1 WO 2 3 4 5
9 Advanced Reimbursement Solutions LLC, et No. CV-19-05395-PHX-DLR al., Plaintiffs, 11 v. 12 Aetna Life Insurance Company, et al., 13 Defendants. 14 15 16 Counterclaim-Plaintiffs are Aetna, Inc., and Aetna Life Insurance Company 17 (“Aetna”). Counterclaim-Defendants are Advanced Reimbursement Solutions, LLC 18 (“ARS”), American Surgical Development, LLC (“ASD”), and 9 outpatient treatment 19 centers (“OTCs”).1 Pending before the Court are motions to dismiss Aetna’s Second 20 Amended Counterclaim (“SACC”) filed by ARS and ASD (Doc. 262) and the remaining 21 OTCs (Docs. 274 and 284). Also before the Court is Aetna’s motion for leave to amend 22 its SACC. (Doc. 437.) As explained below, the Court grants in part and denies in part 23 ARS and ASD’s motion to dismiss, denies the remaining OTCs’ motions to dismiss, and 24 grants Aetna’s motion for leave to amend.2
25 1 Aetna named 19 OTCs, but only 9 remain. The remaining OTCs fall into two separately represented groups: (1) Arrowhead Outpatient Treatment Center, LLC; 26 Lakeshore Interventional Treatment Center, LLC; Mesa Outpatient Treatment Center, LLC; Tempe Interventional Treatment Center, LLC; Tempe Outpatient Treatment Center, 27 LLC; and West Valley OTC, LLC (collectively, “Treatment Center OTCs”), and (2) Valley Pain Centers LLC; Valley Pain Centers of Peoria, LLC; and Valley Pain Centers of 28 Arizona, LLC (collectively, “Pain Center OTCs”). 2 Oral argument is denied because the issues are adequately briefed, and oral 1 I. Background3 2 Aetna brings counterclaims on its own behalf as the provider of fully insured health 3 plans, and in its capacity as claims administrator for self-funded, employer-established 4 health plans that retain Aetna as a third-party administrator. For fully insured plans, Aetna 5 pays claims using its own money. For self-funded plans, claims are paid directly by 6 employers and employees using their own money, but in its capacity as claims 7 administrator, Aetna is authorized by contract to bring actions to recover overpayments on 8 behalf of those plans. (Doc. 203-1 ¶¶ 43-49.) 9 Aetna policy and the terms of Aetna’s plans set forth several requirements designed 10 to impose reasonable limits on the cost of care. For example, Aetna members have cost- 11 sharing obligations. (Id. ¶ 53.) Plan members generally are required to pay an annual 12 deductible before plan benefits are triggered. Once members have paid their deductibles, 13 the plans then generally require members to pay coinsurance—a percentage of the cost— 14 for the healthcare services they receive, until they meet a plan-prescribed out-of-pocket 15 maximum. Members also sometimes are required to pay fixed dollar amounts called 16 copays at the time they receive certain healthcare services. (Id. ¶¶ 54-56.) Aetna’s 17 Copayment and Coinsurance Waivers Payment Policy requires providers to collect 18 copayments and coinsurance as defined by a member’s plan and prohibits providers from 19 waiving those obligations. (Id. ¶ 57.) 20 Aetna also controls costs by entering into network contracts with healthcare 21 providers that set rates Aetna will pay for services rendered by the in-network provider. 22 Out-of-network providers, by contrast, have not agreed to a particular reimbursement for 23 their services and therefore can charge more that in-network providers. (Id. ¶ 60.) But to 24 discourage members from obtaining care from more expensive, out-of-network providers, 25 Aetna typically imposes on members higher coinsurance obligations for out-of-network 26 services, and Aetna members are responsible for the difference between what the out-of-
27 argument will not aid the Court’s decision-making. See Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). 28 3 The following facts are derived from Aetna’s SACC and presumed true for purposes of this order. 1 network provider bills Aetna and the amount allowed by Aetna. (Id. ¶¶ 61-62.) 2 The OTCs contracted with ARS and ASD to provide, among other things, billing 3 services and back-office support in exchange for a portion of the OTCs’ reimbursements. 4 (Id. ¶¶ 66-81.) Aetna alleges that Counterclaim-Defendants “engag[ed] in a multi-faceted 5 out-of-network billing scheme intended to extract extraordinarily inflated payments from 6 Aetna and its self-funded plan sponsors simply because Aetna members received treatment 7 from medical professionals at the OTCs’ offices.” (Id. ¶ 1.) In particular, Aetna accuses 8 Counterclaim-Defendants of: 9 (a) causing Aetna’s contracted providers to refer patients to the out-of-network OTCs in violation of their provider contracts; 10 (b) causing in-network providers to perform services at out-of- network OTCs in violation of their contracts; (c) inducing 11 Aetna members to violate the terms of their insurance plans, including by waiving the Aetna members’ cost-sharing 12 obligations, which otherwise would have served as a deterrent to Aetna members’ use of the OTCs; (d) improperly billing for 13 facility fees on behalf of the OTCs, including misrepresenting the licensure and nature of the OTCs, despite the fact that 14 industry-standard practices and Aetna policy prohibited the billing of facility fees by OTCs; (e) misrepresenting the OTCs’ 15 rates and instead billing at rates required by ARS, which artificially inflated the OTCs’ charges by up to 4,900%; (f) 16 misrepresenting the medical services actually rendered to Aetna members; and (g) billing for uncovered and 17 experimental medical treatments. 18 (Id. ¶ 83.) 