Irvin B. Beaver v. Magellan Health Services, Inc. , 433 N.J. Super. 430 ( 2013 )


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  •                 NOT FOR PUBLICATION WITHOUT THE
    APPROVAL OF THE APPELLATE DIVISION
    SUPERIOR COURT OF NEW JERSEY
    APPELLATE DIVISION
    DOCKET NO. A-1311-12T3
    IRVIN B. BEAVER,
    Plaintiff-Appellant,               APPROVED FOR PUBLICATION
    v.                                         December 11, 2013
    APPELLATE DIVISION
    MAGELLAN HEALTH SERVICES,
    INC., MAGELLAN BEHAVIORAL
    HEALTH, INC., and HORIZON
    BLUE CROSS BLUE SHIELD OF
    NEW JERSEY,
    Defendants-Respondents.
    _______________________________
    Argued October 21, 2013 – Decided December 11, 2013
    Before    Judges   Parrillo,      Kennedy      and
    Guadagno.
    On appeal from Superior Court of New Jersey,
    Law Division, Middlesex County, Docket No.
    L-3465-12.
    Justin Lee Klein argued the cause for the
    appellant (Wilentz Goldman & Spitzer, and
    Hobbie, Corrigan & Bertucio, attorneys;
    Angelo J. Cifaldi and Jacqueline DeCarlo, of
    counsel and on the brief; Mr. Klein, on the
    brief).
    Thomas F. Quinn argued the cause for
    respondents   (Wilson,    Elser,  Moskowitz,
    Edelman & Dicker, LLP, attorneys; Mr. Quinn
    and Joanna Piorek, on the brief).
    The opinion of the court was delivered by
    KENNEDY, J.A.D.
    Under what circumstances may a litigant pursue common law
    and statutory causes of action in the Law Division, rather than
    appeal from State final agency determination, where the merits
    of the agency determination are at issue?           This is the question
    we address in deciding this appeal.
    Plaintiff appeals from an October 12, 2012 order of the Law
    Division dismissing his complaint against defendants Magellan
    Health Services, Inc., Magellan Behavioral, Inc., and Horizon
    Blue    Cross/Blue    Shield   of    New   Jersey    ("defendants"   when
    referenced collectively, "Magellan" or "Horizon" when referenced
    individually).       Plaintiff argues, among other things, that the
    motion judge erred in applying the standards governing a motion
    to dismiss under Rule 4:6-2, and in determining that the Law
    Division lacked subject matter jurisdiction over the matter.
    We have considered plaintiff's arguments in light of the
    record and applicable law.          For reasons stated hereinafter, we
    affirm.
    I.
    We derive the facts from the record developed in the Law
    Division and the administrative proceedings which preceded the
    filing of plaintiff's complaint in the Law Division.
    2                          A-1311-12T3
    Plaintiff is a former public employee and received health
    insurance coverage for himself and his family through the NJ
    Plus and, later, the NJ Direct health benefits programs, which
    at    all   times    relevant         to    this          matter    were    administered        by
    Horizon      on   behalf         of    the        State         Health     Benefits      Program
    (Program).        The      Program,        and     its      governing      body,    the     State
    Health Benefits Commission (SHBC), were established by the New
    Jersey Health Benefits Program Act (the Act), N.J.S.A. 52:14-
    17.24   to    -45.         The   purpose          of      the    Program    is   "to     provide
    comprehensive health             benefits for eligible public employees and
    their families . . . .                It establishes a plan for state funding
    and    private    administration             of       a   health     benefits      program[.]"
    Heaton v. State Health Benefits Comm'n, 
    264 N.J. Super. 141
    , 151
    (App. Div. 1993).           "The SHBC contracts with health insurers to
    provide various benefits plans to program participants."                                    Green
    v. State Health Benefits Comm'n, 
    373 N.J. Super. 408
    , 413 (App.
    Div.    2004)(citing        N.J.S.A.         52:14-17.28).               "The    State     Health
    Benefits Program is, in effect, the State of New Jersey acting
    as a self-insurer."              Burley v. Prudential Ins. Co. of Am., 
    251 N.J. Super. 493
    , 495 (App. Div. 1991).                              In essence, the State
    pays the benefits and Horizon administers the claims.
    Although      the     State      contracts            with    health      insurers        to
    administer various benefit plans for program participants, the
    3                                      A-1311-12T3
    SHBC alone has the authority and responsibility to make payments
    on claims and to limit or exclude benefits.                           N.J.S.A. 52:14-
    17.29(B).           Additionally,      the       SHBC   has    final       authority      to
    adjudicate disputes between plan members and State-contracted
    claims administrators, and may refer such disputes to the Office
    of Administrative Law (OAL) for an evidentiary hearing.                             Green,
    supra, 373 N.J. Super. at 414; Burley, supra, 
    251 N.J. Super. at 500
    .
    Horizon          hired   Magellan     to     manage      mental      health       and
    substance abuse benefits for eligible NJ Plus members.                            Magellan
    would       conduct       "utilization       management        reviews"      of     claims
    submitted by members, and would decide if the treatment was
    medically needed, and, if so, the level and length of treatment.
    As noted, however, the SHBC itself had the final authority and
    responsibility to adjudicate any claim disputes.
    On    February       10,    2008,     plaintiff's       son,    a     minor,      was
    admitted          for    inpatient,      residential          care    at     the      Caron
    Foundation,         a    residential       treatment     facility      for     substance
    abuse.       Initially, Caron prescribed thirty-one days of inpatient
    care,       but    later    revised    its       recommendation       to     include      an
    additional ninety days of inpatient, residential treatment.
