Spinal Imaging, Inc. et al v. State Farm Mutual Automobile Insurance Company
Filing
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Judge Rya W. Zobel: Memorandum of Decision entered granting 11 Motion to Dismiss for Failure to State a Claim; denying 19 Motion to Compel as moot; denying 20 Motion for Leave to File Document as moot. Judgment may be entered dismissing the complaint without prejudice. (Urso, Lisa)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 12-11498-RWZ
SPINAL IMAGING INC.,
and RADIOLOGY DIAGNOSTICS, LLC
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
MEMORANDUM OF DECISION
April 24, 2013
ZOBEL, D.J.
Plaintiffs Spinal Imaging Inc. (“Spinal Imaging”) and Radiology Diagnostics, LLC
(“RD”) together allege that defendant State Farm Mutual Automobile Insurance
Company (“State Farm”) failed to fully compensate them for radiological services that
they provided to 1,782 different patients insured by State Farm. State Farm now moves
to dismiss the complaint for failure to state a claim or for forum non conveniens; in the
alternative, it moves to sever plaintiffs’ case into multiple actions.
I. Background
Spinal Imaging is a Massachusetts corporation that provided radiological
services to patients insured by State Farm from 2004 through 2008. RD is also a
Massachusetts corporation providing radiological services; it has provided services to
patients insured by State Farm from 2008 to the present. Both Spinal Imaging and RD
were nonparticipating (also known as “out of network”) providers, meaning that they did
not directly contract with State Farm for reimbursement at a specific rate.
The complaint alleges that Spinal Imaging and RD obtained assignments from
their State Farm-insured patients, authorizing them to seek payment directly from State
Farm for services they provided to those patients. The complaint further alleges that
State Farm “engaged in a pattern and practice of accepting said assignments as valid
and paying Plaintiffs directly as non-participating providers.” Docket # 10 (Compl.) ¶ 15.
However, the complaint does not provide factual details about any of the alleged
assignments, such as their terms or when and where they were executed.
State Farm paid both plaintiffs in full for some of the radiological services they
rendered, but failed to pay (in whole or in part) for other such services. As to Spinal
Imaging, State Farm apparently did not fully pay for services rendered to 372 different
patients from 2004 to 2008. As to RD, State Farm apparently did not fully pay for
services rendered to 1,410 different patients from 2008 to the present. In all, plaintiffs
seek at least $100,214.54 in reimbursement for services provided to 1,782 different
patients.
The complaint does not allege any identifying facts about the 1,782 different bills
that plaintiffs assert. For instance, it does not name the patients served, the policy
under which each patient was insured, the date on which each policy was issued, the
date on which each patient was treated, or the amount due on each patient’s bill. More
importantly, the complaint does not explain how State Farm breached its insurance
contract with respect to each patient; it only makes the general allegation that as to
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each unpaid bill, State Farm “provided no reasons, or inaccurate reasons, or
inconsistent reasons for the denial of benefits.” Compl. ¶¶ 26-37.
Plaintiffs seek damages for breach of contract (Counts I and II) and violation of
the Massachusetts Consumer Protection Act, Mass. Gen. Laws ch. 93A (Counts III and
IV). State Farm moves to dismiss the complaint for failure to state a claim and for forum
non conveniens; in the alternative, it moves to sever plaintiffs’ 1,782 different unpaid
bills into separate actions.1
II. Failure to State a Claim
A complaint must contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The court accepts as true all
factual allegations contained in the complaint, but not legal conclusions. Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). The complaint must be dismissed if it fails to state a
plausible claim, which requires “more than a sheer possibility that a defendant has
acted unlawfully.” Id. Thus, factual allegations that are “merely consistent with” liability
do not suffice; instead, the facts alleged must “plausibly suggest[]” that the plaintiff is
entitled to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007).
State Farm argues that the breach of contract claims are deficient because they
fail to specifically identify the contracts at issue or how they were breached. Cf. Bosque
v. Wells Fargo Bank, 762 F. Supp. 2d 342, 351 (D. Mass. 2011) (to assert a breach of
contract claim, plaintiffs must allege that there was a contract and that defendant
1
Plaintiffs argue that State Farm’s motion should be denied for failure to comply with Local Rule
7.1. While troubled by the failure of both parties’ counsel to communicate effectively, the court will not
deny State Farm’s motion on those grounds.
