Orchestrate HR, Inc. v. Blue Cross Blue Shield Kansas

District Court, D. Kansas·Decided October 3, 2022·No. 5:19-cv-04007·Unknown

Opinion

FOR THE DISTRICT OF KANSAS

ORCHESTRATE HR, INC., et al., ) ) Plaintiffs, ) ) v. ) Case No. 19-cv-4007-HLT-TJJ ) BLUE CROSS AND BLUE SHIELD ) OF KANSAS, INC., ) ) Defendant. )

MEMORANDUM AND ORDER This matter is before the Court on Defendant’s Request for Recusal (ECF No. 361).1 Defendant asks the undersigned Magistrate Judge to recuse or otherwise disqualify herself from presiding over further proceedings in this action. Defendant asserts recusal is necessary to avoid the appearance of partiality or impropriety and to promote confidence in the judiciary. Having considered the motion at length, giving due regard to the statutory standards and their application to the factual basis Defendant presents, and exercising commitment to the integrity of the federal courts while recognizing my obligation as a judge assigned to this action, I conclude Defendant’s request is without merit and I will deny the motion. I. Relevant Background Among the damages Plaintiffs seek in this case is a sum equal to the total dollar amount of improperly unpaid or underpaid health insurance benefit claims they submitted to Defendant

1 Although self-styled as a request, Defendant appropriately filed the document as a motion and the undersigned directed Plaintiffs to treat it as such. See Text-Only Order dated August 3, 2022 (ECF No. 364). Plaintiffs filed a response (ECF No. 371), and Defendant filed its reply (ECF No. 377). No party requested an evidentiary hearing, and the Court agrees the motion can be decided on the papers. services. Southwestern College is one of the schools.2 In a July 15, 2022 update to their supplemental Rule 26(a)(1) disclosures, Plaintiffs stated their actual damages. With respect to Southwestern College, Plaintiffs allege Defendant’s improper actions resulted in $1,937,623.00

in improperly unpaid claims Plaintiffs submitted on behalf of the school. If Plaintiffs recover damages, the schools will benefit. Plaintiffs’ expert witness offers the following explanation: Vivature contracts with a school to help the school get paid for these eligible necessary medical services3 which then provides more money to the school to spend on its athletes and students. For some schools, this source of income is not only important, but it is needed to ensure the continuity of care being provided to the athletes and students.

As a result of those contracts, Vivature earns a percentage of the dollars of the claims paid and the school receives the balance of those funds. This results in revenue for Vivature and also provides the colleges and universities with funds which they can then use to provide a better collegiate experience for their students.4

Defendant points to this excerpt as support for its assertion that Plaintiffs are pursuing damages “at least partially on behalf of”5 Southwestern College and the other Kansas schools. However, this assertion flies in the face of Defendant’s contention that Plaintiffs may not recover any insurance benefits Defendant may owe to any school because (1) Plaintiffs have not alleged

2 Vivature and Southwestern College entered into a contract on or about June 2016 whereby Vivature agreed to provide credentialing, billing, and medical claims assistance for Southwestern College. Compl. (ECF No. 262) ¶111. 3 “One of the services provided by Vivature is that it works with [colleges and universities across the United States] to monetize the necessary medical services performed by its licensed athletic trainers. These trainers perform services, pursuant to a medical doctor’s standing orders. As part of the services it provides, Vivature reviews a doctor’s standing orders in order [to] create fields in Vivature’s software for certified licensed athletic trainers to use. Those fields relate to services prescribed pursuant to a doctor’s standing orders, which have been deemed medically necessary.” Expert Report of Scott M. Wood (ECF No. 361-2) at 19.

4 Id. at 19-20.

5 ECF No. 361 at 3. adjudicating insurance claims, and (2) Plaintiffs do not allege they are entitled to recover benefits under any school’s policy.6 “Vivature . . . has no legal right . . . to require BCBSKS to cover and pay any insurance claims Vivature submitted on behalf of the Kansas Schools, BCBSKS’s insureds, or any other third party for that matter.”7 Plaintiffs agree their “case is not predicated

on an assignment of claims but instead [they seek] recovery for injury directly inflicted on Plaintiffs by BCBSKS.”8 The Third Amended Complaint asserts claims for defamation, tortious interference, and fraud by non-disclosure. It is a very different matter to say Southwestern College may benefit if Plaintiffs are successful in this action, rather than to say Plaintiffs are pursuing damages on behalf of Southwestern College. Indeed, it is fundamentally inaccurate to state that Plaintiffs are pursuing damages on behalf of Southwestern College or any of the Kansas schools. On April 18, 2022, the undersigned conducted a telephone discovery conference in this case to provide guidance to the parties on Plaintiffs’ objections to certain requests contained in

non-party subpoenas Defendant intended to serve on each of the twelve Kansas schools.9 At the beginning of the conference, the undersigned informed the parties that her spouse is a proud graduate of Southwestern College and would soon become a member of the college’s Board of Trustees. The undersigned also disclosed that she and her spouse have endowed a scholarship for

6 See, e.g., Memorandum of Law in Support of Defendant’s Rule 12(b)(6) Motion to Dismiss Plaintiffs’ Third Amended Complaint (ECF No. 278) at 22-24.

7 Defendant’s Reply in Support of Its Rule 12(b)(6) Motion to Dismiss Plaintiffs’ Third Amended Complaint (ECF No. 286) at 15 n.52.

8 Plaintiffs’ Response to Defendant’s Motion and Memorandum of Law in Support of Defendant’s Rule 12(b)(6) Motion to Dismiss Plaintiffs’ Third Amended Complaint (ECF No. 284) at 33.

9 Defendant served the subpoena on Southwestern College on April 27, 2022. See ECF No. 354. this information with their respective clients. One week later, defense counsel sent an email asking Judge James to repeat the details of the potential issues, to which she directed the following response on the same day:

Judge James is happy to repeat the information she shared with counsel during the telephone conference on April 18. The purpose of the conference was to discuss the requests contained in Rule 45 subpoenas Blue Cross Blue Shield Kansas intends to serve on twelve colleges and universities. In Mr. Murray’s email seeking a conference, he indicated the subpoenas contain mostly identical requests, and he attached a copy of the Southwestern College subpoena as a reference point for the issues the parties had discussed.

Before discussing any substantive issues, Judge James informed counsel that her spouse, a graduate of Southwestern College, will soon become a member of the College’s Board of Trustees. In addition, Judge James and her spouse have endowed a scholarship to be awarded to students at Southwestern College. It is not an athletic scholarship.

While Judge James found it appropriate to disclose this information to counsel and for counsel to inform their clients, she deems it immaterial to her consideration of any issues that have arisen or may arise in this case.

On July 18, 2022, Defendant filed its Request for Recusal. Plaintiffs responded and Defendant filed a reply brief in support of its request. II. Legal Standards Defendant asserts disqualification is appropriate under 28 U.S.C. §§ 455(a), (b)(4), and (b)(5)(iii).

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Orchestrate HR, Inc. v. Blue Cross Blue Shield Kansas, (D. Kan. 2022).

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