Northwell Health, Inc. v. Health Care Service Corporation

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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NORTHWELL HEALTH, INC.,

Plaintiff, MEMORANDUM &

ORDER

CV 23-600 (GRB)(ARL)

-against- FILED

CLERK

BLUECROSS BLUESHIELD OF TENNESSEE, INC., 12/13/202  4 2:29 pm

Defendant.

------------------------------------------------------------------X U.S. DISTRICT COURT

NORTHWELL HEALTH, INC., EASTERN DISTRICT OF NEW YORK

Plaintiff, LONG ISLAND OFFICE

CV 23-602 (GRB)(AYS)

-against-

HEALTH CARE SERVICE CORPORATION,

Defendant.

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NORTHWELL HEALTH, INC.,

Plaintiff,

CV 23-1765 (GRB)(AYS)

-against-

BLUECROSS BLUESHIELD OF FLORIDA, INC.,

Defendant.

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GARY R. BROWN, United States District Judge:

Presently before the Court is a joint motion to dismiss filed in each of the three above-

listed cases. Docket Entry (“DE”) 36.1 For the reasons stated herein, that motion is GRANTED

in part and DENIED in part.

1 All Docket Entry citations refer to documents filed in Northwell Health, Inc. v. BlueCross

BlueShield of Tennessee, Inc., case number 2:23-cv-600(GRB)(ARL). Per the Court’s request,

defendants in the three cases filed a joint motion to dismiss, and the legal and factual issues are

almost identical in each case. See DE 37.

Factual Background

All factual allegations are taken from the Amended Complaint and assumed to be true for

the purposes of deciding this motion. Plaintiff Northwell Health is a New York not-for-profit

corporation that operates hospitals and health care facilities. Amended Complaint, DE 21 ¶ 1.

Beginning in 2000, plaintiff has maintained a contractual relationship with Empire Blue Cross

Blue Shield HMO (“Empire”), a health insurance provider based in New York, by which plaintiff

agreed to provide medically necessary services for Empire’s patients and Empire agreed to

reimburse plaintiff according to a payment schedule. Id. ¶¶ 6-8. The basic contours of this

arrangement have remained the same through the years, but the most current version of their

agreement is contained in a 2008 document titled Participating Practitioner Group Agreement

(hereinafter the “Provider Agreement”) and its subsequent amendment. Id. ¶ 18.

Empire is a member of the Blue Cross Blue Shield Association (“BCBSA”), a national

organization that maintains the Blue Cross Blue Shield trademarks and licenses them to various

entities, including Empire; these entities are collectively known as “Blue Card Plans.” Id. ¶¶ 14-

21. The Provider Agreement states that members of out-of-state Blue Card Plans “shall be

entitled to access the services of [Northwell] Providers that participate in the Empire network” at

the same rates as Empire members. Id. ¶ 21 (quoting Provider Agreement, DE 65 at 10).

Plaintiff alleges that, upon rendering service to a member of an out-of-state Blue Card Plan, it is

that plan’s responsibility to compensate plaintiff according to the terms of the Provider

Agreement. Id. ¶¶ 29-31. The Blue Card Plan is required to submit payment to Empire, which

then, acting only “as an agent for” the plan, provides the payment to plaintiff for any valid

claim.2 Id. ¶ 34.

The defendant in each of the three cases addressed by this opinion is a Blue Card Plan

operating a Blue Cross Blue Shield entity in another state—specifically, BlueCross BlueShield of

Tennessee, Inc., Blue Cross Blue Shield of Florida, Inc., and Health Care Service Corporation

(based in Illinois). Plaintiff alleges that it provided healthcare services to customers of each of

the three defendants, but that defendants have wrongfully denied or underpaid plaintiff’s claims.

Plaintiff filed suit against each defendant in state court; each defendant timely removed to this

Court. Defendants filed a joint motion to dismiss.

