Michelle Roche v. Aetna Inc

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 16-1712
_____________

MICHELLE ROCHE,
INDIVIDUALLY AND AS CLASS REPRESENTATIVE,
Appellant
v.

AETNA, INC.; AETNA HEALTH, INC., A NJ CORP;
AETNA HEALTH INSURANCE CO;
AETNA LIFE INSURANCE, CO; RAWLINGS, CO
_____________

On Appeal from the United States District Court
for the District of New Jersey
District Court No. 1-13-cv-03933
District Judge: The Honorable Noel L. Hillman

Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
March 6, 2017

Before: SMITH, Chief Judge, HARDIMAN, and KRAUSE, Circuit Judges

(Filed: March 9, 2017)
_____________________

OPINION
_____________________

SMITH, Chief Judge.


This disposition is not an opinion of the full court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
 Aetna Life Insurance Company (“Aetna”), a health care plan administrator,

took the position that Michelle Roche, a plan member, had to reimburse it for

medical expenses it paid on behalf of Roche under the relevant benefits plan.

Roche reimbursed Aetna but then filed this action, contending that she should not

have had to reimburse Aetna. The District Court concluded that, before filing this

action, Roche needed to exhaust her administrative remedies. On appeal, Roche

argues that she was not required to exhaust those remedies. Because the plan

unambiguously requires Roche to exhaust her remedies, we will affirm the

judgment of the District Court.

I

Roche is a member of two health care benefit plans: an employee-group

health plan sponsored by Bank of America (“the Bank of America Plan”) and a

governmental health plan funded by the State of New Jersey (“the State Plan”),

collectively (the “Plans”). The administrator of both Plans is Aetna.1 The

Rawlings Company (“Rawlings”) is Aetna’s reimbursement claims vendor.

On January 19, 2007, Roche was injured in a car accident in Pennsylvania.

Between 2008 and 2010, the Plans provided Roche with $88,075.29 to cover

medical expenses for her accident-related injuries. She received $1,473.57 from

1
Roche also sued Aetna Inc., Aetna Health Inc., and Aetna Health Insurance Co.
2
the Bank of America Plan and $86,601.72 from the State Plan. From 2010 to

2012, Rawlings sent Roche, through her personal injury attorney, notices

informing Roche of her purported obligations under the Plans’ terms regarding

Aetna’s right to recover the medical expenses it paid on Roche’s behalf in the

event she received a settlement. Roche eventually recovered money via settlement

from the tortfeasor involved in the car accident. On January 4, 2013, Roche’s

personal injury attorney sent Rawlings a check for $88,075.29 as reimbursement

for the amounts paid by the Plans for Roche’s accident-related injuries.

II

On May 28, 2013, Roche commenced the present case in New Jersey state

court. Then, on June 25, 2013, Defendants removed the case from New Jersey

state court under the Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C.

§ 1332(d). On August 1, 2013, Defendants filed a motion for summary judgment

under Rule 56 or, in the alternative, to dismiss the complaint under Rule 12(b)(6)

of the Federal Rules of Civil Procedure. In 2014, the District Court ordered

limited jurisdictional discovery and dismissed Defendants’ motion without

prejudice to refiling post-discovery. Following jurisdictional discovery,

Defendants renewed their motion.

3
 On February 29, 2016, the District Court granted the Defendants’ motion for

summary judgment and dismissed the action without prejudice. Roche v. Aetna,

Inc., 165 F. Supp. 3d 180, 190 (D.N.J. 2016). The District Court reasoned that

Roche had failed to exhaust her administrative remedies and that exhaustion was

not futile. Id. at 185–90. Roche then timely appealed.

