LD v. United Behavioral Health

• Decision Date: 18 December 2020
• Docket Number: Case No. 4:20-cv-02254 YGR
• Citation: 508 F.Supp.3d 583
• Court: U.S. District Court — Northern District of California
• Parties: LD, et al., Plaintiffs, v. UNITED BEHAVIORAL HEALTH, et al., Defendants.

508 F.Supp.3d 583

LD, et al., Plaintiffs,

v.UNITED BEHAVIORAL HEALTH, et al., Defendants.

Case No. 4:20-cv-02254 YGR

United States District Court, N.D. California.

Signed December 18, 2020

Matthew M. Lavin, Pro Hac Vice, Napoli Shkolnik, PLLC, McLean, VA, Aaron Richard Modiano, Pro Hac Vice, Napoli Shkolnik, PLLC, Coconut Grove, FL, David M. Lilienstein, Katie Joy Spielman, DL Law Group, San Francisco, CA, Wendy Aline Mitchell, Napoli Shkolnik, PLLC, Los Angeles, CA, for Plaintiffs LD, DB, RH, CJ.

Matthew M. Lavin, Napoli Shkolnik, PLLC, McLean, VA, Aaron Richard Modiano, Pro Hac Vice, Napoli Shkolnik, PLLC, Coconut Grove, FL, David M. Lilienstein, Katie Joy Spielman, DL Law Group, San Francisco, CA, Wendy Aline Mitchell, Napoli Shkolnik, PLLC, Los Angeles, CA, for Plaintiff BW.

Geoffrey M. Sigler, Pro Hac Vice, Joshua Lipton, Pro Hac Vice, Gibson Dunn Crutcher LLP, Washington, DC, Heather Lynn Richardson, Lauren Margaret Blas, Gibson, Dunn and Crutcher LLP, Los Angeles, CA, for Defendant United Behavioral Health.

Carys Anne Arvidson, Craig L. Caesar, Pro Hac Vice, Phelps Dunbar LLP, New Orleans, LA, Errol J. King, Jr., Pro Hac Vice, Phelps Dunbar LLP, Baton Rouge, LA, Moe Keshavarzi, David Dworsky, Sheppard Mullin Richter & Hampton LLP, Los Angeles, CA, for Defendant Viant, Inc.

David Dworsky, Sheppard Mullin, Los Angeles, CA, Errol J. King, Jr., Phelps Dunbar LLP, Baton Rouge, LA, for Defendant MultiPlan, Inc.

ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS WITH LEAVE TO AMEND

Re: Dkt. Nos. 65, 66

Yvonne Gonzalez Rogers, United States District Court Judge Plaintiffs¹ bring this putative class action against defendants United Behavioral Health ("United") and MultiPlan, Inc. ("MultiPlan") for claims arising out of United's alleged failure to reimburse their claims for Intensive Outpatient Program ("IOP") services at the Usual, Customary, and Reasonable Rate ("UCR") that non-party Summit Estate, Inc. provided to plaintiffs. Plaintiffs allege that defendants’ conduct caused them injury, because it forced them to pay any amounts that United failed to reimburse for the IOP services. The Court dismissed a prior iteration of the complaint in its entirety, with leave to amend. Plaintiffs filed a First Amended Complaint ("FAC"), in which they assert, on their own behalf and on behalf of a proposed class of similarly-situated subscribers of insurance policies administered by United, claims under the Employee Retirement Income Security Act of 1974 ("ERISA") and the Racketeer Influenced and Corrupt Organizations Act ("RICO").

Now pending are two motions to dismiss all claims in the FAC under Federal Rule of Civil Procedure 12(b)(6) on the grounds that: (1) all of the claims in the FAC continue to be inadequately pleaded; and (2) plaintiffs lack RICO standing.

Having carefully considered the pleadings and the parties’ briefs, and for the reasons set forth below, the Court GRANTS MultiPlan's motion to dismiss WITH LEAVE TO AMEND with respect to the claim under RICO Section 1962(c) asserted against it. The Court GRANTS United's motion to dismiss plaintiffs’ claim for violations of 29 U.S.C. § 1133 WITH PREJUDICE . The Court otherwise DENIES defendants’ motions to dismiss.²

I. BACKGROUND

A. Initial Complaint

In the initial complaint, plaintiffs alleged as follows:

Plaintiffs are members of active health insurance policies administered by United. Compl. ¶ 2, Docket No. 1. Every such policy "provided coverage for out-of-network benefits for mental health and substance use disorder treatment at usual, customary, or reasonable rates." Id. ¶ 6. United describes UCR rates on its website as being "based on what other health care professionals in the relevant geographic areas or regions charge for their services." Id. ¶ 8.

Before obtaining IOP services from Summit Estate, an out-of-network provider, plaintiffs signed a contract with Summit Estate that makes them "responsible for amounts not paid by United." Id. ¶ 27. Summit Estate contacted United to verify out-of-network benefits and United represented during these calls ("VOB calls") that the IOP services in question would be paid "at UCR rates" and that the claims for such services "were not subject to third-party repricing by Viant." Id. ¶ 26. Based on the "plain language" of the plans, "it was understood by all parties that 100% of UCR was equivalent to 100% of the billed charges of Summit Estate." Id. ¶¶ 174, 187, 200, 212, 224. United "through plan documents, marketing materials, EOBs, and other materials" represented to plaintiffs that their plans would pay for out-of-network IOP services "at the UCR amount according to an objective, empirical methodology." Id. ¶ 104.

