Carlin v. United Healthcare Insurance Company of New York

Background

Patricia L. Carlin and Roy H. Carlin, who are enrolled in Medicare and a supplemental coverage plan, sued Medicare Administrative Contractors National Government Services, Inc. and Novitas Solutions, Inc. (together, the “MACs”), along with UnitedHealthcare Insurance Company, UnitedHealthcare Insurance Company of New York, UnitedHealth Group, Inc., and UnitedHealthcare, Inc. (together, the “United Entities”). They alleged that the defendants improperly denied claims for medically necessary services. Their complaint asserted claims under the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO, and state law, including breach of contract, fraud, negligence, unjust enrichment, and state consumer-law violations. They also sought to represent a nationwide class.

The Carlins pursued six Medicare claims. Four were not properly presented for processing or did not result in an initial determination. Two were processed and partially paid, but the Carlins did not pursue administrative appeals. Medicare law generally requires a claimant to complete several administrative review levels before seeking judicial review.

The MACs’ motion

The MACs moved under Federal Rule of Civil Procedure 12(b)(1), which allows dismissal when the court lacks subject-matter jurisdiction. The court held that the Carlins’ claims against the MACs arose under the Medicare Act because deciding them would require determining whether the Carlins were entitled to Medicare reimbursement, regardless of how the claims were labeled as RICO or state-law claims.

The court found that the Carlins had not exhausted the required administrative remedies. Four claims were not properly submitted and therefore did not produce initial determinations that could be appealed. The other two claims were partially paid, but the Carlins did not allege or establish that they pursued administrative appeals. The court also rejected the Carlins’ argument that exhaustion should be excused because it would be futile. It therefore held that it lacked subject-matter jurisdiction over the claims against the MACs and granted the MACs’ motion.

The United Entities’ motion

The United Entities moved under Rule 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. The court dismissed the substantive RICO claim because the complaint did not identify a specific fraudulent misrepresentation by the United Entities, explain how the alleged claims-processing practices were deceptive, or describe the alleged fraudulent scheme with the required detail. Because the substantive RICO claim failed, the RICO conspiracy claim failed as well. The court therefore dismissed the RICO claims against the United Entities.

The court also dismissed the state-law claims after declining to exercise supplemental jurisdiction. Supplemental jurisdiction allows a federal court to hear related state-law claims, but the court concluded that the early stage of the case and the dismissal of the federal claims did not justify retaining those claims.

Disposition

Judge Jesse M. Furman’s conclusion states that the defendants’ motions were granted and the complaint was dismissed. The court declined to allow amendment of the claims against the MACs or the RICO claims, finding those defects substantive and noting that the Carlins had not identified additional facts that could cure them.

The court did grant the Carlins leave to amend their complaint to allege diversity jurisdiction under 28 U.S.C. § 1332 as an independent basis for the state-law claims against the United Entities. The opinion also states that the Carlins could alternatively refile those state-law claims against the United Entities in state court. Any Third Amended Complaint was due within three weeks of the opinion and order; if the Carlins did not properly allege diversity jurisdiction by then, the court stated that it would direct the Clerk to enter judgment for the defendants and close the case.