Nutrishare, Inc. v. Connecticut General Life Insurance Company, et al

Filing 50

ORDER signed by Judge John A. Mendez on 11/21/14 GRANTING 46 Motion to Strike without leave to amend. (Manzer, C)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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NUTRISHARE, INC., a California
corporation,

No.

2:13-cv-02378-JAM-AC

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Plaintiff,
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ORDER GRANTING COUNTERDEFENDANTS IN REPLY’S
MOTION TO STRIKE

v.
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CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, a Connecticut
Corporation, CIGNA HEALTH AND LIFE
INSURANCE COMPANY, a Connecticut
Corporation,

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Defendants.
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CONNECTICUT GENERAL LIFE INSURANCE
COMPANY and CIGNA HEALTH AND LIFE
INSURANCE COMPANY,

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Counter-Claimants,
v.
NUTRISHARE, INC.,
Counter-Defendant.
NUTRISHARE, INC., PATIENT ONE, an
individual, PATIENT TWO, an
individual, PATIENT THREE, an
individual,

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Counter-Claimants in
Reply,
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v.
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CONNECTICUT GENERAL LIFE INSURANCE
COMPANY and CIGNA HEALTH AND LIFE
INSURANCE COMPANY,

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Counter-Defendants in
Reply.

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Defendants, Counter-Claimants and Counter-Defendants in

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Reply Connecticut General Life Insurance Company and CIGNA Health

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and Life Insurance Company (collectively “CIGNA”) move to strike

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(Doc. #46) the counter-claim in reply (“CCIR”) (Doc. #35).

The

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CCIR was filed on behalf of Plaintiff, Counter-Defendant and

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Counter-Claimant in Reply Nutrishare, Inc. (“Nutrishare”) and

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Counter-Claimants in Reply Patients One, Two, and Three

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(collectively “Patients”). 1

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CIGNA’s motion is GRANTED.

For the reasons discussed herein,

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I.

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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The allegations and procedural history of this case have

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been well-documented.

Therefore, the Court provides only a brief

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summary of the information relevant to resolving the motion

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currently before it.
CIGNA brought a counterclaim (“CC”) stating four causes of

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action against Nutrishare: the first two are brought pursuant to

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§ 502(a)(3) of the Employment Retirement Income Security Act

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(“ERISA”), 29 U.S.C. § 1132 (“§1132”), in order to redress

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for November 5, 2014.
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alleged violations of ERISA plans; the third claim is for

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violations of California Business and Professions Code § 17200,

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et seq., California’s unfair competition law (“UCL”); and the

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fourth is for fraud.

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CIGNA serves as the claims administrator and/or the insurer

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of employee health benefit plans governed by ERISA that provide

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reimbursement for covered medical expenses incurred by individual

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plan participants and beneficiaries covered under the plans.

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¶ 2.

CC

CIGNA acts as a claims review fiduciary, either as the

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third party administrator of a self-funded, employer-sponsored

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group health plan, or as an insurer of such employer-sponsored

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ERISA plans.

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specializing in “home infusion” and the provision of Total

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Parenteral Nutrition (“TPN”) to consumers.

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is outside of CIGNA’s network of providers.

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CC ¶ 16.

Nutrishare is a medical provider

CC ¶ 17.

Nutrishare

Id. ¶ 3.

The CC alleges that Nutrishare told some participants that

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they would not be billed at all for Nutrishare’s services.

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¶ 4.

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misrepresenting the amounts it usually accepts for the services

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provided and what the “actual, total charges” for those services

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were.

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to inform CIGNA that it was not charging the required co-

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payments, deductibles, or coinsurance.

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recover the amounts paid by CIGNA to Nutrishare as a result of

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the improper and fraudulent claims.

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Id.

Nutrishare then billed CIGNA at exorbitant rates while

Id. ¶¶ 3, 6-7, 27-32, 39.

CIGNA alleges Nutrishare failed

Id.

The CC seeks to

CC ¶¶ 43-47, 50, 54, 61, 66.

Nutrishare moved to dismiss (Doc. #13) and to strike (Doc.

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#12) portions of the CC.

The Court denied the motions (Doc. #25)

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but certified (Doc. #41) the issue of federal preemption for
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interlocutory appeal.

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petition for permission to appeal (Doc. #43).

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The Ninth Circuit denied Nutrishare’s

Nutrishare then brought the CCIR, joining Patients as fellow

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counter-claimants in reply.

The CCIR brings eight causes of

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action against CIGNA: (1) failure to pay ERISA benefits pursuant

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to §1132; (2) breach of fiduciary duty pursuant to §1132;

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(3) violation of the UCL; (4) breach of implied contract;

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(5) services rendered; (6) breach of covenant of good faith and

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fair dealing; (7) intentional interference with prospective

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economic advantage; and (8) negligent interference with

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prospective economic advantage.

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II.

OPINION

CIGNA bases its motion to strike on two grounds: (1) the

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eight new claims are not compulsory and thus are improperly

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brought in a counter-claim in reply; and (2) Patients were

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improperly joined under either Federal Rule of Civil Procedure 19

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or 20.

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A.

Compulsory Counterclaims
1.

Legal Standard

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Although not explicitly authorized by the Federal Rules of

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Civil Procedure, a “counter-claim in reply” is permitted if the

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counterclaims alleged therein are compulsory.

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MGA Entm't, Inc., 705 F.3d 1108, 1110 (9th Cir. 2013)

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(“Mattel”); Electroglas, Inc. v. Dynatex Corp., 473 F. Supp.

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1167, 1171 (N.D. Cal. 1979); Warner v. Sims Metal Mgmt., C 13-

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02190 WHA, 2013 WL 4777314, at *1 (N.D. Cal. 2013).

