865 F. Supp. 2d 1002
C.D. Cal.2011Background
- MDL court addresses motions to dismiss a Second Consolidated Am. Complaint filed by subscribers, providers, and associations against WellPoint, UnitedHealth (UHG) and Ingenix over out-of-network reimbursements and alleged UCR data manipulation.
- Plaintiffs allege WellPoint used Ingenix’s database to compute depressed UCR rates, leading to underpayment for ONS and higher out-of-pocket costs.
- Ingenix, owned by UHG, collects data and provides pricing schedules; allegations include data scrubbing, exclusion of high charges, and geographic mis-tabulation.
- NY Attorney General investigated the practice; NYAG report labeled the system rigged; Congress held hearings; settlements redirected data use to independent UCR determinations.
- Plaintiffs assert claims under Sherman Act §1, ERISA §§ 1132(a)(1)(B), (a)(2), (a)(3), RICO, state unfair competition/false advertising laws, New York GBL §349, California Cartwright Act, and contract and implied covenant claims; associations sue on their own and behalf of members.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge non-Ingenix ONS benefits | Non-Ingenix ONS reductions injure plaintiffs and are actionable. | Plaintiffs fail to tie injuries to identifiable individuals; claims are conclusory. | Dismissal granted for non-Ingenix ONS benefit reduction claims. |
| Association Plaintiffs' standing | Association injuries from defending members’ interests confer standing. | Associations lack standing to sue in either capacity. | Association Plaintiff standing sustained (individual and representative). |
| Sherman Act §1: per se and Rule of Reason viability | Defendants conspired to fix ONS reimbursements; per se and rule-of-reason analyses apply. | No plausible per se conspiracy; only speculative market power and data exchange. | Per se claim not dismissed; rule-of-reason claim survives; both proceed. |
| RICO claims: enterprise, conduct, and pattern | Plaintiffs plead associated-in-fact enterprise and predicate acts (mail/wire, embezzlement) with pattern. | WellPoint lacks direction/control; pattern lacks predicate acts tied to UHG/Ingenix; improper reliance pleading. | RICO claims dismissed with leave to amend due to deficiencies in conduct, pattern, and reliance pleadings. |
| ERISA remedies and § 1132(c) handling | ERISA claims for benefits and fiduciary duties premised on plan terms and assignments; futility of exhaustion argued. | Some ERISA claims improper or duplicative; de facto administrator theory fails for § 1132(c). | ERISA §§ 1132(a)(1)(B), (a)(2), (a)(3) survive; § 1132(c) claim dismissed without leave to amend. |
Key Cases Cited
- Twombly, 550 U.S. 544 (S. Ct. 2007) (pleading requires plausible claims, not mere conclusions)
- Iqbal, 556 U.S. 662 (S. Ct. 2009) (plausibility standard for non-conclusory allegations)
- McDaniel v. Appraisal Inst., 117 F.3d 421 (9th Cir. 1997) (antitrust pleading standards; not every restraint violates §1)
- Leegin Creative Leather Prods. v. PSKS, 551 U.S. 877 (S. Ct. 2007) (per se rules do not govern all restraints; some are analyzed under Rule of Reason)
- Am. Med. Ass’n v. United Healthcare Corp., 588 F. Supp. 2d 432 (S.D.N.Y. 2008) (courts’ treatment of association plaintiffs and pleadings under antitrust claims)
- Pireno v. Royal Drug, 458 U.S. 119 (U.S. 1982) (Royal Drug/Pireno framework for business of insurance and McCarran-Ferguson considerations)
- Fabe v. Department of Treasury, 508 U.S. 491 (U.S. 1993) (business of insurance vs. other activities; limits of McCarran-Ferguson scope)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (S. Ct. 2008) (reliance requirements in RICO bridging to pattern claims)
- Hemi Group v. City of New York, U.S. __ (2010) (RICO reliance requiring proximate causation; first-party reliance not required)
- Wise v. Verizon Commc’ns, Inc., 600 F.3d 1180 (9th Cir. 2010) (ERISA breach of fiduciary duty requires plan-wide injury)
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (U.S. 2008) (fiduciary duty remedies under ERISA; injuries to plans vs individuals)
- Goren v. New Vision Intern., Inc., 156 F.3d 721 (7th Cir. 1998) (direction to enterprise not limited to formal leaders)