O 1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 CENTRAL DISTRICT OF CALIFORNIA 12 13 JERALD FRIEDMAN, Individually and ) Case No. 14-00034 DDP (PLA) on Behalf of All Others Similarly ) 14 Situated, ) ORDER GRANTING 15 ) DEFENDANTS’ MOTION TO 16 Plaintiff, ) DISMISS AND DENYING ) PLAINTIFFS’ MOTION FOR CLASS 17 v. ) CERTIFICATION ) 18 AARP, INC., AARP SERVICES, INC., ) [Dkts. 119, 150] 19 AARP INSURANCE PLAN, ) UNITEDHEALTH GROUP, INC., and ) 20 UNITED HEALTHCARE INSURANCE ) 21 COMPANY, ) 22 ) ) 23 Defendants. ) 24 25 Presently before the court are Defendants’ Motion to Dismiss and Plaintiffs’ 26 Motion for Class Certification. (Dkts. 119, 150.) Having considered the submissions of 27 the parties and heard oral argument, the court grants Defendants’ motion, denies I. BACKGROUND 1 Plaintiffs Jerald Friedman (“Friedman”) and Carol McGee (“McGee”) (collectively, 2 “Plaintiffs”) bring this putative class action against defendants AARP, Inc., AARP 3 Services Inc., AARP Insurance Plan, UnitedHealth Group, Inc., and United Healthcare 4 Insurance Company (collectively, “Defendants”). (Dkt. 111, First Amended Complaint 5 (“FAC”) ¶¶ 32-41.) The court has set forth the basic facts of the case in its prior Orders, 6 (Dkts. 50, 78), which it repeats here in relevant part. 7 In or around 2011, Plaintiffs purchased a type of health insurance policy, known 8 as a “Medigap” policy, which is designed to offer extra coverage to Medicare 9 10 beneficiaries beyond the basic Medicare benefits, including coverage of copays and 11 deductibles that would otherwise be the patient’s responsibility. (FAC ¶¶ 32-33, 46.) 12 Plaintiffs purchased a Medigap policy that was endorsed by AARP,1 with UnitedHealth2 13 as the insurer. (Id. ¶¶ 32-33, 48.) “AARP [Insurance Plan] is the group policyholder 14 under the Policy.” (Id. ¶ 10.) Additionally, for every AARP/UnitedHealth Medigap 15 policy sold, AARP receives a payment of 4.9%3 of the amount paid by the insured 16 individual. (Id. ¶ 6.) All UnitedHealth Medigap policies are endorsed by AARP. (Id. ¶ 17 48.) Though Defendants’ agreements cast this payment as a royalty, paid in exchange for 18 UnitedHealth’s use of AARP’s intellectual property in marketing and selling its Medigap 19 coverage, Plaintiffs allege that this characterization of the 4.9% payment is false. (Id. ¶¶ 20 73, 77.) On behalf of a putative class, Plaintiffs allege that the 4.9% royalty that AARP 21 22 23 24 1 The court refers to AARP, Inc., AARP Services Inc., and AARP Insurance Plan collectively as “AARP.” 25 2 The court refers to UnitedHealth Group, Inc., and United Healthcare Insurance 26 Company collectively as “UnitedHealth.” 3 Plaintiffs allege that the amount of the royalty has changed over time, “recently 27 changing from 4.95% to 4.9%.” (FAC at n.1.) receives is (1) an unlawful commission; and/or (2) an unlawful rebate/kickback. (Id. ¶¶ 3, 1 6, 18.) 2 In support of Plaintiffs’ first claim that the royalty fee is an unlawful commission, 3 Plaintiffs allege that AARP improperly acts as an unlicensed insurance agent in actively 4 soliciting insurance purchases for Medigap policies on behalf of UnitedHealth. (Id. ¶¶ 6, 5 15-17, 21, 24, 77-78, 87, 92-93, 95-97, 104, 106.) Plaintiffs allege that the 4.9% payment that 6 AARP receives on every AARP/UnitedHealth Medigap policy is an unlawful insurance 7 commission paid to AARP for its role in marketing, soliciting, and selling or renewing 8 the Medigap policies. (Id. ¶¶ 6, 15, 16.) Plaintiffs further allege that “while Defendants 9 10 disclose the existence of a payment in general to AARP which they term a ‘royalty’ paid 11 for the use of AARP’s intellectual property, Defendants hide the fact that the cost of 12 AARP Medigap insurance includes a percentage-based commission to AARP that is 13 funded by consumers, in addition to the insurance premium paid to UnitedHealth for 14 coverage.” (Id. ¶ 99 (emphasis omitted).) 15 For Plaintiffs’ second claim that the royalty fee is an illegal rebate/kickback, 16 Plaintiffs allege that the royalty is a “‘contract . . . promising returns and profits as an 17 inducement’ for the group policyholder AARP to insure its group plan with 18 [UnitedHealth].” (Id. ¶ 109.) Plaintiffs further allege that AARP is “induced to the tune 19 of hundreds of millions of dollars per year to keep AARP Medigap plan with 20 [UnitedHealth] and Defendants worked out a scheme whereby consumers unwittingly 21 fund [the illegal rebate].” (Id.) Therefore, Plaintiffs allege, even if UnitedHealth’s 22 payment to AARP is determined to be a royalty payment for the use of AARP’s 23 intellectual property, the payment would remain an illegal rebate paid to induce AARP 24 to insurance. (Id. ¶ 113.) 