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compulsory when it “arises out of the transaction or occurrence
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Mattel, Inc v.

A claim is

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that is the subject matter of the opposing party’s claim.”

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R. Civ. Proc. 13(a)(1)(A) (“Rule 13”).

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The Ninth Circuit has laid out the proper assessment of
counter-claims in reply:
We apply “the logical relationship test for compulsory
counterclaims.” In re Pegasus Gold Corp., 394 F.3d
1189, 1195–96 (9th Cir. 2005). “A logical relationship
exists when the counterclaim arises from the same
aggregate set of operative facts as the initial claim,
in that the same operative facts serve as the basis of
both claims or the aggregate core of facts upon which
the claim rests activates additional legal rights
otherwise dormant in the defendant.” Id. at 1196; see
also Moore v. N.Y. Cotton Exch., 270 U.S. 593, 610
(1926).
Mattel, 705 F.3d at 1110.
2.

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Fed.

CCIR Claims

CIGNA contends the eight new claims do not arise out of the

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same transactions that are the subject of the CC.

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Reply (Doc. #48) at p. 4.

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relate to billings in which CIGNA declined payment whereas the

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claims in the CC are based on payments actually made to

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Nutrishare as a result of Nutrishare’s allegedly fraudulent and

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improper scheme.

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Id.

MTS at p. 7;

CIGNA argues the claims in the CCIR

The Court agrees.

The four causes of action in the CC are based on allegedly

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improper and fraudulent medical claims submitted by Nutrishare

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and paid out by CIGNA.

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specifically requests restitution or reimbursement of the funds

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actually paid out to Nutrishare by CIGNA on these medical

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claims.

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causes of action in the CCIR are based on medical claims

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submitted by Nutrishare that CIGNA rejected and failed to pay.

Each of CIGNA’s counterclaims

CC ¶¶ 43-47, 50-51, 54, 61, 66.

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However, the eight

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CCIR ¶¶ 79-80, 84-89, 92, 95, 102, 108, 110-12, 122, 134.

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the explicit allegations in each pleading, the transactions

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underlying the causes of action in the CCIR are not the same as

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those in the CC.

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By

In Mattel, the Ninth Circuit was faced with a counterclaim

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by Mattel alleging the theft of trade secrets by MGA and a

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counter-claim in reply from MGA that alleged theft of trade

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secrets by Mattel.

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that the fact both parties were alleging trade secret claims

Mattel, 705 F.3d at 1110.

The court found

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against each other was not enough to render the counter-claim in

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reply compulsory.

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is not the legal theory but the facts.

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construction of [“transaction”] cannot operate to make a

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counterclaim that arises out of an entirely different or

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independent transaction or occurrence compulsory under Rule

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13(a).’”

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Wright & Arthur R. Miller, Federal Practice & Procedure § 1410,

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at 52 (3d ed. 2010)).

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Id.

The court reasoned that “[w]hat matters
‘[E]ven the most liberal

Id. (emphasis in original) (quoting 6 Charles A.

Nutrishare contends that the counterclaims in the CCIR are

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compulsory “because they arise from the very same patient claims

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that are the subject of [the CC].”

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4.

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CIGNA while the CCIR is based on claims that Nutrishare alleges

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were improperly denied and not paid out.

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based on completely separate medical claims from those

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underlying CIGNA’s counterclaims.

Opposition (Doc. #47) at p.

However, the CC involves medical claims that were paid by

Clearly, the CCIR is

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Nutrishare further contends the complaint, CC, and CCIR are

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all “based on whether Nutrishare has a duty to collect copayment
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and coinsurance amounts, and therefore they all arise from the

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same ‘transaction or occurrence.’”

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whether Nutrishare had a duty to collect these payments from its

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patients underlies each of the pleadings in this matter.

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However, as the Ninth Circuit has stated, in determining whether

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a counter-claim in reply is compulsory “what matters is not the

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legal theory but the facts.”

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Nutrishare conflates the legal question that underlies the

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pleadings with the facts alleged in each.

Id.

The legal issue of

Mattel, 705 F.3d at 1110.

The Court cannot

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construe the term “transaction” so loosely as to find a counter-

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claim in reply “that arises out of an entirely different or

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independent transaction or occurrence compulsory under Rule

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13(a).”

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compulsory and thus not permitted.

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1110.

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is granted.

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Id.

As such, the CCIR challenged by this motion is not
See Mattel, 705 F.3d at

CIGNA’s motion to strike the CCIR as an improper pleading

The Court also concludes that any attempt by Nutrishare or

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Patients to amend the CCIR to cure the deficiencies herein

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discussed would fail as its causes of action simply do not arise

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out of the same transaction or occurrence that is the subject

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matter of CIGNA’s counterclaims.

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be futile, the motion to strike is granted WITHOUT LEAVE TO

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AMEND.

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1034, 1041 (9th Cir. 2011).

As amendment would therefore

Cervantes v. Countrywide Home Loans, Inc., 656 F.3d

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B.

Joinder of Patients

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CIGNA contends Patients were improperly joined in this

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action through the filing of the CCIR.

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contend Patients were properly joined pursuant to Federal Rule
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Nutrishare and Patients

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of Civil Procedure 20(a).

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motion to strike the entire CCIR above, the arguments regarding

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the propriety of Patients’ joinder are rendered moot.

As the Court has granted CIGNA’s

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III.

ORDER

For the reasons set forth above, the Court GRANTS CIGNA’s
motion to strike WITHOUT LEAVE TO AMEND.
IT IS SO ORDERED.
Dated: November 21, 2014

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