JEFFREY FARKAS LLC v. HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY (2025)

ORDER DISMISSING CASE

Plaintiff Jeffrey Farkas, M.D., LLC, commenced this action against Defendant Horizon Blue Cross Blue Shield of New Jersey, seeking to confirm an arbitral award pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 9. The Court ordered the parties to show cause why this action should not be dismissed for lack of subject-matter jurisdiction, which both parties contend exists in this case. For the reasons provided below, the Court disagrees, and therefore dismisses the complaint without prejudice pursuant to Rule 12(h)(3).

BACKGROUND

According to the complaint, Plaintiff's medical practice performed a surgery on a patient in Brooklyn. See ECF No. 1 ¶¶ 5–6. Defendant insured that patient. Id. ¶ 7. Plaintiff billed Defendant $64,000 for the surgery but Defendant paid only $533.94. Id. ¶¶ 8–9. As a result, Plaintiff contested the underpayment using the independent dispute resolution (“IDR”) procedure established by the federal No Surprises Act (“NSA”). Id. ¶¶ 11–14. As relevant here, the NSA's IDR procedure is designed to resolve conflicts between out-of-network healthcare providers and insurance companies. See Neurological Surgery Prac. of Long Island v. U.S. Dep't of Health & Hum. Servs., No. 24-cv-4503, 2025 WL 1489603, at *1 (E.D.N.Y. May 23, 2025).¹

In this case, Plaintiff obtained a $48,000 award in the IDR process, or $47,466.06 more than Defendant had already paid. ECF No. 1 ¶ 16. Defendant missed the February 15, 2024, deadline to complete payment. Id. ¶ 18. Nor did Defendant pay Plaintiff its “final offer” amount submitted in the IDR process, which Plaintiff contends must be paid “regardless of whether Plaintiff prevailed in the [NSA IDR] arbitration.” Id. ¶ 19.

Plaintiff then commenced this action. In Count I, it seeks to enforce the IDR award under the FAA. Id. ¶¶ 23–28. In Count II, Plaintiff alleges a substantive violation of the NSA based on Defendant's failure to pay. Id. ¶¶ 29–35. Plaintiff filed a motion for judgment on the pleadings, seeking confirmation of the award. See ECF No. 22. Defendant opposes that motion. See ECF No. 28. Plaintiff's motion raised the issue of this Court's subject-matter jurisdiction. See ECF No. 22-1 at 11–13. In recognition of this threshold issue, the Court issued the following Order to Show Cause:

In this action, Plaintiff seeks to confirm and receive payment from an arbitration award under the [FAA], 9 U.S.C. § 9[,] ․ and alleges that Defendant violated the [NSA]. ECF No. 1. Plaintiff asserts that “[j]urisdiction is proper in this Court pursuant to 9 [U.S.C.] § 9.” Id. para. 3. However, “[t]he FAA does not independently confer subject-matter jurisdiction on the federal courts.” Bakoss v. Certain Underwriters at Lloyds of London Issuing Certificate No. 0510135, 707 F.3d 140, 142 n.4 (2d Cir. 2013). Thus, on or before June 20, 2025, Plaintiff is ORDERED TO SHOW CAUSE why this case should not be dismissed for lack of subject-matter jurisdiction.

Plaintiff filed its response, see ECF No. 26, and upon the Court's Order, Defendant also filed a response, see ECF No. 27.

LEGAL STANDARD

“Federal courts have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto.” Guthrie v. Rainbow Fencing Inc., 113 F.4th 300, 304 (2d Cir. 2024) (emphasis in original). The Court has an “independent obligation to satisfy [itself] of [its] jurisdiction.” Stafford v. Int'l Bus. Machs. Corp., 78 F.4th 62, 68 (2d Cir. 2023). If subject-matter jurisdiction is lacking, the Court “must dismiss the action.” Fed. R. Civ. P. 12(h)(3).

