Cedra Pharmacy Houston, LLC v. Unitedhealth Grp., Inc., CIVIL ACTION NO. H-17-3800
| Decision Date | 07 March 2019 |
| Docket Number | CIVIL ACTION NO. H-17-3800 |
| Parties | CEDRA PHARMACY HOUSTON, LLC, JAMMZ CHEMISTS LLC d/b/a CEDRA DALLAS, and CEDRA PHARMACY LOS ANGELES LLC, Plaintiffs, v. UNITEDHEALTH GROUP, INC., UNITED HEALTHCARE SERVICES, INC., OPTUMRX, INC. CATAMARAN CORPORATION, CATAMARAN PBM OF ILLINOIS, INC., CATAMARAN, LLC, BRIOVARX OF MAINE, INC., BRIOVARX, LLC, and SALVEO SPECIALTY PHARMACY, INC., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending in this case that has been referred for all further pretrial proceedings is Defendants' Motion to Dismiss Plaintiffs' Complaint (Document No. 16). Having considered the motion, the response in opposition, the parties' additional briefing, the argument at a status conference held on January 23, 2019, the allegations in Plaintiffs' Complaint, and the applicable law, the Magistrate Judge RECOMMENDS, for the reasons set forth below, that Defendants' Motion to Dismiss (Document No. 16) be GRANTED.
This is essentially an unfair competition case brought by three specialty pharmacies, Cedra Pharmacy Houston, LLC ("Cedra Houston"), Jammz Chemists, LLC d/b/a Cedra Dallas ("Cedra Dallas") and Cedra Pharmacy Los Angeles LLC ("Cedra LA"), against three groups of Defendants: (1) United Health Group, Inc. and United Healthcare Services, Inc. (the "United Defendants"); (2) OptumRx, Inc. ("ORX")1; and (3) Briovarx of Maine, Inc., Briovarx, LLC and Salveo Specialty Pharmacy, Inc. (referred to hereafter as "specialty pharmacy defendants"), who Plaintiffs allege have conspired to exclude them from participating in the pharmacy network maintained by pharmacy benefit manager ORX on behalf the United Defendants. According to Plaintiffs, they each applied for admission into Defendant ORX pharmacy network, and each application was either denied, or refused consideration. Plaintiffs maintain that the denial of their applications was not based on any legitimate reason, but was instead based on Defendants' desire to dominate and control the specialty drug market for themselves, and to the exclusion of Plaintiffs.
Plaintiffs have alleged eight causes of action in their Complaint: (1) a Civil RICO claim against the United Defendants and ORX (18 U.S.C. § 1962(c)); (2) a RICO Conspiracy claim against the United Defendants and ORX (18 U.S.C. § 1962(d)); (3) an unlawful restraint of trade claim against all Defendants under § 1 of the Sherman Act (15 U.S.C. § 1); (4) a monopolization of the pharmacy benefit market (PBM) claim against all Defendants under § 2 of the Sherman Act (15 U.S.C. § 2); (5) a monopolization of the PBM market claim against all Defendants under § 7 of the Clayton Act (15 U.S.C. § 18); (6) an unfair competition claim against all Defendants under Texas common law; (7) a tortious interference with prospective business relationships claims by Plaintiff Cedra Houston against all Defendants under Texas law; and (8) Plaintiff Cedra LA's fair procedureclaim against Defendants under California common law. Defendants move for dismissal of all these claims under Rule 12(b)(6) for failure to state a claim upon which relief may be granted.
Rule 12(b)(6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). "To survive a motion to dismiss, a 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, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is said to be plausible if the complaint contains "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Plausibility will not be found where the claim alleged in the complaint is based solely on legal conclusions, or a "formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555. Nor will plausibility be found where the complaint "pleads facts that are merely consistent with a defendant's liability" or where the complaint is made up of "'naked assertions devoid of further factual enhancement.'" Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 557)). Plausibility, not sheer possibility or even conceivability, is required to survive a Rule 12(b)(6) motion to dismiss. Twombly, 550 U.S. at 556-557; Iqbal, 129 S.Ct. at 1950-1951.
