Ketayi v. Health Enrollment Grp., Case No.: 20-cv-1198-GPC-KSC

• Court: U.S. District Court — Southern District of California
• Writing for the Court: Hon. Gonzalo P. Curiel United States District Judge
• Parties: ERIC KETAYI and MIRYAM KETAYI, both individually and on behalf of all others similarly situated and for the benefit of the general public, Plaintiffs, v. HEALTH ENROLLMENT GROUP, a Florida corporation; ADMINISTRATIVE CONCEPTS, INC., a Pennsylvania corporation; AXIS, a Bermuda corporation d/b/a Axis Insurance Company; AXIS SPECIALTY U.S. SERVICES, INC., a Delaware corporation; ALLIANCE FOR CONSUMERS USA, a Nebraska corporation; HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC, a Delaware corporation; HEALTH INSURANCE INNOVATIONS HOLDINGS, INC., a Delaware corporation; FIRST HEALTH GROUP, CORP., a Delaware corporation; MARC MUNOZ, an individual; and KEVIN ROMERO, an individual, inclusive, Defendants.
• Decision Date: 01 February 2021
• Docket Number: Case No.: 20-cv-1198-GPC-KSC

ERIC KETAYI and MIRYAM KETAYI,
both individually and on behalf of all others similarly situated
and for the benefit of the general public, Plaintiffs,
v.
HEALTH ENROLLMENT GROUP, a Florida corporation;
ADMINISTRATIVE CONCEPTS, INC., a Pennsylvania corporation;
AXIS, a Bermuda corporation d/b/a Axis Insurance Company;
AXIS SPECIALTY U.S. SERVICES, INC., a Delaware corporation;
ALLIANCE FOR CONSUMERS USA, a Nebraska corporation;
HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC,
a Delaware corporation; HEALTH INSURANCE INNOVATIONS HOLDINGS, INC.,
a Delaware corporation; FIRST HEALTH GROUP, CORP.,
a Delaware corporation; MARC MUNOZ, an individual;
and KEVIN ROMERO, an individual, inclusive, Defendants.

Case No.: 20-cv-1198-GPC-KSC

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

February 1, 2021

ORDER:

(1) GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS; AND

(2) GRANTING IN PART AND DENYING IN PART PLAINTIFFS' REQUEST FOR JURISDICTIONAL DISCOVERY

[ECF Nos. 63, 64, 65, 66, 69, 76, 80.]

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Before the Court are the Motions to Dismiss the First Amended Complaint of Plaintiffs Eric Ketayi and Miryam Ketayi ("Plaintiffs"), filed by Defendants Health Enrollment Group, Administrative Concepts, Inc., Axis, Axis Specialty U.S. Services, Inc., Health Plan Intermediaries Holdings, LLC, Health Insurance Innovations Holdings, Inc., First Health Group, Corp., Marc Munoz, and Kevin Romero (collectively "Defendants"¹). ECF Nos. 63, 64, 65, 66, 69. The motions have been fully briefed. ECF Nos. 76, 77, 78, 79, 80, 82, 83, 84, 85, 86, 87. Upon consideration of the briefing of the parties and for the reasons set for the below, the Court GRANTS in part and DENIES in part the motions to dismiss. The Court further GRANTS in part and DENIES in part Plaintiffs' request for jurisdictional discovery.

I. BACKGROUND²

Plaintiffs Eric and Miryam Ketayi are married with two children and live in San Diego County. ECF No. 53 ("FAC") ¶¶ 13-14, 74. Until the fall of 2016, Plaintiffs had health insurance through Blue Cross/Blue Shield that provided coverage for themselves and their children. Id. ¶ 74. In the face of increasing premiums, Plaintiffs decided to look for less expensive insurance options that provided comparable PPO coverage to their

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existing plan. Id. Plaintiffs came across the website of Defendant Health Enrollment Group ("HEG"), which included statements like "Our PPO's work with over 80% of physicians Nationwide," and "We work with Major Insurance Companies in all 50 states" to provide "Private Health Insurance," "Obamacare," and "PPO" plans. Id. ¶¶ 15, 75. During three separate calls on November 22, 2016, Plaintiffs spoke with who they believed to be a representative of HEG, but "may have been" a representative of Defendant Health Plan Intermediaries Holdings, LLC ("HPI"), or Defendant Health Insurance Innovations Holdings, Inc. ("HII"). Id. ¶ 76, n.8. The representative described the plan to Plaintiffs as a PPO plan and compared it to Plaintiffs' existing Blue Cross/Blue Shield coverage. Id. The representative followed a script that confused Plaintiffs, and claimed that Plaintiffs would have small co-pays, no deductible, and that this seemingly comprehensive coverage would apply were Plaintiffs or their children to visit almost any doctor in the country. Id. ¶ 77. The representative also told Plaintiffs that the PPO plan would cost $379 per month, less than Plaintiffs' Blue Cross/Blue Shield plan, because Defendants aggregated individuals from all over the country and could negotiate "great deals" for consumers. Id. ¶ 78. In responding Plaintiffs' questions about what the plan would cover, the representative stated the coverage was PPO and comprehensive and excluded pregnancy and mental health care. Id. ¶ 79. Relying on the statements of the representative and Defendants, Plaintiffs then decided to initiate the process of purchasing what they believed to be comprehensive health insurance. Id.

