COOPER v. AETNA HEALTH INC. PA, CORP. et al

Filing 1024

OPINION. Signed by Judge Katharine S. Hayden on 6/30/15. (rg, )

Not for Publication
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

IN RE: AETNA UCR LITIGATION
MDL No. 2020
This document relates to: ALL CASES

Civ. No. 07-3541
OPINION

Katharine S. Hayden, U.S.D.J.
This matter comes before the Court on three separate motions: (1) plaintiffs’ motion for
leave to file a third amended consolidated complaint; (2) defendant Aetna’s motion to dismiss the
second and third amended consolidated complaint; and (3) the motion brought by defendants
UnitedHealth Group, Inc. and Ingenix, Inc. (together, “UHG defendants”) to dismiss the second
and third amended consolidated complaint. At issue are plaintiffs’ allegations that Aetna 1 failed
to reimburse insurance subscribers and health care providers properly for out-of-network medical
services (“ONET” or “ONS”). The crux of plaintiffs’ allegations is that Aetna—along with the
UHG defendants—orchestrated a scheme to artificially reduce and fix “usual, customary, and
reasonable” (“UCR”) schedules for out-of-network reimbursements using information from a
flawed database that was maintained by Ingenix. Subscribers—and by extension, providers—were
allegedly promised a “usual, customary, and reasonable” rate of reimbursement for services
rendered by non-participating providers, but were underpaid due to the defendants’ intentional

1

Aetna defendants include Aetna Health Inc. PA, Corp., Aetna Health Management, LLC,
Aetna Life Insurance Company, Aetna Health and Life Insurance Company, Aetna Health, Inc.,
and Aetna Insurance Company of Connecticut (together, “Aetna”).
1

scheme. Having considered the papers filed and heard oral argument, and for the reasons
expressed below, the Court grants plaintiffs’ motion to amend; grants in part and denies in part
Aetna’s motion to dismiss; and grants in part and denies in part UHG defendants’ motion to
dismiss.
I.

FACTUAL BACKGROUND
The subscribers here (“insureds” or “subscriber plaintiffs”) were insured by Aetna under

plans that provided for reimbursement to out-of-network health care providers. Aetna, like many
other health insurers, offers insurance plans that differentiate between coverage for medical
treatment from (a) in-network providers who have negotiated discounted rates with the insurer,
and (b) out-of-network providers who charge insured consumers their usual, non-discounted rates.
The subscriber plaintiffs agreed to pay higher premiums in exchange for that flexibility and the
right to obtain out-of-network benefits. (TAC ¶¶ 3-4.) The portions of ONET charges not paid by
Aetna are not credited toward deductibles or out-of-pocket maximums, which limit the total
amount a plan member has to pay for medical services over a given time period. (TAC ¶ 98.)
Aetna agreed to reimburse subscriber plaintiffs for ONET services at the lesser of (a) the
billed charge or (b) the UCR amount for that service in the geographic area in which it was
performed. “Because reduced fees are not negotiated with out-of-network providers, Aetna will
calculate reimbursement based on the usual, customary and reasonable charge,” defined as “the
amount customarily charged for the service by other providers in the same Geographic area (often
defined as a specific percentile of all charges in the Community).” (TAC ¶¶ 20-21.)
To determine the UCR, Aetna relied (at least in part) on a proprietary database licensed by
Ingenix. Ingenix is a wholly-owned subsidiary of UHG that licenses cost data and “customized
fee analyzers” to medical providers, healthcare insurers and automobile liability insurance

