Opinion
No. CV 04-0835406
October 2, 2006
MEMORANDUM OF DECISION ON MOTION TO DISMISS ( # 176)
The plaintiff, Aetna Health, Inc. (Aetna), filed suit against the defendants in June 2004, alleging that the defendants, in conjunction, engaged in billing for services that were not covered by Aetna's policy. Aetna alleges that the defendants' improper acts consisted of the following: claiming for chiropractic services that were not supervised by medical professionals, misrepresenting services as being performed by miscoding the services, misrepresenting that procedures were performed when they were not performed, and reducing member payments to inflate billing. In May 2005, some of the defendants filed their answer, which included counterclaims alleging (1) tortious interference with business relationships, (2) tortious interference with business expectancy, (3) breach of contract, (4) breach of covenant of good faith and fair dealing, and (5) violations of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq., and the Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 et seq. These counterclaims allegedly arose from Aetna's refusal to make payments for services provided by the defendants and requests by Aetna to view patient records.
The defendants consisted of the following individuals or organizations: Marc Kirshner, a chiropractor, Jeffrey Schorr, a physician, Stuart Jacobson, a physician, Jeffrey Harris, a physician, Rukhshinda Hameedi, a physician, MDK Healthcare Management Corp., Medical Physical Rehabilitation of Stamford, P.C., Riverview Chiropractic Center, Commerce Park Chiropractic, LLC, High Ridge Chiropractic Center, Summer Street Medical, P.C. and Ridgeway Medical, P.C.
Specifically, these defendants were Marc Kirshner, a chiropractor, MDK Healthcare Management Corp., Medical Physical Rehabilitation of Stamford, P.C., Commerce Park Chiropractic, LLC, Riverview Chiropractic Center and High Ridge Chiropractic Center.
On March 3, 2006, Aetna filed a motion to dismiss all of the defendants' counterclaims. The grounds for Aetna's motion are that the defendants' counterclaims are preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (ERISA), and, thus, the court lacks jurisdiction over the subject matter of the counterclaims. The defendants filed a memorandum in opposition in April 2006.
The defendants' revised counterclaims were not actually filed until April 2006, after the case was remanded from federal court. The plaintiff had removed the case to the federal district court in May 2005, alleging that the defendants' counterclaims included a federal question. The district court ruled that counterclaims do not implicate the federal court's jurisdiction and granted the defendants' motion for remand to state court in February 2006. Aetna's motion to dismiss only references the counterclaims, not the revised counterclaims.
"A motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that [a party] cannot as a matter of law and fact state a cause of action that should be heard by the court . . . A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction." (Internal quotation marks omitted.) Louis Gherlone Excavating, Inc. v. McLean Construction Co., 88 Conn.App. 775, 780, 871 A.2d 1057 (2005). "It is a fundamental rule that a court may raise and review the issue of subject matter jurisdiction at any time . . . [W]henever a court discovers that it has no jurisdiction, it is bound to dismiss the case . . ." (Citation omitted; internal quotation marks omitted.) Cardi Materials Corp. v. Connecticut Landscaping Bruzzi Corp., 77 Conn.App. 578, 580, 823 A.2d 1271 (2003).
"When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . [A] court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader." (Internal quotation marks omitted.) Filippi v. Sullivan, 273 Conn. 1, 8, 866 A.2d 599 (2005); see also Fort Trumbull Conservancy, LLC v. New London, 265 Conn. 423, 432-33, 829 A.2d 801 (2003); Dyous v. Psychiatric Security Review Board, 264 Conn. 766, 773, 826 A.2d 138 (2003). "The motion to dismiss . . . admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone . . ." Ferreira v. Pringle, 255 Conn. 330, 346, 766 A.2d 400 (2001). "[I]t is the burden of the party who seeks the exercise of jurisdiction in his favor . . . clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute." (Internal quotation marks omitted.) St. George v. Gordon, 264 Conn. 538, 544-45, 825 A.2d 90 (2003).