III2

We review grants of summary judgment de novo. See Cat Internet Servs.,

Inc. v. Providence Wash. Ins. Co., 333 F.3d 138, 141 (3d Cir. 2003) (citing

Fogleman v. Mercy Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir. 2002)). “Summary

judgment was proper if, viewing the record in the light most favorable to [Roche],

there is no genuine issue of material fact and [Defendants] are entitled to judgment

as a matter of law.” Id. We exercise de novo review when examining the

applicability of exhaustion principles to a plaintiff’s claim but review a decision as

to the futility of exhaustion for an abuse of discretion. See Harrow v. Prudential

Ins. Co. of Am., 279 F.3d 244, 248 (3d Cir. 2002).

2
The District Court had jurisdiction under CAFA, 28 U.S.C. § 1332(d), and
supplemental jurisdiction over Roche’s individual claims under 28 U.S.C. § 1367.
This Court has jurisdiction under 28 U.S.C. § 1291 because, although the District
Court dismissed the action without prejudice, Roche stood on her complaint by not
attempting to avail herself of the administrative process. See Ghana v. Holland,
226 F.3d 175, 180 (3d Cir. 2000).
4
 IV

This case focuses solely on the State Plan because Roche only brought

claims under “non-ERISA governmental health insurance policies” and the Bank

of America Plan is an ERISA-governed plan.3 A152–58. Roche conceded as

much in the District Court. See Roche v. Aetna, Inc., 13-cv-03933, Doc. 35 at *5

n.2 (D.N.J. September 20, 2013) (“Plaintiff is only seeking damages arising from

Defendants’ subrogation lien and/or reimbursement demand for benefits paid

under the State Plan.”). We conclude that the State Plan required Roche to exhaust

her remedies before filing in court.

A

ERISA exempts the State Plan from its coverage. Specifically, 29 U.S.C.

§ 1003(b)(1) exempts from coverage those employee benefit plans that are

“governmental plan[s].” ERISA defines “governmental plan” as “a plan

established or maintained for its employees by the Government of the United

States, by the government of any State or political subdivision thereof, or by any

agency or instrumentality of any of the foregoing.” 29 U.S.C. § 1002(32). The

State Plan is a plan established by the State of New Jersey, specifically through the

State Health Benefits Commission (“the Commission”), and it is therefore exempt

3
“ERISA” is an acronym for the Employee Retirement Income Security Act of
1974.
5
from ERISA’s requirements. A240–52; see also N.J. Stat. Ann. § 52:14-17.25 et

seq.

The State Plan “is, in effect, the State of New Jersey acting as a self-

insurer.” Burley v. Prudential Ins. Co. of Am., 598 A.2d 936, 937 (N.J. Super. Ct.

App. Div. 1991). Aetna administers the State Plan and “makes payments on

claims on behalf of the State.” Id.; see also Neuner v. Horizon Blue Cross Blue

Shield of New Jersey (In re Lymecare, Inc.), 301 B.R. 662, 674 (Bankr. D.N.J.

Nov. 5, 2003) (observing that the State Plan “is administer[ed by] the

[Commission] through contracts with several insurers . . . , under which the insurer

provides the administrative services necessary to effectuate actual delivery of

health care benefits and the payment of claims for benefits”). “The claims must,

however, be authorized by” the Commission. Burley, 598 A.2d at 937. The

Commission also has the power to develop rules and regulations regarding the

State Plan. N.J. Stat. Ann. § 52:14-17.27. Those regulations are found in New

Jersey Administrative Code § 17:9-1.1 et seq.

The regulations governing the State Plan specifically address claim

exhaustion. In relevant part, the regulations state, “Any member of the [State

Plan] who disagrees with the decision of the carrier and has exhausted all appeals

within the plan . . . may request that the matter be considered by the Commission.”

6
N.J. Admin. Code § 17:9-1.3(a). The regulations go on to describe how the

Commission will handle appeals. Id. The regulations thus contemplate

administrative appeals within the State Plan followed by appeals to the

Commission prior to filing in court.