2

companies. (TAC ¶ 99.) “Essentially, Ingenix creates ‘modules’ or uniform pricing schedules,
that provide whole dollar payment amounts for each percentile (for instance, the 80th percentile)
for given medical procedures in various locations.” (TAC ¶ 99.) Ingenix entered this data market
through two acquisitions in the late 1990s: In 1997, Ingenix acquired Medicode, Inc., which sold
a provider charge database known as Medical Data Research (“MDR”) and, one year later, Ingenix
purchased the Prevailing Health Charges System (“PHCS”) database from the Health Insurance
Association of America (“HIAA”), a trade group for the insurance industry. (TAC ¶ 100.)
The PHCS database was developed by HIAA 2 in 1973 to aggregate historical charge data
for surgical and anesthesia procedures from data contributors like health insurance companies,
third-party payors, and self-insured companies. (TAC ¶ 101.) This database later expanded to
include data regarding dental, medical and drugs/medical equipment rates. (TAC ¶ 101.) The
information HIAA compiled consisted of four data points—the date of service, the Current
Procedural Terminology (“CPT”) code, the billed charge, and the geozip. 3 (TAC ¶ 108.) As part
of the PHCS sale, members of HIAA, including Aetna and UHG, were permitted to participate in
an ongoing “Ingenix PHCS Advisory Committee,” which provided for industry input into how
Ingenix acquired and managed its data. (TAC ¶ 331.) HIAA also entered into a ten-year
cooperation agreement with Ingenix, which guaranteed HIAA’s continued input into the
management of the Ingenix database in the form of a joint “Liaison Committee.” (TAC ¶ 331.)

2

HIAA, now known as America’s Health Insurance Plans, markets itself as a national
association representing providers of health benefits. (TAC ¶ 103.) According to plaintiffs, the
Board of Directors at AHIP included “executives of Defendants and their Co-Conspirators
including, but not limited to, the Chairman, President and CEO of Aetna, the CEOs of WellPoint
and UHG, and the president and CEO of Cigna.” (TAC ¶ 104.)
3
Plaintiffs allege that Ingenix divided all states into “geozips” composed of “cities and
towns sharing three-digits of postal zip codes, which were then grouped together by not only
geographical proximity, but also by what Ingenix arbitrarily decided were ‘data similarities.’”
(TAC ¶ 134.)
3

When Ingenix acquired both MDR and PHCS, it merged the underlying data. But because
the databases used different methodologies to produce their ultimate outputs, the dollar amounts
differed for individual procedure codes at reported percentiles. (TAC ¶ 114.) Ingenix allegedly
attempted to cure this discrepancy and merge the databases themselves through the “DataSpan”
initiative. DataSpan, plaintiffs claim, was intended to be a “statistically valid” scientific database
that “would be subject to peer review of methodology, white papers, documentation of the
methodology and results, and periodic external review.” (TAC ¶ 115.) According to plaintiffs,
the DataSpan project uncovered flaws in the databases, but was ultimately shelved after roughly
three years. (TAC ¶ 116.)
Ingenix continued to operate the database (the “Ingenix database” or the “database”),
marketed by UHG as the “industry standard,” and entered into licensing agreements with health
insurers, including Aetna and UHG. These agreements, among others, allowed Ingenix to (1)
“obtain data concerning billing rates and information from those health insurers” and/or (2)
“provide UCR information pricing schedules to those same health insurers … for their use in
billing ONET services.” (TAC ¶ 118.) Ingenix offered access to the database at a discounted price
to insurers in exchange for their submission of health care cost data—the amount of the discount
was based on the amount of data Ingenix accepted and used. (TAC ¶¶ 118, 335.) Aetna and UHG
were significant contributors.

Their data accounted for approximately 70% of the total

submissions during the class period. (TAC ¶ 337.)
Plaintiffs claim that health insurers, like Aetna, used the Ingenix data to determine UCR
rates for ONET “even though Ingenix broadcasts that it is not endorsing, approving or
recommending the use of the Ingenix data for UCR rates.” (TAC ¶ 119.) Specifically, with each
production of information, Ingenix states that its data is “provided to subscribers for informational

