American Medical Ass'n v. United Healthcare Corp.

• Decision Date: 22 August 2008
• Docket Number: No. 00 Civ. 2800(LMM).,00 Civ. 2800(LMM).
• Parties: The AMERICAN MEDICAL ASSOCIATION, et al., Plaintiffs, v. UNITED HEALTHCARE CORPORATION, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

588 F.Supp.2d 432

The AMERICAN MEDICAL ASSOCIATION, et al., Plaintiffs, v. UNITED HEALTHCARE CORPORATION, et al., Defendants.

No. 00 Civ. 2800(LMM).

United States District Court, S.D. New York.

August 22, 2008.

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MEMORANDUM AND ORDER

McKENNA, District Judge.

Defendants¹ here move to dismiss claims brought by various Plaintiffs pursuant to Rules 12(b)(6) and 9(b) of the Federal Rules of Civil Procedure. Plaintiffs, who include subscribers to certain health plans ("Subscriber Plaintiffs")², out-of-network medical care providers suing as assignees of certain subscribers' benefits claims ("Provider Plaintiffs")³, and medical associations suing in their associational capacity on behalf of their members ("Medical Association Plaintiffs")⁴ (all, collectively, "Plaintiffs"), oppose Defendants' motion to dismiss. For the reasons set forth herein, Defendants' motion for dismissal is GRANTED IN PART and DNIED IN PART.

1.

Here, Plaintiffs challenge Defendants' practices in relation to decisions involving the "usual, customary, and reasonable" ("UCR") rates paid by Defendants for outof-network medical services in connection with certain health care plans. Plaintiffs allege that Defendants' practices in determining UCR rates, including Defendants' alleged reliance on the Prevailing Healthcare Charges System ("PHCS") database, violate ERISA and RICO, the terms of the Employer Plans themselves, and, in the case of certain plaintiffs, New York's Deceptive Trade Practices statute and contract law.

This action was initially filed in New York state court and was removed to this Court in April 2000. In the intervening years this Court has addressed several motions, including multiple motions to dismiss. This Court granted in part and denied in part both a motion to dismiss the Counterclaim Complaint, see Am. Med. Ass'n v. United Healthcare Corp., 2007 WL 683974 (S.D.N.Y. March 5, 2007), and a motion for leave to amend the Third Amended Complaint, see Am. Med. Ass'n v. United Healthcare Corp., 2006 WL 3833440 (S.D.N.Y. Dec.29, 2006). This Court also granted in part and denied in part Defendants' motion for summary judgment. See Am. Med. Ass'n v. United HealthCare Corp., 2007 WL 1771498 (S.D.N.Y. June 18, 2007). Plaintiffs moved for a reconsideration of the June 18th Order, and although reconsideration was granted, the Court opted to adhere to its original findings. See Am. Med. Ass'n v. United Healthcare Corp., 2007 WL 2457358 (S.D.N.Y. August 23, 2007).

Recently, this Court authorized Plaintiffs to assert additional claims against United Defendants for antitrust and RICO violations based upon Defendants' alleged scheme to under-reimburse beneficiaries and medical care providers by manipulating UCR data. See Am. Med. Ass'n v. United Healthcare Corp., 2006 WL 3833440 (Dec. 29, 2006). A comprehensive fourth amended complaint ("FAC") was filed on July 10, 2007.

The instant motion concerns new as well as already existing claims contained within the FAC. Defendants seek to dismiss Plaintiffs' RICO claims, antitrust claims, and several ERISA claims for various reasons set forth in Defendants' supporting papers.

2.

Under Rule 12(b)(6) a complaint will be dismissed if there is a "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). The Court must read the complaint generously, accepting the truth of and drawing all reasonable inferences from well-pleaded factual allegations. See York v. Ass'n of Bar of City of New York, 286 F.3d 122, 125 (2d Cir. 2002); see also Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). "To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient `to raise a right to relief above the speculative level.'" ATSI Communications, Inc. v. Shaar Fund Ltd., 493 F.3d 87 (2d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007)).

3.

First, Plaintiffs argue in their opposition papers that this Court need not consider Defendants' Motion to Dismiss because said motion violates F.R.C.P. 12(g), and should be barred in its entirety. (Plaintiffs' Opposition ("Pls.' Opp.") 3-6.) This contention is without merit.

The pertinent statutory language reads: A party who makes a motion under this rule may join with it any other motions herein provided for and then available to the party. If a party makes a motion under this rule but omits therefrom any defense or objection then available to the party which this rules permits to be raised by motion, the party shall not thereafter make a motion based on the defense or objection so omitted ...

