Tanadgusix Corp. v. ARM, Ltd.

• Decision Date: 19 December 2019
• Docket Number: No. 3:18-cv-0219-HRH,3:18-cv-0219-HRH
• Citation: 429 F.Supp.3d 677
• Parties: TANADGUSIX CORPORATION, et al., Plaintiff, v. ARM, LTD., an Illinois corporation, et al., Defendants.
• Court: U.S. District Court — District of Alaska

429 F.Supp.3d 677

TANADGUSIX CORPORATION, et al., Plaintiff,

v.ARM, LTD., an Illinois corporation, et al., Defendants.

No. 3:18-cv-0219-HRH

United States District Court, D. Alaska.

Signed December 19, 2019

Douglas F. Strandberg, Law Office of Douglas F. Strandberg, P.S., Friday Harbor, WA, Laura Dulic, Thomas V. Wang, Jr., Ashburn & Mason, P.C., Natalie A. Cale, Holmes Weddle & Barcott, PC, Anchorage, AK, for Plaintiff.

Steven Richard Rogovin, Pro Hac Vice, Meltzer, Purtill & Stelle LLC, Chicago, IL, Thomas A. Larkin, Stewart, Sokol & Larkin LLC, Portland, OR, Daniel T. Quinn, Richmond & Quinn, Brewster H. Jamieson, Lane Powell LLC, Anchorage, AK, Dennis G. Rolstad, Pro Hac Vice, Hinshaw & Culbertson LLP, San Francisco, CA, Ryan P. McBride, Pro Hac Vice, Seattle, WA, for Defendants.

ORDER

Motion to Dismiss; Motion for Partial Summary Judgment

H. Russel Holland, United States District Judge Defendant Unimerica Insurance Company moves to dismiss the claims plaintiffs have asserted against it.¹ This motion is opposed.² Also pending in this case is plaintiffs' motion for partial summary judgment.³ This motion is opposed.⁴ Oral argument has been heard on both motions.

Background ⁵

Plaintiffs are Tanadgusix Corporation ("TDX"), Ron Philemonoff, Jeanette Matthews, Robert Dean Hughes, Benjamin English, Larry Cooper, and John Lyons. The individual plaintiffs are trustees of the Tanadgusix Corporation Health and Welfare Trust. Defendants are ARM, Ltd., Hines & Associates, Inc., and Unimerica Insurance Company.

Plaintiffs allege that "TDX and the Trust have established an Employee Health Plan (‘the Plan’) for employees of TDX and its subsidiaries, and qualifying Directors of TDX."⁶ Plaintiffs allege that "on June 1, 2005, Bering Sea Eccotech, Inc., a wholly owned TDX subsidiary, as original Plan Sponsor, entered into an Administrative Services Agreement with ARM ... as Contract Administrator, to provide administrative services to the Plan, including, but not limited to the processing and payment of benefits in accordance with the Plan."⁷ Plaintiffs allege that "[s]ubsequently, TDX took over as Plan Sponsor, and at all times relevant was the Plan Sponsor."⁸

Plaintiffs allege that "in 2014, a dependent (‘Patient’) of an employee of TDX Power, a TDX subsidiary, was diagnosed with [the] rare disease of paroxysmal nocturnal hemoglobinuria

."⁹ Plaintiffs allege that it was determined "that it was medically necessary to treat the Patient with infusions of a drug named Soliris [,]" which was "reputed to be the most expensive drug in the world."¹⁰ The Patient was treated "at Scott & White Hospital in Waco, Texas (‘Hospital’), where the Patient's mother worked."¹¹

Plaintiffs allege that "[t]he Hospital is a Participating Provider in an Aetna network, whereby the Hospital, through an agreement with Aetna (‘Hospital Agreement’) allegedly provides discounted rates for services to patients if they are part of a health plan that can access these rates through the Aetna network."¹² Plaintiffs allege that "ARM ... had a contract with Aetna ... which allowed it to access this Aetna network for a fee, purportedly giving TDX Plan members, including the Patient, the opportunity to obtain discounted rates."¹³

Plaintiffs allege that "ARM initially hired or associated with Defendant Hines & Associates, Inc. (‘Hines’) to review the cost of Soliris and provide medical case management of the Patient on behalf of ARM and the Trust."¹⁴ Plaintiffs allege that "[t]he Hines case manager claims she contacted the Hospital and obtained a cost quote of $12,200 per 600mg infusion and $18,200 per 900 mg fusion...."¹⁵ Plaintiffs allege that "[t]he Hines employee failed to document this alleged oral quote, but passed the alleged quote information on to ARM."¹⁶

Plaintiffs allege, however, that in 2014, the Hospital billed $35,956 for an infusion and then $51,934, "for which the Hospital expected payment of $21,573.60 and $32,360.40 respectively (60% of amount billed)[.]"¹⁷ Plaintiffs allege that rather than paying what the Hospital was billing, "ARM continued to reprice each Hospital claim and had the Trust pay a much-reduced amount solely based on an alleged single oral quote from the Hospital to ARM via Hines, which quote the Hospital denies even providing."¹⁸

Plaintiffs allege that "[i]n February of 2017, three of the Trustees of the Trust, TDX Power, Inc., ... along with ARM and the ARM network provider ... were sued by the Hospital" in Texas.¹⁹ Plaintiffs allege that the Hospital was seeking "$1,765,482.12 for underpayment of forty-six claims[.]"²⁰

