1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION 7 RJ, as the representative of her beneficiary 8 son, SJ; LW, as the representative of her Case No. 5:20-cv-02255-EJD beneficiary spouse MW; and DS, an 9 individual, and on behalf of themselves and ORDER GRANTING IN PART AND all others similarly situated, DENYING IN PART DEFENDANTS’ 10 MOTIONS TO DISMISS FIRST Plaintiffs, AMENDED COMPLAINT 11 v. Re: Dkt. Nos. 75, 76 12 CIGNA HEALTH AND LIFE 13 INSURANCE COMPANY, et al., 14 Defendants.
15 In this putative class action suit, Plaintiffs challenge Defendant Cigna Behavioral Health, 16 Inc.’s alleged failure to reimburse covered mental health provider claims at the usual, customary, 17 and reasonable (“UCR”) rates. Presently before the Court are two motions to dismiss the First 18 Amended Class Action Complaint (“FAC”); one brought by Cigna Health and Life Insurance 19 Company (“Cigna”), and a separate motion brought by Defendant MultiPlan, Inc. (“MultiPlan”) 20 (collectively referred to as “Defendants”).1 Dkt. Nos. 75, 76. Plaintiffs filed oppositions (Dkt. 21 Nos. 79-81) and Defendants filed replies (Dkt. Nos. 88, 89). The Court finds these matters 22 suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons 23 stated below, Defendants’ motions will be granted in part and denied in part. 24 25
26 1 Plaintiffs previously named different Defendants: Viant, Inc. (“Viant”), MultiPlan Corp., and Cigna Behavioral Health, Inc. Pursuant to the Joint Stipulation and Order to Substitute and 27 Dismiss Defendants, MultiPlan and Cigna were substituted into the case. Dkt. No. 69. Case No.: 5:20-cv-02255-EJD 1 I. BACKGROUND2 2 Plaintiff RJ is a participant in an employee benefits plan subject to the Employee 3 Retirement Income Security Act of 1974 (“ERISA”), which is sponsored and funded by “Inuit, 4 Inc.” FAC ¶ 38. RJ is the parent of her beneficiary son, SJ, who is also a behavioral health 5 patient. Id. Plaintiff LW is a participant in an employee benefits plan subject to ERISA, which is 6 sponsored and funded by International Paper Co. Id. ¶ 39. LW is the spouse of plan beneficiary, 7 MW, who is a behavioral health patient. Id. Plaintiff DS is a participant in an employee benefits 8 plan subject to ERISA, which is sponsored and funded by Impossible Foods, Inc. Id. ¶ 40. DS is 9 also a behavioral health patient. Id. Cigna is responsible for the administration and payment of 10 claims for behavioral services covered under health plans sponsored or administered by Cigna 11 Corporation or its many wholly owned and controlled subsidiaries, including Cigna Behavioral 12 Health. Id. ¶ 42. Plaintiffs were all members of policies offering out of network (“OON”) 13 benefits which Cigna either sold and underwrote or administered on behalf of employers. Id. ¶ 56. 14 MultiPlan is a Delaware corporation with a business address in New York. Id. ¶ 43. Viant is a 15 Nevada corporation and wholly owned subsidiary of MultiPlan. Id. 16 Summit Estate, Inc. (“Summit Estate”) contacted Cigna to verify coverage before 17 providing treatment (“VOB” calls). A Cigna representative confirmed that RJ’s son, SJ, had 18 coverage through an “MRC-1” plan, with benefits covered at the 80th percentile of charges for 19 similar services in the same geographic area. Id. ¶278. A Cigna representative confirmed MW’s 20 and DS’s plans were “MRC-2” policies and verified that claims would be paid at 150% and 110%, 21 respectively, of the Medicare-based schedule rate for all services. Id. ¶¶ 310, 340. There is, 22 however, no Medicare schedule rates for the substance use disorder services MW and DS were to 23 receive. The MRC-2 policy provides that where a Medicare based amount is not available, “the 24 MRC is determined based on the lesser of: the health care professional or facility’s normal charge 25 for a similar service or supply; or the MRC Option I methodology based on the 80th percentile of 26
27 2 The Background is a brief summary of the allegations in the FAC. See Dkt. No. 63. Case No.: 5:20-cv-02255-EJD 1 billed charges.” Id. ¶ 69 (emphasis added). Thus, all claims at issue were required to be paid 2 using the MRC-1 methodology. Id. ¶ 70. 3 Plaintiffs received intensive outpatient program (“IOP”) services from Summit Estate for 4 behavioral health disorders, including for mental health and substance use disorders. Id. ¶¶ 54-55, 5 275, 282, 308. Plaintiffs submitted timely claims for their treatment to Cigna. Id. ¶ 57. Cigna 6 approved the claims for payment, but underpaid all of them. Id. ¶¶ 58, 79, 82-83. Plaintiffs used 7 their own funds and resources to pay the unpaid portion of their claims to their treatment 8 providers. Id. ¶ 59. 9 Plaintiffs allege that Cigna was required, but failed to pay each and every one of the claims 10 at issue at the usual, customary, and reasonable rate (“UCR”). Id. ¶¶ 60, 84. “That is, it was 11 required to pay an amount based on the competitive fees of similar MH/SUD treatment providers 12 in the same geographic area.” Id. ¶ 60. “UCR is a commonly accepted term in the healthcare 13 industry and means generally, the competitive rate charged by similar providers of the same 14 specialty in the same geographic area.” Id. ¶ 64. For the claims at issue, the UCR rate is “what 15 Cigna was required to reimburse as the ‘Maximum Reimbursable Charge’ (‘MRC’).” Id. ¶ 65. 16 Plaintiffs understood the UCR rate for MRC I policies to mean the same as or substantially similar 17 to what was published on Cigna’s website:
18 [A] data base compiled by FAIR Health, Inc. (an independent non- profit company) is used to determine the billed charges made by 19 health care professionals or facilities in the same geographic area for the same procedure codes using data. The maximum reimbursable 20 amount is then determined by applying a percentile (typically the 70th or 80th percentile) of billed charges, based upon the FAIR Health, 21 Inc. data. For example, if the plan sponsor has selected the 80th percentile, then any portion of a charge that is in excess of the 80th 22 percentile of charges billed for the particular service in the same relative geographic area (as determined using the FAIR Health, Inc. 23 data) will not be considered in determining reimbursement and the patient will be fully responsible for such excess. 24 25 Id. ¶¶ 66-67; see also ¶¶ 310, 340 (“[I]t was customary and understood by all parties that payment 26 according to the plan would default to either 1) the lesser of Summit Estate’s normal charge for a 27 Case No.: 5:20-cv-02255-EJD 1 similar service or supply; or 2) 80th percentile of the healthcare charges made by similar providers 2 in the same geographic area, i.e. the ‘Fair Health’ 80th percentile benchmark.”). For many years 3 and until about 2015, Cigna was legally required to use the “FAIR Health” database to calculate 4 UCR in its payment of claims. Id. ¶ 75. “The significant differences between the publicly 5 available FAIR Health estimates and actual payments provide compelling evidence that the 6 Plaintiffs’ claims were not paid based on the UCR.” Id. ¶ 76. 