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Connecticut General Life Insurance Co. v. Advanced Surgery Center of Bethesda, LLC

United States District Court, D. Maryland

July 15, 2015

CONNECTICUT GENERAL LIFE INSURANCE COMPANY, et al.
v.
ADVANCED SURGERY CENTER OF BETHESDA, LLC, et al.

MEMORANDUM OPINION

DEBORAH K. CHASANOW, District Judge.

This case involves a dispute over health insurance claim payments. Plaintiffs/Counter-Defendants are Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company (collectively, the "Cigna entities").[1] Among other things, the Cigna entities insure and administer employee health and welfare benefit plans. (ECF No. 1 ¶ 41). Defendants/Counter-Plaintiffs are twenty ambulatory surgical care facilities doing business in Maryland, namely: Advanced Surgery Center of Bethesda, LLC; Bethesda Chevy Chase Surgery Center, LLC; Deer Pointe Surgical Center, LLC; Hagerstown Surgery Center, LLC; Leonardtown Surgery Center, LLC; Maple Lawn Surgery Center, LLC; Maryland Specialty Surgery Center, LLC; Monocacy Surgery Center, LLC; Piccard Surgery Center, LLC; Riva Road Surgical Center, LLC; SurgCenter at National Harbor, LLC d/b/a Harborside Surgery Center; SurgCenter of Glen Burnie, LLC; SurgCenter of Greenbelt, LLC; SurgCenter of Silver Spring, LLC; SurgCenter of Southern Maryland, LLC; SurgCenter of Western Maryland, LLC; SurgCenter of White Marsh, LLC; Timonium Surgery Center, LLC; Upper Bay Surgery Center, LLC; and Windsor Mill Surgery Center, LLC ("the ASCs"). The ASCs have provided outpatient surgical services to the Cigna entities' plan members. Defendant Surgical Center Development, Inc. d/b/a SurgCenter Development ("SurgCenter") is a Nevada corporation that purportedly helped establish the ASCs and consults in their businesses (collectively, the ASCs and SurgCenter are "Defendants"). ( Id. ¶ 33). The Cigna entities filed this action against Defendants asserting claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., and state law based on Defendants' purportedly unlawful billing scheme. The ASCs filed a counterclaim against the Cigna entities asserting ERISA claims and multiple state law claims based on the Cigna entities' purportedly unlawful refusal to pay claims for medical services the ASCs performed for the Cigna entities' health insurance plan members. The parties have filed cross-motions to dismiss, which are fully briefed. (ECF Nos. 41 and 43). The court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, Defendants' motion to dismiss will be granted in part and denied in part, and the Cigna entities' motion to dismiss will be granted in part and denied in part.

I. Background[2]

A. The Cigna Entities' Health Insurance Plans

The Cigna entities act as plan administrators for both fully-insured plans, which they fund themselves, and Administrative Services Only ("ASO") plans, which are funded by the employers who sponsor them. ( Id. ¶¶ 42, 44). For both types of plans, as claims administrators, the plan documents authorize the Cigna entities to "recover any overpayments made by the plans on the plans' behalf." ( Id. ¶¶ 45-46). The majority of the plans under which the ASCs have sought benefits on behalf of their patients are governed by ERISA. ( Id. ¶ 47). The plans at issue offer plan members the choice of seeking medical services from health care providers who contract with the Cigna entities to participate in their provider network ("in-network" or "participating" providers) or from health care providers who do not contract with the Cigna entities ("out-of-network providers"). ( Id. ¶ 48). All of the ASCs are out-of-network providers. ( Id. ¶ 2). The Cigna entities' plans reimburse members for certain types of costs and services they receive, which are defined as "covered expenses." When a plan member receives medical services, the Cigna entities determine what portion of the cost for the covered expense is covered by the plan, which is known as the "allowed amount." ( Id. ¶ 49). Plan members have different types of cost-sharing responsibilities when using their plan benefits, including deductibles, co-payments, and co-insurance. ( Id. ¶¶ 50-51). If a plan member receives a medical service from one of the Cigna entities' in-network providers, the plan pays the provider the amount that the provider agreed to accept as the contracted network rate, and the member pays any applicable in-network deductible, co-pay, and co-insurance. ( Id. ¶ 52). If a plan member receives a medical service from an out-of-network provider, the provider can charge whatever it likes for its services (out-of-network rates are generally higher than contracted rates) and the provider may bill the member for any portion of the provider's charges that the plan does not reimburse (amounts not covered by the allowed amount). ( Id. ¶ 55).

