LeCann v. Aliera Cos.
| Decision Date | 22 June 2021 |
| Docket Number | CIVIL ACTION NO. 1:20-cv-2429-AT |
| Court | U.S. District Court — Northern District of Georgia |
| Parties | NOELLE LeCANN, KRISTIN SELIMO, and TANIA FUNDUK, on behalf of themselves and others similarly situated, Plaintiffs, v. THE ALIERA COMPANIES, INC., formerly known as ALIERA HEALTHCARE, INC., Defendant. |
This putative class action arises out of an alleged scheme by Defendant The Aliera Companies, Inc., ("Aliera") to take advantage of state and federal health insurance laws by masquerading its insurance plans as faith-based Health Care Sharing Ministry ("HCSM") plans, which are exempt from federal and state regulations. Plaintiffs allege that, through this scheme, they and others similarly situated were charged significant monthly insurance premiums, but that Defendant, in violation of insurance laws, refused to pay for covered medical procedures and bills, thereby reaping massive profits at Plaintiffs' expense. After thorough briefing, this matter comes before the Court on Aliera's Motion to Dismiss or Alternatively Motion to Compel Arbitration [Doc. 12].1 In its Motion, Aliera briefly asks the Court to dismiss without prejudice Plaintiffs' Amended Complaint because Plaintiffs failed to mediate their disputes. Alternatively and more substantively, Aliera asks the Court to compel arbitration pursuant to Sections 3 and 4 of the Federal Arbitration Act ("FAA"). 9 U.S.C. §§ 3-4.
Below, the Court first provides the factual backdrop against which this action and Aliera's Motion arises. Next, the Court assesses and denies Aliera's arguments for dismissal based on Plaintiffs' failure to mediate. Then, the Court addresses the "gateway question" of who decides whether Plaintiffs' disputes are arbitrable, the Court or the arbitrator. After finding that it is for the Court to decide the issue of arbitrability, the Court discusses whether the arbitration clauses included in the operative contracts are contracts for insurance and thus invalid pursuant to O.C.G.A. § 9-9-2(c)(3). This Georgia statute prohibits arbitration agreements in insurance contracts and is excepted from preemption by the FAA by virtue of the McCarran-Ferguson Act, a federal law which generally reserves for the states the power to regulate insurance.
The Court concludes that the contracts at issue are contracts of insurance as defined by O.C.G.A. § 33-1-2. As a result, O.C.G.A. § 9-9-2(c)(3) renders invalid any agreement to arbitrate and any delegation of the arbitrability question contained within the contracts. Accordingly, because the contracts do not fallwithin the ambit of the FAA under Section 2 of the Act, the Court is without authority to compel arbitration under Sections 3 and 4. As a result, and for the reasons detailed at considerable length below, the Court DENIES in full Aliera's Motion to Dismiss or Alternatively to Compel Arbitration [Doc. 12].
This case is factually and legally complex. In this section, the Court describes the alleged health insurance scheme and the individuals involved; details the Plaintiffs' relationships with Aliera and the related entities; identifies the relevant dispute resolution procedures included (or not) in Plaintiffs' membership agreements; outlines relevant developments around the country in connection with Aliera's business practices, upon which Plaintiffs rely; and highlights Plaintiffs' requested relief.
Defendant Aliera is a for-profit business, without religious affiliation, and was originally incorporated in 2015. (First Amended Complaint ("Compl."), Doc. 32 ¶ 32.) As alleged, Aliera was incorporated and is operated by the Moses family: Timothy Moses, his wife Shelly Steele, and their son Chase Moses. (Id. ¶ 44.) Of relevance to the facts below, before allegedly forming Aliera, Timothy Moses was convicted by a jury in federal court and served prison time for felony securities fraud and perjury in this district. (Id. ¶ 43) (citing United States v. Moses, Doc. 86,1:04-cr-508-CAP-JMF (N.D. Ga.); see also, Fulton Injunction, Doc. 26-2 ¶ 492.) At all times since Aliera's incorporation in 2015, Ms. Steele has served as CEO of Aliera and Chase Moses has served as its President (Compl. ¶ 32); however, Plaintiffs maintain that Timothy Moses exercises significant control over Aliera through his wife and son (id. ¶ 51).
