Leslie v. Quest Diagnostics, Inc.

• Decision Date: 29 March 2018
• Docket Number: Civil Action No. 17-1590 (ES) (MAH)
• Parties: MARVIN D. LESLIE, et al., Plaintiffs, v. QUEST DIAGNOSTICS, INC., Defendant.
• Court: U.S. District Court — District of New Jersey

MARVIN D. LESLIE, et al., Plaintiffs, v. QUEST DIAGNOSTICS, INC., Defendant.

Civil Action No. 17-1590 (ES) (MAH)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

March 29, 2018

Not for Publication

OPINION

SALAS, DISTRICT JUDGE

Pending before the Court is Defendant Quest Diagnostics, Inc.'s ("Quest") motion to dismiss Plaintiffs' Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (D.E. No. 11). The Court has considered the parties' submissions¹ and decides the matter without oral argument under Federal Rule of Civil Procedure 78(b). For the following reasons, the Court GRANTS Quest's motion and DISMISSES Plaintiffs' Complaint without prejudice.

I. Background

Quest is the largest provider of diagnostic and clinical testing in the United States. (D.E. No. 1, Compl. ¶ 34). Plaintiffs are nine individuals who received testing services from Quest. (Id. ¶¶ 25-33). At all relevant times, eight of the Plaintiffs maintained healthcare insurance and one Plaintiff did not. (Id.). For the Plaintiffs who maintained healthcare insurance, each of their insurers declined to cover some or all of Quest's procedures. (Id. ¶¶ 5-10, 11-13). Plaintiffs bring this putative class action to challenge Quest's pricing and billing practices for non-covered procedures. (See generally id.).

In particular, Plaintiffs allege that Quest charges individuals without healthcare insurance (or whose healthcare insurer declines coverage) far more than it charges private and public healthcare insurers, like Aetna or Medicare. (See, e.g., id. ¶¶ 1, 4-14, 19, 44, 118). Plaintiffs contend that Quest should charge these consumers the same amount it charges insurers—what Plaintiffs call the "fair market value rate." (See id. ¶¶ 4, 19). Instead, Quest charges these consumers "rack rates",² which are "frequently more than ten times greater" than the rates Quest charges private and public insurers. (Id. ¶¶ 4, 41). For example, Quest charged Plaintiff Marvin D. Leslie $328.85 for a particular genetic test, but would have charged Aetna (if Aetna did not decline to cover the test) only $59.55. (Id. ¶ 5).

Plaintiffs also allege that Quest's invoices for these procedures are intentionally misleading because they "contain only (i) the aggregate charges for multiple lab tests, (ii) the aggregate third-party payments or discounts for multiple lab tests, and (iii) the aggregate copays or deductibles or other payments billed directly to patients." (Id. ¶ 15). As a result, "[p]atients are not informed by Quest what, if any, insurance discounts or insurance payments are being applied to each lab test, and what amounts patients are being required to pay as a copay or deductible for each lab test." (Id. ¶ 16) (emphasis added).

Plaintiffs further allege that Quest fails to inform patients (i) "whether certain tests were disallowed by their insurer," or (ii) "that patients are being required by Quest to pay Quest's non-market based excessive 'rack rates' for those tests, rather than negotiated fair market value rates for those disallowed tests." (Id. ¶ 17). Finally, Plaintiffs allege that Quest "fails to disclose to patients the fair market value rates for those excluded tests negotiated at arm's-length with Benefit Plans." (Id.).

Plaintiffs bring this putative class action "on behalf of [a] national Class defined . . . as all persons who were charged fees for services by Quest that were in excess of the negotiated or mandated fair market value rates established for those services between Quest and private or public insurers." (Id. ¶ 118). Plaintiffs add that "[i]n the event there is no fair market value rate established for a particular Quest service by Class members' private or public insurers, Plaintiffs seek a declaration as to a reasonably comparable fair market value rate." (Id.). Plaintiffs define "fair market value" as "the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonably knowledge of the relevant facts." (Id.) (citing I.R.S. Publication 561).