19 Aetna’s detailed, 336-paragraph SACC contains 13 separate claims: (1) tortious 20 interference with its Member Benefit Plans, brought against all Counterclaim-Defendants; 21 (2) tortious interference with its Provider Contracts, brought against all Counterclaim- 22 Defendants; (3) fraud, brought against all Counterclaim-Defendants; (4) negligent 23 misrepresentation, brought against all Counterclaim-Defendants; (5) violations of the 24 federal Racketeer Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 25 1962(c), brought against ARS and ASD only; (6) violation of RICO, 18 U.S.C. § 1962(d), 26 brought against ARS and ASD only; (7) violation of Arizona’s version of RICO, A.R.S. § 27 13-2314.01, brought against ARS and ASD only; (8) conspiracy to violate Arizona’s RICO 28 statute, brought against ARS and ASD only; (9) civil conspiracy, brought against all 1 Counterclaim-Defendants; (10) aiding and abetting a tort, brought against all 2 Counterclaim-Defendants; (11) for recoupment of overpayments under the Employee 3 Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(a)(3), brought against all 4 Counterclaim-Defendants; (12) unjust enrichment, brought against all Counterclaim- 5 Defendants; and (13) money had and received, brought against all Counterclaim 6 Defendants. (Doc. 203-1.) 7 II. Legal Standard 8 The Federal Rules of Civil Procedure require a pleading to contain “a short and plain 9 statement of the claim showing that the pleader is entitled to relief[.]” Fed. R. Civ. P. 10 8(a)(2). “To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual 11 allegations; rather, it must plead ‘enough facts to state a claim to relief that is plausible on 12 its face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) 13 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). When ruling on a motion to 14 dismiss, the Court does not assess whether the pleading’s allegations are, in fact, true. 15 Instead, well-pled factual allegations are accepted as true and construed in the light most 16 favorable to the pleader. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). The 17 Court’s task merely is to determine whether those well-pled factual allegations plausibly 18 state a claim to relief under governing law. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 19 The federal rules, however, set a heightened pleading standard for allegations of 20 fraud. “In alleging fraud . . . a party must state with particularity the circumstances 21 constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s 22 mind maybe alleged generally.” Fed. R. Civ. P. 9(b). “Averments of fraud must be 23 accompanied by the who, what, when, where, and how of the misconduct charged.” Vess 24 v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quotations and citation 25 omitted). Ordinarily, Rule 9(b)’s heightened pleading standard applies only to averments 26 of fraud; “[t]he rule does not require that allegations supporting a claim be stated with 27 particularity when those allegations describe non-fraudulent conduct.” Id. at 1104. But 28 “[i]n some cases, the plaintiff may allege a unified course of fraudulent conduct and rely 1 entirely on that course of conduct as the basis of a claim. In that event, the claim is said to 2 be ‘grounded in fraud’ or to ‘sound in fraud,’ and the pleading of that claim as a whole 3 must satisfy the particularity requirement of Rule 9(b).” Id. at 1103-04. 4 When multiple defendants sued in connection with an alleged fraudulent scheme, 5 there is no requirement that the pleader identify every instance of fraudulent conduct for 6 every defendant. Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). Though “Rule 7 9(b) does not allow a complaint to merely lump multiple defendants together,” in fraud 8 suits involving multiple defendants it is sufficient for a pleader to identify the role each 9 defendant played in the alleged fraudulent scheme. Id. at 764-65. Further, in cases such 10 as this one, involving hundreds or thousands of alleged fraudulent transactions, specifying 11 each and every transaction with the particularity ordinarily demanded by Rule 9(b) “is 12 neither practical nor required.” Nutrishare, Inc. v. Connecticut Gen. Life Ins. Co., No. 13 2:13-cv-02378-JAM-AC, 2014 WL 1028351, at *4 (E.D. Cal. Mar. 14, 2014). “When 14 dealing with thousands of instances, it is often the case that a complaint or counterclaim 15 laying out each and every misrepresentation in detail would provide less effective notice 16 and be less useful in framing the issues than would a shorter, more generalized version.” 17 Id. 18 Indeed, Rule 9(b) serves four purposes: 19 First, the rule ensures that the defendant has sufficient information to formulate a defense by putting it on notice of 20 the conduct complained of. . . . Second, Rule 9(b) exists to protect defendants from frivolous suits. A third reason for the 21 rule is to eliminate fraud actions in which all the facts are learned after discovery. Finally, Rule 9(b) protects defendants 22 from harm to their goodwill and reputation. 23 U.S. ex rel. Stinson, Lyons, Gerlin & Bustamante, P.A. v. Blue Cross Blue Shield of 24 Georgia, Inc., 755 F. Supp. 1055, 1056-57 (S.D. Ga. 1990). “A court should hesitate to 25 dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the defendant has been 26 made aware of the particular circumstances for which she will have to prepare a defense at 27 trial, and (2) that plaintiff has substantial prediscovery evidence of those facts.” Harrison 28 v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). “Rules 8(a) and 1 9(b) must be read in conjunction with one another. [A] [p]laintiff may state allegations of 2 fraud in short, plain statements, provided that said statements put [d]efendants on adequate 3 notice of the conduct alleged to be fraudulent.” Reilly v. Charles M. Brewer, Ltd. Profit 4 Sharing Plan, No. CIV 02-2218-PHX-EHC, 2004 WL 7339615, at *4 (D. Ariz. Sep. 30, 5 2004). 