Plaintiffs allege that at some point in 2016, Timothy Moses and Ms. Steele devised a plan to profit by attempting to exploit the fact that the Health Care Sharing Ministries ("HCSMs") are exempt from state and federal insurance laws and regulations, including the Patient Protection and Affordable Care Act ("ACA"). (Id. ¶ 53.) A bona fide HCSM allows people of similar religious faith to join together to share responsibility for one another's medical expenses; these plans provide some assurance that members' medical expenses will be paid for by individuals in the same faith community. (Id. ¶ 54.) Absent the statutory exemptions3 qualified HCSMs would constitute health "insurance" under federal and Georgia law. (Id. ¶ 55.) But because HCSMs are statutorily exempt, operators of these HCSMs are notsubject to federal and state insurance regulations, for example, regulations that limit the percentage of member premiums that can be diverted to purposes other than payment for medical costs and activities to improve health care quality. (Id. ¶¶ 2, 56, 75.)4 The Amended Complaint alleges that, in operating its illegal insurance scheme, Aliera retains around 84% of member contributions (i.e., premiums) as "fees" and diverts these fees to Aliera's owners while saddling Plaintiffs and those similarly situated with millions of dollars in covered but unpaid medical bills. (Id. ¶ 76.) As alleged, Aliera reaps massive profits at the expense of Plaintiffs and thousands of other members who paid fees (or premiums) to participate in Aliera's purported HCSM plan, charging members hundreds of dollars or more every month but refusing to ultimately pay for medical procedures and bills. (Id. ¶¶ 3, 78.)
Because there are state and federal legal limitations regarding what constitutes a valid HCSM, Aliera operated through two other companies, allegedly to lend their plans an appearance of legitimacy. (Id. ¶ 33.) Plaintiffs assert that Aliera marketed, issued, sold, and administered the plans and misrepresented the plans as HCSM plans by using these affiliated companies, even though theseaffiliated companies were operated and/or created by Aliera and did not (and do not) meet the qualifications to be valid HCSMs under federal or Georgia law. (Id.) As alleged, Aliera and the affiliated companies portrayed themselves and operated as a single enterprise, such that a reasonable consumer would not appreciate any meaningful difference between Aliera and these other companies; the "HCSM" plans offered are titled "AlieraCare" plans, as illustrated infra. (Id. ¶ 35.) Below, the Court details the involvement of these two affiliated companies, with a slight detour to start.
The Amended Complaint alleges that Aliera first attempted to break into the HCSM market in 2016 using an entity called Anabaptist Healthshare ("Anabaptist"), a small non-profit Mennonite entity located in Virginia. (Id. ¶ 58.) Plaintiffs contend that Timothy Moses and Aliera specifically sought to use Anabaptist as a part of their scheme because Anabaptist had in 2016 been recognized by the Department of Health and Human Services as a valid HCSM. (Id. ¶ 59.) In 2016, Timothy Moses approached the leaders of Anabaptist and convinced those leaders to partner with Aliera to market and sell HCSM plans. (Id. ¶ 60.) In late 2016, Anabaptist formed Unity Healthshare, LLC ("Unity") for the sole purpose of partnering with Aliera under a contract that allowed Aliera the exclusive license to market, sell, and administer Unity products. (Id. ¶ 61.) As alleged, Aliera fully controlled and operated Unity's HCSM plans in every respect. However, Aliera's relationship with Anabaptist fractured after Anabaptist discovered that Aliera was misappropriating member funds and also learned thatTimothy Moses was a convicted felon who was allegedly diverting funds to himself from the partnership operating account. (Id. ¶ 62.) In summer 2018, Anabaptist terminated its relationship with Aliera and litigation ensued in the Superior Court of Fulton County, Georgia. (Id. ¶ 63.) The Fulton County court ultimately entered an injunction against Aliera and appointed a receiver to protect Anabaptist and its members from misappropriation by Aliera. (Fulton Injunction, Doc. 26-2, at 28-31.) Of note, the superior court found that "[Anabaptist]/Unity delegated the administration of virtually all aspects of the Unity HCSM plans and plan assets to Aliera." (Fulton Injunction at 22.)5 The Fulton Injunction explains that after the fracturing of the relationship, Aliera retained possession of the Unity membership roster, all Unity HCSM plans, all HCSM plan assets, all Unity intellectual property, including the website, and Unity's employees. .) As a result of Aliera's retention of the Unity plans and website, Unity changed its name to Kingdom Healthshare in 2018. (Id. ¶ 90.) Subsequently, the Fulton County Superior Court enjoined Aliera from transitioning any Unity members to new Trinity plans, ordered Aliera to provide Anabaptist/Unity with contact and other information regarding Unity members, and appointed a receiver to oversee Unity plan assets and plan administration. (Id. at 28-30.)
Thus, with its relationship with Anabaptist and Unity terminating, Aliera brought about the creation of Trinity Healthshare, Inc. ("Trinity"), which Plaintiffs allege is a mere shell entity operated, administered, and directed by Aliera solely to serve Aliera's scheme. (Compl. ¶ 67.) Trinity was created in June 2018 and the sole employee and CEO is William Thead III, a former...
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