Neurological Surgery, P.C. v. Siemens Corp.

NEUROLOGICAL SURGERY, P.C.,JEFFREY A. BROWN, M.D., Plaintiffs, v. SIEMENS CORPORATION, Defendants.

17-cv-3477 (ADS)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

December 12, 2017

MEMORANDUM OF DECISION AND ORDER

APPEARANCES:

Garfunkel Wild PC

Attorneys for the Plaintiffs

111 Great Neck Road

Great Neck, NY 11021

By: Colleen M. Tarpey, Esq.,

Marc Andrew Sittenreich, Esq.,

Roy W. Breitenbach, Esq., of Counsel

McGuireWoods LLP

Attorneys for the Defendant

1345 Sixth Avenue, 7th Floor

New York, NY 10105

By: Philip A. Goldstein, Esq.

Dana Rust, Esq.,

Summer L. Speight, Esq., of Counsel

SPATT, District Judge:

The Plaintiffs Neurological Surgery, P.C. ("NSPC") and Jeffrey A. Brown, M.D. ("Dr. Brown") (collectively, the "Plaintiffs") brought this action against the Defendant Siemens Corporation ("Siemens" or the "Defendant") alleging various violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"), and New York State common law.

Presently before the Court is a motion by the Defendant to dismiss the Plaintiffs' complaint pursuant to Federal Rule of Civil Procedure ("FED. R. CIV. P." or "Rule") 12(b)(6) on the grounds that the Plaintiffs' state law causes of action are preempted by ERISA, and that the Plaintiffs failed to exhaust their administrative remedies. For the following reasons, the Defendant's motion is granted in part, and denied in part.

I. BACKGROUND

A. The Relevant Facts

The following facts are drawn from the Plaintiffs' complaint, and for the purposes of the instant motion, are presumed true.

NSPC is the largest private neurosurgery practice in the tristate area. Dr. Brown is one of the neurosurgeons in the practice.

Siemens is the administrator of a self-funded employee benefit plan (the "Plan") established pursuant to ERISA. Siemens employs Empire BlueCross BlueShield ("Empire") as its claims administrator. Empire enters into contracts with health care providers to establish and maintain a network of providers. As administrator, Empire has discretionary authority to process claims and appeals for the Plan.

The Plaintiffs do not participate in Empire's provider network. Nevertheless, the Plaintiffs allege that NSPC receives authorization and assignments from Empire patients, including Siemens employees, to receive payment directly from Siemens through Empire for medical services rendered. The Plaintiffs state that as out-of-network ("OON") providers, they are entitled to reimbursement for usual, customary, and reasonable charges less any co-payment, co-insurance, member out of pocket amount, or deductible amounts (the "UCR rate").

1. JM - June 30, 2014

On June 30, 2014, the Plaintiffs provided health care services to JM, who is a participant in, or beneficiary of, the Plan. The Plaintiffs state that the services provided to JM were medically necessary. JM assigned her rights to receive reimbursement from Empire to the Plaintiffs. JM also provided documents to the Plaintiffs that purportedly showed that Siemens was contractually obligated to pay for the health care services provided by the Plaintiffs.

On July 29, 2014, the Plaintiffs submitted a bill to Siemens' claims administrator for $200,000 for the medical services provided to JM on June 30, 2014. The Plaintiffs have not received any reimbursement for their claim despite numerous communications with Empire and Siemens.

On December 8, 2015, the Plaintiffs appealed their claim. The Plaintiffs allege that Siemens and Empire have not answered their appeal.

2. JM - August 11, 2014

On August 11, 2014, the Plaintiffs again provided health care services to JM which they state were medically necessary. JM again assigned her rights to receive reimbursement from Empire to the Plaintiffs, and provided documents to the Plaintiffs that purportedly showed that Siemens was contractually obligated to pay for the health care services provided by the Plaintiffs.

On October 6, 2014, the Plaintiffs submitted a bill to Siemens' claims administrator for an additional $200,000 for the health care services provided to JM on August 11, 2014. The Plaintiffs communicated with Siemens and Empire on several occasions. Nevertheless, Siemens has not reimbursed the Plaintiffs in full or paid the UCR rate. Instead, the Plaintiffs have received the sum of only $6,477.12 on the August 11, 2014 claim.

On August 13, 2014, NSPC appealed the claim, and it was denied. The Plaintiffs state, upon information and belief, that "appeals to Empire on [NSPC's] claims are routinely denied and/or ignored, thus rendering further appeals futile." (Compl. ¶ 63).