    Plaintiff submitted a claim for coverage and on February
    26,     2008,       Magellan      advised    that       it    would    not     authorize
    4                                     A-1311-12T3
    residential       substance     abuse        treatment      "as   of"   February      25,
    because plaintiff's son "no longer shows evidence" that he needs
    residential       treatment.          Plaintiff     challenged      the    denial     and
    Magellan undertook a "Level 1 appeal review."                       On February 28,
    Magellan advised that its prior denial was proper, and cited a
    telephone conversation between one of the son's doctors at Caron
    and    its   own     physician     advisor       in    which      the   son's      doctor
    allegedly agreed that outpatient care was the appropriate level
    of treatment.
    Plaintiff shortly learned that Magellan's physician advisor
    had,   in    fact,    not    spoken     to    the   particular      Caron     physician
    identified in Magellan's notification of February 28, but to
    another of the son's           doctors who alleged he never stated that
    the    son   required       only      outpatient      treatment.          Accordingly,
    plaintiff     sought        further     review,       and    on   March      11,    2008,
    presented     a    "second    level     appeal"       for   coverage    to    Horizon's
    Member Appeals Subcommittee.
    On March 14, Horizon overturned the denial of coverage for
    residential treatment for the period of February 26 to March 4,
    but denied coverage after that date, finding that plaintiff's
    son "did not show any evidence" of needing residential treatment
    thereafter.        Plaintiff next appealed to the SHBC, which,                         by
    5                                  A-1311-12T3
    letter dated February 17, 2009, upheld the denial of benefits
    after March 4, 2008.    The letter stated, in part:
    The denial is based on your presentation at
    the meeting as well as the documents you
    provided during and prior to the meeting.
    Magellan's    medical    director    gave    a
    background   summary   of   the   appeal   and
    indicated that he reviewed the additional
    medical   notes   received  from   the   Caron
    Foundation.    He indicated that [your son]
    did not meet the ASAM [American Society of
    Addiction Medicine] criteria after March 5,
    2008 for inpatient residential treatment.
    Your written request for appeal of the
    initial administrative decision must specify
    the exact reason or reasons that you are
    using as the basis for the request. It must
    also include any evidence or material that
    can be used to support your basis of appeal.
    The Commission will decide whether to grant
    your request for a hearing in the Office of
    Administrative Law upon receipt of your
    request and the supporting documentation.
    The letter also advised that if the appeal were forwarded to the
    OAL, an administrative law judge (ALJ) would consider evidence
    presented and render a decision, which the SHBC could accept,
    modify   or   reject.       The   SHBC      would      then    issue     a    final
    administrative   decision    "which       may   then    be    appealed       to   the
    Superior Court of New Jersey, Appellate Division."
    Plaintiff elected to pursue a further appeal and the matter
    was transferred to the OAL, where an evidentiary hearing was
    held.    On October 11, 2011, the ALJ issued her initial decision
    6                                  A-1311-12T3
    recommending denial of plaintiff's appeal.    She explained, in
    part, as follows:
    Under the NJ Plus plan in place at the
    time of the claim at issue in this matter,
    Horizon contracted with Magellan to manage
    its   mental   health   and  substance   abuse
    treatment claims.      Initially, [plaintiff]
    takes issue with Magellan's role in managing
    these claims, in general and specifically as
    to his son's treatment.      While Magellan's
    actions are under review here as to his
    son's   claim,   the   issue   of   Magellan's
    "gatekeeper" role for the state plan is
    beyond the scope of this matter.      At issue
    in this matter is whether respondent SHBC
    properly determined that the criteria for
    medical necessity to continue inpatient
    treatment at Caron for [the son] was no
    longer met.    [Plaintiff] has the burden of
    proof in this matter and must prove his case
    by a preponderance of the credible evidence.
    Atkinson v. Parsekian, 
    37 N.J. 143
     (1962).
    A review of the record in this matter
    shows that [plaintiff] has failed to meet
    that burden of proof.      Although he has
    raised substantive issues regarding the
    manner in which Magellan handled this claim,
    he did not submit a sufficient quantum of
    evidence to prove by a preponderance of the
    credible evidence that the SHBC erred in its
    decision.
    [Plaintiff] did show that Magellan was
    incorrect when it cited [the son's] treating
    physician as the Caron staff member with
    whom it initially discussed his treatment.
    The record also supports his contention that
    Magellan's records were further incorrect in
    citing   Caron  staff   as   supporting  his
    transfer to intensive outpatient treatment.
    Given the seriousness of the treatment at
    issue, it is of concern that Magellan denied
    further inpatient treatment on the basis of
    7                          A-1311-12T3
    faulty information in its records.        That
    initial denial however was corrected during
    the first and second level appeal process
    and   residential  treatment    was   approved
    through March 4, 2008.    The issue therefore
    is whether [plaintiff] has proven that the
    SHBC   erred   in  its   decision   that   the
    residential level of treatment was not
    medically necessary after that time.
    In support of his contention that
    continued     residential      treatment      was
    necessary, [plaintiff] presented treatment
    notes    from     Magellan's      records     and