F.R.C.P. 12(g).

Plaintiffs contend that Defendants' current motion to dismiss, and in particular their motions regarding Plaintiffs' RICO and antitrust claims,

were all available to Defendants at the time of their initial opposition to Plaintiffs' motion for leave ... [and that] Defendants' successive filing of the present motion to dismiss was undertaken to gain unjust delay—the delay precisely sought to be prevented by Rule 12(g)

...

(Pls.' Opp. 5, 6.) Plaintiffs contend that Defendants had ample opportunity to raise their opposition to Plaintiffs' RICO and antitrust claims at the same time that they opposed Plaintiffs' motion for leave—especially because both the current motion to dismiss and Defendants' opposition were both brought pursuant to Rule 12(b)(6).

However, the facts of the present case are not congruent with those circumstances for which Rule 12(g) was drafted. Based upon the statute's plain language, Rule 12(g) seeks to prevent successive motions that are similar in nature, when a party has an opportunity to bring all such concerns before the court at once. Plaintiffs point to Defendants' opposition to their motion for leave as a missed opportunity to raise all relevant concerns, but the statute is clearly directed only to the "party who makes a motion under this rule." F.R.C.P. 12(g). Plaintiff's filed the motion for leave in 2006, Plaintiffs initiated motion practice under Rule 12, and therefore, Plaintiffs are the parties to whom Rule 12(g) is directed. Defendants' filing was in opposition, and consequently does not constitute the filing of a motion under the Rule. As the 12(g) Committee Notes state, the Rule forbids "a defendant who makes a preanswer motion under this rule from making a further motion presenting any defense or objection which was available to him at the time he made the first motion and which he could have included, but did not in fact include therein" (Pls.' Opp. 6, citing Id. (Comm. Notes 1966) (emphasis added).)

The precepts of Rule 12(g) are intended to address a party's initial motion filing, filed pursuant to a given rationale; as such, an application of the Rule to the Defendants in the present case would be misplaced. Defendants' motion stands and is therefore eligible for full review and discussion by the Court.

4.

Defendants argue that for various reasons, all set forth within their supporting documents, Plaintiffs have failed to properly allege their claims under The Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.A. §§ 1961 et seq.

4(a).

This Court will first examine Defendants' contention that Plaintiffs' new RICO claims are merely unexhausted requests for reimbursement, for which they were already denied remedy under ERISA. Defendants maintain that Plaintiffs converted their rejected ERISA claims to RICO claims in an effort to avoid such a requirement, but that an exhaustion of remedies is mandated with respect to RICO claims as well. In support of their argument, Defendants rely heavily on First Nationwide Bank v. Gelt Funding Corp.:

A RICO plaintiff "only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation." Furthermore, as a general rule, a cause of action does not accrue under RICO until the amount of damages becomes clear and definite. Thus, a plaintiff who claims that a debt is uncollectible because of the defendant's conduct can only pursue the RICO treble damages remedy after his contractual rights to payment have been frustrated.

27 F.3d 763, 768 (2d Cir.1994) (citations omitted). The Second Circuit's language clearly states that in order for a RICO claim to be actionable, a plaintiff must first frustrate all other contractual avenues available to remedy. Plaintiffs have failed to demonstrate in their FAC how in fact these other means of remedy have been frustrated.

In contrast, Plaintiffs cite to case law (namely, In re Managed Care Litigation, 185 F.Supp.2d 1310 (S.D.Fla.2002), from the Southern District of Florida) that is not controlling within this jurisdiction. (Pls.' Opp. 10.) Additionally, they argue that the Gelt Funding precedent is only applicable to circumstances involving third party debt: "when a plaintiff seeks damages from one party because of an unpaid debt of a third party, the claim is not ripe until the plaintiff can demonstrate that it has sought unsuccessfully to obtain payment from that third party." (Pls.' Opp. 11) (citing Motorola Credit Corp. v. Uzan, 322 F.3d 130, 132 (2d Cir.2003) ("We conclude that the RICO claims based on a third-party's failure to pay on a debt are unripe.") (emphasis added).) This characterization is inaccurate.

In Gelt Funding itself, for example, the court stated that the doctrine applied where the debt owed was from one or more of the RICO defendants. Id. at 769, citing Stochastic Decisions, Inc. v. DiDomenico, 995 F.2d 1158, 1166 (2d Cir.1993). In other instances, the standard is applied in cases involving alleged tort victims or defrauded parties. See Denney v. Deutsche Bank, AG, 443 F.3d 253, 266 (2d. Cir.2006) (involving plaintiffs who relied on allegedly fraudulent tax advice...