B. The Relevant Procedural History

On May 19, 2017, the Plaintiffs filed their complaint in the Supreme Court of the State of New York, Nassau County. The complaint alleges causes of action for violations of ERISA; breach of express contract; breach of implied contract; unjust enrichment; breach of N.Y. INS. LAW § 3224-a (the "Prompt Pay Law"); and for breach of contract as a third party beneficiary. The Plaintiffs seek damages and attorneys' fees.

On June 9, 2017, the Defendant removed this action pursuant to 28 U.S.C. § 1446, claiming that this Court has original jurisdiction because the case presents a federal question under 28 U.S.C. § 1331.

On July 17, 2017, before filing an answer, the Defendant filed the instant motion to dismiss the complaint pursuant to Rule 12(b)(6).

II. DISCUSSION

A. The Legal Standard

In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept the factual allegations set forth in the complaint as true and draw all reasonable inferences in favor of the Plaintiff. See Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013); Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006); Bold Elec., Inc. v. City of N.Y., 53 F.3d 465, 469 (2d Cir. 1995); Reed v. Garden City Union Free School Dist., 987 F. Supp. 2d 260, 263 (E.D.N.Y. 2013).

Under the now well-established Twombly standard, a complaint should be dismissed only if it does not contain enough allegations of fact to state a claim for relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). The Second Circuit has explained that, after Twombly, the Court's inquiry under Rule 12(b)(6) is guided by two principles:

First, although a court must accept as true all of the allegations contained in a complaint, that tenet is inapplicable to legal conclusions, and [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss and [d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.

Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 664, 129 S. Ct. 1937, 1940, 173 L. Ed. 2d 868 (2009)).

Thus, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and . . . determine whether they plausibly give rise to an entitlement of relief." Iqbal, 556 U.S. at 679.

B. As to Whether the Plaintiffs' State Law Claims Are Preempted by ERISA

The briefings in this case illustrate a confusion on the parties' part regarding which type of preemption is to be considered by the Court. The bulk of the parties' papers addresses "complete preemption," which is a jurisdictional concept. As the Plaintiffs have brought ERISA claims, there is no dispute as to jurisdiction. Express preemption, or defensive preemption, is the proper vehicle for the Court's analysis.

"'Complete preemption' can properly be described as a jurisdictional concept—it permits a state cause of action brought in state court to be recast 'as a federal claim for relief, making [its] removal [by the defendant] proper on the basis of federal question jurisdiction.'" Chau v. HartfordLife Ins. Co., 167 F. Supp. 3d 564, 570 (S.D.N.Y. 2016) (quoting Vaden v. Discover Bank, 556 U.S. 49, 61, 129 S. Ct. 1262, 173 L. Ed. 2d 206 (2009)).

That is, when a plaintiff's state law claims are completely preempted by ERISA, a federal court has jurisdiction over those claims because they are subsumed by federal law. See Lehmann v. Brown, 230 F.3d 916, 919-20 (7th Cir. 2000) ("[T]he phrase 'complete preemption' has caused confusion . . . . Unfortunately 'complete preemption' is a misnomer, having nothing to do with preemption and everything to do with federal occupation of a field . . . . State law is 'completely preempted' in the sense that it has been replaced by federal law—but this happens because federal law takes over all similar claims, not because there is a preemption defense."); Lister v. Stark, 890 F.2d 941, 943 n. 1 (7th Cir. 1989) ("The use of the term 'complete preemption' is unfortunate, since the complete preemption doctrine is not a preemption doctrine but rather a federal jurisdiction doctrine.").

However, here, there is no dispute that this Court has jurisdiction because the complaint raises a federal question—a claim against the Defendant under ERISA. There is no question regarding the Court's jurisdiction, therefore the Court does not analyze the Plaintiffs' state law claims under the doctrine of complete preemption.

Instead, the Court considers whether the Plaintiffs' state law claims must be dismissed pursuant to the doctrine of defensive, express preemption. "Express preemption is one of the 'three familiar forms' of ordinary defensive preemption (along with conflict and field preemption)." Wurtz v. Rawlings Co., LLC, 761 F.3d 232, 238 (2d Cir. 2014) (citing Sullivan v. Am. Airlines, Inc., 424 F.3d 267, 273 (2d Cir. 2005)); see also Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 113 (2d Cir. 2008) (analyzing plaintiff's motion to revive his state law claims under the express preemption doctrine where the court had...