Forsyth v. Humana, Inc.
| Decision Date | 23 May 1997 |
| Docket Number | No. 94-16548,94-16548 |
| Citation | 114 F.3d 1467 |
| Parties | 1997-1 Trade Cases P 71,818, 97 Cal. Daily Op. Serv. 3865, 97 Daily Journal D.A.R. 6578 Mary FORSYTH; Marrietta Cade; Willie Andrews; Mary Lou Buehler; Helen Staves; Randolph Bratten; and Searle Auto Glass, Inc., d/b/a Best Glass Company, Plaintiffs-Appellants, v. HUMANA, INC., a Delaware corporation; Humana Health Insurance of Nevada, Inc., a Nevada corporation; and DOES I through X, inclusive, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Will Kemp, J. Randall Jones, Harrison, Kemp & Jones, Chtd., Las Vegas, NV, W.B. Markovits, Markovits & Greiwe, Cincinnati, OH, for plaintiffs-appellants.
David N. Frederick, Las Vegas, NV, Robert N. Eccles, O'Melveney & Myers, Washington, DC, for defendants-appellees.
Appeal from the United States District Court for the District of Nevada Philip M. Pro, District Judge, Presiding. No. CV-89-00249-PMP.
Before: WALLACE and THOMPSON, Circuit Judges, and THOMPSON, District Judge. *
Opinion by Judge DAVID R. THOMPSON; Partial Concurrence and Partial Dissent by Judge WALLACE.
An opinion in this case was filed November 5, 1996, and published at 99 F.3d 1504 (9th Cir.1996).
On November 19, 1996, the appellees filed a petition for rehearing and suggestion for rehearing en banc. The panel voted unanimously to grant the petition for rehearing, withdraw the opinion filed November 5, 1996, and issue a new opinion. Judge D. Thompson voted to reject the suggestion for rehearing en banc, and Judges Wallace and G. Thompson so recommended. The full court was advised of the suggestion for rehearing en banc, and no judge of the court called for rehearing en banc.
As a result of the foregoing, the appellees' petition for rehearing is GRANTED. The opinion filed November 5, 1996, and published at 99 F.3d 1504 (9th Cir.1996) is WITHDRAWN. Pursuant to the order granting rehearing, a new majority opinion, together with a separate opinion by Judge Wallace, is filed contemporaneously with this order. The suggestion for en banc rehearing of the opinion filed November 5, 1996 is REJECTED.
There are two groups of plaintiffs in this case: (1) the employer purchasers of group health insurance policies issued by Humana Health Insurance of Nevada (Premium Payors); and (2) the employee beneficiaries of those policies who made coinsurance payments for health care received (Co-Payors).
The Co-Payors received hospital care from Humana Hospital-Sunrise (Sunrise Hospital), an acute care facility which is owned and operated by defendant Humana, Inc. Under its insurance agreements with the Co-Payors, Humana Health Insurance of Nevada (Humana Insurance) was obligated to pay 80% of the employees' hospital charges over and above a designated deductible amount; the Co-Payors were to pay the remaining 20%. Unknown to the plaintiffs, Humana Insurance negotiated a discount with Sunrise Hospital. Because of this discount, Humana Insurance ultimately paid significantly less than its 80% share of Sunrise Hospital's charges and the Co-Payors paid significantly more than their 20% co-payment share.
The Co-Payors contend Humana Insurance breached its contract with them, and violated the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq., by failing to pass along to them the Sunrise Hospital discounts in the form of reduced co-payments. The Co-Payors also contend the defendants violated ERISA by breaching fiduciary duties, engaging in prohibited transactions, and retaining excessive compensation. Both groups of plaintiffs contend that the defendants violated section 2 of the Sherman Act, 15 U.S.C. § 2, and engaged in a scheme to defraud in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968.
The district court granted summary judgment in favor of the defendants, rejecting all of the plaintiffs' claims except the Co-Payors' ERISA benefits breach of contract claim. This appeal followed.
We have jurisdiction under 28 U.S.C. § 1291. We affirm the district court's summary judgment on the ERISA claims, reverse the district court's summary judgment on the Sherman Act antitrust claims, and affirm in part and reverse in part summary judgment on the RICO claims.
