Redstone v. Empire HealthChoice HMO, Inc.
- Valerie Caproni
- 1:23-cv-02077
- U.S. District Court · Southern District of New York
- 13
In Redstone v. Empire, Judge Caproni granted Empire’s dismissal motion, dismissing the federal claims and dismissing the state claims with prejudice.
The ruling dismissed Redstone’s and Tutela’s claims against Empire concerning payment for L.P.’s medical services. The federal claims were dismissed with an opportunity to move for leave to amend, while the five state-law claims were dismissed with prejudice.
What happened
In Redstone v. Empire HealthChoice HMO, Inc., surgeons Jeremiah Redstone and John Paul Tutela sued Empire over alleged underpayments for breast-reconstruction services provided to L.P., an Empire plan beneficiary. They asserted claims under the Employee Retirement Income Security Act and New York law.
Empire argued that the surgeons could not sue under the federal statute because the plan barred L.P. from assigning benefits without Empire’s written consent. The surgeons argued that the plan’s language was unclear and that Empire had waived the restriction through its dealings with them. Empire also argued that the state-law claims were displaced by the federal statute.
Judge Valerie Caproni granted Empire’s motion to dismiss. She dismissed the federal claims because the plan’s assignment restriction was clear and the complaint did not plausibly allege that Empire waived it; the plaintiffs may move for permission to file an amended complaint. She dismissed the five state-law claims with prejudice because they depended on the plan’s payment obligations and were preempted by federal law.
The detailed version
- Redstone v. Empire HealthChoice HMO, Inc. · No. 1:23-cv-02077
- Valerie Caproni
- Mar. 5, 2024
Background
Jeremiah Redstone and John Paul Tutela, both plastic surgeons, sued Empire HealthChoice HMO, Inc. and Empire HealthChoice Assurance, Inc. The suit concerned alleged underpayments for two breast-reconstruction procedures that the surgeons performed for L.P., who was enrolled in an Empire-administered health plan. The complaint alleged that L.P. assigned her benefits to the surgeons and gave Redstone power of attorney to pursue payment.
Empire authorized both procedures but treated the surgeons as out-of-network providers. For the first procedure, the surgeons billed $671,723, and Empire paid $26,099.20. For the second procedure, Redstone billed $138,451, and Empire paid $7,216.77. The complaint asserted three claims under the Employee Retirement Income Security Act of 1974, or ERISA, based on alleged underpayment of benefits, plus five New York-law claims: breach of contract, breach of implied contract, unjust enrichment, tortious interference, and third-party beneficiary liability.
Empire moved to dismiss the entire complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court considered the plan document because the plaintiffs had relied on the plan’s terms in framing their complaint.
ERISA Claims
ERISA generally permits a plan participant or beneficiary to sue to recover benefits due under the plan. Healthcare providers ordinarily are not plan participants or beneficiaries, but a provider may sue when a beneficiary validly assigns the benefit claim to the provider.
The plan stated that a member could not assign the right to receive payment without the plan’s written consent and that any attempted assignment would be void. The plaintiffs argued that this language was ambiguous because it referred both to a prohibition on assignments and to assignments requiring consent. The court rejected that argument, holding that the provision clearly required written consent. The plaintiffs did not allege that Empire had provided written consent.
The plaintiffs also argued that Empire had waived the restriction through regular communications, authorization of the procedures, direct payments, transmission of benefit information, and authorization for the plaintiffs to act as L.P.’s representatives in benefit reviews. The court held that these allegations were either innocuous or conclusory and did not plausibly show that Empire intentionally gave up its right to enforce the anti-assignment provision. The court also held that Redstone’s power of attorney, standing alone, did not give him the right to sue in his own name.
Because the plaintiffs had not plausibly alleged a valid assignment or waiver, the court held that they had not adequately alleged legal standing—the right to bring the ERISA claims. The court dismissed all federal claims. It stated that the plaintiffs could move for leave, or permission, to file an amended complaint, because the court could not conclude that amendment would necessarily be futile. Any such motion was due by March 29, 2024, under the opinion’s instructions.
New York-Law Claims
The court held that the five state-law claims were expressly preempted by ERISA. Preemption means that federal law displaces state-law claims that relate to an ERISA-covered benefit plan. The court reasoned that each claim depended on Empire’s alleged obligation to pay benefits under the plan, and that liability and damages could not be determined without interpreting the plan’s coverage and payment terms.
The court therefore dismissed all five state-law claims with prejudice. Because preemption resolved those claims, the court did not decide whether the plaintiffs had adequately pleaded the individual state-law causes of action. The court also noted that the plaintiffs had not opposed Empire’s argument concerning the third-party beneficiary claim.
Disposition
Judge Valerie Caproni granted Empire’s motion to dismiss. The federal claims were dismissed, subject to the plaintiffs’ stated opportunity to move for leave to amend. The state-law claims were dismissed with prejudice. The clerk was directed to terminate the motion at docket entry 12.
Read the full 13-page opinion on CourtListener, the free public archive maintained by the Free Law Project.