Connecticut General Life Insurance Company et al v. Advanced Surgery Center of Bethesda LLC et al, No. 8:2014cv02376 - Document 63 (D. Md. 2015)
Court Description: MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 7/15/2015. (sat, Chambers)
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Connecticut General Life Insurance Company et al v. Advanced Surgery Center of Bethesda LLC et al Doc. 63 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : CONNECTICUT GENERAL LIFE INSURANCE COMPANY, et al. : v. : Civil Action No. DKC 14-2376 : ADVANCED SURGERY CENTER OF BETHESDA, LLC, et al. : MEMORANDUM OPINION This case involves a dispute over health insurance claim payments. Life Plaintiffs/Counter-Defendants are Connecticut General Insurance Company Company (collectively, and the Cigna Health and Life entities”).1 “Cigna Insurance Among other things, the Cigna entities insure and administer employee health and welfare benefit plans. Defendants/Counter-Plaintiffs care facilities doing (ECF are business twenty in No. 1 ¶ ambulatory Maryland, 41). surgical namely: Advanced Surgery Center of Bethesda, LLC; Bethesda Chevy Chase Surgery Center, LLC; Deer Pointe Surgical Center, LLC; Hagerstown 1 Plaintiffs’ Corporate Disclosure Statements reveal that they are both subsidiaries of “Connecticut General Corporation, which is a wholly-owned subsidiary of Cigna Holdings, Inc., which is a wholly-owned subsidiary of Cigna Corporation.” (ECF Nos. 18 and 19). Although Plaintiffs repeatedly refer to themselves as “Cigna” as if they were a singular entity, it is unclear what relationship these two subsidiaries share, and whether they can be treated as one and the same for the purposes of this action. Accordingly, they will be referred to as the Cigna entities. Dockets.Justia.com Surgery Center, LLC; Leonardtown Surgery Center, LLC; Maple Lawn Surgery Center, LLC; Maryland Specialty Surgery Center, LLC; Monocacy Surgery Center, LLC; Piccard Surgery Center, LLC; Riva Road Surgical Center, LLC; SurgCenter at National Harbor, LLC d/b/a Harborside Surgery Center; SurgCenter of Glen Burnie, LLC; SurgCenter of Greenbelt, LLC; SurgCenter of Silver Spring, LLC; SurgCenter of Southern Maryland, LLC; SurgCenter of Western Maryland, LLC; SurgCenter of White Marsh, LLC; Timonium Surgery Center, LLC; Upper Bay Surgery Center, LLC; and Windsor Mill Surgery Center, outpatient members. LLC (“the ASCs”). The surgical services to the Defendant Surgical Center ASCs Cigna have provided entities’ Development, Inc. plan d/b/a SurgCenter Development (“SurgCenter”) is a Nevada corporation that purportedly helped establish the ASCs and consults in their businesses (collectively, “Defendants”). (Id. ¶ the 33). ASCs The and Cigna SurgCenter entities filed are this action against Defendants asserting claims under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq., and state law based on Defendants’ purportedly unlawful billing scheme. The ASCs filed a counterclaim against the Cigna entities asserting ERISA claims and multiple state law claims based on the Cigna entities’ purportedly unlawful refusal to pay claims for medical services 2 the ASCs performed for the Cigna entities’ health insurance plan members. The parties have filed cross-motions to dismiss, which are fully briefed. (ECF Nos. 41 and 43). no hearing being deemed necessary. The court now rules, Local Rule 105.6. For the following reasons, Defendants’ motion to dismiss will be granted in part and denied in part, and the Cigna entities’ motion to dismiss will be granted in part and denied in part. I. Background2 A. The Cigna Entities’ Health Insurance Plans The Cigna fully-insured entities plans, act as which plan they administrators fund for both themselves, and Administrative Services Only (“ASO”) plans, which are funded by the employers who sponsor them. (Id. ¶¶ 42, 44). For both types of plans, as claims administrators, the plan documents authorize the Cigna entities to “recover any overpayments made by the plans on the plans’ behalf.” (Id. ¶¶ 45-46). The majority of the plans under which the ASCs have sought benefits on behalf of their patients are governed by ERISA. (Id. ¶ 47). The plans at issue offer plan members the choice of seeking medical services from health care providers who contract with the Cigna entities to participate 2 in their provider network The following facts are either set forth in the complaint or evidenced by documents referenced or relied upon in the complaint. 3 (“in-network” or “participating” providers) or from health care providers who do not contract with the Cigna entities (“out-ofnetwork providers”). (Id. ¶ 48). network (Id. providers. ¶ All of the ASCs are out-of- 2). The Cigna entities’ plans reimburse members for certain types of costs and services they receive, which are defined as “covered expenses.” When a plan member receives medical services, the Cigna entities determine what portion of the cost for the covered expense is covered by the plan, which is known as the “allowed amount.” (Id. ¶ 49). Plan cost-sharing members have responsibilities when different using types their plan of benefits, deductibles, co-payments, and co-insurance. including (Id. ¶¶ 50-51). If a plan member receives a medical service from one of the Cigna entities’ in-network providers, the plan pays the provider the amount that the provider agreed to accept as the contracted network rate, and the member pays any applicable deductible, co-pay, and co-insurance. (Id. ¶ 52). member from receives a medical service an in-network If a plan out-of-network provider, the provider can charge whatever it likes for its services (out-of-network rates are generally higher than contracted rates) and the provider may bill the member for any portion of the provider’s charges that the plan does reimburse (amounts not covered by the allowed amount). 55). 4 not (Id. ¶ In order to keep costs down for plans that offer out-ofnetwork benefits, the Cigna entities’ health plans include various financial incentives to encourage members to choose innetwork providers increased services. costs and to make associated (Id. ¶ 56). members with responsible obtaining for the out-of-network One method the Cigna entities’ plans use to allocate out-of-network costs between plan sponsors and plan members is through co-insurance, which is the percentage of the allowed amount that the member is required to pay toward the cost of that service. The co-insurance that plan members must pay for out-of-network services is usually much higher than the co-insurance they pay for in-network services. (Id. ¶ 57). The Cigna entities allege that their plans include a provision which ensures that plan members pay and out-of-network providers do not waive members’ required co-insurance payments. This provision states that the Cigna entities’ plans do not cover: “charges which you [the member] are not obligated to pay or for which you are not billed or for which you would not have been billed except that they were covered under this plan.” 61). (Id. ¶ In addition, the Cigna entities allege that their plans limit reimbursement for out-of-network services to the “maximum reimbursable charge,” which is further defined as no more than the “provider’s normal charge for a similar service or supply,” and exclude from coverage any amounts that exceed the maximum 5 reimbursable charge. they do not (Id. ¶ 63). automatically The Cigna entities aver that reimburse plan members for every charge submitted to them by providers; rather, the plans cover only a portion of charges submitted for covered expenses (the allowed amount), and the covered expenses also are subject to the member’s cost sharing responsibilities (any applicable deductible, co-pay, and co-insurance), meaning a member must pay his or her portion in order for the charges to be covered under the plan. B. (Id. ¶ 65). The ASCs’ Billing Practices The Cigna entities allege that “SurgCenter has developed a business model designed to game the healthcare system by submitting grossly inflated, phantom ‘charges’ to [them] that do not reflect the actual amount the ASCs bill patients. SurgCenter implements this fraudulent scheme through each of the ASCS with which it partners.” (Id. ¶ 70). SurgCenter partners with local surgeons to form physician-owned ASCs organized as limited liability companies, and becomes a vested partner with thirty-five percent ownership in each ASC, including the twenty Defendant ASCs. (Id. ¶¶ 71-74). SurgCenter helps design and construct the ASCs, and once they are operational, SurgCenter continues providing “no-fee management and consulting services in managing and running [the ASCs].” 6 (Id. ¶¶ 72-73). The Cigna entities allege that the ASCs have engaged and continue to engage in a fee-waiver and dual pricing scheme, with significant support and assistance from SurgCenter. As part of this scheme, the ASCs engaged in fee-waivers by “lur[ing] [the Cigna entities’] plan members in as patients by offering to bill and collect for surgical procedures at the plan members’ ‘innetwork’ or lower benefit levels, even though the ASCs knew that, because they are out-of-network facilities, the members’ out-of-network benefits level should apply.” 3). plan (Id. ¶ The ASCs promised the Cigna entities’ plan members that their in-network benefits would apply (including deductible, copay, and co-insurance) to services rendered by the ASCs and that the plan members would incur no additional out-of-pocket costs above and beyond the costs the ASCs quoted to the plan members (Id. ¶ 67), and the ASCs actually calculated the Cigna entities’ plan members’ cost-sharing responsibilities (deductible, co-pay, and co-insurance) by applying members’ in-network rates. (Id. ¶ 83). scheme The Cigna entities involved “dual pricing”: also allege that the ASCs’ the ASCs billed the Cigna entities’ plan members a certain charge that was based on Medicare rates for the service rendered (in order to approximate an in-network contracted rate), while billing the Cigna significantly higher charge for the same service. entities a While the ASCs’ claim forms acknowledged that “[t]he insured’s portion of 7 this bill has been reduced in amount so the patient’s responsibility for the deductible and copay amount is billed at in network rates,” the claim forms did not disclose the full nature of the fee waiver or that patients had been billed based on entirely rates. different charges (Id. ¶¶ 4, 91-92). that mirrored Medicare-based The Cigna entities allege that by stating “[t]he insured’s portion of this bill has been reduced,” the ASCs and SurgCenter affirmatively sought to mislead the Cigna entities into believing that they charged the patient and the Cigna entities the same charge. (Id. ¶ 93). The Cigna entities assert that they relied on the ASCs’ misrepresentations and omissions in their claim forms when processing and paying the ASCs’ claims. The Cigna entities further assert that “all aspects of the fraudulent dual pricing schemes used by each ASC were designed and implemented at the direction of SurgCenter.” (Id. ¶ 79). The Cigna entities allege that “SurgCenter creates the Insurance Verification sheet and Calculation of Patient Responsibility templates, as well as the claim forms submitted to [the Cigna entities] by the ASCs. These documents are created by SurgCenter and provided to the ASCs as part of the scheme to defraud insurers such as [the Cigna entities].” The Cigna entities provide the (Id. ¶ 84). following example of a charge that was submitted on behalf of one of their plan members 8 by an ASC Defendant in order to show how the purported scheme operated: [T]he ASC submitted “charges” of $28,606.88 to [a Cigna entity]. The member had an outof-network co-insurance requirement of 20 percent. But through an internal investigation, [the Cigna entity] found out that the ASC quoted to the patient a charge of only $5,787.50, or approximately five times lower than the charge submitted to [it]. After already starting at the much lower baseline charge based on Medicare rates, the ASC then charged the patient his or her in-network cost-sharing levels[.] As a result, the ASC charged the patient only $431.88, which was a small fraction of the patient’s cost-sharing responsibility under his or her plan. (Id. ¶ 5).3 Based on Defendants’ scheme, the Cigna entities allege that between 2009 and the present, they were fraudulently induced into paying more than $20 million in claim payments to the various ASC Defendants. C. (Id. ¶¶ 12, 97-116). Procedural History The Cigna entities commenced the instant action on July 25, 2014 by filing a complaint against Defendants. The complaint including: (count I); a asserts claim multiple for violations claims overpayments of RICO against under (counts (ECF No. 1). ERISA Defendants, § II.A-II.T); 502(a)(3) state law claims for fraud (count III); aiding and abetting fraud (count IV); negligent misrepresentation (count V); unjust enrichment 3 Additional allegations regarding Defendants’ purportedly fraudulent scheme will be discussed in the analysis section. 9 (count VI); tortious interference with contract (count VII); and declaratory judgment (count VIII). On August 29, 2014, the parties moved to consolidate several related actions that had been removed from state court pursuant to Federal Rule of Civil Procedure 42(a) on the basis that the actions involved common questions of law and fact. (ECF No. 34). The September 12, 2014. motion to consolidate was granted on (ECF No. 40). Defendants moved to dismiss the complaint on October 21, 2014 pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. (ECF No. 41). On the same day Defendants filed their motion to dismiss, the ASCs filed a counterclaim against the Cigna entities. entities 12(b)(6). moved (ECF No. 42). to dismiss (ECF No. 43). On December 5, 2014, the Cigna the counterclaim pursuant to Rule Both motions to dismiss are fully briefed. II. Standard of Review The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. Charlottesville, 464 F.3d 480, 483 (4th Presley v. City of Cir. 2006). A plaintiff’s complaint need only satisfy the standard of Rule 8(a), which requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” 8(a)(2). Fed.R.Civ.P. “Rule 8(a)(2) still requires a ‘showing,’ rather than 10 a blanket assertion, of entitlement to relief.” v. Twombly, 550 U.S. 544, 555 n.3 (2007). Bell Atl. Corp. That showing must consist of more than “a formulaic recitation of the elements of a cause of action” or “naked assertion[s] devoid of further factual enhancement.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted). At this stage, all well-pleaded allegations in a complaint must be considered as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and all factual allegations must be construed in the light most favorable to the plaintiff. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). In evaluating the complaint, unsupported legal allegations not need be accepted. Revene Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989). v. Charles Cnty. Legal conclusions couched as factual allegations are insufficient, Iqbal, 556 U.S. at 678, as are conclusory factual allegations devoid of any reference to actual events. United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). Moreover, allegations of fraud, which the Cigna entities assert in the RICO and state law claims, are heightened pleading standard under Rule 9(b). F.3d at 783. subject to a Harrison, 176 Rule 9(b) states that “in alleging a fraud or mistake, a party must state with particularity the circumstances 11 constituting the fraud or mistake. and other conditions generally.” Such of a Malice, intent, knowledge, person’s allegations mind typically may be “include alleged the ‘time, place and contents of the false representation, as well as the identity of the person making the misrepresentation and what [was] obtained thereby.’” Superior Bank, F.S.B. v. Tandem Nat'l Mortg., Inc., 197 F.Supp.2d 298, 313–14 (D.Md. 2000) (quoting Windsor Assocs., Inc. v. Greenfeld, 564 F.Supp. 273, 280 (D.Md. 1983)). In cases involving concealment or omissions of material facts, however, meeting Rule 9(b)’s particularity requirement will likely Williamson take a Tobacco different Corp., form. Shaw F.Supp. 973 See 539, 552 v. Brown (D.Md. & 1997) (recognizing that an omission likely “cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation” (internal quotations omitted)). The purposes of Rule 9(b) are to provide the defendant with sufficient notice of the basis for the plaintiff’s claim, to protect the defendant against frivolous suits, to eliminate fraud actions where all of the facts are learned only after discovery, and to safeguard the defendant’s reputation. See Harrison, 176 F.3d at 784. In keeping with these objectives, “[a] court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant[s were] made aware of the particular 12 circumstances for which [they] will have to prepare a defense at trial and (2) that [the] plaintiff has substantial prediscovery evidence of those facts.” Id. III. Defendants’ Motion to Dismiss the Cigna Entities’ Complaint A. Claim for Overpayments Pursuant to ERISA § 502(a)(3) (Count I) The Cigna entities assert a claim under ERISA § 502(a)(3) against all the “overpayments” ASCs that seeking: were (1) purportedly restitution made to the of ASCs past in contravention of the plan terms, and (2) an injunction barring the ASCs from submitting similar claims in the future. The Cigna entities allege that they are fiduciaries of the plans that they administer and seek to recover overpayments made by those plans to the ASCs. (ECF No. 1 ¶ 128). The Cigna entities further allege that the plans at issue do not cover “any portion of the charges that [] the ASCs do not require plan members to pay, nor do they require the plan to cover anything in excess of the ASCs’ normal charges to its patients.” (Id. ¶ 131). The Cigna entities aver that the ASCs did not require their plan members to pay the full amount of their cost responsibilities under the terms of their plans. sharing Accordingly, the Cigna entities argue that by “paying the ASCs amounts that the ASCs did not charge plan members, these plans made overpayments to the ASCs[,]” overpayments which belong to the 13 plans. (Id. reimbursement alternative, ¶¶ of a 132, the 134). alleged declaration that The Cigna entities overpayments, they claim payments the overpayment amounts. may or offset seek in from the future The Cigna entities also seek a permanent injunction directing all of the ASCs to submit to the Cigna entities only the charges that they actually charge the plan members for the ASCs’ services and not to submit charges that they do not require the member to pay (including any waived portions of members’ out-of-network co-payment, coinsurance, or deductible amounts). ERISA authorizes plan fiduciaries4 to bring civil actions under § 502(a)(3): “(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 equitable relief (i) to redress such violations or (ii) to enforce any provisions of 4 As recently noted by the United States Court of Appeals for the Fourth Circuit in Pender v. Bank of Am. Corp., No. 141011, 2015 WL 3541927, at *5 (4th Cir. June 8, 2015): Under ERISA, a person is a fiduciary vis-àvis a plan “to the extent” that he (1) “exercises any discretionary authority or discretionary control respecting management of such plan or . . . its assets,” (2) “renders investment advice for a fee or other compensation,” or (3) “has any discretionary authority or discretionary responsibility in the administration of such plan.” ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A). 14 this subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3) (emphasis added). 1. Reimbursement Based on Equitable Restitution or an Equitable Lien under ERISA § 502(a)(3)(B) Defendants reimbursement damages have of rather prohibited moved overpayments than because to dismiss contending equitable compensatory that relief, damages the it and are claim seeks is not for legal therefore recoverable under ERISA. ERISA § 502(a)(3)(B) equitable relief only. permits plan fiduciaries to seek The Supreme Court of the United States has clarified that this section authorizes “those categories of relief that were typically available in equity[.]” Sereboff v. Mid Atl. Med. Servs., 547 U.S. 356, 361 (2006) (emphasis in original) (internal citation and quotation marks omitted). In Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 205 (2002), the Court noted that a claim is not equitable simply because a plaintiff labels it as such; rather, “whether it is legal or equitable depends on the basis for the plaintiff’s claim and the nature of the underlying remedies sought.” 212-13 (internal citation and quotation marks Id. at omitted). Accordingly, plan fiduciaries seeking restitution for alleged overpayments of plan benefits, such as the Cigna entities, must 15 establish that the relief they seek under § 502(a)(3)(B) is equitable rather than legal restitution. In Knudson, the Court clarified some of the differences between equitable and legal restitution: In cases in which the plaintiff could not assert title or right to possession of particular property, but in which nevertheless he might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him, the plaintiff had a right to restitution at law through an action derived from the common-law writ of assumpsit. In such cases, the plaintiff’s claim was considered legal because he sought to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money. Such claims were viewed essentially as actions at law for breach of contract (whether the contract was actual or implied). In contrast, a plaintiff could seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession. A court of equity could then order a defendant to transfer title (in the case of the constructive trust) or to give a security interest (in the case of the equitable lien) to a plaintiff who was, in the eyes of equity, the true owner. But where the property sought to be recovered or its proceeds have been dissipated so that no product remains, the plaintiff’s claim is only that of a general creditor, and the plaintiff cannot enforce a constructive trust of or an equitable lien upon other property of the defendant. Thus, for restitution to lie in equity, the action generally must seek not 16 to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession. 534 U.S. at 213-14 (emphases in original) (footnote omitted) (internal citations and quotation marks omitted). In Knudson, the plan paid the medical expenses of a beneficiary who had been injured in a car lawsuit arising accident. from the When the accident, beneficiary the settlement funds in a special needs trust. settled beneficiary a placed The plan fiduciary sought to recover reimbursement of the medical expenses under ERISA § 502(a)(3)(B) based on a plan provision which reserved “a first lien upon any recovery, whether by settlement, judgment or otherwise, that the beneficiary receives from a third party, not to exceed the amount of benefits paid by the Plan or the amount received by the beneficiary for such medical treatment.” 207 (internal citations and quotation marks omitted). Id. at The Court found that the basis of the fiduciary’s claim was legal rather than equitable because the funds it sought — the proceeds from the settlement of the beneficiary’s tort claim — were not in the beneficiary’s possession, but rather in a special needs trust account. Accordingly, the Court concluded that the fiduciary’s suit not was authorized by § 502(a)(3) because it actually sought compensatory damages — “some funds for benefits that they conferred” — rather than the equitable return of specific funds 17 belonging to possession. claim for fiduciary the fund that were within the beneficiary’s Accordingly, Knudson established that when making a equitable must restitution establish under that it ERISA is § 502(a)(3), a return of seeking specifically identifiable funds (or proceeds thereof) that are within the defendant’s possession and control that rightfully belong to the plan. Id. at 212-18. The “tracing method” of establishing that the restitution it seeks is equitable requires a fiduciary to trace its money to a particular fund or asset in the defendant’s possession or control. In Sereboff, the Supreme Court recognized a second means by which a plan fiduciary may seek equitable reimbursement of plan funds pursuant to § 502(a)(3). In that case, the plan paid medical expenses of plan beneficiaries who were injured in an automobile accident. The beneficiaries subsequently received a settlement from the third party tortfeasor and were required to set aside a portion of the proceeds from the settlement in an investment account due to a temporary restraining order preliminary injunction filed by the plan fiduciary. addressed whether 502(a)(3)(B) the seeking “equitable” in nature. an “Acts of beneficiaries Third to ERISA fiduciary’s reimbursement of these The Court claim plan and under funds § was The ERISA plan at issue in Sereboff had Parties” reimburse the 18 provision, plan which administrator required if the beneficiary later recovered monies for those injuries from a lawsuit or settlement with a third party. 547 U.S. at 359. The beneficiaries in Sereboff argued that the monies sought by the fiduciary did not meet the “strict tracing rules” required for equitable restitution because the fiduciary could not trace its money to a particular fund or asset, or product thereof, in defendant’s possession. The Court rejected this argument, finding that strict tracing requirements were only necessary for “equitable liens sought as a matter of restitution,” and clarified that when an equitable lien over the funds at issue has been created by agreement (or assignment), no tracing of funds is required in order for it to be an equitable remedy. Id. at 365-68. The Court cited two cases “from the days of the divided bench” to elaborate on how equitable liens are created and why they permit recovery even in the absence of the tracing requirement. First, the Court discussed Barnes v. Alexander, 232 (1914), U.S. 117 a case in which an attorney, Barnes, promised two other attorneys, Street and Alexander, one-third of the contingent fee he expected to receive. The Court likened the attorneys’ claim in Barnes to a portion of the contingency fee to that of the plan fiduciary’s payments: 19 claim to third party In upholding their equitable claim to this portion of the fee, Justice Holmes recited [in Barnes] “the familiar rule of equity that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets a title to the thing.” On the basis of this rule, he concluded that Barnes’ undertaking “created a lien” upon the portion of the monetary recovery due Barnes from the client, which Street and Alexander could “follow . . . into the hands of . . . Barnes,” “as soon as the fund was identified[.]” Much like Barnes’ promise to Street and Alexander, the “Acts of Third Parties” provision in the Sereboffs’ plan specifically identified a particular fund, distinct from the Sereboffs’ general assets — “all recoveries from a third party (whether by lawsuit, settlement, or otherwise)” — and a particular share of that fund to which Mid Atlantic was entitled — “that portion of the total recovery which is due [the plan fiduciary] for benefits paid.” Like Street and Alexander in Barnes, therefore, Mid Atlantic could rely on a “familiar rule of equity” to collect for the medical bills it had paid on the Sereboffs’ behalf. This rule allowed them to “follow” a portion of the recovery “into the Sereboffs’ hands” “as soon as the settlement fund was identified,” and impose on that portion a constructive trust or equitable lien. Sereboff, 547 U.S. at 363-64 (internal citations omitted). Second, the Court cited to Walker v. Brown, 165 U.S. 654 (1897), for the general principle that “to dedicate property to a particular purpose, to provide that a specific creditor and that creditor alone shall be authorized to seek payment of his debt 20 from the property or its value, is unmistakably to create an equitable lien.” Sereboff, citation omitted). The 547 Court U.S. held at that 367-68 the (internal “Acts of Third Parties” provision in the Sereboffs’ plan identified specific funds and a particular share of those funds that the plan fiduciary was entitled to recover, and accordingly, created an equitable lien or constructive trust over those funds, which permitted the plan fiduciary to seek equitable reimbursement pursuant to ERISA § 502(a)(3)(B). In the wake of Knudson and Sereboff, plan fiduciaries have at least two methods of establishing that their claims seeking reimbursement of plan equitable in nature: funds under ERISA § 502(a)(3)(B) are (1) the “tracing method” set forth in Knudson, and (2) the equitable lien or constructive trust method set forth in Sereboff. a. Reimbursement Based on the “Tracing Method” Defendants correctly argue that the relief the Cigna entities seek is not equitable because the Cigna entities have not identified specific assets separate and apart from the ASCs’ general assets. The Cigna entities’ complaint fails to establish that the § 502(a)(3)(B) claim is “equitable” in nature because its overpayments specifically allegations are do currently identifiable. not in the plausibly ASCs’ Indeed, 21 allege that possession the only the and are allegation supporting that the Cigna entities can specifically identify and trace plan funds is that the “overpayments [at issue] are within the possession and control of the Defendants.” 135). were (ECF No. 1 ¶ The Cigna entities have not alleged that the overpayments kept in separate accounts or otherwise how they separate and distinct from the ASCs’ general assets. are See Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Health Special Risk, Inc., dismissal because 756 of the F.3d the 356, plan fiduciary, 366 (5th fiduciary’s who Cir. ERISA sought 2014) § (affirming 502(a)(3) reimbursement claim from its beneficiaries’ secondary insurance policies, had not identified specific funds, but merely “general assets of [d]efendants, which were not received from, and have not been promised to, [the plan fiduciary].”). assertion, devoid of overpayments, which present are day, were still The Cigna entities make only a bald any factual purportedly within the support, made ASCs’ that between possession these 2009 and and are identifiable from their general assets. b. Reimbursement Based on an Equitable Lien The Cigna entities argue that even if the overpayments are not strictly traceable, courts have permitted equitable recovery of overpaid plan funds where the parties have an agreement, such as the Cigna entities’ plan documents, that provide an equitable lien or constructive trust over payments made on behalf of the 22 plan. The Cigna entities point to a provision within their plan documents titled “Recovery of Overpayment,” which states that: “When an overpayment has been made by Cigna, Cigna will have the right at any time to: recover that overpayment from the person to whom or on whose behalf it was made; or offset the amount of that overpayment from a future claim Provision”) (ECF No. 44-1, at 39). payment” (“Overpayment The Cigna entities argue that this Overpayment Provision creates an equitable lien over the funds they seek to recover. Defendants argue that the relief the Cigna entities seek is not equitable because the provision they cite does not create an equitable lien on any portion of the benefits that have been paid to the ASCs. “ERISA-plan provisions do not create constructive trusts and equitable liens by the mere fact of their existence; the liens and trusts are created parties to deliver assets.” at 365. by the agreement between the Health Special Risk, Inc., 756 F.3d Accordingly, the plan document itself must be examined to determine whether its language creates an equitable lien. As discussed by the Supreme Court in Walker, 165 U.S. at 664, an equitable lien may be created against a person’s real or personal property either by express language or by “implication from the terms of the agreement, construed with reference to the situation of the parties at the time of the contract[.]” 