25 Plaintiffs allege that they were injured because they paid more for their Medigap 26 policy due to the 4.9% illegal commission/rebate. (Id. ¶¶ 28, 63.) Plaintiffs allege that 27 “Plaintiffs and the Class agreed to pay a monthly premium for insurance coverage, not a monthly premium plus a 4.9% surcharge used to fund an illegal scheme between 1 Defendants,” (id. ¶ 63), and Plaintiffs are harmed by “paying 4.9% above the actual cost 2 of insurance coverage so that [Defendants] can secretly divert this illegal 3 commission/rebate fee to the unlicensed AARP.” (Id. ¶ 117.) 4 Plaintiff Friedman filed a putative class action in January 2014 asserting violations 5 of California’s Unfair Competition Law (“UCL”), money had and received, and 6 conversion. (See Dkt. 1, Compl.) Defendants filed a Motion to Dismiss under Rule 7 12(b)(6). (Dkt. 27.) On October 6, 2014, this court granted Defendants’ Motion 8 concluding that Friedman had not plausibly alleged that AARP was acting as an 9 10 unlicensed insurance agent collecting an illegal commission. (Dkt. 50.) Friedman 11 appealed. (Dkt. 51.) On May 3, 2017, the Ninth Circuit reversed, holding that Friedman 12 sufficiently pled a claim under the UCL’s unlawful, unfair, and fraudulent prongs. (See 13 Dkt. 54; Friedman v. AARP, Inc., 855 F.3d 1047, 1053 (9th Cir. 2017).) Specifically, the 14 Ninth Circuit held that Friedman had sufficiently alleged that AARP was acting as an 15 unlicensed insurance agent who collected an illegal commission, and Friedman 16 sufficiently alleged misrepresentations regarding the fee that “induced [Friedman] to 17 purchase Medigap through AARP rather than from other insurers . . . .” (Dkt. 54, at 20; 18 Friedman, 855 F.3d at 1056.) On remand, this court was to consider Defendants’ 19 additional challenge to the complaint based on the filed-rate doctrine. Friedman, 855 F.3d 20 at 1057. 21 On January 16, 2018, this court concluded that filed rate principles permitted 22 Friedman to proceed.4 (Dkt. 78, at 4-7.) The court also concluded that Friedman had 23 24 4 In its order, this court stated: “[A]ssuming arguendo that a state filed-rate doctrine exists 25 in the insurance context, it does not bar Friedman’s claims because these claims are more 26 akin to challenges to Defendants’ alleged misrepresentations, rather than challenges to the approved rate, or challenges to whether the rate is reasonable in light of the 27 statutorily prescribed loss ratios for Medigap insurance.” (Dkt. 78.) Plaintiffs have now standing under the UCL, however, Friedman lacked standing to seek injunctive relief 1 because Friedman no longer held a Medigap policy with Defendants. (Id. at 8.) 2 On August 31, 2018, Plaintiffs filed the First Amended Complaint adding McGee 3 as a named plaintiff and adding additional claims. (See FAC.) The First Amended 4 Complaint contains claims for (1) violations of the UCL; (2) money had and received; (3) 5 conversion; (4) breach of contract; (5) breach of the covenant of good faith and fair 6 dealing; (6) financial elder abuse; and (7) violations of the Connecticut Unfair Trade 7 Practices Act (“CUTPA”). (See FAC.) 8 Defendants now move to dismiss the First Amended Complaint under Rule 9 10 12(b)(6).5 (Dkt. 119, Motion to Dismiss (“MTD”).) Defendants challenge the sufficiency 11 of Plaintiffs’ claims based on the following: (1) Plaintiffs’ lack standing under the UCL 12 and CUTPA; (2) Plaintiffs’ fail to allege an underlying predicate for the UCL and CUTPA 13 claims; and (3) Plaintiffs fail to plausibly allege any state law claims. (Id.) 14 II. LEGAL STANDARD 15 A complaint will survive a motion to dismiss when it contains “sufficient factual 16 matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 17 Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 18 When considering a Rule 12(b)(6) motion, a court must “accept as true all allegations of 19
