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Greenville Hospital System v. Employee Welfare Benefits Plan for Employees of Hazelhusrt Management Co.

United States District Court, D. South Carolina, Greenville Division

October 3, 2014

Greenville Hospital System, Plaintiff,
Employee Welfare Benefits Plan for Employees of Hazelhusrt Management Company, Underwritten by Aetna Life Insurance Company, Defendant.


TIMOTHY M. CAIN, District Judge.

This matter is before the court on Motion to Compel Arbitration and Dismiss Plaintiff Greenville Hospital System's ("GHS") Complaint pursuant to Fed.R.Civ.P. 12(1) and (6) filed by Defendant Employee Welfare Benefit Plan for Employees of Hazelhurst Management Company Underwritten by Aetna Life Insurance Company ("Aetna"). (ECF No. 7). GHS filed a response opposing the motion (ECF No. 9) and Aetna filed a reply (ECF No. 10). For the reasons set forth below, the court grants the motion and dismisses this action without prejudice.

I. Facts/Background

GHS and Aetna entered into a Hospital Services Agreement ("Agreement") pursuant to which GHS became a preferred Aetna provider and could submit claims directly to Aetna for hospital services provided to patients covered by an Aetna health insurance plan. Aetna agreed to pay GHS directly for those services at rates established by the parties, and GHS agreed that it would not bill Aetna insureds for the denial of payments. GHS also agreed to abide by Aetna's requirement for precertification and to notify Aetna within two business days, or as soon as reasonably possible, of all admissions of Aetna insureds.

The Agreement also contains a mandatory arbitration provision. (ECF No. 7-2 at 17-18). The arbitration provision requires binding arbitration of "any controversy or claim arising out of or relating to this Agreement or the breach, termination, or validity thereof..." (ECF No. 7-2 at 17). Additionally, the top of each page of the Agreement contains the following provision:


(ECF No. 7-2) (bolding in original).[1]

In August 2011, a patient who had health insurance benefits under an employee health insurance plan established by Hazelhurst Management Company ("the Plan") and underwritten by Aetna was treated at GHS. The patient's mother signed a consent for treatment form which contained an assignment of the patient's benefits under the Plan to GHS.[2] Thereafter, GHS submitted a claim, which Aetna denied on the ground that GHS had failed to obtain precertification as required by the Agreement. GHS appealed the denial and Aetna upheld the denial. GHS then filed this action.

II. Applicable Law

Aetna has moved to dismiss GHS's Complaint and to compel arbitration pursuant to 9 U.S.C. § 3 of the FAA, and Rule 12(b)(1) and (6) of the Federal Rules of Civil Procedure. A motion to dismiss pursuant to Rule 12(b)(1) raises the fundamental question of whether a court is competent to hear and adjudicate claims. "Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction." Pinkley, Inc. v. City of Fredrick, Md., 191 F.3d 394, 399 (4th Cir. 1999). Unless a matter involves an area of a federal court's exclusive jurisdiction, a plaintiff may bring suit in federal court only if the matter involves a federal question arising "under the Constitution, laws or treatises of the United States, " 28 U.S.C. § 1331, or if "the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between citizens of different states, " 28 U.S.C. § 1332(a)(1). In reviewing a motion to dismiss under Rule 12(b)(1), the court is to "regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991)).

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a claim should be dismissed when the complaint fails to allege facts upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a motion to dismiss, the court should "accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). However, "the pleading standard... demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Thus, the rules require more than "labels and conclusions, " "a formulaic recitation of the elements of a cause of action, " or "naked assertions devoid of further factual enhancement." Id. at 678.

In sum, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id. (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). And, for a claim to have facial plausibility, the plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556).

The FAA embodies a federal policy favoring arbitration. Drews Dist., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001). A litigant can compel arbitration under the FAA, if the litigant can demonstrate: "(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the [party] to arbitrate the dispute." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500-01 (4th Cir. 2002) (internal citation and quotations omitted). The FAA mandates that written agreements to arbitrate disputes "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the avoidance of any contract." 9 U.S.C. § 2. "A district court therefore has no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview." Id. at 500. The FAA requires a court to stay "any suit or proceeding" pending arbitration of "any issue referable to arbitration under an agreement in writing for such arbitration" and the Fourth Circuit has found this stay-of-litigation provision to be mandatory. Id. (internal citation and quotations omitted). See also Hooters of Am., Inc. v. Phillips, 173 F.3d 933, ...

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