23 The Court also summarized the manner in which equitable liens are created and their enforcement: Every express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described or identified, a security for a debt or other obligation, or whereby the party promises to convey or assign or transfer the property as security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor, but of his heirs, administrators, executors, voluntary assignees, and purchasers or incumbrancers with notice. Id. at 664-65. Here, the Cigna entities have not plausibly alleged that their plan overpayments, documents which created permits an them to equitable recover under ERISA § 502(a)(3)(B) from the ASC.5 lien the over the overpayments The language in the Overpayment Provision may grant the Cigna entities a contractual right to recoupment of some funds from a plan member to whom or 5 The complaint incorporates by reference the Cigna entities’ plan documents, the terms of which purportedly govern the plans at issue in this case. (ECF No. 44-1). Accordingly, the plan document, which is attached as an exhibit to the Cigna entities’ opposition motion, may be considered in adjudicating Defendants’ motion to dismiss. See Clark v. BASF Corp., 142 th Fed.App’x 659, 660-61 (4 Cir. 2005) (finding that the district court properly considered an ERISA plan document on a motion to dismiss because even though the plan document was not attached to the complaint, there was “no dispute as to its authenticity, the document was referenced in the complaint, and the document was central to [plaintiff’s] claims”). 24 on whose behalf an overpayment was made. creates an equitable lien or How that language constructive trust on every overpayment of benefits made by a Cigna entity to a provider is far from obvious. 305 F.3d 264, See Gallagher v. Reliance Std. Life Ins. Co., (4th 269 Cir. 2002) (internal citation and quotation marks omitted) (“Any ambiguity in an ERISA plan is construed against the drafter of the plan, and it is construed in accordance insured.”). with the reasonable expectations of the The Overpayment Provision, as written, may permit a Cigna entity to recoup an overpayment that it made to a provider directly from a plan member or to refuse to pay future claim amounts of the member in order to offset prior overpayments. Both of these scenarios indicate that the Cigna entities have the right to recoup some funds from a plan member but not the particular payment made. that the provision allows The Cigna entities appear to argue them to recover directly to a provider from that provider. does not support that conclusion. overpayments made The plan language A comparison of the language used on the page directly preceding the Overpayment Provision under the section Responsible” used in the “Expenses (“Third Party Overpayment For Payor Which A Section”) Provision, Third with Party the demonstrates provision at issue does not create an equitable lien. 25 May Be language that the The Third Party Payor Section includes a subsection entitled “Subrogation/Right of Reimbursement” which states that: If a Participant incurs a Covered Expense for which . . . another party may be responsible or for which the Participant may receive payment [from a third party tortfeasor] . . . [t]he plan is [] granted a right of reimbursement from the proceeds of any recovery whether by settlement, judgment, or otherwise. (ECF NO. 44-1, at 38). More importantly, the Third Party Payor Section includes a subsection entitled “Lien of the Plan,” which states that: By accepting benefits under this plan, a Participant: grants a lien and assigns to the plan an amount equal to the benefits paid under the plan against any recovery made by or on behalf of the Participant . . .[;] agrees that this lien shall constitute a charge against the proceeds of any recovery and the plan shall be entitled to assert a security interest thereon; [and] agrees to hold the proceeds of any recovery in trust for the benefit of the plan to the extent of any payment made by the plan. (Id.). trust This language clearly creates a lien or constructive on particular funds that come into a plan members’ possession, and could reasonably be understood by a plan member as asserting such a lien or constructive trust. The language used in the Overpayment Provision cannot be understood by a plan member — or a provider that is not a party to the plan — as asserting an equitable lien or overpayments to providers. 26 constructive trust on plan The Cigna entities’ allegations do not state an equitable claim for recovery 502(a)(3)(B). of overpayments pursuant to ERISA § Accordingly, this portion of the Cigna entities’ ERISA claim will be dismissed. 2. Injunctive Relief The Cigna entities also seek a permanent injunction pursuant to ERISA § 502(a)(3)(A), “directing all of the ASCs to submit to [them] only charges that the ASC actually charges the plan member as payment in full for the ASCs’ services and not to submit charges actually which require the include amounts member to that pay the ASC does (including, not without limitation, the waiver of any portion of the members’ required out-of-network amounts).” co-insurance, co-payment, and deductible (ECF No. 1 ¶ 138). Defendants argue that an ERISA claim for an injunction is barred because, if granted, the injunction would Cigna entities’ fiduciary duty to plan members. breach the Specifically, Defendants argue that an injunction would “prevent the ASCs from discounting the co-payments charged to [the Cigna entities’] insureds — thereby directly harming those insureds[,]” and by restricting insureds’ “choice of medical provider by enjoining the ASCs from matching their patients’ in-network out-of-pocket costs.” (ECF No. 51, at 14-15). 27 The Cigna entities’ request for injunctive appropriate under ERISA § 502(a)(3)(A). relief is They have identified a billing practice by the ASCs which may violate the terms of the plans at issue by not holding plan members accountable for their required contribution amounts (including deductibles, co-pays, and co-insurance) and by billing members and the Cigna entities based on different underlying charges. The Cigna entities, purportedly acting as plan fiduciaries, seek to enjoin these practices in order Defendants’ argument relief Cigna the to enforce that the terms of this claim is seek would breach entities the barred plans. because their the fiduciary duties fails because it is an affirmative defense that is not appropriate Accordingly, to consider Defendants’ at this motion 6 stage to in dismiss the proceedings.6 has failed to An affirmative defense is not ordinarily considered on a motion to dismiss because plaintiffs are not required to negate them in their complaints. The purpose of a motion to dismiss under Fed.R.Civ.P. 12(b)(6) is to “test the legal adequacy of the complaint, and not to address the merits of any affirmative defenses.” Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d. 244, 250 (4th Cir. 1993). “A court may consider defenses on a 12(b)(6) motion only ‘when the face of the complaint clearly reveals the existence of a meritorious affirmative defense.’” E. Shore Markets, Inc. v. J.D. Assoc. Ltd. P’ship, 213 F.3d 175, 185 (4th Cir. 2000); see also 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357, at 348 (2d ed. 1990). It is not clear from the face of the complaint that the Cigna entities’ requested relief would violate their fiduciary duties. Indeed, they seek through the injunction purportedly to enforce the terms of the plans, which is consistent with their fiduciary duties. 28 demonstrate that the Cigna entities’ ERISA § 502(a)(3) claim must be dismissed insofar as it seeks injunctive relief. B. Civil RICO Claim Pursuant to § 1962(c) (Counts II.A to II.T) The Cigna entities assert a claim pursuant to RICO’s civil provision, 18 U.S.C. § 1964, which provides a cause of action to “[a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962].” The Cigna entities allege that Defendants violated RICO § 1962(c). In order for a civil RICO claim to survive a motion to dismiss, a plaintiff must allege “(1) conduct; (2) of an pattern; (4) of racketeering.” 473 U.S. 479, 496 (1985). proximate cause, that is enterprise; (3) through a Sedima, S.P.R.L. v. Imrex Co., Plaintiffs must additionally plead that they were injured in businesses or property “by reason of” the RICO violation. their Hemi Group, LLC v. City of New York, N.Y., 559 U.S. 1, 6 (2010). The Cigna entities allege that SurgCenter entered into twoparty associations-in-fact with each twenty separate enterprises under RICO. ASC, which constitute (ECF No. 1 ¶ 140). According to the Cigna entities: SurgCenter came to agreements with each of the ASCs to create the enterprises, the purpose of which is to operate for-profit medical centers and thereby enrich the enterprise’s members by luring [the Cigna entities’] plan members to use these out-ofnetwork centers through misrepresentation about the centers’ costs to plan members, 29 [the Cigna entities], and their plans. SurgCenter’s role in each of the twenty enterprises was to invest in the ASC and provide operational support to the ASC. Among other things, Surgcenter developed the dual pricing scheme [] and directed the ASCs to follow the dual pricing scheme, which each of the twenty ASCs agreed to do. SurgCenter also provided each ASC with the sample language to include on claim forms submitted to managed care companies like [the Cigna entities.] (Id. ¶ 140). The Cigna entities allege that the ASC’s role in the enterprise was to: (1) lure patients to the facility by misleading the patients into believing that they could use their “in-network” benefits at the ASC; (2) treat patients and charge the patients little or nothing for the ASC’s services; and (3) submit exorbitant, fraudulent charges to managed care companies like the Cigna entities in order to induce them to pay the ASC based on entities claim the fraudulent allege forms to that the sums each Cigna submitted. ASC (Id.). submitted entities and numerous that each The Cigna fraudulent claim form submitted constitutes a separate act of mail and wire fraud. (Id. ¶¶ 148-50). SurgCenter is alleged to have helped direct and coordinate the purported acts of mail and wire fraud. ¶ 151). (Id. The Cigna entities contend that by submitting thousands of forms over the past several years, the purported enterprises have engaged in a pattern of racketeering activity. 153). 30 (Id. ¶ Defendants move to dismiss the Cigna entities’ RICO claim on several entities grounds, have enterprise the failed that is first to of allege distinct from which an is that actionable, Defendants Cigna ongoing, themselves distinct from the alleged racketeering activity. at 15-20). the and (ECF No. 41-1, Defendants argue that the Cigna entities have not met the distinctiveness requirement of § 1962(c) because the ASC is the only participant in the enterprise that has purportedly engaged in fraudulent activities. According to Defendants, SurgCenter has only been named as part of the sham “enterprises” because the alone, could Defendants Cigna not also entities recognized constitute argue that an the that an ASC, standing “enterprise” under members the of RICO. alleged enterprises, SurgCenter and an individual ASC, are not distinct, independent entities because SurgCenter is a thirty-five percent owner of each ASC, provides management services to each ASC, and directed the allegedly fraudulent billing scheme. (ECF No. 41- 1, at 16-18). Under 18 U.S.C. § 1962(c), it is unlawful: for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt. 31 “[T]o establish liability under § 1962(c) one must allege and prove the existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by a different name.” Ltd. v. King, 533 U.S. 158, 161 Cedric Kushner Promotions, (2001). There must be a “person,” alleged to have violated Section 1962(c) and to be liable to the claimant for damages, who is separate and distinct from the “enterprise,” or tool, through which the RICO violation occurred. See Busby v. Crown Supply, Inc., 896 F.2d 833, 840-41 (4th Cir. 1990); New Beckley Mining Corp. v. Int’l Union, United Mine Workers, 18 F.3d 1161, 1163 (4th Cir. 1994). be an individual or corporate entity. A “person” can 18 U.S.C. § 1961(3). “Enterprise,” as set forth in 18 U.S.C. § 1961(4), “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” proof of associates three elements: functioning as (1) a an An “enterprise” requires ongoing continuing organization; unit; and (3) (2) the enterprise is an entity “separate and apart from the pattern of activity in which it engages.” Proctor v. Metro. Money Store Corp., 645 F.Supp.2d 464, 477–78 (D.Md. 2009). An association- in-fact enterprise is not defined by a formal legal structure, but is instead characterized by the association of its members “for a common purpose of engaging 32 in a course of conduct.” United States v. Turkette, 452 U.S. 576, 583 (1981) (emphasis added). An association-in-fact enterprise “need not have a hierarchical structure or a chain of command; decisions may be made on an ad hoc basis and by any number of methods.” United States, 556 U.S. 938, 948 (2009). Court clarified enterprise purpose, need in not Boyle have relationships that any Indeed, the Supreme an “association-in-fact” structural among those Boyle v. features beyond associated with “a the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose.” Id. at 946. As noted by the Seventh Circuit in United Food & Commercial Workers Unions & Employers Midwest Health Benefits Fund v. Walgreen Co., “[d]espite the expansive nature of this definition, it is not limitless[,]” as the alleged “person” must still have a separate identity must from have the purported “conducted or enterprise, participated in “[a]nd the that conduct ‘enterprise’s affairs,’ not just [its] own affairs.” “person” of the 719 F.3d 849, 853-54 (7th Cir. 2013) (quoting Reves v. Ernst & Young, 507 U.S. 170, 185 (1993) (emphasis in original)). In Walgreen Co., the Seventh Circuit affirmed the United States District Court for the Northern District of Illinois’s dismissal of a RICO suit against pharmaceutical manufacturers, Par Pharmaceutical Companies and Par Pharmaceutical, Inc. (“Par”), and a pharmacy, Walgreen Company (“Walgreens), who were 33 alleged to be members of an association-in-fact enterprise. analysis in Walgreen, Co. is instructive here. The There, Par and Walgreens were alleged to have engaged in a fraudulent scheme to overcharge several insurance generic providers, drugs with by dosage filling forms prescriptions that differed for from (e.g., switching from tablet to capsule and vice versa), and were more expensive than the dosage forms prescribed by the physician, in order to increase their profits. Id. at 851-53. “According the to the complaint, the members of enterprise associated for the common purpose of profiting from illegally submitting Par’s more expensive dosage dosage forms actually prescribed.” forms Id. at 854. [] for cheaper “The complaint further allege[d] that communications between the parties, as well as Walgreens’s implementation of the illegal dosage-formswitching program using Par’s pills, establishe[d] relationships among the enterprise’s members.” Id. Finally, the scheme’s multi-year duration was alleged to establish longevity. Id. The Seventh Circuit noted that Boyle “took a liberal view of what it takes to be an association-in-fact for RICO purposes;” but found nevertheless that “[e]ven if [it] were to assume [] that the complaint association-in-fact sufficiently enterprise plead[] under the Boyle, existence it of does an not adequately allege that Walgreens and Par were conducting the affairs of this [“enterprise,”] 34 as opposed to their own affairs.” Id. (emphasis in original). The court noted that “nothing in the complaint reveals how one might infer that these communications [between the parties] and actions were undertaken on behalf of the enterprise as opposed to on behalf of Walgreens and Par in their individual individual self-interests.” capacities, Id. to advance The court further explained that: [T]he activities the complaint describes are entirely consistent with Walgreens and Par each going about its own business, with Par manufacturing generic drugs and marketing its product to pharmacies, and Walgreens purchasing drugs and filling prescriptions. To be sure, Walgreens and Par were not strangers. Representatives from the companies regularly communicated with one another, and Walgreens purchased its generic [drugs] from Par. This type of interaction, however, shows only