that is, about three months after the resolution of the federal charges-the New York State Supreme Court dismissed the state charges “in the interest of justice.” Id. at ¶ 85.

DISCUSSION

I. CHERUVU'S OBJECTIONS

Cheruvu begins his objections by identifying sixty “finding[s],” “conclusion[s],” “reference[s],” and “recommendation[s]”in Judge Foschio's R&R to which he objects. See Docket Item 36 at 5-15. After reviewing Cheruvu's argument and the basis for his...