State of New York, Plaintiff, v. OXFORD HEALTH PLANS NY INC OXFORD HEALTH INSURANCE INC (2026)

Plaintiff State of New York ("State") commenced this commercial action on December 5, 2024, alleging that defendants breached contracts with Stony Brook University Hospital ("SBUH"), a State-owned academic medical center, by failing to pay for observation services rendered to defendants' insureds (see NYSCEF Doc No. 2 ["Complaint"]).

Defendants UnitedHealthcare of New York, Inc. ("United"), and Oxford Health Plans (NY), Inc. and Oxford Health Insurance, Inc. (together, "Oxford") move under CPLR 3211 (a) (1) and (7) for the pre-answer dismissal of the Complaint.

The State opposes the motion through the affirmation of a client representative with exhibits (see NYSCEF Doc No. 49 ["Fullerton Aff."]; see also NYSCEF Doc Nos. 50-53), the affirmation of its counsel with exhibits (see NYSCEF Doc No. 54 ["Stern Aff."]; see also NYSCEF Doc Nos. 55-56), and a memorandum of law (see NYSCEF Doc No. 57 ["Opp Mem"]). The State also cross-moves to seal certain records (see NYSCEF Doc No. 48).

Defendants move separately to strike the State's two affirmations "pursuant to 22 N.Y.C.R.R. § 202.8(c) and . . . § 202.70(g), Rule 17, or, in the alternative, permitting Defendants to submit a 4,200-word Memorandum in Reply to the Affirmations" (NYSCEF Doc No. 59).

BACKGROUND

As alleged in the Complaint, SBUH entered into two network participation agreements with defendants: (i) the May 1, 2007 Facility Participation Agreement with United (see NYSCEF Doc No. 22 ["United Contract"]), and (ii) the July 3, 2002 Hospital Agreement with Oxford (see NYSCEF Doc No. 23 ["Oxford Contract"]).

The contracts with United and Oxford (together, "Contracts") oblige the insurers to reimburse SBUH and the State University of New York at Stony Brook ("SBU") (together, "Stony Brook") "for covered medical services and treatment that Stony Brook provides to the Defendants' insureds" (Complaint, ¶ 15). "The Contracts establish which medical services and treatment are subject to insurance coverage and set the agreed-upon reimbursement that Defendants are required to pay Stony Brook for providing such covered medical services and treatment to the Defendants' insureds" (id., ¶ 16).

"The Contracts require that Defendants provide payment to Stony Brook for each 'Covered Service' that is provided to Defendants' insureds" (id., ¶ 17, citing United Contract, § 5.1 and Oxford Contract, §§ 2-3). "The Contracts define a Covered Service as: 'a health care service or product for which a Customer is entitled to receive coverage from a Payer, pursuant to the terms of the Customer's Benefit Plan with that Payer' " (id., ¶ 18, quoting United and Oxford All Payer Appendices, § 1).¹

The State alleges that, "[s]ubject to the terms and definitions set forth in the Contract[s], 'Observation' is a Covered Service" (id., ¶ 19). The Contracts define "Observation" as "Services furnished by [Stony Brook] on [its] premises, regardless of the length of stay, . . . which are reasonable and necessary to evaluate an outpatient condition or determine the need for a possible Admission to [Stony Brook] as an inpatient" (United and Oxford All Payer Appendices, § 1; see Complaint, ¶¶ 21-22). The State therefore contends that defendants are required to pay for "Observation services as a Covered Service as per the Contracts" (Complaint, ¶ 23), "regardless of the length of a patient's stay . . ." (id., ¶ 24).

"Prior to November 30, 2020, Defendants paid Stony Brook's claims for Observation services rendered to Defendants' insureds irrespective of the duration of the service" (id., ¶ 27). However, "[b]eginning November 30, 2020, Defendants began denying Observation claims

. . . for stays of a duration of less than eight hours" (id., ¶ 28). "On September 19, 2024, Defendants conveyed to Plaintiff that they had partially reversed their policy . . . for services rendered . . . between December 15, 2023 and December 15, 2026" (id., ¶ 30).

Still, "Defendants continue to deny the claims submitted by Stony Brook . . . for Observation services for a duration of less than eight hours, rendered from November 30, 2020 through . . . December 14, 2023" (id., ¶ 31). The State contends that it is owed more than $4 million for such services (see id., ¶ 32).

The State commenced this action on December 5, 2024, alleging four causes of action: (i) breach of the Contracts; (ii) unjust enrichment; (iii) declaratory judgment; and (iv) collection costs under State Finance Law ("SFL") § 18 (see id., ¶¶ 33-56).

Defendants promptly removed the case to the United States District Court for the Northern District of New York ("District Court"), maintaining that the State's claims were entirely preempted by the federal Employee Retirement and Income Security Act of 1974 (see 29 USC § 1001 et seq. ["ERISA"]; see also NYSCEF Doc No. 12 ["Notice of Removal"], ¶¶ 1-2). However, in a Memorandum-Decision and Order dated March 31, 2026, the District Court remanded the case, ruling that "Defendants have failed to establish that any of Plaintiff's state law claims are completely preempted by ERISA" (NYSCEF Doc No. 14 ["Remand"] at 30-31).