B

The State Plan also describes its process for appealing decisions made by

Aetna as the plan administrator. First, the State Plan describes appealable

decisions by Aetna as “adverse benefit determinations.” A247. “Adverse benefit

determinations are decisions Aetna makes that result in denial, reduction, or

termination of a benefit or the amount paid for it.” Id. The State Plan also lists

typical reasons for an adverse benefit determination. Id. Those reasons include,

but are not limited to, ineligibility or lack of coverage under the State Plan. Id.

The State Plan further outlines the procedures following an adverse benefit

determination:

Aetna will send [the plan member] written notice of an adverse
benefit determination. The notice will give the reason for the
decision and will explain what steps [the plan member] must take if
[he or she] wish[es] to appeal. The notice will also tell [the plan
member] about [his or her] rights to receive additional information
that may be relevant to the appeal. Requests for appeal must be made
in writing within 180 days from the receipt of the notice.

7
Id. Following Aetna’s notice, the State Plan “provides for two levels of appeal,

plus an option to seek external review of the adverse benefit determination” by the

Commission. Id. The Plan member “must complete the two levels of appeal

before bringing a lawsuit against the plan.” Id.

In addition to outlining its appeals procedures, the State Plan provides Aetna

with the discretion to exercise a “right of recovery.” A250. This right gives

Aetna, as plan administrator, the authority “to recover from, and be reimbursed by,

[a plan member] for all amounts th[e] Plan has paid” should a plan member, like

Roche, “receive[] any payment from any [responsible tortfeasor] . . . as a result of

an injury.” A251. To protect that right of recovery, the State Plan also provides

for a right to “automatically” place a lien on any settlement related to an injury for

which the State Plan paid benefits. Id.

C

Given the above regulations and plan terms, the State Plan required Roche

to exhaust her administrative remedies when Aetna made its adverse benefit

determination. Under the State Plan, adverse benefit determinations are certain

decisions by Aetna requiring exhaustion of an appeals process prior to filing a

lawsuit. As described earlier, an adverse benefit determination is one “that

result[s] in denial, reduction, or termination of a benefit or the amount paid for it.”

8
A247; see also N.J. Admin. Code § 17:9-1.3(a) (“Any member of the [State Plan]

who disagrees with the decision of the carrier and has exhausted all appeals within

the plan . . . may request that the matter be considered by the Commission.”).

Here, Aetna provided Roche with approximately $88,000 to cover her

medical expenses following an accident. Roche then reached a settlement entitling

her to compensation for her accident-related injuries. Exercising its right of

recovery under the State Plan, Aetna decided to request reimbursement for the

amount paid to cover Roche’s medical expenses after her receipt of settlement

proceeds. That decision by Aetna is unquestionably one that results in the

“reduction . . . of a benefit [to Roche] or the amount paid for it [by the State

Plan].” A247; see also M.J. Paquet, Inc. v. N.J. Dep’t of Transp., 794 A.2d 141,

152 (N.J. 2002) (“Generally, the terms of an agreement are to be given their plain

and ordinary meaning.”); Burley, 598 A.2d at 940 (applying New Jersey contract

law to state benefits plan). Therefore, because Roche has yet to exhaust her

administrative remedies as was required by the State Plan’s terms, she must do so

before returning to court.

Bolstering this conclusion are several of our cases interpreting when a claim

is for “benefits due” under ERISA plans. 29 U.S.C. § 1132(a)(1)(B). A civil

action under ERISA may be brought when a claim seeks “to recover benefits” due

9
to the plan member under the terms of the relevant plan. Id. In Levine v. United

Healthcare Corp., 402 F.3d 156 (3d Cir. 2005), we held that claims by ERISA

plan members to regain certain benefits after reimbursing their plan for those

benefits were claims for “benefits due” under ERISA. Id. at 161–63. Following

the Fourth and Fifth Circuits, we reasoned that such claims were contesting a

decision denying benefits under the ERISA plan and therefore akin to challenges

to decisions administering benefits. Id. at 163; see also Arana v. Ochsner Health

Plan, 338 F.3d 433, 438 (5th Cir. 2003) (en banc) (“As it stands, [the plan

member’s] benefits are under something of a cloud, for [the plan] is asserting a

right to be reimbursed for the benefits it has paid for his account.”); Singh v.

