MEDWELL, LLC v. CIGNA CORPORATION

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

MEDWELL, LLC,

Plaintiff,

v.

CIGNA CORPORATION, CIGNA Civ. No. 20-10627 (KM) (ESK)

HEALTH AND LIFE INSURANCE

COMPANY, CIGNA HEALTHCARE OF OPINION

NEW JERSEY, INC., CONNECTICUT

GENERAL LIFE INSURANCE

COMPANY, JOHN DOES 1–20, JANE

DOES 1–20, XYZ CORPORATIONS 1–

20, and ABC PARTNERSHIPS 1–20,

Defendants.

KEVIN MCNULTY, U.S.D.J.:

MedWell, LLC is a healthcare practice that regularly provided medical

services to patients insured by Cigna1 and would seek payment from Cigna.

Cigna claimed that it had overpaid MedWell for a certain period and so stopped

paying MedWell. MedWell sued Cigna in state court alleging state-law claims.

Cigna removed to this Court, asserting that one claim was completely

preempted by the Employee Retirement Income Security Act of 1974 (ERISA),

29 U.S.C. § 1001, et seq. Now before the Court is MedWell’s motion to remand.

(DE 8.)2 For the foregoing reasons, the motion is DENIED.

1 MedWell sues Cigna Corporation as well as certain subsidiaries, affiliated

entities, and to-be-identified defendants. For simplicity, I refer to all defendants

collectively as “Cigna.”

2 Certain citations to the record are abbreviated as follows:

Compl. = Complaint, attached as Exhibit A to Defendants’ Notice of Removal

(DE 1-2)

Notice = Defendants’ Notice of Removal (DE 1)

Mot. = MedWell’s Motion to Remand (DE 8-1)

I. BACKGROUND

A. Facts

MedWell is a healthcare practice that, for at least fifteen years, has

treated patients insured by Cigna. (Compl. ¶¶ 9, 15.) After treating patients,

MedWell would submit claims to Cigna, which would review the claim and then

pay MedWell directly for the services rendered. (Id. ¶ 17.)

In 2017, Cigna had MedWell submit the records for twenty patients so

Cigna could do an audit. (Id. ¶¶ 20–25.) Those records related to services which

MedWell had provided to patients from 2014 to 2017. (Id. ¶ 22.) Two years

passed without word from Cigna on the audit’s results, while MedWell

continued to treat Cigna-insured patients and receive payment from Cigna. (Id.

¶¶ 29–30.)

In August 2019, however, Cigna stopped paying any claims MedWell

submitted. (Id. ¶ 31.) When MedWell objected to this nonpayment, Cigna

replied that its audit had identified “damages” of over $800,000 due to

overbilling by MedWell (although MedWell contested Cigna’s allegation and

argued that any overbilling would only apply to a small percentage of claims).

(Id. ¶¶ 31–38.) Although Cigna only identified overbilling for the twenty patients

who were the subject of the audit, Cigna is withholding monies owed to

MedWell for all claims submitted after around August 2019, even though those

claims are “wholly unrelated” to the patient records which Cigna reviewed. (Id.

¶¶ 31, 45.)

Opp. = Defendants’ Opposition to Motion to Remand (DE 13)

Ex. A = Exhibit A to Defendants’ Opposition to Motion to Remand (DE 13-2)

Reply = MedWell’s Reply Brief in Support of its Motion to Remand (DE 14)

Sur-reply = Cigna’s Sur-reply (DE 22)

Penaro Decl. = Declaration of Steven L. Penaro (22-2)

Plan 1 = Exhibit A to Sur-reply (DE 22-3)

Plan 2 = Exhibit B to Sur-reply (DE 22-4)

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B. Procedural History

To recover for this nonpayment, MedWell sued Cigna in New Jersey

Superior Court and alleged state-law claims for (1) breach of contract,

(2) breach of the implied covenant of good faith, (3) quantum meruit, (4) unjust

enrichment, (5) promissory estoppel, (6) equitable estoppel, (7) tortious

interference with business relations, (8) tortious interference with prospective

economic advantage, and (9) negligence. (Id. ¶¶ 54–107.)

Cigna removed to this Court, asserting that (1) some, if not all, of Cigna

plans at issue are governed by ERISA, and (2) MedWell’s unjust enrichment

claim is preempted by ERISA because MedWell effectively seeks to collect

“ERISA-regulated benefits” from Cigna. (Notice at 3–4.)