MOTION TO STRIKE

Defendants move to strike the affirmations submitted by the State in opposition to dismissal under 22 NYCRR § 202.8 (c) and 202.70 (g), Rule 17, or, in the alternative, seek permission to submit a 4,200-word memorandum in reply to the affirmations (see NYSCEF Doc No. 59). Defendants argue that the affirmation of counsel (see Stern Aff.) should be stricken in its entirety because it is being used to present legal and factual argument (see NYSCEF Doc No. 60 ["Strike MOL"] at 7-11), and the client affirmation (see Fullerton Aff.) should be stricken of any legal conclusions or "extraneous facts" (Strike MOL at 11-12).

The Court agrees with defendants that the affirmation of the State's counsel improperly "embod[ies] argument on the facts and law" (Matter of County of Essex [Golden Ring Intl., Inc.], 195 AD3d 1187, 1187-1188 [3d Dept 2011] [internal quotation marks and citation omitted], lv denied 38 NY3d 904 [2022]). Nonetheless, having examined the full motion record, the Court finds that (i) the arguments made in the affirmation are largely redundant of other filings, (ii) defendants had the opportunity to fully respond to the State's opposition, and (iii) a second reply brief from defendants at this juncture would not aid the Court's decisional process. Accordingly, in the absence of demonstrated prejudice to a substantial right of defendants, the Court exercises its discretion to overlook any irregularities in the affirmation of the State's counsel (see CPLR 2001; Lagattuta-Spataro v Sciarrino, 191 AD3d 1355, 1356 [4th Dept 2021]).

As to the Fullerton affirmation, the Court finds defendants' objections unavailing. A plaintiff opposing dismissal under CPLR 3211 (a) (7) is entitled to amplify the allegations of its complaint through the affidavit of a representative having personal knowledge (see Leon v Martinez, 84 NY2d 83, 88 [1994]). As the Chief Revenue Officer at SBUH, Fullerton possesses direct familiarity with billing practices, payment matters and the underlying Contracts, and the Court does not rely upon any legal conclusions presented by him. And defendants offer no persuasive basis or authority for striking so-called "extraneous facts" from his affirmation.

Accordingly, the motion to strike is denied, but plaintiff's counsel is cautioned that "[t]he practice of embodying argument on the facts and law in an [affirmation] . . . is improper and is disapproved" (Taylor v African M. E. Church, 265 App Div 858, 858 [2d Dept 1942]).

MOTION TO DISMISS

On a motion to dismiss under CPLR 3211 (a) (7), the court's "sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law[,] a motion for dismissal will fail" (Polonetsky v Better Homes Depot, 97 NY2d 46, 54 [2001] [internal quotation marks and citation omitted]). The complaint "is to be given a liberal construction, the allegations contained within it are assumed to be true and the plaintiff is to be afforded every favorable inference" (State of New York v Jeda Capital-Lenox, LLC, 176 AD3d 1443, 1445 [3d Dept 2019] [internal quotation marks and citations omitted]). Dismissal "is warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery" (Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 142 [2017]).

"Under CPLR 3211 (a) (1), dismissal is warranted if documentary evidence conclusively establishes a defense as a matter of law" (Haire v Bonelli, 57 AD3d 1354, 1356 [3d Dept 2008] [citations omitted]; see Kolchins v Evolution Mkts., Inc., 31 NY3d 100, 106 [2018]).

A. ERISA Preemption

Defendants' principal argument for dismissal is that "Plaintiff's state law causes of action [are] preempted by ERISA" (NYSCEF Doc No. 34 ["MOL"] at 12). Defendants argue that ERISA preempts all state laws that "relate" to any employee benefit plan, and "both Contracts would require the Court to refer to and analyze the coverage provisions of each benefit plan at issue before determining whether Plaintiff is entitled to payment" (id. at 12, 14).

In opposition, the State principally argues that it is seeking "to enforce Defendants' independent contractual promises governing reimbursement for Observation services. Because the legal duties at issue arise from the parties' private Contracts, not from ERISA plans, Plaintiff's claims fall outside the scope of ERISA preemption" (NYSCEF Doc No. 57 ["Opp Mem"] at 5; see Remand at 29).

1. Principles of ERISA Preemption

"Congress enacted ERISA to 'protect . . . the interests of participants in employee benefit plans and their beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and to 'provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts' " (Aetna Health Inc. v Davila, 542 US 200, 208 [2004], quoting 29 USC § 1001 [b]). ERISA also is intended "to provide a uniform regulatory regime over employee benefit plans" throughout the United States (id.).