6 III. ARS and ASD’s motion to dismiss (Doc. 262) 7 A. Judicial Notice 8 This is not the first time Counterclaim-Defendants have moved to dismiss Aetna’s 9 counterclaims. Earlier in this litigation, Counterclaim-Defendants moved to dismiss 10 Aetna’s First Amended Counterclaim (“FACC”). Those motions were based, in part, on 11 Counterclaim-Defendants’ belief that Aetna had not been specific enough about the 12 particular reimbursement claims it was challenging. Before the Court could rule on those 13 motions, Aetna produced in discovery a list of reimbursement claims that formed the basis 14 of its counterclaims. Aetna also moved for leave to file its SACC. Counterclaim- 15 Defendants agreed to stipulate to the filing of the SACC and withdraw their motions to 16 dismiss the FACC on the understanding that the SACC’s allegations were premised on the 17 claims list Aetna produced during discovery, and on condition that Counterclaim- 18 Defendants could move to the dismiss the SACC if they deemed such motions appropriate. 19 ARS and ASD now ask the Court to take judicial notice of Aetna’s claims list and of ARS 20 and ASD’s statistical analysis of those claims. They further ask the Court to take judicial 21 notice of the Medicare Claims Processing Manual. (Doc. 262-3.) The Court grants this 22 request in part. 23 Federal Rule of Evidence 201 allows a court to take judicial notice of a fact “not 24 subject to reasonable dispute in that it is . . . capable of accurate and ready determination 25 by resort to sources whose accuracy cannot reasonably be questioned.” A document not 26 appended to a complaint “may be incorporated by reference into a complaint if the plaintiff 27 refers extensively to the document or the document forms the basis of the plaintiff’s claim.” 28 United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). The Court also can take judicial 1 notice of publicly available federal agency records that are not subject to reasonable 2 dispute. See U.S. ex rel. Modglin v. DJO Global Inc., 48 F. Supp. 3d 1362, 1384 (C.D. 3 Cal. 2014). Here, the Court can consider Aetna’s claims list because the claims identified 4 therein form the basis of its counterclaims. The Court also can consider the Medicare 5 Claims Processing Manual because it is a publicly available document produced by a 6 federal agency, the content of which is not subject to reasonable dispute. The Court grants 7 ARS and ASD’s request to take judicial notice of these materials. 8 The Court denies ARS and ASD’s request to take judicial notice of their statistical 9 analysis of the claims Aetna is challenging. In the Court’s judgment, this type of in-depth 10 analysis crosses the line from merely summarizing the claims list to offering ARS and 11 ASD’s own version or interpretation of the facts, the latter of which is not appropriate at 12 the motion to dismiss stage. Indeed, “[i]f defendants are permitted to present their own 13 version of the facts at the pleading stage—and district courts accept those facts as 14 uncontroverted and true—it becomes near impossible for even the most aggrieved plaintiff 15 to demonstrate a sufficiently ‘plausible’ claim for relief.” Khoja v. Orexigen Therapeutics, 16 Inc., 899 F.3d 988, 999 (9th Cir. 2018). To the extent ARS and ASD’s motion to dismiss 17 is based on this statistical analysis, it is denied.4 18 B. Recoupment of Overpayments under 29 U.S.C. § 1132(a)(3) 19 In Counterclaim 11, Aetna seeks to recover alleged overpayments made to 20 Counterclaim-Defendants pursuant to 29 U.S.C. § 1132(a)(3). ARS and ASD argue that 21 Aetna’s claim constitutes an adverse benefits determination and therefore must be 22 dismissed because Aetna has not alleged that it exhausted its administrative remedies. The 23 Court disagrees. Multiple district courts have determined that attempts to recover 24 overpayments are not adverse benefits determinations subject to administrative exhaustion. 25 4 In any event, ARS and ASD’s statistical analysis of the claims identified by Aetna, 26 even if credited, do not render Aetna’s SACC implausible. This analysis reaches conclusions about “most” or “a majority” of the claims Aetna has identified, but not about 27 all. At best, then, ARS and ASD’s statistical analysis might undermine Aetna’s allegations as to a subset of the claims at issue. That Aetna’s counterclaims might later prove 28 unsuccessful as to a subset of the challenged claims does not mean that Aetna cannot pursue its counterclaims at all. 1 See, e.g., Connecticut Gen. Life Ins. Co. v. Elite Ctr. for Minimally Invasive Surgery LLC, 2 No. 4:16-CV-00571, 2017 WL 1807681, at *2 (S.D. Tex. May 5, 2017); Almont 3 Ambulatory Surgery Ctr., LLC v. UnitedHealth Grp., Inc., 121 F. Supp. 3d 950, 985 (C.D. 4 Cal. 2015); Connecticut Gen. Life Ins. Co. v. True View Surgery Ctr. One, LP, 128 F. Supp. 5 3d 501, 512 (D. Conn. 2015); Nutrishare, 2014 WL 1028351, at *3. 6 ARS and ASD alternatively argue that Counterclaim 11 must be dismissed because 7 Aetna does not allege the specific plan terms that provide a basis for recoupment. The 8 Court disagrees. Paragraph 318 of the SACC alleges that the plans authorize the recovery 9 of overpayments where they “erroneously paid benefits because of false information 10 entered on . . . [a] claim form or required documentation,” and proceeds to identify a host 11 of expenses and services allegedly not covered by the plans. These allegations are 12 sufficient for pleading purposes. More granular details can be fleshed out through 13 discovery. ARS and ASD’s motion to dismiss Counterclaim 11 is denied. 14 C. Fraud 15 To advance a fraud claim, Aetna must allege: 16 (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth; (5) 17 his intent that it should be acted upon by and in the manner reasonably contemplated; (6) the hearer’s ignorance of its 18 falsity; (7) his reliance on the truth; (8) his right to rely thereon; and (9) his consequent and proximate injury. 19 20 Peery v. Hansen, 585 P.2d 574, 577 (Ariz. Ct. App. 1978). ARS and ASD raise a number 21 of arguments as to why Aetna’s fraud claim is not plausible. None are persuasive. 