Opinion
Case No. 5:20-cv-02255-EJD
03-23-2021
RJ, Plaintiff, v. CIGNA BEHAVIORAL HEALTH, INC., et al., Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS
Re: Dkt. Nos. 32, 33
In this putative class action suit, Plaintiff "RJ," as the representative of her beneficiary son, SJ, challenges Defendant Cigna Behavioral Health, Inc.'s ("Cigna") alleged failure to reimburse covered mental health provider claims at the usual, customary, and reasonable ("UCR") rates. Presently before the Court are two motions to dismiss; one brought by Cigna and a separate motion brought by Defendant Viant, Inc. ("Viant"). Dkt. Nos. 32-33, respectively. Plaintiff filed oppositions (Dkt. Nos. 40-41) and Defendant filed replies (Dkt. Nos. 42-43). The Court finds it appropriate to take the motions under submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons stated below, Defendants' motions will be granted in part and denied in part. I. BACKGROUND
The Background is a brief summary of the allegations in the Class Action Complaint. See Dkt. No. 1.
SJ is a member of a Cigna-administered employee benefit plan ("Plan") of which he is a beneficiary. Compl. ¶ 32. The Plan is funded by Plaintiff's employer and is governed by the Employee Retirement Income Security Act of 1974 ("ERISA"). Id. SJ sought treatment for behavioral health disorders, including for mental health and substance use disorders, from Summit Estate, Inc. ("Summit Estate"), a licensed and accredited treatment provider. Id. ¶ 173. The healthcare provider contacted Cigna to verify out-of-network ("OON") benefits and was told that benefits were paid at 70% of UCR rates until Plaintiff's out of pocket cost sharing responsibilities were met, and thereafter benefits were paid at UCR rates calculated according to the "MRC-1 methodology." Id. ¶¶ 34, 174. "[B]ased upon Summit Estate's prior dealings with Cigna and upon the representations made on the phone call and on the plain language of Plaintiff's employer benefit plan, it was understood by all parties that 100% of MRC-1 was equivalent to 100% of the billed charges of Summit Estate." Id. ¶ 175. Based on Cigna's representations "and with an understanding of the plain terms of the employer benefit plan," SJ and his IOP provider contracted for SJ to receive treatment. Id. ¶¶ 37, 176. This contract obligated SJ to pay for any portion of the bills for services not paid by Cigna. Id. ¶ 35.
Plaintiff alleges generally that healthcare providers ask and are told by Cigna that no prior authorization was required prior to rendering intensive outpatient treatment ("IOP") services, and that claims for IOP services were not subject to third-party repricing by Viant. Id. ¶ 34. However, it is unclear whether Summit Estate specifically asked and received this information from Cigna.
Notwithstanding Cigna's representations, Cigna sent every claim at issue in the case to Viant for repricing. Id. ¶ 42. Viant purported to offer payments at UCR rates, but in reality, the amount offered bore no relationship to UCR rates as that term is defined in SJ's Cigna policy. Id. ¶¶ 42-45. Viant offered essentially the same flat, lower rate that it offers across the entire country. Id. ¶ 46. This rate is the "product of a secret, proprietary, database and/or pricing method." Id. ¶ 52. For every dollar Viant "save[d]" Cigna, Viant received a kick-back. Id. ¶ 47.
Cigna never told Plaintiff, SJ or his IOP provider that claims were subject to third party repricing until after SJ and his IOP provider entered into a contract for treatment. Id. ¶ 51. SJ does not have any agreement with Viant that would permit Viant to negotiate with providers on his behalf. Id. ¶ 42. As a result of Cigna's and Viant's actions, Cigna allowed only $6,225.12 of the $51,175.00 billed for IOP services (or 12% of billed charges). Id. ¶ 178. SJ was left responsible for the balance. Id. ¶ 179. SJ paid the amount owing on the balance bill directly to his provider. Id. ¶ 102. Cigna did not issue an "adverse benefit determination" in an Explanation of Benefits ("EOB") letter, and consequently SJ is unable to appeal the underpayment under ERISA. Id. ¶¶ 62-64.
Plaintiff asserts the following claims on behalf of SJ: (1) violations of RICO, 18 U.S.C. § 1962(c) against both Defendants; (2) underpayment of benefits in violation of ERISA § 502(a)(1)(B) against Cigna; (3) breach of plan provisions in violation of ERISA § 502(a)(1)(B) against Cigna; (4) failure to provide accurate materials and a request for declaratory and injunctive relief against Cigna in violation of ERISA § 502(c); (5) violation of fiduciary duties of loyalty and duty of care under ERISA § 502(a)(3) and a request for declaratory and injunctive relief against Cigna; (6) violation of fiduciary duty of full and fair review under ERISA § 502(a)(3) and a request for declaratory and injunctive relief against Cigna; (7) declaratory and injunctive relief pursuant to ERISA § 502(a)(3) against both Defendants; and for (8) "Other Appropriate Equitable Relief" against both Defendants under ERISA § 502(a)(3). Id. ¶¶ 193-295.