DISCUSSION

The Court lacks subject-matter jurisdiction over this action. As mentioned, the FAA provides no standalone basis of subject-matter jurisdiction; instead, there must be an “independent jurisdictional basis to resolve the matter.” Badgerow v. Walters, 596 U.S. 1, 4 (2022). Where, as here, a party seeks confirmation of an arbitral award pursuant to Section 9 of the FAA, the Court “may look only to the application actually submitted to it in assessing its jurisdiction.” Id. at 5. In other words, the Court does not “look through” the petition to determine if there is a federal jurisdictional hook. Id. at 9–11. Practically, this means that for a federal court to have the power to confirm an arbitration award under the FAA, the petition must properly invoke diversity jurisdiction, 28 U.S.C. § 1332, or federal-question jurisdiction, id. § 1331. Badgerow, 596 U.S. at 9. But the federal court does not “proceed downward” to the “underlying substantive dispute” to locate that federal hook. Id.²

The leading case, Badgerow, put those principles into practice. There, an employee's contract required arbitration of employment disputes. Id. at 5. After the employee was fired, she submitted both federal and state employment claims to an arbitrator, but the arbitrator ruled for her employer. Id. The employee sought to vacate the award in state court. Id. at 5–6. Her employer then removed the case to federal court and sought to confirm the award. Id. The Supreme Court ruled that the federal court lacked subject-matter jurisdiction. Id. at 9. The parties were non-diverse. Id. And their applications before the federal court “raise[d] no federal issue.” Id. That was so even though the employee raised federal employment claims in the underlying arbitration. Id. As the Supreme Court explained, by the time the case reached federal court, the parties were “contesting not the legality of [the employee]’s firing but the enforceability of an arbitral award,” which was “no more than a contractual resolution of the parties’ dispute.” Id. With that foundation, the Court now proceeds to determine whether the FAA claim in this case has the necessary jurisdictional hook.

I. Supplemental Jurisdiction

There is one preliminary matter to address. Defendant presents a creative argument that the Court need not even reach Section 1331 because it has subject-matter jurisdiction over Plaintiff's FAA claim pursuant to the supplemental jurisdiction statute, 28 U.S.C. § 1367. See ECF No. 27 at 3–4. Of course, Section 1367 opens the door to supplemental jurisdiction only where a federal court already has “original jurisdiction” (such as a claim under Section 1331 or 1332). Defendant says that is the case here because Plaintiff's Count II asserts a substantive violation of the NSA, a federal statute implicating Section 1331. The Court is unpersuaded. Count II is just the FAA claim with a different label. See ECF No. 1 ¶¶ 34–35 (“Defendant has failed to remit the arbitration payment to Plaintiff. As such, Defendant has failed to comply with the requirements of the [NSA].”). Accordingly, Count II “clearly appears to be immaterial,” and in the context of an FAA petition, “made solely for the purpose of obtaining jurisdiction,” rendering it subject to dismissal. See Binder & Binder PC v. Barnhart, 399 F.3d 128, 131 (2d Cir. 2005).

In any event, the Second Circuit has made clear that “[a]ctions to confirm arbitration awards ․ are straightforward proceedings in which no other claims are to be adjudicated.” Ottley v. Schwartzberg, 819 F.2d 373, 377 (2d Cir. 1987) (emphasis added). There may be some confusion in this case because Plaintiff proceeded with a complaint, a type of pleading that often contains various claims, rather than, as would have been appropriate in an FAA action, a petition to confirm the award. See Trs. for the Mason Tenders Welfare Fund v. Nacrimena Env't Servs. Co., No. 13-cv-3574, 2015 WL 1026695, at *1 n.1 (S.D.N.Y. Mar. 9, 2015). But, for the avoidance of doubt, Plaintiff's stylistic choice does not broaden the relief available to it, such that Count II could provide a basis for original jurisdiction. See id. (construing a complaint as an FAA petition and denying any relief beyond the scope of the petition). In sum, because “[t]he FAA limits a district court's authority when reviewing an arbitration award,” the Court is not permitted within the scope of this action to opine on whether a substantive violation of the NSA took place; although “not unrelated to the underlying arbitration,” it is “not necessary to vindicate the [Court's] authority” over an arbitral award. See NFL Players Ass'n v. NFL Mgmt. Council, 523 F. App'x 756, 760 (2d Cir. 2013). The FAA claim therefore cannot find grounding in supplemental jurisdiction.