To promote uniformity, "ERISA includes expansive pre-emption provisions . . . to ensure that employee benefit plan regulation would be exclusively a federal concern" (id. [internal quotation marks and citation omitted]). The provisions of ERISA "shall supersede any and all State laws insofar as they may . . . relate to any employee benefit plan" (29 USC § 1144 [a]).

Additional preemptive force is found in ERISA's " 'comprehensive legislative scheme,' " which "includes 'an integrated system of procedures for enforcement' " (Davila, 542 US at 208, quoting Massachusetts Mut. Life Ins. Co. v Russell, 473 US 134, 147 [1985]). ERISA preemption "is deliberately expansive, and designed 'to establish [benefit] plan regulation as exclusively a federal concern' " (Pilot Life Ins. Co. v Dedeaux, 481 US 41, 45-46 [1987], quoting Alessi v Raybestos-Manhattan, Inc., 451 US 504, 523 [1981]).

"[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted" (Davila, 542 US at 209). Indeed, "the ERISA civil enforcement mechanism is one of those provisions with such 'extraordinary pre-emptive power' that it 'converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule' " (id. at 209, quoting Metropolitan Life Ins. Co. v Taylor, 481 US 58, 65-66 [1987]).

Complete preemption will be found if (i) the plaintiff could have brought the claim under ERISA, and (ii) no legal duty independent of ERISA or the ERISA plan is alleged to have been violated (see id. at 210). In applying the first prong, courts must "consider whether the plaintiff is the type of party that can bring a claim pursuant to [ERISA]; and second, . . . whether the actual claim that the plaintiff asserts can be construed as a colorable claim for benefits pursuant to [ERISA]" (Montefiore Med. Ctr. v Teamsters Local 272, 642 F3d 321, 328 [2d Cir 2011]).

The second form of ERISA preemption is known as conflict preemption. Under this doctrine, a state-law claim is preempted insofar as it "relate[s] to any employee benefit plan" subject to ERISA (29 USC § 1144 [a]). "[U]nder the doctrine of conflict preemption, state laws that conflict with federal laws are preempted, and preemption is asserted as a federal defense to the . . . suit" (Montefiore Med. Ctr. v Local 272 Welfare Fund, 2018 WL 1665645, *9, 2018 US Dist LEXIS 28019, *28 [SD NY, Feb. 20, 2018, No. 09-CV-3096 (RA/SN)] [internal quotation marks and citations omitted]).

2. The District Court's Remand

Defendants invoked the doctrine of complete preemption in removing this case to federal court (see Notice of Removal, §§ 1-2). However, the District Court rejected complete preemption for at least three independent reasons.

First, defendants had not shown that Stony Brook "is the type of party that can bring [an ERISA] claim" (McCulloch Orthopaedic Surgical Servs., PLLC v Aetna Inc., 857 F3d 141, 146 [2d Cir 2017]). Stony Brook is neither a participant in, nor a beneficiary of, an ERISA plan, and defendants' claim of derivative standing failed in the absence of proof that defendants' insureds were permitted to assign their benefits to Stony Brook (see Remand at 15-23).

Second, the federal court concluded that defendants had not shown that "the actual claim that the plaintiff asserts can be construed as a colorable claim for benefits pursuant to [ERISA]" (McCulloch, 857 F3d at 146). "A colorable ERISA claim exists when the claim implicates coverage and benefit determinations as set forth by the terms of the ERISA benefit plan" (id. at 149 [internal quotation marks and citation omitted]). The District Court characterized the State's claims as "a billing dispute relating to the amount of reimbursement due under the Contracts" (Remand at 24). "Simply put, Plaintiff's claims concern 'the computation of contract payments or the correct execution of such payments' and the 'independent contractual obligations' between Stony Brook and Defendants" (id. at 25, quoting Montefiore, 642 F3d at 331).

The District Court rejected defendants' "claim that because [their health plans ('Plans')] purportedly permitted them to implement the [policy of denying Observation coverage for stays of less than 8 hours ('Policy')], any denial of reimbursement to Stony Brook pursuant to the Policy effectively constituted a denial of insurance benefits . . . under the applicable Plan" (id. at 26). The federal court found that the limited documentation submitted by defendants did "not permit meaningful analysis of the documents from which they are taken, let alone the terms of the underlying Plans," and defendants "conflate[d] whether a particular service is covered under a Plan with the correct reimbursement amount for a particular service under the Contracts" (id.).

On the latter point, the District Court reasoned that "Plaintiff's allegations relate to the computation of 'contracted fee(s)' under the Contracts, and thus the amount of payment, and not a determination of benefits under the Plans that implicates the right to payment" (id. at 27). The documents "indicate that Defendants adjusted Plaintiff's claims for reimbursement based on Defendants' interpretation of the Contracts, and not because Defendants had denied ERISA benefits to individuals being treated in Stony Brook's emergency room" (id. at 28-29; see id. at 29 ["Defendants have failed to establish that coverage for emergency room Observation services was actually denied under any Plan."]).