II. STANDARDS
Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity "to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).
To survive a Rule 12(b)(6) motion to dismiss, the complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp., 550 U.S. at 570). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id.
In evaluating the complaint, the court must generally accept as true all "well-pleaded factual allegations." Iqbal, 556 U.S. at 664. The court must also construe the alleged facts in the light most favorable to the plaintiff. See Retail Prop. Trust v. United Bhd. Of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014) (the court must "draw all reasonable inferences in favor of the nonmoving party" for a Rule 12(b)(6) motion). The court, however, "does not have to accept as true conclusory allegations in a complaint or legal claims asserted in the form of factual allegations." In re Tracht Gut, LLC, 836 F.3d 1146, 1150-51 (9th Cir. 2016) (citing Bell Atl. Corp., 550 U.S. at 555-56); see also Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) ("Nor is the court required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.").
III. DISCUSSION
Cigna argues that the Complaint should be dismissed in its entirety. Specifically, Cigna contends that (1) as to the second claim for underpayment of benefits and third claim for breach of plan provisions, Plaintiff does not identify any terms in her ERISA Plan that required Cigna to pay Summit Estate's claim at 100% of the billed charges, and in fact, the Plan does not require Cigna to pay at that rate; (2) the fourth claim for failure to provide accurate materials cannot be maintained against Cigna because Cigna is not the plan administrator; (3) the fifth claim for violation for fiduciary duties is duplicative; (4) the sixth claim for violation of fiduciary duties is duplicative, cannot be asserted against Cigna because Cigna is not the Plan, and Plaintiff cannot show entitlement to 100% of the billed charges; (5) the seventh and eighth claims are duplicative; and (6) the RICO claim fails because Plaintiff does not plausibly allege an association-in-fact enterprise and predicate acts.
Viant seeks dismissal of the three claims pled against it, namely the RICO claim and the seventh and eighth claims for equitable relief. Viant contends that all three claims sound in fraud and are subject to dismissal for failure to plead fraud with the requisite particularity required under Federal Rule of Civil Procedure 9(b). As to the RICO claim, Viant argues that Plaintiff fails to allege with particularity a pattern of racketeering activity and an association-in-fact enterprise.
A. ERISA CLAIMS
1. Second and Third Claims
In the second and third claims, Plaintiff seeks unpaid benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B) equal to 100% of billed charges. Compl. ¶¶ 174-5, 252, 261. To state a claim under Section 502(a)(1)(B), "a plaintiff must allege facts that establish the existence of an ERISA plan as well as the provisions of the plan that entitle it to benefits." Almont Ambulatory Surgery Ctr., LLC v. UnitedHealth Grp., Inc., 99 F. Supp. 3d 1110, 1155 (C.D. Cal. 2015) (citation and internal quotation marks omitted).
Here, Plaintiff does not point to any particular provision or term in the Plan that requires Cigna to reimburse for IOP services at UCR rates or at 100% of billed charges. Accordingly, Cigna contends that the Plaintiff's second and third claims for benefits under the Plan are subject to dismissal. In Bristol SL Holdings, Inc. v. Cigna Health & Life Ins. Co., the court dismissed a claim for benefits because the plaintiff merely alleged it "believe[d]" most of its 106 patients had ERISA plans. 2019 WL 6329645, at *2 (C.D. Cal. Sept. 24, 2019); see also Simi Surgery Ctr., Inc. v. Conn. Gen. Life Ins. Co., 2018 WL 6332285, at *3 (C.D. Cal. Jan. 4, 2018) (dismissing assignee's claim for benefits under 173 purported ERISA plans for, among other things, failure to identify "the plan terms that allegedly entitle [plaintiff] to benefits"). In Glendale Outpatient Surgery Ctr. ("GOSC") v. United Healthcare Servs., the Ninth Circuit affirmed dismissal of plaintiff's ERISA claim because the complaint failed to identify "(i) any ERISA plan, apart from vague references to anonymous patients who allegedly assigned rights to GOSC; or (ii) any plan terms that specify benefits that the defendants were obligated to pay but failed to pay." 805 Fed. App'x 530, 2020 WL 2537317, at *1 (9th Cir. May 19, 2020). The Ninth Circuit also observed that the pleading deficiencies "[we]re exacerbated by GOSC's decision to lump 44 separate events — presumably involving distinct ERISA plans, coverage provisions, medical procedures, and insurer communications — into a single set of generalized allegations." Id.