II. Federal-Question Jurisdiction

A. Introduction

Now, the Court must determine whether the complaint implicates federal-question jurisdiction. To recap, the sole asserted basis for subject-matter jurisdiction in this case is the FAA. See ECF No. 1 ¶ 3. Because the FAA, standing alone, provides no basis for subject-matter jurisdiction, the Court examines “the face of the application” for “an independent jurisdictional basis.” Badgerow, 596 U.S. at 9. No one claims that there is diversity jurisdiction.³ But both parties say there is federal-question jurisdiction. See ECF No. 26 at 3; ECF No. 27 at 4–5. To answer the question of whether this complaint implicates federal-question jurisdiction, the Court must wade into an area whose contours are still being defined following Badgerow. Where the FAA petition is predicated on diversity, the inquiry is straightforward enough. See Badgerow, 596 U.S. at 9 (observing that the parties were from the same state). But analyzing federal-question jurisdiction is a more involved inquiry.

B. Authority After Badgerow

The Second Circuit first explicated this exact issue post-Badgerow in Trustees of the New York State Nurses Association Pension Plan v. White Oak Global Advisors, LLC, 102 F.4th 572 (2d Cir. 2024). In White Oak, a pension plan asserted various claims against its investment manager pursuant to the federal Employee Retirement Income Security Act (“ERISA”). Id. at 583–84. The plan prevailed on its claims in arbitration and the federal district court confirmed the award. Id. Following Badgerow, the investment manager challenged the district court's judgment, asserting that it lacked subject-matter jurisdiction to entertain the plan's FAA petition. Id. at 584. In analyzing Badgerow, the Second Circuit explained that it “instructs that subject matter jurisdiction over a petition to confirm an award turns on the law governing the contractual rights created by the arbitration agreement.” Id. at 596. Thus, because contracts are typically “creatures of state law” (like the employment contract mandating arbitration in Badgerow), “an action to enforce an arbitration contract through confirmation of its resulting award ordinarily does not arise under federal law.” Id. Notwithstanding that general principle, the Second Circuit ultimately held that the specific arbitration agreement in White Oak represented “an exception” because of the “the federal ERISA claim in the [FAA] petition.” Id. at 596–97.

In describing the exception just mentioned, the Second Circuit reasoned that the contractual right at issue in the case “[d]erive[d] from an ERISA [c]ontract.” Id. at 595. The court specifically explained that the arbitration agreement was “an integral part of the documents governing the Plan and [was] governed by ERISA.” Id. at 598. In further distinguishing away from an arbitration agreement governed by state law, the court explained that ERISA “preempts any state laws that [would] purport” to govern the agreement between the plan and the investment manager. Id. Despite all this, the Court of Appeals was clear in stating that “ERISA express preemption, and its displacement of state contract law with federal common law, does not create ‘arising under’ jurisdiction” pursuant to Section 1331. Id. at 600. It additionally observed that ERISA remedies are limited to those provided by the substantive statute. Id. Thus, explained the Second Circuit, “for jurisdiction to be proper, the petition to confirm must state a cause of action contained within ERISA or another federal statute.” Id. And the plan satisfied that test only because a specific ERISA provision “contemplates enforcement of a petition to confirm an arbitral award.” Id.; see 29 U.S.C. § 1132(a)(3) (ERISA provision permitting a plan “participant or beneficiary” to, inter alia, “enforce any provisions of [ERISA] or the terms of the plan”).