7 Instead of applying the MCR I methodology, Defendants used Viant’s methodology to 8 “fabricate a fraudulent UCR rate and withhold a substantial part of the payment owed for 9 Plaintiffs’ claims.” Id. ¶ 84. “Viant’s methodology operates by culling data from a ‘Outpatient 10 Standard Analytical File’ (‘SAF’).” Id. ¶ 185. An SAF is composed of data collected from 11 Medicare Part B providers for services rendered to Medicare beneficiaries by the Department of 12 Health and Human Services (DHHs) / Centers for Medicaid and Medicaid Services (CMS). Id. 13 This methodology produced rates that are a fraction of the FAIR Health benchmark. Id. ¶ 164. 14 For example, for RJ/SJ, the Fair Health benchmark was $2,576; the provider charged $2,156 for 15 services, and Defendants’ payment rate was $259. Id. 16 As part of the MultiPlan “repricing” process, Plaintiffs received Patient Advocacy 17 Department (“PAD”) letters indicating that they should contact Cigna if they “get a bill from a 18 provider for more than the ‘What I Owe’ amount” indicated in the Cigna Explanation of Benefit 19 (“EOB”). Id. ¶¶ 289, 321, 351. The PAD letters informed Plaintiffs for the first time that Cigna 20 “has contracted with Viant to negotiate on your behalf.” Id. ¶ 359. The letters stated, “[w]e will 21 work with Viant on your behalf to attempt to reduce your expenses from this out-of-network 22 provider.” Id. ¶¶ 289, 321, 351. 23 “At no time material to this action did the Plaintiff[s] negotiate with Cigna, MultiPlan, or 24 Viant or agree to alter plan terms, consent to a discounted rate for IOP services, or to be bound 25 by Cigna’s, MultiPlan’s or Viant’s undisclosed payment policies, pricing methodologies or rate 26 schedules with respect to any of the services the Plaintiff[s] received from [Summit Estate].” Id. 27 Case No.: 5:20-cv-02255-EJD 1 ¶¶ 296, 326, 355. Notwithstanding the absence of any such agreement, Cigna and MultiPlan 2 applied “an unlawful discount” to the rate they paid Summit Estate. Id. As a result, RJ has paid 3 balance bills to Summit Estate totaling more than $36,303.16 (id. ¶ 298); MW is financially 4 responsible for a balance owed of $38,372.20 (id. ¶ 328); and DS is financially responsible for a 5 balance owed of $37,932.62 (id. ¶ 355). Plaintiffs paid the “underpayment amounts” to their 6 providers from their own funds and resources. Id. ¶ 59. 7 A. Procedural History 8 On April 2, 2020, Plaintiff RJ filed the original complaint. Dkt. No. 1. Defendants moved 9 to dismiss the complaint (Dkt. Nos. 32-33), which the Court partially granted on March 23, 2021. 10 See RJ v. Cigna Behavioral Health, Inc., No. 20-2255 EJD, 2021 WL 1110261, at *9 (N.D. Cal. 11 Mar. 23, 2021). The Court dismissed with prejudice the ERISA § 502(c) claim for failure to 12 provide plan materials and the ERISA § 502(a)(3) claim for failure to provide a full and fair 13 review. Id. at *5-6. The Court also dismissed the following claims with leave to amend: RICO 14 claim (Count I); claim for equitable relief to enjoin acts (Count VII), and “claim for other 15 appropriate equitable relief” (Count VIII). Id. at *6-10. Finally, the Court allowed RJ’s ERISA § 16 502(a)(1)(B) claims for underpayment of plan benefits (Counts II and III), and alternative claim 17 under ERISA § 502(a)(3) for violation of fiduciary duties (Count V) to proceed. Id. at *3-6. 18 On April 30, 2021, Plaintiffs filed the FAC. Dkt. No. 63. Plaintiffs assert the following 19 claims: (1) violations of RICO, 18 U.S.C. § 1962(c) against both Defendants; (2) RICO 20 conspiracy, 18 U.S.C. § 1962(d) against both Defendants; (3) underpayment of benefits in 21 violation of ERISA against Cigna; (4) breach of plan provisions in violation of ERISA § 22 502(a)(1)(B) against Cigna; (5) violation of fiduciary duties of loyalty and duty of care under 23 ERISA and a request for declaratory and injunctive relief against Cigna; and (6) violation of 24 fiduciary duties of loyalty and due care and request for declaratory and injunctive relief against 25 MultiPlan. The instant motions followed. 26 27 Case No.: 5:20-cv-02255-EJD 1 II. STANDARDS 2 Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 3 specificity “to give the defendant fair notice of what the . . . claim is and the grounds upon which 4 it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 5 A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim 6 upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). 7 To survive a Rule 12(b)(6) motion to dismiss, the complaint “must contain sufficient 8 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. 9 Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp., 550 U.S. at 570). A claim has facial 10 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable 11 inference that the defendant is liable for the misconduct alleged. Id. The plausibility standard 12 “calls for enough facts to raise a reasonable expectation that discovery will reveal evidence” to 13 support a plaintiff’s claim. Twombly, 550 U.S. at 556. 14 In evaluating the complaint, the court must generally accept as true all “well-pleaded 15 factual allegations.” Iqbal, 556 U.S. at 664. The court must also construe the alleged facts in the 16 light most favorable to the plaintiff. See Retail Prop. Trust v. United Bhd. Of Carpenters & 17 Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014) (the court must “draw all reasonable inferences 18 in favor of the nonmoving party” for a Rule 12(b)(6) motion). The court, however, “does not have 19 to accept as true conclusory allegations in a complaint or legal claims asserted in the form of 20 factual allegations.” In re Tracht Gut, LLC, 836 F.3d 1146, 1150-51 (9th Cir. 2016) (citing Bell 21 Atl. Corp., 550 U.S. at 555-56); see also Sprewell v. Golden State Warriors, 266 F.3d 979, 988 22 (9th Cir. 2001) (“Nor is the court required to accept as true allegations that are merely conclusory, 23 unwarranted deductions of fact, or unreasonable inferences.”). 24 Claims sounding in fraud are subject to a heightened pleading standard. Fed. R. Civ. P. 25 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances 26 constituting fraud or mistake.”); Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103-1104 (9th Cir. 27 Case No.: 5:20-cv-02255-EJD 1 2003) (recognizing that claims “grounded in fraud” or which “sound in fraud” must meet the Rule 2 9(b) pleading standard, even if fraud is not an element of the claim). The allegations must be 3 “specific enough to give defendants notice of the particular misconduct which is alleged to 4 constitute the fraud charged so that they can defend against the charge and not just deny that they 5 have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). 