The representative then told Plaintiffs they would be transferred to an agent who could verify that they qualified for the Plan, who Plaintiffs believe was an employee of Defendants Administrative Concepts, Inc. ("ACI") or Axis Defendants.³ Id. ¶ 81. Before

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the representative transferred Plaintiffs to the agent, he told them that the agent would read them a series of statements and that Plaintiffs would need to say yes to all of the statements if they wished to purchase Defendants' product, that Plaintiffs should ignore statements that did not apply to them or the product they were purchasing, and that Plaintiffs should not interrupt or ask questions, or they would be forced to start the process over. Id. ¶ 81. Plaintiffs felt pressured to agree to the agent's verification statements based on the representative's directions and accordingly answered yes to every question, despite not understanding or agreeing with everything that was being said. Id. ¶ 82.

On the same day, November 22, 2016, Plaintiffs purchased Defendants' product (the "Liberty Health plan") and continued to pay "premiums" for Defendants' coverage from November 2016 until at least August 2017. Id. ¶¶ 13-14, 83, 84. After Plaintiffs' purchase, Defendants mailed Plaintiffs a card that said "Preferred Provider (PPO) Network Access" and included the URL to a website for Defendant First Health Group, Corp. ("First Health"), which stated it was "[y]our national choice for PPO network solutions." Id. ¶¶ 84, 40. Plaintiffs assert that Defendants made these representations with the knowledge that they had not actually sold, underwritten, or provided any sort of PPO plan or otherwise comprehensive coverage to Plaintiffs. Id. ¶ 84.

On July 29, 2017, Plaintiff Eric Ketayi was admitted to Cedars-Sinai Hospital for back surgery. Id. ¶ 85. For his six-night hospital stay, surgery, and other necessary care, the health plan Plaintiffs had purchased from Defendants covered $1,500. Id. ¶ 86. Plaintiffs were responsible for $194,366.73. Id. Plaintiffs attempted to dispute the lack of coverage, but Axis Defendants—the only Defendant Plaintiffs were able to reach—did not alter its level of coverage or agree to further contribute. Id. ¶ 87.

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On June 26, 2020, Plaintiffs filed their initial putative class action complaint.⁴ ECF No. 1. On September 11, 2020, Plaintiffs filed their First Amended Complaint ("FAC"), asserting putative class claims for (1) violations of the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq.; (2) false and misleading advertising under the False Advertising Law ("FAL"), Cal. Bus. & Prof. Code § 17500 et seq.; (3) violation of the Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750 et seq.; (4) fraud and deceit, Cal. Civ. Code § 1709; (5) violation of the Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.; (6) conspiracy to violate federal civil RICO, 18 U.S.C. § 1961 et seq.; and (7) "restitution, money had and received, unjust enrichment, quasi-contract and/or assumpsit." FAC ¶¶ 102-177. On October 9, 2020, Defendants Axis, Axis Specialty, First Health, HII, HPI, and ACI filed motions to dismiss the FAC. ECF Nos. 63, 64, 65, 66. On October 13, 2020, Defendants HEG, Marc Munoz, and Kevin Romero filed a motion to dismiss the FAC. ECF No. 69.

II. REQUESTS FOR JUDICIAL NOTICE AND OBJECTIONS TO EVIDENCE

The Court will first consider the parties' evidentiary arguments submitted in connection with these motions to dismiss.

The incorporation-by-reference doctrine and judicial notice pursuant to Federal Rule of Evidence 201 are the two exceptions to the general rule that the Court may not consider material outside the pleadings when ruling on a motion to dismiss for failure to state a claim. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). Federal Rule of Evidence 201 provides that a court "may judicially notice a fact that is

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not subject to reasonable dispute," either because it is (1) "generally known within the trial court's territorial jurisdiction" or (2) "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). A court can therefore "take judicial notice of matters of public record" at the motion to dismiss stage. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

Axis and Axis Specialty request that the Court take judicial notice of the following exhibits: (A) the Group Hospital Indemnity Insurance Certificate downloaded by Eric Ketayi; (B) the Group Accident Insurance Certificate downloaded by Eric Ketayi; (C) AXIS Insurance's California Department of Insurance Certificate of Authority; (D) AXIS Insurance's California Secretary of State Certificate of Qualification. As to Exhibits A and B, what Axis and Axis Specialty refer to as the "Plan Documents," the Court notes that Axis and Axis Specialty conflate the distinct doctrines of judicial notice and incorporation by reference. See Khoja, 899 F.3d at 998 ("Both of these procedures permit district courts to consider materials outside a complaint, but each does so for different reasons and in different ways."). Axis and Axis Specialty have provided no argument as to why the elements of judicial notice are met with respect to the Plan Documents, nor do they pinpoint specific facts in the documents that they ask the Court to consider. ECF No. 63-3. Further, the Court finds that it is inappropriate to consider the Plan Documents incorporated by reference into the FAC because Axis and Axis Specialty only appear to rely on the documents for an improper purpose, that is, to contest disputed facts. Cf. Khoja, 899 F.3d at 1006. Even if the Court were to reason that the Plan Documents serve as a foundation for an element to Plaintiffs' claims because they could indicate whether or not Plaintiffs did, in fact, purchase a limited benefit plan, Plaintiffs do not dispute that they purchased a limited benefit plan, that...