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New Life Homecare, Inc. v. Blue Cross of Northeastern Pennsylvania

February 14, 2008


The opinion of the court was delivered by: Judge Caputo


Presently before the Court is Defendants Blue Cross of North Eastern Pennsylvania, et al.'s Motion (Doc. 48) to dismiss the Amended Complaint (Doc. 43) of Plaintiffs New Life Homecare, Inc., et al. Because New Life does not have standing to bring ERISA claims; because the only state law claim preempted by ERISA is the individual Plaintiffs' breach of contract claim in Count VIII; because Plaintiffs' claims are not precluded by Defendants' argument that they acted properly when terminating the group coverage; because in Count IV's breach of fiduciary duty claims, Defendants were not fiduciaries with respect to the processing of enrollment forms but Plaintiffs did state a claim upon which relief can be granted arising out of Defendants' failure to offer an option for a waiver; because Plaintiffs have not stated claims upon which relief can be granted in Counts III, V, or VI but have stated claims upon which relief can be granted in the ERISA § 510 claim (Count VII), New Life's breach of contract claim (Count VIII), and New Life and Malia's tortious interference with contratual relations claim (Count IX), Defendants' motion will be granted in part and denied in part. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1367.


Plaintiffs filed their Amended Complaint (Doc. 43) on August 15, 2007. Therein, they allege the following: Plaintiff New Life Homecare Inc. (New Life) is a specialty pharmacy providing for the home care and treatment of those with bleeding disorders. (Am. Compl., Doc. 43 ¶ 6.) Plaintiff the Reverend Gregory M. J. Malia is President and Chief Executive Officer of New Life and also a participant in the company's group health insurance plan. (Id. ¶ 7.) Plaintiff Frederick Lee is Vice President and a plan participant, and Plaintiffs Barbara Badum, Rodger Deaton, Jerome Drogalis, Margaret Falzone, Zaida Gonzales, Christina Miles, Michael Pajka, Matthew Robinson, Sally Roper, Dawn Sweeny, and Michael Wishneski are employees of New Life and participants in the plan. (Id. ¶¶ 8-19.) The group insurance policy through which New Life offers coverage to its employees and their dependents was issued by Defendants Blue Cross of Northeastern Pennsylvania and Highmark Blue Shield (collectively, "Blue Cross"), both independent licensees of Blue Cross and Blue Shield Association. (Id. ¶¶ 20-23, 28.). Defendant First Priority Health, an HMO, and Defendant First Priority Life Insurance Company, Inc., are subsidiaries of Blue Cross of Northeastern Pennsylvania. (Id. ¶¶24-27.)

Plaintiffs allege that the group insurance agreement between New Life and the Blue Cross Defendants ("the Policy") has been annually renewed without interruption since 2001 and that, on or about October 25, 2006, Blue Cross offered to renew the Policy for 2007 and New Life accepted this offer, giving rise to a "2007 renewal agreement." (Id. ¶¶ 30-33.) Plaintiffs' claim arises out of Blue Cross' cancellation of the 2007 Policy based on New Life's alleged noncompliance with the underwriting requirements. Plaintiffs allege in part that this cancellation resulted in New Life employees having to apply for individual conversion policies under the plan, which are "significantly more costly and afford less benefits than the 2007 policy." (Id. ¶ 55.) Several of these Plaintiff-employees themselves have bleeding disorders or have children who do and have been experiencing interruptions and restrictions in access to medically necessary services, medicines, and supplies. (Id. ¶ 57.) Additionally, New Life has suffered loss of clients, sales, and income. (Id. ¶ 58.)

