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Omega Hospital, LLC v. United Healthcare Services, Inc.

United States District Court, M.D. Louisiana

April 30, 2019

OMEGA HOSPITAL, LLC
v.
UNITED HEALTHCARE SERVICES, INC. AND UNITED HEALTHCARE OF LOUISIANA, INC.

          RULING

          JUDGE JOHN W. deGRAVELLES UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Omega Hospital, LLC's (“Omega” or “Plaintiff”) motion for reconsideration of the Court's September 11, 2018 ruling on United Healthcare Services, Inc. and United Healthcare of Louisiana, Inc.'s (collectively “United” or “Defendants”) motion to dismiss and motion for leave of court to amend its complaint. (Doc. 92). The September 11, 2018 ruling (Doc. 90) on United's motion to dismiss (Doc. 67) dismissed all remaining claims by Omega against United for alleged violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”) and Louisiana state law. United opposes Omega's motion for reconsideration and motion for leave of court to amend. (Doc. 94). Omega filed a reply. (Doc. 99). After carefully considering the law and the parties' arguments, the Court grants Omega's Rule 15(a) motion for leave of court to amend and denies Omega's Rule 59(e) motion for reconsideration.

         I. Relevant Facts and Procedural History

         Omega filed its complaint on August 24, 2016. (Doc. 1). Omega is a hospital and surgical center that treats patients whose healthcare benefit plans are insured and/or administered by United. Omega treats United's insureds on an out-of-network basis, which means that Omega does not have a pre-existing provider contract with United. Omega, as the assignee of a class of its patients, alleged that United violated ERISA and Louisiana state law in an alleged scheme for reimbursement and recoupment of alleged overpayments made by United. (Doc. 1). United responded with a motion to dismiss under Rule 12(b)(1) and 12(b)(6) on November 1, 2016. (Doc. 11). United's initial motion to dismiss was opposed by Omega (Doc. 20), and oral argument was heard[1] on August 10, 2017. (Doc. 35).

         The ruling on United's initial motion to dismiss was issued by Judge Brady on September 22, 2017. (Doc. 37). This Court denied United's motion under Rule 12(b)(1) and found that Omega had standing to proceed with its claims of violation of ERISA and state law. Specifically, the Court found that Omega had sufficiently plead a valid assignment. (Doc. 38 at 4-6). Under Rule 12(b)(6), the Court found that “Omega's Complaint lack[ed] necessary specificity and fail[ed] to provide proper factual support of certain allegations.” (Doc. 38 at 6-7). The Court allowed Omega time to “amend its Complaint to allege with specificity the dates of service and claim numbers at issue with respect to the identified patients”. (Doc. 38 at 7). United was, in turn, ordered to provide all plan information within a designated time period. Omega was then further ordered to amend its Complaint to “clarify and specify the class it purports to represent”. (Doc. 38 at 7). Finally, with regard to Omega's claims pursuant to state law, the Court dismissed the state law claims brought on behalf of ERISA-plan participants. The Court also dismissed the state law claims brought on behalf of non-ERISA plan participants without prejudice subject to Omega's leave to amend those allegations. (Doc. 38 at 9).

         On October 20, 2017, Omega amended its Complaint pursuant to the Court's Order. (Doc. 41).

         Following a re-assignment of this matter to Judge deGravelles, United filed its second motion to dismiss. (Doc. 67). United sought dismissal based on the following grounds: (1) Omega lacked standing to bring this case; (2) Omega failed to exhaust administrative remedies; (3) Omega failed to state plausible ERISA claims; (4) the Court lacked supplemental jurisdiction over Omega's state law claims; and (5) alternatively, Omega's state law claims were implausible and the breach of contract claim was preempted by ERISA. (Doc. 67-1). Omega opposed the motion and did not seek leave of court to amend its Complaint a second time. (Doc. 76).

