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Appalachian Regional Healthcare v. Coventry Health and Life Insurance Co.

United States District Court, Sixth Circuit

January 24, 2014



KARL S. FORESTER, Senior District Judge.

This matter is before the Court on the motion of Coventry Health and Life Ins. Co. ("Coventry") to dismiss Plaintiffs' Second Amended Complaint [DE 141] and motion to dismiss King's Daughters' Intervening Complaint. For the reasons discussed below, the motions will be denied.


Plaintiffs ("ARH") filed a First Amended Complaint on April 26, 2012. DE 5. The First Amended Complaint raised various claims against Coventry and the Commonwealth of Kentucky, Cabinet for Health and Family Services ("Cabinet"). Coventry and the Cabinet filed separate answers to the Amended Complaint, but neither moved to dismiss. DE 34, 35. King's Daughters moved to intervene on December 21, 2012, and ARH moved to file a Second Amended Complaint on January 11, 2013. DE 119, 122. These motions were granted on March 28, 2013. DE 132, 133.

ARH's Second Amended Complaint did not raise any new claims against Coventry or the Cabinet. DE 135. Instead, it added the United States Department of Health and Human Services ("HHS"), the Centers for Medicare and Medicaid Services ("CMS"), and the Secretary of HHS and raised various claims against these new federal defendants. Nonetheless, Coventry and the Cabinet moved to dismiss the Second Amended Complaint because it incorporated the First Amended Complaint. Any of Coventry's arguments that were ruled on adversely either before the motion to dismiss was filed or while it was pending will be addressed in summary fashion.


A. Standard for Motion to Dismiss

To withstand a motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), abrogating Conley v. Gibson, 355 U.S. 41 (1957). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555. See also Association of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007) (same). In ruling upon a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6), all of a plaintiff's allegations are presumed true, and the complaint is construed in the light most favorable to the plaintiff. Hill v. Blue Cross and Blue Shield of Michigan, 409 F.3d 710, 716 (6th Cir. 2005). Courts may consider a document referenced in the complaint and central to the plaintiff's claim without converting the motion to one for summary judgment. Greenberg v. Lie Ins. Co. of Virginia, 177 F.3d 507, 514 (6th Cir. 1999).

B. Motion to Dismiss Second Amended Complaint

1. Private Right of Action, End-Run Theory and State-Law Claims

Coventry insists ARH's claims against Coventry must be dismissed because the "Medicaid Act has created no rights that are privately enforceable in a court of law." DE 141-1 at 11. While the decision came after briefing on the present motion, this Court ruled to the contrary in its September 11, 2013 Opinion. DE 161; Appalachian Regional Healthcare v. Coventry Health and Life Ins. Co., ___ F.Supp.2d ___, 2013 WL 4875027 at *7-10 (E. D. Ky. September 11, 2013).

Moreover, Coventry mischaracterizes all of ARH's state law claims against Coventry as merely "attempting to privately enforce provisions of the federal Medicaid statutes and regulations." DE 141-1 at 11. See also id. at 6. The mere fact that the Letter of Agreement ("LOA") between Coventry and ARH incorporated federal law does not convert ARH's state-law claims into federal ones. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 581 (7th Cir. 2012) ("The issue here... is not whether federal law itself provides private remedies, but whether it displaces remedies otherwise available under state law. The absence of a private right of action from a federal statute provides no reason to dismiss a claim under a state law just because it refers to or incorporates some element of the federal law."). In response to an argument similar to Coventry's - that statelaw claims are federal claims in disguise and an "impermissible end-run around the lack of a private action" - the Seventh Circuit held that argument itself is "really just an end-run' around wellestablished preemption doctrine...." Id. at 584. See also Robinson v. Deutsche Bank Nat. Trust Co., No. 5:12-cv-590, 2013 WL 4552933 at *10 (E. D. N.C. April 9, 2013) ("For the same reasons stated by the Seventh Circuit in Wigod, this court concludes that Defendants' end-run' theory is without merit."). In the present case, Coventry does not argue preemption, and this Court agrees with the Seventh Circuit regarding an end-run theory. ARH can pursue its state-law claims.

Additionally, Coventry's reliance on Astra, U.S.A., Inc. v. Santa Clara County, 131 S.Ct. 1342 (2011), is misplaced. In Astra, a group of healthcare providers claimed to be third-party beneficiaries of a Pharmaceutical Pricing Agreement between the federal government and some drug companies regarding Medicaid price ceilings for the drugs. The providers sued the pharmaceutical companies for violations of the federal price ceilings. The parties conceded there was no private right of action under the federal statute. The court held, under the circumstances, that a suit to enforce the contract and one to enforce the statute were "in substance one and the same" and their treatment must be the same. Id. at 1345.

Here, by contrast, ARH is suing to enforce its own contract with Coventry, not as an alleged third-party beneficiary. In Wigod, the court concluded that Astra is limited to a third-party beneficiary context. Wigod, 673 F.3d at 584 n. 19. When the question is whether Congress intended to preclude a plaintiff from enforcing a contract to which the plaintiff is itself a party, "[t]hat is a preemption question not addressed in Astra. " Id. ...

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