Williams v. Steward Health Care Sys.

• Decision Date: 25 February 2022
• Docket Number: Civil Action 5:20-CV-00123-RWS-CMC
• Parties: BEVERLY WILLIAMS and AMY JOHNSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiffs, v. STEWARD HEALTH CARE SYSTEM, LLC and MEDICAL REIMBURSEMENTS OF AMERICA, Defendants.
• Court: U.S. District Court — Eastern District of Texas

BEVERLY WILLIAMS and AMY JOHNSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiffs,
v.
STEWARD HEALTH CARE SYSTEM, LLC and MEDICAL REIMBURSEMENTS OF AMERICA, Defendants.

Civil Action No. 5:20-CV-00123-RWS-CMC

United States District Court, E.D. Texas, Texarkana Division

February 25, 2022

ORDER

ROBERT W. SCHROEDER III UNITED STATES DISTRICT JUDGE

The above-entitled and numbered civil action was referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. On December 16, 2021, the Magistrate Judge issued a Report and Recommendation, recommending Defendants' Motion to Dismiss Second Amended Class Action Complaint (Docket No. 66) and Defendant Medical Reimbursements of America's (“MRA”) Rule 12(b)(1) Motion to Dismiss Plaintiffs' Claims Regarding Non-Party Hospitals for Lack of Subject Matter Jurisdiction (Docket No. 95) be denied. Docket No. 118.

Defendant Steward Health Care System, LLC (“Steward”) and Defendant MRA each filed separate objections. See Docket Nos. 121, 122. Plaintiff Beverly Williams and Plaintiff Amy Johnson filed responses to the objections. Docket Nos. 125, 126. The Court conducts a de novo review of the Magistrate Judge's findings and conclusions.

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BACKGROUND

Plaintiffs bring this putative class action pursuant to Federal Rule of Civil Procedure 23 on behalf of themselves and two proposed classes (the “Unauthorized Billing Class” and the “Excess Billing Class”) against Defendants. Second Amended Complaint (“SAC”), Docket No. 64 ¶¶ 16, 88. According to Plaintiffs, this case is an individual and putative class action arising from Defendants' scheme to deceptively collect unauthorized and illegal payments for hospital treatment resulting from motor vehicle accidents. In Count I, Plaintiffs allege violation of Texas Finance Code § 392.001 et seq. Id. ¶¶ 101-111. In Count II, Plaintiffs allege violation of the Texas Deceptive Trade Practices Act. Id. ¶¶ 112-127. In Count III, Plaintiffs assert fraud claims. Id. ¶¶ 128-136. In Count IV, Plaintiffs allege mail and wire fraud in violation of the Racketeer Influenced and Organized Crime Act (“RICO”), 18 U.S.C. §§ 1961-1968 and 18 U.S.C. § 1962 (c) and (d). Id. ¶¶ 137-150.

I. MOTIONS TO DISMISS

In a combined motion, Defendants move to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Defendants state the Court must decline to exercise subject matter jurisdiction under the local controversy exception of the Class Actions Fairness Act (“CAFA”). Recognizing Plaintiffs have also alleged in their SAC a federal RICO claim separate and apart from CAFA, Defendants argue the purported RICO claim fails because Plaintiffs have failed to state a claim under 18 U.S.C. § 1961, et seq. Specifically, Defendants argue that Plaintiffs' RICO claim fails because Plaintiffs have not made adequate allegations of predicate acts and Plaintiffs have failed to allege any injury that resulted from any alleged RICO violations. Defendants request the Court dismiss the RICO claim pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b).

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According to Defendants, without a plausible RICO claim, Plaintiffs are left with only CAFA as a potential basis for jurisdiction, meaning the Court does not have jurisdiction over this case. Therefore, Defendants assert Plaintiffs' claims must be dismissed pursuant to Rule 12(b)(1).

Defendant MRA separately moves, pursuant to Federal Rule of Civil Procedure 12(b)(1), to dismiss for lack of subject matter jurisdiction. MRA requests the Court dismiss Plaintiffs' class claims asserted on behalf of patients at non-party hospitals where Plaintiffs were never treated and never billed. According to MRA, Plaintiffs do not have Article III standing to pursue these claims.^[1]In their response, Plaintiffs state they have Article III standing to pursue their individual claims against MRA, and neither Plaintiff is attempting to use claims of absent class members to establish their own standing. Thus, according to Plaintiffs, the cases relied upon by MRA are distinguishable. Plaintiffs argue issues with regard to class claims should be resolved at the class certification stage.

II. REPORT AND RECOMMENDATION

On December 16, 2021, the Magistrate Judge issued a 97-page Report and Recommendation (“R&R”), recommending Defendants' motions to dismiss be denied. Docket No. 118. First, the Magistrate Judge found Defendants have not met their burden to prove the

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local controversy exception to CAFA jurisdiction applies. Therefore, the Court recommended Defendants' combined Rule 12(b)(1) motion be denied. R&R at 48.