In its memorandum of law, Aetna argues that the defendants' state law counterclaims are an attempt to enforce benefit rights under an ERISA plan. Aetna notes that the defendants are seeking to enforce provisions of the provider agreement regarding payment using state law counterclaims, claims that would be available to the defendants under the civil enforcement provisions of ERISA. Further, Aetna contends that the defendants' allegations that Aetna has refused to pay under the administered plan hinge on the interpretation of the term "covered services." Aetna argues that requiring a court to interpret a portion of an employee benefit plan indicates that the claim may "relate to" an employee benefit plan. Finally, Aetna contends that the defendants' claims "relate to" ERISA plans because in order to prove their claims, the defendants must make evident the relationship between themselves, their patients, and Aetna. Aetna argues that this relationship can only be explained in light of the ERISA plan. Based on the foregoing arguments, Aetna argues that the defendants' counterclaims are preempted by operation of ERISA.
In their opposition to the motion, the defendants first state that Aetna bears the burden of proving that the challenged state statute refers to an ERISA plan. The defendants then reason that they are not either participants or beneficiaries in the employee benefit plan, and, therefore, the defendants' claims do not fall within the civil enforcement provisions of ERISA. Further, the defendants' claims only seek to enforce the provider agreement between Aetna and the defendants, not any aspect of the employee benefit plan. Finally, defendants argue that a state law of general application will not be preempted by ERISA if its effect on the employee benefit plan is too remote to warrant a finding that the law "relates to" the plan.
An overview of the law of ERISA and ERISA preemption is well warranted. "ERISA is a comprehensive regulation of employee welfare and pension benefit plans [that] extends to those that provide medical, surgical, or hospital care or benefits for plan participants or their beneficiaries through the purchase of insurance or otherwise . . . The federal statute does not go about protecting plan participants and their beneficiaries by requiring employers to provide any given set of minimum benefits, but instead controls the administration of benefit plans . . . as by imposing reporting and disclosure mandates . . . participation and vesting requirements . . . funding standards . . . and fiduciary responsibilities for plan administrators . . . It envisions administrative oversight, imposes criminal sanctions, and establishes a comprehensive civil enforcement scheme . . . It also preempts some state law." (Citations omitted; emphasis added; internal quotations marks omitted.) Napoletano v. CIGNA Healthcare of Connecticut, Inc., 238 Conn. 216, 233, 680 A.2d 127 (1996), cert. denied, 520 U.S. 1103, 117 S.Ct 1106, 137 L.Ed.2d 308 (1997). "The preemption provision of ERISA, 29 U.S.C. § 1144(a) (1994), preempts any state law that may now or hereafter relate to any employee benefit plan." (Emphasis in original; internal quotation marks omitted.) Id.
The first inquiry for ERISA preemption is to determine whether the state law relied upon directly conflicts with a provision of ERISA. In Boggs v. Boggs, 520 U.S. 833, 841, 117 S.Ct. 1754, CT Page 17896 138 L.Ed.2d 45 (1997), the Court found that "if state law conflicts with the provisions of ERISA or operates to frustrate its objects . . . there is a conflict, which suffices to resolve the case. We need not inquire whether the statutory phrase `relate to' provides further and additional support for the [preemption] claim. Nor need we consider the applicability of field [pre-emption]." Using the Supreme Court's reasoning, if no such direct conflict is found, further inquiry is needed. Id. There is no indication that the state law that the defendants rely on is anything but generally applicable state law, not law that directly impacts the law of pensions. Since this is the case, further inquiry is needed to determine whether the generally applicable law upon which the defendants rely for their counterclaims has an impact on the ERISA plan.
