In re Managed Care Litigation, MDL No. 1334.

• Citation: 185 F.Supp.2d 1310
• Decision Date: 20 February 2002
• Docket Number: No. 00-1334-MD,MDL No. 1334.,00-1334-MD
• Parties: In re MANAGED CARE LITIGATION. This Document Relates to Subscriber Track Cases.
• Court: U.S. District Court — Southern District of Florida

185 F.Supp.2d 1310

In re MANAGED CARE LITIGATION.

This Document Relates to Subscriber Track Cases.

MDL No. 1334.

No. 00-1334-MD

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

February 20, 2002.

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ORDER GRANTING IN PART AND DENYING IN PART THE DEFENDANTS' MOTIONS TO DISMISS THE AMENDED COMPLAINTS

MORENO, District Judge.

Before the Court is a second round of motions to dismiss filed by the managed care insurance company ("MCO") Defendants¹ seeking to topple the insured subscriber Plaintiffs' complaints stating claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and the Employee Retirement Income Security Act ("ERISA"). Pursuant to 28 U.S.C. § 1407, the Judicial Panel on Multidistrict Litigation transferred five of these lawsuits to this Court, joining the Price v. Humana case filed in the Southern District of Florida. In the June 12, 2001 Subscriber Track Order, which addressed the initial motions to dismiss, this Court dismissed without prejudice nearly all of the RICO claims because the Plaintiffs had not properly pled the predicate acts of mail and wire fraud with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure. In re Managed Care Litig., 150 F.Supp.2d 1330, 1347 (S.D.Fla. 2001) ("Subscriber Track Order"). The Court finds that the new complaints are compliant with Rule 9(b) and that the Plaintiffs have demonstrated standing to bring the RICO claims. However, the Court now finds that the McCarran-Ferguson Act, a law that Congress passed to prohibit federal lawsuits that encroach upon the state regulatory decisionmaking process, requires that the RICO claims of ten of the sixteen Plaintiffs be dismissed with prejudice. The laws regulating the insurance industry in the states of Florida, New Jersey, California and Virginia do not provide for civil remedies, thus reverse-preempting the federal RICO claims brought by the Plaintiffs who reside in those states.

The Court dismisses the ERISA misrepresentation of medical necessity definition fiduciary duty claim and both summary plan description claims of the subscribers who continue to be enrolled in the Defendants' health plans because those Plaintiffs have an adequate remedy under other provisions of the statute and, furthermore, they failed to exhaust appropriate administrative procedures before filing the present lawsuit. Those Plaintiffs who are no longer participants of the MCOs' health plans have stated valid misrepresentation claims, but the claims must be tailored to conform with this Court's prior ruling concerning what information ERISA requires a fiduciary to disclose. However, the Court denies the motion to dismiss the remaining ERISA claim alleging a breach of fiduciary duty for improperly interfering with physician-patient communication by imposing "gag orders" on doctors. That claim has been properly pled and will proceed. Finally, all of the common law civil conspiracy and state unjust enrichment claims are dismissed.

I. Introduction

A. Issues Relating Specifically to O'Neill v. Aetna

For ease of administration, citations to provisions that are common in the Plaintiffs' complaints will refer to the O'Neill v. Aetna Subscriber Track Second Consolidated Amended Complaint ("O'Neill Compl."). Defendant Aetna raises two new objections to that particular Complaint. First, Aetna contends that dismissal is warranted because the Plaintiffs failed to correctly plead the identity of its corporations. Specifically, the Amended Complaint does not name the correct states of incorporation because a December 13, 2000 reorganization, which took place after the Plaintiffs filed their initial complaint, relocated Aetna, Inc. to Pennsylvania. The Plaintiffs are directed to take timely, appropriate action to correct this administrative oversight.