Plaintiffs assert violations of the consumer protection laws of their respective home states: the New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-1, et seq.; the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. Ann. § 501.201, et seq.; the Colorado Consumer Protection Act, Colo. Rev. Stat. § 6-1-101, et seq.; the Pennsylvania Unfair Trade Practices and Consumer Protection Law, Pa. Stat. Ann. Tit. 73, § 201-1, et seq.; the Arizona Consumer Fraud Statute, A.R.S. § 44-1521, et seq.; the Michigan Consumer Protection Act, Mich. Comp. Laws Ann. § 445.901, et seq.; the Maryland Consumer Protection Act, Md. Code Ann., Com. Law § 13-101, et seq.; the Nevada Deceptive Trade Practices Act, Nev. Rev. Stat. § 598.0903, et seq.; the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750, et seq.; and the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq. (Id. ¶¶ 135-209). Plaintiffs also assert common law claims for breach of contract, unjust enrichment, and fraud. (See id. ¶¶ 210-33).³

II. Legal Standard

To withstand a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (citation omitted).

"When reviewing a motion to dismiss, all allegations in the complaint must be accepted as true, and the plaintiff must be given the benefit of every favorable inference to be drawn therefrom." Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (citation and internal quotation marks omitted). But the court need not accept "legal conclusions" as true. See Iqbal, 556 U.S. at 678. And "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. "In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010).

Finally, Federal Rule of Civil Procedure 9(b) imposes a heightened pleading requirement for allegations of fraud or mistake. See Giercyk v. Nat'l Union Fire Ins. Co. of Pittsburgh, No. 13-6272, 2015 WL 7871165, at *2-3 (D.N.J. Dec. 4, 2015). "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). A plaintiff may satisfy Rule 9(b) by pleading the "date, place or time of the fraud, or through alternative means of injecting precision and some measure of substantiation into their allegationsof fraud." Lum v. Bank of Am., 361 F.3d 217, 224 (3d Cir. 2004) (citation omitted); see also United States v. Eastwick Coll., 657 F. App'x 89, 93 (3d Cir. 2016) ("In order to satisfy Rule 9(b), a complaint must provide all of the essential factual background that would accompany the first paragraph of any newspaper story—that is, the who, what, when, where and how of the events at issue.") (citations and internal quotation marks omitted).

III. Analysis

A. Consumer-Fraud Statutes

In Counts 1 through 10, Plaintiffs assert claims under ten different consumer-fraud statutes. (See Compl. ¶¶ 135-41 (Count 1: New Jersey), ¶¶ 142-48 (Count 2: Florida), ¶¶ 149-55 (Count 3: Colorado), ¶¶ 156-63 (Count 4: Pennsylvania), ¶¶ 164-72 (Count 5: Arizona), ¶¶ 173-80 (Count 6: Michigan), ¶¶ 181-87 (Count 7: Maryland), ¶¶ 188-93 (Count 8: Nevada), and ¶¶ 194-209 (Counts 9 & 10: California)).⁴

To state a cause of action under these consumer-fraud statutes, a plaintiff must show at least (i) a deceptive or unfair business practice (ii) that caused (iii) actual loss or damage to the consumer. See, e.g., Ciser v. Nestle Waters N. Am. Ins. Inc., 596 F. App'x 157, 160 (3d Cir. 2015) (citation omitted).⁵ Quest argues that these claims must be dismissed because (i) "differential or'high' pricing does not constitute an unfair or deceptive trade practice"; and (ii) "Plaintiffs have failed to plead their concealment claims with the particularity required by Rule 9(b)." (Def. Mov. Br. at 6-7).

1. Differential or High Pricing

The Court agrees with Quest that allegations of differential pricing, by themselves, do not constitute unfair or deceptive trade practices. See Bouffard v. Lab. Corp. of Am. Holdings, Civ. No. 17-0193, D.E. No. 32 at 12 (M.D.N.C. Mar. 28, 2018) ("[T]here is simply no support for the proposition that a failure to charge a rate at or below that charged each Plaintiff's insurer . . . is unfair or deceptive."); Banner Health v. Med. Sav. Ins. Co., 163 P.3d 1096, 1102 (Ariz. Ct. App. 2007) ("[T]he fact that hospitals routinely accept reduced payments on behalf of many patients [does not] mean that the published and billed rates are unreasonable."); Hillsborough Cty. Hosp. Auth. v. Fernandez, 664 So. 2d 1071, 1072 (Fla. Dist. Ct. App. 1995) (holding that "evidence of [] contractual discounts, standing alone, is insufficient to prove that [the hospital's] charges were unreasonable"); see also Huntington Hosp. v. Abrandt, 779 N.Y.S.2d 891, 892 (N.Y. App. Div. 2004) ("The fact that lesser amounts for the same services may be accepted from commercial insurers or government programs as payment in full does not indicate that the amounts charged to defendant were not reasonable.") (citation omitted).

This makes sense because, as Quest persuasively argues, insurers and uninsured (or underinsured) patients are not similarly situated. (Def. Mov. Br....