BRAINBUILDERS LLC v. EMBLEMHEALTH, INC.

Background

The plaintiffs—Brainbuilders LLC and H and D, acting through their attorney-in-fact, Rochel Sorotzkin—moved for reconsideration under Local Rule 6.3 and sought permission to file a third amended complaint. The motion followed the Court’s August 8, 2022 Opinion and Order granting motions to dismiss the Second Amended Complaint filed by the GHI Defendants, EmblemHealth, Inc. and Group Health Incorporated, and by the City Defendants. The Clerk entered judgment for the defendants on August 10, 2022.

The motion challenged only the dismissal of the claim against the GHI Defendants for breach of the implied covenant of good faith and fair dealing. The plaintiffs also asked the Court to rule that Sorotzkin had valid authority to sue for H and D, rather than for Brainbuilders, and requested leave to amend the complaint to replead the good-faith claim and clarify whose benefit the suit sought.

Reconsideration of the Good-Faith Claim

The Court explained that reconsideration is an extraordinary remedy. Under Local Rule 6.3, the moving party must identify controlling decisions or facts that the court overlooked and that could reasonably change the result. The limited grounds include an intervening change in controlling law, new evidence, clear error, or manifest injustice. Reconsideration is not a chance to present arguments that were available but omitted earlier.

In the prior Opinion, the Court found that the plaintiffs had not identified a specific contractual provision that was breached. It also dismissed the implied-covenant claim as duplicative of the contract claim because both claims relied on the same allegation: that the defendants covered only a small portion of D’s treatment costs.

The plaintiffs argued for the first time on reconsideration that an implied-covenant claim may be pleaded as an alternative to a contract claim when there is a genuine dispute about whether a contract exists or covers the dispute. The Court held that the plaintiffs could not use reconsideration to raise that new argument. The Court further held that the argument would not change the result even if considered. The plan included coverage for applied behavioral analysis, based reimbursement amounts on data collected by GHI and agreed to by the City of New York, and did not promise a specific payment amount. Thus, the Court found no genuine dispute about whether a contract existed or whether the plan covered the subject of the claim; the dispute concerned the amount of reimbursement required. The Court denied reconsideration of the good-faith claim.

Power of Attorney

The Court declined to issue the requested additional ruling about Sorotzkin’s authority. It reiterated that H and D had standing—the legal ability to sue—for their own benefit against the GHI Defendants, and that Sorotzkin could sue for them under a power of attorney governed by New Jersey law. It also reiterated that Sorotzkin could not sue on her own behalf or on behalf of Brainbuilders because of the plan’s no-assignment provision, and that the power of attorney did not give Sorotzkin or Brainbuilders legal or equitable ownership of the members’ claims.

The Court acknowledged concerns about statements in the Second Amended Complaint concerning assignments and about the failure to identify whether H, D, Brainbuilders, or Sorotzkin was entitled to reimbursement. But it held that those pleading problems were not decisive of the earlier dismissal. The Court therefore denied the request to confirm or supplement its prior rulings in the reconsideration proceeding.

Leave to Amend

The Court denied leave to file a third amended complaint. It relied first on the fact that judgment had already been entered. Under Second Circuit precedent cited by the Court, a party seeking to amend after judgment must first obtain an order setting aside or vacating the judgment. Because the Court denied reconsideration, the request to amend was also moot at that stage.

The Court separately denied amendment as futile, meaning that the proposed amendment would still fail to state a legally sufficient claim. The Court had already considered whether to allow amendment in its August 8 Opinion and concluded that the plaintiffs had had two prior opportunities to amend, had not identified changes that would alter the analysis, and were unlikely to correct the deficiencies. The Court found that the plaintiffs’ proposed clarifications would not cure those problems.

Disposition

The Court denied Plaintiffs’ motion for reconsideration and/or leave to amend. It directed the Clerk of Court to terminate all pending motions, adjourn all remaining dates, and close the case. Judge Katherine Polk Failla signed the Opinion and Order.