that the defendants had a commercial relationship, not that they had joined together to create a distinct entity for purposes of improperly filling [generic drug] prescriptions. Although the [plaintiff’s] allegations do not entirely rule out the inference that Walgreens and Par were acting in concert on behalf of a shadow enterprise while maintaining the outward appearance of a normal commercial relationship, there is ultimately not enough in this complaint to elevate that inference from a “sheer possibility” to something that is “plausible on its face.” Nor does the fact that Walgreens’s and Par’s activities were by all appearances illegal indicate that the companies were acting on behalf of a distinct enterprise. A corporation, after all, is perfectly capable of breaking the law on its own behalf. The 35 their complaint describes conduct that might plausibly state a claim for fraud (among other things) against either defendant, but RICO does not penalize parallel, uncoordinated conduct. [Plaintiff] cannot bootstrap its allegations of illegal conduct into allegations that Walgreens and Par conducted the affairs of an enterprise by asking us to infer that because the activities were illegal, they therefore must also have been coordinated activity undertaken on behalf of the [“enterprise”]. Id. at 855. plaintiff’s Moreover, argument that the Seventh Walgreens Circuit and Par rejected were the acting on behalf of the purported enterprise because they could not have achieved the drug-switching scheme on their own. Id. at 856. The court noted that “while it is true that Walgreens does not make drugs and Par does not fill prescriptions, and that the two companies must therefore ‘cooperate’ in order for drugs to reach consumers, such cooperation describes virtually prescription pharmaceutical distribution chain.” Id. every The court found that the allegations in the complaint did not “[fall] outside the bounds of the parties’ normal commercial relationship” and therefore there was no “basis for inferring that Walgreens affairs.” and Par were conducting the enterprise’s Id. As in Walgreen Co., the allegations in the Cigna entities’ complaint fall short of plausibly alleging that each ASC and SurgCenter were engaged in concerted 36 affairs that were undertaken on behalf of a separately identifiable associationin-fact that is distinct from the ASC and SurgCenter. Taking the Cigna entities’ allegations as true, it is unclear what affairs each ASC and SurgCenter conducted separate from their own affairs, and whether there was any concerted ongoing conduct between the members of these purported enterprises. SurgCenter is alleged to have developed the fraudulent billing scheme and to have pitched the idea to each ASC, invested in each ASC, and provided operational support to each ASC such as providing the language on the claims forms defraud the Cigna entities. that were purportedly used to The ASCs are alleged to have lured the Cigna entities’ plan members in to their surgery centers, provided them medical care, and then submitted fraudulent bills with misrepresentations in them in order to obtain excessive payments from the Cigna entities and profit therefrom. These allegations fail to show that the alleged “enterprises” had any affairs that were members’ businesses. “enterprises” were separate from those of their affiliate In fact, the purported affairs of the providing medical care and submitting fraudulent bills based on that care in order to obtain excessive insurance claim payments from the Cigna entities, but this simply describes the affairs of each individual ASC, not some separate enterprise. In order to state a claim under RICO § 1962(c), the “person” and “the enterprise” must be distinct. 37 The ASC cannot be both the tool through which the racketeering occurred and the person responsible for using that tool in a manner that violates RICO. In addition, enterprises are characterized by ongoing, concerted activities and members that function as a continuing unit. The Cigna entities have not provided factual support showing that SurgCenter participated or conducted the ongoing affairs of said “enterprises.” See Reves v. Ernst & Young, 507 U.S. 170, 185 (1993) (noting that under § 1962(c) a “person” may be liable if they are “‘associated with’ an enterprise and participate in the conduct of its affairs — that is, participate enterprise itself”). in the operation or management of the SurgCenter is alleged to have developed and pitched the fraudulent billing scheme to the ASC and then provided “operational support.” The only specific allegation showing SurgCenter’s support for the scheme is that it provided the language that was used in the ASCs’ claim forms submitted to the Cigna entities and the patient responsibility calculation forms. The Cigna entities’ allegation that SurgCenter provided ongoing operational support is devoid of any factual support, aside from what appears to be this singular act of consulting by providing language to use in these forms. These allegations are not sufficient to show that SurgCenter and the ASCs were working together to conduct continuous, ongoing affairs of the purported enterprises. The only continuous, ongoing fraudulent activity 38 alleged is that of the ASCs, which cannot in and of themselves constitute “persons” and “enterprises” within the meaning of RICO § 1962(c). Moreover, although the ASCs and SurgCenter are both alleged to have taken some part in this purportedly fraudulent billing scheme, the allegations in the complaint do not show that the billing scheme was part of ongoing, concerted activities by members of some separately identifiable enterprise. Rather, the allegations in the complaint are consistent with SurgCenter and each ASC perhaps carrying in purportedly ASCs, and a out their fraudulent fraudulent then own manner. business became business an SurgCenter services fraudulent claim defendants in strangers, they to pitched it investment partner in patients forms to Walgreen have the Co., a profitable to both parties: to submitted Cigna various each entities. Defendants commercial the ASC, Each ASC provided and the albeit developed model, providing intermittent operational support. medical initiatives purportedly here relationship Like the are not which is SurgCenter, like Par, pitched the idea of the purportedly fraudulent scheme to the ASC, and the ASC, like Walgreens, carried out the actual fraudulent scheme. Although the complaint’s allegations may indicate that the ASCs and SurgCenter were each engaged in fraudulent conduct, they do not plausibly allege that this was coordinated conduct performed 39 on behalf of a distinct enterprise. Each ASC easily could have accomplished this fraudulent scheme on its own, and in fact, appears to have carried out most of the fraudulent conduct with minimal assistance from SurgCenter. There arguments is no need the regarding to address Cigna Defendants’ entities’ RICO additional claim, as the complaint fails plausibly to allege the existence of a separate, distinct enterprise, or that each ASC and SurgCenter were conducting the affairs of such an enterprise rather than their own affairs. C. State Law Claims The Cigna entities assert the following state law claims against Defendants: fraud, aiding and abetting fraud, negligent misrepresentation, unjust enrichment, and tortious interference with contract. Defendants have moved to dismiss these claims, arguing that: (1) the claims are preempted by ERISA, and (2) the allegations fail to state plausible claims. 1. ERISA Preemption Defendants first argue that the Cigna entities’ state law claims “relate to” or “have a connection with” an ERISA plan and should therefore be dismissed because they are preempted ERISA § 514(a) under the doctrine of conflict preemption. explained by the Fourth Circuit in Darcangelo v. by As Verizon Communications, Inc., 292 F.3d 181, 186 (4th Cir. 2002), there 40 are two forms of ERISA preemption: conflict preemption under § 514 and complete preemption under § 502. the broader of the two doctrines. preemption, state preempted[.]” laws that “Under ordinary conflict conflict Id. at 186. Conflict preemption is with federal laws are “ERISA § 514 expressly states the scope of ordinary conflict preemption under ERISA: state laws are superseded insofar as they ‘relate to’ an ERISA plan. U.S.C. § 1144(a).” “[t]he Supreme enforcement Id. at 187. Court provision, has § As for complete preemption, determined 502(a) 29 (29 that U.S.C. ERISA’s § civil 1132(a)), completely preempts state law claims that come within its scope and converts these claims into federal claims under § 502.” Id. In Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371 (4th Cir. 2001), the Fourth Circuit addressed the issue of whether ERISA preempted a plan beneficiary’s state law claim against the plan administrator for negligent misrepresentation. The Fourth Circuit elaborated on what it means to “relate to” an ERISA plan under § 514: ERISA’s broadly-phrased preemption clause provides that ERISA’s provisions “supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C.A. § 1144(a) (West 1999). A state 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.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). In fact, 41 “ERISA pre-empts any state law that refers to or has a connection with covered benefit plans . . . ‘even if the law is not specifically designed to affect such plans, or the effect is only indirect.’” District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 129-30, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992) (quoting IngersollRand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990)). Of course, “[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.” Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. 2890. But, as long as the nexus between the state law and the employee benefit plan is not too tangential, “a state law of general application, with only an indirect effect on a pension plan, may nevertheless be considered to ‘relate to’ that plan for preemption purposes.” Smith v. Dunham-Bush, Inc., 959 F.2d 6, 9 (2nd Cir. 1992). A “state law” includes “all . . . decisions . . . of any State.” 29 U.S.C.A. § 1144(c)(1) (West 1999). Thus, in appropriate circumstances, state common law claims fall within the category of state laws subject to ERISA preemption. See Ingersoll-Rand, 498 U.S. at 140, 111 S.Ct. 478; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). When a cause of action under state law is “premised on” the existence of an employee benefit plan so that “in order to prevail, a plaintiff must plead, and the court must find, that an ERISA plan exists,” Ingersoll-Rand, 498 U.S. at 140, 111 S.Ct. 478, ERISA preemption will apply. Alternatively, a state law claim is preempted when “it conflicts directly with an ERISA cause of action [under § 502(a)].” Id. at 142, 111 S.Ct. 478; see Powell v. Chesapeake & Potomac Tel. Co. of Va., 780 F.2d 419, 422 (4th Cir. 1985) (“To the extent that ERISA redresses the mishandling of 42 benefits claims or other maladministration of employee benefit plans, it preempts analogous causes of action, whatever their form or label under state law.”). Id. at 377-78 (first alteration in original). Accordingly, state law causes of action “relate to” employee benefit plans within the existence meaning of an of § employee 514, if they are benefit plan or premised if on they conflict with an ERISA cause of action under § 502. the directly In Aetna Health Inc. v. Davila, 542 U.S. 200, 208-09 (2004), the Supreme Court described the circumstances under which a state law claim is preempted action under because it ERISA’s directly civil conflicts enforcement with provision a cause § of 502(a), stating that: “any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted.” added). Id. (emphasis In assessing the preemption issue in Davila, the Court noted, in relevant part, that “if an individual, at some point in time, could have brought his claim under ERISA § 502(a)[], and where there is no other independent legal duty that is implicated by a defendant’s actions, then the individual’s cause of action is completely pre-empted by ERISA § 502(a)[].” 210. Id. at The Court also commented that “any civil action to enforce [a duty that arises independently of any duty imposed by ERISA 43 or the plan terms] is not within the scope of the ERISA civil enforcement mechanism.” Defendants contend Id. at 212. that the Cigna entities’ state law claims “relate to” ERISA plans because they are premised on the ASCs’ waiver of members’ cost-sharing responsibilities, which were required by the plans, and the Cigna entities’ subsequent payment of claims based on the purportedly false charges the ASCs submitted. (ECF No. 41-1, at 26). Defendants aver that the Cigna entities’ arguments as to why the ASCs’ charges were false or fraudulent and why the Cigna entities should not be required to pay them stem from the terms of the plans — specifically, the plans were only required to pay the ASCs’ “normal charges” inflated charges conclude that for were because the services excluded the Cigna from provided and coverage. entities’ state therefore, Defendants law claims depend on an interpretation of the ERISA plans at issue, the claims are preempted and should be dismissed. The Cigna entities contend that their state law claims are not preempted by ERISA because the focal point of their claims is Defendants’ fraudulent conduct, in particular, the submission of fraudulent claim forms to the Cigna entities. According to the Cigna entities, their state law claims survive preemption because the court “need not interpret the terms of [their] plans in order to determine that Defendants committed fraud and were 44 unjustly enriched by submitting fictional charges to [the Cigna entities].” As (ECF No. 44, at 20). noted by the Fourth Circuit in Griggs, determining whether claims “relate to” an ERISA plan requires a closer look at the factual nature of the claims asserted. 237 F.3d at 379. The factual bases of the Cigna entities’ state-law claims are that Defendants engaged in a fraudulent dual pricing and feeforgiving scheme in order to obtain overpayments from the Cigna entities for the services they were rendering to plan members. The Cigna entities allege that the crux of the scheme involved Defendants’ submission of claim forms that included fraudulent or negligent allege misrepresentations. that the representations alternative, ASCs they that the knew were The Cigna that the making ASCs did were not entities statements false, use aver that they reasonably or relied on and in the care reasonable communicating their charges to the Cigna entities. entities further in The Cigna Defendants’ materially false statements and omissions and paid these false charges, resulting in financial injury to them, and that the ASCs have been overpayments. abetting fraud The unjustly Cigna claim enriched entities that by allege SurgCenter retaining in the these aiding “knowingly and and substantially assisted in the fraudulent conduct” by designing and implementing the scheme and providing assistance to the ASCs 45 in carrying out the scheme, such as by supplying the “language used on entities. claims forms” that were used to defraud the Cigna (ECF No. 1 ¶¶ 229, 231). The Cigna entities’ allegations do not have a sufficient connection with ERISA plans such that their claims “relate to” or have “connection with” the plans in order to trigger ERISA preemption. premised The on the Cigna entities’ existence of an fraud-based employee claims benefit are not plan, see Ingersoll-Rand, 498 U.S. at 140, nor do they conflict directly with an ERISA civil enforcement action under § 502(a).7 Cf. Griggs, 237 F.3d at 378-79 (finding that “ERISA preempts state common law fraudulent or negligent misrepresentation when the false representations benefits under an concern employee the benefit existence plan” or because extent of failing to provide sufficient plan information is an allegation concerning a “core function performed by an ERISA fiduciary”). Although some of the allegations in the complaint reference ERISA plans, the core allegations of misconduct that the Cigna entities have pled for their state law causes of action relate to the fraudulent or negligent misrepresentations that the ASCs made to the Cigna entities in order to obtain payments to which they may 7 As discussed above, the Cigna entities’ claim seeking reimbursement of plan funds cannot be brought under ERISA § 502(a)(3)(B) because it seeks legal rather than equitable relief. 