In re Managed Care Litigation

• Court: U.S. District Court — Southern District of Florida
• Writing for the Court: Moreno
• Citation: In re Managed Care Litigation, 298 F.Supp.2d 1259 (S.D. Fla. 2003)
• Decision Date: 08 December 2003
• Docket Number: No. MDL 1334-MD.,MDL 1334-MD.
• Parties: In re: MANAGED CARE LITIGATION This Document Relates to Provider Track Cases

298 F.Supp.2d 1259

In re: MANAGED CARE LITIGATION This Document Relates to Provider Track Cases

No. MDL 1334-MD.

United States District Court, S.D. Florida, Miami Division.

December 8, 2003.

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OMNIBUS ORDER GRANTING IN PART AND DENYING IN PART JOINT MOTION TO DISMISS THE SECOND AMENDED CONSOLIDATED CLASS ACTION COMPLAINT

MORENO, District Judge.

TABLE OF CONTENTS

  I. INTRODUCTION ...................................................1271
                     A. COMPLAINT ...................................................1271
                 II. LEGAL STANDARD .................................................1272
                III. DISCUSSION .....................................................1272
                     A. RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS
                         ACT ........................................................1273
                        1. "ENTERPRISE" .............................................1273
                        2. PREDICATE ACTS ...........................................1277
                        3. PROXIMATE CAUSE ..........................................1280
                        4. RICO CONSPIRACY ..........................................1280
                        5. EQUITABLE RELIEF UNDER RICO ..............................1281
                        6. MCCARRAN-FERGUSON ACT ....................................1283
                        7. ARBITRABLE PRIMARY RICO CLAIMS ...........................1285
                     B. ERISA PREEMPTION ............................................1287
                        1. SECTION 502 PREEMPTION ...................................1289
                        2. SECTION 514 PREEMPTION ...................................1292
                        3. EXHAUSTION OF REMEDIES ...................................1294
                     C. CHOICE OF LAW ...............................................1296
                     D. STATE COMMON LAW CLAIMS .....................................1297
                        1. QUASI-CONTRACT CLAIMS ....................................1297
                     E. STATE STATUTORY CLAIMS ......................................1298
                        1. PROMPT PAY: PRIVATE RIGHT OF ACTION ......................1298
                        2. CAL. BUS. & PROFESSIONS CODE § 17200 ................1300
                        3. NEW JERSEY CONSUMER FRAUD ACT ............................1303
                     F. MEDICAL ASSOCIATION STANDING ................................1305
                

        1. INDIVIDUAL STANDING: INJURY-IN-FACT ......................1305
                        2. REPRESENTATIVE STANDING ..................................1307
                     G. PARENT-SUBSIDIARY RESPONSIBILITY ............................1308
                 IV. CONCLUSION .....................................................1310
                

I. INTRODUCTION

This multi-district litigation involves two separate categories of plaintiffs who have filed suit against various insurance companies that provide managed care. One group of plaintiffs consists of Providers¹ who allege that the managed care company defendants, both individually and in combination, engaged in a pattern of failing to pay claims in full and in a timely manner, thereby breaching certain agreements and selected federal and state statutes. The Providers include those in the Main Track nationwide class action complaint as well as certain tag-along plaintiffs transferred to this Court from locations around the country by the Judicial Panel on Multi-District Litigation.

Before the Court is the second phase of motions to dismiss in the Provider track of this litigation. Defendant managed care companies² jointly seek to dismiss various portions of the Main Track Second Amended Consolidated Class Action Complaint for failure to state a claim upon which relief can be granted. Through numerous pleadings spanning many months and a hearing on August 14, 2003, these well-matched parties have participated in a classic legal contest. For the reasons outlined below, the joint motion to dismiss is GRANTED in part and DENIED in part consistent with this opinion.

A. COMPLAINT

The Main Track Second Amended, Consolidated Class Action Complaint (the "SAC") (D.E. No. 1607) contains ten separate causes of action: (1) RICO conspiracy, 18 U.S.C. § 1962(d); (2) RICO aiding and abetting, 18 U.S.C. § 2((1) and (2) collectively referred to herein as "secondary RICO violations"); (3) primary RICO, 18 U.S.C. § 1962(a) & (c); (4) RICO declaratory and injunctive relief, 18 U.S.C. § 1964(a); (5) breach of contract; (6) unjust enrichment/constructive contract; (7) violation of various state prompt pay statutes; (8) violation of the California Business & Professions Code § 17200; (9) violation of the Connecticut Unfair Trade Practices Act³; and (10) violation of the New Jersey Consumer Fraud Act.