20 abandoned their UCL fraudulent prong claims and with it, have also abandoned the 21 allegations of misrepresentations. (See Dkt. 147, Opposition (“Opp.”) at 2, n.6 “Plaintiffs 22 are no longer pressing the ‘fraud’ prong.”). Nevertheless, the court declines to revisit the filed-rate doctrine because, as discussed below, Plaintiffs claims fail for the independent 23 reason that Plaintiffs have no standing under the UCL. 24 5 Defendants motion was filed as a Joint Motion to Dismiss and Motion for Summary Judgment. (See Dkt. 119.) Plaintiffs filed an Ex-Parte Application requesting this court to 25 deny or defer Defendants’ Motion for Summary Judgment. (Dkt. 126.) The court granted 26 the motion and vacated Defendants’ motion for summary judgment without prejudice. (Dkt. 132.) Therefore, the court addresses Defendants’ motion under Rule 12(b)(6) 27 limiting the analysis to the allegations in the operative complaint. material fact and must construe those facts in the light most favorable to the plaintiff.” 1 Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include 2 “detailed factual allegations,” it must offer “more than an unadorned, the-defendant- 3 unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. Conclusory allegations or 4 allegations that are no more than a statement of a legal conclusion “are not entitled to the 5 assumption of truth.” Id. at 679. In other words, a pleading that merely offers “labels 6 and conclusions,” a “formulaic recitation of the elements,” or “naked assertions” will not 7 be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and 8 internal quotation marks omitted). 9 10 “When there are well-pleaded factual allegations, a court should assume their 11 veracity and then determine whether they plausibly give rise to an entitlement of relief.” 12 Id. at 679. Plaintiffs must allege “plausible grounds to infer” that their claims rise “above 13 the speculative level.” Twombly, 550 U.S. at 555, 556. “Determining whether a complaint 14 states a plausible claim for relief” is a “context-specific task that requires the reviewing 15 court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. 16 III. DISCUSSION 17 On appeal, the Ninth Circuit determined that Friedman had sufficiently alleged 18 that the AARP royalty fee was an illegal commission to an unlicensed insurance agent. 19 (Dkt. 54, at 13; Friedman, 855 F.3d at 1053.) The Ninth Circuit also accepted Friedman’s 20 allegations that the fee was “in fact, charged on top of [ ] regulator-approved premium,” 21 and that “the misrepresentations . . . induced him to purchase Medigap through AARP 22 rather than from other insurers who ‘do not secretly charge unlawful insurance agent 23 commissions to consumers.’” (Dkt. 54, at 20; Friedman, 855 F.3d at 1055-56 (citing Compl. 24 ¶ 77).) Plaintiffs’ First Amended Complaint currently contains similar allegations of 25 fraudulent misrepresentations and concealment, however, in Plaintiffs’ Opposition to the 26 present motion, Plaintiffs have abandoned their UCL fraud claims. (See Dkt. 147, Opp. at 27 2, n.6 (“Plaintiffs are no longer pressing the ‘fraud’ prong.”).) Plaintiffs also no longer argue that Defendants’ fee is charged “on top of” regulator-approved premiums as was 1 argued on appeal, rather, Plaintiffs now argue that the regulator-approved rate 2 “includes” the alleged illegal commission/rebate. (Opp. at 12:2.) In light of Plaintiffs’ 3 abandoned UCL fraud theory, the court finds it necessary to revisit Plaintiffs’ UCL 4 standing considering only the unlawful and unfair prongs.6 5 6 A. UCL 1. Standing 7 Defendants argue that Plaintiffs lack UCL standing because Plaintiffs’ allegations 8 are insufficient to plausibly allege injury in fact and economic harm. (MTD at 11:22-13:1.) 9 10 Defendants contend that Plaintiffs did not pay a surcharge “on top of” their premiums 11 because Plaintiffs paid “only and exactly” the Department of Insurance (“DOI”) 12 mandated rate and the AARP royalty program is a program expense paid out of the DOI 13 mandated rate. (Id. at 12.) Plaintiffs argue that the First Amended Complaint sufficiently 14 pleads injury in fact and economic harm because they allege that the “DOI-approved rate 15 includes an illegal surcharge that harmed Plaintiffs because it was layered on top of the 16 true premium required to bind coverage.” (Opp. at 12:2-3 (emphasis added) (citing FAC 17 ¶¶ 22, 27-28, 52, 74, 83,114-19, 139, 160, 162).) 