4:20-cv-02254
N.D. Cal.Aug 26, 2020Background
- Plaintiffs (members of United-managed health plans) received intensive outpatient program (IOP) services from out-of-network provider Summit Estate and signed agreements making them responsible for amounts not paid by insurer.
- Plaintiffs allege United represented it would reimburse out-of-network IOP services at the usual, customary, and reasonable rate (UCR) and that claims were not subject to third‑party repricing, but United retained Viant to reprice/ negotiate claims and paid reduced amounts.
- Plaintiffs claim Viant lacked authority from members to negotiate, that Viant and United concealed repricing methodology, and that EOBs failed to disclose repricing or appeal rights, resulting in balance bills to plaintiffs.
- Plaintiffs sued (putative class) asserting ERISA claims (benefits under §502(a)(1)(B); disclosure §1132(c); fiduciary breach §1109; full and fair review §1133; equitable relief §1132(a)(3)) and a RICO §1962(c) claim; defendants moved to dismiss under Rule 12(b)(6) and for lack of RICO standing.
- The court found plaintiffs’ pleadings deficient across ERISA and RICO theories (failure to identify plan terms, failure to plead plan‑administrator status or disclosure requests, EOBs contradict allegations, RICO defects as to enterprise, conduct, predicates, and proximate cause) and GRANTED dismissal with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of ERISA §502(a)(1)(B) (underpaid benefits / plan‑term breach) | Plans promised out‑of‑network UCR reimbursement (effectively 100% of provider charges); United failed to pay UCR | Plaintiffs failed to identify plan provisions requiring UCR or 100% payment | Dismissed for failure to plead the relevant plan terms; leave to amend granted |
| ERISA §1132(c) disclosure claim (plan administrator and request) | United performed administrative functions and failed to disclose material plan info and methodology | United is not the plan administrator; plaintiffs never alleged a written request or statutory disclosure violation | Dismissed: plaintiffs did not plead administrator status or requisite disclosure request or statutory basis for methodology disclosure |
| ERISA fiduciary breach §1109 and §1133 (full and fair review / EOBs) | United’s repricing constituted adverse benefit determinations and denied appeal rights; EOBs inaccurate | EOBs (submitted by United) show amounts paid, remaining balance, and appeal process; plaintiffs cite no authority requiring use of exact words “adverse benefit determination” or disclosure of Viant | Dismissed to extent based on asserted EOB defects; fiduciary breach dismissed for failure to allege conflict with plan documents |
| ERISA §1132(a)(3) equitable relief (disgorgement, reprocessing, injunction) | Seek disgorgement, surcharge, and reprocessing as equitable relief alternative to legal remedies | Relief sought is legal, not equitable; predicates fail because other ERISA claims are deficient | Dismissed: plaintiffs did not plead ERISA violation or show the remedies are equitable in nature; may replead consistent with Depot standard |
| RICO §1962(c) (enterprise, conduct, pattern, predicates) | United and Viant ran a kickback/repricing scheme; predicate mail/wire fraud and federal health offenses | Allegations show routine contractual repricing, lack common‑purpose enterprise, fail to plead mail/wire fraud with Rule 9(b) particularity, and federal health offenses are not RICO predicates | Dismissed: plaintiffs failed to plead an association‑in‑fact enterprise, direction/conduct of enterprise, predicate acts with particularity, or a pattern |
| RICO proximate cause/standing | Plaintiffs relied on United plan representations about UCR, causing them to pay balance bills | Plaintiffs did not identify plan provisions or allege specific reliance on misrepresentations; thus no proximate cause for mail/wire fraud predicates | Dismissed for lack of RICO standing/proximate cause; leave to amend granted |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard governs Rule 12(b)(6))
- Varity Corp. v. Howe, 516 U.S. 489 (1996) (equitable relief under ERISA §1132(a)(3) and plaintiff standing distinctions)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (proximate cause and reliance requirement for mail/wire fraud RICO predicates)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (RICO proximate causation requires direct relation between injury and predicate act)
- Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) (elements for RICO §1962(c) and association‑in‑fact enterprise)
- Depot, Inc. v. Caring for Montanans, Inc., 915 F.3d 643 (9th Cir. 2019) (to obtain equitable relief under ERISA §1132(a)(3), both basis and remedy must be equitable)