Opinion
CIVIL ACTION No. 02-1335, SECTION "C" (2).
July 7, 2004
ORDER REASONS
Before the Court is Defendants' Motion to Dismiss. (Rec. Doc. 85). Oral argument was heard on Defendants' Motion to Dismiss on June 23, 2004. The Motion was taken under submission.
After a thorough review of the law, the record, the Motion, and the memoranda filed in support thereof and in opposition thereto, Defendants' Motion to Dismiss is DENIED.
I. INTRODUCTION
Plaintiff issues and administers group health plans that are governed by ERISA. Plaintiff issues and administers some of the plans, and as to others simply administers them. Defendant, a health care provider, provides polysomnography services to patients who are insured under the ERISA health plans that are either issued and administered or simply administered by Plaintiff. Plaintiff and Defendant do not have a contractual relationship between themselves.
Plaintiff claims that Defendant overcharged Plaintiff for the services Defendant provided to Plaintiff's insureds. Polysomnography services consist of several individual components. Normally, according to Plaintiff, charges for polysomnography services should be billed at one set rate for the entire polysomnographic service. This one set rate is referred to as a bundle, and the process of billing only for these bundles is called bundling. Normally, according to Plaintiff, polysomnography services should be bundled and billed under the American Medical Association's CPT Manual Code Numbers 95810 and 95811. According to Plaintiff, Defendants billed Plaintiff for services provided to Plaintiff's insureds for each individual component of the polysomnography studies. This process is referred to as unbundling, and, according to Plaintiff, in this case, entitles Plaintiff to damages in an amount close to three-quarters of a million dollars.
Accordingly, Plaintiff brought suit against the Defendant to recover for these alleged overcharges. Plaintiff alleges that Defendant intentionally and fraudulently misrepresented the actual services rendered and the total charge due and that Defendants were unjustly enriched by collecting the overcharges from Plaintiff. At about the same time as Plaintiff brought suit, Plaintiff began recalculating bills received from Defendant by bundling the unbundled charges and submitting payment only for what Plaintiff calculated the bundled portion to be. Accordingly, Defendant brought a counterclaim to recover the amount Plaintiff allegedly withheld from Defendant by recalculating the bills.
On June 23, 2004, the Court granted in part and denied in part Defendants' Motion for Partial Summary Judgment. The Court dismissed Plaintiff's state law claims for fraud and also dismissed all of Plaintiff's state law claims arising before May 3, 2001 as having prescribed. At that time, the Court also heard oral argument on Defendants' Motion to Dismiss. The Court took the Motion under submission.
The parties have not resolved whether these claims fall exclusively under ERISA or whether Plaintiff may assert state law claims as well. Nor have they asked the Court to resolve those questions. Accordingly, because it appears that diversity jurisdiction exists, the Court did not raise the questions on its own. The Court did address Defendants' Motion for partial summary judgment on its merits, but the Court expressed its reservations at oral argument about doing so in light of the fact that the state law claims might be entirely preempted.
In the Motion to Dismiss, Defendants argue that Plaintiff is not the proper party in interest to bring suit on those plans which it only administers and does not insure. Defendants argue that, in the absence of express contractual assignments of rights from the insurers of the self insured plans to Plaintiff, Plaintiff has no cause of action against Defendants as pertains to the self-insured plans. Defendants aver that there have been no express contractual assignments of rights.
Plaintiff argues that, under ERISA, it is the proper party in interest to bring this type of suit even in the absence of express contractual assignments of rights. Plaintiff also argues that the service agreements entered into by the insurers of the self-insured plans and it are express contractual assignments of rights. Last, Plaintiff argues that, if it is not the proper party in interest and the service agreements are not express contractual assignments of rights, it should be given leave to obtain the assignments.
II. STANDARD OF REVIEW
Although Defendants titled the present motion a Motion to Dismiss, they referred to matters outside of the record. However, at oral argument, Defendants conceded that they did not need to rely on the outside matters to prevail on their Motion. They stated that they included the outside matters as mere illustrations. Therefore, rather than convert Defendants' Motion to Dismiss into a motion for summary judgment, the Court will analyze Defendants' Motion as it was entitled-that is, as a Motion to Dismiss.
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, a district court must accept the factual allegations of the complaint as true and resolve all ambiguities or doubts regarding the sufficiency of the claim in favor of the plaintiff. See Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). Unless it appears "beyond a doubt that the plaintiff can prove no set of facts in support of his claim," the complaint should not be dismissed for failure to state a claim. Id. at 284-285 (quoting Conley v. Gibson. 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957)). However, conclusory allegations or legal conclusions masquerading as factual conclusions will not defeat a motion to dismiss. See Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995) (citing Fernandez-Montes, 987 F.2d at 284).
III. LAW AND ANALYSIS
Plaintiff is the proper party in interest to bring this suit as espoused in 29 U.S.C. § 1132, the codified section of ERISA embodying the civil enforcement remedies provided for by Congress, because it is a fiduciary seeking equitable relief to redress violations of ERISA. 29 U.S.C. § 1132.
