Solomon v. Blue Cross and Blue Shield Ass'n
| Decision Date | 23 May 2008 |
| Docket Number | Case No. 03-22935-CIV. |
| Citation | 574 F.Supp.2d 1288 |
| Parties | Dr. Jeffrey SOLOMON, et al., Plaintiffs, v. BLUE CROSS AND BLUE SHIELD ASSOCIATION, et al., Defendants. |
| Court | U.S. District Court — Southern District of Florida |
Harley Shepard Tropin, Kozyak Tropin & Throckmorton, Coral Gables, FL, for Plaintiff.
Craig A. Hoover, Washington, DC, for Defendant.
ORDER DISMISSING THIRD AMENDED COMPLAINT WITH PREJUDICE
THIS CAUSE came before the Court upon the Joint Motion to Dismiss the Third Amended Complaint (D.E. No. 614) filed on June 21, 2008. The Court has considered the motion, the response, the reply and the pertinent portions of the record, and being otherwise fully advised in the premises, it is ADJUDGED that the motion is GRANTED. Plaintiffs have not alleged either conspiracy or fraud with adequate specificity.
The Plaintiffs are practitioners in several unrelated fields not requiring an MD degree. Jeffrey Solomon is a chiropractor. Scott Ashton is a podiatrist. Kathy Tisko is a physical therapist. Therapycare, Inc. is a corporation that employs podiatrists. Allen Knecht is a chiropractor. Several associations of chiropractors, podiatrists, and psychologists are also Plaintiffs. This lawsuit is a class action. Plaintiffs (except for the associations1) seek to represent all healthcare providers as defined in paragraph ¶ 155 of the Third Amended Complaint that submitted claims to the defendant insurance companies after November 4, 1999.
The Defendants include twenty Blue Cross Blue Shield Plans or their parent corporations ("BCBS Plans"), the Blue Cross and Blue Shield Association ("BCBSA"), and the National Account Service Company, LLC ("NASCO"). The BCBS Plans are independently owned companies that license the Blue Cross and Blue Shield service marks. Each of the BCBS Plans operates in a limited service area defined by the terms of that BCBS Plan's license agreement. The Third Amended Complaint does not name as Defendants 47 other BCBS Plans that the Complaint alleges participated in a conspiracy.
The BCBS Plans use two software programs to process those insurance claims that require the cooperation of two or more BCBS Plans. The first is BlueCard. BlueCard enables a subscriber of one BCBS Plan to seek treatment from a provider in the service area of another BCBS Plan. All BCBS Plans participate in Blue-Card. The BCBSA administers BlueCard. The second software program is NASCO. The BCBS Plans use the NASCO software to process claims for some national insurance accounts. BCBSA and three of the BCBS Plans own NASCO, which in turn owns the software.
The Complaint alleges that the Defendants conspired to violate RICO. The Plaintiffs allege that the Defendants acted as an enterprise to commit the RICO predicate acts of mail fraud (in violation of 18 U.S.C. § 1341) and wire fraud (in violation of 18 U.S.C. § 1343). The Plaintiffs also allege that each of the Defendants "sought to and did aid and abet the others" in committing mail fraud and wire fraud. See Third Amended Complaint ¶ 134. Plaintiffs claim that the BCBS Plans sent by wire and mail "agreements, manuals, correspondences, patient lists, payments, EOBs, reports, data summaries, statements and Plan materials" to the Plaintiffs that contained representations that the "Defendants and other BCBS Entities would pay Plaintiffs and Class Members for the covered, medically necessary services they provided to BCBS Subscribers." See Third Amended Complaint ¶¶ 135, 136 and 137(a). Other parts of the Complaint allege that Defendants promised to pay Plaintiffs "fully and fairly" for all insurance claims. See Third Amended Complaint ¶¶ 78, 79 and 106. Plaintiffs allege that the Defendants conspired to utilize the Blue Card and NASCO software systems to systemically "reduce, delay and deny" payments in violation of the representations made to Defendants. See Third Amended Complaint ¶ 131(a). Plaintiffs allege that Defendants knew the representations made to the Plaintiffs were false and "made for the purpose of deceiving Plaintiffs and the Class obtaining their property for the Defendants' and BCBS' Entities gain." See Third Amended Complaint ¶ 139.
The Third Amended Complaint contains three counts. The first is violation of RICO 18 U.S.C. § 1962(d) by conspiring to violate 18 U.S.C. 1962(c). This count requires allegations (and later proof) that Defendants conspired to commit certain predicate crimes. See Third Amended Complaint ¶¶ 168-172. The second is violation of 18 U.S.C. § 2 by seeking to violate and aiding and abetting in the violation of 18 U.S.C. § 1962(c). This count alleges that the Defendants aided and abetted each other in committing the predicate RICO crimes of mail fraud and wire fraud. See Third Amended Complaint ¶¶ 173-178. The third is for declaratory and injunctive relief under 18 U.S.C. § 1964(a). This count asks the Court to enjoin the Defendants from violating RICO in the future. See Third Amended Complaint ¶¶ 179-182.