    correspondence from Caron staff directors.
    The correspondence from the treating staff
    at Caron supports continued residential
    treatment, citing relevant       ASAM [American
    Society of Addiction Medicine] criteria.
    Balanced against that however, is the expert
    medical   testimony    and    report     of   Dr.
    O'Donnell presented on behalf of respondent.
    His testimony also addressed the relevant
    criteria for medical necessity, reaching a
    different conclusion than that of the Caron
    doctors.   Dr. O'Donnell's interpretation of
    the ASAM criteria was more conservative than
    that of the Caron physicians as set forth in
    their correspondence.        In weighing the
    evidence, however, greater weight is on the
    side of respondent.         While the Caron
    physicians were the treating doctors, only
    their   correspondence    was     presented    in
    evidence.     [Plaintiff] presented neither
    their curriculum vitae nor their testimony
    in support of his case. As such neither
    their credentials nor their testimony was
    subject   to    the    scrutiny      and    cross
    examination undergone by Dr. O'Donnell.
    As [plaintiff] has not met his burden
    of proof, his appeal is denied.
    On November 14, 2011, the SHBC adopted the ALJ's findings and
    conclusions.
    8                            A-1311-12T3
    On December 28, 2011, plaintiff filed a notice of appeal
    from the SHBC's final decision.                   Plaintiff later voluntarily
    withdrew his appeal and the appeal was dismissed on May 18,
    2012.
    On May 14, 2012, plaintiff filed a complaint in the Law
    Division seeking "relief for [d]efendants' denial of substance
    abuse treatment as a violation of plaintiff's health plan" and
    named only Horizon and Magellan as defendants.                        The complaint
    recited the history of plaintiff's efforts to secure coverage
    for his son's inpatient, residential substance abuse treatment
    and asserted four causes of action: (1) breach of contract; (2)
    breach      of    fiduciary    duty;   (3)      violation    of     the   New    Jersey
    Consumer     Fraud      Act,   N.J.S.A.    56:8-1    to     —184    (CFA);      and   (4)
    unjust enrichment.
    In support of the first count alleging breach of contract,
    plaintiff asserted that "under the terms of defendants' contract
    with [] plaintiff, defendants are required to provide coverage
    for   all    inpatient     treatment      for    mental     health    and    substance
    abuse disorders" and breached that contract by their denial of
    coverage         for   inpatient   treatment.         In      the    second      count,
    plaintiff asserted that defendants violated the duty of care
    they owed as fiduciaries by "setting limitations on payments and
    denying or reducing coverage" for substance abuse treatment.
    9                                    A-1311-12T3
    The        third         count         alleged            that          defendants'
    "wrongful decision to deny payment for" the continued inpatient
    treatment      for    plaintiff's      son       constituted     an     unconscionable
    commercial practice under the CFA.                  The last count stated that
    defendants have been "unjustly enriched" through their use of
    funds   that     should   have      been    used    to    pay    for     the   inpatient
    treatment of plaintiff's son.
    Defendants       moved   to     dismiss      plaintiff's         complaint     under
    Rule 4:6-2(a) (lack of jurisdiction) and Rule 4:6-2(e) (failure
    to   state   a    claim).        In    a    lengthy      opinion       from    the   bench
    delivered on October 12, 2012, the motion judge considered the
    history of plaintiff's claim as recited in the pleadings, and
    held that "plaintiff should have instituted this action in the
    Appellate Division" and that a transfer of the matter to the
    Appellate Division under Rule 1:13-4(a) at that point was time-
    barred.
    The motion judge then entered an order of dismissal and
    this appeal followed.
    II.
    Plaintiff       argues   that    his       complaint   does       not    constitute
    "one of the 'rare instances' in which a complaint should be
    dismissed as a matter of law, prior to the exchange of any
    discovery."          Further, he asserts that his complaint does not
    10                                   A-1311-12T3
    challenge the SHBC's final administrative action, but rather is
    a   separate   action   at    law   alleging      statutory       and    common   law
    causes of action against Magellan and Horizon.                Plaintiff relies
    upon Rinaldo v. RLR Inv., LLC, 
    387 N.J. Super. 387
     (App. Div.
    2006), and Burley, supra, 
    251 N.J. Super. 493
    , in support of the
    latter argument.
    Initially, we observe that despite the reference to Rule
    4:6-2(e) in defendants' brief in the Law Division, the motion
    judge held that the case must be dismissed on jurisdictional
    grounds, thereby embracing defendants' arguments under Rule 4:6-
    2(a).    "Whether subject matter jurisdiction exists presents a
    purely legal issue . . . which we review de novo."                      Santiago v.
    N.Y. & N.J. Port Auth., 
    429 N.J. Super. 150
    , 156 (App. Div.
    2012),   certif.    denied,    
    214 N.J. 175
        (2013);    see    Manalapan
    Realty, L.P. v. Twp. of Manalapan, 
    140 N.J. 366
    , 378 (1995).
    Accordingly, the issue before us is not whether the four causes
    of action alleged in plaintiff's complaint are sufficiently pled
    under Rule 4:6-2(e), but rather whether plaintiff can assert
    those    causes    of   action      in     the    Law     Division       under    the
    circumstances presented.            As noted, this is an issue of law
    which we review de novo.
    Pursuant to the Act, the SHBC "shall establish a health
    benefits program for the employees of the State," together with
    11                                 A-1311-12T3
    the   "rules   and   regulations   as    may   be    deemed   reasonable   and