18 “The UCL prohibits ‘unfair competition’ which is broadly defined to include 19 ‘three varieties of unfair competition—acts or practices which are unlawful, or unfair, or 20 21 6 There are several cases regarding the AARP royalty throughout the country. See, e.g., 22 Sacco v. AARP, Inc., No. 18-14041-CIV, 2018 WL 502191 (S.D. Fla. July 24, 2018); Bloom v. AARP, Inc., No. 2:18-cv-0-2788 (D.N.J. Nov. 30, 2018); Krukas v. AARP, Inc., 376 F. Supp. 23 3d 1 (D.D.C. 2019). Most similar to the case here is the case Dane v. UnitedHealthCare Ins. 24 Co., No. 3:18-CV-00792 (SRU), 2019 WL 2579261 (D. Conn. June 24, 2019). The court there also concluded that plaintiffs did not have standing. Id. at *7 (“The fee that Dane and 25 each insured pays is an expense of the program paid out of United’s [regulator]- 26 approved Medigap premiums, and Dane paid only the legally required rate. . . . [H]e cannot plausibly allege any loss caused by United’s allocation of its premium revenue to 27 program expenses.”). fraudulent.’” Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1168 (9th Cir. 2012) (quoting 1 Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 973 P.2d 527, 540 (Cal. 1999)). 2 Under the UCL, a plaintiff must have “suffered injury in fact and [ ] lost money or 3 property[ ] as a result of unfair competition.” Kwikset Corp. v. Sup. Ct., 246 P.3d 877, 886 4 (Cal. 2011). A “loss of money or property” is “[a]n undesirable outcome of a risk; the 5 disappearance or diminution of value, usu[ally] in an unexpected or relatively 6 unpredictable way.” Peterson v. Cellco P’ship, 164 Cal. App. 4th 1583, 1592 (2008) (internal 7 quotations omitted) (quoting Hall v. Time Inc., 158 Cal. App. 4th 847, 853 (2008)). 8 “Notably, lost money or property—economic injury—is itself a classic form of injury in 9 10 fact.” Kwikset, 246 P.3d at 886. “‘[T]he quantum of lost money or property necessary to 11 show standing’ under [the UCL] is only so much as would satisfy federal standing.” Van 12 Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1049 (9th Cir. 2017) (quoting Kwikset, 246 13 P.3d at 886). “[A]n economic injury-in-fact requirement, [ ] demands no more than the 14 corresponding requirement under Article III of the U.S. Constitution.” Reid v. Johnson & 15 Johnson, 780 F.3d 952, 958 (9th Cir. 2015) (citing Hinojos v. Kohl’s Corp., 718 F.3d 1098, 1104 16 (9th Cir. 2013)). Under Article III, an injury in fact is “‘an invasion of a legally protected 17 interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or 18 hypothetical.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1543 (2016) (quoting Lujan v. 19 Defenders of Wildlife, 504 U.S. 555, 560 (1992)). 20 Allegations of overpayment can be sufficient to plead economic injury in fact. See 21 Clayworth v. Pfizer, Inc., 233 P.3d 1066, 1087 (Cal. 2010) (“[S]ection 17204 requires only 22 that party have ‘lost money or property,’ and [plaintiffs] indisputably lost money when 23 they paid an allegedly illegal overcharge.”). For example, where UCL claims are based 24 on fraud, economic injury is sufficiently pled with allegations that plaintiff would not 25 have purchased a product or service had plaintiff been aware of the true nature or price 26 27 of the product or service.7 See Kwikset, 246 P.3d at 890 (“For each consumer who relies on 1 the truth and accuracy of a label and is deceived by misrepresentations into making a 2 purchase, the economic harm is the same: the consumer has purchased a product that he 3 or she paid more for than he or she otherwise might have been willing to pay if the 4 product had been labeled accurately.”); Klein v. Chevron U.S.A., Inc., 202 Cal. App. 4th 5 1342, 1375 (2012), as modified on denial of reh’g (Feb. 24, 2012) ( “by advertising in gallon 6 units without disclosing the effect of temperature on motor fuel, [Defendant] deceives 7 consumers as to the true price of motor fuel.”). Where UCL violations are based on the 8 UCL unlawful or unfair prong, and are not based on fraud or deceit, economic injury 9 10 may be sufficiently pled with allegations that plaintiff paid more than the product’s 11 value, or was otherwise dissatisfied with the product, as a result of the unlawful or unfair 12 conduct. See, e.g., Clayworth, 233 P.3d at 1070-71, 1086-87 (holding that plaintiffs suffered 13 economic injury where plaintiffs paid an overcharge because of a price fixing conspiracy 14 to maintain prices at levels 50 to 400 percent higher than for the same products outside of 15 the United States); Hall, 158 Cal. App. 4th at 855 (where plaintiff lost no money absent 16 allegations that plaintiff did not want the product, the product was unsatisfactory, or that 17 the product was worth less than what he paid for it). 