Hospitals v. 1199SEIU National Benefit Fund for Health and Human Service…

Background

NYU Langone Hospitals sued 1199SEIU National Benefit Fund for Health and Human Service Employees and 1199SEIU National Benefit Fund for Home Care Employees in New York state court. The defendants removed the case to federal court. NYU Langone alleged that it had a contract with the defendants to provide covered health care services at negotiated rates and that the defendants failed to pay nearly $50,000 for hospital services provided to the newborns of three women covered as dependents under the defendants’ plans. The defendants paid the claims for the mothers’ services but allegedly did not pay the claims for the newborns’ stays.

NYU Langone asserted two breach-of-contract claims, one against each benefit fund. It argued that the newborns’ stays were covered maternity benefits under the Newborns’ and Mothers’ Health Protection Act of 1996, a federal law incorporated into the Employee Retirement Income Security Act of 1974, or ERISA. The hospital did not identify a contract or plan provision establishing that the newborn services were covered; instead, it relied on the federal law.

Defendants’ Motion to Dismiss

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. On such a motion, the court generally accepts the complaint’s factual allegations as true and draws reasonable inferences for the plaintiff, but the allegations must make entitlement to relief plausible rather than merely possible.

The court held that ERISA expressly preempted NYU Langone’s contract claims. ERISA’s preemption provision overrides state laws and claims that relate to an ERISA plan. The court explained that state-law claims are preempted when they seek to remedy the denial of benefits under an ERISA-regulated plan and do not enforce a legal duty independent of ERISA.

The court concluded that NYU Langone’s claims depended entirely on the argument that the federal maternity-benefit law required the funds to cover the newborns’ hospital stays. Because the claims sought to enforce a duty allegedly imposed by ERISA, rather than an independent contractual duty, the hospital could not pursue them as breach-of-contract claims. The court also rejected the hospital’s argument that it was enforcing a separate provider contract because the claims challenged the scope and administration of benefits under the defendants’ plans.

Request to Amend and Disposition

NYU Langone requested permission to amend its amended complaint. The court denied that request because the hospital had already amended once after receiving notice of the alleged deficiencies, and another attempt would not cure them. The court also determined that adding an ERISA claim would be futile. Although the hospital alleged that the mothers assigned their health care benefits to it, the plans expressly barred assignment of benefits or other plan rights to participating providers. The court therefore concluded that the alleged assignments could not support an ERISA claim by the hospital.

Judge Naomi Reice Buchwald granted the defendants’ motion in full, dismissed the amended complaint with prejudice, terminated the pending motion, and directed the clerk to close the case. The court did not decide whether the federal maternity-benefit law actually required coverage of the newborns’ hospital stays because it concluded that the hospital could not raise that issue through these contract claims.