Total Benefits Planning v. Anthem Blue Cross

• Decision Date: 22 December 2008
• Docket Number: No. 07-4115.,07-4115.
• Citation: 552 F.3d 430
• Parties: TOTAL BENEFITS PLANNING AGENCY, INC., et al., Plaintiffs-Appellants, v. ANTHEM BLUE CROSS AND BLUE SHIELD, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

552 F.3d 430

TOTAL BENEFITS PLANNING AGENCY, INC., et al., Plaintiffs-Appellants, v. ANTHEM BLUE CROSS AND BLUE SHIELD, et al., Defendants-Appellees.

No. 07-4115.

United States Court of Appeals, Sixth Circuit.

Argued: July 30, 2008.

Decided and Filed: December 22, 2008.

ARGUED:

Richard B. Reiling, Law Office, Dayton, Ohio, for Appellants. James M. Burns, Williams Mullen, Washington, D.C., Mark Edward Elsener, Porter, Wright, Morris & Arthur, Cincinnati, Ohio, for Appellees.

ON BRIEF:

Richard B. Reiling, Law Office, Dayton, Ohio, for Appellants. James M. Burns, Williams Mullen, Washington, D.C., Mark Edward Elsener, Porter, Wright, Morris & Arthur, Cincinnati, Ohio, Kent A. Britt, Glenn V. Whitaker, Vorys, Sater, Seymour & Pease, Cincinnati, Ohio, B. Scott Jones, Reminger Co. LPA, Cincinnati, Ohio, Thomas J. Gruber, McCaslin, Imbus & McCaslin, Cincinnati, Ohio, Peter L. Cassady, Sarah Clay Leyshock, Brian R. Redden, Beckman Weil Shepardson, Cincinnati, Ohio, John R. Folkerth, Jr., Weprin, Folkerth & Routh, Dayton, Ohio, Christopher Freeman Johnson, Freund, Freeze & Arnold, Dayton, Ohio, Maria Del Monaco, Ulmer & Berne, Cleveland, Ohio, John M. Hands, Ulmer & Berne, Cincinnati, Ohio, Edward R. Goldman, Rendigs, Fry, Kiely & Dennis, Cincinnati, Ohio, for Appellees.

Before: GILMAN and ROGERS, Circuit Judges; ZOUHARY, District Judge.^*

OPINION

JACK ZOUHARY, District Judge.

Total Benefits Planning Agency and four of its insurance agents (collectively "Total Benefits") appeal a dismissal of their amended complaint for failure to state a claim under 12(b)(6) of the Federal Rules of Civil Procedure. Total Benefits maintained contracts with Anthem Blue Cross and Blue Shield; Anthem Life Insurance Company, Inc.; Anthem Health Plans of Kentucky, Inc.; Anthem Insurance Company, Inc. (collectively "Anthem"); and Cornerstone Broker Insurance Services Agency ("Cornerstone") for the sale of group life and health insurance policies in Ohio, Indiana, and Kentucky. Total Benefits allege Anthem conspired to boycott and blacklist Total Benefits in violation of Section 1 of the Sherman Act. In addition to appealing the dismissal, Total Benefits also appeal the district court's failure to sua sponte permit them to file a second amended complaint before dismissing their case.

The district court, after originally denying the motion to dismiss, dismissed the amended complaint after finding Plaintiffs failed to allege a violation of Section 1 of the Sherman Act under either the per se analysis or the rule-of-reason test. The court was persuaded in part by two Supreme Court decisions handed down after the district court's original ruling: Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. ___, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007); and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).

For the reasons that follow, we AFFIRM the dismissal.

FACTUAL BACKGROUND

Total Benefits developed "an innovative strategy for controlling health care costs ... utiliz[ing] a 51-year old federal tax law to `refinance' health-care costs by raising deductibles on existing group insurance policies and administering benefits through a medical expense reimbursement plan" (Am.Comp. ¶ 22). Total Benefits claim the system is able to "save businesses in Ohio, Indiana, and Kentucky, 20% or more on their health insurance costs, without cutting benefits" (Am.Comp. ¶ 23). In September 2004, Anthem advised Total Benefits that the strategy "was not in the best interest of Anthem or the more traditional insurance agencies," and that Anthem would not permit Total Benefits, or any other Anthem agent, to engage in such practices and remain agents of Anthem. In June 2005, Anthem severed its agency relationship with Total Benefits because they continued to promote the strategy (Am.Comp. ¶ 24).

Total Benefits allege Anthem and its various agents¹ conspired to blacklist and organize an industry boycott against Total Benefits in violation of the Sherman Act, 15 U.S.C. § 1, because Total Benefits refused to relinquish the strategy. Total Benefits also allege defamation, libel, tortious interference with contract, conspiracy, and breach of contract under state law.