"In a 1983 case dealing with ERISA preemption, the [United States Supreme Court], viewing ERISA's preemption language to be clear and relying on a dictionary definition of the term `relate,' stated that [a] law `relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan . . . In fact . . . Congress used the words `relate to' in § 514(a) [ 29 U.S.C. § 1144(a)] in their broad sense. To interpret § 514(a) to [preempt] only state laws specifically designed to affect employee benefits would be to ignore the remainder of § 514. It would have been unnecessary to exempt generally applicable state criminal statutes from [preemption] in § 514(b) [ 29 U.S.C. § 1144(b)], for example, if § 514(a) applied only to state laws dealing specifically with ERISA plans. Nor, given the legislative history, can § 514(a) be interpreted to [preempt] only state laws dealing with the subject matters covered by ERISA — reporting, disclosure, fiduciary responsibility, and the like. The bill that became ERISA originally contained a limited [preemption] clause, applicable only to state laws relating to the specific subjects covered by ERISA. The Conference Committee rejected these provisions in favor of the present language, and indicated that the section's [preemptive] scope was as broad as its language." (Emphasis in original; internal quotation marks omitted.) Napoletano v. CIGNA Healthcare of Connecticut, Inc., supra, 238 Conn. 235-36, citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-99, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (the court noted that a state law may be preempted even when the state law is not designed to affect covered plans, the effect is only indirect, or the state law is consistent with ERISA's substantive requirements). But see Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2d Cir. 1989), cert. denied, 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989) (noting that "[t]hose [laws] that have not been preempted are laws of general application — often traditional exercises of state power or regulatory authority — whose effect on ERISA plans is incidental.").
ERISA has its own internal citations for section numbers; whenever possible the corresponding U.S.C. section number has been provided.
"It is thus clear that ERISA's [preemption] provision was prompted by recognition that employers establishing and maintaining employee benefit plans are faced with the task of coordinating complex administrative activities. A patchwork scheme of regulation would introduce considerable inefficiencies in benefit program operation, which might lead those employers with existing plans to reduce benefits, and those without such plans to refrain from adopting them. [Preemption] ensures that the administrative practices of a benefit plan will be governed by only a single set of regulations." (Internal quotation marks omitted.) Napoletano v. CIGNA Healthcare of Connecticut, Inc., supra, 238 Conn. 237.
To determine properly whether the defendants' counterclaims are preempted by ERISA, this court must examine the content of the counterclaims and whether they have any affect, beyond incidental, on the ERISA plan. The defendants' causes of action do not directly implicate an ERISA plan, but rely instead on generally applicable law. See Aetna Life Ins. Co. v. Borges, supra, 869 F.2d 147 (noting that Connecticut's escheat law does not focus specifically on ERISA plans or benefits, but on abandoned or lost property generally). But see Ingersoll-Rand Co. v. McClendon, supra, 498 U.S. 139 -40 (stating that a cause of action that relates to the essence of the pension plan itself, rather than simply the benefits of the pension plan, or where liability can only be established by referencing the pension plan will be clear cases where preemption exists). In Napoletano v. Cigna Healthcare of Connecticut, Inc., supra, 238 Conn. 216, the physician plaintiffs raised similar claims as the defendants in the present case. In that case, the plaintiffs consisted of a group of physicians that was participating in the CIGNA healthcare network and had been terminated without cause. Those plaintiffs also alleged that their removal was a breach of the contract between network provider and physician, a breach of the covenant of good faith and fair dealing, tortious interference with business expectancy, and a violation of CUTPA. The Supreme Court noted that "the essence of the plaintiffs' claims do not relate to the administration of employee benefit plans . . . The claims and relief do not impermissibly affect the plans — they do not attempt to prescribe the substantive administrative aspects of a plan, such as a determination of an employee's eligibility, the nature and amount of employee benefits, the amount of an employer's contribution to a plan, and the rules and regulations under which the plan operated . . . The plaintiffs' claims do not require the administrators to operate the plans differently, they do not force a plan to adopt a certain scheme of substantive coverage, they do not tell CIGNA what type of plan to adopt, what coverage to offer, or whom to cover." (Citations omitted.) Id., 243-44. "[T]he plaintiffs' claims merely turn on requiring CIGNA to enforce the benefit plan that it has already established and is maintaining." Id., 244.