Discussion

Standard of review

The Court has applied the well-trodden standard, recently discussed in Potter v. Inc. Vill.

of Ocean Beach, 2024 WL 3344041 at *4 (E.D.N.Y. July 9, 2024), in deciding defendants’

motion to dismiss. In sum, assuming the allegations of the complaint to be true and drawing

inferences in favor of the plaintiffs, the factual matters asserted must be facially plausible and

support the propounded claims.

2 Oddly, even though Empire is a party to the critical contracts and the entity at least nominally

responsible for transmitting payments to plaintiff, Empire is not a party to any of the suits

currently pending before the Court, nor has plaintiff’s counsel provided an explanation for

Empire’s absence. On April 16, 2024, the Court issued an order to show cause as to whether

Empire was a required party under Fed. R. Civ. P. 19. Both plaintiff and defendants submitted

briefs positing that Empire is not a required party and that the Court should proceed to decide the

motion to dismiss. This position is somewhat troubling, particularly as Empire’s presence in the

suit would implicate this Court’s subject matter jurisdiction. However, given that none of the

current parties in the suit has alleged any prejudice from Empire’s absence, nor has Empire

sought to intervene, the Court is prepared to proceed without Empire, albeit with some

reservations.

Breach of contract claims

Contractual language alone cannot bind nonsignatories to a contract

Plaintiff initially argues that defendants, who are not signatories to any contract between

plaintiff and Empire, are nevertheless bound by the Provider Agreement because of provisions

that purport to impose obligations on third parties, including Blue Card Plans such as defendants.

However, “[i]t goes without saying that a contract cannot bind a nonparty,” Davis v. Blige, 505

F.3d 90, 103 (2d Cir. 2007) (quoting EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002)),

and “[l]iability for breach of contract does not lie absent proof of a contractual relationship or

privity between the parties.” See CDJ Builders Corp. v. Hudson Grp. Const. Corp., 889

N.Y.S.2d 64, 65 (N.Y. App. Div. 2d Dep’t 2009) (finding that nonsignatory property owners

were not parties to a contract between prime contractor and subcontractor). “In determining

whether the parties entered into a contractual agreement…it is necessary to look [ ] to the

objective manifestations of the intent of the parties as gathered by their expressed words and

deeds.” Brown Bros. Elec. Contractors v. Beam Const. Corp., 41 N.Y.2d 397, 399, 361 N.E.2d

999 (N.Y. 1977). “Generally, a nonsignatory to a contract cannot be named as a defendant in a

breach of contract action unless it has thereafter assumed or been assigned the contract.” Alzal

Corp. v. I.F.C. Int’l Freight Corp., No. 13-CV-2577 (PKC)(JO), 2015 WL 1298585, at *6

(E.D.N.Y. Mar. 23, 2015) (quoting Crabtree v. Tristar Auto. Grp., Inc., 776 F. Supp. 155, 166

(S.D.N.Y. 1991)).

Here, it is undisputed that there is no written contract signed by both plaintiff and

defendants. See DE 21 ¶ 51. Instead, plaintiff points to various provisions of its agreements

with Empire, particularly portions of the Provider Agreement relating to “Payors.” See DE 53 at

4-5. As defined in that contract, “Payor means the entity that is legally responsible for payment

of Medically Necessary Services under the terms of the Health Benefit Program”: in other words,

the insurance company providing coverage to the patient, which, in some instances, includes

defendants. DE 65 at 2. The Provider Agreement refers to “Payor Obligations” that suggest that

the Payor, rather than Empire, must compensate Northwell for services rendered to the Payor’s

customers. Id. at 6 (“the applicable Payor shall not deny a claim for Medically Necessary

services”); 13 (“Payor is the sole party responsible for payment of compensation to Provider.”).

Plaintiff asserts these obligations indicate an intent to bind Payors, including defendants, to the

agreement; defendants counter with other provisions in the contract that suggest that it is

ultimately Empire who is responsible for payments to Northwell. See id. at 5 (“All claims for

services to Other Plans’ members shall be submitted to Empire in accordance with the terms of

this agreement…. Empire’s payment, plus the amount of any applicable cost-sharing…shall

constitute payment in full to the provider.”).