Finally, the District Court determined that defendants had not satisfied the second prong of Davila: the absence of any " 'other independent legal duty that is implicated by [a] defendant's actions' " (id., quoting Davila, 542 US at 210). "For purposes of removal," the District Court found "that all of Plaintiff's claims implicate legal duties other and independent from the Plans, including legal duties arising under the Contracts" (id. at 30). "Defendants have not established that any 'exemplar claim' involves the denial of ERISA benefits to Defendants' insureds," and "the parties' submissions support Plaintiff's contentions that Defendants adjusted the amount of reimbursement due to Stony Brook as a result of the Policy, and not any Plan" (id.).

3. Defendants' Arguments for Express Preemption

Defendants acknowledge the District Court's rejection of complete preemption but maintain "that decision is not relevant to whether ERISA § 514 [expressly] preempts Plaintiff's claims" (MOL at 16).

Section 514 of ERISA is a "sweeping express preemption provision declaring that ERISA 'shall supersede any and all State laws . . . [that] relate to any employee benefit plan' " (Trustees of New York State Nurses Assn. Pension Plan v White Oak Glob. Advisors, LLC, 102 F4th 572, 598 [2d Cir 2024], quoting 29 USC § 1144 [a]).

"Recognizing that the text of this provision is so expansive . . . as to afford no meaningful limitation, the federal courts have developed several tests that give content to the scope of ERISA preemption" (id. [internal quotation marks and citation omitted]). "The Supreme Court has instructed that 'a state law relates to an ERISA plan if it has a connection with or reference to such a plan' " (id., quoting Egelhoff v Egelhoff ex rel. Breiner, 532 US 141, 147 [2001]). " 'A law refers to ERISA if it acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law's operation' " (id., quoting Rutledge v Pharmaceutical Care Mgt. Assn., 592 US 80, 88 [2020]).

"The touchstone of the preemption analysis is congressional intent, as guided by two presumptions": (i) Congress "does not [ordinarily] intend to supplant state law"; and (ii) "ERISA typically does preempt state laws that . . . affect the relationships among the core ERISA entities: beneficiaries, participants, administrators, employers, trustees and other fiduciaries" (id. at 598-599 [internal quotation marks and citations omitted]).

Defendants argue that United agreed to pay SBUH for rendering a "Covered Service," which is "a health care service or product for which a Customer is entitled to receive coverage from a Payer, pursuant to the terms of the Customer's Benefit Plan with that Payer" (United Contract, §§ 1.2, 5.1, 6.4). "Members — not United — are responsible for payment of services that are not covered by the plan" (MOL at 14, citing United Contract, § 3.3). The same is true of Oxford, which similarly "agreed to pay SBUH the 'allowable rates' for rendering 'Covered Services' to members, and SBUH agreed to seek payment for 'non-covered services' from the members themselves" (id., citing Oxford Contract, §§ 2, 3.1, 3.2).

Defendants therefore contend that "the Court must refer to the benefit plans, and make a claim-by-claim, plan-by-plan analysis as to whether and to what extent each relevant benefit plan provides coverage for a specific Observation stay" (id. at 15). "Because Plaintiff's claims 'would require the Court to analyze the terms of the Plan to determine the benefits owed,' Section 514 preempts Plaintiff's state law claims" (id., quoting Rowe v UnitedHealthcare Serv., LLC, 2024 US Dist LEXIS 170425, *10 [ED NY, Sept. 20, 2024, No. 23-CV-0516 (OEM/ARL)] ["The adjudication of each of Plaintiff's claims would require the Court to analyze the terms of the Plan to determine the benefits owed. As such, Plaintiff's claims would require 'reference to' the Plan and are therefore expressly preempted by ERISA" (internal citation omitted)]).

Relatedly, defendants argue that the description of Observation services in the United and Oxford All Payer Appendices ("Appendices") does not obviate the need for the Court to refer to the underlying Plans to ascertain whether Observation services are a "Covered Service" for particular insureds. Referring to the State's own allegations, "[t]he Contracts require that Defendants provide payment to Stony Brook for each 'Covered Service' that is provided to Defendants' insureds" (Complaint, ¶ 17 [emphasis added]), and "[t]he Contracts define a Covered Service as: 'a health care service or product for which a Customer is entitled to receive coverage from a Payer, pursuant to the terms of the Customer's Benefit Plan with that Payer' " (id., ¶ 18, quoting Appendices, § 1, Definitions).

Thus, "Plaintiff must show that an Observation service is covered under a benefit plan before the Court can determine whether the Contracts require Defendants to pay," necessitating interpretation of the underlying health insurance plans, some of which are governed by ERISA (MOL at 16).