Unlike in Bristol and GOSC, the Complaint here is based on more than a belief and includes factual allegations to support Plaintiff's claims. Plaintiff identifies her Plan and alleges unequivocally that her Plan is governed by ERISA and that SJ is a beneficiary of that Plan. Compl. ¶ 32. Further, Plaintiff alleges that "SJ's insurance plan was an MRC I plan." Id. ¶ 22. Plaintiff alleges that SJ's healthcare provider contacted Cigna for verification of benefits (id. ¶ 34, 174); Cigna represented it would reimburse the claims at issue at UCR rates (id. ¶ 21), and that after Plaintiff reached the out of pocket maximum, Cigna "would pay according to MRC-1 methodology which translates to 100% of billed charges" (id. ¶ 174). These allegations are sufficient to plead not only the existence of an ERISA plan but also a Plan provision requiring Cigna to pay benefits calculated according to the MRC-1 methodology. See, e.g., Forest Ambulatory Surgical Assocs., L.P. v. United HealthCare Ins. Co., 2011 WL 2748724, at *5 (N.D. Cal. July 13, 2011) ("To state a claim under [Section 502(a)(1)(B)], a plaintiff must allege facts that establish the existence of an ERISA plan as well as the provisions of the plan that entitle [him] to benefits."); see also Reiten v. Blue Cross of Cal., 2020 WL 1032371, at *2 (C.D. Cal. Jan. 23, 2020) (same). Although Plaintiff does not cite to a specific Plan term or provision by page or paragraph, that level of detail is not required at the pleading stage. See Forest Ambulatory, 2011 WL 2748724, at *5 ("Although the allegations in the complaint do not need to describe a given plan in detail, such as to identify each plan's policy number, the allegations must be sufficient to raise the existence of an ERISA plan above [a] speculative level.") (quoting In re Managed Care Litig., 2009 WL 742678, at *3 (S.D. Fla. Mar. 20, 2009)).
Further, Plaintiff alleges that Cigna "reported, in both plan language and on telephonic verification of benefits, that it would reimburse patients and/or their assignees at the UCR for MRC I policies." Compl. ¶ 10. The Complaint also alleges that "based upon Summit Estate's prior dealings with Cigna and upon the representations made on the phone call and on the plain language of RJ's employer benefit plan, it was understood by all parties that 100% of MRC-1 was equivalent to 100% of the billed charges of Summit Estate." Id. ¶ 175. Plaintiff's allegations are sufficient to give rise to a "reasonable inference [that Cigna] is liable" for medical care covered by the terms of [an] ERISA plan[]" at UCR rates calculated under the MRC I methodology. See Glendale, 805 Fed. Appx. at 531.
In her Opposition brief, Plaintiff argues that Cigna should have used the FAIR Health database to calculate pricing. This allegation does not appear in the Complaint and will not be considered. See Yamauchi v. Cotterman, 84 F. Supp. 3d 993, 1009 (N.D. Cal. 2015) ("In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss.") (quoting Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003) (emphasis in original)).
Moreover, Cigna attached Plaintiff's Plan to its motion to dismiss. Dkt. No. 32-2. Thus, Cigna is well aware of Plaintiff's Plan and the MRC provision stated therein.
Cigna insists that Plaintiff's claims for benefits must be dismissed because Plaintiff fails to allege that Cigna "paid less than her plan's MRC amount on her son's claims." Reply at 1. The Court disagrees. Plaintiff alleges that "SJ has been denied the full benefits available under the Intuit benefit plan." Compl. ¶ 179. This allegation, coupled with allegations that the Plan required Cigna to pay benefits at UCR rates calculated under the MRC I methodology, is indistinguishable from "an allegation that Cigna paid less than her plan's MRC amount on her son's claims."
In its Reply, Cigna argues that it did in fact, pay Summit Estate the MRC, as evidenced by a revised EOB that Cigna filed with its brief. Reply at 2, 4. In particular, Cigna highlights a notation on the revised EOB stating, "THIS IS A CORRECTION OF A PREVIOUSLY PROCESSED CLAIM. . . . YOUR PLAN COVERS OUT OF NETWORK SERVICES TO A MAXIMUM REIMBURSABLE AMOUNT." Id. at 3. Cigna asks that the Court take judicial notice of this revised EOB because EOBs are referenced in the Complaint. Id.
As a general rule, a district court may not consider material beyond the pleadings in ruling on a Rule 12(b)(6) motion. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). One exception to this general rule is the incorporation-by-reference doctrine relied upon by Cigna. Thus, the court may consider the revised EOB. IV Solutions, Inc. v. PacifiCare Life and Health Insur. Co., 2006 WL 7888009, at *4 (C.D. Cal. Dec. 19, 2016). However, the incorporation-by-reference doctrine does not permit the court to accept the truth of the matters stated in the revised EOB. In re ECOtality, Inc. Sec. Litig., 2014 WL 4634280, at *3 n.2 (N.D. Cal. Sept. 15, 2014) (considering documents incorporated by reference, but not for the truth of the matters stated therein); Gammel v. Hewlett-Packard Co., 905 F. Supp. 2d 1052 (C.D. Cal. 2012) (court may consider contents of documents under the doctrine of incorporation by reference, but "will not consider these documents for the truth of the matters they assert."). Thus, at the pleading stage, Cigna cannot rely on the notation in the revised EOB to prove it properly paid benefits calculated using the MRC methodology.