46 not have been entitled had they accurately and fully represented the amounts they charged patients. Accordingly, the Cigna entities’ allegations supporting their state law claims arise from Maryland tort law, rather than arising out of the plans themselves. obligations or duties See Davila, 542 U.S. at 212-14 (noting that any civil action to enforce a duty that arises independently of any duty imposed by ERISA or the plan terms does not fit within the scope of the ERISA civil enforcement mechanism); see United Healthcare Servs., Inc. v. Sanctuary Surgical Ctr., Inc., 5 F.Supp.3d 1350, 1361 (S.D.Fla. 2014) (“Defendants had a common law and statutory duty to refrain from making misrepresentations in the presentation of insurance claims for benefits. The obligation to meet that duty is not dependent on the terms of any ERISA plan, and arises independently from any contractual duties imposed by ERISA.”); Horizon Blue Cross Blue Shield of New Jersey v. E. Brunswick Surgery Ctr., 623 F.Supp.2d 568, 578 (D.N.J. 2009) (finding that the plaintiff’s Defendants’ allegations (health care (plan administrator) providers) “comprehensive regarding scheme to circumvent and compromise [p]laintiff’s contractual arrangements with in-network providers” in order to “siphon business from [p]laintiff’s in-network providers” went “far beyond a simple dispute over benefits due or not due to a plan participant under 47 ERISA” and instead, were based in common law fraud and tortious interference). The allegations underlying the tortious interference claim vary slightly from the Cigna entities’ other state law claims. The Cigna entities allege that “each of the [plan beneficiaries] for whom the ASCs submitted benefit claims and received payment from [them] received health care benefits pursuant to a benefit plan insured or administered by [the Cigna entities].” 1 ¶ 252). required (ECF No. The Cigna entities allege that these ERISA plans the member to pay his or her cost-sharing responsibility in order for the plan to cover a portion of the charges that were submitted for the service rendered. They further allege that despite Defendants’ knowledge of this plan requirement, they “engaged in a fraudulent dual pricing scheme in order to bill [the Cigna entities] and [their] ASO clients inflated charges in excess of those actually charged to the patients, to induce the patients to use the ASCs’ out-of-network services, and to undermine and circumvent [the Cigna entities’] provider network system.” (Id. ¶ 254). These allegations do not sufficiently “relate to” an ERISA plan such that this claim must be preempted. duplicative 502(a). As of an ERISA discussed civil above, enforcement the Cigna This claim is not provision entities’ under claim § for equitable reimbursement under § 502(a)(3)(B) is not cognizable, 48 because the Cigna entities equitable reimbursement. based claims, the seek legal damages rather than As with the Cigna entities’ fraud- misconduct complained of does not involve ERISA entities and the misadministration of ERISA benefits, but the intermeddling of third party providers in a contract between the Cigna entities, beneficiaries. the plan administrators, and the plan See E. Brunswick Surgery Ctr., 623 F.Supp.2d at 578 (finding that an insurance company’s claim against an “out of network” provider for tortious interference with contract was not preempted by ERISA because the insurer’s claim was “not predicated on an alleged failure to provide full benefits to a plan participant” comprehensive but scheme rather, to on the circumvent defendants’ and “alleged compromise [the insurer’s] contractual arrangements with in-network providers”). Accordingly, this is not an instance where Plaintiffs are trying to “evade ERISA’s enforcement provisions by characterizing [their] claims as arising under common law,” when in fact they arise under ERISA. at 578. an See E. Brunswick Surgery Ctr., 623 F.Supp.2d Rather, this claim is based on Defendants’ violation of independent violations, the duty, duty separate imposed and by apart Maryland from any common law ERISA that prohibits persons from intentionally inducing others to breach their contracts with third parties. Although a plan beneficiary’s acceptance of a fee-waiver may constitute a breach 49 of the plans’ terms, the conduct at issue here is Defendants’ inducement of plan beneficiaries to engage in such a breach. This conduct may violate a legal duty, separate and apart from any obligation imposed by ERISA. Other courts addressing ERISA preemption of similar state law claims in cases involving factual scenarios analogous to the present case have also found that the state law claims were not preempted by ERISA. See Arapahoe Surgery Ctr., LLC v. Cigna Healthcare, Inc., No. 13-CV-3422-WJM-CBS, 2015 WL 1041515, at *6-7 (D.Colo. Mar. 6, 2015) (finding that the insurance carrier’s state law claims against ambulatory surgical centers for fraud, aiding and abetting fraud, negligent misrepresentation, unjust enrichment, and tortious interference with contract were not preempted by ERISA because they did not sufficiently conflict “relate to” preemption); ERISA United plans in Healthcare order to Servs., trigger Inc. v. Sanctuary Surgical Ctr., Inc., 5 F.Supp.3d 1350, 1363 (S.D.Fla. 2014) (internal administrator] is citation not omitted) charging an (“Because ERISA [the plan entity with improprieties under an ERISA plan, and because its state law claims [of fraud, misrepresentation, and unjust enrichment against defendants for submitting false or fraudulent claims] do not have a nexus with an ERISA plan or a plan’s benefit system in the sense the claims are based on the failure of a plan to 50 pay covered benefits, the court concludes that [the plan administrator’s] claims do not have sufficient ‘connection with’ an ERISA-regulated plan to ‘relate to’ such a plan and trigger ERISA [conflict] Goals Chiropractic 1343047, at preemption.”); *3-6 Center, (D.N.J. Aetna Inc., Apr. No. 7, Health Inc. v. 10-5216-NLH-JS, 2011) (finding Health 2011 that WL state statutory and common law fraud laws imposed a duty on health care providers, separate and independent from any duties imposed by ERISA, that prohibited them from engaging in fraudulent billing practices and permitted an insurance carrier to bring claims for common law fraud, statutory fraud, and negligent misrepresentation without being subject to ERISA preemption); E. Brunswick Surgery Ctr., 623 F.Supp.2d at 573-78 (finding that the plan administrator’s state law claims of insurance fraud, common law interference completely fraud, negligent against preempted misrepresentation, ambulatory by ERISA surgical because and centers the tortious were not administrator’s allegations were based in common law fraud). 2. Failure to State a Claim Next, Defendants argue that even if the Cigna entities’ state-law claims are not preempted by ERISA, they should be dismissed under Rule 12(b)(6) for failure to state a claim. 51 a. Fraud and Negligent Misrepresentation (Counts III & V) The Cigna entities assert a fraud claim against all ASCs based on the alleged misrepresentations and omissions in the ASCs’ claim forms. In order to state a claim for common law fraud in Maryland, a plaintiff must allege “(1) that the defendant made a false representation to the plaintiff, (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth, (3) that the misrepresentation was made for the purpose of defrauding the plaintiff, (4) that the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation.” Legore v. OneWest Bank, FSB, 898 F.Supp.2d 912, 919 (D.Md. 2012) (quoting Alleco Inc. v. Harry & Jeanette Weinberg Found., Inc., 340 Md. 176, 195 (1995)). Maryland law also recognizes claims for non-disclosure and concealment, fraud.” “two similar, yet distinct, claims sounding in Bourgeois v. Live Nation Entm’t, Inc., 3 F.Supp.3d 423, 459 (D.Md. 2014); Fegeas v. Sherrill, 218 Md. 472, 476 (1958) (“Concealment and non-disclosure are closely related and in any given situation usually overlap.”). The elements of fraudulent concealment are: (1) the defendant owed a duty to the plaintiff to disclose a material fact; (2) the defendant failed to disclose that fact; (3) the defendant intended to defraud or 52 deceive the plaintiff; (4) the plaintiff took action in justifiable reliance on the concealment; and (5) the plaintiff suffered damages as a result of the defendant’s concealment. Blondell v. Littlepage, 413 Md. 96, 119 (2010). A claim for deceit by nondisclosure “requires only that the defendant remain silent about, or omit, facts[.]” Lloyd v. Gen. Motors Corp., 397 Md. 108, 138 n.11 (2007). The non-disclosed fact must be material, be which means it must one on person would rely in making a decision. Md.App. 406, 430 (2003). Like a which a reasonable Sass v. Andrew, 152 claim for fraudulent concealment, a claim for deceit by nondisclosure will only lie if “the defendant had a duty to disclose.” Id.; Bourgeois, 3 F.Supp.3d at 459–60. In the alternative, the Cigna entities assert a claim for negligent misrepresentation against the ASCs, alleging that the ASCs failed to exercise reasonable care or competence communicating their charges to the Cigna entities. claim for negligent misrepresentation under To state a Maryland plaintiff must allege that: (1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the 53 in law, a statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence. Lloyd, 397 Md. 108, 136 (2007). First, Defendants argue that the Cigna entities’ fraud and negligent misrepresentation claims should fail because the ASCs fully disclosed in their claim forms that patients’ cost-sharing requirements had been billed at in-network rates and therefore did not misrepresent, either intentionally or negligently, their charges. In response, the Cigna entities argue that the documents attached to the complaint do not show that the ASCs adequately disclosed entities. The Cigna their billing entities practices attach a to sample the claim submitted by one of the ASC Defendants, which states: Cigna form “The insured’s portion of this bill has been reduce[d] in amount so the patient’s responsibility for the deductible and copay amount is billed at in network rates.” (ECF No. 1-4). The Cigna entities contend that the bills only indicate that patients’ copays and deductible amounts were reduced to in-network rates, but fail to discounted. disclose that the underlying charges were also The Cigna entities aver that the language used in the claim forms shows that Defendants affirmatively sought to mislead them into believing that the ASCs charged the patient and the Cigna entity a single, common price; when in actuality, Defendants were calculating patients’ cost-sharing amounts based 54 on much lower underlying charges, often based on Medicare rates, and then billing the Cigna entities based on a separate, exorbitant charge that had no relation to the patients’ charge. The Cigna entities have plausibly alleged a misrepresentation based on the ASCs’ statement used in the claim forms that “[t]he reduced,” insured’s because this portion of statement, this without bill any has been further qualification, indicates that the insured’s billed amount was the same as the amount billed to the Cigna entities, when in fact the Cigna entities allege that it was a different amount entirely. (ECF No. 1-4). In addition, the ASCs’ statement that the patient’s portion of this bill has been reduced, followed by the statement that “the patient’s responsibility for the deductible and copay amount is billed at in-network rates” may constitute fraudulent concealment or non-disclosure. The Cigna entities have alleged that the ASCs reduced patients’ bills by charging them in-network coinsurance rates, but the ASCs’ claim forms fail to mention their other cost-sharing reduction practice, which significantly lowered the amounts patients were required to pay. were billed Had the Cigna entities known that patients different underlying charges or that their co- insurance rates were reduced, they may have refused to pay these claims. that Accordingly, the Cigna entities have plausibly alleged the ASCs may be liable 55 for fraud or negligent misrepresentation for, either intentionally or negligently, providing misleading information about their billing practices in their claim forms. Second, Defendants argue that the ASCs were not obligated to disclose their pricing policy to the Cigna entities, and, because they owed no duty to the Cigna entities, they cannot be liable for fraud or negligent misrepresentation. Maryland ordinarily does not impose a general duty on every party to a transaction to disclose facts to the other party. Md.App. at 430. Sass, 152 Maryland law recognizes, though, that even where there is no duty to disclose, a person who suppresses or conceals facts that materially qualify other representations that person has made may be found liable for fraud. Hogan v. Maryland State Dental Ass’n, 155 Md.App. 556, 567 (2004). Court of guidance Appeals in of Maryland determining whether has a relied duty on exists the Liability [for negligent misrepresentation] arises only where there is a duty, if one speaks at all, to give the correct information. And that involves many considerations. There must be knowledge, or its equivalent, that the information is desired for a serious purpose; that he to whom it is given intends to rely and act upon it; that, if false or erroneous, he will because of it be injured in person or property. Finally, the relationship of the parties, arising out of contract or otherwise, must be such that in morals and 56 following between parties: The two good conscience the one has the right to rely upon the other for information, and the other giving the information owes a duty to give it with care. An inquiry made of a stranger is one thing; of a person with whom the inquirer has entered, or is about to enter, into a contract concerning the goods which are, or are to be, its subject, is another. Griesi v. (quoting Atl. Weisman Gen. v. Hosp. Corp., Connors, 312 360 Md. Md. 1, 428, 13-14 447 (2000) (1988)) (alteration in original). The Cigna entities sufficiently have alleged a duty between themselves and the ASCs because they allege that the ASCs knew that the Cigna entities would be relying on the information provided in their claim forms when determining claim payment amounts. Accordingly, when submitting claims forms that included representations about their charges, the ASCs had a duty not to conceal or suppress material information that was necessary to qualify the true nature of their charges or billing practices. Third, Defendants argue that the Cigna entities’ allegation that they justifiably relied on these alleged misrepresentations does not meet the heightened pleading standard of Rule 9 because the Cigna entities acknowledge elsewhere in the complaint that they paid a fraction or nothing of some of the claims that were submitted, and therefore, the Cigna entities could not plausibly have relied on the claim forms in adjudicating these claims, but 57 rather independently determined the amounts they would pay under the applicable policies. In response, the Cigna entities argue that even though they did not pay the full amount of the charges they were billed, determine the they still portion of responsible for paying. relied the on charges the claim that the forms plan to was For example, they state that typically a provider submits a charge to a Cigna entity and the entity determines which portion (if any) of the charge is considered for coverage by the plan — known as the “allowed amount.” It avers that “[t]he higher the charge submitted to [the Cigna entity], the greater the plan responsibility amount and the more [the Cigna entity] must reimburse the ASCs.” (ECF No. 44, at 15). The Cigna entities have adequately pled reliance, as they have alleged that they received the ASCs’ claim forms that indicated the charges for the services that had been rendered