In considering a Rule 12(b)(6) motion to dismiss, all well pleaded facts are to be taken as true, and viewed in the light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). But, as it is only facts that must be taken as true, the court may "begin by identifying the pleadings that, because they are no more than conclusions, are not entitled to the assumption oftruth." Iqbal, at 1950. It is only then that the court can view the well pleaded facts, "assume their veracity and [ ] determine whether they plausibly give rise to an entitlement to relief." Iqbal, at 950.
Prior to consideration of Plaintiffs' claims, and Defendants' arguments for dismissal of those claims, it is important to note that several of the Defendants named by Plaintiffs, referred to herein as the Catamaran Defendants (Catamaran Corporation, Catamaran PBM of Illinois, Inc., and Catamaran, LLC), do not exist, and have not existed as separate, independent entities since 2015, when they were acquired by the United Defendants and otherwise merged with Defendant ORX. That acquisition and merger pre-dated most of the conduct about which Plaintiffs complain in this case, including most particularly, Plaintiffs' exclusion from the ORX network, which occurred in 2016 and 2017.
Defendants argue that Plaintiffs have not alleged plausible RICO claims because they have not alleged a RICO "enterprise," have not alleged that the RICO Defendants conducted the affairs of a RICO enterprise, have not alleged a racketeering activity, and have not alleged a pattern of racketeering. These pleading allegations are crucial to a RICO claim.
A plaintiff in a civil action may recover damages under the RICO statute, 18 U.S.C. § 1961, et seq., if he is able to allege and prove: 1) a violation of 18 U.S.C. § 1962(a), (b), (c), or (d), and 2) injury to business or property as a result of such violation.2 18 U.S.C. § 1964(c) (). Section 1962, as interpreted by the Fifth Circuit Court of Appeals, provides in its simplest terms, that:
Crowe v. Henry, 43 F.3d 198, 203 (5th Cir. 1995). All civil RICO claims require allegations and proof of "1) a person who engages in 2) a pattern of racketeering activity 3) [which is] connected to the acquisition, establishment, conduct or control of an enterprise." Id. at 204 (emphasis in original).
A "person", within the meaning of § 1962, "includes any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C. § 1961(3). To be liable as a "RICO person" under § 1962, however, the defendant must be "one that either poses or has posed a continuous threat of engaging in acts of racketeering." Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241, 242 (5th Cir. 1988), cert. denied, 109 S. Ct. 1531 (1989).
A "pattern of racketeering" within the meaning of § 1962 "requires at least two acts of racketeering activity." 18 U.S.C. § 1961(5). In this circuit, "a pattern of racketeering activity" has two elements: "1) predicate acts--the requisite racketeering activity, and 2) a pattern of such acts." In re Burzynski, 989 F.2d 733, 742 (5th Cir. 1993). Predicate acts are delineated in 18 U.S.C. § 1961(1), and include, for purposes of this case, extortion. To set out a pattern of predicate acts, a plaintiff must demonstrate that the predicate acts are related and that such acts have some type of continuity. Id.
An "enterprise" within the meaning of § 1962 "includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). If the plaintiff is alleging an association-in-fact enterprise, there must be allegations and evidence demonstrating "'an ongoing organization, formal or informal, and . . . evidence that the various associates function as a continuing unit.'" Whelan v. Winchester Prod. Co., 319 F.3d 225, 229 (5th Cir. 2003) (quoting United States v. Turkette, 101 S. Ct. 2524, 2528 (1981)). "The enterprise is not a pattern of racketeering activity, but must exist separate and apart from the pattern of racketeering activity in which it engages." Id. at 229.
Here, while Defendants argue, for a multitude of reasons, that Plaintiffs have not alleged plausible RICO claims, the plausibility of Plaintiffs' RICO claim is most directly and clearly affected by Plaintiffs' failure to allege a plausible "racketeering activity." Plaintiffs' RICO claims are subject to dismissal on that basis alone.7
In their Complaint, Plaintiffs allege that the RICO Defendants, through one or both of their association-in-fact enterprises, "have engineered a wide-ranging campaign to economically extort Plaintiffs, by repeatedly threatening Plaintiffs and/or the Cedra Owners with...
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