         After an analysis of Omega's amended Complaint, the arguments of the parties, and the law, the Court granted United's second motion to dismiss in part and denied it in part. (Doc. 90). The Court found that: (1) United's anti-assignment provisions were invalidated by La. Rev. Stat. § 40:2010, (Doc. 90 at 14), and La. Rev. Stat. § 40:2010 was not preempted by Gobeille v. Liberty Mutual Ins. Co., 136 S.Ct. 936 (2016), (Doc. 90 at 18); (2) an assignment may confer both authorized representative and assignee status to a provider, such as Omega, (Doc. 90 at 20); (3) Omega lacked standing to assert any ERISA claims on LL's behalf and those claims were dismissed without prejudice, (Doc. 90 at 22); (4) Omega lacked derivative standing to assert its Section 502(a)(3)(A) breach of fiduciary duty claim seeking prospective relief and Section 502(a)(3)(B) breach of fiduciary duty claim seeking unjust enrichment due to United's failure to comply with the terms of the Plans because the assignment did not contain express reference to fiduciary duty claims or future rights, (Doc. 90 at 27); (5) Omega sufficiently alleged that exhaustion should be excused due to United's failure to provide meaningful access to administrative remedies, (Doc. 90 at 30); (6) Omega's 29 U.S.C. § 1132(A)(1)(B) claim was dismissed because Omega did not plausibly plead that it is entitled to benefits recouped by cross-plan offsetting, (Doc. 90 at 32-33); (7) Omega's Section 503 claim was dismissed because Omega alleged that United is the “Plan Administrator”, not the “Plan”, (Doc. 90 at 35-36); and (8) Omega's claims of breach of contract and negligent misrepresentation were dismissed because the Court declined to exercise supplemental jurisdiction over the remaining state law claims. (Doc. 90 at 36).

         Omega's current motion requests that the Court reconsider its ruling on the following grounds: (1) Omega inartfully plead the activity engaged in by United and the injury caused by United's “recoupment scheme”; (2) the Court accepted United's version of events which was contrary to Omega's contentions; (3) the United States Supreme Court decision of Montanile v. Board of Trustees of Nat. Elevator Industry Health Plan, 136 S.Ct. 651, 193 L.Ed.2d 556 (2016), vindicates Omega's theory for recovery; and (4) the Court may have erred legally regarding the express assignment of the claim for breach of fiduciary duty. (Doc. 92-1 at 2). Additionally, Omega argues that it amended its Complaint in response to the Court's September 22, 2017 ruling, which included a specific scope of amendment. Omega suggests that because the ruling did not address any issue with Omega's legal theory and did not order Omega to name the assignments from patients whose accounts were used as the vehicle for United to recover the overpayments, Omega did not take the liberty of making such amendments. Therefore, Omega also moves the Court under Rule 15(a) to grant it leave of court to amend the Complaint to correct the pleading deficiencies “identified by the Court”. (Doc. 92-1 at 2).

         United opposes Omega's motion under Rule 59(e) and under Rule 15(a). (Doc. 94). United argues that Montanile has “no bearing” on United's offsetting practices, and offsetting is permissible under ERISA and upheld by the courts. (Doc. 94 at 3-4). United also argues that no one is injured when United recoups overpayments; therefore, Omega's claims are implausible. (Doc. 94 at 4-5). United maintains that Omega has no standing for fiduciary breach claims. (Doc. 94 at 5-7). Finally, United opposes Omega's motion to amend its complaint as any amendment would be futile. (Doc. 94 at 7-10).