Prudential Health Care Plan, Inc., 335 F.3d 278, 291 (4th Cir. 2003) (“[The plan

member’s] claim to recover the portion of her benefit that was diminished by her

payment to Prudential under the unlawful subrogation term of the plan is no less a

claim for recovery of a plan benefit under § 502(a) than if she were seeking

recovery of a plan benefit that was denied in the first instance.”). As a result, in

Levine, we concluded, “[The plan members’] claim [was] for benefits due. [They]

have already paid back a portion of their benefits. Thus, they claim essentially that

they are entitled to have certain health insurance claims paid under their ERISA

plans.” Levine, 402 F.3d at 163.

10
 We reaffirmed Levine’s reasoning in Wirth v. Aetna U.S. Healthcare, 469

F.3d 305 (3d Cir. 2006). The plan member in Wirth argued that his claim to

recover money paid to reimburse a plan administrator was not a claim for benefits

under the plan. Id. at 308. Citing Levine, we held that the plan member was

actually seeking “benefits due” to him. Id. at 309 (citing Levine, 402 F.3d at 163).

In sum, we stated:

Here, as in Levine, the actions undertaken by the insurer resulted in
diminished benefits provided to the [plan members]. That the bills
and coins used to extinguish Aetna’s lien are not literally the same as
those used to satisfy its obligation to cover [the plan member’s]
injuries is of no import—“the benefits are under something of a
cloud.”
Id. (quoting Arana, 338 F.3d at 438).

While these cases address language from ERISA and not from New Jersey

law, they are persuasive because of similarities between ERISA and the State

Plan’s terms. ERISA, like the State Plan at issue here, requires administrative

exhaustion of claims following an “adverse benefits determination.” 29 C.F.R.

§ 2560.503-1; see also Harrow, 279 F.3d at 252 (“We apply the exhaustion

requirement to ERISA benefit claims . . . .”); Weldon v. Kraft, Inc., 896 F.2d 793,

800 (3d Cir. 1990) (“Except in limited circumstances . . . , a federal court will not

entertain an ERISA claim unless the plaintiff has exhausted the remedies available

under the plan.”). Also like the State Plan, ERISA regulations define an adverse
11
benefit determination as “[a] denial, reduction, or termination of, or a failure to

provide or make payment (in whole or in part) for, a benefit.” 29 C.F.R.

§ 2560.503-1(m)(4)(i). Therefore, as an ERISA plan member’s attempt to regain

money that the member reimbursed to a plan must be administratively exhausted

under ERISA, a functionally identical claim under the State Plan must also be

administratively exhausted before the State Plan member files in court.

Given the plain terms of the State Plan requiring exhaustion, New Jersey

regulations requiring exhaustion, and analogous ERISA case law supporting our

reading of the State Plan, we conclude that Roche needed to have exhausted her

administrative remedies before filing in court.

D

Roche presents several arguments attempting to explain why she did not

need to exhaust her administrative remedies. Each argument is unpersuasive.4

Roche first argues that Levine and Wirth are “inapplicable” here because

those cases are ERISA cases. Blue Br. 13–14. In doing so, she fails to identify

any meaningful distinction between the claims and plans in those cases and her

own. Focusing on the text of the State Plan, Roche also contends that (1)

reimbursement occurs “after the ‘coverage’ issue has already been resolved and, as

4
Because we conclude that Roche needed to exhaust her administrative remedies,
we do not address Aetna’s alternative arguments for dismissal.
12
such, [reimbursement] cannot effect [sic] the extent, nature or provision of

insurance”; (2) the State Plan’s “separate” right of recovery section “does not

provide for administrative review” and so no exhaustion was required; and (3) the

placement of an automatic lien on settlements demonstrates that the State Plan

“did not intend for appeals” of Aetna’s decisions to seek reimbursement. Blue Br.