22 High Prices. ARS and ASD argue that Aetna cannot maintain a fraud claim based 23 on the prices reflected in the OTCs’ bills because high prices do not constitute fraud. Stated 24 differently, ARS and ASD contend that the prices charged by the OTCs were not 25 misrepresentations. The Court disagrees. The SACC does not merely allege that the OTCs 26 charged high prices. The SACC instead alleges that the OTCs used grossly inflated rates 27 supplied by ARS in place of their actual rates. Although ARS and ASD might disagree 28 with Aetna’s characterization of these high rates as being something other than the OTCs’ 1 actual rates, the Court must accept Aetna’s allegations as true for purposes of this order. 2 Aetna has adequately alleged a misrepresentation based on the OTCs’ use of grossly 3 inflated rates supplied by ARS, untethered from the OTCs’ actual rates. 4 Moreover, the authorities cited by ARS and ASD do not support their position. ARS 5 and ASD cite F.T.C. v. Magui Publishers, Inc., 9 F.3d 1551, 1993 WL 430102 (9th Cir. 6 1993) for the proposition that “mere setting of high prices may not constitute fraud,” but 7 they take this quote out of context. The full quote reads: “Magui argues that the district 8 court erred in finding that it misrepresented the value of its prints, citing United States v. 9 Interstate Eng'g Corp., 288 F. Supp. 402, 422 (D. N.H. 1967) (Wyzanski, C.J.) for the 10 principle that mere setting of high prices may not constitute fraud. However, the district 11 court did not clearly err in finding that Magui’s representations regarding the value of its 12 prints contributed to the misrepresentation that the prints were valuable works of art.” 13 Magui Publishers, 1993 WL 430102, at *4. The Court did not hold that the mere setting 14 of high prices may not constitute fraud; it made this statement in a portion of the decision 15 summarizing the appellant’s argument. And in any event, Magui Publishers was an appeal 16 from a final judgment issued after a bench trial, not an appeal from an order granting a 17 motion to dismiss. The case does not support dismissal of Aetna’s fraud claim at the 18 pleading stage. 19 Likewise, ARS and ASD cite In re McGinty, 276 B.R. 489, 497 (Bankr. N.D. Miss. 20 2000) for the proposition that charging inflated prices is not actionable fraud absent some 21 misrepresentation, but In re McGinty was a decision issued after full trial on the merits, not 22 at the pleading stage. Further, Aetna does not allege that ARS and ASD merely charged 23 inflated prices. Aetna alleges that the OTCs, via their contracts with ARS and ASD, 24 misrepresented their actual rates. 25 Finally, ARS and ASD cite Jones v. Swanson Services Corp., No. CIV.A. 3:06- 26 00002, 2009 WL 2151300, at *4 (M.D. Tenn. July 13, 2009) for the proposition that 27 “conclusory allegation of high prices” are insufficient to state a claim for fraud. But far 28 1 from being conclusory, Aetna’s allegations regarding the relationship between ARS, ASD, 2 and OTCs, and Counterclaim-Defendants’ pricing scheme are extraordinarily detailed. 3 Reasonable Reliance on and Materiality of OTCs’ Prices. ARS and ASD argue 4 that Aetna cannot have reasonably relied on the OTCs’ prices when determining 5 reimbursement amounts because Aetna was never under any obligation to pay more than 6 what it thought was reasonable. Relatedly, they also argue that Aetna has not pled with 7 sufficient specificity the claims for which the OTCs’ billed prices impacted Aetna’s 8 reimbursement decisions, i.e., materiality. The Court disagrees. 9 ARS and ASD once again rely on two decisions rendered after trials on the merits. 10 See N. Cypress Med. Ctr. Operating Co., Ltd. v. Aetna Life Ins. Co., 898 F.3d 461 (5th Cir. 11 2018); People v. Brigham, 261 A.D. 2d 43 (N.Y. Ct. App. 1999). Regardless of the merits 12 of those decisions, they do not stand for the proposition that fraud claims like those being 13 pursued by Aetna here cannot move past the pleading stage. “Questions about materiality 14 and reasonable reliance . . . usually are for the jury, not for the court to decide on a motion 15 to dismiss.” Lerner v. DMB Realty, LLC, 322 P.3d 909, 914 (Ariz. Ct. App. 2014). There 16 will come a time when ARS and ASD can offer evidence to controvert Aetna’s allegations. 17 But at this stage, Aetna’s allegations are entitled to a presumption of truth. The SACC 18 plausibly alleges that Aetna relied, at least in part, on the OTCs’ billed charges when it 19 determined how much (if any) to reimburse. The SACC also identifies examples of claims 20 that it would have paid differently had it known that the OTCs’ bills did not reflect their 21 actual rates. Aetna’s use of exemplars, rather than pleading the details of every disputed 22 claim, does not render the SACC deficient. To the contrary, Aetna’s use of exemplars 23 helps to harmonize Rule 8’s command that a complaint be short, plain, and simple, with 24 Rule 9(b)’s demand for more detail in cases of fraud. 25 Waiver of Cost-Sharing. ARS and ASD argue that Aetna cannot plausibly allege 26 fraud based on waiver of patients’ cost-sharing obligations. ARS and ASD’s argument is 27 two-fold. First, they argue that Aetna’s allegations are implausible because patients had 28 no cost-share obligations in 80% of the challenged claims. But this argument is based on 1 ARS and ASD’s own statistical analysis and interpretation of the claims data, which the 2 Court will not consider at the motion to dismiss stage.5 Second, ARS and ASD argue that 3 an alleged failure to collect cost-share from patients does not amount to fraud absent a duty 4 to disclose the cost-share waiver to the health plan. For this proposition, ARS and ASD 5 rely on Connecticut General Life Insurance Co. v. Southwest Surgery Center, LLC, 349 F. 6 Supp. 3d 718, 731 (N.D. Ill. 2018), but that reliance is misplaced for two reasons: (1) the 7 case addressed this issue in the context of a motion for summary judgment, not a motion 8 to dismiss, and (2) the district court concluded that a fact dispute about whether the health 9 plan’s claims submission procedures required such disclosure precluded summary 10 judgment. ARS and ASD are moving to dismiss, not for summary judgment. And 11 paragraph 57 of the SACC alleges that Aetna’s Copayment and Coinsurance Waivers 12 Payment Policy prohibits both participating and non-participating providers from waiving 13 copayment or coinsurance obligations. The Court must accept that allegation as true for 14 present purposes. 