Krukas v. AARP, Inc.

• Decision Date: 06 May 2020
• Docket Number: Civil Action No. 18-1124 (BAH)
• Citation: 458 F.Supp.3d 1
• Parties: Helen KRUKAS, Andrea Kushim, and Georgia Luke, on behalf of themselves and all similarly situated, Plaintiffs, v. AARP, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

458 F.Supp.3d 1

Helen KRUKAS, Andrea Kushim, and Georgia Luke, on behalf of themselves and all similarly situated, Plaintiffs,

v.AARP, INC., et al., Defendants.

Civil Action No. 18-1124 (BAH)

United States District Court, District of Columbia.

Signed May 6, 2020

Jason Samuel Rathod, Nicholas A. Migliaccio, Migliaccio & Rathod LLP, Washington, DC, Brett H. Cebulash, Pro Hac Vice, Kevin S. Landau, Tess Bonoli, Pro Hac Vice, Taus, Cebulash & Landau, LLP, New York, NY, David A. Goodwin, Pro Hac Vice, Gustafson Gluek PLLC, Minneapolis, MN, for Plaintiff Helen Krukas.

Jason Samuel Rathod, Nicholas A. Migliaccio, Migliaccio & Rathod LLP, Washington, DC, for Plaintiffs Andrea Kushim, Georgia Luke.

Alec W. Farr, Adam Lee Shaw, Heather Shaw Goldman, Bryan Cave Leighton Paisner LLP, Washington, DC, Jeffrey S. Russell, Pro Hac Vice, Bryan Cave Leighton Paisner, LLP, Saint Louis, MO, for Defendants AARP Services Inc., AARP Insurance Plan.

Alec W. Farr, Bryan Cave Leighton Paisner LLP, Washington, DC, for Defendant AARP, Inc.

MEMORANDUM OPINION

BERYL A. HOWELL, Chief Judge This putative class action challenges the role of defendants AARP, Inc., AARP Services, Inc. ("ASI"), and AARP Insurance Plan ("AARP Trust") (collectively referred to as "AARP") in soliciting, marketing, and administering a supplemental Medicare health insurance program, known as a "Medigap" program. Plaintiffs, who are purchasers of AARP-administered Medigap policies, filed a First-Amended Class-Action Complaint ("FAC"), ECF No. 40, after the denial of defendants’ motion to dismiss the original complaint, see Krukas v. AARP, Inc. , 376 F. Supp. 3d 1, 9 (D.D.C. 2019).¹ The FAC added a breach of fiduciary duty claim to the four original claims of a violation of the District of Columbia's Consumer Protection Procedures Act ("CPPA"), D.C. CODE § 28-3901 et seq. , and common law claims of conversion, unjust enrichment, and fraudulent concealment. See FAC ¶¶ 117–20. Pending now is defendants’ motion to dismiss, under Federal Rule of Civil Procedure 12(b)(6), the new breach of fiduciary duty claim. See Defs.’ Mot. to Dismiss Count II of Pls.’ FAC ("Defs.’ Mot."), ECF No. 42; Defs.’ Mem. Supp. Mot. to Dismiss Count II of Pls.’ FAC ("Defs.’ Mem."), ECF No. 42. For the reasons explained, defendants’ motion is granted, and Count II of the FAC is dismissed without prejudice.

I. BACKGROUND

The factual allegations relevant to Count II of the FAC are summarized below, along with this case's procedural history. Additional background, including descriptions of plaintiffs’ CPPA, conversion, unjust enrichment, and fraudulent concealment claims, is set out in the prior decision and will not be repeated here. See Krukas , 376 F. Supp. 3d at 9–14.

A. Factual Allegations

Defendant AARP, Inc. is a non-profit membership organization for seniors aged 50 and older. See FAC ¶¶ 25, 30. UnitedHealthcare ("United"), a health insurance company that is not a party here, insures a set of Medigap policies offered to AARP members, subject to state-specific regulation and approval. See id. ¶ 36; see also Krukas , 376 F. Supp. 3d at 15 (explaining that Medigap policies are regulated by states). Medigap insurance supplies coverage for some healthcare costs not covered by Medicare. See Krukas , 376 F. Supp. 3d at 10 ; see also 42 U.S.C. § 1395ss. Plaintiff Helen Krukas, currently a Florida resident, purchased AARP Medigap coverage in 2012 and renewed that coverage monthly through November 2016. FAC ¶ 22. Plaintiff Andrea Kushim, a Michigan resident, bought AARP Medigap coverage in December 2016, which she renewed through the filing of the FAC. Id. ¶ 23. Plaintiff Georgia Luke, also a Michigan resident, purchased coverage in July 2017 and has renewed it through the filing of the FAC. Id. ¶ 24. All three plaintiffs are also members of AARP, Inc. See id. ¶ 76. Plaintiffs bring this action individually and on behalf of a putative class comprised of "[a]ll persons in the United States who purchased or renewed an AARP Medigap Policy." Id. ¶ 97.

