Lee v. Life Ins. Co. of North America

• Decision Date: 05 August 1993
• Docket Number: Civ. A. No. 92-0058 P.
• Citation: 829 F. Supp. 529
• Parties: Tony LEE, Ramachandran Palissery, and Ralph Talarico, for themselves and all those similarly situated, Plaintiffs, v. The LIFE INSURANCE COMPANY OF NORTH AMERICA, the University of Rhode Island, Mr. Edward Eddy, Mr. Robert Carothers, Mr. Blaise Morrissey, the State of Rhode Island and Providence Plantations Board of Governors for Higher Education, and One or More John Does, individually, jointly and severally in both their corporate capacities, and in their personal and official capacities, Defendants.
• Court: U.S. District Court — District of Rhode Island

829 F. Supp. 529

Tony LEE, Ramachandran Palissery, and Ralph Talarico, for themselves and all those similarly situated, Plaintiffs, v. The LIFE INSURANCE COMPANY OF NORTH AMERICA, the University of Rhode Island, Mr. Edward Eddy, Mr. Robert Carothers, Mr. Blaise Morrissey, the State of Rhode Island and Providence Plantations Board of Governors for Higher Education, and One or More John Does, individually, jointly and severally in both their corporate capacities, and in their personal and official capacities, Defendants.

Civ. A. No. 92-0058 P.

United States District Court, D. Rhode Island.

August 5, 1993.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Keven A. McKenna, Pawtucket, RI, Sinclair T. Banks, W. Kingston, RI, for plaintiffs.

Michele A. Theroux, Charles J. McGovern, William P. Devereaux, McGovern, Noel & Benik, Providence, RI, for defendant Life Ins. Co. of North America.

Jay S. Goodman, Mandell, Goodman, DeLuca & Schwartz, Providence, RI, for defendants URI, Eddy, Carothers, Morrissey & Bd. of Governors.

MEMORANDUM AND ORDER

PETTINE, Senior District Judge.

This is a class action lawsuit on behalf of current and former students at the University of Rhode Island ("URI" or "the university").¹ Plaintiffs allege a multitude of federal and state claims attacking the university's mandatory health clinic fee and health insurance requirement. Jurisdiction is premised on 28 U.S.C. § 1331 (federal question); 28 U.S.C. § 1337(a) (antitrust); 28 U.S.C. § 1343(a) (civil rights); and 28 U.S.C. § 1367(a) (supplemental).

Defendants have moved to dismiss this suit under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. For the reasons stated below, I grant defendants' motion with respect to all federal claims. In addition, I decline to exercise supplemental jurisdiction over the pendant state claims, and dismiss those claims without prejudice.

I. Standard of Review

It is not proper to dismiss a complaint under Fed.R.Civ.P. 12(b)(6) unless "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)). In making this determination, a court should accept the well-pleaded complaint as true and indulge every reasonable inference in favor of the plaintiff. Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st Cir.1990). This standard of review "does not mean, however, that a court must (or should) accept every allegation made by the complainant, no matter how conclusory or generalized." U.S. v. Avx Corp., 962 F.2d 108, 115 (1st Cir.1992).

II. Background

URI operates a University Health Services ("UHS" or "health clinic") on its Kingston, Rhode Island campus. UHS offers ambulatory services and health education to URI undergraduate and graduate students by walk-in or by appointment. It is open 24 hours per day, seven days per week during the academic year.

URI imposes a mandatory health clinic fee for full-time undergraduate and graduate students. Full-time graduate students may only waive the health clinic fee if they are a member of a health maintenance organization, or a member or dependent of the military. Undergraduate students may only waive the fee if they enroll in fewer than 12 hours per semester. In 1991-92, the health clinic fee was $124.00 per semester.

URI also requires full-time students to carry health insurance to supplement the medical coverage provided through UHS. Students may satisfy this requirement in two ways. They may (1) purchase a private health insurance policy offered through URI or (2) demonstrate that they have "comparable coverage" through some other health insurance plan. In 1990-91 and 1991-92, the URI-sponsored policy was available through defendant The Life Insurance Company of North America ("LINA"). The cost of the LINA policy (12 month coverage) was $282.00 for 1990-91 and $330.00 for 1991-92.

The LINA plan was designed to "dovetail" with medical services provided at UHS. Thus, a student enrolled in the LINA plan would only pay for coverage of health services not provided through the student's mandatory health clinic fee. Additionally, under the LINA plan, insurance coverage was only available if students first sought medical assistance from UHS. If necessary, a student was then referred to an outside health care provider by UHS. If UHS was closed (e.g., during official university holidays and the summer), students were required to notify UHS of any medical actions taken.