MedWell moved to remand, namely arguing that Cigna’s notice of

removal failed to plead complete preemption. (Mot. at 2–8.) In opposing

MedWell’s motion, Cigna walked through the prongs of complete preemption

and attached claims forms which MedWell submitted to Cigna, arguing that

these forms showed that MedWell could collect benefits from Cigna on behalf of

patients. (Opp.; Ex. A.) In reply, MedWell argued that Cigna needed to submit

the plans themselves so that the Court could review whether patients could

validly assign claims to MedWell. (Reply at 9–11.)

The Court asked Cigna to respond to this argument (DE 21), and Cigna

provided excerpts of two plans of Cigna-insured patients who received services

from MedWell in 2019 and 2020. (Penaro Decl. ¶¶ 7–15.) Both plans state that

“Medical benefits are assignable to the provider.” (Plan 1 at 4; Plan 2 at 3.)

II. DISCUSSION AND ANALYSIS

A. Removal and ERISA Preemption

Defendants may remove cases brought in state court that arise under

federal law. 28 U.S.C. §§ 1441(a), 1331. But a removed action must be

remanded when “it appears that the district court lacks subject matter

jurisdiction.” Id. § 1447(c). So, on a motion to remand, I must determine

whether the action arises under federal law.

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Under the well-pleaded complaint rule, an action “arises under” federal

law “only if a federal question is presented on the face of the

plaintiff’s . . . complaint.” Dukes v. U.S. Healthcare, 57 F.3d 350, 353 (3d Cir.

1995). Here, the complaint only pleads state-law claims (Compl. ¶¶ 54–107),

but there is an exception to the well-pleaded complaint rule “for matters that

Congress has so completely preempted that any civil complaint that falls within

this category is necessarily federal in character.” Lazorko v. Pa. Hosp., 237 F.3d

242, 248 (3d Cir. 2000). Section 502 of ERISA is one such statutory provision

that completely preempts any state causes of action within its scope. Aetna

Health Inc. v. Davila, 542 U.S. 200, 209 (2004). That section provides that “[a]

civil action may be brought—(1) by a participant or beneficiary . . . (B) to

recover benefits due to him under the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify his rights to future benefits under the

terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). A claim is completely preempted

by § 502(a) if “(1) the plaintiff could have brought the claim under § 502(a), and

(2) no other legal duty supports the plaintiff’s claim.” N.J. Carpenters & the Trs.

Thereof v. Tishman Constr. Corp. of N.J., 760 F.3d 297, 303 (3d Cir. 2014)

(emphasis omitted) (citing Pascack Valley Hosp. v. Local 464A UFCW Welfare

Reimbursement Plan, 388 F.3d 393, 400 (3d Cir. 2004)).

As the removing party, Cigna bears the burden of showing that each

prong is satisfied. Carlyle Inv. Mgmt. LLC v. Moonmouth Co., 779 F.3d 214, 218

(3d Cir. 2015); see also Pascack, 388 F.3d at 401. If “any doubt exists” over

whether Cigna can make that showing, then I must remand. See Carlyle, 779

F.3d at 218.

B. ERISA Complete Preemption Prong 1

This first prong entails two inquiries: “[w]hether the plaintiff is the type of

party that can bring a claim pursuant to Section 502(a)(1)(B)” and “whether the

actual claim that the plaintiff asserts can be construed as a colorable claim for

benefits pursuant to Section 502(a)(1)(B).” Progressive Spine & Orthopaedics,

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LLC v. Anthem Blue Cross Blue Shield, Civ. No. 17-536, 2017 WL 4011203, at

*5 (D.N.J. Sept. 11, 2017).

Type of Party

By the statute’s terms, only participants or beneficiaries may bring a

§ 502(a) claim. Pascack, 388 F.3d at 400. Nonetheless, healthcare providers,

like MedWell, may bring such claims if they have a valid assignment of benefits

from plan participants. CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165,