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breached it). State Farm is correct. First, the complaint fails to provide the minimal
information necessary to identify the 1,782 insurance policies that it alleges State Farm
violated. As discussed above, the complaint does not even identify who the patients at
issue were or what policies they were insured under.2 Rule 8 does not require plaintiffs
to plead specific facts with particularity; but the complaint must at least give State Farm
basic notice of what contracts the plaintiffs believe State Farm breached. Cf. Twombly,
550 U.S. at 555 (complaint must “give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests” (omission in original) (quoting Conley v. Gibson,
355 U.S. 41, 47 (1957))). The present complaint fails that low standard.
Second, the complaint fails to plausibly allege how State Farm breached each
contract. It makes only the general assertion that State Farm provided “no reasons, or
inaccurate reasons, or inconsistent reasons for the denial of benefits” with respect to
each policy. Compl. ¶¶ 26-37. That conclusory assertion is not enough to create a
plausible claim, particularly in the absence of any specific factual allegations to support
it. See Iqbal, 556 U.S. at 678. As it stands, the complaint does not give State Farm
enough information to respond in a meaningful way to its allegations. With respect to
any individual policy, State Farm has no way of knowing why plaintiffs believe its
reasons for denying benefits were “inaccurate” or “inconsistent” (or nonexistent, for that
matter). The allegations simply fail to give State Farm fair notice of the grounds for
2
This failure is all the more surprising because plaintiffs apparently have that information readily
available. Their opposition to the motion to dismiss attaches a printed spreadsheet listing each asserted
medical bill by its account number, the patient’s first and last name, the date on which services were
rendered, the amount charged, the amount paid, the outstanding balance, the insurance policy number,
and the insurer. Of course, plaintiffs cannot repair the complaint just by providing the missing information
in their subsequent briefing.
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plaintiffs’ claims. Cf. Twombly, 550 U.S. at 555.
Plaintiffs raise several responses. First, they argue that State Farm had an
implied contract with them based on its alleged practice of paying them directly for
radiological services to patients insured by State Farm. But nothing in the complaint
makes it plausible that State Farm had an implied contract to pay every bill plaintiffs
submitted; rather, the complaint alleges that State Farm paid some bills in full, paid
some in part, and rejected others. Those allegations are certainly “consistent with”
liability, but they do not “plausibly suggest[]” it. Twombly, 550 U.S. at 557.3
Second, plaintiffs argue that Mass. Gen. Laws ch. 90, § 34M requires State
Farm to pay the medical bills of patients it insured. That statute, however, is
inapplicable for two reasons. First, the complaint does not allege that the insurance
policies here were Massachusetts policies. Cf. Metro. Prop. & Cas. Ins. Co. v. Bos.
Reg’l Physical Therapy, 538 F. Supp. 2d 338, 342 (D. Mass. 2008) (one element of a
claim under the statute is “a Massachusetts automobile policy issued by the defendant
insurer”). Second, the complaint does not allege that State Farm refused to pay the
medical bills at issue “based solely on a medical review of the bill or of the medical
services underlying the bill,” as necessary to trigger the practitioner’s review
requirement that plaintiffs cite. Mass. Gen. Laws ch. 90, § 34M; cf. McGovern Physical
Therapy Assocs. v. Metro. Prop. & Cas. Ins. Co., 802 F. Supp. 2d 306, 310-13 (D.
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At best, plaintiffs’ implied contract argument might counter State Farm’s alternative argument
that plaintiffs have failed to allege valid assignments. Because the court has already determined
plaintiffs’ claims must be dismissed for failure to allege the contracts at issue or their breach, it need not
also address the asserted failure to allege valid assignments.
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Mass. 2011).4
Plaintiffs have therefore failed to state plausible breach of contract claims. As
their chapter 93A claims alleging unfair business practices are based wholly on their
breach of contract claims, their chapter 93A claims must fail as well. See FAMM Steel,
Inc. v. Sovereign Bank, 571 F.3d 93, 107-08 (1st Cir. 2009). Moreover, even if plaintiffs’
breach of contract claims were valid, they allege only the refusal to pay certain
contested debts. No facts are alleged that would imply unfair or deceptive conduct. As
such, the complaint does not state a chapter 93A claim. McGovern, 802 F. Supp. 2d at
316.5
Plaintiffs argue that they have stated a chapter 93A claim by stating a violation
of Mass. Gen. Laws ch. 176D, which regulates insurance carriers. “[A] purported
violation of chapter 176D is ‘evidence of a violation of chapter 93A . . . .” Bos. Reg’l,
538 F. Supp. 2d at 343 (quoting Peterborough Oil Co. v. Great Am. Ins. Co., 397 F.
Supp. 2d 230, 244 (D. Mass. 2005)). Specifically, plaintiffs argue that their allegations
show State Farm refused to pay their bills without conducting a reasonable
investigation and refused to pay although liability was reasonably clear, in violation of
sections 3(9)(d) and 3(9)(f) of chapter 176D. But the complaint does not state any facts
showing that State Farm failed to conduct a reasonable investigation, or that liability
was reasonably clear when State Farm refused to pay the bills at issue. The conclusory
4
To the extent that plaintiffs argue State Farm was required to review the medical bills for
“reasonableness,” see McGovern, 802 F. Supp. 2d at 308, their argument still lacks merit because
plaintiffs have not alleged any facts showing that State Farm failed to review the bills properly.
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Given these conclusions, the court need not reach State Farm’s additional argument that the
conduct at issue did not occur in Massachusetts.