In order to keep costs down for plans that offer out-of-network benefits, the Cigna entities' health plans include various financial incentives to encourage members to choose in-network providers and to make members responsible for the increased costs associated with obtaining out-of-network services. ( Id. ¶ 56). One method the Cigna entities' plans use to allocate out-of-network costs between plan sponsors and plan members is through co-insurance, which is the percentage of the allowed amount that the member is required to pay toward the cost of that service. The co-insurance that plan members must pay for out-of-network services is usually much higher than the co-insurance they pay for in-network services. ( Id. ¶ 57). The Cigna entities allege that their plans include a provision which ensures that plan members pay and out-of-network providers do not waive members' required co-insurance payments. This provision states that the Cigna entities' plans do not cover: "charges which you [the member] are not obligated to pay or for which you are not billed or for which you would not have been billed except that they were covered under this plan." ( Id. ¶ 61). In addition, the Cigna entities allege that their plans limit reimbursement for out-of-network services to the "maximum reimbursable charge, " which is further defined as no more than the "provider's normal charge for a similar service or supply, " and exclude from coverage any amounts that exceed the maximum reimbursable charge. ( Id. ¶ 63). The Cigna entities aver that they do not automatically reimburse plan members for every charge submitted to them by providers; rather, the plans cover only a portion of charges submitted for covered expenses (the allowed amount), and the covered expenses also are subject to the member's cost sharing responsibilities (any applicable deductible, co-pay, and co-insurance), meaning a member must pay his or her portion in order for the charges to be covered under the plan. ( Id. ¶ 65).

B. The ASCs' Billing Practices

The Cigna entities allege that "SurgCenter has developed a business model designed to game the healthcare system by submitting grossly inflated, phantom charges' to [them] that do not reflect the actual amount the ASCs bill patients. SurgCenter implements this fraudulent scheme through each of the ASCS with which it partners." ( Id. ¶ 70). SurgCenter partners with local surgeons to form physician-owned ASCs organized as limited liability companies, and becomes a vested partner with thirty-five percent ownership in each ASC, including the twenty Defendant ASCs. ( Id. ¶¶ 71-74). SurgCenter helps design and construct the ASCs, and once they are operational, SurgCenter continues providing "no-fee management and consulting services in managing and running [the ASCs]." ( Id. ¶¶ 72-73).

The Cigna entities allege that the ASCs have engaged and continue to engage in a fee-waiver and dual pricing scheme, with significant support and assistance from SurgCenter. As part of this scheme, the ASCs engaged in fee-waivers by "lur[ing] [the Cigna entities'] plan members in as patients by offering to bill and collect for surgical procedures at the plan members' in-network' or lower benefit levels, even though the ASCs knew that, because they are out-of-network facilities, the plan members' out-of-network benefits level should apply." ( Id. ¶ 3). The ASCs promised the Cigna entities' plan members that their in-network benefits would apply (including deductible, co-pay, and co-insurance) to services rendered by the ASCs and that the plan members would incur no additional out-of-pocket costs above and beyond the costs the ASCs quoted to the plan members ( Id. ¶ 67), and the ASCs actually calculated the Cigna entities' plan members' cost-sharing responsibilities (deductible, co-pay, and co-insurance) by applying members' in-network rates. ( Id. ¶ 83). The Cigna entities also allege that the ASCs' scheme involved "dual pricing": the ASCs billed the Cigna entities' plan members a certain charge that was based on Medicare rates for the service rendered (in order to approximate an in-network contracted rate), while billing the Cigna entities a significantly higher charge for the same service. While the ASCs' claim forms acknowledged that "[t]he insured's portion of this bill has been reduced in amount so the patient's responsibility for the deductible and copay amount is billed at in network rates, " the claim forms did not disclose the full nature of the fee waiver or that patients had been billed based on entirely different charges that mirrored Medicare-based rates. ( Id. ¶¶ 4, 91-92). The Cigna entities allege that by stating "[t]he insured's portion of this bill has been reduced, " the ASCs and SurgCenter affirmatively sought to mislead the Cigna entities into believing that they charged the patient and the Cigna entities the same charge. ( Id. ¶ 93). The Cigna entities assert that they relied on the ASCs' misrepresentations and omissions in their claim forms when processing and paying the ASCs' claims.