by the ASCs, and they relied on the information provided in the claim form in processing the claim. Defendants imply that because the Cigna entities reduced some of the claim amounts that they paid or rejected other claims entirely, the Cigna entities could not possibly have relied on the form in arriving at the payment amounts. This argument disregards the Cigna entities’ explanation as to how they process claims. entities have alleged that their 58 claim The Cigna adjudication process required them to reference other information in addition to the claim form when processing a claim, some of which led to a reduction in the claim payment or an outright denial of the claim because it was not a covered expense under the terms of the plan. Reliance on the plan terms and other information in processing claims does not undermine the allegation that the Cigna entities also relied on the charges presented in the claim forms when calculating the payment due to the ASCs, as the Cigna entities purportedly had no other means to verify the ASCs’ charges other than through the claim forms. In addition, the Cigna relied entities have alleged that they on the representation that the charges in the claim form were the same charges that allegations had as been true, billed the to Cigna the patient. entities’ Taking reliance this on this representation may have caused them to pay the ASCs amounts to which they would not have been entitled had the Cigna entities known that the patient was charged a different amount. b. Aiding and Abetting Fraud (Count IV) The Cigna entities also assert a claim against SurgCenter for aiding and abetting fraud for its assistance and encouragement in the purportedly fraudulent billing scheme. order to state a claim for aiding and abetting Maryland law, a plaintiff must allege that: fraud In under “1) there is a violation of the law (tort) by the principal; 2) defendant knew 59 about the violation, and 3) defendant gave substantial assistance or encouragement to the principal to engage in the tortious conduct.” Bank, Legacy Inv. & Mgmt., LLC v. Susquehanna No. WDQ-12-2877, 2014 WL 824066 (D.Md. Feb. 28, 2014) (quoting Alleco, 340 Md. at 186). Defendants’ only argument as to this claim is that it must be dismissed because the Cigna entities failed sufficiently to allege the underlying tort of fraud. As discussed above, however, the Cigna entities have adequately pled fraud by the ASCs. In SurgCenter addition, not only they knew have about alleged the sufficiently purportedly that fraudulent billing scheme, but designed, implemented, and assisted the ASCs in carrying out the scheme. c. Unjust Enrichment (Count VI) The Cigna entities assert a claim for unjust enrichment against all the ASCs. This claim is also based on the ASCs’ purportedly fraudulent practice of dual pricing, which involved submitting claim forms to the Cigna entities with “false charges” that were much higher than the amounts the ASCs billed patients for the same service. The Cigna entities allege that they processed benefits for the services provided based on these “false charges” and paid benefits that they were not obligated to cover. According to the Cigna entities, Defendants therefore obtained a benefit based on their fraudulent practices and it 60 would be inequitable for the ASCs to retain these payments to which they were not entitled. In order to state a claim for unjust enrichment under Maryland law, a plaintiff must plead: (1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without the payment of its value. Abt Assocs. v. JHPIEGO, 104 F.Supp.2d 523, 535 (D.Md. 2000) (citing Everhart v. Miles, 47 Md.App. 131 (1980)). Defendants argue that the Cigna entities’ claim for unjust enrichment is “simply another iteration of [their] claim for fraud hiding behind an equitable banner.” 28). (ECF No. 41-1, at Defendants contend that because the Cigna entities’ fraud allegations are insufficient, their claim for unjust enrichment is also insufficient and should be dismissed. Not only have the Cigna entities stated a plausible claim for fraud, enrichment. their allegations also state a claim for unjust They have alleged that the ASCs obtained benefits from them (inflated claim payments) and that the ASCs had an appreciation or knowledge of the benefit conferred. Finally, the Cigna entities allege that it would be inequitable for the ASCs to retain millions in inflated payments that they received 61 due to their purportedly fraudulent scheme because the ASCs would be unjustly enriched at the expense of the Cigna entities. d. Tortious Interference with Contract (Count VII) The Cigna entities assert a claim for tortious interference with contract against all Defendants. They allege that: SurgCenter and the ASCs knew that its patients’ plans made the patients responsible for payment of the patients’ cost-sharing responsibility. Despite this knowledge, the ASCs, at the direction of and in coordination with SurgCenter, engaged in a fraudulent dual pricing scheme in order to bill [the Cigna entities] and [their] ASO clients inflated charges in excess of those actually charged to the patients, to induce the patients to use the ASCs’ out-of-network services, and to undermine and circumvent [the Cigna entities’] provider network system. Further, the ASCs, at the direction of and in coordination with SurgCenter, knowingly misrepresented to patients that the patients could use their “in-network” benefits at the ASCs. By these actions, [Defendants] . . . induced the members to breach the terms of their plans. In addition, after [the Cigna entities] discovered the fraudulent scheme and began disputing the ASCs’ bills, several of the ASCs have made false and malicious statements to [Cigna entity plan] members in an effort to harm [the Cigna entities’] relationship[s] with [their] members, mislead [] members about the terms of their healthcare plans, and conceal the nature of the ASCs’ fraudulent billing schemes. (ECF No. 1 ¶¶ 253-57). The Cigna entities contend that these actions by Defendants constitute tortious interference and have caused them harm “by causing [them] to make overpayments to the 62 ASCs and [have] caused harm to the relationship between [the Cigna entities] and [their] members[.]” (Id. ¶ 259). In Painter's Mill Grill, LLC v. Brown, 716 F.3d 342, 353–54 (4th Cir. 2013), the Fourth Circuit noted that: To establish a claim for wrongful interference with a contract [under Maryland law], a plaintiff must demonstrate “(1) [t]he existence of a contract or a legally protected interest between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional inducement of the third party to breach or otherwise render impossible the performance of the contract; (4) without justification on the part of the defendant; (5) the subsequent breach by the third party; and (6) damages to the plaintiff resulting therefrom.” Blondell v. Littlepage, 185 Md.App. 123, 968 A.2d 678, 696 (2009) (internal quotation marks omitted), aff'd, 413 Md. 96, 991 A.2d 80 (2010). Defendants argue that this claim should be dismissed because the Cigna entities have not alleged that their insureds breached their contracts. According to Defendants, “inducing patients to use out-of-network services does not constitute a breach of the patients’ plan because, as [the Cigna entities] admit[], [their] plans expressly allow patients to seek care from an out-of-network provider.” Defendants’ argument is (ECF No. 41-1, at 29). unavailing considering that the Cigna entities expressly allege that Defendants induced their plan members to breach their contracts 63 by agreeing to cost sharing arrangements deductibles, and — payment coinsurance at of “in-network” “out-of-network” copays, providers — that conflicted with the terms of their plans, which required that they pay “out-of-network” cost sharing at “out-of-network” providers such as the ASCs. Accordingly, this claim will not be dismissed. D. Declaratory Judgment (Count VIII) The Cigna entities seek a declaration that “the claims for reimbursement submitted by the ASCs are not for covered services and are not payable under employee health and welfare benefit plans that are insured or administered by [the Cigna entities]. [The Cigna entities] also seek[] a declaration that the ASCs must return all sums received [from the Cigna entities].” (ECF No. 1 ¶ 267). The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the United relations States of any . . . may interested declare party the seeking whether or not further relief is sought.” rights such and other declaration, 28 U.S.C. § 2201(a). The Fourth Circuit has further explained that a federal court may properly exercise jurisdiction in such cases where three criteria are controversy met: between “(1) the the parties complaint of alleges sufficient an actual immediacy and reality to warrant issuance of a declaratory judgment; (2) the 64 court possesses an independent basis for the jurisdiction over the parties (e.g., federal question or diversity jurisdiction); and (3) the court does not abuse its discretion in its exercise of jurisdiction.” Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, 592 (4th Cir. 2004) (citing 28 U.S.C. § 2201; Cont'l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994)). “A federal court has the discretion to decline to entertain a declaratory judgment action, but . . . the court must do so only for ‘good reason.’” Cont’l Cas. Co. v. Fuscardo, 35 F.3d 963, 965 (4th Cir. 1994) (quoting Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 324 (4th Cir. 1937)). “In deciding whether to entertain a declaratory judgment action, a federal court declaratory should action analyze will controversy. . . . whether settle all its resolution aspects of the of the legal [I]t makes no sense as a matter of judicial economy for a federal court to entertain a declaratory action when the result would be to try a controversy by piecemeal, or to try particular controversy.” 1992) issues without settling the entire Mitcheson v. Harris, 955 F.2d 235, 239 (4th Cir. (internal citation and quotation marks omitted)). Declaratory relief is appropriate when the court finds that (i) it will serve a useful purpose in clarifying and settling the legal relations in issue, and (ii) it will terminate and afford 65 relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.” Fuscardo, 35 F.3d at 965. At this juncture it is unclear whether the Cigna entities’ request for a declaratory judgment is viable. First, the Cigna entities basis have not specified on what legal entitled to the declaratory relief they seek. point out, declaration to the seeks extent return the of Cigna are As Defendants entities’ overpayments they under requested ERISA § 502(a)(3)(b), this relief would not be authorized as it is legal relief which falls outside the scope of ERISA. See Arapahoe Surgery Ctr., 2015 WL 1041515, at *4 (noting that Cigna had merely re-framed its ERISA restitution claim in the form of a declaration, which did “not change the nature of the relief sought, which falls outside the scope of [ERISA] § 502(a)”). Second, it is not apparent how the declaration sought would settle all aspects of this controversy or whether relief would be necessary after resolution of the other claims. The Cigna entities have stated several plausible claims under other counts of the complaint that may provide bases for the relief they seek. At this time, it not clear whether the declaration sought would duplicate or supplement the other relief sought in the complaint, making it premature to dismiss this count. 66 IV. The Cigna Entities’ Motion to Dismiss the ASCs’ Counterclaim The ASCs’ counterclaim against the Cigna entities asserts six causes of action: three under ERISA; breach of contract; unjust enrichment; and promissory estoppel. A. ERISA Claims (Counts I to III) Count I is a claim for benefits and clarification of rights pursuant to ERISA § 502(a)(1)(B); Count II is a claim for breach of fiduciary duty pursuant to ERISA § 502(a)(3); and Count III is a claim for failure to provide information pursuant to ERISA § 502(c)(1)(B). The Cigna entities have moved to dismiss these counterclaims arguing that the ASCs: (1) have not sufficiently pled that they have standing to bring ERISA claims; (2) cannot pursue their claim for breach of fiduciary duty under ERISA § 502(a)(3) because they seek the same relief under ERISA § 502(a)(1)(b); and (3) have not sufficiently pled a claim for non-disclosure of information. 1. (ECF No. 43). Lack of Standing to Bring ERISA Counterclaims The Cigna entities first move to dismiss the ASCs’ ERISA counterclaims on the ground that the ASCs have not adequately pled that they have derivative standing as assignees of plan members’ rights in order to bring ERISA claims. The ASCs expressly allege that: “[p]rior to receiving care, the ASCs’ Cigna-insured patients sign forms 67 assigning to the ASC the patient’s rights and benefits under their Cigna health insurance plan. The rights assigned include the right to appeal benefit denials and to sue.” that, pursuant entities’ plan to (ECF No. 42 ¶ 35). their members, assignment they The ASCs also allege of submitted benefits claims from Cigna the Cigna to entities for the cost of the medical services provided to their insureds. (Id. ¶ 38). The Cigna entities assert that not all assignments of ERISA rights convey the same rights. According to the Cigna entities, to plead sufficiently that they have standing to bring their ERISA claims, the ASCs must provide the actual language of the assignments, which they have failed to do. 12-13). (ECF No. 43-1, at The Cigna entities assert that because the ASCs provide no allegations that their patients transferred their rights to bring claims for breach of fiduciary duty or failure to provide information, these claims must be dismissed. Judge Bennett aptly notes in Peninsula Regional Medical Center v. Mid Atlantic Medical Services, LLC, 327 F.Supp.2d 572, 576 (D.Md. 2004) that: Section 502(a)(1)(B) confers a cause of action upon “participants,” “beneficiaries,” and “fiduciaries” of ERISA plans. Other judges of this Court have held that thirdparty providers, such as Peninsula, may sue under § 502(a) when the provider is specifically assigned the beneficiary’s rights under the ERISA plan. 68 Id. (footnotes omitted) (internal citations omitted); Brown v. Sikora & Assocs., Inc., 311 F.App’x 568, 570 (4th Cir. 2008) (noting that “sister circuits have consistently recognized [derivative standing for ERISA benefits] when based on the valid assignment of ERISA health and welfare benefits by participant and beneficiaries” and that “extending derivative standing to health care providers serves to further the explicit purpose of ERISA”); Connecticut State Dental Ass’n. v. Anthem Health Plans, Inc., 591 F.3d 1337, 1347 (11th Cir. 2009) (“[I]t is well- established in this and most other circuits that a healthcare provider may acquire derivative standing to sue under ERISA by obtaining a written assignment from a “participant” or “beneficiary” of his right to payment of medical benefits.”). The ASCs have plausibly alleged that they have derivative standing to bring ERISA claims on behalf of their plan members, who specifically assigned them in writing their “rights and benefits under their Cigna health insurance plan,” including the “right to appeal benefit denials and to sue.” 35). (ECF No. 42 ¶ The Cigna entities have argued that the ASCs are required to provide the language of the assignment sufficiently to plead standing. Few courts in the Fourth Circuit have addressed whether a party has ERISA derivative standing, and none have indicated on a motion to dismiss that the plaintiff must include in the complaint the specific language of the assignment in 69 order sufficiently to plead standing. Indeed, the few cases cited by the Cigna entities for this proposition can readily be distinguished on their facts. See Peninsula Regional Med. Ctr., 327 F.Supp.2d at 576 (finding on a motion to dismiss that a healthcare provider did not have standing as a provider to bring an ERISA claim against plan administrators because it did not allege that it was assigned ERISA rights by plan members); Brown, 311 F.App’x at 570-71 (finding on a motion for summary judgment that a plan sponsor (employer) did