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allegations on these points are insufficient. So even assuming chapter 176D is
applicable—which State Farm contests—plaintiffs have failed to plausibly allege that it
was violated. They consequently cannot rest any chapter 93A claim on that ground.
For the reasons described above, the complaint must be dismissed in its entirety
for failure to state a claim. Since the complaint’s flaws could be solved by amendment,
however, the court will briefly address defendant’s arguments regarding forum non
conveniens and severance in order to provide direction to the parties.
III. Forum Non Conveniens
“[T]he federal doctrine of forum non conveniens has continuing application only
in cases where the alternative forum is abroad,” Am. Dredging Co. v. Miller, 510 U.S.
443, 449 n.2 (1994), “and perhaps in rare instances where a state or territorial court
serves litigational convenience best,” Sinochem Int’l. Co. v. Malay. Int’l Shipping Corp.,
549 U.S. 422, 430 (2007). In all other cases, the appropriate disposition is transfer to a
different federal court rather than dismissal. See Sinochem, 549 U.S. at 430; 28 U.S.C.
§ 1404(a).
Defendant has pointed out a range of problems with hearing this case in a
Massachusetts forum, chief among them being that apparently none of the insurance
policies being litigated were issued in Massachusetts. On the other hand, the plaintiffs’
initial choice of forum deserves substantial deference, especially since it is their home
forum. See Adelson v. Hananel, 510 F.3d 43, 53 (1st Cir. 2007). The decision is a close
one and difficult to resolve on this limited record.
In the end, the court is convinced that this is not one of the rare cases where
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litigational convenience requires hearing plaintiffs’ claims in state court. Dismissal on
forum non conveniens grounds therefore is not warranted. The present record also
does not justify transferring this case to any other federal district, since there is no
reason to suppose any other single court would be better suited to hear the case as it
currently stands.
IV. Severance
Defendant moved in the alternative to sever the case into multiple separate
actions, one for each unpaid bill. Severance of that type is authorized by Federal Rule
of Civil Procedure 21. See Fed. R. Civ. P. 21; see also Acevedo-Garcia v. Monroig, 351
F.3d 547, 558 (1st Cir. 2003). In considering a motion to sever, the court may look to:
(1) whether the claims arise out of the same transaction or occurrence;
(2) whether the claims present some common questions of law or fact;
(3) whether settlement of the claims or judicial economy would be facilitated;
(4) whether prejudice would be avoided if severance were granted; and
(5) whether different witnesses and documentary proof are required for the
separate claims.
Preferred Med. Imaging v. Allstate Ins. Co., 303 F. Supp. 2d 476, 477 (S.D.N.Y. 2004).
Here, plaintiffs have alleged that State Farm breached 1,782 separate insurance
contracts by failing to reimburse for medical bills under separate policies; they have not
alleged any facts showing that these separate breaches arose from the same
transaction or occurrence. The first factor thus weighs heavily in favor of severance. In
addition, it is not clear whether the relevant terms of the insurance policies at issue
were identical, whether they were governed by identical state insurance laws, and
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whether State Farm allegedly breached them in the same fashion (for instance, by
giving the same “inaccurate” or “inconsistent” reason as to each policy). It therefore
does not appear at present that the claims present any common questions of law or
fact. Finally, judicial economy weighs against resolving all of these different questions
in a single proceeding, since a single factfinder would be unable to process all of the
information necessary to understand each of the 1,782 separate occurrences. On the
present record, then, severance seems to be an attractive option—as many other
courts have found in similar cases. See Preferred Med. Imaging, 303 F. Supp. 2d 476
(severing sixty insurance claims); see also Bos. Post Road Med. Imaging v. Allstate
Ins. Co., Civil Action No. 03-3923(RCC), 2004 WL 1586429 (S.D.N.Y. 2004) (severing
fifty-nine insurance claims); Deajess Med. Imaging v. Travelers Indem. Co., 222 F.R.D.
563 (S.D.N.Y. 2004) (severing thirty-three insurance claims).
Because the court is dismissing the complaint without prejudice, plaintiffs will
have the opportunity to reconsider their litigation strategy. To avoid severance,
plaintiffs may wish to voluntarily divide their claims into separate actions, with each
action aggregating only claims with a common nucleus of relevant facts (e.g., the terms
of the policy at issue, the manner in which it was allegedly breached, etc.). Plaintiffs will
then also be able to consider what forum is appropriate for whatever actions they
choose to assert.
V. Conclusion
For the foregoing reasons, State Farm’s motion to dismiss (Docket # 11) is
ALLOWED. Judgment may be entered dismissing the complaint without prejudice.
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Plaintiffs’ motion to compel (Docket # 19) and State Farm’s motion for leave to
file a reply brief (Docket # 20) are DENIED AS MOOT.
April 24, 2013
/s/Rya W. Zobel
DATE
RYA W. ZOBEL
UNITED STATES DISTRICT JUDGE
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