15 Format of Provider’s Bill. ARS and ASD argue that Aetna cannot state a fraud 16 claim based on the OTCs’ alleged misrepresentation of the “provider type” on their bills 17 “because such a misrepresentation could not have been material to Aetna’s payment 18 decision, and Aetna could not have justifiably relied on it.” (Doc. 262-1 at 19.) This 19 argument is rejected because questions of materiality and reasonable reliance are questions 20 of fact not suitable for resolution at the motion to dismiss stage. 21 ARS and ASD also argue that Aetna cannot plausibly allege that the OTCs 22 knowingly misrepresented the provider type on their bills with the intent to defraud. The 23 Court disagrees. The SACC contains sufficient factual matter to permit a reasonable 24 inference of knowledge and fraudulent intent. (See, e.g, Doc. 203-1 ¶ 7, 83, 100-114, 210.) 25 D. Standing 26 ARS and ASD argue that Aetna does not have standing to assert non-ERISA claims 27 on behalf of the self-funded plans. The Court previously has rejected this sort of argument.
28 5 In any event, ARS and ASD’s statistical analysis does not show that none of the challenged claims involved patient cost-share obligations. 1 See Blue Cross of California Inc. v. Insys Therapeutics Inc., 390 F.Supp.3d 996, 1007 (D. 2 Ariz. 2019) (“As for the self-funded plans, Insys argues that Anthem lacks standing 3 because it neither suffered a financial injury nor has a valid assignment to bring the state 4 law claims on behalf of the plans. . . . In support, Insys notes that, while Anthem provides 5 administrative services for self-funded plans, it neither funds nor pays claims for these 6 plans. . . . Although reimbursements on behalf of self-funded plans might not have been 7 made from Anthem’s fisc, Anthem still has a concrete and particularized interest in paying 8 only valid claims to ensure its members’ financial interests are protected.” (internal 9 quotations and citation omitted)). To support their contrary view, ARS and ASD rely on 10 Almont, in which the district court concluded that the administrator of self-funded plans 11 lacked standing to bring claims under California’s Unfair Competition Law (“UCL”), 12 which has an economic injury component that “renders it more restrictive than federal 13 injury in fact[.]” 121 F. Supp. 3d at 962. But Aetna is not bringing a counterclaim under 14 the UCL. And even the Almont court later determined that the plan administrator had 15 Article III standing to pursue other state law claims on behalf of self-funded plans. See 16 Almont Ambulatory Surgery Ctr., LLC v. UnitedHealth Grp., Inc., Case No.CV 14-03053 17 MWF(VBKx), 2015 WL 12778048, at * 20 (C.D. Cal. Oct. 23, 2015). 18 ARS and ASD also argue that Aetna’s state law and non-ERISA claims seek 19 damages that exceed the scope of Aetna’s authority to recover overpayments. But Aetna 20 alleges that its Administrative Services Agreements give it broad authority to pursue 21 recoveries on behalf of self-funded plans, and the Court must accept that as true for present 22 purposes. 23 E. State and Federal RICO Claims 24 To state a plausible RICO claim, Aetna must allege that ARS and ASD 25 “participate[d] in (1) the conduct of (2) an enterprise that affects interstate commerce (3) 26 through a pattern (4) of racketeering activity[.]” Eclectic Properties East, LLC v. Marcus 27 28 1 & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014); 18 U.S.C. § 1962(c).6 ARS and ASD 2 argue that Aetna has not plausibly alleged any of these elements. 3 Racketeering Activity. Racketeering activity is defined by statute to include certain 4 predicate offenses. 18 U.S.C. § 1961(1). Aetna’s RICO claim is based on the predicate 5 offenses of mail fraud and wire fraud. (Doc. 203-1 ¶ 265); 18 U.S.C. §§ 1341, 1343. ARS 6 and ASD argue that the SACC fails to adequately plead fraud of any kind, reiterating the 7 arguments they made with respect to the SACC’s common law fraud claim. For reasons 8 already explained, the Court finds the SACC adequately pleads fraud. 9 Conduct of an Enterprise. The SACC alleges the existence of 9 separate 10 association-in-fact enterprises, each consisting of ARS, ASD, and one of the remaining 9 11 OTCs. (Doc. 203-1 ¶ 256.) RICO defines enterprise broadly to include “any individual, 12 partnership, corporation, association, or other legal entity, and any union or group of 13 individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). “[A]n 14 association-in-fact enterprise is . . . a continuing unit that functions with a common 15 purpose.” Boyle v. United States, 556 U.S. 938, 944, 948 (2009). However, “proof of a 16 ‘pattern of racketeering activity’ is not, by itself, proof of an ‘enterprise.’” Odom v. 17 Microsoft Corp., 486 F.3d 541, 549 (9th Cir. 2007) (internal citation omitted). “The 18 enterprise and its activity are two separate things,” Id. at 551, and liability under RICO 19 “depends on showing that the defendants conducted or participated in the conduct of the 20 ‘enterprise’s affairs,’ and not just their own affairs.” Reves v. Ernst & Young, 507 U.S. 21 170, 185 (1993) (emphasis in original). 22 ARS and ASD argue that the SACC does not plausibly allege that they conducted 23 the affairs of an enterprise rather than acted in their own self interests. ARS and ASD rely 24 principally on two cases, Connecticut General Life Insurance Co. v. Advanced Surgery 25 Center of Bethesda, LLC, No. DKC 14-2376, 2015 WL 4394408 (D. Md. July 16, 2015) 26 and Tri State Advanced Surgery Center, LLC v. Health Choice, LLC, 112 F. Supp. 3d 809,