16–17. Simply put, those arguments are not supported by the text of the State Plan

and do nothing to undercut the State Plan’s plain language that a decision by Aetna

requires exhaustion when it “result[s] in denial, reduction, or termination of a

benefit or the amount paid for it.” A247.

Roche further observes that Aetna failed to comprehensively follow the

State Plan’s terms by not providing notice of appeal procedures. Blue Br. 18. She

argues that a particular ERISA regulation extinguishing exhaustion requirements

in the absence of notice should apply to the State Plan. Gray Br. 2–3 (citing 45

C.F.R. § 147.136). While Roche may be correct that Aetna gave no notice of the

State Plan’s appeal procedures, she fails to explain why we should apply an

ERISA regulation to the State Plan and why that ERISA regulation would apply

given that the State Plan payments here occurred between 2008 and 2010 but the

regulation covered, at the earliest, plan years “on or after September 23, 2010.”

Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating

13
to Internal Claims and Appeals and External Review Processes under the Patient

Protection and Affordable Care Act, 75 Fed. Reg. 43,330, 43,364 (July 23, 2010).

Although we earlier analogized to our case law interpreting ERISA, a similar

analogy is unpersuasive here for a simple reason: neither the State Plan nor New

Jersey law contains the language found in the ERISA regulation Roche cites or

includes other language extinguishing the exhaustion requirement in the absence

of notice. See A247; N.J. Admin. Code § 17:9-1.3. Finally, Roche was in

possession of the appeal procedures and offers no reason for why she could not

have appealed other than her mistaken belief that no adverse benefit determination

had been made. Thus, given the lack of any State Plan term or New Jersey

regulation waiving exhaustion and Roche’s possession of the appeal procedures,

the initial lack of notice of those procedures did not extinguish the State Plan’s

exhaustion requirement.

Roche also offers a series of five arguments that broadly challenge the

application of an exhaustion requirement to her claims. First, she contends that

exhaustion “was intended to provide an appeal mechanism whereby medical

professionals could evaluate” benefits determinations. Blue Br. 19. Roche offers

nothing to support her assertion that review by medical professionals is the only

purpose of exhaustion. She also provides no explanation for why that general

14
purpose for exhaustion requires us to ignore the plain terms of the State Plan and

New Jersey regulations requiring exhaustion. See M.J. Paquet, 794 A.2d at 152.

Second, she argues that claims of “across-the-board” errors were not meant to be

exhausted. Blue Br. 20. This argument is unpersuasive because Roche points to

no “across-the-board” policy by Aetna in deciding to exercise its right to recovery.

Third, she states that, even if ERISA applies, we should not require exhaustion “as

[a] matter[] of the Court’s inherent adjudicatory power and of the policy

underlying exhaustion.” Blue Br. 23. Roche again provides no support for that

conclusion. Fourth, according to Roche, exhaustion does not apply to questions of

law and the issues presented here involve “only a question of law.” Blue Br. 23–

24 (citing cases). This argument fails to account for the State Plan’s terms. This

case squarely involves Aetna’s decision to seek reimbursement, which is one that

resulted in the “reduction . . . of a benefit [to Roche] or the amount paid for it [by

the State Plan]” and one that required exhaustion under the State Plan. A247.

Neither Roche’s brief nor the cases she cites provides support for the proposition

that we should ignore the State Plan’s plain terms and New Jersey regulations

because this case may also involve questions of law. Cf. Harrow, 279 F.3d at

253–54. Doing so would likely undermine the exhaustion requirement under the

State Plan as many adverse benefit determinations are likely related to questions of

15
law. Finally, Roche observes, without support, that claims for breach of fiduciary

duty under ERISA need not be exhausted, and so, presumably, her claims for

breach of fiduciary duty under New Jersey law need not be either. Blue Br. 24–25.