not have derivative standing to assert ERISA claims as an assignee of plan participant’s rights because “to have derivative standing, [it means that plaintiff] could have sued the actual ERISA participants, who would then have clearly had standing to sue for the unpaid ERISA benefits” and the plan sponsor could never have sued the actual plan participants to recover their ERISA benefits); Chesters v. Welles-Snowden, 444 F.Supp.2d 342, 346 (D.Md. 2006) (finding that removal from state court was not warranted because the family members of a plan beneficiary did not have standing to sue under ERISA because they were not health care providers and “[a]lthough various courts have held that assignees of participants and beneficiaries may have derivative standing under ERISA, they have only done so in cases involving health care providers 70 to whom a participant or beneficiary assigned their claims under an ERISA plan in exchange for health care”). Courts outside of the Fourth Circuit that have addressed whether a plaintiff’s allegations regarding the assignment of rights from a plan participant or beneficiary are sufficient to confer derivative standing under ERISA have required different levels of specificity. Compare N. Cypress Med. Ctr. Operating Co. v. CIGNA Healthcare, 782 F.Supp.2d 294, 301-02 (S.D.Tex. 2011) (finding that plaintiff/provider had sufficiently alleged that it obtained an assignment of rights from each patient, which was sufficient to confer beneficiary status upon it to bring ERISA claims and to “withstand a facial attack on the [c]ourt’s subject matter jurisdiction”), aff’d 781 F.3d 182 (5th Cir. 2015), with Sanctuary Surgical Ctr., Inc. v. Aetna, Inc., No. 11-80799-CV, 2012 WL 993097, at *2 (S.D.Fla. Mar. 22, 2012) (finding that plaintiffs’/providers’ allegations that they had been assigned rights by their patients were insufficient to confer derivative ERISA standing because plaintiffs failed to allege that they were “written assignments” of rights and did not provide the express language of the assignments) and Franco v. Conn. Gen. Life Ins. Co., 818 F.Supp.2d 792 (D.N.J. 2011) (finding that plaintiff/providers had not sufficiently alleged that they obtained a valid assignments in order to confer standing under ERISA based in part on the fact that plaintiffs’ 71 “complaints nowhere recite assignment provisions”). the language of the relevant The Cigna entities point to Sanctuary Surgical Centre, Inc. v. UnitedHealthcare, Inc., No. 10-81589CV, 2011 WL 6935289, at *4 (S.D.Fla. Dec. 30, 2011), for the proposition that “to sufficiently plead its standing as an ERISA beneficiary,” the ASCs must “provide the language of the actual assignments.” This unpublished decision from another jurisdiction is not binding and the undersigned is not persuaded that in order plausibly to allege derivative standing that the actual assignment language is needed. Of course at the summary judgment stage the ASCs will need definitively to show that the scope of the purportedly assignment received covers from all patients in ERISA rights order to they have proceed with these claims. 2. Breach of Fiduciary Duty Claim is Duplicative of the ASCs’ Claim for Benefits and Clarification of Rights In support of their counterclaim for benefits and clarification of rights under ERISA § 502(a)(1)(B), the ASCs allege that the Cigna entities, as plan administrators or insurers, are obligated to pay benefits to plan members and their assignees pursuant to the terms and methodology set forth in the ERISA plans. (ECF No. 42 ¶ 78). The ASCs further allege that the Cigna entities have breached the terms of their plans by “arbitrarily denying or reducing payments due to the ASCs 72 based on [their] misconstruction [their] plans’ exclusion[.]” and/or misapplication (Id. ¶ 81). of In support of their breach of fiduciary duty claim under ERISA § 502(a)(3), the ASCs allege that as “insurer and administrator of health benefit plans governed by ERISA, [the Cigna entities are] obligated to comply with ERISA’s fiduciary duties.” (Id. ¶ 85). The ASCs aver that the Cigna entities’ fiduciary duties with respect to the plans include acting “solely in the interest of the participants and beneficiaries” which involves acting with the exclusive their purpose of “providing beneficiaries” administering the 1104(a)(1)). The and plan.” ASCs benefits “defraying (Id. argue ¶ to participants reasonable 86) that (citing the Cigna and expenses 29 of U.S.C. entities § have breached their fiduciary duties by denying or reducing benefits payable to the ASCs for the services they rendered to the Cigna entities’ plan members. Cigna entities’ misconstruction claim and (Id. ¶ 87). denials They also allege that the were misapplication not of only the based plan on their language, but also were done to “(a) allow [them] to avoid [their] obligations to pay benefits, (b) discourage [their] insureds from using outof-network services, and (c) coerce into becoming in-network providers.” out-of-network providers (Id. ¶¶ 87-88). The Cigna entities aver that the ASCs’ claim for breach of fiduciary duty should be dismissed because “[c]ourts in this 73 Circuit [] regularly dismiss a plaintiff’s breach of fiduciary duty claim where it is duplicative of a claim for benefits under section 502(a)(1)(B).” (ECF No. 43-1, at 15). According to the Cigna entities, the ASCs’ claim for breach of fiduciary duty is merely a claim allegations for for both benefits in claims disguise, are the as same the (that underlying the Cigna entities wrongfully reduced or denied benefits based on their misconstruction/misapplication of plan terms), and the relief sought for both claims is the same (a monetary award equal to the value of the services rendered that was wrongfully withheld). In Korotynska v. Metro. Life Ins. Co., 474 F.3d 101, 102-04 (4th Cir. 2006), the Fourth Circuit reviewed the district court’s dismissal of a plaintiff’s ERISA § 502(a)(3) claim on a motion for judgment on the pleadings. The court addressed whether a plaintiff could bring a claim under § 502(a)(3) for breach of fiduciary duty against a plan administrator based on her allegations that the plan administrator engaged in a number of improper claims administration procedures designed to deny valid claims. The Fourth Circuit noted that: In Varity [Corp. v. Howe, 516 U.S. 489 (1996))], the Supreme Court held that § [502](a)(3) authorizes some individualized claims for breach of fiduciary duty, but not where the plaintiff’s injury finds adequate relief in another part of ERISA’s statutory scheme. The Court, taking both parts of § 74 [502](a)(3) as one whole, concluded that the provision creates a “catchall” which “act[s] as a safety net, offering appropriate equitable relief for injuries caused by violations that [§ 502] does not elsewhere adequately remedy.” But “where Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief normally would not be ‘appropriate.’” Id. at 104-05 (internal citations omitted). analyzed the factual allegations The Fourth Circuit underlying the plaintiff’s breach of fiduciary duty claim, which were essentially that: she filed for benefits under her plan, her benefits were wrongfully terminated, she appealed the termination decision, and the injury she asserted in her complaint was the financial harm that resulted from her termination of benefits. Circuit found that based on these allegations The Fourth there was no question that the plaintiff’s injury was redressable elsewhere in ERISA’s scheme, noting that: Section [502](a)(1)(B) allows plan participants to obtain individualized review of an allegedly wrongful denial of benefits. The plaintiff’s injury here — denial of benefits by the plan administrator — plainly gives rise to a cause of action under § [502](a)(1)(B) and as such would usually be appealed under that provision. . . . . . . . Although the Second Circuit has held that plaintiffs may seek relief simultaneously under § [502](a)(1)(B) and § [502](a)(3), the great majority of circuit courts have 75 interpreted Varity to hold that a claimant whose injury creates a cause of action under § [502](a)(1)(B) may not proceed with a claim under § [502](a)(3). These courts have not allowed claimants to proceed with § [502](a)(3) claims where relief was potentially available to them under § [502](a)(1)(B), because, in Varity, “[t]he Supreme Court clearly limited the applicability of § [502](a)(3) to beneficiaries who may not avail themselves of § [502]’s other remedies.” A plaintiff whose injury consists of a denial of benefits “has adequate relief available for the alleged improper denial of benefits through his right to sue [the benefit plan] directly under section [502](a)(1),” and thus “relief through the application of Section [502](a)(3) would be inappropriate.” To allow a claim under § [502](a)(3) would permit “ERISA claimants to simply characterize a denial of benefits as a breach of fiduciary duty, a result which the Supreme Court expressly rejected.” We join our sister circuits and hold that § [502](a)(1)(B) affords the plaintiff adequate relief for her benefits claim, and a cause of action under § [502](a)(3) is thus not appropriate. Id. at 105-07 (internal citations omitted). Accordingly, the Fourth Circuit affirmed the district court’s dismissal of the plaintiff’s claim for breach of fiduciary duty under ERISA § 502(a)(3). Based on the Fourth Circuit’s holding in Korotynska that a § 502(a)(3) claim will not lie when a plaintiff has adequate relief under another ERISA provision, the ASCs’ breach fiduciary duty claim under § 502(a)(3) must be dismissed. 76 of Like the plaintiff in Korotynska, the crux of the ASCs’ allegations supporting the breach of fiduciary duty claim are that the ASCs sought plan benefits on behalf of their patients (plan participants/beneficiaries), and the Cigna entities improperly denied the ASCs’ claims for benefits based on their misconstruction or misapplication of the plan terms and their alleged self-interested compensation and motive profits. The of retaining injury increased alleged here is redressable under § 502(a)(1)(B), which likely is why the ASCs have also brought a claim under that provision. Circuit does not permit “plaintiffs to The Fourth seek relief simultaneously under § [502](a)(1)(B) and § [502](a)(3),” when the injury 502(a)(1)(B). alleged creates a cause of action under § Korotynska, 474 F.3d at 106-07.8 8 The ASCs argue in their opposition that it is not clear at this stage in the proceedings that § 502(a)(1)(B) will afford them complete relief because some patients who have assigned their rights and benefits to the ASCs have not yet had their claims denied by the Cigna entities. Accordingly, they argue that a judgment on the ASCs’ § 502(a)(1)(B) claims would not necessarily cover those patients and they should be able to proceed simultaneously with their § 502(a)(3) claim to enjoin the Cigna entities from offsetting the previous payments made to the ASCs against the costs for future services rendered to other ASC patients. As aptly noted by the Cigna entities, § 502(a)(1)(B) specifically states that an action under that section can be brought “to clarify [a participant or beneficiary’s] rights to future benefits under the term of the plan” (ECF No. 53, at 10) — and therefore would adequately cover the availability of prospective relief for those patients whose claims have not yet been submitted to or denied by the Cigna entities. 77 3. In Failure to State a Claim for Non-Disclosure of Information support of their claim for failure to provide information under ERISA § 502(c)(1)(B), 29 U.S.C. 1132(c)(1)(B), the ASCs allege that “[a]s plan administrator of the health plans at issue, [the Cigna entities are] required to maintain and provide plan participants and beneficiaries, assignees, certain information upon request.” 94). or their (ECF No. 42 ¶ On behalf of their Cigna-insured patients, the ASCs aver that they have “requested documents that [the Cigna entities] claim[] provide the basis for [their] refusal to reimburse the ASCs for services the ASCs have rendered” and the Cigna entities have failed to produce the requested information. 97). Based on their failure to provide (Id. ¶¶ 96- this requested information, the ASCs allege that the Cigna entities are civilly liable to their plan participants and their assignees for the penalty provided in 29 U.S.C. 1132(c)(1)(B). (Id. ¶¶ 95, 98). The Cigna entities contend that the ASCs have not pointed to any legal authority that they had a duty to disclose the documents upon which they relied when denying claims. The Cigna entities argue that all that is required of a plan administrator upon denial of plan benefits, is “to set forth the specific reasons for such a denial[,]” (ECF No. 43-1, at 16-17) (citing 29 U.S.C. § 1133), a duty with which they purportedly fully 78 complied by informing the ASCs that their claims were denied based on the plans’ exclusion of patients are not obligated to pay. coverage for charges that The Cigna entities add that the ASCs’ own pleadings show that the Cigna entities met their disclosure obligations under ERISA, because they allege that the Cigna entities informed them that their claims were being denied based on this specific policy exclusion. The Cigna entities’ arguments miss the mark. They contend that they have met their disclosure obligations under, 29 U.S.C. § 1133, which provides that: In accordance with the regulations of the Secretary, every employee benefit plan shall— (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such a denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim. The ASCs’ claim, however, is not based on the Cigna entities’ failure to inform them of the reason for their claim denials; rather, the ASCs allege that the Cigna entities have failed to provide a full and fair review of their claim denials because they have failed to provide 79 the documentation they requested as part of their claims appeal process. 29 U.S.C. § 1132(a)(1)(A) provides a cause of action to a plan participant or beneficiary based on a plan administrator’s failure to supply requested information under 29 U.S.C. § 1132(c). 29 U.S.C. § 1132(c)(1)(B), states in relevant part that: Any administrator . . . who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal[.] Id. (emphasis added). Specifically, the ASCs cite 29 C.F.R. § 2560.503-1(h)(2)(iii) (“Appeal of adverse benefit determinations”), an ERISA implementing regulation, which they allege requires plans and plan administrators to provide certain documentation as part of the claims appeal process. regulation provides that: (2) Full and fair review. [T]he claims procedures of a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures— . . . 80 This (iii) Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section[.] Id. (emphasis added). Subsection (m)(8) of this same regulation states that a “document, record, or other information shall be considered ‘relevant’ to a claimant’s claim if such document . . . [w]as relied upon in making the benefit determination[.]” C.F.R. § 2560.503-1(m)(8)(i). In addition, the ASCs 29 cite subsection (i)(5) of this regulation, which applies to “Timing of notification of benefit determination on review,” and states in relevant part: (5) Furnishing documents. In the case of an adverse benefit determination on review, the plan administrator shall provide such access to, and copies of, documents, records, and other information described in [subsection j.] Subjection j requires that “plan administrators shall provide a claimant . . . upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.” 