PROCEDURAL BACKGROUND

On August 4, 2005, Total Benefits filed suit to prevent and restrain continuing violations of the Sherman Antitrust Act, 15 U.S.C. § 1. On September 8, 2005, Anthem filed a motion to dismiss, arguing dismissal was appropriate because Total Benefits (1) failed to identify the subject, product and geographic markets that were at issue; (2) claimed harm only to themselves as opposed to harm to competition; (3) failed to adequately allege "a contract, combination or conspiracy" in sufficient detail; and (4) was barred from challenging the alleged conduct by the McCarren-Ferguson Act, 15 U.S.C. § 1012, because Total Benefits could not demonstrate a boycott. Cornerstone moved to dismiss on grounds identical to those set forth by Anthem.

On September 8, 2006, the district court denied the motions to dismiss of Anthem and Cornerstone, finding Anthem's refusal to contract with Total Benefits to be a vertical boycott and that the complaint sufficiently alleged Anthem unlawfully coerced insurance agents who did business with Total Benefits. The district court concluded from these allegations that Total Benefits "sufficiently alleged a prima facie case of each element of the per se test" for their Sherman Act claim.

Anthem immediately filed a motion to reconsider, advancing the following arguments: (1) the district court erred by using per se principles for a vertical boycott; and (2) Plaintiffs' claims must be reviewed under the rule-of-reason test, and Plaintiffs failed to adequately plead "a rule of reason case." Cornerstone again joined Anthem's motion.

On November 2, 2006, Total Benefits filed an amended complaint, further defining their claims against Anthem, Cornerstone, and the newly added other Defendants, claiming these Defendants had conspired with Anthem to boycott, coerce, and otherwise blacklist Total Benefits.

Following the amended complaint, Anthem again moved to dismiss, asserting Total Benefits failed to allege: (1) sufficient detail in connection with the "participants, time, place and effect of the alleged conspiracy"; (2) facts to support the "conclusionary assertions that [Total Benefits] are the victims of a price fixing conspiracy"; and (3) the applicable product and geographic markets, and the impact on competition. The other Defendants filed motions to dismiss asserting these same grounds.

On July 25, 2007, following the Leegin and Twombly decisions, the district court reversed its earlier position and dismissed the recently amended complaint. The district court held:

• Total Benefits failed to sufficiently allege there was a horizontal agreement between Defendants and therefore failed to state a claim for a per se violation under the Sherman Act.

• Total Benefits failed to set forth a prima facie case for a rule-of-reason violation because it failed to plead (a) a set price or price level in order to support a claim of price fixing; (b) plausible grounds to infer an agreement between the parties; (c) an adverse effect on the marketplace; and (d) the existence of market power.

Total Benefits appeal this decision.

JURISDICTION

The district court had federal question jurisdiction pursuant to 28 U.S.C. § 1331 and supplemental jurisdiction over state law claims pursuant to 28 U.S.C. § 1337. This Court has appellate jurisdiction pursuant to 28 U.S.C. § 1291.

STANDARD OF REVIEW

The standard of appellate review for a motion to dismiss pursuant to Rule 12(b)(6) is de novo, and the Court will employ the same standard as the district court. First Am. Title Co. v. Devaugh, 480 F.3d 438, 443 (6th Cir.2007); Nat'l Hockey League Players Ass'n v. Plymouth Whalers Hockey Club, 419 F.3d 462, 468 (6th Cir.2005).

An action may be dismissed if the complaint fails to state a claim upon which relief can be granted. Federal Civil Rule 12(b)(6). The moving party has the burden of proving that no claim exists. Although a complaint is to be liberally construed, it is still necessary that the complaint contain more than bare assertions or legal conclusions. In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir.1993) (citing Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir.1988)). All factual allegations in the complaint must be presumed to be true, and reasonable inferences must be made in favor of the non-moving party. Great Lakes Steel v. Deggendorf, 716 F.2d 1101, 1105 (6th Cir. 1983); 2 MOORE'S FEDERAL PRACTICE § 12.34[1][b] (Matthew Bender 3d ed.2003). The court need not, however, accept unwarranted factual inferences. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). To survive a motion to dismiss, the complaint must present "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007).²

A Sherman Act Section 1 complaint must contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action"; rather, it must "raise a right to relief among the speculative level." Id. at 1964-65. A plaintiff must allege "enough factual matter ... to suggest that an agreement was made," and "an allegation of parallel conduct and a bare assertion of conspiracy will not suffice." Id. at 1965-66.

DISMISSAL FOR FAILURE TO STATE A CLAIM

Plaintiffs allege the district court erred in failing to find the complaint adequately pled a violation of Section 1 of the Sherman Act based on a per se violation or the rule-of-reason test. Each argument will be addressed separately.

1. Per se Violation

The per se standard recognizes there are some methods of restraint that are so inherently and facially anti-competitive that an elaborate and burdensome inquiry into a demonstrable economic...