Of greater significance is the Defendant's second argument that the Plaintiffs are purportedly attempting to hold the Aetna parent corporation liable for the conduct of its subsidiaries. See United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) ("It is a general principle of corporate law deeply `ingrained in our economic and legal systems' that a parent corporation ... is not liable for the acts of its subsidiaries."). The Plaintiffs respond that the Amended Complaint charges Aetna with responsibility only for its own wrongful conduct, and they disavow any reliance on derivative liability or a corporate-veil-piercing theory. See O'Neill Compl., ¶ 36 ("Aetna is responsible for the distribution of the advertising, marketing, and membership materials ... for all of its Health Plans."); Plaintiffs' Response in Opposition to Defendants' Motion to Dismiss Each of the Consolidated Amended Complaints Filed in the Subscriber Track at 68 (clarifying that the Plaintiffs are not proceeding under an alter ego theory of liability). Although open to different constructions, the text of the Amended Complaint supports the Plaintiffs' interpretation, thus resolving the issue in their favor. See Bestfoods, 524 U.S. at 65, 118 S.Ct. 1876 ("[T]he existence of the parent-subsidiary relationship under state corporate law is simply irrelevant to the issue of direct liability.").

B. Factual Overview

The Plaintiffs claim that the Defendants did not properly notify subscribers of the MCOs' internal cost-reduction practices that did or could affect both professional medical judgment as to appropriate medical treatment and the granting or denial of policy claims. The MCOs allegedly induced their customers to enroll and reenroll in the Defendants' health plans by virtue of standardized misrepresentations and factual omissions contained in various disclosure materials, such as summary plan descriptions and subscriber agreements. O'Neill Compl., ¶¶ 58-59. Those materials state that the subscriber's Primary Care Physician will prescribe treatments on the basis of the physician's independent medical judgment, exercised with reference to each subscriber's medical needs. Id. at ¶¶ 53, 61, 68.

The Plaintiffs allege that the managed care insurance companies apply the term "medical necessity" in a manner that conflicts with the definition stated in membership materials and common usage in the medical profession. Id. at ¶¶ 43, 45, 63. Rather than applying that term in congruence with the patient's medical needs in the view of the patient's doctor and the American Medical Association, it is alleged that every Defendant managed care company relies on undisclosed and unregulated guidelines created by third parties who make their calculated decisions based upon "the minimum possible level of care that was adequate in a limited sample of `best case' situations." Id. at ¶ 80. The insurance industry's collusive practices, together with protective cover provided by organizations such as the National Committee for Quality Assurance ("NCQA"), also defraud patients of proper treatment and appropriate insurance coverage as promised. Id. at ¶¶ 97 (outlining industry-wide approach to managed care, which includes the adoption of health care review criteria, the joint development of accreditation standards, participation in trade associations, and the use of industry informational sources), 105 ("[T]he NCQA's quality assurance standards are, in large part, a sham.").²

The Plaintiffs also charge that they were not fully informed about certain monetary incentives used to influence their doctors. The plan benefits materials state that such incentives are "intended to continually improve medical care" and "enhance patient satisfaction." Id. at ¶ 68. The Plaintiffs argue that those financial incentives instead erode the doctors' independent judgments because they reward doctors who limit medical expenses according to factors that override a patient's best interest in favor of restraining "unnecessary" treatment and maximizing the insurance company's profits. Id. at ¶ 63. The physician financial arrangements also include incentives causing claim reviewers to limit treatment, even where the denied benefits would have satisfied the definition of medical necessity as stated in materials provided to members and potential members. Id.

Furthermore, the MCOs allegedly require "gag clauses" in their contracts with physicians, whereby the doctors suffer penalties if they communicate to the patients information concerning proprietary information such the financial incentives or discuss alternative treatment not covered by the managed care company's plan. Id. at ¶¶ 63, 75, 91. The Plaintiffs allege that each managed care company applies extortionate financial pressure on the physicians in order to keep patients in the dark about the financial incentives and the medical necessity maneuvers, yet tell potential plan members in advertisements and on the Internet that it "encourages participating physicians to discuss their financial arrangements with patients." Id. at ¶ 64.

C. Motion to Dismiss Standard

A court should grant a motion to dismiss only if the plaintiff fails to allege 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 such a motion, 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 Hospital, Inc. v. Hospital Corp. of Am., 795 F.2d 948 (11th Cir.1986). As this Court has indicated previously, a motion to dismiss is merely the first juncture of what could be a long journey. See, e.g., Subscriber Track Order, 150 F.Supp.2d at 1339 (noting that the issue of "whether the evidence supports the allegations of injury" would be revisited). It is not the role of this Court to applaud or impugn the motivation behind a lawsuit or speculate upon fact-intensive...