Second, turning to Defendants' Rule 12(b)(6) motion to dismiss Plaintiffs' RICO claim, the Magistrate Judge first found that, at this preliminary stage, the pleadings suffice to withstand Defendants' Rule 12(b)(6) challenge as to Plaintiffs' allegations of injury and proximate cause. Id. at 51-57. Next, the Magistrate Judge found that Plaintiffs have pleaded Defendants' alleged predicate acts of mail and wire fraud with sufficient particularity in compliance with Rule 9(b). Id. at 57-62. Finally, the Magistrate Judge found that Plaintiffs' allegations sufficiently allege continuity of racketeering activity. Id. at 62-66. The Magistrate Judge recommended Defendants' combined Rule 12(b)(6) motion be denied. Id. at 66.

Third, the Magistrate Judge considered MRA's separate Rule 12(b)(1) motion to dismiss Plaintiffs' class claims asserted on behalf of patients at non-party hospitals where Plaintiffs were never treated and never billed, finding it without merit. After setting forth the parties' assertions and the applicable law, including an in-depth discussion of the cases relied upon by MRA, the Magistrate Judge discussed additional cases within the Fifth Circuit illustrating the “tension” in the case law in this specific area of Article III standing. Id. at 83-93. The Magistrate Judge concluded as follows:

. . . According to Plaintiffs, the unchallenged allegations of the SAC control, and following appropriate discovery, Rule 23 will permit any pertinent challenge as to whether Plaintiffs are appropriate class representatives. The Court agrees

As the District Court for the Western District of Texas recently held:

[W]hile the Court agrees that a plaintiff must “demonstrate standing for each claim he seeks to press, ” and that the fact that ‘a suit may be a class action . . . adds nothing to the question of standing,' the Court agrees with Plaintiff that no standing issue exists here. Defendant has not challenged Plaintiff's standing to bring suit on its own behalf, and the Court does not foresee any reason such a

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challenge would be successful. Instead, Defendant challenges whether Plaintiff has standing “to bring contract claims under the laws of California, or Colorado, or Connecticut-or anywhere else.” As Plaintiff argues, “Rule 23, not Article III standing, is the better framework for analyzing differences between the named plaintiff and the absent class members.”

Indep. Barbershop, L.L.C. v. Twin City Fire Ins. Co., 499 F.Supp.3d 331, 337 (W.D. Tex. 2020) (emphasis original) (citations omitted); see also Shular v. LVNV Funding L.L.C., Civil Action No. H-14-3053, 2016 WL 685177, at *9 (S.D. Tex. Feb. 18, 2016) (quoting WRIGHT & MILLER, FED. PRAC. & PROC. § 1785.1, at 141 (3d ed.)) (“As long as the representative parties have a direct and substantial interest, they have standing; the question whether they may be allowed to present claims on behalf of others who have similar, but not identical, interests depends not on standing, but on an assessment of typicality and adequacy of representation.”).

Here, neither in its motion for protective order nor in its current motion to dismiss, nor at the hearings on September 9 or October 21, did MRA dispute Plaintiffs' Article III standing to bring their own claims. See, e.g. Docket Entry # 116 at 37:1922 (‘We do agree that if they're ultimately able to prove their allegations, they would have standing both on an individual and a class basis with respect to Steward and the insurance plans that they have, but nothing further.'). The Court finds Plaintiffs have adequately pleaded Article III standing against MRA for its conduct. Because Plaintiffs have individual standing for their own claims, the Court agrees with Plaintiffs that the cases relied upon by MRA are distinguishable.

Considering the “tension” in the prior cases over whether differences among class members is a matter of Article III standing at all or whether it goes to the propriety of class certification, and further considering the most recent opinions from within this circuit as well as the allegations involved in this case, the Court recommends MRA's Rule 12(b)(1) motion to dismiss be denied. The Court finds Rule 23, not Article III standing, is the better framework for analyzing differences between the named Plaintiffs and the absent class members. Indep. Barbershop, 499 F.Supp.3d at 337.

Id. at 94-96 (internal footnotes omitted).

III. OBJECTIONS

A. Steward's Objections^[2]

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In its objections, Steward first asserts the Magistrate Judge failed to properly scrutinize the SAC's continuity allegations. Docket No. 121 at 1-2. According to Steward, “a court should not deem continuity sufficiently pleaded based on sporadic acts of alleged mail or wire fraud without allegations of independent facts supporting continuity.” Id. at 2. Relatedly, Steward objects to the Magistrate Judge's legal conclusions that Plaintiffs sufficiently pleaded continuity-specifically a “specific threat” of repeated racketeering activity or that the activity is Steward and MRA's “regular way of doing business”-and thus that Plaintiffs sufficiently pleaded RICO's “pattern” element. Id. at 6-8. Steward further argues the Magistrate Judge...