6 Dismissal “is proper only where there is no cognizable legal theory or an absence of 7 sufficient facts alleged to support a cognizable legal theory.” Navarro v. Block, 250 F.3d 729, 732 8 (9th Cir. 2001); see also Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019) 9 (dismissal may be based on either “the lack of a cognizable legal theory or the absence of 10 sufficient facts alleged under a cognizable legal theory”). If claims are dismissed, a court should 11 grant leave to amend unless “the pleading could not possibly be cured by the allegation of other 12 facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 13 1990). 14 III. DISCUSSION 15 Cigna seeks dismissal of the RICO claims. Cigna contends that Plaintiffs (1) fail to 16 plausibly allege predicate acts by Cigna; (2) fail to plead a RICO enterprise; and (3) fail to allege 17 that LW and DS suffered a RICO injury. Cigna contends that because the RICO claim fails, the 18 RICO conspiracy claim also necessarily fails. Cigna also argues that Plaintiff LW’s claims must 19 be brought in the United States District Court for the Western District of Tennessee in accordance 20 with the forum selection clause in her health benefits plan. 21 MultiPlan similarly argues that the RICO claims are deficient because Plaintiffs fail to 22 adequately plead an “association-in-fact”; a pattern of racketeering activity; RICO standing; and 23 proximate causation. Further, MultiPlan contends that the sixth claim for equitable relief under 24 ERISA fails to allege sufficient facts to establish a breach of fiduciary duties. Lastly, MultiPlan 25 contends that Plaintiffs fail to allege sufficient facts to establish they are entitled to injunctive 26 relief. 27 Case No.: 5:20-cv-02255-EJD 1 A. RICO Claims 2 “To state a claim under § 1962(c), a plaintiff must allege ‘(1) conduct (2) of an enterprise 3 (3) through a pattern (4) of racketeering activity.’” Odom v. Microsoft Corp., 486 F.3d 541, 547 4 (9th Cir. 2007) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985) (footnote 5 omitted)); see also Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996). “To plead a RICO 6 pattern, at least two predicate acts of racketeering activity need to be alleged.” Synopsys, Inc. v. 7 Ubiquiti Networks, Inc., 313 F. Supp. 3d 1056, 1077 (N.D. Cal. 2018) (citation omitted). 8 “Racketeering activity” is defined as “the commission of a predicate act that is one of an 9 enumerated list of federal crimes.” Id. at 1076. “[W]here RICO is asserted against multiple 10 defendants, a plaintiff must allege at least two predicate acts by each defendant.” In re Wellpoint, 11 Inc. Out-of-Network “UCR” Rates Litig., 903 F. Supp. 2d 880, 914 (C.D. Cal. 2012) (emphasis in 12 original); accord, Dooley v. Crab Boat Owners Ass’n, No. 02-676 MHP, 2004 WL 902361, at *5 13 (N.D. Cal. Apr. 26, 2004). 14 1. Predicate RICO Acts- Mail Fraud and Wire Fraud 15 Mail fraud and wire fraud are among the statutory predicate acts listed in section 1961(1). 16 Mail fraud occurs whenever a person, “having devised or intending to devise any scheme or 17 artifice to defraud,” uses the mail “for the purpose of executing such scheme or artifice or 18 attempting so to do.” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 658 (2008) (citing 18 19 U.S.C. § 1341). The elements of mail fraud and wire fraud are essentially identical. United States 20 v. Brugnara, 856 F.3d 1198, 1207 (9th Cir. 2017). A plaintiff must show “(1) a scheme to 21 defraud, (2) the use of either the mail or wire, radio, or television to further the scheme, and (3) the 22 specific intent to defraud.” Id. Wire and mail fraud require the intent to deceive and cheat—in 23 other words, to deprive the victim of money or property by means of deception.” United States v. 24 Miller, 953 F.3d 1095, 1102 (9th Cir. 2020) (emphasis in original). 25 RICO fraud claims must be pled with particularity in accordance with Federal Rule of 26 Civil Procedure 9(b). Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 27 Case No.: 5:20-cv-02255-EJD 1 (9th Cir. 1991). To satisfy this standard, a plaintiff must allege “the who, what, when, where, and 2 how” of the fraud. Vess, 317 F. 3d at 1106; see also Edwards v. Marin Park, Inc., 356 F.3d 1058, 3 1065-66 (9th Cir. 2004) (requiring pleader of RICO fraud claim to allege the time, place and 4 specific content of false representations as well as the identities of the parties to the 5 misrepresentation). 6 a) Reliance 7 Cigna first argues that to state a RICO claim based on mail or wire fraud, Plaintiffs must, 8 but have failed to, allege “that someone relied on the defendant’s misrepresentations.” Bridge, 9 553 U.S. at 658 (emphasis in original). Cigna acknowledges that the FAC alleges Plaintiffs relied 10 on Cigna’s representations during VOB calls, but argues that this allegation is not plausible 11 because VOB calls generally do not contain sufficiently specific promises to pay. Mot. at 10. 12 Cigna’s argument would have weight if Plaintiffs were asserting a promissory estoppel or breach 13 of contract claim,3 but this is not their allegation. Instead, they allege mail and wire fraud. 14 Reasonable reliance on a specific promise to pay is not an element of a RICO claim predicated on 15 mail and wire fraud. Bridge, 553 U.S. at 653 (“we reject petitioners’ contention that the 16 ‘common-law meaning’ rule dictates that reliance by the plaintiff is an element of a civil RICO 17 claim predicated on a violation of the mail fraud statute.”).4 Of course, “it may well be that a 18 RICO plaintiff alleging injury by reason of a pattern of mail fraud must establish at least third- 19 party reliance in order to prove causation.” Bridges, 553 U.S. at 658. “But the fact that proof of 20
21 3 See ABC Servs. Grp., Inc. v. Health Net of Cal., Inc., No. 18-243 DOC, 2020 WL 2121372, at *6 (C.D. Cal. May 4, 2020) (“Plaintiff’s allegations about the authorization and verification process 22 are inadequate to support a promissory estoppel claim.”); Pac. Bay Recovery, Inc. v. Cal. Physicians’ Servs., Inc., 12 Cal. App. 5th 200, 216 (2017) (affirming dismissal of implied contract 23 and estoppel claims where provider claimed “that it was led to believe that it would be paid a portion or percentage of its total billed charges, which charges correlated with usual, reasonable 24 and customary charges” on VOB and authorization calls); Cedars Sinai Med. Ctr. v. Mid-W. Nat’l Life Ins. Co., 118 F. Supp. 2d 1002, 1008 (C.D. Cal. 2000) (“[W]ithin the medical insurance 25 industry, an insurer’s verification is not the same as a promise to pay.”).