In Napoletano v. CIGNA Healthcare of Connecticut, Inc, supra, 238 Conn. 216, the case of the physicians ( Napoletano) was combined with that of the patients ( Hollis v. CIGNA Healthcare of Connecticut, Inc.) who were denied the right to continue to receive services from their current medical providers. Further analysis will only explore the Supreme Court's reasoning as relates to the physician plaintiffs.
Similarly, the defendants in the present case are pressing claims that allege that Aetna has interfered impermissibly with their relationships with their patients, cost them business because of this interference, and breached the provider agreement between the parties. At no time do the defendants make any allegations that would require that Aetna make any substantive changes to the employee benefit plan that they administer. Like the plaintiffs in Napoletano, these defendants are asking that Aetna enforce the benefit plan that they have already established and are maintaining. The defendants contend that if they performed the services under the Aetna plan, then they are entitled to receive payment for such services under the provider agreement. By not making payments under the plan and investigating the defendants' procedures, Aetna has caused the effects that the defendants detail in their counterclaims. See Revised Answer, Special Defenses and Counterclaim, ¶ 64. The defendants' allegations do not implicate the administration of Aetna's employee benefit plan; their allegations suggest that the court should require that Aetna enforce the plan as currently maintained. The defendants are not asking that the coverage of the plan be expanded to include chiropractic services or that the plan be adjusted in any other substantive manner. If the defendants' allegations are to be believed, then the court is being asked to require Aetna to make payments under the current plan (and cease interference with the defendants' business operations), because the defendants have complied with the requirements of the plan and the provider agreement.
While the court may have to make reference to the ERISA plan in the course of deciding issues in the defendants' counterclaims, it is not apparent that the determinations will have an effect on the regulations of the ERISA plan. "What triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefit plans, such as determining an employee's eligibility for a benefit and the amount of that benefit." (Internal quotation marks omitted.) Gresham v. Lumbermen's Mutual Casualty Co., 404 F.3d 253, 258 (4th Cir. 2005). See generally Sommers Drug Stores v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1467 (5th Cir. 1986), cert. denied, 479 U.S. 1034, 107 S.Ct. 884, 93 L.Ed.2d 837 (1987) ("courts are more likely to find that a state law relates to a benefit plan if it affects relations among the principal ERISA entities — the employer, the plan, the plan fiduciaries, and the beneficiaries — than if it affects relations between one of these entities and an outside party, or between two outside parties with only an incidental effect on the plan."); Hospice of Metro Denver Inc. v. Group Health Insurance of Oklahoma, Inc., 944 F.2d 752, 756 (10th Cir. 1991) (Internal quotation marks omitted.) ("a state law claim which does not affect the relations among the principal ERISA entities . . . is not preempted by ERISA."); Geller v. County Line Auto Sales, Inc., 86 F.3d 18, 23 (2d Cir. 1996) (common law fraud claim not preempted when "plan was only the context in which . . . garden variety fraud occurred.").
Nothing this court might decide will expand coverage for beneficiaries under the plan, require Aetna to expand employee eligibility, or require Aetna to change substantive provisions of the plan. The only issue to be decided in the counterclaims is whether Aetna has wrongfully withheld payments from the defendants based on the provisions of the provider agreement. No reference to the ERISA plan is needed, other than to demonstrate that the parties formed a relationship with the plan as a backdrop. Claims based on breach of the provider agreement do not specifically reference the employee benefit plan and do not require an adjustment to the administration of the plan.
