Eastman v. Quest Diagnostics Inc.

108 F. Supp. 3d 827, 2015 U.S. Dist. LEXIS 74612, 2015 WL 3607660
CourtDistrict Court, N.D. California
DecidedJune 9, 2015
DocketCase No. 15-cv-00415-WHO
StatusPublished

This text of 108 F. Supp. 3d 827 (Eastman v. Quest Diagnostics Inc.) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eastman v. Quest Diagnostics Inc., 108 F. Supp. 3d 827, 2015 U.S. Dist. LEXIS 74612, 2015 WL 3607660 (N.D. Cal. 2015).

Opinion

ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

WILLIAM H. ORRICK, United States District Judge

INTRODUCTION

Plaintiffs seek to assert antitrust and related state-law claims against defendant [830]*830Quest Diagnostics Incorporated for its alleged monopoly pricing for routine diagnostic testing services. Plaintiffs’ claims fail because they have not sufficiently alleged that they were injured by Quest’s anticompetitive practices or that Quest’s conduct foreclosed competition in a substantial share of the relevant market. Plaintiffs’ complaint is DISMISSED WITH LEAVE TO AMEND.

BACKGROUND

Plaintiffs Colleen Eastman, Christi Cruz, and Carmen Mendez are individuals who have paid for out-patient routine diagnostic testing services by Quest. Compl. ¶¶ 33-85 [Dkt. No. 1]. Their payments to Quest were “as a result of’ or “to fulfill” their “co-payment and deductible obligations.” Id. They allege that Quest was able to charge above-competitive prices for its diagnostic testing services as a result of its exclusionary anti-competitive practices, including eliminating competitors and colluding with major health plans to limit competition in the diagnostic testing services market. Id. ¶¶ 115-117.

Plaintiffs allege four causes of action against Quest: (i) monopolization in violation of Section 2 of the Sherman Act; (ii) violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200; (iii) violation of California’s Unfair Practices Act, Cal. Bus. & Prof. Code §§ 17043, 17044; and (iv) monopolization in violation of California’s Cartwright Act, Bus. & Prof. Code § 16700.

LEGAL STANDARD

A motion to dismiss should be granted under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The court must “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party,” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008), drawing all “reasonable inferences” from those facts in the nonmoving party’s favor, Knievel v. ESPN, 393 F.3d 1068, 1080 (9th Cir.2005). A complaint may be dismissed if it does not allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, “a complaint [does not] suffice if it tenders naked assertions devoid of further factual enhancement,” id. (quotation marks and brackets omitted), and the court need not “assume the truth of legal conclusions merely because they are cast in the form of factual allegations,” W. Min. Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981). If a motion to dismiss is granted, a court should normally grant leave to amend unless it determines that the pleading could not possibly be cured by allegations of other facts. Cook, Perkiss & Liehe v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir.1990).

DISCUSSION

Quest moves to dismiss the complaint, arguing that (i) plaintiffs lack Article III and statutory standing because they do not allege that Quest’s conduct had any impact on the amount they paid for Quest’s services; (ii) the monopolization claims fail because plaintiffs do not plead facts necessary to show that Quest’s conduct injured competition; (iii) plaintiffs do not plead Quest’s pricing and costs necessary to sustain the Unfair Practices Act claim; and (iv) the Unfair Competition Law claim is derivative of the other claims. I heard [831]*831oral argument on May 13, 2015 and now address each argument in turn.

I. STANDING

A. Article III and statutory standing

Quest argues that plaintiffs lack Article III and statutory standing because plaintiffs do not allege that their co-payments or deductibles are higher because of Quest’s conduct or would be lower if their testing had been referred to a competitor of Quest. Plaintiffs respond that the purchase of products affected by an anti-competitive overcharge is sufficient to establish standing and that they have satisfied this showing because they allege that “they were injured by the monopoly overcharges that they paid for routine diagnostic testing performed by Quest.” Dkt. No. 25 at 19.

Plaintiffs cite to paragraphs 1 and 115-117 of their complaint. Id. Those paragraphs state, in their entirety:

1. This is a class action under the Sherman Act and related state laws on behalf of health plans and outpatients to recover monopoly overcharges that they have paid directly to Quest Diagnostics Incorporated for routine diagnostic testing.
115. As a result of its long-term and persistent pattern of kickbacks, exclusionary contracting with aligned health insurers, and acquisitions to advance its overall scheme to' monopolize, Quest has injured, and continues to injure, competition in the relevant market for plan/out-patient billing. The injury to competition is manifest in at least three ways: above-competitive prices, inferior quality of testing, and reduction in choice among providers of routine diagnostic testing.
116. There is ample evidence that Quest has controlled prices in the relevant market in Northern California since at least 2011.
117.Quest is a rational monopolist. It often substantially discounts its prices in the physician billing market to well below cost to get pull-through business in the relevant plan/out-patient billing market; therefore, it must add a monopoly premium for pull-through testing to compensate for its below-cost prices. The fact that it has been able to charge such premiums for over a decade is strong evidence of its control over pricing in the relevant market for plan/out-patient billing.

Paragraphs 1 and 115-117 do not allege that plaintiffs made any payments to Quest, what portion of their co-payment or deductible obligations relate to testing performed by Quest, or that any payments were higher as a result of Quest’s anticompetitive conduct. Plaintiffs allege elsewhere that they made payments to Quest “as a result of’ or “to fulfill” their “co-payment and deductible obligations,” Compl. ¶¶ 33-35, but they do not identify their health plans, whether they are covered by an HMO, PPO, or indemnity plan, or the amount they paid to Quest.

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Bluebook (online)
108 F. Supp. 3d 827, 2015 U.S. Dist. LEXIS 74612, 2015 WL 3607660, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eastman-v-quest-diagnostics-inc-cand-2015.