The Cigna entities further assert that "all aspects of the fraudulent dual pricing schemes used by each ASC were designed and implemented at the direction of SurgCenter." ( Id. ¶ 79). The Cigna entities allege that "SurgCenter creates the Insurance Verification sheet and Calculation of Patient Responsibility templates, as well as the claim forms submitted to [the Cigna entities] by the ASCs. These documents are created by SurgCenter and provided to the ASCs as part of the scheme to defraud insurers such as [the Cigna entities]." ( Id. ¶ 84).

The Cigna entities provide the following example of a charge that was submitted on behalf of one of their plan members by an ASC Defendant in order to show how the purported scheme operated:

[T]he ASC submitted "charges" of $28, 606.88 to [a Cigna entity]. The member had an out-of-network co-insurance requirement of 20 percent. But through an internal investigation, [the Cigna entity] found out that the ASC quoted to the patient a charge of only $5, 787.50, or approximately five times lower than the charge submitted to [it]. After already starting at the much lower baseline charge based on Medicare rates, the ASC then charged the patient his or her in-network cost-sharing levels[.] As a result, the ASC charged the patient only $431.88, which was a small fraction of the patient's cost-sharing responsibility under his or her plan.

( Id. ¶ 5).[3] Based on Defendants' scheme, the Cigna entities allege that between 2009 and the present, they were fraudulently induced into paying more than $20 million in claim payments to the various ASC Defendants. ( Id. ¶¶ 12, 97-116).

C. Procedural History

The Cigna entities commenced the instant action on July 25, 2014 by filing a complaint against Defendants. (ECF No. 1). The complaint asserts multiple claims against Defendants, including: a claim for overpayments under ERISA § 502(a)(3) (count I); violations of RICO (counts II.A-II.T); state law claims for fraud (count III); aiding and abetting fraud (count IV); negligent misrepresentation (count V); unjust enrichment (count VI); tortious interference with contract (count VII); and declaratory judgment (count VIII).

On August 29, 2014, the parties moved to consolidate several related actions that had been removed from state court pursuant to Federal Rule of Civil Procedure 42(a) on the basis that the actions involved common questions of law and fact. (ECF No. 34). The motion to consolidate was granted on September 12, 2014. (ECF No. 40).

Defendants moved to dismiss the complaint on October 21, 2014 pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. (ECF No. 41). On the same day Defendants filed their motion to dismiss, the ASCs filed a counterclaim against the Cigna entities. (ECF No. 42). On December 5, 2014, the Cigna entities moved to dismiss the counterclaim pursuant to Rule 12(b)(6). (ECF No. 43). Both motions to dismiss are fully briefed.

II. Standard of Review

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the sufficiency of the complaint. Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). A plaintiff's complaint need only satisfy the standard of Rule 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "Rule 8(a)(2) still requires a showing, ' rather than a blanket assertion, of entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007). That showing must consist of more than "a formulaic recitation of the elements of a cause of action" or "naked assertion[s] devoid of further factual enhancement." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal citations omitted).