Cigna's motion to dismiss the second and third claims for benefits is denied.
2. Fourth Claim Under ERISA § 502(c)
In the fourth claim, Plaintiff alleges that Cigna failed to fulfill its obligation to furnish accurate materials summarizing its group health plans, known as SPD materials, under 29 U.S.C. § 1022, and failed to supply accurate EOBs, SPDs and other required information under 29 U.S.C. § 1132(c). Compl. ¶ 263. Cigna contends that the claim fails because a §502 claim can only be maintained against the plan administrator, and Cigna is the claims administrator, not the plan administrator.
ERISA § 502(c) imposes plan disclosure obligations only on the designated plan administrator, i.e., "the person specifically so designated by the terms of the instrument under which the plan is operated." 29 U.S.C. § 1002(16)(A); Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 633 (9th Cir. 2008) ("only the plan 'administrator' can be held liable for failing to comply with the reporting and disclosure requirements"). Here, the person designated as plan administrator is Intuit. Decl. of William P. Donovan, Jr. Ex. 1, at 51 (the "Plan Administrator" is the "Employer named above," i.e., "Intuit Inc."), Dkt. No. 32-2. Implicitly recognizing that Cigna is not the plan administrator, Plaintiff alleges that "[f]or ERISA Plans that are self-funded, but do not specifically designate a Plan Administrator, Cigna functions as the de facto Plan Administrator." Compl. ¶ 98. This allegation does not cure the defect in Plaintiff's claim because the Ninth Circuit has rejected the "de facto" theory. See e.g., Bush v. Liberty Life Assurance Co. of Bos., 77 F. Supp. 3d 900, 905 (N.D. Cal. 2015) (citing Ford v. MCI Commc'ns Corp. Health & Welfare Plan, 399 F.3d 1076, 1081-82 (9th Cir. 2005), overruled on other grounds by Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202 (9th Cir. 2011)); see also, e.g., Driscoll v. MetLife Ins., 2016 WL 11529805, at *8 (S.D. Cal. May 2, 2016) (citing Bush).
The fourth claim is dismissed.
3. Fifth Claim For Breach of ERISA Fiduciary Duties of Loyalty and Due Care
The fifth claim is brought under 29 U.S.C. § 1132(a)(3). Compl. ¶ 279. Under section 1132(a)(3), a civil action may be brought "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3). Plaintiff alleges that Cigna breached its duties of loyalty and due care "by making out-of-network benefit reductions and adverse benefit determinations that were not authorized by the plan documents and were also misrepresented on EOBs sent to the Plaintiff and the Class, causing Plaintiff and the Class to incur, and pay, substantial balance bills at the benefit to Cigna's bottom line." Id. ¶ 272.
Cigna argues that the section 1132(a)(3) claim should be dismissed because "when relief is available under section 1132(a)(1), courts will not allow relief under § 1132(a)(3)'s catch-all provision." Mot. at 10 (quoting Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004)). As Plaintiff points out, however, the Ninth Circuit has held post-Johnson that a plaintiff may pursue simultaneous claims under sections 1132(a)(1) and 1132(a)(3). Moyle v. Liberty Mut. Ret. Benefit Plan, 823 F.3d 948, 959-62 (9th Cir. 2016). The Ninth Circuit explained that allowing a plaintiff to plead both claims (1) comports with the Supreme Court's decisions in Varity Corp. v. Howe, 516 U.S. 489 (1996) and Cigna Corp. v. Amara, 563 U.S. 421 (2011); (2) adheres to Federal Rule of Civil Procedure 8(a)(3), which allows pleading relief in the alternative; and (3) is consistent with ERISA's intended purpose of protecting participants' and beneficiaries' interests. Id. at 962. Plaintiff may not, however, obtain double recoveries. Id. at 961.
Cigna counters that even under Moyle, a plaintiff must allege a distinct theory of injury, citing Ihde v. United of Omaha Life Ins. Co., 2017 WL 5444551, at *8 (D. Colo. Nov. 14, 2017). In Ihde, plaintiff asserted a claim for benefits under section 1132(a)(1)(B) and a claim for breach of fiduciary duty under sections 1109(a) and 1132(a)(2). The latter claim was based on an allegation that defendant omitted the insurance plan's name from the Summary Plan Description ("SPD"). The magistrate judge recommended dismissal of plaintiff's section 1132(a)(3) claim, reasoning that plaintiff failed to allege she was harmed by the omission of the plan's name in the SPD, and that she could not "repackage" her claim for benefits under the guise of a breach of fiduciary duty claim.