    necessary   for   the   administration     of"      the   program.   N.J.S.A.
    52:14-17.27.      Pursuant to the enabling legislation's grant, the
    SHBC adopted a comprehensive regulatory appeals process:
    (a) Any member of the [Plan] who disagrees
    with    the    decision   of    the   claims
    administrator and has exhausted all appeals
    within the plan, may request that the matter
    be considered by the Commission. . . .    It
    shall be the responsibility of the member to
    provide the Commission with any medical or
    other information that the Commission may
    require in order to make a decision.
    (b) . . . .
    (c) Notification of all Commission decisions
    will be made in writing to the member and
    the    following    statement    shall    be
    incorporated in every written notice setting
    forth the Commission's determination in a
    matter where such determination is contrary
    to the claim made by the claimant or his or
    her legal representative:
    "If   you    disagree   with   the
    determination of the Commission in
    this matter, you may appeal by
    sending a written statement to the
    Commission within 45 days from the
    date of this letter informing the
    Commission of your disagreement
    and all of the reasons therefor.
    If no such written statement is
    received within the 45-day period,
    this    determination   shall   be
    considered final."
    (d) Any member who disagrees with the
    Commission's   decision  and   submits   the
    written statement as set forth in (c) above
    within 45 calendar days shall be notified of
    12                               A-1311-12T3
    the disposition of the appeal in one of two
    ways:
    1. The Commission shall determine
    whether to grant an administrative
    hearing on the basis of whether
    the matter involves contested facts
    or is solely a question of law.
    If the appeal involves solely a
    question of law, the Commission
    shall likely deny an administrative
    hearing request. If the request
    for an administrative hearing is
    denied, the Commission shall issue
    detailed findings of fact and
    conclusions of law. These findings
    and conclusions shall become the
    Commission's final administrative
    determination that may be appealed
    to the Superior Court, Appellate
    Division.
    2. If the appeal involves disputed
    facts, the Commission shall approve
    an administrative hearing request
    and transmit the matter to the
    Office of Administrative Law. Upon
    completion of this hearing, the
    Administrative   Law   Judge   will
    submit to the Commission an initial
    decision that the Commission may
    adopt, reject or modify.     If the
    Commission rejects or modifies the
    initial decision, it shall issue
    detailed findings of fact and
    conclusions of law that will become
    the Commission's final administra-
    tive determination that may then
    be appealed to the Superior Court,
    Appellate Division.
    [N.J.A.C. 17:9-1.3.]
    The   language   in   Horizon's   handbook   tracks   the   regulatory
    language adopted by the SHBC.          Further, as already noted, we
    13                          A-1311-12T3
    have consistently recognized the statutory and regulatory scheme
    that   requires     disputes    over     eligibility      and   benefits     to   be
    submitted first to the SHBC, and, only thereafter, to this court
    for resolution.       See Burley, supra, 
    251 N.J. Super. 493
    ; Green,
    supra, 
    373 N.J. Super. 408
    ; Murray v. State Health Benefits
    Comm'n.,     
    337 N.J. Super. 435
    ,    439-40    (App.    Div.      2001)
    (explaining the statutory and regulatory scheme).
    Plaintiff     contends       he   is     not   challenging     the      SHBC
    determination in his present complaint, but rather is asserting
    contract   and     tort    claims   against     the   Program   administrators.
    Plaintiff essentially argues that the SHBC final agency action
    is irrelevant to his asserted causes of action.                      Defendants
    argue that the language in plaintiff's complaint shows plainly
    that, irrespective of the causes of action asserted, plaintiff
    is simply seeking coverage for his son's inpatient substance
    abuse treatment, and that a reversal of the SHBC determination
    is essential to plaintiff's complaint.                Our examination of the
    causes of action set forth in plaintiff's complaint is therefore
    pivotal to our determination of jurisdiction.
    We begin with an examination of the authority cited                         by
    plaintiff and thereafter we shall examine the language of the
    complaint.
    14                                A-1311-12T3
    In   Rinaldo,     plaintiffs          brought     an   action    against       a
    neighboring       landowner    who    had    obtained     a   freshwater   wetlands
    permit from the Department of Environmental Protection (DEP) to
    construct     an    access    road        over   protected    wetlands.    Rinaldo,
    supra, 
    387 N.J. Super. at 392-93
    .                   Plaintiffs had not received
    notice of the permit application and brought an action to enjoin
    the construction of the road and a corresponding "mitigation
    project" required by the DEP.                    
    Ibid.
       Plaintiffs also sought
    money damages for injury to their farm, and asserted claims
    against     the    landowner     and       its    contractors    for   negligence,
    trespass, conversion and intentional interference with property
    rights.     
    Id. at 393-94
    .
    On   motion,   the     Chancery      Division     transferred   the    entire
    case to the Appellate Division as, in effect, an appeal from a
    final decision of the DEP.                  
    Id. at 394
    .         We held that the
    Chancery     Division   erred        in    concluding    that   plaintiffs'      tort
    claims against the landowner and other private parties should
    have been transferred to the Appellate Division.                       
    Id.
     at 399-
    400.   We stated, in part,