C. Application

Unsurprisingly, Plaintiff seizes on White Oak’s bottom-line holding, arguing that because the claim there was “predicated on ERISA,” this case is the same insofar as it is predicated on the NSA. ECF No. 26 at 3. Defendant similarly argues that the NSA “create[d] the cause of action” that Plaintiff seeks to confirm under the FAA and, similarly, that “Plaintiff's claim is triggered solely by the federal NSA.” ECF No. 27 at 4, 6. The Court disagrees. Closer analysis of White Oak makes clear that a “predicate[ ]” federal claim is not enough to implicate Section 1331. That is because this case does not involve federally-governed contractual rights. And, even if it did, Plaintiff would lack a federal cause of action to enforce them under the FAA.

i. Lack of Contractual Rights

Plaintiff runs into a threshold issue in seeking to enforce contractual rights under the NSA. As the Second Circuit explained, in FAA cases, the relevant “contractual rights” do not emerge from the ultimate arbitral award but rather from the agreement to arbitrate. See White Oak, 102 F.4th at 596 (“[A] petition to confirm an award does not vindicate the award itself, but rather enforces the parties’ agreement to arbitrate and abide by the resulting award.”). Based on this, in White Oak, the district court initially endorsed a “broader theory that federal question jurisdiction lies over any FAA § 9-11 petition seeking to enforce an arbitration agreement whose contractual rights are governed exclusively by federal law.” Id. at 600 n.10. Put differently, there would have been enough in the petition for federal-question jurisdiction even had the substantive ERISA statute not provided its own cause of action. Specifically, the district court reasoned that “[i]t is plain from the face of the Plan's petition that the narrow contractual rights before the court ‘relate to’ an ERISA plan and are governed exclusively by federal law,” and differentiated the case from “a state-law based Section 9 application as was at issue in Badgerow.” Trs. of N.Y. State Nurses Ass'n Pension Plan v. White Oak Glob. Advisors, LLC, No. 21-cv-8330, 2022 WL 2209349, at *4 (S.D.N.Y. June 20, 2022).

Because ERISA contained a relevant federal cause of action, the White Oak court left open the question of whether the broader theory of liability just described is viable. See 102 F.4th at 600 n.10. Even assuming that it is, a fundamental problem emerges in the NSA context. Defendant is right to observe in its opposition to Plaintiff's motion that there is no arbitration agreement in this case. See ECF No. 28 at 14. Or as another court has put it, “the NSA's IDR process can be called ‘arbitration[,]’ ․ [b]ut arbitration, at least under the FAA, assumes an ‘agreement’ or ‘contract” to arbitrate.” See Med-Trans Corp. v. Cap. Health Plan, Inc., 700 F. Supp. 3d 1076, 1083 (M.D. Fla. 2023). However, “[t]he NSA's IDR ․ is statutorily compelled.” Id. And without an agreement to arbitrate, this case diverges sharply from the broader theory of Section 1331 jurisdiction based on contractual rights alone. Recall that in White Oak, “the arbitration agreement ․ [was] not some separate instrument governed by an entirely different body of state contract law, but rather [was] an integral part of the documents governing the Plan and [was] governed by ERISA.” 102 F.4th at 598. By contrast, this case involves no arbitration agreement “governed by” federal law. Id. That alone would seem to be enough to defeat federal jurisdiction under Badgerow. But the defect here runs even deeper. Not only is there no agreement to arbitrate under state law, but there is no such agreement at all. And without predicate contractual rights to enforce, there can be no jurisdictional hook based on federal contractual rights. See White Oak, 2022 WL 2209349, at *5.