Although Plaintiff's claims for benefits and breach of fiduciary duty overlap substantially, the latter is not just a "repackaging" of the former. In the breach of fiduciary duty claim, Plaintiff seeks injunctive and declaratory relief, as well as removal of Cigna as a fiduciary. Plaintiff alleges that separate and apart from the denial of benefits, Cigna breached its duty as a fiduciary by, among other things, sending EOBs containing misrepresentations, failing to provide accurate information about the methodology applied to calculate UCR rates, and failing to disclose that Cigna would utilize Viant as a repricing agent. Compl. ¶¶ 272, 275-78. Further, unlike in Ihde, Plaintiff's breach of fiduciary duty claim may entitle her to equitable relief, separate and apart from an award of benefits.
Cigna's motion to dismiss the fifth claim is denied.
4. Sixth Claim for Failure to Provide "Full and Fair Review"
In the sixth claim, Plaintiff alleges that Cigna failed to comply with its fiduciary duty to provide a "full and fair review" of an "adverse benefit determination" pursuant to 29 U.S.C. § 1133. Compl. ¶¶ 280-86. Plaintiff seeks injunctive and declaratory relief to redress the alleged failure to provide a full and fair review. Id. ¶ 286.
Cigna argues that the sixth claim is subject to dismissal because, among other things, a section 1133 claim can only be asserted against a plan, and Cigna is not the Plan. Plaintiff does not provide any response to this argument. The claim is dismissed. See Herzfeld v. Teva Pharm. USA, Inc. Omnibus Welfare Plan, 2019 WL 8647729, at *6 (C.D. Cal. Aug. 26, 2019) ("By its plain language, § 1133 . . . impose[s] duties only upon benefit plans.").
5. Seventh and Eighth Claims for Equitable and Injunctive Relief
Plaintiff asserts the seventh claim for equitable relief under 29 U.S.C. § 1132(a)(3)(A) and the eighth claim for equitable relief under 29 U.S.C. § 1132(a)(3)(B). The claims are asserted against both Defendants. Id.
Plaintiff does not address these claims in her Opposition to Cigna's motion. Accordingly, the Court will dismiss the seventh and eighth claim as to Cigna.
Viant moves to dismiss the seventh and eighth claims on several grounds. First, Viant argues that the Complaint fails to plead facts to establish Viant's fiduciary status or any underlying breach of fiduciary duties. The Court disagrees.
Claims under §1132 can only be asserted against a fiduciary as that term is defined in ERISA. Brown v. Ca. Law Enf't Assoc., 81 F. Supp. 3d 930, 934 (N.D. Cal. 2015). A person is a fiduciary with respect to an ERISA plan under three different circumstances:
to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.29 U.S.C. § 1002(21)(A). Here, the Complaint does not allege that Viant is named as a fiduciary in the Plan. Nor does the Complaint allege that Viant had responsibility or authority over the Plan's management or administration. Nevertheless, Plaintiff argues that Viant had responsibility and authority over Plan assets by virtue of negotiating and repricing patient claims. In Monterey Peninsula Horticulture, Inc. v. Emp. Benefit Mgmt. Servs., Inc. (hereinafter "MPH"), the plaintiff asserted a similar theory of fiduciary liability. 2020 WL 2747846 (N.D. Cal. May 27, 2020). The plaintiff alleged that defendant had authority and control over the plan assets "by determining the amount and recipient of benefit payments," issuing checks and paying approved claims. Id. at *3. The MPH court held that these allegations plausibly suggested that defendant had control over disposition of plan assets, and therefore denied defendant's motion to dismiss the breach of fiduciary claim.
As in MPH, Plaintiff alleges that Viant had authority and control over Plan assets. Plaintiff alleges that Viant "determined the reimbursement rate for every underpaid claim in the present litigation." Compl. ¶ 7. Viant counters that other allegations in the compliant show that Viant did not exercise authority or control over Plan assets. Specifically, Viant points to allegations indicating that Viant could only negotiate and/or reprice benefit claims pursuant to strict pricing terms established by Cigna. See id. ¶¶ 53, 112, 116-19, 128. However, there is nothing in Section 1002(21)(A) to suggest that a person or entity with limited control over plan assets cannot be considered a fiduciary. Plaintiff's allegation, although thin, is sufficient at the pleading stage to plausibly suggest that Viant is a fiduciary by virtue of its alleged authority and control over plan assets. See Josef K. v. California Physicians' Serv., 2019 WL 2342245 at *7 (N.D. Cal.) ("'Congress commodiously imposed fiduciary standards on persons whose actions affect the amount of benefits retirement plan participants will receive'. . . . Thus, although fiduciary status does not attach to a party who 'merely perform[s] ministerial duties or processes claims,' a party may qualify as a fiduciary 'if it has the authority to grant, deny, or review denied claims.'" (internal citations omitted)).