26 4 Cigna’s reliance on Taylor Grp. v. ANR Storage Co., 24 F. App’x 319, 323 (6th Cir. 2001) is misplaced because it was decided before and is inconsistent with Bridge. 27 Case No.: 5:20-cv-02255-EJD 1 reliance is often used to prove an element of the plaintiff’s cause of action, such as the element of 2 causation, does not transform reliance itself into an element of the cause of action.” Id. at 659 3 (quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 478 (2006), (THOMAS, J., concurring in 4 part and dissenting in part)); see also In re Bextra & Celebrex Mktg. Sales Pracs. Litig., No. 05- 5 1699 CRB, 2012 WL 3154957, at *5-6 (N.D. Cal. Aug. 2, 2012) (granting motion to dismiss with 6 prejudice, and holding that “[i]n cases where the RICO violation involves misrepresentations, such 7 as in mail and wire fraud cases, courts often determine whether proximate cause exists by asking 8 whether there was cases actual reliance on those misrepresentations”). Guided by the analysis in 9 these cases, the Court rejects Cigna’s argument that Plaintiffs must allege reasonable reliance on a 10 specific promise to pay in order to plead a RICO violation based on mail or wire fraud. Whether 11 causation is sufficiently pled is discussed in a subsection section of this Order. 12 b) Two Predicate Acts Requirement 13 Cigna next contends that Plaintiffs alleged predicate acts in the FAC, the three phone calls 14 and the PAD letters, are insufficient to sustain the minimum required two predicate acts of fraud. 15 Cigna reasons that Plaintiffs fail to allege that Cigna made any false or misleading statement 16 during the VOB calls for MW and DS, which leaves only the single VOB call for RJ as a potential 17 predicate act. Cigna contends that the post-service communications, such as the PAD letters, 18 cannot constitute predicate acts of fraud because Plaintiffs could not have relied on the PAD 19 letters before receiving treatment. 20 The Court finds that the three VOB calls are sufficient to satisfy the predicate acts 21 requirement. Each are pled with particularity. On February 27, 2018, Creyna Franco of Summit 22 Estate called Cigna, and Cigna’s representative, “Abby,” “verified that MW had active benefits for 23 out of network behavioral health treatment and represented that the plan was an MRC-2 policy 24 which would pay 150% of the Medicare schedule rate for all services.” FAC ¶ 310. On August 25 22, 2019, Creyna Franco of Summit Estate called Cigna, and Cigna’s representative, “Mykal,” 26 verified that DS had active benefits for out of network behavioral health treatment and represented 27 Case No.: 5:20-cv-02255-EJD 1 that the plan was an MRC 2 policy which would pay 110% of the Medicare schedule rate for all 2 services.” Id. ¶ 340. Construing the allegations in the light most favorable to Plaintiffs, the FAC 3 plausibly alleges that Cigna misled Plaintiffs and their providers into believing that rates for 4 MW’s and DS’s services would be determined based on UCR, even if the Cigna’s representatives 5 did not explicitly refer to UCR during the VOB calls. This is supported by Plaintiffs allegations 6 that “[a]s there is no Medicare schedule rate for the substance use disorder services [MW and DS 7 were] to receive from Summit Estate, it was customary and understood by all parties that payment 8 according to the plan would default to either 1) the lesser of Summit Estate’s normal charge for a 9 similar service or supply; or 2) 80th percentile of the healthcare charges made by similar providers 10 in the same geographic area, i.e. the Fair Health 80th percentile benchmark.” Id. ¶¶ 310, 340. 11 Plaintiffs also plead fraud with particularity as to SJ’s services. On March 4, 2019, Creyna 12 Franco, of Summit Estate called Cigna, and Cigna’s representative, “Anna,” told Summit Estate 13 that its plan would reimburse claims based on the 80th percentile of UCR. Id. ¶ 278. The FAC 14 also plausibly alleges that Cigna misled Plaintiffs and their providers by omitting any information 15 about repricing. Id. ¶ 398. Therefore, the predicate acts requirement for mail and wire fraud is 16 satisfied.5 17 c) Specific Intent to Defraud 18 Defendants contend that the FAC lacks sufficient facts to support a reasonable inference 19 that they acted with the requisite intent to deceive and cheat. Cigna reasons that most 20 communications that Plaintiffs reference—such as RJ’s son’s EOB and their OON letters— 21 disclose that Viant priced their claims, which they argue is inconsistent with an intent to defraud. 22 This argument overlooks Plaintiffs’ allegation that the fraudulent scheme began with the VOB 23 calls, when Cigna failed to disclose anything about MultiPlan or Viant’s role in repricing claims. 24 The lack of transparency about Viant’s repricing methodology supports a reasonable inference that 25
26 5 Because the VOB calls are sufficient, it is unnecessary to resolve at this stage in the proceedings 27 whether the post-service communications, such as the PAD letters, also constitute predicate acts. Case No.: 5:20-cv-02255-EJD 1 Defendants acted with the intent to defraud, and Cigna subsequent disclosure Viant’s role in 2 repricing is not necessarily inconsistent with an intent to defraud. Furthermore, fraudulent intent 3 may be inferred from the extreme discrepancy between on the one hand, Defendants’ payment 4 rates of $238 to $259 per diem, and on the other hand, the provider’s charge of $2,156 per diem 5 and the Fair Health Benchmark of $2,576 per diem. See FAC ¶ 164. 6 Cigna contends that when the VOB calls were made, it could not have known what actual 7 services would be rendered and therefore could not have intended to defraud Plaintiffs for the 8 subsequently administered IOP services. This argument is unpersuasive at the pleading stage. 9 The FAC alleges that during the VOB calls, Cigna’s representatives verified active benefits for 10 OON “behavioral health treatment.” Id. ¶¶ 278, 310, 340. The FAC also alleges that Cigna and 11 MultiPlan’s employees responsible for Outpatient Review (OPR) had FAIR Health data loaded 12 onto their virtual “Toolbox” in their in-house claims routing system. Construing these allegations 13 in the light most favorable to Plaintiffs and considering all reasonable inferences, they are 14 sufficient to support a plausible inference that at the time the VOB calls occurred, Cigna knew 15 what services would be rendered and how they should have been priced. 16 The FAC satisfactorily alleges two predicate acts of mail and wire fraud. 