At this stage, all well-pleaded allegations in a complaint must be considered as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and all factual allegations must be construed in the light most favorable to the plaintiff. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) ( citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). In evaluating the complaint, unsupported legal allegations need not be accepted. Revene v. Charles Cnty. Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989). Legal conclusions couched as factual allegations are insufficient, Iqbal, 556 U.S. at 678, as are conclusory factual allegations devoid of any reference to actual events. United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979).

Moreover, allegations of fraud, which the Cigna entities assert in the RICO and state law claims, are subject to a heightened pleading standard under Rule 9(b). Harrison, 176 F.3d at 783. Rule 9(b) states that "in alleging a fraud or mistake, a party must state with particularity the circumstances constituting the fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Such allegations typically "include the time, place and contents of the false representation, as well as the identity of the person making the misrepresentation and what [was] obtained thereby.'" Superior Bank, F.S.B. v. Tandem Nat'l Mortg., Inc., 197 F.Supp.2d 298, 313-14 (D.Md. 2000) ( quoting Windsor Assocs., Inc. v. Greenfeld, 564 F.Supp. 273, 280 (D.Md. 1983)). In cases involving concealment or omissions of material facts, however, meeting Rule 9(b)'s particularity requirement will likely take a different form. See Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539, 552 (D.Md. 1997) (recognizing that an omission likely "cannot be described in terms of the time, place, and contents of the misrepresentation or the identity of the person making the misrepresentation" (internal quotations omitted)). The purposes of Rule 9(b) are to provide the defendant with sufficient notice of the basis for the plaintiff's claim, to protect the defendant against frivolous suits, to eliminate fraud actions where all of the facts are learned only after discovery, and to safeguard the defendant's reputation. See Harrison, 176 F.3d at 784. In keeping with these objectives, "[a] court should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant[s were] made aware of the particular circumstances for which [they] will have to prepare a defense at trial and (2) that [the] plaintiff has substantial prediscovery evidence of those facts." Id.

III. Defendants' Motion to Dismiss the Cigna Entities' Complaint

A. Claim for Overpayments Pursuant to ERISA § 502(a)(3) (Count I)

The Cigna entities assert a claim under ERISA § 502(a)(3) against all the ASCs seeking: (1) restitution of past "overpayments" that were purportedly made to the ASCs in contravention of the plan terms, and (2) an injunction barring the ASCs from submitting similar claims in the future. The Cigna entities allege that they are fiduciaries of the plans that they administer and seek to recover overpayments made by those plans to the ASCs. (ECF No. 1 ¶ 128). The Cigna entities further allege that the plans at issue do not cover "any portion of the charges that [] the ASCs do not require plan members to pay, nor do they require the plan to cover anything in excess of the ASCs' normal charges to its patients." ( Id. ¶ 131). The Cigna entities aver that the ASCs did not require their plan members to pay the full amount of their cost sharing responsibilities under the terms of their plans. Accordingly, the Cigna entities argue that by "paying the ASCs amounts that the ASCs did not charge plan members, these plans made overpayments to the ASCs[, ]" overpayments which belong to the plans. ( Id. ¶¶ 132, 134). The Cigna entities seek reimbursement of the alleged overpayments, or in the alternative, a declaration that they may offset from future claim payments the overpayment amounts. The Cigna entities also seek a permanent injunction directing all of the ASCs to submit to the Cigna entities only the charges that they actually charge the plan members for the ASCs' services and not to submit charges that they do not require the member to pay (including any waived portions of members' out-of-network co-payment, co-insurance, or deductible amounts).

ERISA authorizes plan fiduciaries[4] to bring civil actions under § 502(a)(3): "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3) (emphasis added).

1. Reimbursement Based on Equitable Restitution or an Equitable Lien under ERISA § 502(a)(3)(B)

Defendants have moved to dismiss the claim for reimbursement of overpayments contending that it seeks legal damages rather than equitable relief, and is therefore prohibited because compensatory damages are not recoverable under ERISA.