Viant raises several other grounds for dismissal of the seventh and eighth claims, which the Court finds unnecessary to address at this time. This is because the claims do not meet the basic pleading requirements of Rule 8: to give notice of what the claims are and the grounds upon which they rest. Plaintiff prefaces each claim by stating, "Plaintiff brings this count . . . only to the extent that the Court finds that injunctive relief sought to remedy Counts III through VI are unavailable." Compl. ¶¶ 288, 295. Although this prefatory language is followed by a smattering of additional allegations, Plaintiff fails to clearly differentiate the seventh and eighth claims from others in the Complaint.
The seventh and eighth claims are dismissed as to Viant.
B. RICO Claim
Defendants raise essentially two challenges to the RICO claim: failure to plead with particularity (1) an association-in-fact enterprise and (2) predicate RICO acts.
1. Association-in-Fact Enterprise
To plead an association-in-fact enterprise for a RICO claim, "plaintiffs must plead that the enterprise has (A) a common purpose, (B) a structure or organization, and (C) longevity necessary to accomplish the purpose." Eclectic Props. East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 997 (9th Cir. 2014) (citing Boyle v. United States, 556 U.S. 938, 946 (2009)).
Here, the Complaint describes a contractual relationship between Defendants. Courts have uniformly held that a routine commercial dealing is insufficient to establish RICO liability. See e.g., Gardner v. Starkist Co., 418 F. Supp. 3d 443, 461 (N.D. Cal. 2019) ("characterizing routine commercial dealing as a RICO enterprise is not enough"); Gomez v. Guthy-Renker, LLC, 2015 WL 4270042, at *8 (C.D. Cal. July 13, 2015). Plaintiff relies on Odom v. Microsoft Corp., 486 F.3d 541, 543, 545 (9th Cir. 2007), as well as other cases, in which the courts found seemingly routine contractual relationships could form the basis of an association-in-fact enterprise. Here, however, Plaintiffs fails to plead with particularity sufficient facts to plausibly show that Cigna and Viant knowingly formed an enterprise to fraudulently underpay claims at below the UCR rates. In an attempt to transform Defendants' commercial dealing into a RICO enterprise, Plaintiff alleges that Defendants' common purpose was to deceive, but there are insufficient facts pled with particularity to plausibly support this theory. Plaintiff alleges that Cigna contracted with Viant to negotiate amounts to pay for OON claims, but does not to explain how this contract shows a common purpose to commit fraud. That the contract includes financial incentives for Viant does not, without more, suggest a common purpose to commit fraud. Plaintiff's characterization of Defendants' contractual relationship as an "alliance" (Compl. at 7), "collusion" (id. ¶ 33), "cover-up" (id.), and "con" (id. ¶ 44), does not transform Defendants' contract into a RICO enterprise without pleading facts to support these characterizations.
See In re Wells Fargo Ins. Mktg. & Sales Practices Litig., 2018 WL 4945541, at *4 (C.D. Cal. June 18, 2018); In re Chrysler-Dodge-Jeep Ecodiesel Mktg., Sales Practices, & Prods. Liab. Litig., 295 F. Supp. 3d 927, 981 (N.D. Cal. 2018); Bias v. Wells Fargo & Co., 942 F. Supp. 2d 915, 942 (N.D. Cal. Apr 25, 2013); Friedman v. 24 Hour Fitness USA, Inc., 580 F. Supp. 2d 985 (C.D. Cal. 2008); Downey Surgical Clinic, Inc. v. Ingenix, Inc., 2013 WL 12114069, at *12 (C.D. Cal. Mar. 12, 2013).
Plaintiff's RICO claim is therefore subject to dismissal for failure to allege an association-in-fact. See LD v. United Behavioral Health, 2020 WL 5074195, at *8 (N.D. Cal. Aug. 26, 2020) (dismissing similar RICO claim against United Behavioral Health and Viant with leave to amend); see also Stitt v. Citibank, N.A., 2015 WL 75237, at *5 (N.D. Cal. Jan. 6, 2015), aff'd, 748 F. Appx 99, 101 (9th Cir. 2018) (dismissing RICO claim because, among other things, the plaintiffs offered no factual allegations to render plausible their claim that the enterprise members actually knew of the alleged fraudulent common purpose, or that they "formed" the enterprise to participate in that purpose).