18 Additionally, a plaintiff must also demonstrate that the lost money was “as a 19 result of” the unfair competition. See Kwikset, 246 P.3d at 884. “[T]here must be a causal 20 connection between the harm suffered and the unlawful business activity[,] [t]hat causal 21 connection is broken when a complaining party would suffer the same harm whether or 22 not a defendant complied with the law.” Daro v. Superior Court, 151 Cal. App. 4th 1079, 23 1099 (2007) as modified on denial of reh’g (July 3, 2007). 24 25 7 Additionally, where UCL claims are based on misrepresentations, a plaintiff “must 26 demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary 27 fraud actions.” In re Tobacco II Cases, 46 Cal. 4th 298, 306 (2009). Here, Plaintiffs contend that they sufficiently allege economic harm because the 1 4.9% royalty fee UnitedHealth pays to AARP is charged to member insureds “on top of 2 the true premium . . . .” (Opp. at 12:3 (emphasis added) (citing FAC ¶¶ 22, 27-28, 52, 74, 3 83, 114-19, 139, 160, 192).) Plaintiffs allege that “Defendants are not entitled to keep this 4 illegal fee charged to consumers on top of the legal portion of the payment necessary to 5 bind coverage (i.e., the true “premium”) (FAC ¶ 85). In essence, Plaintiffs allege an 6 overpayment.8 Peterson v. Cellco Partnership is an instructive case involving similar 7 allegations of overpayment in a similar context. 164 Cal. App. 4th 1583 (2008). In 8 Peterson, plaintiffs asserted claims under the UCL’s unlawful prong alleging that they 9 10 purchased cell phones and insurance from the defendant, the defendant was not licensed 11 to offer or sell insurance, and the defendant retained a percentage of each insurance 12 premium as an illegal commission. Id. at 1586. Plaintiffs there also alleged that they had 13 lost money because “they paid the alleged unlawful commission that was illegally 14 retained or received by defendant as a percentage of plaintiffs’ insurance payments.” Id. 15 at 1591. In other words, plaintiffs there alleged an overpayment because of an unlawful 16 commission illegally charged and retained by the defendant. See id. The California Court 17 of Appeal held that plaintiffs had not been injured because plaintiffs “received the 18 19
20 8 The court focuses its economic harm analysis on Plaintiffs’ illegal commission theory 21 because Plaintiffs’ have sufficiently alleged an unlawful commission. (See Friedman, 855 22 F.3d at 1053; Dkt. 78, at 8.) As discussed supra, Plaintiffs have not plausibly alleged a premium rebate. However, the court notes that assuming Plaintiffs have plausibly 23 alleged an unlawful rebate, Plaintiffs would nonetheless lack standing because Plaintiffs 24 paid only the lawfully permitted DOI rate—not 4.9% on top of the regulator-approved premium. See also, e.g., Dane, 2019 WL 2579261, at *7 (“Because Dane did not pay more 25 than the [regulator]-approved filed rate for the coverage he received, and he could not 26 have purchased United Medigap coverage for any other rate . . . he cannot plausibly allege any loss caused by United’s allocation of its premium revenue to program 27 expenses.”) benefit of their bargain, having obtained the bargained for insurance at the bargained for 1 price.” Id. at 1591. 2 Plaintiffs here attempt to distinguish Peterson arguing that plaintiffs in Peterson 3 failed to allege that they were “harmed as a result of the defendants’ conduct.” (Dkt. 193, 4 Pls.’ Resp. Suppl. Br. at 7:6-7.) Further, Plaintiffs argue that unlike in Peterson, “[w]hile 5 Plaintiffs received the bargained-for insurance, they did not receive it at the bargained- 6 for price: the premium necessary to bind coverage (i.e., the ‘Gross Premium’).” (Id. at 6:5-7 7 (emphasis added).) However, the court finds that the allegations here and the allegations 8 in Peterson are substantially similar. In Peterson, plaintiffs alleged a harm as a result of 9 10 defendants’ conduct, the same injury Plaintiffs allege here—a loss of money based on an 11 alleged illegal commission retained from the insured’s premiums. Plaintiffs in Peterson 12 also alleged, as Plaintiffs do here, that the insurance policy they paid for was actually 13 worth less, and that they, essentially, overpaid. See Peterson, 164 Cal. App. 4th at 1593 n.5 14 (“Plaintiffs contend the insurance policy ‘was actually worth less than what they paid for 15 [it]’ because defendant “extracted a percentage of [their] payment.’”). The court finds no 16 significant difference between the alleged harm here and the alleged harm in Peterson. 