176 n.10 (3d Cir. 2014). That is, “when a patient assigns payment of insurance

benefits to a healthcare provider, [the] provider gains standing to sue for that

payment.” Am. Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield, 890

F.3d 445, 450 (3d Cir. 2018) (citation omitted) (alteration in original). In

response to such rulings that assignments may confer ERISA standing,

insurers have put anti-assignment clauses into their contracts, and such

clauses are enforceable. Id. at 447–48. Thus, to assure themselves of a valid

assignment and thereby jurisdiction, courts have reviewed (1) authorization

forms from healthcare providers to determine whether patients assigned

benefits, and (2) patients’ insurance plans to determine whether there is an

anti-assignment clause. Progressive, 2017 WL 4011203, at *7; N. Jersey Brain

& Spine Ctr. v. United Healthcare Ins. Co., Civ. No. 18-15631, 2019 WL

6317390, at *3 (D.N.J. Nov. 25, 2019), report & recommendation adopted by

2019 WL 6721652 (Dec. 10, 2019).

MedWell does not contest that the claims forms show that MedWell

attempted to collect payment from Cigna based on a purported assignment of

benefits. See also Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321,

325 (2d Cir. 2011) (holding that similar forms showed an assignment). To prove

that such assignments were valid (i.e., no anti-assignment clause could

invalidate them), Cigna produced two “representative” plans pursuant to which

MedWell submitted claims for reimbursement. (Sur-reply at 2–3 & n.3.)3 Both

3 To be sure, MedWell seeks renumeration for an unspecified number of claims

that could involve varying plans, while Cigna has provided only two “representative”

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plans affirmatively allow for assignments to a provider. (Plan 1, at 4; Plan 2, at

3.) So it would seem that Cigna has made the requisite showing. See

Progressive, 2017 WL 4011203, at *7; N. Jersey Brain & Spine Ctr., 2019 WL

6317390, at *3.

Nonetheless, MedWell argues that only pre-2017 claims and plans are

relevant to this case because Cigna is withholding payments due to overbilling

identified in patient records from 2014 to 2017. (Reply at 1.) Plans or claims

that post-date 2017, MedWell contends, are not relevant because the

Complaint does not raise causes of action relating to claims that MedWell

submitted post-2017. (Id.) MedWell reimagines its own Complaint. The unjust

enrichment count simply alleges that “MedWell conferred benefits upon” Cigna

(i.e., services to Cigna-insured patients), and Cigna “failed to provide MedWell

with remuneration for said benefits.” (Compl. ¶¶ 74, 77.) There is no

specification that MedWell only seeks to recover for the claims related to the

twenty patients whose records were audited. To the contrary, the Complaint

alleges that Cigna is “withholding all monies” due to MedWell for services

“unrelated” to the twenty patients. (Id. ¶ 45 (emphases added).) The crux, then,

of the Complaint is that Cigna owes MedWell payment for many more claims

than just those related to the twenty patients. While the twenty patients’

records may have triggered for Cigna’s halt to payments, MedWell presumably

plans. Nonetheless, it is sufficient for jurisdiction if at least some of the claims for

reimbursement are completely preempted. This is so because I may exercise

supplemental jurisdiction over the remaining claims since Cigna is allegedly

withholding payment on those claims and the preempted claims as part of the same

course of conduct. See 28 U.S.C. § 1367(a) (providing “supplemental jurisdiction over

all other claims that are so related to claims in the action within such original

jurisdiction that they form part of the same case or controversy”); Montefiore, 642 F.3d

at 332–33 (claims forms showed that some of the claims satisfied the Davila test and

the remaining claims that formed the basis of an unjust enrichment count came

within the court’s supplemental jurisdiction); Brunswick Surgical Ctr., LLC v. CIGNA

Healthcare, Civ. No. 09-5857, 2010 WL 3283541, at *1 (D.N.J. Aug. 18, 2010) (where

claims involved thirteen plans, eight of which were governed by ERISA, claims

regarding the five non-ERISA plans were subject to supplemental jurisdiction).

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wants to recover all monies owed. Accordingly, the plans which Cigna

submitted are relevant and presumably related to claims which Cigna has paid

to MedWell.

In sum, Cigna has produced sufficient evidence to show that MedWell is

the type of party that could bring an ERISA claim.4

Type of Claim

Next, I ask whether the claim asserted by MedWell can be considered a

claim for benefits under ERISA. Progressive, 2017 WL 4011203, at *8.5 Such

claims seek “to recover benefits due to [a beneficiary] under the terms of his

plan” or “to enforce his rights under the terms of the plan.” Id. (quoting 29

U.S.C. § 1132(a)(1)(B)). There is “a common distinction in the case law between

claims involving the ‘right to payment’ and claims involving the ‘amount of

payment’—that is, on the one hand, claims that implicate coverage and benefits

established by the terms of the ERISA benefit plan, and, on the other hand,

claims regarding the computation of contract payments or the correct

execution of such payments.” Montefiore, 642 F.3d at 331. The former are

claims for benefits under ERISA, while the latter are not. Id.; accord Pascack,

388 F.3d at 403; see also Blue Cross of Cal. v. Anesthesia Care Assocs. Med.

Grp., 187 F.3d 1045, 1051 (9th Cir. 1999) (right to payment case when patient

assigned benefits to dentist, dentist billed insurer, and insurer refused to pay

(citation omitted)).