ERISA § 502(a)(3)(B) permits plan fiduciaries to seek equitable relief only. The Supreme Court of the United States has clarified that this section authorizes "those categories of relief that were typically available in equity[.]" Sereboff v. Mid Atl. Med. Servs., 547 U.S. 356, 361 (2006) (emphasis in original) (internal citation and quotation marks omitted). In Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 205 (2002), the Court noted that a claim is not equitable simply because a plaintiff labels it as such; rather, "whether it is legal or equitable depends on the basis for the plaintiff's claim and the nature of the underlying remedies sought." Id. at 212-13 (internal citation and quotation marks omitted). Accordingly, plan fiduciaries seeking restitution for alleged overpayments of plan benefits, such as the Cigna entities, must establish that the relief they seek under § 502(a)(3)(B) is equitable rather than legal restitution.

In Knudson, the Court clarified some of the differences between equitable and legal restitution:

In cases in which the plaintiff could not assert title or right to possession of particular property, but in which nevertheless he might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him, the plaintiff had a right to restitution at law through an action derived from the common-law writ of assumpsit. In such cases, the plaintiff's claim was considered legal because he sought to obtain a judgment imposing a merely personal liability upon the defendant to pay a sum of money. Such claims were viewed essentially as actions at law for breach of contract (whether the contract was actual or implied).
In contrast, a plaintiff could seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant's possession. A court of equity could then order a defendant to transfer title (in the case of the constructive trust) or to give a security interest (in the case of the equitable lien) to a plaintiff who was, in the eyes of equity, the true owner. But where the property sought to be recovered or its proceeds have been dissipated so that no product remains, the plaintiff's claim is only that of a general creditor, and the plaintiff cannot enforce a constructive trust of or an equitable lien upon other property of the defendant. Thus, for restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant's possession.

534 U.S. at 213-14 (emphases in original) (footnote omitted) (internal citations and quotation marks omitted). In Knudson, the plan paid the medical expenses of a beneficiary who had been injured in a car accident. When the beneficiary settled a lawsuit arising from the accident, the beneficiary placed settlement funds in a special needs trust. The plan fiduciary sought to recover reimbursement of the medical expenses under ERISA § 502(a)(3)(B) based on a plan provision which reserved "a first lien upon any recovery, whether by settlement, judgment or otherwise, that the beneficiary receives from a third party, not to exceed the amount of benefits paid by the Plan or the amount received by the beneficiary for such medical treatment." Id. at 207 (internal citations and quotation marks omitted). The Court found that the basis of the fiduciary's claim was legal rather than equitable because the funds it sought - the proceeds from the settlement of the beneficiary's tort claim - were not in the beneficiary's possession, but rather in a special needs trust account. Accordingly, the Court concluded that the fiduciary's suit was not authorized by § 502(a)(3) because it actually sought compensatory damages - " some funds for benefits that they conferred" - rather than the equitable return of specific funds belonging to the fund that were within the beneficiary's possession. Accordingly, Knudson established that when making a claim for equitable restitution under ERISA § 502(a)(3), a fiduciary must establish that it is seeking return of specifically identifiable funds (or proceeds thereof) that are within the defendant's possession and control that rightfully belong to the plan. Id. at 212-18. The "tracing method" of establishing that the restitution it seeks is equitable requires a fiduciary to trace its money to a particular fund or asset in the defendant's possession or control.