29 U.S.C. § 1132 provides that the only actions which may be brought by fiduciaries, such as Plaintiff, are (1) for appropriate relief under 29 U.S.C. § 1109; (2) to enjoin any act or practice which violates any provision of this subchapter [of ERISA] or the terms of the plan; or (3) to obtain other appropriate equitable relief to redress such violations [of ERISA] or to enforce any provisions of this subchapter or the terms of the plan. Id.
Although not directly discussed in this memorandum, Plaintiff is undoubtedly an ERISA fiduciary. Health Care Service Corporation v. Tap Pharmaceutical Products, Inc., 274 F. Supp.2d 807, 811-12 (E.D. Tex. Aug. 1, 2003). Additionally, ERISA defines a "party in interest" in relevant part as "any fiduciary (including, but not limited to, any administrator, officer, trustee, or custodian), counsel, or employee of [an] employee benefit plan" or "a person providing services to such plan." Id. citing 29 U.S.C. § 1002(14)(A)-(B).
The first and second actions listed above are inapplicable in this case. As to the first action, relief under 29 U.S.C. § 1109 is only appropriate when brought by a participant, beneficiary, or fiduciary against a fiduciary for breach of his fiduciary duties. Defendants are not fiduciaries of the plans administered by Plaintiff.
As to the second action. Plaintiff has not sought to enjoin any act or practice employed by Defendants. Rather, they seek either monetary damages under various legal theories of recovery and restitution for unjust enrichment, an equitable theory of recovery. Accordingly, one need only determine if Plaintiff may obtain relief via the third aforementioned action.
To make this determination, one must answer whether the relief Plaintiff seeks is other appropriate equitable relief to redress violations [of ERISA] or to enforce any provisions of this subchapter or the terms of the plan. The answer to this question necessarily involves two questions: (1) is the relief Plaintiff seeks appropriate equitable relief and (2) is the relief Plaintiff seeks purposed to redress violations of ERISA or to enforce provisions of the subchapter entitled Protection of Employee Benefit Rights or the terms of the plan. As explained below, both of these inquiries must be answered in the affirmative and, in line with those responses, the Court should find that Plaintiff is the proper party in interest.
First, Plaintiff is seeking appropriate equitable relief. Although Plaintiff states that he seeks monetary damages, one of his principle causes of action is for unjust enrichment. Unjust enrichment, although not a type of relief, is a claim recognized at equity. As such, the remedy for unjust enrichment, restitution, is an equitable remedy as made clear by the United States Supreme Court's opinion in Great-West Life Annuity Ins. Co. v. Knudson.
In Great-West Life Annuity Ins. Co. v. Knudson, in a 5-4 split decision, Justice Scalia, writing for the majority, opined that, in determining whether the relief sought by a fiduciary is "equitable relief", a court should not consider whether the relief is a type of relief available in equity — such as an injunction, restitution, or specific performance — but whether the theory of recovery resounds in equity. Great-West Life Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213-15 (2002).
In that case, the defendant/respondent, Janette Knudson, was injured in a car accident incurring $411,157.11 in medical expenses. Id. at 207. The health plan of her employer, Earth Systems, Inc., covered her medical costs, most of which were paid by Earth Systems' Insurer, the plaintiff/petitioner, Great-West Life Annuity Insurance Company. Id. The plan's reimbursement provision gave Great-West the right to recover from a beneficiary any payment for benefits paid by the plan that the beneficiary is entitled to recover from a third party. Id. A separate agreement assigned Great-West the Plan's rights to any reimbursement provision claim. Id.
After the Knudsons filed a state court action against the manufacturer of their car and others, they negotiated a settlement. Great-West Life Annuity Ins. Co., 534 U.S. at 207. The bulk of the recovery was allocated to attorney's fees and to a trust for Janette's medical care, and $13,828.70 (the portion of the settlement attributable to past medical expenses) was earmarked to satisfy Great-West's reimbursement claim. Id. at 207-208. Approving the settlement, the state court ordered the state court defendants to pay the trust its portion directly and to pay the remainder to respondents' attorney, who, in turn, would tender checks to Great-West and other creditors. Id. at 208. Instead of cashing its check, Great-West filed a federal civil action under 29 U.S.C. § 1132 purportedly seeking to enforce the Plan's reimbursement provision by requiring the Knudsons to pay the Plan $411,157.11 of any proceeds recovered from third parties. Id.
The district court granted summary judgment in favor of the Knudsons, holding that the terms of the plan limited its right of reimbursement to the $13,828.70 determined by the state court. Id. The Ninth Circuit affirmed on different grounds, holding that judicially decreed reimbursement for payments made to a beneficiary of an insurance plan by a third party is not "equitable relief" authorized by 29 U.S.C. § 1132. Great-West Life Annuity Ins. Co., 534 U.S. at 209.