ii. Lack of Cause of Action

In any case, even had this action involved an “[NSA]-governed contract,” the NSA flunks the Second Circuit's cause-of-action requirement. See White Oak, 102 F.4th at 595. Specifically, the “exception” described in White Oak is unavailable because the complaint, construed as a petition, does not “state a cause of action” under the NSA. Id. at 600. As the Fifth Circuit recently explained, “[t]he NSA ․ provides that an IDR award ‘shall not be subject to judicial review, except in a case described in any of paragraphs (1) through (4) of section 10(a)’ of the [FAA].” Guardian Flight L.L.C. v. Health Care Serv. Corp., No. 24-10561, 2025 WL 1661358, at *1 (5th Cir. June 12, 2025) (precedential order) (quoting 42 U.S.C. §§ 300gg-112(b)(5)(D), 300gg-111(c)(5)(E)). Those four paragraphs, see 9 U.S.C. § 10(a), “set[ ] forth specific grounds for vacating arbitration awards”: “corruption, fraud, or undue means in procurement of the award, evident partiality or corruption in the arbitrators, specified misconduct on the arbitrators’ part, or where the arbitrators exceeded their powers.” See Jock v. Sterling Jewelers Inc., 646 F.3d 113, 121 (2d Cir. 2011). Accordingly, “the NSA contains no express right of action to enforce or confirm an IDR award,” nor does it contain an implied private right of action to do the same. See Guardian Flight, 2025 WL 1661358, at *2 (emphasis added). So, by seeking confirmation here, Plaintiff asks the Court to impermissibly invent a cause of action to confirm an award under the NSA. See ECF No. 1 ¶ 28.⁴ It may not do so.

Plaintiff initially argued that the NSA provides a private cause of action. See ECF No. 22-1 at 13–15 (citing, inter alia, Guardian Flight LLC v. Aetna Life Ins. Co., No. 24-cv-00680, 2025 WL 1399145 (D. Conn. May 14, 2025)). The Court rejects that position for the reasons just described, with which Defendant agrees. See ECF No. 28 at 15; see also Guardian Flight, 2025 WL 1661358, at *3 n.5. Now, in response to the Order to Show Cause, the parties urge that the absence of a cause of action is not dispositive and that federal-question jurisdiction is broader. See, e.g., ECF No. 28 at 3 n.1, 9 (“[T]he question of whether the Court has subject matter jurisdiction under the well-pleaded complaint rule and whether Plaintiff fails to state a claim are two separate inquiries.”). To be sure, that argument has some merit. Although in the “vast bulk of suits that arise under federal law,” “federal law creates the cause of action asserted,” there are some “extremely rare exceptions” in which federal-question jurisdiction may exist even without a federal cause of action. Gunn v. Minton, 568 U.S. 251, 257 (2013).

Following White Oak, these exceptions seem foreclosed because “the petition to confirm must state a cause of action.” 102 F.4th at 600; accord Friedler v. Stifel, Nicolaus, & Co., 108 F.4th 241, 250–51 (4th Cir. 2024) (Wilkinson, J., concurring) (interpreting White Oak to require as much). Nevertheless, even assuming the exceptions are available, they cannot help here. Defendant asks the Court to apply the so-called Gunn-Grable exception, arguing that “[a] federal court may exercise federal question jurisdiction ‘if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.’ ” ECF No. 27 at 4–5 (quoting Tantaros v. Fox News Network, LLC, 12 F.4th 135, 147–48 (2d Cir. 2021)). But Tantaros shows why that test is inapplicable here: it is used to determine if there is “[f]ederal jurisdiction over a state law claim.” Tantaros, 12 F.4th at 140–41; accord Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005). That is not relevant where both parties assert that the face of the petition contains only a federal law claim based on a statute that plainly supplies no enforceable rights in this posture. See ECF No. 26 at 3; ECF No. 27 at 4.