In Sereboff, the Supreme Court recognized a second means by which a plan fiduciary may seek equitable reimbursement of plan funds pursuant to § 502(a)(3). In that case, the plan paid medical expenses of plan beneficiaries who were injured in an automobile accident. The beneficiaries subsequently received a settlement from the third party tortfeasor and were required to set aside a portion of the proceeds from the settlement in an investment account due to a temporary restraining order and preliminary injunction filed by the plan fiduciary. The Court addressed whether the ERISA fiduciary's claim under § 502(a)(3)(B) seeking reimbursement of these plan funds was "equitable" in nature. The ERISA plan at issue in Sereboff had an "Acts of Third Parties" provision, which required beneficiaries to reimburse the plan administrator if the beneficiary later recovered monies for those injuries from a lawsuit or settlement with a third party. 547 U.S. at 359. The beneficiaries in Sereboff argued that the monies sought by the fiduciary did not meet the "strict tracing rules" required for equitable restitution because the fiduciary could not trace its money to a particular fund or asset, or product thereof, in defendant's possession. The Court rejected this argument, finding that strict tracing requirements were only necessary for "equitable liens sought as a matter of restitution, " and clarified that when an equitable lien over the funds at issue has been created by agreement (or assignment), no tracing of funds is required in order for it to be an equitable remedy. Id. at 365-68.
The Court cited two cases "from the days of the divided bench" to elaborate on how equitable liens are created and why they permit recovery even in the absence of the tracing requirement. First, the Court discussed Barnes v. Alexander, 232 U.S. 117 (1914), a case in which an attorney, Barnes, promised two other attorneys, Street and Alexander, one-third of the contingent fee he expected to receive. The Court likened the attorneys' claim in Barnes to a portion of the contingency fee to that of the plan fiduciary's claim to third party payments:
In upholding their equitable claim to this portion of the fee, Justice Holmes recited [in Barnes ] "the familiar rule of equity that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets a title to the thing." On the basis of this rule, he concluded that Barnes' undertaking "created a lien" upon the portion of the monetary recovery due Barnes from the client, which Street and Alexander could "follow... into the hands of... Barnes, " "as soon as the fund was identified[.]"
Much like Barnes' promise to Street and Alexander, the "Acts of Third Parties" provision in the Sereboffs' plan specifically identified a particular fund, distinct from the Sereboffs' general assets - "all recoveries from a third party (whether by lawsuit, settlement, or otherwise)" - and a particular share of that fund to which Mid Atlantic was entitled - "that portion of the total recovery which is due [the plan fiduciary] for benefits paid." Like Street and Alexander in Barnes, therefore, Mid Atlantic could rely on a "familiar rule of equity" to collect for the medical bills it had paid on the Sereboffs' behalf. This rule allowed them to "follow" a portion of the recovery "into the Sereboffs' hands" "as soon as the settlement fund was identified, " and impose on that portion a constructive trust or equitable lien.

Sereboff, 547 U.S. at 363-64 (internal citations omitted). Second, the Court cited to Walker v. Brown, 165 U.S. 654 (1897), for the general principle that "to dedicate property to a particular purpose, to provide that a specific creditor and that creditor alone shall be authorized to seek payment of his debt from the property or its value, is unmistakably to create an equitable lien." Sereboff, 547 U.S. at 367-68 (internal citation omitted). The Court held that the "Acts of Third Parties" provision in the Sereboffs' plan identified specific funds and a particular share of those funds that the plan fiduciary was entitled to recover, and accordingly, created an equitable lien or constructive trust over those funds, which permitted the plan fiduciary to seek equitable reimbursement pursuant to ERISA § 502(a)(3)(B).

In the wake of Knudson and Sereboff, plan fiduciaries have at least two methods of establishing that their claims seeking reimbursement of plan funds under ERISA § 502(a)(3)(B) are equitable in nature: (1) the "tracing method" set forth in Knudson, and (2) the equitable lien or constructive trust method set forth in Sereboff .

a. Reimbursement Based on the "Tracing Method"