         Omega filed a reply arguing that: (1) United has mischaracterized Omega's claims in order to support United's position that Omega lacks standing. Omega's benefit claim seeks simply to recover benefits once paid on behalf of its representative patients but now taken away through a retroactive benefit redetermination. Omega's assignments provide derivative standing in the same manner that Omega could have pursued if United had issued the retroactive explanation of benefits initially. Omega cites to Peterson v. Unitedhealth Group, Inc., 242 F.Supp.3d 834 (D.Minn. Mar. 14, 2017), which is almost identical to the instant matter, but has previously been distinguished by this Court in its September 11, 2018 ruling. (Doc. 99 at 1-2). (2) The Fifth Circuit Court of Appeals, in Manuel v. Turner Industries Group, L.L.C., 905 F.3d 859 (5th Cir. 2018), recognized Montanile in its decision. Manuel suggests that United cannot pursue equitable relief to recoup overpayments absent an ability to trace the overpaid funds to their source. Omega argues that United recouped against Omega's general assets and not the specific traceable funds it allegedly overpaid. Omega urges the Court to reconsider its prior analysis in light of Montanile, Manuel, and Estate of Barton v. ADT Sec. Services Pension Plan, 837 F.3d 1014 (9th Cir. 2016). (Doc. 99 at 3-6). (3) The Court improperly construes 29 U.S.C. § 1133 in finding that claims under this section only apply to the plan, and not to plan administrators. Omega argues that this is contrary to legal authority from the Fifth Circuit Court of Appeals. (Doc. 99 at 8). (4) Omega argues five specific amendments that it is prepared to make that will “easily cure” the remaining defects, and this amendment is “favored in the interest of justice”. (Doc. 99 at 7-8 and 10).

         II. Discussion

         A. Standard for Motion for Reconsideration under Rule 59(e)

         While the Federal Rules of Civil Procedure do not formally recognize the existence of motions for reconsideration (e.g., Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991)), courts customarily consider such motions under Rule 60(b) or Rule 59(e). Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442 (9th Cir. 1991). Rule 59(e) of the Federal Rules of Civil Procedure allows a party to move to alter or amend a judgment within twenty-eight (28) days of its entry. Fed. R. Civ. Proc. 59(e).

         District courts have considerable discretion in deciding whether to grant a Rule 59(e) motion. Edward H. Bohlin Co., Inc. v. Banning Co., Inc., 6 F.3d 350, 355 (5th Cir. 1993). The factors to be considered in a Rule 59(e) analysis are: (1) the judgment is based upon a manifest error of fact or law; (2) newly discovered or previously unavailable evidence exists; (3) the initial decision was manifestly unjust; (4) counsel engaged in serious misconduct; and (5) an intervening change in law alters the appropriate outcome. Livingston Downs Racing Ass'n, Inc. v. Jefferson Downs Corp., 259 F.Supp.2d 471, 475-76 (M.D. La. 2002) (citing Metairie Bank & Trust Co. v. Payne, 2000 WL 979980 (E.D. La. July 17, 2000); Campbell v. St. Tammany Parish School Bd., 1999 WL 777720 (E.D. La. Sept. 29, 1999)). However, a motion for reconsideration is an extraordinary remedy and should be used sparingly in the interest of finality and conservation of judicial resources. Carroll v. Nakatani, 342 F.3d 943, 945 (9th Cir. 2003). The court should deny a motion for reconsideration when the movant rehashes legal theories and arguments that were raised or could have been raised before the entry of the judgment. See Templet v. HydroChem Inc., 367 F.3d 473, 478-79 (5th Cir. 2004). A motion for reconsideration does not support old arguments that are reconfigured. Resolution Trust Corp. v. Holmes, 846 F.Supp. 1310, 1316, n.18 (S.D. Tex. 1994). Mere disagreement with a prior ruling does not support a Rule 59(e) motion. See e.g., Hutchinson v. Staton, 994 F.2d 1076, 1082 (4th Cir. 1993).

         Courts in the Fifth Circuit are directed to take motions under Rule 59(e) seriously. Two cases note that Rule 59(e) does not place any particular limitations upon the possible grounds for relief. Ford v. Elsbury, 32 F.3d 931, 937 (5th Cir. 1994); Lavespere v. Niagara Mach. & Tool Works, Inc., 910 F.2d 167, 174 (5th Cir. 1990), cert. denied, 510 U.S. 859, 114 S.Ct. 171, 126 L.Ed.2d 131 (1993), abrogated on other grounds by Little v. Liquid Air Corp., 37 F.3d 1069 (5th Cir. 1994)(en banc). The Court notes the Fifth Circuit's general principle that “the district court must strike a proper balance between two competing interests: ‘the need to bring litigation to an end and the need to render just decisions.'” Ford v. Elsbury, 32 F.3d at 937 (quoting Lavespere, supra).