Students opting for "comparable" plans in 1990-91 and 1991-92 were required to submit a waiver card to the university by a date certain. Failure to submit the waiver card resulted in automatic enrollment in, and billing for, the LINA plan. If the LINA bill was not paid, URI prohibited future registration of that student. URI warned its students in writing that comparable coverage plans must pay for laboratory tests, x-rays, orthopedic supplies and selected gynecological procedures performed at UHS. URI also cautioned its students that Rhode Island Blue Cross and health maintenance organizations in Rhode Island were not deemed "comparable" plans.

In 1990-91 and 1991-92, approximately 40% of the more than 10,000 URI students acquired health insurance through LINA. The remaining 60% obtained coverage from other carriers. While the university claims that it makes no profit on the insurance requirement, it does collect a $10.00 administrative fee for processing each student. In addition, UHS is supported, in part, by the laboratory, x-ray, orthopedics and gynecological fees that are paid by student insurance carriers.

On January 31, 1992, plaintiffs filed the present action. Unfortunately, there is no simple way to summarize plaintiffs' legal theories. They have adopted an everything-but-the-kitchen-sink approach to this case. Plaintiffs' amended complaint is a 45 page single-spaced document crammed full of federal and state claims. On the federal side, there are numerous antitrust allegations, as well as claims under the Equal Protection and Due Process clauses of the Fourteenth Amendment to the United States Constitution. On the state side, plaintiffs' claims include Money Had and Received, Breach of Contract, Duress, Undue Influence, Negligent Misrepresentation, Innocent Misrepresentation, Breach of Insurer's Duty to Deal Fairly and in Good Faith, Negligence, Breach of Implied Contract, Breach of Fiduciary Duty and Ultra Vires. Plaintiffs also assert equal protection and due process claims under the Rhode Island Constitution, and claims under Rhode Island antitrust statutes.² At its core, this suit seeks to recoup health clinic fees and LINA insurance premiums paid by plaintiff URI students, plus treble damages for antitrust violations.

III. Discussion

A. Federal Antitrust Claims

I begin my scrutiny of the amended complaint with the federal antitrust allegations (Counts VII, XVI). Plaintiffs advance three sets of antitrust claims: (1) conspiracy claims under § 1 of the Sherman Act; (2) per se tying claims under § 1 of the Sherman Act; and (3) conspiracy to monopolize claims under § 2 of the Sherman Act. Defendants' primary argument in support of their motion to dismiss is that plaintiffs have failed to adequately allege the essential elements of any antitrust violations.³

1. Conspiracy Claims Under § 1 of the Sherman Act

Section 1 of the Sherman Act states that "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1. Despite this sweeping language, the U.S. Supreme Court has long recognized that the Act prohibits only unreasonable restraints of trade. Business Electronics Corp. v. Sharp Electronics Corp., 485 U.S. 717, 723, 108 S.Ct. 1515, 1518, 99 L.Ed.2d 808 (1988).

To determine unreasonable restraint of trade, courts generally evaluate the alleged anticompetitive actions "through case-by-case application of the so-called rule of reason test — that is, `the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.'" Id. (quoting Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977)). In the First Circuit's words, "the `rule of reason' limits the Act's literal words by forbidding only those arrangements the anticompetitive consequences of which outweigh their legitimate business justifications ..." Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 486 (1st Cir.1988), cert. denied, 488 U.S. 1007, 109 S.Ct. 789, 102 L.Ed.2d 780 (1989). In this special context, the term "`anticompetitive' ... refers not to actions that merely injure individual competitors, but rather to actions that harm the competitive process. And, the law assesses both harms and benefits in light of the Act's basic objectives, the protection of a competitive process that brings to consumers the benefits of lower prices, better products, and more efficient production methods." Id. (citations omitted).

In limited circumstances, courts will apply a per se standard to antitrust allegations under § 1. The per se approach is appropriate where the challenged conduct is "manifestly anticompetitive" and thus no in-depth analysis of the market effect is necessary. Business Electronics, 485 U.S. at 723-24, 108 S.Ct. at 1519. Examples of per se violations include price-fixing schemes and concerted refusals to deal. Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 9 and n. 10, 104 S.Ct. 1551, 1156 and n. 10, 80 L.Ed.2d 2 (1984); U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 593 (1st Cir.1993).

Thus, to state a valid claim under § 1 of the...