481 F.Supp.3d 1011
N.D. Cal.2020Background:
- Plaintiffs are out-of-network Intensive Outpatient Program (IOP) providers who say United Behavioral Health (United) confirmed via verification-of-benefits (VOB) calls it would reimburse claims “at a percentage” of Usual, Customary and Reasonable (UCR) rates.
- United allegedly routed claims to Viant, a third‑party repricer, which negotiated lower, undisclosed reimbursement amounts and United paid based on those reduced offers; plaintiffs say United retained the difference.
- Plaintiffs brought putative class claims for Sherman Act Section 1 (price‑fixing), RICO, and several California common‑law and UCL claims alleging misrepresentation, breach, promissory estoppel, and conspiracy.
- Defendants moved to dismiss under Rule 12(b)(6) arguing (1) plaintiffs lack statutory standing for antitrust and RICO claims, (2) state‑law claims are preempted by ERISA, and (3) pleading defects (including fraud particularity).
- The court granted the motions to dismiss but gave plaintiffs leave to amend within 30 days to try to cure standing, pleading, and preemption defects.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust (§1) standing for damages | Providers were injured by underpayments and expenses from pursuing payment | Injuries are derivative of patients’ injuries; antitrust protects competition, not providers’ collection risk | Dismissed: plaintiffs lack antitrust standing; injuries too remote and speculative |
| Antitrust (§1) substantive claim (price‑fixing) | United and Viant conspired to fix reimbursement rates | Viant acted as United’s negotiator/agent; alleged conduct does not show fixed prices or restraint on competition | Dismissed: complaint fails to plead a restraint of trade or a plausible relevant market; neither per se nor rule‑of‑reason pleaded |
| RICO (1962(c) and (d)) standing and elements | Defendants ran a kickback/repricer scheme using misrepresentations; predicate fraud and healthcare offenses | Injuries are derivative of patients’; complaint fails to plead enterprise, direction, pattern, or predicate acts with particularity | Dismissed: lack of RICO standing; also fails to plead enterprise, conduct, and predicate mail/wire fraud with Rule 9(b) specificity; §1962(d) fails absent substantive violation |
| State‑law claims and ERISA preemption | Claims arise from United’s representations and an independent obligation to providers | Claims depend on ERISA‑plan terms and thus are preempted under ERISA §514(a) | Dismissed: state claims preempted because they reference or depend on ERISA plan terms; Fremont decision distinguished |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state a plausible claim)
- American Ad Mgmt., Inc. v. Gen. Tel. Co., 190 F.3d 1051 (9th Cir. 1999) (antitrust standing factors)
- Brantley v. NBC Universal, Inc., 675 F.3d 1192 (9th Cir. 2012) (antitrust standing requires harm from anticompetitive aspect)
- Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148 (9th Cir. 2001) (Section 1 elements and rule‑of‑reason framework)
- In re WellPoint, Inc. Out‑of‑Network "UCR" Rates Litig., 903 F. Supp. 2d 880 (C.D. Cal. 2012) (providers lacked antitrust standing; more direct victims existed)
- Hemi Grp., LLC v. City of New York, 559 U.S. 1 (2010) (RICO proximate cause requires direct causal nexus)
- Odom v. Microsoft Corp., 486 F.3d 541 (9th Cir. 2007) (RICO enterprise and association‑in‑fact elements)
- Edwards v. Marin Park, Inc., 356 F.3d 1058 (9th Cir. 2004) (Rule 9(b) applies to RICO fraud predicates)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) (complete preemption under ERISA §502(a))
- Providence Health Plan v. McDowell, 385 F.3d 1168 (9th Cir. 2004) (ERISA §514 preemption tests and the "reference/connection" inquiry)