Importantly, this is the only outcome consistent with the review regime selected by Congress in the NSA. As the Fourth Circuit has explained, “Badgerow suggests that there may be federal statutes beyond the FAA itself that would ‘entitle[ ] the applicant to relief’ and thus support jurisdiction.” Friedler, 108 F.4th at 247 (brackets retained) (quoting Badgerow, 596 U.S. at 9). In that case, the court observed that an alleged violation of the Securities Exchange Act would have been insufficient to support federal jurisdiction, since the SEC Act would not have provided for the vacatur sought in the FAA action. Id. at 248. So, too, here. As discussed, the NSA explicitly provides for a “strictly limited form of judicial review” of IDR decisions. Guardian Flight, 2025 WL 1661358, at *4. The NSA plainly does not provide for the confirmation of awards. See id. at *3 (“Congress chose not to incorporate § 9 into the NSA. It incorporated only parts of § 10. By contrast, in other statutes, Congress has incorporated § 9 to create a private right of action.” (emphasis in original)). More generally, there is no indication that, as the parties would have it, Congress sought to provide those bound to IDR awards with every remedy available under the FAA. To the contrary, “the NSA's text and structure point in the opposite direction. The NSA expressly bars judicial review of IDR awards except as to the specific provisions borrowed from the FAA.” Id. at *2 (emphases in original). And the Second Circuit has cast this problem in jurisdictional terms.⁵ In White Oak, the court searched for a private right of action in part because of the command “not ․ to fill in unwritten gaps in ERISA's civil remedies.” 102 F.4th at 600. That rationale applies with equal force here and militates against adopting a view of federal-question jurisdiction that would permit parties to use the FAA to obtain remedies under the NSA that Congress chose not to provide. See Med-Trans, 700 F. Supp. 3d at 1084 (“Neither the NSA nor the FAA says that the FAA bears on the NSA outside the four explicitly incorporated paragraphs. The Court will not assume otherwise.”).

* * *

CONCLUSION

For the foregoing reasons, the complaint is dismissed without prejudice for want of subject-matter jurisdiction. Fed. R. Civ. P. 12(h)(3). Accordingly, Plaintiff's motion for judgment on the pleadings is denied as moot. The Clerk of Court is respectfully directed to enter judgment consistent with this Order and to close this case.

SO ORDERED.

FOOTNOTES

1.   Unless otherwise indicated, when quoting cases and the parties’ papers, all internal quotation marks, alteration marks, emphases, footnotes, and citations are omitted. The Court refers to the pages assigned by the Electronic Case Files system (“ECF”).

2.   Plaintiff appears to miss this distinction by arguing, in part, that subject-matter jurisdiction is proper because “the claims in the underlying arbitration” are based on the federal NSA. ECF No. 26 at 3. As just discussed, Badgerow rejects that approach.

3.   Plaintiff asserts entitlement to $47,466.07, which is below Section 1332(a)’s $75,000 jurisdictional threshold. See ECF No. 1 ¶ 22; see also ECF No. 26 at 3 (Plaintiff disavowing diversity jurisdiction based on the amount in controversy). Nor can the Court determine Plaintiff's citizenship. It is a limited liability company, and so it “takes the citizenship of all of its members.” Platinum-Montaur Life Scis., LLC v. Navidea Biopharmaceuticals, Inc., 943 F.3d 613, 615 (2d Cir. 2019). However, there are no allegations concerning Plaintiff's membership.

4.   Plaintiff's authority is distinguishable on (minimally) the basis of a missing cause of action. See Demopoulos v. Curcio, No. 20-cv-01208, 2023 WL 2166907, at *2 (E.D.N.Y. Feb. 6, 2023) (ERISA and Labor Management Relations Act contain private causes of action); LifeVoxel.AI Inc. v. Mamillapalli, No. 23-cv-00534, 2024 WL 1343590, at *4 (D. Conn. Mar. 29, 2024) (same for the Defend Trade Secrets Act). The court in Atticus Limited Liability Co. v. Dramatic Publishing Co., No. 22-cv-10147, 2023 WL 3135745, at *7 (S.D.N.Y. Apr. 27, 2023), was merely attempting to ascertain the basis of federal jurisdiction in another case for its claim preclusion analysis. In any event, that case involved a claim under the Copyright Act, which also contains a private right of action, see 17 U.S.C. § 501(b).

5.   Indeed, Defendant makes several of these same points about the missing cause of action and limited review scheme in both its response to the Order to Show Cause and opposition to Plaintiff's motion, but treats them as merits, rather than jurisdictional, problems. As explained here, White Oak, which Defendant notably fails to engage with, instructs otherwise.

HECTOR GONZALEZ United States District Judge