Even assuming that Roche’s analogy between ERISA and New Jersey law is

accurate, Roche may not restyle her challenge to Aetna’s benefits determination as

a fiduciary claim to avoid exhaustion under the State Plan. See Harrow, 279 F.3d

at 253 (“Plaintiffs cannot circumvent the exhaustion requirement by artfully

pleading benefit claims as breach of fiduciary duty claims.”); see also Beaver v.

Magellan Health Servs., Inc., 80 A.3d 1160, 1167–68 (N.J. Super. Ct. App. Div.

2013) (rejecting inclusion of breach of fiduciary duty claims in complaint to avoid

jurisdiction in New Jersey Superior Court and noting “Plaintiff cannot avoid

[jurisdiction] by cloaking his claims under the mantle of contract and tort”).

Roche last insists that the District Court abused its discretion in concluding

that exhaustion would not be futile here. We have held that “[a] plaintiff is

excused from exhausting administrative procedures under ERISA if it would be

futile to do so.” Harrow, 279 F.3d at 249. Although New Jersey courts appear to

recognize this exception to administrative exhaustion as well, see L.W. v. Egg

Harbor Twp. Bd. of Educ., No. A-0928-12T1, 2015 WL 1013164, at *4 (N.J.

Super. Ct. App. Div. Mar. 10, 2015) (citing Harrow, 279 F.3d at 250), it is unclear

16
whether the futility exception would apply in light of clear language mandating

exhaustion in both the State Plan and the New Jersey regulation. Even assuming

the futility exception applies here, the District Court did not abuse its discretion in

concluding that Roche failed to demonstrate the futility of exhaustion.

To determine whether exhaustion would be futile, we consider a non-

exclusive list of factors:

(1) whether plaintiff diligently pursued administrative relief; (2)
whether plaintiff acted reasonably in seeking immediate judicial
review under the circumstances; (3) existence of a fixed policy
denying benefits; (4) failure of the insurance company to comply with
its own internal administrative procedures; and (5) testimony of plan
administrators that any administrative appeal was futile.
Harrow, 279 F.3d at 250. Roche has the burden of establishing futility. See

D’Amico v. CBS Corp., 297 F.3d 287, 293 (3d Cir. 2002) (“A party invoking this

exception must provide a clear and positive showing of futility before the District

Court.” (citing Harrow, 279 F.3d at 249–50)); L.W., 2015 WL 1013164, at *4.

The only factor weighing in Roche’s favor is Aetna’s lack of compliance with its

procedures when it failed to provide Roche with notice of the State Plan’s appeal

procedures. The District Court reasonably determined that Aetna’s failure to do so

does not overcome the other relevant factors, which all weigh in Aetna’s favor.

Roche has not attempted to pursue administrative relief. Instead, she sought

judicial relief having made no meaningful attempt to respond to Rawlings’ letters
17
asserting Aetna’s right to recovery under the State Plan. As noted earlier, she

provides no evidence of a fixed Aetna policy denying reimbursement claims. She

similarly offers no testimony from an Aetna official regarding the futility of an

appeal. In sum, no abuse of discretion occurred here because Roche has not

demonstrated that exhaustion would be futile.5

V

For the reasons stated above, we will affirm the District Court’s grant of

summary judgment and dismissal of Roche’s complaint without prejudice.

5
In passing, Roche argues the District Court erred in denying her request for
discovery. Blue Br. 29–30 (citing Roche v. Aetna Inc., 13-cv-3933, Doc. 35-3
(D.N.J. September 20, 2013)). We review the District Court’s decision for abuse
of discretion, Shelton v. Bledsoe, 775 F.3d 554, 559 (3d Cir. 2015), and conclude
that no abuse of discretion occurred. In the District Court, Roche failed to identify
with specificity what “particular information” she sought and, more importantly,
“how, if disclosed, it would [have] preclude[d] summary judgment.” Id. at 568.
18