29 C.F.R. § 2560.503-1(j)(3) (emphasis added). The ASCs have stated a plausible violation of 29 U.S.C. § 1132(c)(1)(B) for failure to 81 comply with a request for information, based on their allegations that: the Cigna entities denied benefit claims that were submitted by the ASCs (purported assignees of plan participants’ ERISA rights) on behalf of the Cigna entities’ plan members; following the Cigna entities’ denial of claims, the ASCs “requested documents that [the Cigna refusal to rendered” failed entities] claim[] reimburse the (ECF to No. provide 42 ¶ the provide ASCs 96); for and requested the basis services that for the [the ASCs Cigna information. [their] have entities] The Cigna entities, as plan administrators, were required to provide a “full and fair” review of their claim denials as required by 29 U.S.C. § 1133(2) and 29 C.F.R. § 2560.503-1, which included providing, upon request, access to or copies of documents that they relied upon in processing the claims that they denied. ASCs have sufficiently alleged that they requested The such documentation after each claim was denied and that the Cigna entities failed to provide it. B. Breach of Contract (Count IV) The ASCs allege that “they treat patients who are insured by Cigna health benefit plans that are not governed by ERISA. As the assignees of those patients, the ASCs bring this claim for breach of contract.” (ECF No. 42 ¶ 100). For plan members of non-ERISA plans, the Cigna entities agree to insure these individuals in exchange for the 82 receipt of their premium payments. (Id. ¶ 101). These plans are also governed by plan documents which permit members to seek out-of-network services, and that the Cigna entities “will pay a specific percentage of the lesser of (a) the actual billed charge, or (b) the usual and customary charge for a procedure based on another comparable benchmark.” (Id. ¶ 104). The ASCs allege that the Cigna entities have breached this agreement by denying or reducing claim payments for their insureds’ services provided by the ASCs. claims (Id. ¶ 105). for out-of-network Finally, the ASCs allege that they have been financially injured by the Cigna entities’ breach and seek damages. The Cigna entities launch the same argument against this claim as they do against the ASCs’ ERISA claims, namely, that the ASCs have not sufficiently alleged that they have standing as assignees to bring this claim because they have failed to provide the actual language of the assignments. at 18). (ECF No. 43-1, For the same reasons discussed above, the ASCs have sufficiently alleged that they were assigned the right to pursue benefits and to sue on behalf of their patients, whether the patients were participants in an ERISA or a non-ERISA plan. C. Unjust Enrichment (Count V) The ASCs assert a claim for unjust enrichment based on the following allegations: 83 [The Cigna entities have] repeatedly reduced or denied payment to the ASCs for care provided to [the Cigna entities’] insureds based on [their] misconstruction and/or misapplication of certain language in [their] plan documents. [The Cigna entities have] done so even though [their] insureds have paid additional premiums to [the Cigna entities] for the right to receive out-ofnetwork care if they so desire. (ECF No. 42 ¶ 108). The ASCs allege that as a result of the Cigna entities’ reductions or denials of claim payments they have provided medical services to the Cigna plan (Id. ¶ 109). members at no cost to the Cigna entities. entities’ The ASCs further allege that by reducing or denying payments to the ASCs, the Cigna entities have been able to increase their own compensation the form for inequitable in the Cigna of plan entities savings, to and retain it would those be savings. Accordingly, the ASCs seek an order from the court awarding them the value of all services for which the Cigna entities have reduced or denied payment. “[U]njust enrichment (Id. ¶ 112). and quantum meruit, both ‘quasi- contract’ causes of action, are remedies to provide relief for a plaintiff when an enforceable contract does not exist but fairness dictates that the plaintiff receive compensation for services provided.” Cnty. Cmm’rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 96 (2000) (quoting Dunnaville v. McCormick & Co., 21 F.Supp.2d 84 527, 535 (D.Md. 1998)) (internal quotation marks omitted). rule is that no In Maryland, “[t]he general quasi-contractual claim can arise when a contract exists between the parties concerning the same subject matter on which the quasi-contractual claim rests.” Id. at 96 (internal v. citation omitted); see also FLF, Inc. World Publ’ns, Inc., 999 F.Supp. 640, 642 (1998) (“It is settled law in Maryland, and elsewhere, that a claim for unjust enrichment may not be brought where the subject matter of the claim is covered by an express contract between the parties.”). The Cigna entities contend that this claim is preempted by ERISA to the extent that it relates to patients covered by ERISA plans (ECF No. 43-1, at 19), and the ASCs concede this point, (ECF No. 52, at 16 n.11). Accordingly, the ASCs’ claim for unjust enrichment is asserted only as to those patients whose health benefit plans are not covered by ERISA. The Cigna enrichment recovery entities claim under on a the theory also basis of challenge that unjust ASCs’ “Maryland enrichment contract covers the same subject matter.” 22). the law when unjust precludes a valid (ECF No. 43-1, at As assignees of their patients’ claims, the ASCs would “stand benefit in the plans shoes with of their patients, and their [the Cigna entities] clearly cover[] subject matter of the ASCs’ unjust enrichment claim[.]” 23). 85 patients’ the (Id. at Although in Maryland a plaintiff may plead in the alternative by asserting claims for unjust enrichment and breach of contract, when doing so the “plaintiff’s claim for unjust enrichment must include an allegation of fraud or bad faith in the formation of the contract.” Jones v. Pohanka Auto N., Inc., 43 F.Supp.3d 554, 573 (D.Md. 2014) (dismissing a plaintiff’s claim for unjust enrichment, where the plaintiff had acknowledged the existence of a contract with defendant, because “nowhere in the complaint [did plaintiffs] actually allege bad faith in the formation of [the contract]”). Here, the ASCs assert claims for breach of contract based on their patients’ assignment of rights under their health plans. The ASCs then argue that they are bringing the unjust enrichment counterclaim on their patients’ own behalves contractual and not as rights. the The assignees factual of their allegations underlying both of these claims, however, are the same and the ASCs have not provided an independent factual basis upon which their unjust enrichment claim rests. The ASCs further allege in their countercomplaint that a valid insurance contract exists between the Cigna entities and their plan members, that the Cigna entities’ plan members assigned their rights under these contracts to the ASCs, and that the ASCs are seeking recourse because the Cigna entities’ misconstruction of the plans caused them to be financially harmed while the Cigna entities were 86 simultaneously countercomplaint financially do the benefitted. ASCs allege Nowhere that the in the underlying contracts or their assignments may be invalid due to fraud, bad faith, or any other reason. If an ASC has a valid assignment of rights covering the subject matter of this dispute (payment of plan benefits) from a party to the contract, then the ASC has a valid contract remedy and need not rely on a quasi-contractual remedy. Accordingly, because the ASCs’ allegations acknowledge that contracts exist covering the same subject matter as the unjust enrichment claim, the unjust enrichment claim will be dismissed. D. Promissory Estoppel (Count VI) The ASCs assert a claim for promissory estoppel based on the allegations that “[p]rior to providing care to many of Cigna’s insureds, the ASCs sought and obtained confirmation from [the Cigna entities] that the patient’s health benefit permitted the patient to receive that care from the ASC[.] plan In each such case, [the Cigna entities] specifically represented (either orally, in writing, or both) that the care would be covered by the patient’s health benefit plan.” Cigna-insured or (ECF No. 42 ¶¶ 114-15). Cigna-administered The ASCs further assert that the Cigna entities reasonably expected that the ASCs would render care based on their confirmation of coverage, and the ASCs did in fact rely on the Cigna entities’ representations 87 and provide services to the Cigna entities’ plan members. ¶¶ 116-17). (Id. According to the ASCs, after they submitted claims to the Cigna entities for the services they provided, the Cigna entities denied payment on the ground that the “patient’s Cignainsured or Cigna-administered health provide out-of-network benefits.” benefit (Id. ¶ 118). plan did not As a result of these claim denials, the ASCs allege that they have suffered financial losses by providing care to the Cigna entities’ plan members that was not covered by the plans, and these losses can be avoided only by enforcing the Cigna entities’ promises that the services would be covered by the patient’s plans. (Id. ¶¶ 119-20). Judge Blake noted in Goss v. Bank of America, N.A., 917 F.Supp.2d 445, 450-51 (D.Md. 2013) that: “Maryland courts, which disapprove of the term ‘promissory estoppel,’ have incorporated the Restatement (Second) on Contracts to adopt the analogous doctrine of ‘detrimental reliance,’ a tort that does not sound in fraud.” Jordan v. Alt. Resources Corp., 458 F.3d 332, 348 (4th Cir. 2006) (citing Pavel Enterprises, Inc. v. A.S. Johnson Co., 342 Md. 143, 674 A.2d 521, 532 (1996)). “Promissory estoppel offers a vehicle to enforce a promise for which there is no consideration, but the plaintiff nonetheless relied upon the promise to his detriment in circumstances that make it unconscionable not to enforce the promise.” Edell & Assoc., P.C v. Law Offices of Peter G. Angelos, 264 F.3d 424, 440 (4th Cir. 2001). To maintain a claim under promissory 88 estoppel, or “detrimental plaintiffs must allege: reliance,” the (1) a clear and definite promise; (2) where the promisor has a reasonable expectation that the offer will induce action or forbearance on the part of the promisee; (3) which does induce actual and reasonable action or forbearance by the promisee; and (4) causes a detriment which can only be avoided by the enforcement of the promise. Pavel, 674 A.2d at 532. The Cigna entities argue that this claim dismissed because it is preempted by ERISA. should be According to the Cigna entities, other “courts have specifically found promissory estoppel claims are preempted because allowing such claims to proceed would in essence allow a plaintiff to modify a plan’s terms outside the regulatory scheme outlined through ERISA.” (ECF No. 43-1, at 20). For the same reasons the Cigna entities’ state law claims are not preempted by ERISA, the counterclaim is not preempted. ASCs’ promissory estoppel This claim does not arise from plan members right to recover benefits under the terms of their Cigna plans; rather, it is based on the promises made by the Cigna entities to the ASCS that the Cigna entities would pay for their plan members’ services. These promises purportedly induced the ASCs to provide services to patients to their own 89 detriment because promises. the Cigna Accordingly, entities the later ASCs’ reneged on counterclaim their arises independent of ERISA under the doctrine of promissory estoppel or detrimental reliance. promissory estoppel Numerous courts that have assessed claims factually similar to that of the ASCs’ (made by providers against insurers who have promised that services were covered by the insurance plan and then later refused to pay for them), have found that these claims were not preempted by ERISA. See Nat’l Centers for Facial Paralysis, Inc. v. Wal-Mart Claims Administration Group Health Plan, 247 F.Supp.2d 755, 760 (D.Md. 2003) (finding that a provider’s promissory estoppel claim against a plan administrator was not preempted by ERISA); Oak Brook Surgical Ctr., Inc. v. Aetna, Inc., 863 F.Supp.2d 724, 730 (N.D.Ill. 2012) (finding that a provider’s claim against an insurance company for promissory estoppel was not preempted by ERISA and indicating that “the court is fundamentally troubled by [the insurer’s] insistence that it can impunity Health make because & Hosp. whatever ERISA Auth. representations shields v. it from Beverage it desires liability”); Distribs. Co., with Denver LLC, 843 F.Supp.2d 1171, 1183-84 (D.Colo. 2012), aff’d 546 F.App’x 742 (10th Cir. 2013) (finding that a third party provider’s promissory estoppel claim brought on its own behalf against an insurer that made promises to 90 the provider to pay for a patient’s services was not preempted by ERISA); cf. Access Mediquip L.L.C. v. UnitedHealthcare Ins. Co., 662 F.3d 376, 383 (5th Cir. 2011), opinion reinstated in part on reh’g, 698 F.3d 229 (5th Cir. 2012) (finding that a provider of medical devices’s claim for negligent misrepresentation against an insurer “premised on allegations that it was misled by an ERISA [plan administrator’s] statements regarding the extent of coverage for the provider’s services” was not preempted by ERISA). The Cigna promissory entities estoppel further claim should contend be that dismissed the ASCs’ because their allegations are “missing a key element of promissory estoppel under Maryland law — that [the Cigna entities’] actions caused detriment which can only be avoided by the enforcement of the promise.” (ECF No. (internal citation and 43-1, at 23) quotation (emphasis marks in omitted). original) The Cigna entities aver that the ASCs’ allegations fail to meet the last element of this claim because enforcement of their alleged promises is not the only way to avoid detriment to the ASCs. The Cigna elsewhere entities in their point to the counterclaim fact that that their the ASCs allege patients remain responsible for the full amount of their charges if the Cigna entities do not pay. Based on this assertion, the Cigna entities argue that no injustice will result if their alleged promises are not enforced because the ASCs can collect from 91 their patients any outstanding amounts due to them, thereby avoiding any detriment. The Cigna entities’ argument is unavailing. The ASCs’ claim for promissory estoppel or detrimental reliance centers on the Cigna entities’ promises to pay the ASCs for their services. The Cigna patients entities also essentially promised to pay are and arguing that therefore, the ASCs’ the ASCs’ counterclaim should properly be against their patients. The ASCs are the master of their counterclaim, however, and chose to assert promissory estoppel against the Cigna entities, rather than their patients. The Cigna entities cite no authority indicating that the ASCs’ potential right to recover from a third party payor would excuse the promisors from honoring their own promises to pay.9 9 Moreover, the cases cited by the Cigna entities for the proposition that “the ASCs cannot show that any ‘injustice’ would result” (ECF No. 43-1, at 24) (emphasis added), are inapplicable here because those cases involved factual determinations made in the context of motions for summary judgment or at trial. See Pavel, 342 Md. at 168 (finding that there was “sufficient evidence in the record to support the trial judge’s conclusion that [plaintiff] had not proven its case for detrimental reliance”); Citiroof Corp. v. Tech Contracting Co., Inc., 159 Md.App. 578, 586, 589 (2004) (finding that the trial court’s determination that the evidence was sufficient to satisfy the elements of detrimental reliance was not clearly erroneous); Union Trust Co. of Md. v. Charter Med. Corp., 663 F.Supp. 175, 179 (D.Md. 1986) (finding on a motion for summary judgment that the record did not establish that the plaintiff’s substantive allegations supporting its claim for promissory estoppel were supported and therefore entering judgment against it). Indeed, only one case cited by the Cigna 92 V. Conclusion For the foregoing reasons, Defendants’ motion to dismiss and the Cigna Entities’ motion to dismiss will be granted in part and denied in part. A separate order will follow. /s/ DEBORAH K. CHASANOW United States District Judge entities involved the dismissal of a promissory estoppel claim, and that case is factually distinguishable. Wynn v. HewlettPackard Co., No. 8:11-CV-01287-AW, 2012 WL 113390, at *3-4 (D.Md. Jan. 12, 2012) (finding that plaintiff had not stated a plausible claim for promissory estoppel because the allegations did not state an existence of a clear and definite promise and the detriment complained of was based on an employer’s promise to vest stock benefits on a certain date and plaintiff retired prior to that date, making her ineligible for vesting anyhow). 93
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