Plaintiffs also allege that: At all relevant times, New Life and the Blue Cross Defendants had a separate relationship related to New Life's business as a pharmacy. (Id. ¶ 29.) In this relationship, Blue Cross, as an insurer, "provides, among other things, prescription drug benefits administered by its pharmacy benefits manager, Express Scripts, Inc." (Id.) On October 15, 2004, Blue Cross sent a letter to thousands of its subscribers announcing that effective January 1, 2005, New Life would no longer be a participating provider in its Specialty Pharmacy Provider Network and promoting instead a different specialty pharmacy, owned by Express Scripts. (Id. ¶ 61.) In response, New Life brought a civil action in the Court of Common Pleas of Luzerne County, and on December 21, 2004, the parties entered a "Stipulation of Settlement" wherein Blue Cross and Express Scripts agreed to promote New Life as a participating provider and New Life agreed to release those parties from the state court litigation and accept reduced rates for certain products in anticipation of increased business. (Id. ¶¶ 60, 62.) Blue Cross, however, failed to satisfy its obligations under this settlement, New Life sought further judicial intervention, and in September 2005, the parties entered into a second settlement placed on the record in open court, wherein Blue Cross agreed to send a letter to subscribers specifically promoting New Life. (Id. ¶ 65.)

In September 2006, however, Express Scripts informed New Life that it would no longer maintain its Specialty Inject Network and would therefore terminate New Life as a "participating pharmacy." (Id. ¶ 66.) Express Scripts also sent correspondence to New Life's customers on Blue Cross letterhead stating that New Life would no longer be a participating provider after November 1, 2006. (Id. ¶ 67.) New Life's counsel wrote to Express Scripts on September 23 and November 13, 2006, requesting corrective action, but received no response until a letter from Blue Cross on November 16, 2006, questioning New Life's provider status. (Id. ¶¶ 68-69.)

This letter questioning New Life's provider status came only shortly before Blue Cross sent New Life notice, on November 21, 2006, that it intended to terminate the group health insurance through which New Life covered its employees. (Id. ¶ 70.) Plaintiffs allege further that when New Life attempted to procure other group health insurance coverage, the Blue Cross Defendants "arbitrarily refused to insure New Life or any affiliated group, including a separate and distinct corporation ... and a wholly owned corporation ... in violation of Blue Cross's own contract." (Id. ¶ 71.) The Blue Cross Defendants also, in the course of this litigation, took measures to harm Plaintiffs New Life and Reverend Malia, including directing Express Scripts to terminate New Life as a participating provider in Blue Cross's specialty pharmacy network effective August 18, 2007, and, "with full knowledge of ... Malia's chronic and life threatening health conditions, ... discriminat[ing] against the Reverent Malia by implying that they will refuse to insure the Reverend ... or any company in which he holds a managerial position. (Id. ¶¶ 72-73.)

Plaintiff bring nine (9) claims. In Count I, they allege that Blue Cross unjustifiably breached its contractual agreement with New Life regarding the 2007 policy and seek to enforce the terms of the Plan pursuant to ERISA § 502(a). (Id. ¶¶ 74-79.) In Count II, Plaintiffs claim the 2007 policy agreement is still in force and seek clarification of their rights to future benefits under that agreement, pursuant to § 502(a)(1)(B) of ERISA. (Id. ¶¶ 80-84.) In Count III, Plaintiffs claim Defendants discriminated against Malia based on his chronic and life-threatening health conditions, thus violating the non-discrimination provision of the Health Insurance Portability and Accountability Act (HIPPA), 29 U.S.C. § 1182(a)(1). (Id. ¶¶ 85-89.) In Count IV, Plaintiffs claim that Defendants breached their fiduciary duties under the 2006 and 2007 policy agreements by obstructing New Life from coming into compliance with underwriting requirements. (Id. ¶¶ 90-99.) In Count V, Plaintiffs claim that Defendants are equitably estopped, under ERISA § 502(a)(3), from denying the existence or enforcement of the 2007 policy and subsequent renewals. (Id. ¶¶ 100-108). In Count VI, Plaintiffs claim that if the policy is terminated, individual plan participants are entitled under federal law, state law, and the 2006 policy agreement to coverage under "individual conversion contracts," available under the Plan, but that Defendants have failed to offer such coverage to certain individuals, breaching the contract and violating the applicable claims procedure provided under ERISA § 503(1).

(Id. ¶¶ 109-13.) In Count VII, Plaintiffs claim that Defendants discriminated against them for exercising their rights under an employee benefit plan, in violation of ERISA § 502. (Id. ¶¶ 114-17). In Count VIII, Plaintiffs bring a state law claim of breach of contract based on Defendants' repudiation of the parties' 2007 renewal agreement and issuance of cancellation notices without a valid basis. And in Count IX, Plaintiffs bring a state law claim of tortious interference with business and contractual relations. (Id. ¶¶ 123-28.)