4. The State's Opposition

In opposing defendants' invocation of express preemption, the State argues principally that its claims arise from independent contractual duties: defendants' obligation to provide reimbursement for Observation services under the Contracts. "Because the legal duties at issue arise from the parties' private Contracts, not from ERISA plans, Plaintiff's claims fall outside the scope of ERISA preemption" (Opp Mem at 5). "Plaintiff's state law claims are limited to enforcement of obligations unrelated to ERISA or any provision of an ERISA plan, so preemption is improper" (id. at 6 [internal quotation marks omitted]; see Atlantic Neurosurgical Specialists, P.A. v Multiplan, Inc., 2022 US Dist LEXIS 8733, *11-12 [SD NY, Jan. 18, 2022, No. 20 Civ 10685 (LLS)] ["A state law claim enforces obligations independent from the ERISA plan, and thus is distinct from a claim for benefit and is not using the plan as a critical factor to establish liability, when only 'the amount of payment is pegged to the terms of the plan' " (quoting Plastic Surgery Ctr., P.A. v Aetna Life Ins. Co., 967 F3d 218, 231 [3d Cir 2020])]).

The State seeks to draw support for this position from the District Court's Remand, which agreed "with Plaintiff that the basis for the Defendants' liability does not involve a coverage or benefits determination, and it is not derived from the terms of the plan documents [and does not] call upon the Court to construe or apply plan provisions" (Remand at 29 [internal quotation marks and citation omitted]). "Because the source and basis of Plaintiff's claims have already been determined in this action, that determination is now law of the case" (Opp Mem at 7).

The State characterizes this action as one "where a 'claim relates only to the contractual relationship between a plan-administrator and one of its service providers and does not touch upon the relationship between . . . [an ERISA] plan and its beneficiaries' " (id., quoting Knickerbocker Dialysis, Inc. v TrueBlue, Inc., 582 F Supp 2d 364, 367 [ED NY 2008]). The State further observes that the "Contracts apply to all policies, including those that are not regulated by ERISA," and even for "any ERISA-governed plans, the issues in this case are unrelated to any actual right to benefits under any particular plan" (id. at 8).

And while recognizing that the underlying ERISA "plans may be tangentially related to [the State's] claims, mere reference to such materials is not dispositive of the preemption issue" (id. at 9). "The decisive inquiry is 'whether the ERISA plans at issue are a critical factor in establishing liability, or whether [a finding] would require reference to the Plan in determining liability or damages' " (id. at 10, quoting CIGNA Health & Life Ins. Co. v BioHealth Labs., Inc., 2025 US Dist LEXIS 96720, *34 [D Conn, May 20, 2025, No. 3:19-CV-01324 (JCH)] [internal quotation marks and citation omitted]). "Although there may be a reference to the term 'Covered Service', which may be defined in the plans, such definitions are irrelevant to the claims at issue here, which were not denied on that basis" (id. [citation omitted] [emphasis added]).

5. Analysis

The State sues principally on a contractual theory to recover for Observation services of less than eight hours rendered by SBUH to defendants' insureds pursuant to the Contracts. To prevail on a claim for breach of contract, "a party must establish the existence of a contract, the party's own performance under the contract, the other party's breach of its contractual obligations, and damages resulting from the breach" (Adirondack Classic Design, Inc. v Farrell, 182 AD3d 809, 811 [3d Dept 2020]).

Under the express terms of the Contracts, defendants are obliged to pay Stony Brook "for rendering Covered Services to Customers," and "Customers" are defined as "person[s] eligible and enrolled to receive coverage from [defendants] for Covered Services" (United Contract, §§ 1.2, 1.4, 1.6, 5.1, 6.1, 6.4, 6.7, 6.8; see Oxford Contract, §§ 2, 3.1, 3.2, 13). The same is true of the Appendices, which establish reimbursement rates "for Covered Services rendered by a Facility to a Customer" (Appendices, § 2.1) and make specific provision for the rendition of "Covered Services" for "Observation" (and other outpatient services) (id., § 2.3.1).²

Thus, as the State appears to acknowledge (see Opp Mem at 10), the Contracts and Appendices do, in fact, "relate to . . . employee benefit plan[s] described in [ERISA]" (29 USC § 1144 [a]) through their myriad references to "Covered Services" under the benefit plans of defendants' insureds/Stony Brook's Customers, some of which are governed by ERISA.

To be sure, "[t]he mere fact that a claim arises against the factual backdrop of an ERISA plan does not mean it makes 'reference to' that plan" (Plastic Surgery Ctr., 967 F3d at 235). Preemption will not be found where "the state law has only a tenuous, remote, or peripheral connection with covered plans" (New York State Conf. of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 661 [1995] [internal quotation marks and citation omitted]).

Relying on this distinction, the State insists that the benefit plans are only "tangentially related" (Opp Mem at 9), arguing that its claims relate to the computation of amounts due under the Contracts, not the determination of insurance benefits under the plans of defendants' insureds ("Plans") (see id.). According to the State, the scope of Covered Services is "irrelevant to the claims at issue here," and if reference to Plan documents becomes necessary, "it would require only a 'cursory examination' of the plan, not a detailed construction" (id. at 10 [internal quotation marks and citation omitted]).