An agreement between AARP and United governs AARP and United's relationship related to the AARP Medigap policies. Id. ¶ 42. United insures the AARP Medigap coverage through a group policy issued to defendant AARP Trust, "a grantor trust organized by AARP, Inc. under" District law. Id. ¶ 27. AARP Trust, as group policyholder, collects coverage premiums from the insured and transmits those payments, minus certain expenses, to United. Id. One of the expenses withheld is a fee, amounting to 4.95% of the premiums, retained by the AARP Trust, id. , and then passed along to AARP, Inc. and ASI, id. ¶ 60. The agreement between AARP, Inc. and United terms this payment a "royalty" for United's use of AARP's reputation, membership lists, and marks in offering the AARP Medigap policies. Id. ¶¶ 45–47. Plaintiffs allege, however, that "the payment is not a royalty but, in fact, an illegal commission that AARP collects for soliciting its members to purchase AARP Medigap Policies and collecting premiums from them and remitting those premiums to UnitedHealth." Id. ¶ 6. "Defendants do not," the FAC alleges, "disclose that the amounts members are paying are not just ‘premiums’ to pay for the actual insurance coverage, and the administrative expenses incurred by the AARP Trust, but a 4.95% commission on top of the premiums that AARP remits to UnitedHealth." Id. ¶ 70.

Count II of the FAC, at issue here, alleges, referring to the defendants collectively as AARP, that "AARP owed Plaintiffs and the Class a fiduciary duty," id. ¶ 118, and that "AARP breached its fiduciary duties of candor, good faith, and loyalty by, among other things, (1) failing to disclose to the Class, or misleading the Class about, the true nature and the amount of AARP's royalty payments, and (2) engaging in self-dealing by syphoning 4.95% from the Class's payments for AARP Medigap Policies," id. ¶ 119. These breaches of fiduciary duty, the FAC alleges, "harmed Plaintiffs and the Class in the amount of the undisclosed 4.95% that AARP kept for itself before remitting Plaintiffs’ and the Class's Medigap premiums to UnitedHealth." Id. ¶ 120.

B. Procedural History

Krukas filed the original complaint, "individually, and on behalf of all others similarly situated (except for individuals residing in California), as well as the general public," Krukas , 376 F. Supp. 3d at 9, on May 1, 2018, see Compl., ECF No. 1. That original complaint raised four claims: Count One alleged that AARP violated the CPPA by misrepresenting material facts about the 4.95% payment and about AARP's lack of license as an insurance broker or agent. Id. ¶¶ 92–103. Count Two claimed that defendants’ conversion of her ownership right to the 4.95% payment entitled her to damages in the amount she was wrongfully charged. Id. ¶¶ 104–07. Count Three alleged unjust enrichment based on defendants’ retention of the 4.95% payment from plaintiff. Id. ¶¶ 109–11.

Finally, Count Four alleged fraudulent concealment because defendants concealed or failed to disclose the 4.95% payment, a material fact that defendants should have known should be disclosed or not concealed and that defendants concealed despite defendants’ "duty to speak." Id. ¶¶ 112–18.

Defendants’ motion to dismiss the original complaint under Rule 12(b)(6) argued that several doctrines required dismissal of all Counts and, in the alternative, that the complaint's factual allegations were insufficient to support the claims. See generally Defs.’ First Mot. to Dismiss, ECF No. 8. As already stated, Krukas denied the motion. See 376 F. Supp. 3d. at 9. First, Krukas concluded that the primary jurisdiction doctrine, which is applicable only in cases involving issues that fall "within the special competence of an administrative body," did not require staying or dismissing the CPPA and common law claims. Id. at 15 (quoting United States v. W. Pac. R.R. Co. , 352 U.S. 59, 63–64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956) ). Second, the filed-rate doctrine, which bars certain suits challenging the reasonableness of regulatory rates approved by administrative bodies, see id. at 17–20 (describing the filed-rate doctrine), did not bar the claims as pled in the complaint, see id. at 20–26 (explaining this conclusion).² Although the suit "ha[s] some relation to filed rates for state insurance coverage," Krukas reasoned, the complaint attacks not the reasonableness of rates filed by United and approved by the applicable state insurance regulator but instead the "fraudulent misrepresentation" of a "a third-party doing business with" the entity whose rates are regulated. Id. at 22 (emphasis in original). Third, after determining that District law governed the dispute, see id. at 27–32 (conducting a choice of law analysis), Krukas deemed "dismissal for statute of limitations reasons ... not appropriate at this time": with key facts still "unknown," the complaint was not " ‘on its face’ conclusively time barred." Id. at 33–34 (quoting Bregman v. Perles , 747 F.3d 873, 875 (D.C. Cir. 2014) ). Finally, Krukas ruled that the original complaint plausibly stated a claim for relief on each of the four Counts. See id. at 34–47.

With defendants’ consent, the FAC, which added two plaintiffs — Kushim and Luke — as well as the breach of fiduciary duty claim, was filed on November 27, 2019. See FAC.³ Defendants responded with the pending motion to dismiss Count II of the FAC, which motion became ripe for resolution on March 4, 2020, with the filing of defendants’ reply. See Defs.’ Reply Mem. Supp. Defs.’ Mot. to Dismiss Count II of Pls.’ FAC ("Defs.’ Reply") at 6, ECF No. 48⁴

II. LEGAL STANDARD

To survive a motion to dismiss under Rule 12(b)(6), the "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."

Wood v. Moss , 572 U.S. 744, 757–58, 134 S.Ct. 2056, 188 L.Ed.2d 1039 (2014) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). A...