Defendants move to dismiss Plaintiffs' Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). This motion is fully briefed and ripe for disposition.


I. Motion to Dismiss Pursuant to Rule 12(b)(1)

Motions to dismiss for lack for standing may be reviewed under Federal Rule of Civil Procedure 12(b)(1). Maio v. Aetna, 221 F.3d 472, 282 & n.7 (3d Cir. 2000). Rule 12(b)(1) provides for dismissal of an action where the court lacks jurisdiction over the subject matter of that action. A defendant may challenge the existence of subject matter jurisdiction in two fashions. See Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). Where a defendant attacks the complaint as deficient on its face, the Court must assume that "the allegations contained in the complaint are true." Id. In deciding a Rule 12(b)(1) facial attack, the court may consider the allegations contained in the complaint and the exhibits attached to the complaint; matters of public record such as court records, letter decisions of government agencies and published reports of administrative bodies; and "undisputably authentic" documents which the plaintiff has identified as a basis of his claims and which the defendant has attached as exhibits to his motion to dismiss. Hunter v. United States, 2000 WL 1880257, at *3 (M.D. Pa. Dec. 15, 2000). See generally Pension Benefit Guar. Corp. V. White Consol. Indus. Inc., 998 F.2d 1192, 1196-97 (3d Cir. 1993).

When the motion to dismiss attacks the existence of subject matter jurisdiction in fact, no presumptive truthfulness attaches to the allegation included in the plaintiff's complaint. Carpet Group Int'l v. Oriental Rug Imps. Ass'n, Inc., 227 F.3d 62, 69 (3d Cir. 2000) (quoting Mortensen, 549 F.2d at 891). Thus, the Court may weigh all of the available evidence to satisfy itself that subject matter jurisdiction indeed exists. Id. It is important to note also that the existence of disputed material facts will not preclude the Court from evaluating the jurisdictional allegations set forth in the compliant. Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000).

In the present matter, the portion of Defendants' motion related to standing relies on Plaintiff's allegations and so will be treated as a facial attack. Accordingly, I will consider the allegations contained in the Amended Complaint and attachments thereto.

II. Motion to Dismiss Pursuant to Rule 12(b)(6)

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, Plaintiff has not plead "enough facts to state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. ----, 127 S.Ct. 1955, 1960, 167 L.Ed.2d 929 (2007), or alleged "facts sufficient to raise a right to relief above the speculative level." Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 317 (3d Cir. 2007). In light of Federal Rule of Civil Procedure 8(a)(2), specific facts are not necessary; the statement need only "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Erickson v. Pardus, --- U.S. ----, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam). "[T]he factual detail in a complaint [must not] be so sketchy that the complaint does not provide the type of notice of the claim to which the defendant is entitled under Rule 8." Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007).

In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The Court may also consider "undisputedly authentic" documents where the plaintiff's claims are based on the documents and the defendant has attached a copy of the document to the motion to dismiss. Id. The Court need not assume that the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 (3d Cir. 1998), nor credit a complaint's "bald assertions" or "legal conclusions." Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).

When considering a Rule 12(b)(6) motion, the Court's role is limited to determining whether the plaintiff is entitled to offer evidence in support of the claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court does not consider whether the plaintiff will ultimately prevail. See id. In order to survive a motion to dismiss, the plaintiff must set forth information from which each element of a claim may be inferred. See Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). The defendant bears the burden of establishing that the plaintiff's complaint fails to state a claim upon which relief can be granted. See Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).


I. The Record Before the Court

The parties refer to a number of agreements: the group insurance agreement for calendar year 2006 ("2006 Policy"); a "2007 renewal contract" ("2007 Policy") which Plaintiffs indicate was entered into when they accepted Defendants' offer, in an October 2006 letter, to renew the policy (see Doc. 43 ¶ 76; Br. in Opp'n, Doc. 54, at 7); the state court settlement agreements to which Plaintiffs refer; and the March 2007 "Partial Settlement Agreement and Release" that Defendants cite.

