Ohio Valley Health Services & Education Corp. Health Plan v. Riley
Docket: Civil Action No. 5:15CV65
Court: District Court, N.D. West Virginia; December 9, 2015; Federal District Court
Michael D. Riley and the West Virginia Offices of the Insurance Commissioner’s motion to dismiss is denied by the court. The background includes a detailed history of litigation involving Ohio Valley Health Services, Education Corporation (OVHS&E) and related entities. OVHS&E operates two employee benefit plans and entered into a contract with Health Plan of the Upper Ohio Valley, Inc. (Upper Ohio Valley Health Plan) for administrative services, including claims payments. Due to funding shortages from January 2005 to April 2013, claims approval was delayed. Wheeling Hospital brought a lawsuit for unpaid claims against OVHS&E and others, which was dismissed, leading to arbitration and a settlement between Wheeling Hospital and Upper Ohio Valley Health Plan.
In the current civil action, the plaintiffs seek declaratory and injunctive relief on three counts. Count I requests a declaration that the Employment Retirement Income Security Act (ERISA) preempts the West Virginia Prompt Pay Act in several respects, such as the 30-day payment requirement and the imposition of prejudgment interest and attorney’s fees. Count II seeks a declaration that Upper Ohio Valley Health Plan has no right to indemnification, as ERISA preempts the Prompt Pay Act. Count III requests a declaration barring Upper Ohio Valley Health Plan's indemnification claims based on various defenses like estoppel and waiver. The plaintiffs also seek permanent injunctions in Counts I and II against the enforcement of the Prompt Pay Act and claims for indemnification related to the Wheeling Hospital settlement.
Defendant-counterclaimant Upper Ohio Valley Health Plan has filed a counterclaim consisting of five counts: Count I alleges breach of contract against OVHS&E Health and Dental Plans and OVHS&E; Count II asserts breach of contract and failure to indemnify against the same parties; Count III claims implied indemnification against OVHS&E Health and Dental Plans and OVHS&E; Count IV seeks unjust enrichment against OVMC and EORH; and Count V claims unjust enrichment against OVHS&E as an alternative.
Defendants Riley and the Insurance Commissioner have filed a motion to dismiss, arguing that the plaintiffs lack standing regarding Count I and that no actual case or controversy exists, suggesting that ruling in favor of the plaintiffs would result in an advisory opinion, which would be outside the Court's jurisdiction. The plaintiffs counter that Riley and the Insurance Commissioner have the statutory authority to enforce the Prompt Pay Act, making them proper parties, and assert they have standing and that the potential judgment would not be advisory. They further argue that an injury exists due to the defendants' failure to commit to refrain from enforcing the Prompt Pay Act.
In their reply, Riley and the Insurance Commissioner argue that the plaintiffs’ claimed injury is theoretical and that they cannot enforce the Prompt Pay Act against an ERISA-governed plan. They also discuss a proposal from the plaintiffs to dismiss them contingent on a commitment not to enforce the law, which they rejected. Ultimately, the Court denies the motion to dismiss.
The document outlines the legal standards for a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), noting that such motions can be either facial or factual attacks on jurisdiction, with different implications for how the court assesses the allegations.
A distinction exists between 'facial' and 'factual' challenges regarding how courts evaluate allegations in a complaint. In a facial challenge, allegations are presumed true, akin to a Rule 12(b)(6) motion, whereas a factual challenge allows the court to assess evidence and determine its jurisdiction without presuming truthfulness of the allegations. The court can evaluate jurisdictional claims even with disputed material facts present.
When addressing a motion to dismiss under Rule 12(b)(6), courts accept all well-pled facts as true, but legal conclusions and bare assertions without factual enhancement do not qualify as well-pled facts. The purpose of such a motion is to assess the sufficiency of the claim, not to resolve factual disputes or merits, distinguishing it from a summary judgment motion under Rule 56, which addresses the merits of a claim. Complaints must present enough facts to state a plausible claim for relief, allowing reasonable inference of the defendant's liability. While detailed factual allegations are not mandatory, they must raise the right to relief above a speculative level.