27 6 Arizona courts have interpreted the state law version of RICO “to mirror the federal RICO statute.” Aviva USA Corp. v. Vazirani, 632 Fed. App’x 885, 889 (9th Cir. 28 2015). The Court therefore analyzes Aetna’s federal RICO claim with the understanding that the same outcome will obtain under Arizona’s analogous statute. 1 814 (D. Ark. 2015), which, when confronted with similar fraudulent billing allegations as 2 those present here, concluded that the claimants had failed to plausibly allege that the 3 billing scheme was part of an enterprise, rather than consistent with each entity carrying 4 out its own business in a fraudulent manner. 5 This Court, however, is not persuaded by the analyses in Connecticut General and 6 Tri State. As the Third Circuit explained, “[i]t will often be the case that the interests of 7 the enterprise are congruent with those of its members; such congruence presumably 8 provides the incentive for members to participate in the enterprise.” In re Insurance 9 Brokerage Antitrust Litigation, 618 F.3d 300, 378 (3d. Cir. 2010). As such, the fact that 10 conduct may be consistent with each participant’s own interests does not necessarily mean 11 that the conduct cannot also plausibly reflect the affairs of an enterprise. This Court finds 12 persuasive the Third Circuit’s view “that if defendants band together to commit [violations] 13 they cannot accomplish alone . . . then they cumulatively are conducting the association- 14 in-fact enterprise’s affairs, and not [simply] their own affairs.” Id. (internal quotation and 15 citation omitted; alterations in original). Here, the SACC alleges that ARS and ASD 16 banded together with each OTC to obtain reimbursement for exorbitant facility fees, an 17 objective that they could not have accomplished alone. For example, the SACC alleges 18 that ASD generated referrals on behalf of the OTCs (Doc. 203-1 ¶¶ 76-82, 89-99), that 19 ARS prepared agreements and sent follow-up letters to Aetna’s members regarding the 20 alleged cost-share waivers (Id. ¶¶ 122-137), and that the OTCs used artificial, grossly 21 inflated rates provided by ARS, which the OTCs could not use outside their contracts with 22 ARS (Id. ¶¶ 9, 10, 14, 72-74, 86, 115-121). As alleged, these actions plausibly reveal 23 conduct on behalf of each association-in-fact enterprise, notwithstanding the fact that the 24 interests of the alleged enterprise might have been congruent with the interests of each 25 member. 26 Pattern of Racketeering Activity. Lastly, ARS and ASD argue that Aetna has not 27 adequately pled a pattern of racketeering activity for each of the 9 alleged enterprises 28 because a pattern of racketeering activity “requires at least two acts of racketeering 1 activity,” 18 U.S.C. § 1961(5), and here Aetna’s SACC alleged only one example of mail 2 or wire fraud per OTC, and not all OTCs are included in the exemplars. (Doc. 203-1 ¶¶ 3 154-169.) On this score, ARS and ASD are correct. Although Aetna need not allege every 4 single instance of mail or wire fraud, to plead a pattern of racketeering activity it must 5 allege at least two specific instances of mail or wire fraud per enterprise. The Court 6 therefore grants ARS and ASD’s motion to dismiss the RICO claims from the SACC 7 because Aetna has not adequately alleged a pattern of racketeering activity with respect to 8 each of association-in-fact enterprise. 9 F. Summary 10 Although ARS and ASD purport to move for dismissal of all Aetna’s counterclaims, 11 their motion to dismiss fails to specifically address Aetna’s tortious interference, civil 12 conspiracy, aiding and abetting a tort, unjust enrichment, and money had and received 13 claims. The Court therefore does not comment on these claims in the context of ARS and 14 ASD’s motion to dismiss. The Court denies ARS and ASD’s motion to dismiss Aetna’s 15 fraud, negligent misrepresentation, and ERISA claims. The Court grants ARS and ASD’s 16 motion to dismiss Aetna’s state and federal RICO claims (Counts 5, 6, 7, and 8). 17 IV. Treatment Center OTCs’ Motion to Dismiss (Doc. 274) 18 A. Fraud and Negligent Misrepresentation 19 The Treatment Center OTCs argue that the SACC fails to plead fraud and negligent 20 misrepresentation with the requisite degree of particularity. The Court disagrees. “[A] 21 complaint need not distinguish between defendants that had the exact same role in a fraud.” 22 United States ex rel. Silingo v. WellPoint, Inc., 904 F.3d 667, 677 (9th Cir. 2018). Here, 23 Aetna accuses all of the remaining OTCs of playing essentially the same role in the alleged 24 fraudulent scheme. Aetna also pleads specific examples of allegedly fraudulent claims. 25 (See, e.g., Doc. 203-1 ¶¶ 155, 157, 163, 169.) The Court is satisfied that the Treatment 26 Center OTCs have been made aware of the circumstances for which they will have to 27 prepare a defense, and that Aetna has sufficient pre-discovery evidence supporting its 28 allegations. Dismissal of these claims under Rule 9(b) is inappropriate. 1 The Treatment Center OTCs also argue that Aetna’s fraud and misrepresentation 2 claims fail because Aetna does not plausibly allege reliance on the information in the 3 claims submitted to it by the Treatment Center OTCs. For reasons already explained, 4 however, questions about materiality and reasonable reliance generally are not properly 5 resolved at the motion to dismiss stage. 