A final determination that the court must make in analyzing whether the defendants' counterclaims are preempted by operation of ERISA, beyond the question of whether the claims are "related to" an ERISA plan, is whether the state law claims raised by the defendants in their counterclaims are identical to causes of action that they might have advanced under the civil enforcement provisions of ERISA. See Plumbing Industry Board v. E.W. Howell Co., 126 F.3d 61, 68 (2d Cir. 1997) (noting that while the court did not find automatic preemption based on a "refers to" analysis, the court did find preemption because the examined statute provided an alternative mechanism for enforcing ERISA-protected rights). Section 1132(a) of the U.S.C., states, in part, "[a] civil action may be brought by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan . . ." (Emphasis added.) The type of actions that can be brought under the civil enforcement provisions of ERISA are extensive, but either include references to "participant," "beneficiary," or the secretary of labor. No reading of the Code would include litigants like we have here.
29 U.S.C. § 1002, the definition section of ERISA, defines "participant" to mean "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit." Further, it defines "beneficiary" to mean "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." Id.
The defendants cannot be considered participants in the Aetna plan because that definition contemplates an employee, former employee or family member eligible to receive employee benefits under an ERISA plan. The defendants, thus, would have to be considered beneficiaries under the plan to take advantage of the civil enforcement provisions of ERISA. Using the definition provided in ERISA, the defendants would only be regarded as beneficiaries if their patients ("participants") had assigned one of their rights under the plan to the defendants. There are no facts alleged in the complaint or counterclaims to suggest that the defendants have been assigned some right under the plan that would normally accrue to the participants in the course of medical treatment. The defendants have only received the right to receive payments from the plan provider in exchange for providing healthcare services. While the standing requirements of 29 U.S.C. § 1132 are restricted, an exception has been recognized by federal appellate courts. See Simon v. General Electric Co., 263 F.3d 176, 178 (2d Cir. 2001) (noting that an exception has been carved out that "grants standing only to healthcare providers to whom a beneficiary has assigned his claim in exchange for healthcare"). See also Simon v. General Electric Co., supra, 177, citing, Chemung Canal Trust Co. v. Sovran Bank/Maryland, 939 F.2d 12, 14 (2d Cir. 1991), cert. denied, 505 U.S. 1212, 112 S.Ct. 3014, 120 L.Ed.2d 887 (1992). ("[I]n the absence of some indication of legislative intent to grant additional parties standing to sue, the list in § 502 [ 29 U.S.C. § 1132] should be viewed as exclusive.")
There are no alleged facts in the pleadings to indicate that the defendants are assignees of rights held by their patients under the patients' healthcare plan. Even if the defendants held such rights, then the assignments would have to be valid under the benefit plan. See Erika, Inc. v. Blue Cross Blue Shield of Alabama, 496 F.Sup. 786 (N.D. Ala. 1980); Kelly Healthcare, Inc. v. Prudential Ins. Co. of America, Inc., 226 Va. 376, 309 S.E.2d 305 (Va. 1983) ("authorization to pay" clauses have been found not to constitute an assignment). Without such a finding, it is not possible to find that the defendants are beneficiaries under the ERISA definition such that they would have standing to sue under the civil enforcement provisions of 29 U.S.C. § 1132. If the defendants are not bringing suit of a type that they could have brought to enforce rights using enforcement procedures under ERISA, then their state law civil claims are not preempted by this methodology.
The plaintiff's motion to dismiss is denied because the defendants' counterclaims are not preempted by ERISA. The court finds that the state law, which is the basis for the counterclaims, does not come in direct conflict with the provisions of ERISA. Further, the court finds that the defendants' counterclaims do not "relate to" an ERISA plan, such that enforcement of defendants' claims will call into question the administration of the plan, nor were the defendants' principal ERISA entities such that actions involving them implicate the ERISA plan. On the contrary, enforcement of the defendants' claims will only require that the plaintiff operate the plan as currently formulated. No changes to the plan need be contemplated. Additionally, the court finds that the defendants would not have standing to sue under the civil enforcement provisions of ERISA, so their state law claims cannot be of a type that they could have remedied through utilization of ERISA.