17 Plaintiffs’ allegations of injury are based on the premise that AARP was not entitled to 18 receive a commission, however, “absent allegations by plaintiffs that they could have 19 bought the same policy elsewhere for a lower price, they suffered no actual injury.” Id. at 20 1591; see also Medina v. Safe-Guard Prods., Int’l, Inc., 164 Cal. App. 4th 105, 114, as modified 21 (July 11, 2008) (“[Plaintiff] hasn’t suffered any loss because of [defendant’s] unlicensed 22 status.”). 23 Moreover, Plaintiffs’ attempt to create economic harm under the theory that they 24 paid more than the “true premium,” is unavailing; Plaintiffs’ theory is based on 25 speculation. In reaching this conclusion, the court finds it necessary to analyze in more 26 detail Plaintiffs’ theory regarding a “true premium.” Plaintiffs contend that the “true 27 premium” is the amount necessary or required to bind coverage. (Opp. at 12:3; FAC ¶ 85.) Plaintiffs appear to contend that even though there were no misrepresentations on 1 which they relied, and though they received the insurance they wished to purchase, at 2 the price they agreed to pay, they still overpaid. In effect, rather than Plaintiffs having 3 responsibility for choosing the coverage they wished to buy and what they wished to pay 4 for it, in our market-based competitive economy, the burden, according to Plaintiffs, is on 5 the Defendants to not charge more than some hypothetical premium necessary to bind 6 coverage. There is no such thing as a “true premium” necessary to secure coverage. 7 Plaintiffs’ theory is based on the speculative assumption that had UnitedHealth not paid 8 9 these funds to AARP, the savings would have been passed on to the consumer.9 10 Plaintiffs’ creative theory that businesses must “pass on the savings” to consumers lacks 11 real world credibility. In lieu of passing on all or some portion of such savings, 12 businesses may, for example, reduce debt, increase employee compensation, increase 13 advertising expenditures, invest in new products or business opportunities—all the 14 while being mindful of what competitors are doing in the marketplace. Plaintiffs’ intent 15 to substitute the opinion of an expert to cure the flaws discussed above is insufficient to 16 meet the standard of plausibility. (See Opp. at 2, n.3.) The expert, Plaintiffs posit, would 17 look at historical data and say that the Defendants would not exercise business judgment 18 on what to do with hypothetical savings but would instead sell insurance for an amount 19 that matches or correlates in some way to the alleged illegal commission/rebate. In short, 20 21 22 9 Importantly, the DOI approved the premium amount that UnitedHealth charged and that Plaintiffs agreed to pay. The DOI regulates the premium rates that Medigap insurers 23 are permitted to pay. See Cal. Ins. Code § 10192.15(c)(1). Further, the DOI may only 24 approve premium rates that are neither “excessive or inadequate.” Cal. Code Regs. tit. 10, §2644.1. Therefore, Plaintiffs paid a lawfully permitted premium rate authorized by the 25 DOI. As discussed above, Plaintiffs theory that the DOI’s approved premium should 26 have been lower is speculative and implicates the filed rate doctrine. However, because the court finds that Plaintiff’s lack standing, the court does not revisit the filed rate 27 doctrine here. Plaintiffs’ theory that UnitedHealth would pass on any “savings” in the form of a 1 reduced premium would turn the world of business decisions on its head by substituting 2 speculation and the opinions of experts for the decisions of executives who actually run 3 businesses. That is a bridge too far. 4 To summarize: Plaintiffs do not allege that they were unaware of the cost of 5 insurance; Plaintiffs no longer claim that had they been aware of conduct alleged, they 6 would have sought out different insurance; and Plaintiffs no longer claim that the 4.9% 7 fee was “on top of” the regulator-approved premium. Such allegations would satisfy the 8 nonconjectural injury requirement. While there are cases in which unlawful conduct can 9 10 result in non-speculative economic harm to consumers, the court concludes that this is 11 not one of those cases. See, e.g., Clayworth, 49 Cal. 