Maio v. Aetna Inc.
| Decision Date | 11 August 2000 |
| Docket Number | AETNA-US,AETNA-U,No. 99-1854,AETNA-HEALTH,99-1854 |
| Citation | 221 F.3d 472 |
| Parties | (3rd Cir. 2000) JOSEPH MAIO; JO ANN MAIO; and GARY BENDER, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED v. AETNA INC.;HEALTHCARE, INC;S. HEALTHCARE OF ARIZONA INC.;S. HEALTHCARE OF CALIFORNIA INC.;S. HEALTHCARE INC. (COLORADO); AETNA HEALTH PLANS OF SOUTHERN NEW ENGLAND, INC.;S. HEALTHCARE, INC. (DELAWARE);S. HEALTHCARE INC. (FLORIDA);S. HEALTHCARE OF GEORGIA INC.;S. HEALTHCARE OF ILLINOIS;S. HEALTHCARE INC. (KENTUCKY);S. HEALTHCARE INC. (LOUISIANA);S. HEALTHCARE INC. (MASSACHUSETTS);S. HEALTHCARE INC. (MICHIGAN);PLANS OF NEW JERSEY, INC.;S. HEALTHCARE INC. (NEW YORK);S. HEALTHCARE OF THE CAROLINAS;S. HEALTHCARE INC. (OHIO);S. HEALTHCARE INC. (PENNSYLVANIA); AETNA HEALTH PLANS OF CENTRAL AND EASTERN PENNSYLVANIA, INC.; AETNA HEALTH PLANS OF WESTERN PENNSYLVANIA, INC; AETNA HEALTH PLANS OF TENNESSEE, INC.;S. HEALTHCARE INC. (TEXAS);S. HEALTHCARE OF NORTH TEXAS INC.;S. HEALTHCARE INC. (VIRGINIA); AETNA- U.S. HEALTHCARE OF WASHINGTON INC. JOSEPH MAIO; JO ANN MAIO; GARY BENDER, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 99-1969), District Judge: Honorable John P. Fullam Attorneys for Appellants: Edith M. Kallas (argued) David J. Bershad Patricia M. Hynes Charles S. Hellman Milberg Weiss Bershad Hynes & Lerach LLP One Pennsylvania Plaza 49th Floor New York, New York 10119, James J. Binns The Mellon Bank Center 39th Floor 1735 Market Street Philadelphia, Pennsylvania 19103 Harvey Rosenfield The Foundation for Taxpayer and Consumer Rights 1750 Ocean Park Boulevard Suite 200 Santa Monica, California 90405, Eugene A. Spector Jeffrey L. Kodroff Andrew Abramowitz Spector & Roseman, P.C. 1818 Market Street Suite 2500 Philadelphia, Pennsylvania 19103
Attorneys for Appellees: Alan J. Davis (argued) Burt M. Rublin Raymond A. Quaglia Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street, 51st Floor Philadelphia, Pennsylvania 19103-7599
BEFORE: GREENBERG and WEIS, Circuit Judges, SCHWARTZ,* District Judge
OPINION FOR THE COURT
This matter comes before this court on an appeal by Joseph Maio, Jo Ann Maio and Gary Bender (hereinafter "appellants") from the district court's final order entered September 29, 1999, which granted motions to dismiss appellants' complaint pursuant to Fed. R. Civ. P. 12(b)(1), 12(b)(6) and 9(b). In their "class action complaint," appellants asserted claims against Aetna, Inc., Aetna-U.S. Healthcare, Inc., and Aetna-U.S. Healthcare, Inc.'s 24 regional subsidiary health plans (collectively "Aetna" or "appellees") for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. S 1961 et seq., and state law. The appellants describe this case as challenging "Aetna's failure to disclose its restrictive and coercive internal policies and practices, which render its advertising, marketing and membership materials false and misleading in violation of RICO." Br. at 4. Appellants allege that "Aetna has engaged in a massive nationwide fraudulent advertising campaign designed to induce people to enroll in its HMO by representing that Aetna affirmatively manages its members' health care so as to, inter alia, raise the quality of care to a `level of health care never available under the old fee-for-service system,'" when in fact, Aetna designed undisclosed internal policies to "improve defendants' profitability at the expense of quality of care." Br. at 4-5 (footnote omitted). Appellants seek compensatory damages and an injunction enjoining appellees from pursuing the "policies, acts and practices" alleged in the complaint, together with punitive damages, treble damages, and attorney's fees under RICO.