         B. Standard for Motion for Leave of Court to Amend under Rule 15(a)

         Omega also seeks leave of Court to amend the Complaint a second time under Rule 15(a). “The court should freely give leave when justice so requires”. FRCP 15(a)(2). Omega highlights that it has only amended its Complaint one prior time pursuant to the instructions of Judge Brady in the Court's ruling on United's first motion to dismiss. The ruling grants Omega leave of court to amend its complaint a first time to “cure the deficiencies noted by the Court”. (Doc. 38 at 90). Omega strictly adhered to the ruling and amended the Complaint solely to “allege with specificity the dates of service and claim numbers at issue with respect to the identified patients” and to “clarify and specify the class it purports to represent”. (Doc. 38 at 7). With this one limited amendment in mind, Omega urges the Court to grant it leave to amend the Complaint in whole to address all deficiencies under Rule 15(a).

         The Rule 15(a) standard is “more permissive” than the standard of Rule 59(e). DeGruy v. Wade, 586 Fed.Appx. 652, 655 (5th Cir. 2014). When a court is faced with a motion under both Rule 59(e) and Rule 15(a), the Fifth Circuit has stated that it is proper to analyze the motion under each rule. Id. While Rule 59(e) motions “must clearly establish either a manifest error of law or fact or must present newly discovered evidence, ” Rosenzweig v. Azurix Corp., 332 F.3d 854, 864 (5th Cir. 2003), a motion to amend under Rule 15(a) “permit[s] liberal amendment to facilitate determination of claims on the merits.” Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981). Where a district court has entered a judgment on the pleadings and the plaintiff moves under Rule 59(e) to vacate the judgment and amend the complaint, the court should also analyze the motion under the more liberal Rule 15(a) standard. Rosenzweig, 332 F.3d at 864; Dussouy, 660 F.2d at 597, n.1; Jumonville v. Department of Treasury, 50 F.3d 1033, *2 (5th Cir. 1995) (citing Southern Constructors Group, Inc. v. Dynalectric Co., 2 F.3d 606, 611 (5th Cir. 1993)).

         Although leave to amend under Rule 15(a) is to be freely given, that generous standard is tempered by the necessary power of a district court to manage a case. See Shivangi v. Dean Witter Reynolds, Inc., 825 F.2d 885, 891 (5th Cir. 1987). In deciding whether to grant leave to amend, the district court may consider a variety of factors in exercising its discretion, including undue delay, bad faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, and futility of the amendment. Id. at 891; DeGruy, 586 Fed.Appx. at 656.

         It is with these principles in mind that the Court addresses Omega's motion for reconsideration and for leave of court to amend its Complaint.

         C. The Parties' Arguments

         There were two general, over-arching issues for Omega on the underlying motion to dismiss: (1) standing; and (2) whether Omega plausibly plead United's “recoupment scheme”[2] and how/whether it injured the Plaintiffs. Based on the record that was before the Court at the time of ruling on United's motion, the matter was dismissed. (Doc. 90). Omega now comes before this Court urging a reconsideration of this ruling because, in general, Omega believes that the Court misunderstood Omega's case as a whole, resulting in an incorrect ruling. Omega argues that this misunderstanding arose not only from the Court subscribing to United's mischaracterization of the “recoupment scheme”, but also due to Omega's “inartful pleading” which Omega admits did not assist the Court in properly considering the motion or the record before it. (Doc. 92-1 at 2; Doc. 99 at 7). Omega attempts to better explain its case and allegations, suggesting that clarity will render a more just result. (Doc. 99 at 8).

         1.Explanation of the “Recoupment Scheme”

         Omega argues that the ruling on the motion to dismiss stemmed from a misunderstanding that Omega alleges a breach of fiduciary duty claim, and, therefore, the customary derivative standing analysis should be applied. Omega suggests that a proper understanding of its claims should result in a ...


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