II. LEGAL STANDARD

A court will not grant a motion to dismiss unless the plaintiff fails to prove any facts that would entitle the plaintiff to relief. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). When ruling on a motion to dismiss, a court must view the complaint in the light most favorable to the plaintiff and accept the plaintiff's well-pleaded facts as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); St. Joseph's Hosp., Inc. v. Hosp. Corp. of Am., 795 F.2d 948 (11th Cir.1986).

III. DISCUSSION

Coventry, Health Net, Humana, PacifiCare, Prudential, United and WellPoint have filed a joint motion to dismiss the SAC.⁴ Anthem and Coventry have also filed separate motions to dismiss.⁵ The Court has issued several Orders of Dismissal as to previous versions of both Provider and Subscriber Track complaints. Many of these previous rulings are pertinent to resolution of the instant motions.

(1) The Court rejected Defendants' position that claims under 18 U.S.C.1962(a) must result from the "investment" of racketeering proceeds, rather than merely flow from predicate acts of racketeering. See St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 441 (5th Cir.2000); Fogie v. THORN Americas, Inc., 190 F.3d 889, 899 (8th Cir.1999); Vemco v. Camardella, 23 F.3d 129, 132 (6th Cir.1994). The Court adopted the minority position that does not require an investment use injury independent of the alleged predicate acts under Section 1962(a). See In re Managed Care Litig., 150 F.Supp.2d 1330, 1351-52 (S.D.Fla.2001); See also Busby v. Crown Supply, 896 F.2d 833, 836-40 (4th Cir. 1990); accord Avirgan v. Hull, 691 F.Supp. 1357, 1362 (S.D.Fla.1988), aff'd, 932 F.2d 1572 (11th Cir.1991). Nonetheless, in the most recent version of the Complaint, Plaintiffs have alleged that they suffered injury from Defendants' "investment and reinvestment of [racketeering] income ... to operate, expand and perpetuate [the Managed Care Enterprise]." SAC ¶¶ 186, 192, 197.

(2) The Court rejected Defendants' position that Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), supercedes Eleventh Circuit precedent that authorizes a private cause of action for "aiding and abetting" a RICO violation pursuant to 18 U.S.C. § 2. See In re Managed Care Litig., 135 F.Supp.2d 1253, 1267 (S.D.Fla.2001); see also Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386 (11th Cir.1994); cf. Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1204 (11th Cir. 2001).

(3) The Court held that the central enterprise allegations underlying all of Plaintiffs' RICO claims were untenably broad, and that the supporting averments were too vague, incomplete or indefinite. Plaintiffs failed to identify the third-party entities which formed the enterprise, and also did not provide sufficient detail regarding the links between these third-party entities. Accordingly, the Court directed Plaintiffs to "identify who comes within the ambit of [the RICO] enterprise, or where [plaintiffs' RICO claims] begin and end." In re Managed Care Litig., 135 F.Supp.2d 1253, 1262 (S.D.Fla.2001).

(4) With regard to state prompt-pay statutes, the Court required Plaintiffs to "identify which state statutes are being alleged and which Defendants are alleged to have violated which statute" and "state how each Defendant violated the statute." Id. at 1269-70.

A. RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT (COUNTS I-IV)

The Racketeer Influenced and Corrupt Organizations Act ("RICO") provides that it is "unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." 18 U.S.C. § 1962(c). Therefore, "to state a RICO claim, a plaintiff must plead (1) that the defendant (2) through the commission of two or more acts (3) constituting a `pattern' (4) of `racketeering activity' (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) an `enterprise' (7) the activities of which affect interstate or foreign commerce." McCulloch v. PNC Bank, 298 F.3d 1217, 1225 (11th Cir.2002). "Racketeering activity" is defined to include "any act which is indictable under a lengthy list of criminal offenses." Langford v. Rite Aid of Ala., Inc., 231 F.3d 1308, 1312 (11th Cir.2000).

1. "ENTERPRISE"

a. Requirement of a Discernible "Entity"

Defendants argue that the SAC again fails to define a sufficiently discrete enterprise for purposes of RICO liability. Plaintiffs include the following entities within their definition of the Managed Care Enterprise ("MCE"): Defendants, their trade associations, a few named vendors, unidentified "health insurance companies not named as defendants herein," and "other third party entities." SAC ¶¶ 26-31. Plaintiffs previously alleged that the RICO enterprise comprised the entire health care industry, including both providers and the numerous different companies connected in some professional fashion...