In affirming the decision of the Ninth Circuit, the Supreme Court held that in determining whether the relief sought by a fiduciary is "equitable relief", a court should not consider whether the relief is a type of relief available in equity — such as an injunction, restitution, or specific performance — but whether the theory of recovery resounds in equity. Id. at 213-215. The Court went on to determine that, although petitioner attempted to characterize its theory of recovery as either an injunction to compel the payment of money past due under a contract, specific performance of a past due monetary obligation, or restitution, its theory of recovery against the Knudsons was legal. Id. Because the Knudsons never acquired possession of the settlement funds, a necessary requirement to establish entitlement to equitable restitution, petitioner could not seek equitable restitution of those funds. Id. No matter how petitioner characterized the relief it sought, as long as the right to that relief is established in law and not in equity, then the relief is not equitable. Accordingly, summary judgment in favor of the Knudsons was appropriate. Id.
The majority further stated the terminology "appropriate equitable relief" contained in 29 U.S.C. § 1132 would be meaningless and excessive verbiage if given another construction, particularly if given the construction advocated by the dissenters — that is, whether relief may be deemed equitable relief should be determined solely on the type of relief sought. Great-West Life Annuity Ins. Co., 534 U.S. at 216. The Court argued that the dissenters' construction would create circumstances where inventive lawyers working for fiduciaries could always convince a court to sustain a 29 U.S.C. § 1132(a)(3) action through clever pleading — for instance, calling a suit for money damages an injunction to compel the payment of money past due under a contract, specific performance of a past due monetary obligation, or restitution. Id. The majority reasoned that giving the terminology "appropriate equitable relief" that construction would violate the general rules of statutory construction that no word should be considered excessive verbiage, if the statute can be construed to avoid it. Id. Such construction would also constitute an unwarranted departure from the Court's notation in Mertens v. Hewitt Associates, 508 U.S. 248, 258, n. 8 (1993) (Scalia, J.) that equitable relief must mean something less than all relief. Id.
In any event, in this case, Plaintiff seeks, albeit inarticulately, equitable restitution by asking for `damages' for unjust enrichment. As the funds that Plaintiff claims Defendants possess without just cause are within the possession of Defendants, Plaintiff's action, insofar as it seeks restitution of the funds held by Defendants, is appropriate equitable relief as contemplated by 29 U.S.C. § 1132(a)(3) and Great-West Life Annuity Ins. Co. v. Knudson.
The Seventh circuit agreed with this conclusion in Central States, Southeast and Southwest Areas Health Welf. Fund v. Neurological Assocs., 53 F.3d 172, 173 (7th Cir. 1995) and in Trustmark Life Ins. Co. v. University of Chicago Hospitals, 207 F.3d 876, 880 (7th Cir. 2000). In both cases, the Seventh Circuit stated that a suit by a fiduciary against a medical care provider to recover mistaken overpayments made to the medical care provider for the medical treatment of a plan member is appropriate equitable relief.
A District Court sitting in the Eastern District of Texas, agreeing with the Seventh Circuit, has stated that a suit by a fiduciary against a medical care provider to recover mistaken overpayments made to the medical care provider for the medical treatment of a plan member is appropriate equitable relief. Health Care Service Corporation v. Tap Pharmaceutical Products, Inc., 274 F. Supp.2d 807, 811-12 (E.D. Tex. Aug. 1, 2003).
Therefore, Plaintiff is seeking appropriate equitable relief.
The second requirement necessary for Plaintiff to maintain an action under 29 U.S.C. § 1132(a)(3) is that Plaintiff must seek relief purposed to redress a violation of ERISA. Plaintiff clearly seeks such relief. A suit by a fiduciary against a medical care provider to recover mistaken overpayments made to the medical care provider for the medical treatment of a plan member is of primary concern under ERISA and, as such, is an action to redress a violation of ERISA. Central States, Southeast and Southwest Areas Health Welf. Fund, 53 F.3d at 173; Trustmark Life Ins. Co., 207 F.3d at 880; Health Care Service Corporation v. Tap Pharmaceutical Products, Inc., 274 F. Supp.2d at 811-12.
Accordingly, because Plaintiff, a fiduciary as administrator of the various ERISA plans, is seeking appropriate equitable relief and the relief Plaintiff seeks is purposed to redress violations of ERISA. Plaintiff is a proper party in interest to this action.
At oral argument, when asked to address the conclusion the Court just reached, defendants argued that, even if Plaintiff could be considered a proper party to an equitable action, the Fifth Circuit's decisions in Bauhaus USA, Inc. v. Copeland, 292 F.3d 439 (5th Cir. 2002) and Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348 (5th Cir. 2003) provide clear precedent that, under the circumstances of this case, Plaintiff cannot recover in equity from Defendants. In those cases, the Fifth Circuit held that for a fiduciary to properly seek equitable relief through the imposition of a constructive trust the funds it seeks must (1) be specifically identifiable, (2) must belong in good conscience to the plaintiff, and (3) must be within the possession and control of the defendant. Bombardier Aerospace Employee Welfare Benefits Plan, 354 F.3d at 356. This argument shall not be addressed by the Court because Defendants have only moved the Court to dismiss for lack of standing. No formal motion has been made on this subsidiary issue nor has the Court received any memoranda to this effect. The parties remain free to move the Court for summary judgment on this issue within the time limits imposed by this Court's scheduling order.
IV. CONCLUSION
Therefore, because Plaintiff has standing to bring an equitable action under ERISA, Defendants' Motion to Dismiss is DENIED.