    Plaintiffs could have filed a notice of
    appeal to this court from the DEP's wetlands
    permit and mitigation project approvals and
    filed a separate action in the Chancery
    Division asserting their tort claims against
    the   private   defendants.  The  fact  that
    plaintiffs    elected   to  challenge  state
    administrative agency decisions and assert
    15                               A-1311-12T3
    tort claims against private parties in a
    single complaint does not vest this court
    with jurisdiction over claims that the Court
    Rules allocate to the jurisdiction of the
    Chancery or Law Division. See Maisonet v.
    N.J. Dep't of Human Servs., 
    140 N.J. 214
    ,
    226-28 (1995).
    [Id. at 400.]
    We   added     that    even      if     plaintiffs          were     unsuccessful        in
    challenging the DEP wetlands permit in the Appellate Division,
    this would "not foreclose them from pursuing their tort claims
    against the private defendants."               
    Ibid.
    In      Burley,   plaintiff,        a     State        employee       with    health
    insurance under the Program, brought suit in the Law Division
    against Prudential, the State's claims administrator,                             for bad
    faith   in     declining    to    pay    the        full    amount       sought   by    her
    physician for a procedure he had performed, and in its refusal
    to advise in advance of the "customary fee" it would approve for
    her son's prescribed tonsillectomy.                        Burley, supra, 
    251 N.J. Super. at 494-96
    .          The suit was dismissed in the Law Division
    based   upon    plaintiff's      failure       to    exhaust       her   administrative
    remedies.      
    Id. at 494-95
    .
    On appeal, we affirmed, but modified, the ruling in the Law
    Division.      We observed that
    plaintiff   must  first  seek   recourse   by
    administrative appeal to the SHBC.       Both
    sound principles of administrative law and
    the relevant contract provisions require the
    16                                      A-1311-12T3
    plaintiff to seek administrative relief
    before attempting to sue for damages.    All
    available   and   appropriate administrative
    remedies generally should be fully explored
    "before judicial action is sanctioned."
    Abbott v. Burke, 
    100 N.J. 269
    , 296 (1985).
    The "exhaustion" principle ensures that
    claims will be heard as a preliminary matter
    by a body with expertise, a factual record
    may be created for appellate review, and
    there is a chance that the agency decision
    may satisfy the parties and keep them out of
    court.    Atlantic City v. Laezza, 
    80 N.J. 255
    , 265 (1979).
    [Id. at 498.]
    We transferred the matter to the SHBC for a hearing on the
    merits of plaintiff's claim under the Program, and added that
    "[o]ur action, is of course, without prejudice to any claim
    plaintiff may wish to assert administratively or at law against
    either Prudential or the SHBC."          Id. at 500.
    Here, by contrast, plaintiff has explicitly stated that his
    complaint   is   brought     to   recover    "unpaid   benefits"    under      the
    Program.     Accordingly, to recover, plaintiff must necessarily
    secure a reversal of the SHBC final agency action upholding the
    denial of those same benefits.               Plaintiff cannot      avoid this
    obvious    conclusion   by    cloaking      his   claims   under   the    mantle
    of contract and tort.
    The New Jersey Constitution of 1947 provides that "persons
    aggrieved by action or inaction of state or local administrative
    agencies could seek review . . . in the Superior Court '. . . on
    17                                 A-1311-12T3
    terms and in the manner provided by rules of the Supreme Court
    . . . .'"    Pascucci v. Vagott, 
    71 N.J. 40
    , 51-52 (1971) (quoting
    N.J. Const. art. VI, § 5, ¶ 4).                  Pursuant to that authority, the
    Court adopted Rules 2:2-3 and 2:2-4, with the intention that
    "every proceeding to review the action or inaction of a state
    administrative      agency     would       be     by    appeal               to    the   Appellate
    Division."        Cent. R.R. Co. v. Neeld, 
    26 N.J. 172
    , 185, cert.
    denied, 
    357 U.S. 928
    , 
    78 S. Ct. 1373
    , 
    2 L. Ed. 2d 1371
     (1958).
    Specifically, Rule 2:2-3 states that "appeals may be taken to
    the   Appellate     Division    as     of       right       .       .    .    to    review    final
    decisions    or    actions    of     any    state           administrative               agency   or
    officer."    R. 2:2-3(a)(2).          So too, "the Appellate Division may
    grant leave to appeal, in the interest of justice, . . . from an
    interlocutory      decision     or    action           of       a       state      administrative
    agency or officer, if the final judgment, decision or action
    thereof is appealable as of right pursuant to R. 2:2-3(a) . . . ."
    R. 2:2-4.
    To be sure, "some actions or inactions of State agencies
    and officers do not constitute 'administrative' agency action or
    inaction that is subject to review by the Appellate Division
    under Rule 2:2-3(a)(2)."           D.J. Miller & Assocs., Inc. v. State,
    Dep't of Treasury, 
    356 N.J. Super. 187
    , 191 (App. Div. 2002).
    One obvious example is tortious conduct that subjects a State
    18                                             A-1311-12T3
    agency or officer to liability under the Tort Claims Act (TCA),
    N.J.S.A. 59:1-1 to 12-3.                    
    Ibid.
           Another example is an action
    for   breach         of    contract       under     the       Contractual        Liability       Act
    (CLA), N.J.S.A. 59:13-1 to -10, "which does not constitute State
    administrative            agency        action   within       the    intent      of    Rule   2:2-
    3(a)(2) and thus jurisdiction over such a claim resides in the
    appropriate          trial    court       rather       than    the   Appellate         Division."
    