The Court is unpersuaded by the State's attempt to minimize the significance of the Plans, which play a central role in its allegation that defendants breached the Contracts by failing to pay for Covered Observation services of less than eight hours (see Complaint, ¶¶ 34-36). As pleaded in the State's own Complaint, "Defendants are required to make payments to Stony Brook for Observation services as a Covered Service" (id., ¶ 23). As such, the State bears the ultimate burden of proving that Observation services of less than eight hours are a Covered Service. And to ascertain the scope of Covered Services, the Court must review Plans on a claim-by-claim, plan-by-plan basis.

If a particular Plan does not provide coverage for Observation services, it is not a Covered Service under the Contracts, and defendants are under no obligation to provide reimbursement for it. The Court cannot compute the amounts that the State is owed under the Contracts for rendering Observation services without first ascertaining whether the services for which reimbursement is sought are, in fact, Covered Services.

And under the plain language of the Contracts, "[t]he only way to determine whether [p]laintiff's claims [for Observation services of less than eight hours are Covered Services] is to review the terms of the governing ERISA Plan" (Northeast Plastic Surgery PLLC v Anthem Blue Cross Blue Shield, 2025 NY Misc LEXIS 10022, *6 [Sup Ct, NY County 2025] [internal quotation marks and citation omitted]).³ As such, the State's claims "relate to" the Plans in an important way.

This conclusion follows regardless of the basis of defendants' denial of reimbursement. The State maintains that the denials at issue were based on a uniform policy decision by defendants under the Contracts, rather than lack of underlying insurance coverage (see Opp Mem at 12), a point that defendants dispute (see NYSCEF Doc No. 62 ["Reply"] at 5). But even assuming a wrongful blanket denial of reimbursement for Observation services pursuant to a fixed policy (see NYSCEF Doc No. 52), the State's recovery under the Contracts necessarily depends on proof that Observation was a Covered Service (see Complaint, ¶¶ 25-28; see also Opp Mem at 17 ["successive breaches"]), which requires examination of the underlying Plans, some of which are governed by ERISA. If the State is unable to prove that Observation is a Covered Service for particular insureds, it will be unable to establish defendants' contractual liability to reimburse for those services, regardless of the basis of the original denial.

Nor has the State proven on this record that the relationship between its claims and the Plans is merely "tangential" and that only a "cursory examination" would be required. For example, while the Lowitt Alarms policy with Oxford expressly covers "Observation Stay" with a 50% coinsurance after deductible (see NYSCEF Doc No. 29 at 16), other plans made part of the record, like the one for Miller's Ale House (see NYSCEF Doc No. 28), do not identify Observation services as a standalone category of covered services, thus implicating issues of Plan interpretation (and potential liabilities of Plan participants).

The Court therefore concludes that the State's claims may require the Court to interpret and apply ERISA Plans to determine the benefits to which SBUH's customers were entitled, and those claims appear to be subject to express ERISA preemption (see Park Ave. Podiatric Care P.L.L.C. v Cigna Health & Life Ins. Co., 2023 US Dist LEXIS 42030, *7-8 [SD NY, Mar. 13, 2023, No. 22 Civ. 10312 (AKH)] ["The adjudication of each of Plaintiff's claims would require the Court to analyze the terms of the Plan to determine the benefits owed. As such Plaintiff's claims would require 'reference to' the Plan and are therefore expressly preempted by ERISA."], affd 2024 US App LEXIS 13227 [2d Cir 2024]; Jeffrey Farkas M.D., LLC v Group Health, Inc., 2019 US Dist LEXIS 17756, *11 [SD NY, Feb. 1, 2019, No. 18 Civ. 8535 (CM/KHP)] [finding preemption where court needed to "refer to and interpret" the ERISA plan]; Neurological Surgery, P.C. v Aetna Health Inc., 511 F Supp 3d 267, 289-290 [ED NY 2021] ["The source of those 'pre-authorization(s), precertification(s), or other requirements' is an ERISA plan. That same ERISA plan also determines what is, and what is not, a 'covered' service. Plaintiff's dispute involves obligations derived from ERISA plans themselves; they are thus not independent of ERISA" (internal citation omitted)]; cf. Plastic Surgery Ctr., 967 F3d at 231 ["The claims here . . . arose precisely because there was no coverage under the plans for services performed by an out-of-network provider," which is in "contrast to in-network providers whose relationship with Aetna is governed by a provider agreement that typically cross-references the ERISA plan and limits payment to 'covered services' . . . ."]).

But given the various ERISA and non-ERISA plans at issue, together with the varying provisions in the Plans for Observation services, the Court further concludes that defendants have not demonstrated their entitlement to blanket dismissal of the Complaint as expressly preempted by ERISA. Not all of the State's claims involve ERISA plans (cf. Murphy Med. Assocs., LLC v Yale Univ., 120 F4th 1107, 1114 [2d Cir 2024] [plaintiff "has failed to plead a valid assignment — whether pursuant to an ERISA plan or a non-ERISA plan — in light of the blanket anti-assignment provision in Yale's plan document"]), and defendants have not proven that resolution of claims like the one pertaining to Lowitt Alarms would require more than a "cursory examination" of the Plans. These issues should be evaluated and decided on a claim-by-claim, plan-by-plan basis after the exchange of appropriate discovery.