However, the Court need not resolve potential ambiguities in the contract because

contractual language or actions by contracting parties, standing alone, cannot bind a

nonsignatory that has not otherwise manifested assent to it. See Alzal, 2015 WL 1298585, at *7

(finding that an allegation that a nonsignatory shipping company was a party to a bailment

contract was implausible when based solely on plaintiff’s contract with a logistics corporation,

even though the contract anticipated that the corporation would retain the services of a shipping

company); see also TransformaCon, Inc. v. Vista Equity Partners, Inc., No. 15-CV-3371 (SAS),

2015 WL 4461769, at *5 (S.D.N.Y. July 21, 2015) (“TransformaCon does not state how a

presentation purporting to assign responsibilities to Active at a meeting that Active employees

did not attend could show Active’s intent to be bound.”). The fact that the Provider Agreement

contemplates obligations on third parties is curious, but it does not suspend the requirement that

defendants may only be found liable under the contract if there is some basis in their words or

conduct to hold them liable to the contract. See Thomson-CSF, S.A. v. Am. Arb. Ass’n, 64 F.3d

773, 777 (2d Cir. 1995) (“While Thomson was aware that the Working Agreement purported to

bind it as an ‘affiliate’ of Rediffusion, at no time did Thomson manifest an intention to be bound

by that Agreement.”); see also Jacobson v. Televida, Inc., No. 04CV163 (SLT) (MDG), 2005

WL 3609101, at *5 (E.D.N.Y. Aug. 10, 2005) (“[Plaintiff] does not articulate how

nonsignatories to a contract can be held liable under a personal guarantee provision in an

agreement they did not sign, or support this claim with any case law.”). Accordingly, the Court

must consider whether plaintiff has plausibly alleged that defendants agreed to be bound to the

Provider Agreement by some method other than signing the contract.

Plaintiff has plausibly alleged that defendants manifested an intent to be bound by the

Provider Agreement

Plaintiff contends that even if the terms of the Provider Agreement alone do not bind

defendants, they should be liable under a variety of other theories—most importantly, that

defendants assumed the obligations of that contract. “A non-signatory to a contract may be

bound to the terms of an agreement if the non-signatory is found to have manifested an intent to

be bound by the contract,” Ravelombonjy v. Zinsou-Fatimabay, 632 F. Supp. 3d 239, 260

(S.D.N.Y. 2022) (internal quotations omitted), as determined by “the totality of its expressed

words and deeds.” MBIA Ins. Corp. v. Royal Bank of Canada, 706 F. Supp. 2d 380, 397

(S.D.N.Y. 2009). Although this rule is most often applied when the non-signatory is an “alter

ego” of one of the contracting parties, that is not a requirement, and it can be invoked whenever

the non-signatory “indicates through performance of [the contract’s] terms or other unequivocal

acts that it intends to adopt the contract.” Impulse Mktg. Grp., Inc. v. Nat’l Small Bus. All., Inc.,

No. 05-CV-7776 (KMK), 2007 WL 1701813, at *5 (S.D.N.Y. June 12, 2007).

Here, plaintiff argues that defendants’ “repeated acceptance of both the benefits and the

obligations” of the Provider Agreement demonstrated their intent to be bound to that contract.

See DE 53 at 16. Plaintiff highlights that defendants’ patients received treatment at plaintiff’s

facilities and defendants remitted payment (via Empire) in a manner that arguably conformed

with the Provider Agreement. See, e.g., DE 21 ¶ 28. In addition, barring the disputes about the

validity of certain claims that gave rise to this lawsuit, the payments provided by defendants

matched the rate schedule listed in the Provider Agreement. Id. ¶¶ 30-32. Drawing all

inferences in plaintiff’s favor, the Court concludes this is sufficient to allege that defendants

manifested an intent to be bound to the contract. See also Northwell Health, Inc. v. Blue Cross &

Blue Shield of S.C., No. 23-CV-00603 (JS)(SIL), 2024 WL 3823201, at *7 (E.D.N.Y. Aug. 13,

2024) (reaching same conclusion in a case involving the same plaintiff, same contractual

documents, and a similarly situated Blue Card defendant).