In this case, Riley and the Insurance Commissioner argue that the court lacks jurisdiction due to the plaintiffs’ lack of standing, which is essential for establishing a valid case or controversy under Article III of the U.S. Constitution. This article limits federal courts to actual cases and controversies, encompassing doctrines of standing, mootness, ripeness, and political questions that restrict federal judicial power.
Standing is a fundamental aspect of the case or controversy requirement under Article III, as established in Lujan v. Defenders of Wildlife. It involves determining whether a litigant is entitled to have the court resolve the dispute. To establish standing, a plaintiff must demonstrate three key elements: (1) an 'injury in fact,' which must be concrete, particularized, and actual or imminent; (2) a causal connection between the injury and the defendant's conduct, which must be fairly traceable to the challenged action; and (3) a likelihood that a favorable court decision will remedy the injury. In the context of a preenforcement challenge to a statute, such as the Prompt Pay Act, standing can be established by showing a realistic danger of sustaining direct injury from the statute's enforcement.
A plaintiff may demonstrate this realistic danger by proving one of three conditions: (1) a threat of application of the statute; (2) a likelihood of application; or (3) a credible threat of application. A credible threat of prosecution under a criminal statute is sufficient to confer standing for a pre-enforcement challenge, even in the absence of prior enforcement history.
In the current case, the plaintiffs seek a declaratory judgment asserting that the Prompt Pay Act is invalid and preempted by ERISA concerning the OVHS&E Health and Dental Plans. The discussion will address whether Riley and the Insurance Commissioner are proper parties to the lawsuit. The plaintiffs argue that their claims against these individuals are distinct and that, due to their role in enforcing the Prompt Pay Act, they are appropriate parties to the action.
When a plaintiff challenges a state statute before enforcement, the appropriate defendants are the government officials responsible for its administration and enforcement, as established in case law. Public policy favors individuals seeking declaratory judgments against these officials rather than breaking the law and facing potential legal consequences. In this context, defendants Riley and the Insurance Commissioner are responsible for enforcing the Prompt Pay Act, which grants the commissioner authority to assess insurer compliance with specific standards. The plaintiffs argue they possess standing to sue, countering the defendants' claim of lack of standing due to insufficient injury traceable to them. They assert that the absence of an agreement not to enforce the Act poses a risk of penalties, thereby establishing a preenforcement injury. For standing, plaintiffs must demonstrate: (1) actual injury, (2) a causal link between the injury and the defendants' actions, and (3) the possibility of redress. The plaintiffs maintain that their alleged injury arises from the threat of enforcement by the defendants, thereby satisfying the causal connection and asserting that a favorable ruling could remedy their situation through a declaratory judgment or injunction against enforcement.
The plaintiffs have demonstrated a judicially cognizable injury necessary for standing, specifically in the context of a pre-enforcement challenge to the Prompt Pay Act. To establish this injury, plaintiffs can show either a threat of enforcement, likelihood of application, or a credible threat of prosecution under the statute. A credible threat exists when there is a realistic possibility of prosecution, which confers standing even without prior enforcement history.
In this case, there is a credible threat that defendants Riley and the Insurance Commissioner may enforce the Prompt Pay Act, potentially resulting in the addition of 10% interest to claims not processed in a timely manner. Notably, Riley and the Insurance Commissioner have not disavowed any intention of enforcing the Act, and discussions between the parties indicate a disagreement on its applicability to ERISA-covered plans. This adverse positioning further supports the existence of a credible threat.
Consequently, the plaintiffs have established sufficient grounds for standing, leading to the denial of the defendants’ motion to dismiss based on jurisdictional grounds. Additionally, the plaintiffs seek a permanent injunction against the enforcement of the Prompt Pay Act, countering the defendants’ claim that such a request would constitute an advisory opinion. The court finds that both criteria for avoiding an advisory opinion are met, thus dismissing the defendants' argument. The court orders the Clerk to transmit a copy of the memorandum opinion and order to the involved counsel.