    Id. at 192
    .
    In    a     thinly          disguised      effort        to    fit    within      the    Law
    Division's jurisdiction and divest this court of ours, plaintiff
    framed his claims as those alleging breach of contract, breach
    of fiduciary duty, consumer fraud under the CFA, and                                       unjust
    enrichment.           Ordinarily,           if   properly        pled      and   substantively
    based, these claims might be sufficient to vest the Law Division
    with jurisdiction.                 However, our "exclusive jurisdiction does
    not turn on the theory of the challenging party's claim or the
    nature of the relief sought."                     Mutschler v. N.J. Dep't of Envtl.
    Prot., 
    337 N.J. Super. 1
    , 8 (App. Div.) (citing Neeld, 
    supra,
     
    26 N.J. at 184-85
    ), certif. denied, 
    168 N.J. 292
     (2001)).                                        Here,
    stripped        to        their     barest       essentials,         plaintiff's          claims,
    sounding     in       tort        and    contract,       amount      to    no    more     than    a
    collateral challenge to the November 14, 2011 SHBC final agency
    action     upholding         the        limitation      of     coverage     for       plaintiff's
    19                                     A-1311-12T3
    health benefit claims.          Indeed, absent an attack on that final
    agency action, plaintiff's tort and contract claims are patently
    without basis in fact or law.
    As we stated in Mutschler:
    The Appellate Division has been vested with
    exclusive jurisdiction to review any action
    or   inaction   of  a  state   administrative
    agency. Pascucci v. Vagott, 
    71 N.J. 40
    , 51-
    54 (1976); Equitable Life Mortgage & Realty
    Investors v. New Jersey Div. of Taxation,
    