However, defendants raise valid concerns that cast some doubt on plaintiff’s allegations.

Specifically, plaintiff admits that defendants did not have access to the Provider Agreement prior

to this lawsuit,3 meaning that if defendants manifested an intent to be bound, they did so without

3 In fact, plaintiff failed to share these documents even within the context of this litigation until

ordered to do so by this Court. The contracts at issue have been designated “attorneys’ eyes

only,” preventing defendants’ in-house counsel from accessing them, DE 44 at 9, and the

versions filed under seal and provided to the Court contained significant redacted portions, as

evidenced by an excerpt of the 2008 Provider Agreement attached below:

viewing the contract or having precise knowledge of its contents—a dubious proposition.

Accordingly, the parties are directed to proceed to discovery, focused on the issue of what, if any

objective manifestations of intent defendants made to be bound to plaintiffs contracts.

Although plaintiff concedes that there is no contract to which both plaintiff and

defendants are signatories, plaintiff has plausibly, albeit thinly alleged that defendants

manifested an intent to be bound to the Provider Agreement. The Court therefore denies

defendants’ motion to dismiss as to plaintiff's breach of contract claims.*

34 35

DE 43-2 at 34-35. At the Court’s request, plaintiff submitted unredacted copies of these

agreements to the Court and defendants’ attorneys, but no version, whether redacted or

unredacted, has been provided to defendants’ in-house counsel.

* Defendant BlueCross BlueShield of Tennessee, in addition to joining in the other defendants’

arguments, posits that this Court lacks personal jurisdiction over it. See DE 51 at 29-30.

However, “[p]rior to discovery, a plaintiff may defeat a motion to dismiss [pursuant to Fed. R.

Civ. P. 12(b)(2)] based on legally sufficient allegations of jurisdiction.” Ball v. Metallurgie

Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990). Here, plaintiff has plausibly alleged

that BCBS of Tennessee became a party to the Provider Agreement, which states “any action

with respect to this Agreement shall be solely and exclusively brought and tried in a court of

competent jurisdiction in the State of New York,” which would be sufficient to establish

personal jurisdiction for this action. DE 43-2 at 20. Although it remains to be seen whether

defendants in fact manifested an intent to be bound to the Provider Agreement, since that issue

cannot be resolved at a motion to dismiss, neither can the personal jurisdiction question. See,

e.g., Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 85-86 (2d Cir. 2013) (denying

pre-discovery Rule 12(b)(2) motion based on a venue provision in a contract purportedly signed

by the defendant, despite significant evidence that the contract was a forgery, but noting that the

defendant could raise the issue again following discovery).

Third-party beneficiary claims

Plaintiff next contends that it is a third-party beneficiary of defendants’ agreements with

BCBSA and has a right to sue under those contracts. “It is ancient law in New York that to

succeed on a third party beneficiary theory, a non-party must be the intended beneficiary of the

contract, not an incidental beneficiary to whom no duty is owed.” County of Suffolk v. Long

Island Lighting Co., 728 F.2d 52, 63 (2d Cir. 1984) (citing Lawrence v. Fox, 20 N.Y. 268 (N.Y.

1859)). To successfully allege such status as a third-party beneficiary, a plaintiff must establish:

(1) the existence of a valid and binding contract between other parties, (2) that the

contract was intended for his benefit and (3) that the benefit to him is sufficiently

immediate, rather than incidental, to indicate the assumption by the contracting parties of

a duty to compensate him if the benefit is lost.

Madeira v. Affordable Hous. Found., Inc., 469 F.3d 219, 251 (2d Cir. 2006) (quoting State of

Cal. Pub. Employees. Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427, 434–35 (N.Y. 2000)).