Defendants correctly argue that the relief the Cigna entities seek is not equitable because the Cigna entities have not identified specific assets separate and apart from the ASCs' general assets. The Cigna entities' complaint fails to establish that the § 502(a)(3)(B) claim is "equitable" in nature because its allegations do not plausibly allege that the overpayments are currently in the ASCs' possession and are specifically identifiable. Indeed, the only allegation supporting that the Cigna entities can specifically identify and trace plan funds is that the "overpayments [at issue] are within the possession and control of the Defendants." (ECF No. 1 ¶ 135). The Cigna entities have not alleged that the overpayments were kept in separate accounts or otherwise how they are separate and distinct from the ASCs' general assets. See Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Health Special Risk, Inc., 756 F.3d 356, 366 (5th Cir. 2014) (affirming dismissal of the plan fiduciary's ERISA § 502(a)(3) claim because the fiduciary, who sought reimbursement from its beneficiaries' secondary insurance policies, had not identified specific funds, but merely "general assets of [d]efendants, which were not received from, and have not been promised to, [the plan fiduciary]."). The Cigna entities make only a bald assertion, devoid of any factual support, that these overpayments, which were purportedly made between 2009 and present day, are still within the ASCs' possession and are identifiable from their general assets.

b. Reimbursement Based on an Equitable Lien

The Cigna entities argue that even if the overpayments are not strictly traceable, courts have permitted equitable recovery of overpaid plan funds where the parties have an agreement, such as the Cigna entities' plan documents, that provide an equitable lien or constructive trust over payments made on behalf of the plan. The Cigna entities point to a provision within their plan documents titled "Recovery of Overpayment, " which states that: "When an overpayment has been made by Cigna, Cigna will have the right at any time to: recover that overpayment from the person to whom or on whose behalf it was made; or offset the amount of that overpayment from a future claim payment" ("Overpayment Provision") (ECF No. 44-1, at 39). The Cigna entities argue that this Overpayment Provision creates an equitable lien over the funds they seek to recover. Defendants argue that the relief the Cigna entities seek is not equitable because the provision they cite does not create an equitable lien on any portion of the benefits that have been paid to the ASCs.

"ERISA-plan provisions do not create constructive trusts and equitable liens by the mere fact of their existence; the liens and trusts are created by the agreement between the parties to deliver assets." Health Special Risk, Inc., 756 F.3d at 365. Accordingly, the plan document itself must be examined to determine whether its language creates an equitable lien. As discussed by the Supreme Court in Walker, 165 U.S. at 664, an equitable lien may be created against a person's real or personal property either by express language or by "implication from the terms of the agreement, construed with reference to the situation of the parties at the time of the contract[.]" The Court also summarized the manner in which equitable liens are created and their enforcement:

Every express executory agreement in writing, whereby the contracting party sufficiently indicates an intention to make some particular property, real or personal, or fund, therein described or identified, a security for a debt or other obligation, or whereby the party promises to convey or assign or transfer the property as security, creates an equitable lien upon the property so indicated, which is enforceable against the property in the hands, not only of the original contractor, but of his heirs, administrators, executors, voluntary assignees, and purchasers or incumbrancers with notice.

Id. at 664-65.

Here, the Cigna entities have not plausibly alleged that their plan documents created an equitable lien over the overpayments, which permits them to recover the overpayments under ERISA § 502(a)(3)(B) from the ASC.[5] The language in the Overpayment Provision may grant the Cigna entities a contractual right to recoupment of some funds from a plan member to whom or on whose behalf an overpayment was made. How that language creates an equitable lien or constructive trust on every overpayment of benefits made by a Cigna entity to a provider is far from obvious. See Gallagher v. Reliance Std. Life Ins. Co., 305 F.3d 264, 269 (4th Cir. 2002) (internal citation and quotation marks omitted) ("Any ambiguity in an ERISA plan is construed against the drafter of the plan, and it is construed in accordance with the reasonable expectations of the insured."). The Overpayment Provision, as written, may permit a Cigna entity to recoup an overpayment that it made to a provider directly from a plan member or to refuse to pay future claim amounts of the member in order to offset prior overpayments. Both of these scenarios indicate that the Cigna entities have the right to recoup some funds from a plan member but not the particular payment made. The Cigna entities appear to argue that the provision allows them to recover overpayments made directly to a provider from that provider. The plan language does not support that conclusion. A comparison of the language used on the page directly preceding the Overpayment Provision under the section "Expenses For Which A Third Party May Be Responsible" ("Third Party Payor Section") with the language used in the Overpayment Provision, demonstrates that the provision at issue does not create an equitable lien. The Third Party Payor Section includes a subsection entitled "Subrogation/Right of Reimbursement" which states that:

If a Participant incurs a Covered Expense for which... another party may be responsible or for which the Participant may receive payment [from a third party tortfeasor]... [t]he plan is [] granted a right of reimbursement from the proceeds of any recovery whether by settlement, judgment, or otherwise.