2. Predicate RICO Acts
Plaintiff's RICO claim is also subject to dismissal for the independent reason that the Complaint fails to allege predicate RICO acts. "To state a claim under § 1962(c)," a plaintiff must also allege "a pattern . . . of racketeering activity." Walter v. Drayson, 538 F.3d 1244, 1247 (9th Cir. 2008). "To plead a RICO pattern, at least two predicate acts of racketeering activity need to be alleged." Synopsis, Inc. v. Ubiquiti Networks, Inc., 313 F. Supp. 3d 1056, 1077 (N.D. Cal. 2018) (citation omitted). "Racketeering activity" is defined as "the commission of a predicate act that is one of an enumerated list of federal crimes." Id. at 1076. "[W]here RICO is asserted against multiple defendants, a plaintiff must allege at least two predicate acts by each defendant." In re Wellpoint, Inc. Out-of-Network "UCR" Rates Litig., 903 F. Supp. 2d 880, 914 (C.D. Cal. 2012) (emphasis in original); accord, Dooley v. Crab Boat Owners Ass'n, 2004 WL 902361, at *5 (N.D. Cal. Apr. 26, 2004).
a. Federal Health Offenses
The alleged commission of "Federal Health offenses" (Compl. ¶ 197), as defined by 18 U.S.C. § 24, are not among the statutory list of predicate acts that can constitute racketeering under 18 U.S.C. § 1961(1), and Plaintiff does not contend otherwise. Instead, Plaintiff's theory is that "laundering of monetary instruments" in violation of 18 U.S.C. § 1956 is listed as a predicate act in § 1961(1); that 18 U.S.C. §1956(c)(7)(F) criminalizes laundering the proceeds of a federal health care offense; and therefore, a Federal health offense can constitute a predicate act of racketeering. This money laundering theory does not appear anywhere in Complaint, and therefore will not be considered. Schneider v. Cal. Dep't of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998)) (instructing that a deficient pleading cannot be cured by new allegations raised in a plaintiff's response to a motion to dismiss).
b. Mail/Wire Fraud
The remaining alleged predicate acts—mail fraud and wire fraud—are among the statutory predicate acts listed in section 1961(1). Mail fraud and wire fraud have four essential elements: "(1) a scheme to defraud, (2) the statements made and facts omitted as part of the scheme were material, (3) use of the wires, or United States mail, in furtherance of the scheme, and (4) a specific intent to deceive or defraud." United States v. Woody's Trucking, LLC, 2018 WL 443454, at *2 (D. Mont. Jan. 16, 2018) (citing United States v. Woods, 335 F.3d 993, 997-99 (9th Cir. 2003)). RICO fraud claims must be pled with particularity in accordance with Federal Rule of Civil Procedure 9(b). Lancaster Cmty. Hosp. v. Antelope Valley Hosp. Dist., 940 F.2d 397, 405 (9th Cir. 1991). To satisfy this standard, a plaintiff must allege "the who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F. 3d 1097, 1106 (9th Cir. 2003) (citation omitted); see also Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th Cir. 2004) (requiring pleader of RICO fraud claim to allege the time, place and specific content of false representations as well as the identities of the parties to the misrepresentation); Lancaster, 940 F.2d at 405 (requiring pleader asserting RICO claim with predicate act of mail fraud to allege the time, place and manner of each act of fraud plus the role of each defendant in each scheme).
Here, Plaintiff's allegations of mail and wire fraud do not come close to complying with Rule 9(b). The Complaint lacks any specifics as to the who, what, when, where, and how of any particular fraudulent communication. The RICO claim is subject to dismissal based on these deficiencies alone. See, e.g., Edwards, 356 F.3d at 1065-66 (affirming dismissal of RICO fraud claim for failure to allege "the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation").
Further, the Complaint fails to plead with particularity that any alleged misrepresentation was sent over the United States wires or mail (or were communicated by a different means). Plaintiff alleges in only vague and conclusory terms that some communications were transmitted by wire and that "interstate wire facilities" were used. Compl. ¶¶ 210, 228, 232-34. Cigna allegedly made false representations in EOBs, which, in theory, could have been transmitted over interstate wires or mail. Id. ¶ 206. But Plaintiff does not identify any particular EOB, much less identify any fraudulent statement within an EOB. These deficiencies are also fatal to Plaintiff's RICO claim. Saniefar v. Moore, 2017 WL 5972747, at *10 (E.D. Cal. Dec. 1, 2017) (claim dismissed where no allegation of interstate communication).