Defendants filed a Joint Motion to Dismiss the Third Amended Complaint (D.E. No. 614) on June 21, 2007. The Joint Motion to Dismiss argues inter alia that Plaintiff's allegations of conspiracy and of the predicate RICO crimes of mail and wire fraud lack adequate specificity. This Order addresses those arguments below. Certain Defendants filed other Motions to Dismiss (D.E. Nos. 612, 613 and 615) on June 21, 2008 with arguments that relate only to those certain Defendants. This Order does not address the arguments made in those motions because this Court holds that the arguments made in the Joint Motion to Dismiss dispose of this lawsuit. The Motions to Dismiss at docket entries 612, 614 and 615 are therefore DENIED without prejudice to refile.
The parties dispute the standard for the motion to dismiss. The parties disagree about whether the recent Supreme Court decision Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) applies to this case. The Twombly decision affirmed the dismissal of an antitrust lawsuit. Conspiracy is one of the elements of the Sherman Act antitrust claim at issue in Twombly. The plaintiffs in Twombly failed to allege facts that implied the existence of a conspiracy.
The Supreme Court in Twombly explicitly retired the pleading standard set in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), substituting a flexible "plausibility" standard under which a complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007). The Conley decision held that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. at 1968. Instead, Twombly now requires that a complaint must allege a claim that is "plausible on its face." Id. at 1974. A complaint alleging conspiracy, therefore, must allege facts that infer conspiracy instead of mere "parallel conduct and a bare assertion of conspiracy." Id. at 1966.
Plaintiffs argue that Twombly does not apply to this case because Twombly only applies to antitrust cases. The Eleventh Circuit has not addressed this issue. The Second Circuit rejected this argument in Iqbal v. Hasty, 490 F.3d 143, 155-56 (2nd Cir.2007). This Court agrees with the Iqbal decision. The Twombly decision does not limit its holding to antitrust cases. The Conley v. Gibson case, which Twombly explicitly retires, was not an antitrust case. Both Twombly and this case address the sufficiency of factual pleadings for pleading a conspiracy. That Twombly involved an antitrust case and this case involves a RICO conspiracy is of no moment. The Twombly decision therefore sets the pleadings standards for this case.
Plaintiffs' allegations of conspiracy and fraud lack the required specificity. The failure to adequately plead conspiracy warrants the dismissal of Count One, the claim for conspiracy to commit a RICO violation. The failure to plead fraud with the required specificity warrants dismissal of all three counts because all three counts depend on adequate allegations of mail fraud and wire fraud. The failure to plead conspiracy and fraud with specificity is addressed in turn, below.
The essence of a RICO conspiracy claim is that each defendant has agreed to participate in the conduct of an enterprise's illegal activities. 18 U.S.C. § 1962(d). This Court has held before that "proof of the agreement is at the heart of a conspiracy claim." In re Managed Care Litig., 430 F.Supp.2d 1336, 1345 (S.D.Fla.2006). A complaint for RICO conspiracy must therefore "[d]escribe the alleged agreement to perform at least two of the predicate acts." O'Rear v. Am. Family Life Assur. Co., 139 F.R.D. 418, 422 (M.D.Fla.1991). This Court's Local Rules reiterate the requirement that the Plaintiff "describe in detail the conspiracy, including the identity of the co-conspirators, the object of the conspiracy, and the date and substance of the conspiratorial agreement" in the Plaintiffs RICO Case Statement. The Eleventh Circuit has affirmed the dismissal of RICO claims where the allegations of conspiracy were "merely conclusory and unsupported by any factual allegations." Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 950 (11th Cir.1997).
The Twombly decision, discussed above, adds new bite to the RICO requirement that the Plaintiffs describe the agreement to conspire in the complaint. The Plaintiffs in Twombly alleged a conspiracy among certain regional telecommunications providers. The complaint in Twombly relied on allegations of the defendants' parallel behavior to infer conspiracy. The Supreme Court upheld the dismissal of...
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...that each defendant has agreed to participate in the conduct of an enterprise's illegal activities." Solomon v. Blue Cross & Blue Shield Ass'n , 574 F. Supp. 2d 1288, 1291 (S.D. Fla. 2008) (citing 18 U.S.C. § 1962(d) ) (emphasis in original). This Court has previously held that "proof of th......
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