The plaintiffs contracted for health insurance, through employee benefit plans, with Humana Insurance during the period of 1985 through 1988. Pursuant to an agreement made in 1984 between Humana Insurance and Sunrise Hospital, Humana Insurance would receive a discount for its portion of the hospital charges incurred by its insureds. Unaware of this discount, the plaintiffs continued to pay their required premiums and undiscounted co-payments. As a result, Humana Insurance ended up paying less than 80% of the hospital's charges for health care services, the Co-Payors paid more than 20% of these charges, and the Premium Payors paid the same premiums despite the reduced cost to Humana Insurance of the health care services.
The plaintiffs assert that Humana Insurance concealed the discount deal by writing checks to Sunrise Hospital for 80% of the billed charges. Sunrise Hospital would then remit the clandestine discount to Humana Insurance through monthly intercompany transfers, in what the plaintiffs characterize as a "classic kickback scheme."
The plaintiffs filed this action in the district court on March 29, 1989, alleging both state and federal claims. Six months later, the court granted the defendants' motion, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss the state law claims because those claims were preempted by ERISA.
The plaintiffs filed a first amended complaint on October 27, 1989. Following another round of motions, the district court upheld the sufficiency of the plaintiffs' ERISA claims, some of the RICO claims and the The second amended complaint asserted three claims for relief: (1) an ERISA claim by the Co-Payor class against Humana Insurance alleging breach of fiduciary duty, prohibited transactions and retention of excessive compensation; (2) an antitrust claim under section 2 of the Sherman Act by both classes of plaintiffs alleging the defendants had monopolized or attempted to monopolize the market for acute care facilities in Clark County, Nevada; and (3) a RICO claim by both classes of plaintiffs alleging Humana Insurance marketed and administered its policies through repeated acts of mail and wire fraud.
antitrust claims, and certified the two classes of plaintiffs, Premium Payors and Co-Payors. At the district court's direction, the plaintiffs filed a second amended complaint.
Again, the defendants moved for summary judgment. On July 21, 1993, after exhaustive briefing and argument, the district court granted the motion in its entirety ("the July 21, 1993 judgment"), but gave the plaintiffs leave to file a third amended complaint to assert on behalf of the Co-Payor class an ERISA benefits breach of contract claim against Humana Insurance under 29 U.S.C. § 1132(a)(1)(B).
The plaintiffs filed a third amended complaint. In that complaint they asserted only one claim, a breach of contract claim under ERISA in which they alleged that the Co-Payor class was entitled to benefits under 29 U.S.C. § 1132(a)(1)(B), because Humana Insurance had not properly allocated the discount it received from Sunrise Hospital.
The Co-Payor class moved for summary judgment on this claim; Humana Insurance also moved for summary judgment as to the proper measure of damages. The district court granted both motions on June 3, 1994 (the "June 3, 1994 judgment"), finding liability on the breach of contract claim, but limiting damages to the excess charges the Co-Payor plaintiffs paid, and specifying the methodology for calculating the damages for these class members. Following further submissions by the parties, the district court entered an order on July 29, 1994 approving and adopting a schedule of damage awards by which the Co-Payors were to be reimbursed the amounts they had been overcharged on their co-payments.
On July 1, 1994, before the district court determined the damage awards, the plaintiffs filed a notice of appeal from the district court's June 3, 1994 judgment. The plaintiffs voluntarily dismissed that appeal after we determined that the June 3, 1994 judgment was not a final, appealable order. Thereafter, the plaintiffs filed a timely notice of appeal which brings this case before us.
The defendants have moved to dismiss this appeal in its entirety, or in the alternative to limit the appeal to the sole claim asserted in the plaintiffs' third amended complaint. In the defendants' words, their motion to dismiss raises two jurisdictional issues: "(1) whether plaintiffs' voluntary dismissal of an earlier appeal from the June 3[, 1994] Judgment precludes review of that judgment here; and (2) whether plaintiffs' failure to preserve in their Third Amended Complaint claims dismissed by the district court's earlier Order of July 21, 1993, precludes review of that ruling in this appeal."
On the merits, the defendants dispute the plaintiffs' various claims of error, and ask us to affirm the district court across the board. We first consider the motion to dismiss or limit the appeal.
The plaintiffs' voluntary dismissal of their premature appeal from the June 3, 1994 judgment does not preclude review of that judgment in this appeal. The June 3, 1994 judgment was not a final, appealable order when it was entered because the district court had not then determined the amount of damages. See Brown v. United States Postal Serv., 860 F.2d 884, 886 (9th Cir.1988). We deny the motion to dismiss the appeal in its entirety.
The defendants' contention that the appeal should be limited...
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