17 2. Predicate RICO Acts- Health Offenses and Money Laundering 18 The Court rejected Plaintiffs’ first attempt to plead a RICO claim based on “Federal Health 19 Offenses” as defined by 18 U.S.C. § 24 because they “are not among the statutory list of predicate 20 acts that can constitute racketeering under 18 U.S.C. § 1961(1).” RJ, 2021 WL 1110261, at *9. 21 Plaintiffs now allege that Cigna “laundered monetary instruments with monies obtained through 22 the commission of Federal Health Offenses.” FAC ¶ 175. Cigna contends that this RICO money 23 laundering theory of liability fails because it is not pled with particularity as required by Rule 9(b). 24 Plaintiffs question the applicability of Rule 9(b) to money laundering, and argue that the FAC 25 satisfies Rule 8 by alleging that Defendants conducted financial transactions, that these 26 transactions represented the proceeds of unlawful Federal Health Offenses, that Defendants knew 27 Case No.: 5:20-cv-02255-EJD 1 that the proceeds were derived from the Offenses, and that Defendants intentionally designed the 2 transactions to conceal their illegality. 3 Although there are differences of opinion, “[m]ost courts have held the money laundering 4 involves an element of fraud, and therefore must be pled with particularity under Rule 9(b). See 5 Desoto v. Condon, No. 08-514 AHS, 2008 WL 11338151, at *10 (N.C. Cal. Oct. 3, 2008) 6 (“Courts have held that allegations of money laundering must satisfy Rule 9(b)’s requirements 7 because money laundering involves an element of fraud.”), aff’d, 371 F. App’x 822 (9th Cir. 8 2010); see also Best Deals on TV, Inc. v. Naveed, No. 07–1610 SBA, 2007 WL 2825652, at *7 9 (N.D. Cal. Sept. 26, 2007). However, the issue is academic because Plaintiffs’ allegations are 10 insufficient to satisfy the more lenient Rule 8 pleading standard for several reasons. 11 To establish money laundering under 18 U.S.C. § 1956(a)(1), a plaintiff must allege and 12 ultimately prove that defendants: (1) engaged in a financial transaction which involved proceeds 13 from specified illegal activity, (2) knew the proceeds were from illegal activity, and (3) intended 14 the transaction either to promote the illegal activity or to conceal the nature, source, or ownership 15 of the illegal proceeds. United States v. Marbella, 73 F.3d 1508, 1514 (9th Cir. 1996). Here, the 16 first element is lacking. The FAC only vaguely refers to “Federal Health Offenses,” without 17 specifying which offense(s) Defendants allegedly committed. Plaintiffs’ Opposition brief lists 18 several statutory violations (18 U.S.C. § 1035, § 664, § 1347, § 1027, § 1349, § 1341, and § 1343), 19 but these do not appear anywhere in the FAC, and therefore will not be considered. See Schneider 20 v. Cal. Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998)) (instructing that a deficient 21 pleading cannot be cured by new allegations raised in a plaintiff’s response to a motion to 22 dismiss); Yamauchi v. Cotterman, 84 F. Supp. 3d 993, 1009 (N.D. Cal. 2015) (“In determining the 23 propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff’s 24 moving papers, such as a memorandum in opposition to a defendant’s motion to dismiss.”) 25 (quoting Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003) (emphasis in original)). The 26 FAC also lacks sufficient facts to plausibly allege the third element of money laundering, namely 27 Case No.: 5:20-cv-02255-EJD 1 that Defendants intended the transactions to promote the illegal activity or to conceal the nature, 2 source, or ownership of the illegal proceeds. “[W]here a defendant takes no steps to disguise or 3 conceal the source or destination of [allegedly laundered] funds, . . those transactions 4 conspicuously lack the convoluted character associated with money laundering.” United States v. 5 Wilkes, 662 F.3d 524, 545 (9th Cir. 2011) (internal quotations omitted). Plaintiffs allege that 6 Defendants underpaid claims and profited from the underpayments (Opp’n at 8 (citing FAC)), but 7 do not allege that they disguised or concealed the source or destination of allegedly laundered 8 funds. Furthermore, profiting from an alleged fraud does not alone constitute money laundering. 9 “The money laundering statute criminalizes behavior that masks the relationship between an 10 individual and his illegally obtained proceeds; it has no application to the transparent division or 11 deposit of those proceeds.” Metaxas v. Lee, No. 19-3819 EMC, 2020 WL 7025095, at *10 (N.D. 12 Cal. Nov. 30, 2020) (quoting United States v. Adefehinti, 510 F.3d 319, 322 (D.C. Cir. 2007)); see 13 also United States v. Esterman, 324 F.3d 565, 570 (7th Cir. 2003) (“[W]e have stressed that the 14 mere transfer and spending of funds is not enough to sweep conduct within the money laundering 15 statute; instead, subsequent transactions must be specifically designed to hide the provenance of 16 the funds involved.”); United States v. Caldwell, 560 F.3d 1214, 1222 (10th Cir. 2009) (“Money 17 laundering requires more than simply writing a check with the proceeds of unlawful activity. We 18 have repeatedly stated that § 1956 is not a money spending statute.”). Moreover, because 19 Plaintiffs have self-funded plans, it is not plausible for Cigna to engage in money laundering. 20 Accordingly, the RICO claim is dismissed to the extent it is based on money laundering. 21 3. Association-in-Fact Enterprise 22 To plead an association-in-fact enterprise for a RICO claim, “plaintiffs must plead that the 23 enterprise has (A) a common purpose, (B) a structure or organization, and (C) longevity necessary 24 to accomplish the purpose.” Eclectic Props. East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 25 997 (9th Cir. 2014) (citing Boyle v. United States, 556 U.S. 938, 946 (2009)). 26 The Court rejected Plaintiffs’ first attempt at alleging an association-in-fact enterprise 27 Case No.: 5:20-cv-02255-EJD 1 because all the complaint described was a contractual relationship between Defendants, and courts 2 have uniformly held that a routine commercial dealing is insufficient to establish RICO liability. 3 RJ, 2021 WL 1110261, at *7. The Court noted the failure to plead with particularity sufficient 4 facts to plausibly show that Cigna and Viant knowingly formed an enterprise to fraudulently 5 underpay claims at below the UCR rates. Id. 6 Defendants argue that the FAC does not cure the deficiencies previously identified by the 7 Court. Specifically, Cigna argues that its contract to use Viant to negotiate discounts is not 8 enough to plead a RICO enterprise. MultiPlan similarly argues that the FAC fails to allege that it 9 did anything more than carry out the terms of its contract with Cigna. Plaintiffs counter that the 10 allegations of a RICO enterprise are substantially similar to those found sufficient in LD v. United 11 Behavioral Health, 508 F. Supp. 3d 583, 601-02 (N.D. Cal. Dec. 18, 2020) and urges this Court to 12 also find their allegations sufficient. 