Based on the foregoing, defendants have failed to demonstrate their entitlement to dismissal of the Complaint as expressly preempted by ERISA.

B. Pleading Insufficiency

Defendants argue that the Complaint should be dismissed because it does not identify the particular claims for Observation services said to constitute breaches of the Contracts. Under CPLR 3013, "[s]tatements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense."

The Court is satisfied that the Complaint comports with the liberal notice-pleading requirement of CPLR 3013. The Complaint identifies: the group of claims being challenged (i.e., denial of claims for Observation services for stays of less than 8 hours from November 30, 2020 through December 14, 2023) (see Complaint, ¶¶ 25-31); the contractual provisions said to be breached by the foregoing denials (see id., ¶¶ 15-23); the State's own performance under the Contracts (see id., ¶ 25); and resulting damages (see id., ¶ 32). This is not a case like Fika Midwifery PLLC v Independent Health Assn., Inc. (208 AD3d 1052, 1057 [4th Dept 2022]), where the timing and nature of the payments were themselves at issue in the litigation.⁴

Accordingly, the branches of defendants' motion challenging the sufficiency of the pleading are denied.

C. Timeliness of the State's Claims

Defendants argue, in passing, that plaintiff's claims are time-barred: "Plaintiff seeks payment for claims going back over five years. However, both Contracts require any corrections to payment to occur within twelve months. Plaintiff first notified Defendants that it was seeking payment for the claims on April 4, 2023. Taking that allegation as true, all claims that were adjudicated more than twelve months before that date, or April 4, 2022, are time-barred under the Contracts" (MOL at 20 [citations omitted]), which allow the State to seek correction of an alleged underpayment by giving notice "within 12 months after the payment was initially made" (United Contract, § 6.9; see Oxford Contract, § 3.3).

The Court concludes that defendants have not met their initial burden of tendering documentary evidence conclusively establishing the date(s) on which the State first gave notice of the alleged underpayments. Defendants merely cite to paragraph 53 of the Complaint, the cause of action under SFL § 18, which alleges that "[o]n April 4, 2023, Plaintiff notified Defendants . . . that should Defendants fail to pay the debt in full within 90 days of Defendants' presumed receipt of the notice, Defendants would be liable for a collection fee equal to [22%] of the principal and interest then due and owing." This allegation, standing alone, does not conclusively demonstrate the absence of any earlier notice or otherwise address the impact on defendants' alleged blanket policy of denials (see e.g. Fullerton Aff., ¶¶ 15-17).

Under the circumstances, defendants have not established their entitlement to dismissal of claims adjudicated prior to April 4, 2022, under CPLR 3211 (a) (1) (see Reply at 12).

D. Remaining Causes of Action

1. Unjust Enrichment

Defendants seek dismissal of the State's cause of action for unjust enrichment, arguing that the claim is redundant of the contractual claim.

"Unjust enrichment occurs when in equity and good conscience, a party obtains or possesses value that rightfully belongs to another party" (Henning v Henning, 103 AD3d 778, 780-781 [2d Dept 2013] [internal quotation marks, brackets and citations omitted]). It is a quasi-contractual " 'obligation which the law creates, in the absence of any agreement' " (State of New York v Barclays Bank of NY, 76 NY2d 533, 540 [1990], quoting Miller v Schloss, 218 NY 400, 407 [1916]). Thus, "[t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter" (Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; see Pappas v Tzolis, 20 NY3d 228, 234 [2012]).

Inasmuch as the subject matter of the parties' dispute is comprehensively addressed in the parties' Contracts, and there is no "bona fide dispute as to the[ir] existence" (Kulback's Inc. v Buffalo State Ventures, LLC, 197 AD3d 890, 892 [4th Dept 2021] [internal quotation marks and citation omitted]; cf. ARB Upstate Communications LLC v R.J. Reuter, L.L.C., 93 AD3d 929, 934 [3d Dept 2012]), the State's claim for unjust enrichment must be dismissed.

2. Declaratory Judgment

The State's third cause of action seeks a declaration that defendants are obliged to pay for Observation services of less than eight hours, asserting that defendants intend to resume their former policy of denying reimbursement for such services (see Complaint, ¶¶ 48-49).

The claim for declaratory relief is predicated on the same contractual theory underlying the first cause of action. As such, the State has an adequate alternative remedy at law (see Apple Records v Capitol Records, 137 AD2d 50, 54 [1st Dept 1988]), and its claim for declaratory relief is dismissed as duplicative and unnecessary (see Pacella v Town of Newburgh Volunteer Ambulance Corps. Inc., 164 AD3d 809, 814 [2d Dept 2018]).

