Murphy Medical Associates, LLC v. 1199SEIU National Benefit Fund

Background

Murphy Medical Associates, LLC, Diagnostic and Medical Specialists of Greenwich, LLC, and Steven A.R. Murphy sued 1199SEIU National Benefit Fund over alleged nonpayment for COVID-19 testing performed for Fund members. The plaintiffs’ amended complaint asserted a remaining claim under the Employee Retirement Income Security Act of 1974 (ERISA). They alleged that the Fund did not fully pay or timely respond to claims, did not adequately explain its administrative appeals process, and instructed members to conceal health-plan information when seeking COVID-19 testing or related services.

The Fund moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint plausibly states a legal claim. The court had previously dismissed the plaintiffs’ original complaint but allowed them to amend their ERISA claim if they alleged that they had exhausted the Fund’s administrative remedies or showed why exhaustion should be excused.

Administrative Exhaustion

The Fund’s Summary Plan Description required claimants to complete the plan’s claims-and-appeals procedures before filing suit. After a claim denial, a claimant had to request administrative review and, if that review was unsuccessful, appeal to the Appeals Committee of the Fund’s Board of Trustees. Nonparticipating providers had no independent right to appeal but could be authorized to appeal on behalf of a Fund participant; an authorized provider received no greater rights than the participant.

The court held that the amended complaint did not plausibly allege exhaustion. The plaintiffs did not allege that they requested administrative review or appealed to the Board’s Appeals Committee. The court also treated the plaintiffs’ failure to address the exhaustion argument in their opposition brief as a concession that they had not used the Fund’s formal appeals process. Corresponding with the Fund about the claims did not complete either required step.

Futility

The court explained that exhaustion may be excused only upon a clear and positive showing that using the administrative process would be futile. The plaintiffs did not meet that demanding standard. Their allegations that the Fund automatically or reflexively denied claims lacked factual support, and the complaint’s attachments showed that some claims had been approved and reimbursed and that the Fund had requested additional documentation for some claims.

The court likewise found insufficient support for the plaintiffs’ allegations that the Fund rarely complied with ERISA’s claim-processing deadlines. The attached explanations of payment did not show when the claims were received, which was necessary to evaluate the applicable deadline. The allegation that Fund members had been instructed to conceal health-plan information also did not show that using the appeals process would have been futile.

The court rejected the plaintiffs’ argument that the Families First Coronavirus Response Act made the Fund’s internal appeals process irrelevant. It found no authority showing that the Act nullified the plan’s appeal requirements and concluded that the plan’s exhaustion terms remained controlling.

Disposition

Judge Dale E. Ho granted the Fund’s motion to dismiss. The court dismissed the plaintiffs’ last surviving ERISA claim because they did not plausibly allege exhaustion and did not show that exhaustion should be excused. The court denied the plaintiffs’ request for a second amendment because they did not explain how they would cure the pleading defects and had already been given an opportunity to amend. The amended complaint was dismissed with prejudice, and the case was closed.