(ECF NO. 44-1, at 38). More importantly, the Third Party Payor Section includes a subsection entitled "Lien of the Plan, " which states that:

By accepting benefits under this plan, a Participant: grants a lien and assigns to the plan an amount equal to the benefits paid under the plan against any recovery made by or on behalf of the Participant...[;] agrees that this lien shall constitute a charge against the proceeds of any recovery and the plan shall be entitled to assert a security interest thereon; [and] agrees to hold the proceeds of any recovery in trust for the benefit of the plan to the extent of any payment made by the plan.

( Id. ). This language clearly creates a lien or constructive trust on particular funds that come into a plan members' possession, and could reasonably be understood by a plan member as asserting such a lien or constructive trust. The language used in the Overpayment Provision cannot be understood by a plan member - or a provider that is not a party to the plan - as asserting an equitable lien or constructive trust on plan overpayments to providers.

The Cigna entities' allegations do not state an equitable claim for recovery of overpayments pursuant to ERISA § 502(a)(3)(B). Accordingly, this portion of the Cigna entities' ERISA claim will be dismissed.

2. Injunctive Relief

The Cigna entities also seek a permanent injunction pursuant to ERISA § 502(a)(3)(A), "directing all of the ASCs to submit to [them] only charges that the ASC actually charges the plan member as payment in full for the ASCs' services and not to submit charges which include amounts that the ASC does not actually require the member to pay (including, without limitation, the waiver of any portion of the members' required out-of-network co-insurance, co-payment, and deductible amounts)." (ECF No. 1 ¶ 138).

Defendants argue that an ERISA claim for an injunction is barred because, if granted, the injunction would breach the Cigna entities' fiduciary duty to plan members. Specifically, Defendants argue that an injunction would "prevent the ASCs from discounting the co-payments charged to [the Cigna entities'] insureds - thereby directly harming those insureds[, ]" and by restricting insureds' "choice of medical provider by enjoining the ASCs from matching their patients' in-network out-of-pocket costs." (ECF No. 51, at 14-15).

The Cigna entities' request for injunctive relief is appropriate under ERISA § 502(a)(3)(A). They have identified a billing practice by the ASCs which may violate the terms of the plans at issue by not holding plan members accountable for their required contribution amounts (including deductibles, co-pays, and co-insurance) and by billing members and the Cigna entities based on different underlying charges. The Cigna entities, purportedly acting as plan fiduciaries, seek to enjoin these practices in order to enforce the terms of the plans. Defendants' argument that this claim is barred because the relief the Cigna entities seek would breach their fiduciary duties fails because it is an affirmative defense that is not appropriate to consider at this stage in the proceedings.[6] Accordingly, Defendants' motion to dismiss has failed to demonstrate that the Cigna entities' ERISA § 502(a)(3) claim must be dismissed insofar as it seeks injunctive relief.

B. Civil RICO Claim Pursuant to § 1962(c) (Counts II.A to II.T)

The Cigna entities assert a claim pursuant to RICO's civil provision, 18 U.S.C. § 1964, which provides a cause of action to "[a]ny person injured in his business or property by reason of a violation of [18 U.S.C. § 1962]." The Cigna entities allege that Defendants violated RICO § 1962(c). In order for a civil RICO claim to survive a motion to dismiss, a plaintiff must allege "(1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). Plaintiffs must additionally plead proximate cause, that is that ...


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