4th at 765, 775, 789 (holding that 12 plaintiffs were harmed by paying an overcharge where a price-fixing conspiracy resulted 13 in prices 50 to 400 percent higher than the same products outside of the United States); 14 Candelore v. Tinder, Inc., 19 Cal. App. 5th 1138, 1146 (2018) (discussing claim that 15 defendant charged customers over the age of thirty twice as much as younger customers 16 for the same feature); Monarch Plumbing Co., Inc. v. Ranger Ins. Co., 2006 WL 2734391, at *6 17 (E.D. Cal. Sept. 25, 2006) (discussing injury of higher insurance premiums resulting from 18 biased counsel’s decisions to settle meritless claims). Absent allegations that Plaintiffs 19 paid more than the value of the product, measured by a non-hypothetical theory, 20 Plaintiffs have not plausibly alleged economic harm. Thus, the court concludes that 21 Plaintiffs lack standing under the UCL. 22 2. UCL Predicate 23 Defendants next contend that Plaintiffs have not sufficiently pled any underlying 24 UCL predicate under the unlawful prong. On appeal, the Ninth Circuit determined that 25 Plaintiffs had sufficiently pled that AARP transacts insurance without a license in 26 violation of California’s Insurance Code. Friedman, 855 F.3d at 1053 (“At the motion to 27 dismiss stage, we conclude that Friedman has plausibly alleged this payment to be a ‘commission.’”). Therefore, the illegal commission predicate is sufficiently alleged. 1 However, the First Amended Complaint contains a second UCL predicate: violations of 2 California’s and Connecticut’s anti-rebating laws. Defendants argue that “Plaintiffs do 3 not, and cannot, offer any plausible theory of how a payment to AARP induces 4 individual AARP members to choose UnitedHealth Medigap insurance over 5 alternatives.” (MTD at 15:12-14 (emphasis omitted).) 6 California’s anti-rebating statute provides: 7 An admitted life insurer shall not issue or deliver in this State, 8 any securities or any special or advisory board or other 9 contracts of any kind promising returns and profits as an 10 inducement to insurance nor shall it permit its agents, officers or employees to do so. 11 12 Cal. Ins. Code § 10430 (emphasis added). Connecticut’s anti-rebate statute provides: 13 No insurance company doing business in this state, or 14 attorney, producer or any other person shall pay or allow, or offer to pay or allow, as inducement to insurance, any rebate of 15 premium payable on the policy, or any special favor or 16 advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement not 17 specified in the policy of insurance. 18 Conn. Gen. Stat. Ann. § 38a-825 (emphasis added). The purpose of anti-rebate statutes is 19 to “protect the solvency of the insurance company, prevent unfair discrimination among 20 insureds of the same class, protect the quality of service, avoid concentration of the 21 market in a few insurance companies, and avoid unethical sales practices.” 1 Couch on 22 Ins. § 2:32, Rebate Prohibitions. 23 Plaintiffs assert that the anti-rebating “prohibitions apply both to rebates paid to 24 group policyholders and individual insureds.” (Opp. at 14:21-22.) Plaintiffs contend that 25 AARP, as the group policyholder, is induced because, but for the rebate payment to 26 AARP, AARP “could move the AARP Medigap program to a different insurer.” (Opp. at 27 15:15-16.) Plaintiffs have cited to no cases, and the court was unable to identify any, in 1 which a court determined that the anti-rebating statutes applied to an arrangement such 2 as the one alleged to be unlawful here. Plaintiffs’ reliance on American Association of Meat 3 Processors v. Casualty Reciprocal Exchange, 588 A.2d 491 (Pa. 1991) and Associated California 4 Loggers, Inc. v. Kinder, 110 Cal. App. 3d 673 (1980) is misplaced.10 In American Association 5 of Meat Processors, the Pennsylvania Supreme Court held that its anti-rebating statute was 6 violated where an insurer paid a group policyholder a percentage of the insureds’ 7 premiums, and the group policyholder passed on the benefit of these payments to the 8 insured members. 588 A.2d at 493-94. Thus, the individual insureds were receiving 9 10 insurance at a reduced premium and were induced to insurance. See id. at 494. In Kinder, 11 the Department of Insurance Commissioner alleged that the arrangement between an 12 insurer and a group policyholder, where the insurer reimbursed the group policyholder 13 for administrative services outside of the policy, was an illegal rebate or an illegal 14 commission. 