    151 N.J. Super. 232
    , 237-38, (App. Div.),
    certif. denied, 
    75 N.J. 535
     (1977).       The
    Appellate Division's exclusive jurisdiction
    does   not   turn  on  the   theory   of  the
    challenging party's claim or the nature of
    the relief sought.     Central R.R. Co. v.
    Neeld, 
    26 N.J. 172
    , 184-85, cert. denied,
    
    357 U.S. 928
    , 
    78 S. Ct. 1373
    , 
    2 L. Ed. 2d 1371
     (1958).    Thus, this court's exclusive
    jurisdiction extends to claims of state
    agency inaction, Hospital Ctr. at Orange v.
    Guhl, 
    331 N.J. Super. 322
    , 329-30 (App. Div.
    2000), and to claims that are essentially
    declaratory in nature.        Equitable Life
    Mortgage & Realty Investors v. New Jersey
    Div. of Taxation, 
    supra,
     
    151 N.J. Super. at 238
    . It also extends to claims that are
    joined with claims within the jurisdiction
    of another court or division of this court.
    Pascucci v. Vagott, 
    supra,
     
    71 N.J. at 52-54
    .
    [Mutschler, 
    supra,
     337 N.J. Super. at 9].
    Plaintiff's arguments which seek to avoid the application of
    this well-recognized principle are unpersuasive.
    In   our   view,   neither      Rinaldo     nor    Burley   stand   for   the
    proposition    that,   in       circumstances      like     those   before    us,
    plaintiff   may   pursue    a    private   cause      of   action   against   the
    20                                A-1311-12T3
    SHBC's claims administrators that is necessarily dependent upon
    the merits of his challenge to the SHBC's final agency action
    rejecting his claim for health care coverage.              Notwithstanding
    plaintiff's     energetic   arguments   to   the   contrary,   plaintiff's
    complaint in the Law Division is squarely predicated upon the
    contention that defendants "wrongfully den[ied]" coverage for
    the health care claims advanced, and plaintiff in his complaint
    explicitly averred that "[t]his is an action for unpaid benefits
    and injunctive relief."1
    In Rinaldo, for example, we explained that plaintiffs were
    entitled   to   pursue   their   claims   against    the   holder   of    the
    wetlands permit and its contractors because the issuance of the
    1
    We observe that plaintiff's complaint may be subject to other
    procedural and substantive infirmities.   For example, plaintiff
    asserts that defendants "breached their contract" with him, yet
    it is clear that defendants were merely contractually bound to
    the SHBC - not to plaintiff.          Further, while the CFA
    "encompass[es] the sale of insurance policies as goods and
    services that are marketed to consumers," "the payment of
    insurance benefits is not subject to the CFA."      Lemelledo v.
    Benefit Mgmt. Corp., 
    150 N.J. 255
    , 265 (1997) (citing Nikiper v.
    Motor Club of Am., 
    232 N.J. Super. 393
    , 401 (App. Div.), certif.
    denied, 
    117 N.J. 139
     (1989)); Pierzga v. Ohio Cas. Grp. of Ins.
    Cos., 
    208 N.J. Super. 40
    , 47 (App. Div.), certif. denied, 
    104 N.J. 399
     (1986); see also In re Van Holt, 
    163 F.3d 161
    , 168 (3d
    Cir. 1998)("The mere denial of insurance benefits to which
    . . . plaintiffs believe[] they [are] entitled does not comprise
    an unconscionable commercial practice."). Also, it is apparent
    that plaintiff failed to allege a claim of breach of duty of
    good faith with the required specificity.      See R. 4:5-8(a).
    However, because such issues were not presented to the motion
    court, we do not address them here. Nieder v. Royal Indem. Ins.
    Co., 
    62 N.J. 229
    , 234-35 (1973).
    21                               A-1311-12T3
    wetlands permit did not insulate the permittee from liability
    for damaging its neighbor's property in undertaking its work.
    Rinaldo, 
    supra,
     