3. State Finance Law § 18

The State's fourth cause of action seeks collection costs under SFL § 18, which authorizes a collection fee, not to exceed 22% of the outstanding debt, "to cover the cost of processing, handling and collecting" the debt where the debtor failed to remit payment within 90 days of the submission of a billing invoice (id. § 18 [5]). The statute defines "debt" as "any liquidated sum due and owing any state agency which has accrued pursuant to law or through contract," and the term "liquidated" is defined as "an amount which is fixed or certain or capable of being readily calculated, whether or not the underlying liability or amount of the debt is disputed" (id. § 18 [1] [b], [d]).

Defendants contend that any debt owed to the State is not liquidated, arguing that the State's claims "are complicated and subject to reduction depending on (1) whether ERISA preempts state law, (2) whether and to what extent Plaintiff performed any Covered Services, (3) whether and to what extent claims are barred by the one-year limitation clause in the Contracts, and (4) whether there are other reasons that these benefit claims are not payable. Given these complications, Plaintiff's claim is not 'fixed or certain or capable of being readily calculated' " (MOL at 21-22, quoting New York State Workers' Compensation Bd. v Episcopal Church Home & Affiliates, Inc., 218 AD3d 1317, 1321 [4th Dept 2023]). Defendants further argue that the claim fails in any event because "Section 18 requires a Plaintiff to mail an invoice or notice of the liquidated sum before bringing a claim," and the State "has not done that" (id. at 22).

The branch of defendants' motion seeking dismissal of the SFL § 18 claim is denied. Defendants have not affirmatively demonstrated that plaintiff's claims for reimbursement are unliquidated, and their assertion that no invoice or notice was mailed to them prior to suit is unsupported by conclusive documentary proof.

CROSS MOTION TO SEAL

The State cross-moves to seal the Contracts in their entirety under 22 NYCRR 216.1 (a) (see NYSCEF Doc No. 48; see also NYSCEF Doc Nos. 50-51). The unopposed cross motion is granted (see NYSCEF Doc Nos. 22-27, 47).

CONCLUSION

Accordingly,⁵ it is

ORDERED that defendants' motion to strike is denied; and it is further

ORDERED that plaintiff's second and third causes of action are dismissed; and it is further

ORDERED that defendants' motion to dismiss is granted to the extent indicated in the preceding decretal paragraph and is otherwise denied; and it is further

ORDERED that, within twenty (20) days from the date of this Decision & Order, defendants shall file and serve an answer to the Complaint; and it is further

ORDERED that plaintiff's cross motion to seal NYSCEF Doc Nos. 50-51 is granted, and these documents shall remain filed under seal; and finally it is

ORDERED that a remote preliminary conference shall be scheduled and the parties are directed to confer in advance of such conference regarding the matters set forth in Commercial Division Rule 8, as well as the use of alternative dispute resolution such as mediation.

This constitutes the Decision & Order of the Court, the original of which is being uploaded to NYSCEF for entry by the Albany County Clerk. Upon such entry, counsel for plaintiff shall promptly serve notice of entry on all parties entitled to such notice.

Dated: September 17, 2026

Albany, New York

RICHARD M. PLATKIN

A.J.S.C.

Papers Considered:

NYSCEF Doc Nos. 2, 12, 14, 20-34, 48-65.

FOOTNOTES

1.   "United and Oxford All Payer Appendices" refers to NYSCEF Doc Nos. 24-27.

2.   The Court therefore is unpersuaded by plaintiff's suggestion that references in the Appendices to a contractual reimbursement rate for Observation services can somehow be divorced from the bedrock requirement of the parties' contractual scheme: that Stony Brook is reimbursed for providing Covered Services to defendants' insureds.

3.   Insofar as the State relies on the District Court's finding that Stony Brook's claims stem from contractual obligations independent of the Plans (see Remand at 25), the Court notes that the "independent legal duty" test is derived from principles of complete preemption, not express preemption (see Montefiore, 642 F3d at 328-329). The Court further observes that the District Court's finding was not necessary to its remand order (see Remand at 23-24 ["(T)he Court also agrees with Plaintiff that Defendants have failed to establish that Plaintiff's state law claims are completely preempted by ERISA. . . . For the avoidance of doubt, however, the Court nonetheless proceeds (to consider the issue of independent legal duty)"]; see also Karol v Polsinello, 127 AD3d 1401, 1402 [3d Dept 2015] ["The (law-of-the-case) doctrine applies only when the prior ruling directly passed upon a question of law that is essential to the determination of the matter"]).

4.   Additionally, as observed by the State, any claim by defendants that they lack actual notice of the nature of plaintiff's claims is belied by the extensive proceedings before the federal District Court, including pre-remand discovery on exemplar claims (see Remand at 10-11). Defendants also acknowledge that the State provided them with a claims list more than one year ago (see MOL at 11).

5.   The Court has considered the parties' remaining arguments but finds them unavailing or unnecessary to reach given the dispositions ordered herein. Any requests for relief not specifically granted herein are denied.

Richard M. Platkin, J.