ERISA-N.J. District Court Rules That State Law Claims For Fraud and Misrepresentation Are Not Preempted By ERISA

Published: 2011-04-11 11:00:03
Author: Stanley D. Baum

  In Aetna Health Inc. v. Health Goals Chiropractic Center, Inc., No. 10-5216-NLH-JS (D. NJ 2011), Defendant Kathleen Baumgardner, D.C. (hereinafter "Dr. Baumgardner") is a licensed chiropractor and officer of Defendant Health Goals Chiropractic Center, Inc. (collectively the "Defendants"). Plaintiffs Aetna Heath Inc. and Aetna Life Insurance Co. (collectively the "Plaintiffs") are health care benefits and health insurance providers. At all relevant times, Dr. Baumgardner was an in-network healthcare provider with the Plaintiffs. As an in-network provider, she was obligated to accept discounted rates when she provided professional chiropractic services to individuals covered by the Plaintiffs' insurance plans. Under the terms of the in-network contract, the Plaintiffs were required to pay Dr. Baumgardner for all services deemed medically necessary or otherwise covered by the plans.

The Plaintiffs alleged that the Defendants entered into a scheme to defraud the Plaintiffs, and submitted insurance claims and statements to Plaintiffs for services which, among other things: (i) contained knowingly false and misleading information, (ii) misrepresented the services performed and (iii) failed to disclose information which affected their right to payment. According to the Plaintiffs, the claims submitted included excessive, phantom and duplicate charges. As a result of this alleged fraud, the Plaintiffs allege that they paid Defendants $1,078,079.42 to which they were not entitled. The Plaintiffs filed suit in the Superior Court of New Jersey. The Plaintiffs' complaint relies exclusively on state law and alleges that the Defendants committed common law fraud, statutory fraud and negligent misrepresentation of their services when they submitted their claims to the Plaintiffs. Later, the Defendants removed the case to the New Jersey District Court, alleging that the Plaintiffs' state claims were preempted by ERISA. Are they right? If not, removal is not proper.