    387 N.J. Super. at 400
    .                                     Here, by contrast,
    plaintiff's      claim      is    that          he    was     damaged       by    the    denial     of
    benefits     –   a     claim     fully          adjudicated           on    the    administrative
    level,    and    for      which       plaintiff            has    abandoned        his    right    to
    appellate review.
    Plaintiff's focus at oral argument upon the errant claim of
    Magellan's physician advisor that a Caron physician had agreed
    that the son needed only outpatient treatment is unavailing.
    That    claim    was      addressed         and       corrected        at    the       second    level
    appeal by Horizon's Member Appeals Subcommittee, and plaintiff's
    coverage was extended to March 4 – after the date of the alleged
    telephone conversation with the Caron doctor.                                      Plaintiff thus
    challenged       that      claim           on        the     administrative             level,     and
    succeeded.
    Our   conclusion          in    Burley,             that   a   plaintiff         must     first
    pursue an administrative appeal from a denial of coverage under
    the program, before pursuing an action at law, and that the
    dismissal of a premature suit must be "without prejudice" to a
    later    action      at    law        is    not       authority        for       the    proposition
    plaintiff advances here.                   Burley, supra, 
    251 N.J. Super. at 500
    .
    As noted, plaintiff's claims in the Law Division are dependent
    22                                     A-1311-12T3
    upon the resolution of an issue contrary to the final agency
    action     of     the   SHBC     -    an   issue   fully   adjudicated       on    the
    administrative appeal before the SHBC - as to which plaintiff
    has abandoned his appeal.              Accordingly, plaintiff's complaint in
    the Law Division must be dismissed for lack of jurisdiction.                        To
    hold otherwise would permit plaintiff to collaterally attack a
    State administrative determination in the Law Division.                      The Law
    Division is without jurisdiction to adjudicate such claims.                          R.
    2:2-3(a).2
    The        remainder   of       plaintiff's     arguments   on     appeal     are
    without    sufficient       merit     to   warrant    discussion   in    a   written
    opinion.     R. 2:11-3(e)(1)(E).
    Affirmed.
    2
    Cf. R. 2:5-5(b)(authorizing the Appellate Division, but only in
    "exceptional instances," to order the record on appeal of a
    state agency decision to be supplemented by a specially-
    designated trial court judge).
    23                                A-1311-12T3
    

Document Info

Docket Number: A-1311-12

Citation Numbers: 433 N.J. Super. 430, 80 A.3d 1160

Filed Date: 12/11/2013

Precedential Status: Precedential

Modified Date: 10/30/2014

Authorities (20)

Hospital Center at Orange v. Guhl , 331 N.J. Super. 322 ( 2000 )

Dj Miller & Associates v. State, Dept. of Treasury , 356 N.J. Super. 187 ( 2002 )

Central RR Co. v. Neeld , 26 N.J. 172 ( 1958 )

Atkinson v. Parsekian , 37 N.J. 143 ( 1962 )

Mutschler v. DEPT. OF ENVIR. PROTECTION , 337 N.J. Super. 1 ( 2001 )

Nikiper v. Motor Club of America Cos. , 232 N.J. Super. 393 ( 1989 )

Manalapan Realty v. Township Committee of the Township of ... , 140 N.J. 366 ( 1995 )

Pascucci v. Vagott , 71 N.J. 40 ( 1976 )

MARIE NIKIPER v. Motor Club of America Cos. , 117 N.J. 139 ( 1989 )

Pierzga v. Ohio Cas. Group of Ins. Companies , 208 N.J. Super. 40 ( 1986 )

Maisonet v. New Jersey Department of Human Services, ... , 140 N.J. 214 ( 1995 )

Lemelledo v. Beneficial Management Corp. of America , 150 N.J. 255 ( 1997 )

Abbott v. Burke , 100 N.J. 269 ( 1985 )

CITY OF ATLANTIC v. Laezza , 80 N.J. 255 ( 1979 )

Re Van Holt, Jo Van Holt v. Liberty Mutual Fire Insurance ... , 163 F.3d 161 ( 1998 )

Rinaldo v. RLR INV., LLC , 387 N.J. Super. 387 ( 2006 )

EQUITABLE LIFE MORT. AND REALTY INVESTORS v. NJ Div. of ... , 151 N.J. Super. 232 ( 1977 )

Murray v. STATE HEALTH BENEFITS COMM. , 337 N.J. Super. 435 ( 2001 )

BURLEY EX REL. BURLEY v. Prudential Ins. , 251 N.J. Super. 493 ( 1991 )

Heaton v. State Health Ben. Com'n , 264 N.J. Super. 141 ( 1993 )

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