California Spine And Neurosurgery Institute v. Zoetis, Inc.

Background

California Spine And Neurosurgery Institute, doing business as San Jose Neurospine (SJN), brought claims under the Employee Retirement Income Security Act of 1974 (ERISA). SJN is an out-of-network health care provider. Zoetis sponsors the self-funded 2023 Zoetis Plan, which is governed by ERISA. The United Defendants administer the Plan.

SJN alleged that it provided surgical services to a Plan beneficiary after United representatives verified coverage and described the expected reimbursement rates. SJN alleged that it relied on those representations and would not have performed the surgery without them. SJN submitted a $57,500 claim, but United paid $1,186.70. SJN alleged that the Defendants failed to properly address its appeal and failed to provide requested documents.

SJN asserted claims to recover ERISA benefits under 29 U.S.C. § 1132(a)(1)(B) and for breach of fiduciary duties under § 1132(a)(3) and 29 U.S.C. §§ 1104(a)(1)(A)-(B). SJN also sought attorney’s fees and costs.

Motion to Dismiss

The Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. They argued that the Plan’s anti-assignment provision barred SJN’s lawsuit, that SJN had not identified Plan terms supporting its benefits claim, that the fiduciary-duty claim was inadequately pleaded or duplicative, and that United Healthcare Insurance Company was not a proper defendant.

The court held that SJN plausibly alleged that United waived the anti-assignment provision. SJN alleged that it contacted United before providing the services, submitted the claim as an assignment, and received a partial payment directly, while the balance was denied for reasons unrelated to the assignment. The court concluded that these allegations were sufficient at the pleading stage.

The court also held that SJN adequately stated a claim for ERISA benefits. SJN identified the 2023 Zoetis Plan and alleged that United confirmed coverage and specific reimbursement information before the surgery. The court stated that SJN did not have access to the Plan before the motion to dismiss and was not required to guess which Plan provisions applied when the Defendants controlled the relevant information. The court denied the motion to dismiss the benefits claim.

The court further held that SJN adequately pleaded a breach-of-fiduciary-duty claim. The Defendants did not dispute that they were Plan fiduciaries. SJN alleged that they misrepresented coverage and reimbursement rates, issued deficient explanations of benefits, failed to act with the care of a prudent administrator, and caused damages by not honoring the quoted rates. The court also rejected the arguments that the claim required identification of a specific Plan provision or was duplicative of the benefits claim.

Finally, the court found that United Healthcare Insurance Company was a proper party at this stage. SJN pointed to an authorization for the surgery issued by that entity and alleged that both United Defendants were third-party administrators of the Plan. Accepting the complaint’s factual allegations as true and drawing reasonable inferences for SJN, the court found a sufficient connection between the entity and the conduct at issue.

Judicial Notice and Disposition

The Defendants asked the court to take judicial notice of a document they described as the Plan. The court denied that request because the Defendants had not shown that the document was the 2023 Zoetis Plan, that the 2021 plan remained effective in 2023, or that the document labeled “Summary Plan Description” was the entire Plan. The court also denied requests to take judicial notice of a declaration and several disputed facts about the Plan because those matters were subject to reasonable dispute.

Judge Noél Wise denied the Defendants’ motion to dismiss. The Defendants were ordered to file an answer to the complaint within 21 days of the order.