4 In extra filings, MedWell argues, for one reason or the other, that the Court

cannot be sure that the plans are encompassed by the claims in this suit or that Cigna

has accurately portrayed them. (E.g., DE 30.) But, on this limited record and at this

early stage, what I have before me are plans which Cigna attests are encompassed by

this case and would appear, within their four corners, to satisfy the ERISA inquiry. So,

at least now, there is no reasonable “doubt” that the plans can satisfy the ERISA

inquiry. See Carlyle, 779 F.3d at 218. Moreover, because jurisdiction can be assessed

at any time, MedWell is free to later more clearly establish as a matter of fact that no

relevant plans qualify for the ERISA inquiry.

5 MedWell does not meaningfully contest the remaining inquiries.

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This is a “right to payment” case. MedWell, on behalf of

patients/beneficiaries, seeks payment from Cigna because Cigna has failed to

pay altogether, even though it is obliged to under those plans. (Compl. ¶¶ 77–

79.) Moreover, Cigna’s denial of payment was based on Cigna’s position that

some services provided by MedWell were not covered (id. ¶¶ 40–41), and claims

that implicate coverage disputes fall under § 1132 (a)(1)(B), see CardioNet, 751

F.3d at 177–78. Thus, MedWell seeks to “to recover benefits due to [a

beneficiary] under the terms of his plan.” 29 U.S.C. § 1132(a)(1)(B); see also

Blue Cross of Cal., 187 F.3d at 1051. Accordingly, both subparts of prong 1 of

the ERISA complete preemption analysis are satisfied.

C. ERISA Complete Preemption Prong 2

Under the second prong, I ask whether “there is no other independent

legal duty that is implicated by [Cigna’s] actions.” Davila, 542 U.S. at 210. In

other words, I ask whether Cigna’s liability would “derive[] entirely from the

particular rights and obligations established by the benefit plans.” Id. at 213. If

a key question in the case comes down to whether claims are covered under

the plan or were wrongfully denied, then liability derives from the plan. Merling

v. Horizon Blue Cross Blue Shield of N.J., Civ. No. 04-4026, 2009 WL 2382319,

at *11 (D.N.J. July 31, 2009); Klimowicz v. Unum Life Ins. Co. of Am., Civ. No.

04-2990, 2007 WL 2904195, at *4 (D.N.J. Sept. 28, 2007) (Greenaway, Jr., J.),

aff’d, 296 F. App’x 248 (3d Cir. 2008).

Here, MedWell, in the stead of patients/beneficiaries, seeks to have

Cigna pay benefits allegedly owed under those patients’ plans. Cigna, for its

part, contends that it has no obligation to pay because some of those claims

are not covered. (Compl. ¶¶ 40–41.) Thus, to show that Cigna must pay

MedWell, I will need to consult the terms of the plans to see if Cigna is

wrongfully denying benefits, and a case that turns on wrongful denial of

benefits satisfies the second prong. See Merling, 2009 WL 2382319, at *11;

Klimowicz, 2007 WL 2904195, at *4. Further, MedWell and Cigna have no

agreement with one another that could affect Cigna’s obligations. Wayne

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Surgical Ctr., LLC v. Concentra Preferred Sys., Inc., Civ. No. 06-928, 2007 WL

2416428, at *5 (D.N.J. Aug. 20, 2007) (“Because no extrinsic contract governs

the amount of reimbursement to which WSC is entitled, WSC’s claims are

‘inextricably intertwined’ with the terms of the ERISA welfare benefit plans.”);

see also N. Jersey Brain & Spine Ctr. v. Aetna Life Ins. Co., Civ. No. 16-1544,

2017 WL 659012, at *5 (D.N.J. Feb. 17, 2017), report & recommendation

adopted by 2017 WL 1055957 (Mar. 20, 2017). Indeed, courts in this District

find that unjust enrichment claims by a provider as assignee qualify for ERISA

preemption. E.g., Cohen v. Horizon Blue Cross Blue Shield of N.J., Civ. No. 15-

4525, 2017 WL 685101, at *7 (D.N.J. Feb. 21, 2017); Wayne Surgical Ctr., 2007

WL 2416428, at *5. Accordingly, the second prong is satisfied.

III. CONCLUSION

For the reasons set forth above, MedWell’s motion to remand is denied.

A separate order will issue.

Dated: December 4, 2020

/s/ Kevin McNulty

____________________________________

Kevin McNulty

United States District Judge

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