13 In LD, the court concluded that plaintiffs had plausibly alleged RICO enterprise based on 14 allegations that (1) the defendants “collaborated and conspired to develop and use a database and 15 pricing tool that would generate the lowest possible reimbursement rates for the OON IOP 16 services at issue, which employed data that did not represent the customary rates of similar IOP 17 providers in the geographic area as required by plaintiffs’ plans”; and (2) the enterprise’s affairs 18 existed for the common purpose of keeping reimbursements for IOP claims artificially low. Id. at 19 602. The LD rejected as premature the defendants’ argument that they were merely engaged in a 20 routine contractual relationship with a goal of cost-containment, and found that the plaintiffs 21 raised a plausible inference that the defendants’ contractual relationship was a cover for their 22 scheme to profit from the fraud at the plaintiffs’ expense. Id. 23 Here, Plaintiffs’ FAC includes allegations that are substantially similar to those in LD and 24 likewise support a plausible inference that Defendants engaged in a RICO enterprise. See, e.g., 25 FAC ¶¶ 215-268. Cigna argues that the Court should not follow LD because it was incorrectly 26 decided insofar as it did not consider Eclectic Props. E., LLC, which instructed that “[w]hen 27 Case No.: 5:20-cv-02255-EJD 1 companies engage in . . . and operate legitimate businesses for years thereafter, and otherwise act 2 as routine participants in American commerce, a significant level of factual specificity is required 3 to allow a court to infer reasonably that such conduct is plausibly part of a fraudulent scheme.” 4 751 F.3d at 997-98. The FAC, however, includes the requisite “significant level of factual 5 specificity” from which to infer a RICO enterprises. Plaintiffs allege that Cigna sent MultiPlan an 6 arbitrarily selected “target rate” for each claim at issue for repricing. FAC ¶¶ 234, 236. Viant 7 then repriced the claim based on nation-wide median rates charged by Medicare facilities, not 8 amounts charged by intensive outpatient substance use providers in a given geographic area. Id. 9 ¶¶ 221-32. When Viant did not have data for a certain service, its software engineers would select 10 the service rate. Id. ¶¶ 225-27. MultiPlan actively offered the Viant methodology to Cigna as a 11 product capable of underpaying claims with minimal provider pushback, and MultiPlan knew and 12 explained to Cigna that the Viant methodology could provide the appearance of legitimacy and 13 offer cover for the fraudulent underpayment of IOP claims. Id. ¶ 240. MultiPlan secretly 14 discussed the Viant OPR Review methodology with Cigna at annual events hosted by the Client 15 Advisory Board of MultiPlan (“CAB”). Id. ¶ 240. The Viant methodology was specifically 16 designed to be adapted and customized based on input and direction from the insurer, here Cigna. 17 Id. ¶ 242. Defendants jointly developed the underpayment scheme, including collaborating on 18 “Whitepapers,” which explained how the Viant methodology could be implemented to output any 19 payment price Cigna wanted in order to maximize profits, without regard to, and in violation of, 20 the patients’ health plan provisions. Id. ¶¶ 250, 259, 264; see also ¶¶ 256 (MultiPlan sought input 21 from Cigna), 261 (Cigna reviewed, commented, and provided feedback on the Whitepapers “in 22 order to structure Cigna’s relationship with MultiPlan and implement the Viant methodology to 23 underpay claims”), 262 (Cigna provided “direction”). “Cigna partnered with MultiPlan to use the 24 Viant methodology so that the ‘UCR’ rate produced through Viant’s methodology could be 25 presented as ‘independent’ and ‘defensible,’ permitting Cigna and other insurers to abdicate their 26 responsibility for the derived rates.” Id. ¶ 251. MultiPlan executives regularly met with Cigna to 27 Case No.: 5:20-cv-02255-EJD 1 discuss Viant’s methodology and how to lower the rates paid for services, without ever seriously 2 discussing the employee benefits plan language. Id. ¶¶ 255-59. The FAC includes additional 3 factual allegations to show Cigna directed the affairs of the alleged enterprise. Id. ¶¶ 134, 137, 4 198, 261-64. Defendants’ fee structure incentivized MultiPlan to reprice claims below Cigna’s 5 “target” rate for IOP treatment. Id. ¶¶ 237, 267. After repricing claims, Defendants sent Plaintiffs 6 joint letters in which they represented that the providers will be paid the maximum reimbursable 7 amount allowed under Plaintiffs’ plans if the provider does not agree to Viant’s rate. Id. ¶ 368. 8 The providers, however, never received the maximum reimbursable rate. Id. ¶ 370. The Court 9 finds that Plaintiffs’ non-conclusory allegations are sufficient to “nudg[e] their claims across the 10 line from conceivable to plausible.” Twombly, 550 U.S. at 570. “That a legitimate contractual 11 relationship between the defendants exists does not undermine plaintiffs’ plausible allegations that 12 defendants also engaged in an enterprise to defraud them and used the contractual relationship as a 13 cover.” LD, 508 F. Supp. 3d at 602. 14 4. Plaintiffs LW’s and DS’s Alleged RICO Injury 15 Cigna contends that LW’s and DS’s RICO claim fails because they do not allege they 16 actually made any out-of-pocket payments. The FAC is vague in that it alleges they are 17 “financially responsible for a balance owed” to Summit Estate (FAC ¶¶ 328, 355), which suggests 18 that LW and Ds may not have paid their providers. Elsewhere, however, the FAC alleges that 19 “Plaintiffs paid the underpayment amounts to their treatment providers from their own funds and 20 resources.” Id. ¶59. “Plaintiffs” refers to “RJ, as the representative of her beneficiary son, SJ; 21 LW as the representative of her beneficiary spouse, MW; and, DS, an individual.” Id. ¶ 1. The 22 Court accepts Plaintiffs’ unequivocal allegation that they paid their treatment providers and finds 23 that LW and DS have satisfactorily alleged a RICO injury. 24 5. Standing and Proximate Cause 25 To establish RICO standing, a plaintiff must allege an injury to business or property 26 proximately caused by the alleged RICO offense. Gilbert v. Bank of Am., No. 13-1171 JSW, 2014 27 Case No.: 5:20-cv-02255-EJD 1 WL 12644028, at *4 (N.D. Cal. Sept. 23, 2014). “When a Court evaluates a RICO claim for 2 proximate causation, the central question it must ask is whether the alleged violation led directly 3 to the plaintiff’s injuries.” Anza v. Ideal Steal Supply Corp., 547 U.S. 451, 461 (2006). 