Plaintiff counters that Rule 9(b) only requires that the elements of mail fraud or wire fraud be pled with particularity, and not the circumstances of the mailed or wired communication, citing Sebastian Int'l., Inc. v. Russolillo, 128 F. Supp. 2d 630, 635 (C.D. Cal. 2001). In Sebastian, the plaintiff alleged that the defendants received and sold diverted authentic products, as well as distributed and sold counterfeit products. The parties disputed which facts or elements were required to be pled with particularity under Rule 9(b). Id. The plaintiff argued that Rule 9(b) "merely require[d] that the elements of mail fraud or wire fraud be pled with specificity," whereas the defendant argued that Rule 9(b) "required a plaintiff to plead the specific falsity in the mailed or wired communications." Id. The Sebastian court concluded that both parties were right, depending on the circumstances of the fraud alleged, explaining:
[t]he mail and wire fraud statutes encompass two types of fraud: those in which misrepresentations [are] made, and those in which no misrepresentations are made. [citations] In a case of mail or wire fraud that does not involve a misrepresentation of fact, the 'circumstances' [referencing the language of 9(b) ] ... would consist of four elements: (1) a scheme to defraud; (2) intent to defraud; (3) reasonable forseeability that the mails (or wires) would be used; and (4) use of the mails (or wires) in furtherance of the scheme.Id. (quoting Murr Plumbing, Inc. v. Scherer Bros. Fin. Services Co., 48 F.3d 1066, 1070 n.6 (9th Cir. 1995)). The Sebastian court also quoted from a Seventh Circuit decision to further explain the two types of fraud:
We recognize, of course, that a given mailing or wire communication need not be fraudulent on its face in order to constitute an act of mail or wire fraud; even innocuous communications can qualify for this purpose so long as they are incident to an essential part of the [fraudulent] scheme. [citations] But in this case the plaintiffs rely on the mailings and wire communications themselves as the acts of fraud.Sebastian, 128 F. Supp. 2d at 635 (quoting Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1330 (7th Cir. 1994)). The Sebastian court ultimately held that the plaintiff was not required to plead with particularity the circumstances of the mailed or wired communication because the plaintiff was not relying on mailings and wirings as the acts of fraud; the mailings and wirings were only "incident to an essential part of the scheme" to receive and sell diverted authentic products, and to distribute and sell counterfeit products. Id. at 636.
Plaintiff in the instant case analogizes to Sebastian and argues that she similarly is not relying on any mailings or wirings as the acts of fraud for the RICO claim. Plaintiff instead argues that the RICO scheme in this case "is the creation and use of Outpatient Repricing (OPR) tied to a target price that is not made known to plan sponsors, insured, beneficiaries, and healthcare providers and then paying claims at or below the target price while representing to the world that the MRC methodology was used." Opp'n at 13 (emphasis added). Even accepting this characterization of the RICO claim, however, Plaintiff's RICO scheme necessarily hinges on an allegedly fraudulent "represent[ation] to the world that the MRC methodology was used." Because this case involves an alleged misrepresentation, Plaintiff must plead the circumstances constituting the fraud with particularity. Fed. R. Civ. P. 9(b). And if this alleged misrepresentation (or any others Plaintiff intends to rely on for her RICO claim) was made through the mail or over the wire, then Plaintiff must plead with particularity the circumstances of the mailed or wired communication. Sebastian, 128 F. Supp. 2d at 635-36.
More fundamentally, the Complaint also lacks sufficient factual allegations to support a reasonable inference that Defendants acted with specific intent to deceive or defraud. The Ninth Circuit recently clarified that to be guilty of mail or wire fraud, "a defendant must act with the intent not only to make false statements or utilize other forms of deception, but also to deprive a victim of money or property by means of those deceptions. In other words, a defendant must intend to deceive and cheat." United States v. Miller, 953 F.3d 1095, 1102 (9th Cir. 2020) (emphasis in original). The Complaint in this case lacks sufficient facts to support a reasonable inference that Cigna, and especially Viant, acted with the requisite intent to deceive and cheat.
Plaintiff requests leave to conduct limited discovery in the event the Court dismisses the RICO claim, citing Neubronner v.Milken, 6 F.3d 666 (9th Cir. 1993). The request is denied. Although in some cases, discovery may be appropriate where evidence of fraud is exclusively in the defendant's possession, that is not the situation Plaintiff faces. In Neubronner, the Ninth Circuit stated, "surely we can not expect a private plaintiff in an insider trading case to plead with the specificity Rule 9(b) requires without allowing some limited opportunity for discovery." Id. at 671. This is not an insider trading case. Moreover, the who, what, when and how of the misrepresentations Defendants allegedly made are not exclusively within Defendants' knowledge.
IV. CONCLUSION
For the reasons stated above, Defendants' motions to dismiss are GRANTED as to the first, fourth, sixth, seventh and eighth claims. The first, seventh and eighth claims are dismissed with leave to amend; the fourth and sixth claims are dismissed without leave to amend. Defendants' motions are DENIED as to the remaining claims.
Plaintiff's request to add Intuit as a party-defendant is denied without prejudice to filing a separate motion seeking such relief consistent with the Federal Rules of Civil Procedure.
IT IS SO ORDERED. Dated: March 23, 2021
/s/_________
EDWARD J. DAVILA
United States District Judge