6 B. Tortious Interference 7 “A prima facie case of intentional interference requires: (1) existence of a valid 8 contractual relationship, (2) knowledge of the relationship on the part of the interferor, (3) 9 intentional interference inducing or causing a breach, (4) resultant damage to the party 10 whose relationship has been disrupted, and (5) that the defendant acted improperly.” Wells 11 Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension 12 Trust Fund, 38 P.3d 12, 31 (Ariz. 2002). Here, Aetna accuses all Counterclaim-Defendants 13 of tortiously interfering with its member benefit plans and provider contracts. With respect 14 to the former, Aetna alleges that: (1) its member benefit plans contain provisions requiring 15 members to satisfy their cost-sharing obligations; (2) Counterclaim-Defendants knew of 16 the existence of these contracts and of the members’ cost-sharing obligations under those 17 contracts; (3) Counterclaim-Defendants interfered with these provisions by waiving or 18 failing to collect the required patient cost-share; (4) these actions caused Aetna’s members 19 to breach the terms of their plans; and (5) Aetna was damaged because it made unnecessary 20 payments to the OTCs as a result. (Doc. 203-1 ¶¶ 170-182.) As for the latter, Aetna alleges 21 that: (1) Aetna’s provider contracts typically require providers to refer to other in-network 22 providers, except in certain limited situations, and to bill in a certain manner; (2) 23 Counterclaim-Defendants knew about these contracts, yet induced in-network providers to 24 refer patients to out-of-network providers and to perform services at out-of-network 25 locations; and (3) as a result, Aetna made unnecessary payments to the OTCs. (Id. ¶¶ 183- 26 193.) 27 The Treatment Center OTCs argue that Aetna fails to plead the elements of this 28 claim with the degree of particularity required by Rule 9(b). But Rule 9(b) applies only to 1 averments of fraud. It is not necessary for Aetna to plead every element of this claim with 2 the type of specificity Rule 9(b) demands. And, in any event, for reasons already discussed, 3 Aetna’s SACC satisfies Rule 9(b) by incorporating the claims list Aetna disclosed during 4 discovery, identifying the Treatment Center OTCs’ role in the overall scheme, and offering 5 exemplar contract language. The type of granularity the Treatment Center OTCs (and, 6 frankly, all Counterclaim-Defendants) seem to be demanding at the pleading stage is not 7 practical, productive, or helpful in a case of this magnitude. The parties are aware of the 8 universe of claims Aetna is challenging. They know, then, that the relevant contracts are 9 those that pertain to the patients for which those claims were submitted. Aetna has 10 adequately identified the role it believes the ARS, ASD, and the various OTCs played in 11 the overall scheme. This is more than adequate for the Treatment Center OTCs to respond 12 and prepare a defense. 13 Aside from a misguided Rule 9(b) argument, the Treatment Center OTCs argue that 14 the SACC does not adequately allege that they knew about the substance—as opposed to 15 the mere existence—of the relevant agreements. The Court disagrees. For starters, even 16 under Rule 9(b), knowledge, intent, and other conditions of the mind may be pled 17 generally. Further, for pleading purposes, one can reasonably infer that if the Treatment 18 Center OTCs knew that these contracts existed, they also were aware of the cost-sharing 19 and in-network referral obligations that those contracts allegedly imposed. Aetna need not 20 use magic words in its SACC to survive dismissal. 21 The Treatment Center OTCs also argue that the SACC is deficient because it 22 summarizes the relevant provisions of the plans but does not identify the precise language 23 in the plans that prohibit patient cost-sharing. Again, the Court disagrees. Aetna’s 24 summaries of relevant plan language are adequate to put the Treatment Center OTCs on 25 notice of the claims being asserted against them. Moreover, Aetna has disclosed a list of 26 the precise claims it is challenging. Through discovery, the parties can identify with more 27 specificity the precise language of each corresponding plan. But it would undermine Rule 28 8(a) to require Aetna to identify in its SACC the precise language for each and every plan. 1 C. Civil Conspiracy and Aiding and Abetting 2 The Treatment Center OTCs argue that Aetna’s civil conspiracy and aiding and 3 abetting claims fail for lack of an underlying tort. But, as previously explained, the SACC 4 adequately alleges fraud, misrepresentation, and tortious interference claims. Therefore, 5 Aetna’s civil conspiracy and aiding and abetting claims are tethered to underlying torts. 6 The Treatment Center OTCs also argue that Aetna’s aiding and abetting claim fails 7 because, as pled, it does not identify which Counterclaim-Defendants were the primary and 8 which were the secondary tortfeasors. The Court agrees with Aetna that, at bottom, this is 9 a “magic words” argument. The SACC does not need to contain the magic words “primary 10 tortfeasors” and “secondary tortfeasors” in order to state a plausible aiding and abetting 11 claim. 13 The Treatment Center OTCs argue that Aetna fails to adequately plead a claim under 14 29 U.S.C. § 1132(a)(3) because the SACC does not identify the plans at issue, nor does it 15 identify the precise terms of those plans that it seeks to enforce. The Court disagrees. 16 Given the number of disputed claims, it would not be practical or productive for Aetna to 17 include in its SACC the precise language for every single plan. Instead, the SACC pleads 18 what it alleges to be materially representative plan language. And Aetna has provided a 19 list of the disputed claims to the Treatment Center OTCs through discovery. This 20 information is adequate to put the Treatment Center OTCs on notice of the plan language 21 that Aetna seeks to enforce. 