Prior to filing an answer to the complaint, the appellees filed sequential motions to dismiss. In its Memorandum and Order of September 29, 1999, see Maio v. Aetna, Inc., No. 99-1969, 1999 WL 800315 (E.D. Pa. Sept. 29, 1999), the district court determined that appellants' RICO claims in counts I and II of the complaint failed because appellants did not allege that they suffered a concrete "injury in fact" sufficient to confer standing on them to challenge Aetna's allegedly fraudulent activities. Accordingly, the district court entered an order granting the appellees' motions insofar as they pertained to appellants' RICO claims, and thus dismissed with prejudice counts I and II of the complaint, the RICO counts. The district court then dismissed the state law claims without prejudice "for lack of subject matter jurisdiction." Id. at *2.
For the reasons that follow, we will affirm the district court's order dismissing the complaint on the ground that appellants have not alleged an injury to business or property cognizable under RICO.
We decide this appeal on the facts appellants alleged in their complaint. Appellants instituted this purported class action on behalf of themselves and all members of a class consisting "of all persons in the United States who are, or were, enrolled in [Aetna's] Health Maintenance Organization (the `HMO') plans (the `Plan') at any time during the period from July 19, 1996 to the present (the `class period')."1 JA-14. The class allegedly consists of millions of both present and former Aetna HMO members who, as a group, "were targeted by [Aetna] and induced into enrolling in Aetna's HMO by virtue of defendants' standardized and uniform misrepresentations and omissions of material facts contained in advertising, marketing and membership materials." Id. Appellants aver that during the class period, Aetna engaged in a fraudulent scheme designed to induce individuals to enroll in its HMO plan by representing "that its primary commitment, in connection with the healthcare services provided to its HMO members, is to maintain and improve the quality of care given to such members and that defendants' policies are designed to accomplish these goals." JA-14.
Appellants also assert that Aetna represented that HMO members would receive high quality health care from physicians who are solely responsible for providing all medical care and maintaining the physician-patient relationship, when in reality Aetna's internal policies restrict the physicians' ability to provide the high quality health care that appellants have been promised. JA-15. Moreover, they claim that despite Aetna's representations that it compensated its physicians under a system that provides them with incentives based upon the quality of care provided, Aetna's provider contracts actually offer the physicians financial incentives to withhold medical services and reduce the quality of care to HMO members. Id.
The complaint alleges that Aetna made these various representations through marketing, advertising and membership materials distributed to each and every prospective enrollee including the appellants. JA-29. The complaint provides several examples of Aetna's advertisements during the class period, each of which appellants claim reaffirmed in some manner Aetna's supposed commitment to "raising the quality of healthcare in America." See JA-29 to JA-34. Similarly, the complaint refers to certain membership materials, including a brochure entitled "HMO Plan Benefits," and avers that the brochure represented that Aetna provides financial incentives "intended to continually improve medical care," see JA-35, when in reality, the financial incentives were intended to have just the opposite effect--i.e., to restrict the level of health care that the participants received.
The complaint further points to the "HMO Plan Member Handbook" and the "Certificate of Coverage," and alleges that Aetna falsely represented therein that the health care administered under the HMO is entrusted solely to Aetna- affiliated physicians and individual practice associations. Appellants claim essentially that these representations created an illusion that the physicians would make the necessary decisions regarding patient care independently, when in reality Aetna's policies restricted the physicians' decisionmaking abilities concerning the level and extent of care to be provided in particular cases. Appellants argue specifically that the HMO Plan Member Handbook explicitly states that (1) "Participating Physicians maintain the physician-patient relationship with Members and are solely responsible to Member for all Medical Services which are rendered by Participating Physicians"; (2) "Understand that participating doctors and other health care providers who care for you are not employees of the HMO and that the HMO does not control them"; and (3) HMO members have the right to "[h]elp your doctor make decisions about your health care." See JA-35 (alteration in original); JA-321 to JA-322; Br. at 11.2
Appellants also claim that appellees falsely represented in other membership documents that physicians would be awarded for providing quality care, when in reality the physicians were rewarded under Aetna's plan based on how well they minimized costs. Appellants first point to the HMO Plan Member Handbook as well as the "Physician and Hospital Directory" and contend that appellees represented therein that in order to ensure that HMO members receive high quality care, physicians are compensated under a system that provides them with incentives based upon the quality of care provided:
Primary care physicians are generally compensated in accordance with our Quality Care Compensation System, which rewards primary care physicians for delivery of quality care in a cost-effective manner. This includes payment on a per member per month basis (c...
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