4 MultiPlan argues that the FAC is deficient because Plaintiffs do not and cannot allege 5 MultiPlan had any responsibility for a communication to Plaintiffs that was material to their 6 decision-making at the beginning of the treatment process. MultiPlan reasons that Cigna allegedly 7 issued the benefits plans and responded to the VOB calls, and the FAC does not allege any facts to 8 suggest MultiPlan was in any way responsible for these actions. MultiPlan acknowledges that the 9 FAC alleges it sent the OON letters, but argues that these letters were not the proximate cause of 10 the alleged harm because they were sent after Plaintiffs sought and received treatment. The 11 argument is unpersuasive because as already discussed above, Plaintiffs satisfactorily allege that 12 Cigna and MultiPlan were co-participants in a RICO scheme that caused harm. Having pled a 13 cognizable RICO scheme, “the statements and acts of co-participants in a scheme to defraud [are] 14 admissible against other participants.” See In re Volkswagen “Clean Diesel” Mktg, Sales 15 Practices, and Prods. Liab. Litig., MDL No. 2672 CRB, 2017 WL 4890594, at *12 (N.D. Cal. 16 Oct. 30, 2017) (quoting United States v. Stapleton, 293 F.3d 1111, 1262 (9th Cir. 2002)). That 17 MultiPlan did not have a direct role in issuing the benefits plans and responding to the VOB calls 18 is of no moment. See LD v. United Behavioral Health, No. 20-2254 YGR, 2021 WL 930624, at 19 *7 (N.D. Cal. Mar. 11, 2021) (“That Viant (MultiPlan’s subsidiary) allegedly began to handle 20 claims for IOP services only after United had already made alleged misrepresentations during 21 VOB calls does not alter the fact that plaintiffs plausibly allege that MultiPlan knowingly 22 participated and directed the scheme which, again, encompassed the VOB calls in question as well 23 as other conduct in furtherance of the scheme that took place before and after Viant began to 24 handle IOP claims.”). 25 B. RICO CONSPIRACY CLAIM 26 As discussed above, Plaintiffs plead a substantive violation of RICO based on the predicate 27 Case No.: 5:20-cv-02255-EJD 1 acts of mail and wire fraud, but not based on the predicate act of money laundering. Therefore the 2 RICO conspiracy claim survives to the extent it is based on mail and wire fraud. The RICO 3 conspiracy claim fails to the extent it is based on money laundering. See Howard v. Am. Online 4 Inc., 208 F.3d 741, 751 (9th Cir. 2000) (“Plaintiffs cannot claim that a conspiracy to violate RICO 5 existed if they do not adequately plead a substantive violation of RICO.”); Sanford v. 6 MemberWorks, Inc., 625 F.3d 550, 559 (9th Cir. 2010) (“Because we conclude that the section 7 1962(c) claim cannot be saved by amendment, it follows that the section 1962(d) claim also 8 cannot be saved.”). 9 C. FORUM SELECTION CLAUS IN LW’S PLAN 10 Cigna contends that LW’s claims should be dismissed because her health benefits plan 11 contains a forum selection clause requiring a participant or beneficiary to bring an action in 12 connection with the plan in the United States District Court for the Western District of Tennessee. 13 Plaintiffs raise several arguments in response, none of which are persuasive. First, Plaintiffs assert 14 that a Rule 12(b)(6) motion to dismiss is not the appropriate procedural mechanism for enforcing a 15 forum selection clause. In the Ninth Circuit, whether a Rule 12(b)(6) motion is a proper 16 mechanism for enforcing a forum selection clause is an unsettled question. In Atl. Marine Const. 17 Co. v. U.S. Dist. Court for W. Dist. of Texas, the Court held that 28 U.S.C § 1404(a) is the proper 18 “mechanism for enforcement of forum-selection clauses that point to a particular federal district, 19 and expressly declined to consider “whether defendant in a breach-of-contract action should be 20 able to obtain dismissal under Rule 12(b)(6) if the plaintiff files suit in a district other than the one 21 specified in a valid forum-selection clause.” 571 U.S. 49, 61 (2013). Since then, a few out-of- 22 circuit courts have permitted parties to assert a forum selection clause in a Rule 12(b)(6) motion. 23 See Claudio-De Leon v. Sistema Universitario Ana G. Mendez, 775 F.3d 41, 46 (1st Cir. 2014) 24 (“Absent a clear statement from the Supreme Court to the contrary, the use of Rule 12(b)(6) to 25 evaluate forum selection clauses is still permissible in this Circuit.”); Smith v. Aegon Cos. Pension 26 Plan, 769 F.3d 922, 934 (6th Cir. 2014) (affirming Rule 12(b)(6) dismissal predicated on 27 Case No.: 5:20-cv-02255-EJD 1 enforcing a forum selection clause); Podesta v. Hanzel, 684 F. App’x 213, 216 (3d Cir. 2017) 2 (finding Rule 12(b)(6) is an acceptable means of enforcing a forum selection clause). Other 3 district courts within the Ninth Circuit have come to the same conclusion. See Verifone, Inc. v. A 4 CAB, LLC, No. 15-157 GMN, 2016 WL 4480686, at *2 (D. Nev. Aug. 24, 2016) (dismissing 5 counterclaims related to a services agreement where the agreement contained a forum selection clause, 6 and “accept[ing] VeriFone’s characterization of its motion as brought under Rule 12(b)(6)”); see also 7 Mix v. Neeb, No. 14-1594 KJM, 2014 WL 6469130, at *2 (E.D. Cal. Nov. 17, 2014) (“It appears no 8 controlling precedent precludes 12(b)(6) dismissal based on a contrary forum selection clause. . . . 9 This court accepts Sampson’s characterization of its motion as brought under Rule 12(b)(6).”). 10 Consistent with the First, Third and Sixth Circuit and the district court decisions cited above, this 11 Court concludes that a Rule 12(b)(6) motion is an acceptable means of enforcing a forum selection 12 clause. 13 Second, Plaintiffs contend that the forum selection clause is unenforceable because it is 14 stated in the benefits booklet (summary plan description (“SPD”)), and not the governing 15 employee benefits plan document. The SPD states, however, that the “booklet also serves as the 16 portion of the official plan document governing covered benefits” and “constitutes part of, and is 17 incorporated by reference into” LW’s benefits plan. Dkt. No. 76-4 at 43. Moreover, the benefits 18 plan contains the same forum selection clause. Dkt. No. 89-2 at 33. 