Of these, only two (2) are included in the record on the Motion to Dismiss: (1) the 2006 Policy (Pls.' Ex. A, Doc. 43), which is attached to Plaintiffs' Amended Complaint, and (2) excerpts from the 2007 Policy -- specifically, the Underwriting Requirements section, Table of Contents page, and the page including termination provisions -- which Defendants attached to their Motion to Dismiss. (See Defs.' Ex. 1, Doc. 49). Undisputedly authentic documents attached to a motion to dismiss may be considered when the Plaintiffs' claims are based on those documents, Pension Benefit Guar. Corp., 988 F.2d at 1196, and Plaintiffs base some of their claims, for instance the claims that Defendants breached the 2007 Policy and breached their fiduciary duties, on the 2007 Policy agreement, including, specifically, its Underwriting Requirements. (See Am. Compl., Doc. 43 ¶¶ 77-79, 82-84, 94-95, 105-08). The March Settlement, although submitted, does not meet the requirements set forth in Pension Benefit Guar. Corp. for inclusion in the record on a motion to dismiss.

II. Standing to Raise ERISA Claims

A. Individual Plaintiffs' Standing

The statutory standing requirements of ERISA § 502(a) provide that a civil action may be brought only by certain parties in certain situations. A participant or beneficiary may sue "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarity his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Also, a "participant, beneficiary, or fiduciary" may bring an action "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." Id. § 1132(a)(3).

A "participant" is "any employee or former employee of an employer ... 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 whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C. § 1002(7). To demonstrate that one "may become eligible" for benefits, "a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future." Leuthner v. Blue Cross & Blue Shield of Northeastern Pa., 454 F.3d 120, 124 (3d Cir. 2006). Having a "colorable claim" requires a "lower burden of persuasion than showing likelihood of success on the merits." Id.

Defendants argue that the individual Plaintiffs lack standing to obtain future insurance coverage because "there was no continued group insurance plan" at the time Plaintiffs filed their most recent complaint and therefore, the Plaintiffs were not participants or beneficiaries at the time their compliant was filed. (Reply Br., Doc. 57, at 8.) But the Third Circuit Court of Appeals has stated that "[t]here is an open question in our Court as to when statutory standing must attach." Graden v. Conextant Sys. Inc., 496 F.3d 291, 296 n.7 (3d Cir. 2007). In Graden, the court noted that Leuthner declined to decide the issue with regard to a § 1132(a)(3) claim for equitable relief and that Daniels v. Thomas & Betts Corp., 263 F.3d 66, 78 (3d Cir. 2001), held that a person need only be a participant at the time of breach to have standing in the context of a § 1132(a)(1)(A) suit. Id. The Daniels court did not elaborate on its holding; it simply stated that "[a]n individual who 'is ... entitled' to a plan benefit or who 'may become entitled' to such a benefit, as of the time that individual makes the request of the plan administrator, thus becomes a 'beneficiary.'" 263 F.3d at 78. The Graden court stated that although the issue was not squarely before it, "one would expect the Daniels holding to apply here ... [b]ecause the relevant language of § 1132(a)(1)(A) and (a)(2) are the same." 263 F.3d at 78. Likewise, nothing in the language of the subsections under which Plaintiffs claim standing,(a)(1)(B) and (a)(3), differs from that of (a)(1)(A) in a way that suggests standing should be evaluated at a different time under those subsections.

Furthermore, even if the Plaintiffs no longer have standing, the Third Circuit Court of Appeals has also held that "in the proper case, we may find that a plaintiff has statutory standing if the plaintiff can in good faith plead that she was an ERISA plan participant or beneficiary and that she still would be but for the alleged malfeasance of a plan fiduciary." Leuthner, 454 F.3d at 129 (ultimately concluding that claimant's allegations did not satisfy this but-for exception and thus did not have a colorable claim for benefits). The essence of this action is that the individual Plaintiffs would still be participants in the 2007 Policy but for Defendants' alleged breach of the 2007 agreement, including a provision that allegedly gave New Life until December 31, 2007, to meet all underwriting requirements, and alleged obstruction of New Life's attempts to bring the plan ...

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