Plaintiffs allege that the Trust first obtained stop-loss insurance from Unimerica in 2016 and that the Trust had a stop-loss insurance policy with Unimerica through the end of December 2018.²¹ Although Unimerica was not the Trust's stop-loss insurer in 2015, the Unimerica Policy provides "that the Benefit Period was ‘Covered Expenses Incurred from January 1, 2015 through December 31, 2018...."²² Thus, plaintiffs allege that "Unimerica agreed to pay claims from 2015 that were submitted to it during the extended Benefit Period for which TDX paid an increased premium to Unimerica."²³ Plaintiffs allege that the Policy set a specific deductible for the Patient of $450,000.²⁴

Plaintiffs allege that "[d]uring both 2016 and 2017 the Patient's medical treatment at the Hospital exceeded the Patient's $450,000 deductible under the Unimerica Policy and ARM submitted the excess Hospital claims to Unimerica, which paid the excess pursuant to its Policy with TDX."²⁵

Plaintiffs allege that in November 2017, ARM was terminated as the plan administrator and the Trust "retained Professional Benefit Services, Inc. (‘PBS’) to [a]dminister claims under the TDX Plan."²⁶ Plaintiffs allege that starting in November 2017 "and continuing into 2018, PBS utilized a preferred health care provider network that had a contract with the Hospital, and pursuant to the agreements, the Hospital was paid at the 60% of the Hospital contract rate for Patient treatment in late 2017 and 2018."²⁷ Plaintiffs allege that "[a]s a result, the Hospital ha[d] no underpayment claims for 2018, but the Patient exceeded her $450,000 deductible ... and the excess claim was submitted to Unimerica for payment, which payment Unimerica processed without complaint or modification at the time."²⁸

Plaintiffs allege that "[o]n August 6, 2018, the Trustees provided Unimerica with a Scott & White summary sheet of underpayment claims by year."²⁹ Plaintiffs allege that according to the summary sheet, "Unimerica would owe at least $1,628,835.92 toward the unpaid Hospital claims."³⁰ Specifically, this summary sheet showed that the Hospital claimed the underpayment for 2015 was $503,489.11; $548,818.61 for 2016; and $576,528.20" for 2017.³¹ Plaintiffs allege that "[b]ecause TDX and the Trust believed that Unimerica owed any underpayments to the Hospital, TDX and the Trust requested that Unimerica attend a mediation of all Parties in the Hospital Litigation...."³²

Plaintiffs allege that "[o]n August 31, 2018 the United States Magistrate Judge in the Hospital Litigation issued a Report and Recommendation to the United States District Judge in which he found, in part, that ARM ... had breached" its agreements with plaintiffs "by processing and repricing the Hospital claims at less than the contractually agreed upon rate of 60% of the billed charge."³³

Plaintiffs allege that "[t]he mediation of the Hospital Lawsuit took place ... on September 19, 2018 without the participation of Unimerica or the Aetna entities."³⁴ Plaintiffs allege that "[a]t the mediation TDX and the Trust, along with ARM, reached a tentative settlement with the Hospital entirely contingent on Unimerica participating in a final settlement to pay at least $1,500,000 for the underpaid Hospital claims."³⁵ Plaintiffs allege that "TDX and the Trust agreed to have the Hospital claims re-adjudicated in accordance with the Magistrate's decision and in accordance with the TDX Plan Document and Unimerica Policy."³⁶

Plaintiffs allege that "[i]n addition to the Hospital claims, in 2018 the Patient underwent surgery at Texas Children's Hospital, and Texas Children's Hospital has submitted claims to be paid under the TDX Plan in an amount in excess of $2,000,000.00."³⁷

Plaintiffs allege that on November 12, 2018, the "repriced" Hospital claims for the Patient's treatment in 2015, 2016, and 2017 were submitted to Unimerica.³⁸ In addition, "the Hospital claims for 2018 and all of the Children's Hospital claims" were submitted to Unimerica "because the Patient had already exceeded the Patient's Specific Deductible of $450,000 for 2018."³⁹

Plaintiffs allege that Unimerica responded to these claims on January 4, 2019.⁴⁰ Plaintiffs allege that in the January 4, 2019 letter, "Unimerica ... purported to exercise its rights under the Policy provision Paragraph titled ‘Misstated Data, Concealment, Fraud’ to unilaterally, without any prior notice to TDX and the Trust, retroactively change the terms and conditions of the Policy."⁴¹ In the January 4, 2019 letter, Unimerica stated that in October 2015, ARM had provided it with "claim data [that] showed that [the Patient] was receiving Soliris

once every two weeks at a cost of $24,400 per treatment."⁴² Unimerica stated that "[r]elying on this data, [it] estimated that, as of August 31, 2015, the total year-to-date spend for [the Patient's] Soliris treatment was $564,000, totaling approximately $745,000 per year."⁴³ Unimerica further stated that its "underwriting team used and relied on the ARM reports[ ] to determine whether to quote, issue a policy and to establish appropriate terms and conditions, in accordance with industry standards."⁴⁴ Based on the alleged misrepresentation about the cost of Soliris treatment, Unimerica changed the deductible for the Patient for the years 2016-2018 to $1,050,000 and excluded any claims incurred in 2015.⁴⁵

Plaintiffs allege that on January 28, 2019,...