19 Third, Plaintiffs argue that the forum selection clause is void as a matter of public policy 20 because it is contrary to the language and purpose of ERISA. This argument has been considered 21 and rejected by the Ninth Circuit. See In re Becker, 993 F.3d 731, 733 (9th Cir. 2021) (holding 22 that “ERISA does not bar forum selection clauses”); see also Rapp v. Henkel of Am., Inc., No. 18- 23 1128 JLS, 2018 WL 6307904, at *4 (C.D. Cal. Oct. 3, 2018) (noting that “district courts in this 24 circuit. . . have uniformly found that forum-selection clauses in ERISA plans do not contravene 25 ERISA’s venue provision and are enforceable”); Rodriguez v. PepsiCo Long Term Disability 26 Plan, 716 F. Supp. 2d 855, 860 (N.D. Cal. 2010) (“[e]nforcement of a forum selection clause is 27 Case No.: 5:20-cv-02255-EJD 1 not inconsistent with the terms or policy rationales of ERISA.”); Marin v. Xerox Corp., 935 F. 2 Supp. 2d 943, 946 (N.D. Cal. 2013) (“Courts, however, have held that enforcement of forum 3 selection clauses is not inconsistent with the terms or policy rationales of ERISA.”). A forum 4 selection should not be enforced where doing so would deprive a plaintiff of her day in court. 5 Rodriguez, 716 F. Supp. 2d at 861. Here, however, Plaintiffs have not shown that the prospect of 6 LW having to travel to Tennessee to litigate her claims is so burdensome such that it will 7 effectively deny her of her day in court. 8 Fourth, Plaintiffs argue that LW is not asserting “an action in connection with the plan” 9 because the plan is not a defendant, and therefore her claims do not fall within the scope of the 10 forum selection clause. However, the forum selection clause applies to actions “in connection 11 with the plan” without regard to who is named as a defendant. Therefore, the Court rejects 12 Plaintiffs’ argument and concludes that LW’s claims are within the scope of the forum selection 13 clause. See Wallace v. International Paper Company, No. 20-2242 JVS, 2020 WL 4938361, at *6 14 (C.D. Cal. July 2, 2020) (concluding that claims for breach of fiduciary duties were within scope 15 of forum selection clause pertaining to actions “in connection with the Plan”). 16 D. Sixth Claim For Breach of ERISA Fiduciary Duties against MultiPlan 17 The sixth claim is brought against MultiPlan under 29 U.S.C. § 1132(a)(3). Under section 18 1132(a)(3), a civil action may be brought “by a participant, beneficiary, or fiduciary (A) to enjoin 19 any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) 20 to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any 21 provisions of this subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3). 22 1. Breach of Fiduciary Duties 23 In ruling on MultiPlan’s previous motion to dismiss, the Court found that Plaintiffs’ 24 allegations were sufficient to allege MultiPlan’s status as an ERISA fiduciary, but that the claim 25 was otherwise deficient. In its second motion to dismiss, MultiPlan advances no reason to revisit 26 the Court’s prior ruling regarding MultiPlan’s status as an ERISA fiduciary. MultiPlan maintains, 27 Case No.: 5:20-cv-02255-EJD 1 however, that the FAC fails to rectify any of the pleading deficiencies. 2 As an initial matter, MultiPlan mischaracterizes the breach of fiduciary duties when it 3 focuses solely on misrepresentations. The claim is based on broader allegations. Plaintiffs allege 4 that MultiPlan breached its fiduciary duties to Plaintiffs by, among other things, “refusing to 5 properly determine appropriate reimbursement for Plaintiffs claims for medically necessary IOP 6 treatment”; employing a cursory, incomplete and/or biased reimbursement methodology through 7 the use of the Viant methodology”; and “failing to utilize an adequate and appropriate database in 8 determinations as to the UCR reimbursement amount in that the database did not contain similar, 9 representative charges of similar providers of similar services in the same geographic area as 10 Plaintiffs’ providers.” FAC ¶¶ 485-91. These alleged breaches, which do not sound in fraud, are 11 supported with sufficient factual allegations to provide MultiPlan fair notice of what the claim is 12 and the grounds upon which it rests. 13 To the extent the breach of fiduciary duties claim is based on misrepresentations, Plaintiffs 14 must plead and prove: “(1) the defendant’s status as an ERISA fiduciary acting as a fiduciary; (2) 15 a misrepresentation on the part of the defendant; (3) the materiality of that misrepresentation; and 16 (4) detrimental reliance by the plaintiff on the misrepresentation.” In re Computer Scis. Corp. 17 ERISA Litig., 635 F. Supp. 2d 1128, 1140 (C.D. Cal. 2009). The allegations that support 18 Plaintiffs’ RICO claim also support the breach of fiduciary claim. Accordingly, MultiPlan’s 19 motion to dismiss the sixth claim is denied. 20 2. Equitable Relief 21 Lastly, MultiPlan contends that Plaintiffs fail to plead they are entitled to equitable relief. 22 MultiPlan is correct that in general, “[f]or a plaintiff to establish that it is entitled to an injunction, 23 it must demonstrate, among other things, that “remedies available at law, such as monetary 24 damages, are inadequate to compensate for” plaintiff’s injuries. Ctr. for Biological Diversity v. 25 Mattis, 868 F.3d 803, 827 (9th Cir. 2017). In the context of ERISA, however, a plaintiff may 26 seek relief in the alternative. Moyle v. Liberty Mut. Ret. Ben. Plan, 823 F.3d 948, 962 (9th Cir. 27 Case No.: 5:20-cv-02255-EJD 1 || 2016), as amended on denial of reh’g and reh’g en banc (Aug. 18, 2016) (“allowing plaintiffs to 2 seek relief under both Sections 1132(a)(1)(B) and 1132(a)(3) is consistent with ERISA’s intended 3 || purpose of protecting participants’ and beneficiaries’ interests.”). Certainly, Plaintiffs may not 4 || obtain double recovery. Jd. at 961. At the pleading stage, however, “[i]t is exceedingly premature 5 ... to engage in a battle over whether or not a specific equitable remedy is appropriate. Akhalaghi 6 || v. Cigna Corp., No. 19-3754 JST, 2020 WL 6260012, at *7 (N.D. Cal. July 27, 2020) (quoting 7 Dennis v. Cal. Physicians’ Serv., No. 18-06708 WHA, 2019 WL 1301757, at *3 (N.D. Cal. March 8 || 21, 2019)). 9 || IV. CONCLUSION 10 For the reasons stated above, Defendants’ motions to dismiss is GRANTED in part and 11 DENIED in part. The RICO claims are dismissed to the extent they are based on the predicate act 12 || of money laundering. LW’s claims are also dismissed. These claims are dismissed without leave 13 to amend because further amendments would be futile. See Gardner v. Martino, 563 F.3d 981, 14 || 990 (9th Cir. 2009) (leave to amend may be denied “where the amendment would be futile.” ); 3 15 || Chodos v. W. Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2002) (“[W]hen a district court has already a 16 || granted a plaintiff leave to amend, its discretion . . . is particularly broad.”). Defendants’ motions
17 || are DENIED in all other respects. 18 IT IS SO ORDERED. 19 20 || Dated: September 2, 2022
EDWARD J. DAVILA 22 United States District Judge 23 24 25 26 Case No.: 5:20-cv-02255-EJD 28 Dees RANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTIONS TO