Courts applying New York law have been inconsistent as to whether the intent to benefit the

third party must be apparent from the language of the contract or whether it may be determined

external evidence. Compare Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., 66 N.Y.2d

38, 45 (N.Y. 1985) (a third party may recover on a contract only if “no one other than the third

party can recover if the promisor breaches the contract or that the language of the contract

otherwise clearly evidences an intent to permit enforcement by the third party”), with Trans-

Orient Marine Corp. v. Star Trading & Marine, Inc., 925 F.2d 566, 573 (2d Cir. 1991) (“In

determining third party beneficiary status it is permissible for the court to look at the surrounding

circumstances as well as the agreement.”).

Here, plaintiff argues it is a third-party beneficiary of defendants’ license and

membership agreements, by which defendants allegedly agreed to “comply with the Membership

Standards” of BCBSA and “effectively and efficiently participate in the Blue Card Program.”

See DE 53 at 19. However, plaintiff apparently did not have access to these agreements until

defendants provided them, at the Court’s request, after the present motion was briefed. See

Electronic Order dated April 16, 2024. Plaintiff also alleges that there may be other pertinent

contracts defendants are parties to and requests limited discovery to determine whether plaintiff

is an intended beneficiary of any of those agreements. Given the importance of this issue and

plaintiff’s inability to access key documents up to this point, the Court agrees that this claim

should not be resolved until plaintiff has had the chance to conduct discovery on this issue. See

Bild v. Konig, No. 09-CV-5576 (ARR)(VVP), 2011 WL 1563576, at *2 (E.D.N.Y. Apr. 25,

2011) (denying motion to dismiss as to a third-party beneficiary claim because “the parties have

not submitted a complete version of the [ ] Agreement”). As such, defendants’ motion is denied

as to plaintiff’s third-party beneficiary claims.

Unjust enrichment claims

Finally, plaintiff asserts that defendants have been unjustly enriched because their

patients have received services from plaintiff, and defendants have failed to fully reimburse

plaintiff for those services. In New York, an unjust enrichment claim requires a showing that

“(1) defendant was enriched, (2) at plaintiff’s expense, and (3) equity and good conscience

militate against permitting defendant to retain what plaintiff is seeking to recover.” Ashland Inc.

v. Morgan Stanley & Co., Inc., 652 F.3d 333, 339 (2d Cir. 2011). Unjust enrichment is “a quasi-

contract claim…the law creates in the absence of any agreement,” Diesel Props S.r.l. v.

Greystone Business Credit II LLC, 631 F.3d 42, 54 (2d Cir. 2011), and may be asserted in the

alternative only “[w]here there is a bona fide dispute as to whether a relevant contract exists or

covers the disputed issue.” Marshall v. Hyundai Motor Am., 51 F. Supp. 3d 451, 471 (S.D.N.Y.

2014) (collecting cases). By contrast, “the existence of a valid and enforceable written contract

governing a particular subject matter ordinarily precludes recovery in quasi contract for events

arising out of the same subject matter.” Diesel Props S.r.l., 631 F.3d at 54 (quoting Clark–

Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388 (N.Y. 1987)).

Here, the Provider Agreement submitted by plaintiff clearly covers the subject matter of

the dispute, and plaintiff has plausibly alleged that defendants are parties to that agreement.

Therefore, plaintiff’s unjust enrichment claims are dismissed as duplicative of the breach of

contract claims.

Conclusion

For the reasons stated herein, defendants’ motion is GRANTED as to plaintiff’s unjust

enrichment claims and DENIED as to plaintiff’s breach of contract and third-party beneficiary

claims. The parties are directed to proceed to discovery with the assigned magistrate judges.5

SO ORDERED.

Dated: Central Islip, New York

December 13, 2024

/s/Gary R. Brown

GARY R. BROWN

United States District Judge

5 Given the important role Empire allegedly plays in the payment remittance process, the parties

are directed to include Empire in the discovery process. Future requests to delay these cases

based on the inaccessibility (or redaction) of relevant documents—whether belonging to

plaintiff, defendants, or Empire—will not be tolerated.