22 E. Unjust Enrichment and Money Had and Received 23 The Treatment Center OTCs argue that Aetna’s unjust enrichment and money had 24 and received claims are inadequately pled because Aetna fails to allege facts demonstrating 25 that it was impoverished by making payments to the Treatment Center OTCs, or that it is 26 entitled to recover any money paid to the Treatment Center OTCs. This argument strikes 27 the Court as bizarre—the entire thrust of Aetna’s SACC is that due to the allegedly tortious 28 actions of the Counterclaim-Defendants, it paid (or overpaid) claims to the OTCs that it 1 would not otherwise have paid. The Court rejects the Treatment Center OTCs’ argument 2 on this point. 3 Alternatively, the Treatment Center OTCs argue that these claims fail at least as 4 they pertain to the self-funded plans because the money paid from those plans does not 5 belong to Aetna. The Court disagrees. Aetna alleges that is serves as a fiduciary for the 6 self-funded plans at issue. “[T]rustees may indisputably litigate claims and collect 7 overpayments on behalf of the trust—or in this case, plan sponsors—even though they do 8 not ‘own’ the money they seek to collect.” Almont, 2015 WL 12778048, at *21. 9 F. Standing 10 Lastly, the Treatment Center OTCs argue that Aetna lacks standing to assert state- 11 law claims on behalf of the self-funded plans. The Court has already rejected this argument 12 in the context of ARS and ASD’s motion to dismiss. 13 G. Summary 14 The Treatment Center OTCs’ motion to dismiss is denied. 15 V. Pain Center OTCs’ Motion to Dismiss (Doc. 284) 16 The Pain Center OTCs’ challenge Aetna’s fraud, misrepresentation, tortious 17 interference, civil conspiracy, aiding and abetting, unjust enrichment, and money had and 18 received claims, and also challenges Aetna’s standing to bring its ERISA claim. But the 19 Pain Center OTCs’ motion relies on essentially the same arguments the Court has rejected 20 in the preceding pages of this order. The Court needs not reiterate its analysis of these 21 claims. Suffice it to say that nothing in the Pain Center OTCs’ motion changes the Court’s 22 analysis of the sufficiency of Aetna’s SACC. The Pain Center OTCs’ motion to dismiss is 23 denied. 24 VI. Aetna’s Motion for Leave to Amend (Doc. 437) 25 After the parties briefed the various motions to dismiss Aetna’s SACC, Aetna 26 moved for leave to file a Third Amended Counterclaim (“TACC”). (Doc. 437.) Aetna 27 filed its motion within the current scheduling order’s deadline for amending pleadings. It 28 seeks to add additional counterclaims and parties based on information Aetna has learned 1 through discovery, to shore up its existing claims with additional information learned 2 through discovery, to correct the entities listed as Counterclaim-Defendants, and to 3 otherwise conform the pleading to the evidence 4 “The court should freely give leave when justice so requires.” Fed. R. Civ. P. 5 15(a)(2). The Court then assesses the propriety of the motion for leave to amend by 6 considering factors such as bad faith, undue delay, prejudice to the opposing party, futility 7 of amendment, and whether the complaint previously has been amended. See Allen v. City 8 of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). “Generally, this determination should 9 be performed with all inferences in favor of granting the motion.” Griggs v. Pace Am. 10 Grp., Inc., 170 F.3d 877, 880 (9th Cir. 1999). 11 The Court does not find that Aetna is pursuing its motion in bad faith. The 12 Counterclaim-Defendants argue that Aetna’s motion comes too late and that granting the 13 request would be prejudicial because it would require them to re-brief their motions to 14 dismiss. The Court disagrees. The Court’s ruling on the pending motions to dismiss moots 15 Counterclaim-Defendants’ second concern. And Aetna’s motion is not too late; it was filed 16 within the deadline for amending pleadings and in response to new information unearthed 17 in discovery. Moreover, the Court has set a supplemental scheduling conference to modify 18 the current case management deadlines, meaning the parties will have an opportunity to 19 adjust the case schedule to accommodate the new allegations. 20 With that said, the Court has its own concerns about Aetna’s proposed TACC. 21 These concerns relate to circumstances that have changed since the filing of Aetna’s motion 22 for leave to amend. First, Aetna’s proposed TACC includes certain OTCs that have since 23 settled. Second, this order finds that Aetna’s SACC fails to allege a pattern of racketeering 24 activity as to ARS and ASD. Aetna did not have the benefit of this Court’s order when it 25 drafted its proposed TACC. In light of these changed circumstances, the Court grants 26 Aetna’s motion for leave to amend, but will give Aetna 10 days from the date of this order 27 in which to file its amended pleading. This additional time will allow Aetna to make any 28 adjustments to its proposed TACC that might be necessitated by recent developments. If Aetna makes any such adjustments, it shall file, concurrent with the TACC, an updated redlined version that apprises the Court and all parties of the changes. 3 IT IS ORDERED as follows: 4 1. ARS and ASD’s motion to dismiss (Doc. 262) is GRANTED IN PART and 5 DENIED IN PART as explained herein. 6 2. The Treatment Center OTCs’ motion to dismiss (Doc. 274) is DENIED. 7 3. The Pain Center OTCs’ motion to dismiss (Doc. 284) is DENIED. 8 4. Aetna’s motion for leave to amend (Doc. 437) is GRANTED. Aetna shall file 9 its TACC within 10 days of the date of this order. 10 Dated this 25th day of March, 2022. 11 12 13 , {Z, 14 _- Ae 15 Usted States Dictric Judge 16 17 18 19 20 21 22 23 24 25 26 27 28
-21-