After receiving the IOP services, claims were submitted to United for payment according to the "out-of-network rate." Id. ¶ 8. Instead of "paying UCR," United engaged defendant Viant to "negotiate" reimbursements. Id. ¶ 18. Viant has "financial incentives" to negotiate low reimbursements. Id. ¶¶ 40, 46. Viant's negotiations resulted in offers to Summit Estate to reimburse for IOP services at an amount below the UCR, and United paid the plaintiffs’ claims at the reduced Viant amount. Id. ¶¶ 36-38. Neither United nor Viant disclosed to plaintiffs the methodology they used for calculating the reimbursement rates for IOP services. Id. ¶¶ 44, 127.

No plaintiff has an agreement with Viant that permits Viant to negotiate with providers on his or her behalf. Id. ¶ 34. Yet, Viant represented "through written and oral correspondence" that it had authority to negotiate with providers on the patients’ behalf. Id. ¶ 51.

"Every claim at issue in this litigation has been underpaid by United and overpaid or currently owed by the Plaintiffs and the Class." Id. ¶ 79. "United's underpayment of the claims at issue here resulted in unduly large balance bills to Plaintiffs." Id. ¶ 99.

The Explanation of Benefits ("EOB") letters sent to plaintiffs do not state that Viant's repricing is permitted under the plaintiffs’ plans and that the repriced amount negotiated by Viant is consistent with plan terms. Id. ¶ 53. The EOBs also do not state that the repriced amount is an "adverse benefit determination" that plaintiffs have the right to appeal. Id. Accordingly, plaintiffs did not have the opportunity to appeal the "underpayment[s]." Id. ¶ 56.

Plaintiffs allege that United and other insurers were required as part of the settlement of an unrelated litigation ("Ingenix litigation") to underwrite the creation of a database called the "FAIR health" database, which contains rates for the reimbursement for IOP treatment. Id. ¶ 20. Nonetheless, United and the other insurers were not required by the Ingenix litigation settlement to use the FAIR health database. Id.

Plaintiffs bring the action on their own behalf and on behalf of a proposed class of members "of a health benefit plan either administered or insured by United" whose claims for out-of-network IOP services "were underpaid or repriced by United and Viant," id. ¶ 233: a claim against (1) both defendants under RICO, 18 U.S.C. § 1962(c) ; (2) United for underpaid benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B) ; (3) United for breach of plan provisions under ERISA, 29 U.S.C. § 1132(a)(1)(B) ; (4) United for ERISA disclosure violations under 29 U.S.C. § 1132(c)(1) ; (5) United for breach of fiduciary duties under 29 U.S.C. § 1109 and 29 U.S.C. § 1132(a)(3) ; (6) United for violations of ERISA's full and fair review statute, 29 U.S.C. § 1133 ; and (7) two claims against both defendants for equitable relief under 29 U.S.C. § 1132(a)(3).

On August 26, 2020, the Court granted defendants’ motions to dismiss all claims in the initial complaint, and it did so with leave to amend. Docket No. 55.

B. FAC

The FAC differs from the initial complaint in the following ways: (1) plaintiffs modified some of their allegations, as described in more detail below; (2) plaintiffs substituted MultiPlan for Viant as a defendant; (3) plaintiffs added a claim for conspiracy in violation of RICO, 18 U.S.C. § 1962(d), against both defendants; (4) plaintiffs removed "Federal Health offenses" as the predicate offenses for their RICO claims; and (5) plaintiffs abandoned their claim under ERISA Section 502(c)(1), 29 U.S.C. § 1132(c)(1), for failure to comply with ERISA's disclosure and notice obligations. FAC, Docket No. 57.

First, the FAC describes the terms of the plans that defendants allegedly breached when they allegedly under-reimbursed the claims for IOP services at issue. The plan terms allegedly require United to reimburse claims "based on available data resources of competitive fees in that geographic area" or "based on UCR rates" in the case of named plaintiff DB. Id. ¶¶ 248-279. These plan terms allegedly required United to rely on actual customary rates of similar IOP-services providers in the relevant geographic region. Id.

Second, the FAC better explains defendants’ alleged scheme to under-reimburse the claims for IOP services at issue. That is, prior to obtaining the IOP services at issue, plaintiffs’ provider, Summit Estate, called United to verify that they had plan coverage; during these calls, United's representatives fraudulently represented to Summit Estate that United would pay for the out-of-network IOP services at issue at 100% of the UCR rate after plaintiffs had satisfied their deductibles and co-pays. See id. ¶¶ 255, 291, 322, 351, 378. During these calls, the United representatives also stated that "UCR would be paid based on the 80th percentile of charges for similar services in the geographic area." Id. Plaintiffs allege that these statements were fraudulent because United did not, in fact, reimburse the IOP-services claims at issue based on the UCR. Id.

Next, plaintiffs modified their allegations with respect to the process that United allegedly used to calculate the reimbursements for the claims for IOP services at issue, namely, United and MultiPlan collaborated and conspired to...