110 Cal. App. 3d at 676. The California Court of Appeal held that the 15 payments were reasonable in relation to the services rendered and were not unlawful. Id. 16 at 680. The Court of Appeal did not specifically address whether the anti-rebating 17 statutes could apply to group policyholders on the theory that the group policyholder, as 18 opposed to individual insureds, could be induced to insurance. Nonetheless, it appears 19 that the Court did not accept the Commissioner’s claims that the payments were in 20 violation of the anti-rebating statute because “[the] agreements themselves did not affect 21 the underlying insurance coverage and the payments . . . were reasonable in relation to 22 the services rendered.” See id. at 681. 23 24 10 Plaintiffs also refer the court to the New York State Department of Financial Services 25 Office of the General Counsel to argue that even if the 4.9% taken by AARP is for a 26 licensing fee, the payment is still an illegal premium because it is essentially a referral fee. (See Pls.’ Suppl. Br. at 14.) The Opinion letters of the NYSDFS OGC are non-binding, and 27 further, the context for which the opinion was written is unknown. The court concludes that Plaintiffs have not plausibly alleged unlawful premium 1 rebates in violation of California’s or Connecticut’s anti-rebating statutes. Plaintiffs do 2 not allege that any portion of the 4.9% royalty payment was passed on to the insured 3 members. Plaintiffs have not alleged that they received any discount, or that their 4 premium was less because of UnitedHealth’s payments to AARP. The insureds’ 5 underlying insurance coverage was unaffected and there are no allegations that the 6 individual insureds were induced to insurance by the arrangement. See also, e.g., Dane, 7 2019 WL 2579261, at *3 (“The alleged rebate is not paid to the ultimate insureds, so United 8 cannot be said to be influencing individual insured’s purchasing decisions.”). Therefore, 9 10 Plaintiffs have not plausibly alleged violations of California’s or Connecticut’s anti- 11 rebating statutes. 12 B. CUTPA Claims 13 CUTPA, like the UCL, has a standing requirement that requires a plaintiff to have 14 “suffered an ascertainable loss of money or property . . . as a result of . . . .” the prohibited 15 conduct. Conn. Gen. Stat. Ann. § 42-110g(a). For the reasons discussed above, the court 16 concludes that Plaintiffs also do not meet CUTPA’s economic harm requirement. 17 Plaintiffs also lack standing under CUTPA for the independent reason that they 18 are not Connecticut residents nor were they injured in Connecticut. CUTPA provides, in 19 relevant part: “Persons entitled to bring an action under subsection (a) of this section 20 may, . . . bring a class action on behalf of themselves and other persons similarly situated 21 who are residents of this state or injured in this state to recover damages.” Id. § 42- 22 110g(b). Because Plaintiffs have not alleged that they are Connecticut residents or that 23 they were injured in Connecticut, Plaintiffs lack standing to assert CUTPA claims. 24 C. State Law Claims 25 Next, Defendants challenge the sufficiency of Plaintiffs’ state law claims, money 26 had and received, conversion, breach of contract, breach of the covenant of good faith 27 and fair dealing, and financial elder abuse. As discussed above, Plaintiffs do not allege that they paid more than the DOI-approved rate or that they paid more than they agreed 1 to pay. For the reasons stated above, Plaintiffs’ theory that they paid “more than what is 2 required to obtain coverage under the insurance policy,” (Opp. at 19:10-11), is not 3 plausible to support the state law claims. Absent any plausible allegations that 4 Defendants charged Plaintiffs more than Plaintiffs agreed to pay, that Defendants 5 provided unsatisfactory coverage, or that the contract prohibited Defendants from the 6 alleged conduct, Plaintiffs state law claims fail. 7 IV. CONCLUSION 8 For the reasons stated above, Defendants’ Motion to Dismiss is Granted. The 9 10 court hereby DISMISSES the Third Amended Complaint without leave to amend and 11 denies Plaintiffs’ motion for class certification. 12 IT IS SO ORDERED. 13 14 15 16 DATED: November 1, 2019 ___________________________________ 17 DEAN D. PREGERSON 18 UNITED STATES DISTRICT JUDGE 19 20 21 22 23 24 25 26 27