4

purposes only” and that it “disclaims any endorsements, approval, or recommendation or particular
uses” of the data. According to Ingenix, “[t]here is neither a stated nor an implied ‘reasonable and
customary charge’ (either actual or derived).” (TAC ¶ 119.)
Plaintiffs argue, however, that Aetna’s use of the database was entirely reflexive: “Aetna’s
computer system automatically adjudicates claims for the vast majority of ONET claims. The
Ingenix Database [was] automatically applied” and “[n]o human intervention was necessary to
evaluate the individual claims or the accuracy of the UCR provided by Ingenix.” (TAC ¶ 140.)
This allegation notwithstanding, plaintiffs themselves suggest a more varied process for
determining reimbursement. Plaintiffs allege that Aetna independently selected the Ingenix
Database percentile it would apply when it utilized the Database for ONET reimbursement. (SAC
¶¶ 323, 344.) Plaintiffs also allege that they were under-reimbursed for ONET services even when
Aetna did not utilize the Ingenix Database at all, including when Aetna utilized Medicare rates
(SAC ¶¶ 33, 35, 60, 358, 402, 445; TAC ¶ 172), in-network fee schedules (SAC ¶¶ 33, 60), or in
some cases “some other faulty methodology” (SAC ¶ 432; TAC ¶ 307). In all cases, however,
plaintiffs allege that that Aetna “prevented [them] … from knowing … the actual methodologies
used … to determine the UCR rate.” (SAC ¶ 508; see also TAC ¶ 367.)
When the Ingenix Database was used to determine ONET reimbursement, plaintiffs claim
that the data was flawed upon submission. Specifically, plaintiffs submit that Aetna and other
contributors “scrubbed” the data they contributed to Ingenix by removing the highest charges for
particular services. “From 1980 until the termination of its licensing of the Ingenix Database,
without substantial change, Aetna applied certain profiling rules (the ‘Profiling Rules’) to
determine whether or not it would collect and send the charge data for a particular claim to Ingenix.
If a claim ‘profiles,’ it is collected by Aetna as UCR data. If a claim does not ‘profile,’ it is not

5

collected or sent to Ingenix.” (TAC ¶ 128.) Plaintiffs argue that, during all or part of the class
period, Aetna “used its profiling rules to pre-edit its charge data to remove valid high charges prior
to sending the remaining charges to Ingenix for inclusion” in the Database. 4 (TAC ¶ 129.)
Plaintiffs also take issue with the manner in which Ingenix solicited and collected its data.
In arguing that the four data points solicited from insurers were insufficient, plaintiffs contend that
the information received “did not identify the provider, the patient (including age and condition),
the type of facility where the services were performed, any adjustment factors for cost of living,
the specific provider-type performing the services, the provider’s usual charge and licensure, the
type of facility where the service was performed …, or the prevailing fee or charge level for any
provider or service in a particular geographic region.” (TAC ¶ 131.) Additionally, plaintiffs argue
that, once Ingenix received the data from its contributors, “it further ‘scrubbed’ the pooled data to
remove high-end values but not low-end so-called outliers[,] so as to lower the percentile amounts
used to determine UCR.” (TAC ¶ 137.)
Plaintiffs allege that the “end result” of this process was a database that “produced flawed
uniform pricing schedules that systematically resulted in the under-reimbursement for ONET by
Aetna.” (TAC ¶ 151.) The flaws in this process, according to plaintiffs, include the following:
(a) questionable accuracy of the underlying data; (b) no inquiry into whether all of the contributors
were using the same criteria and coding accurately and consistently; (c) Ingenix’s practice of
aggregating data from other codes when there was insufficient charge data to provide a statistically
valid sample for a CPT code; (d) a combination of geozips to determine what Ingenix considered

4

As of 2005, Ingenix required its data contributors to certify with each submission that the
data provided was complete and not pre-edited or otherwise manipulated. Plaintiffs claim that,
despite submitting certifications to that effect, Aetna did not change its submission practice and
“knew that the certifications were false and misleading.” (TAC ¶ 130.)
6

to be a “sociodemographic region” when there was no verification for such regions; (e) scrubbing
and editing of data by individual data contributors, including Aetna, before the data was sent to
Ingenix; (f) further scrubbing and editing of data by Ingenix; (g) the absence of an appropriate
statistical methodology, which resulted in data that was inappropriately biased downward; (h)
inclusion of charges for procedures in non-comparable geographic areas; (i) failure to segregate
procedures performed by providers of the same or similar skill; (j) inclusion of discounted innetwork data; and (k) failure to distinguish between the number of medical providers whose
charges are reflected. (TAC ¶ 151.) These purported flaws notwithstanding, plaintiffs contend
that “the uniform pricing schedules created by the Ingenix Database were automatically relied
upon to determine UCR rates despite the fact that Ingenix actually informed insurance companies
(including Aetna) that it was not endorsing, approving or recommending use of it to determine
UCR rates.” (TAC ¶ 147.)
This system of ONET reimbursement eventually became the subject of an investigation by
the New York Attorney General. The NYAG investigative task force determined that health
insurers who participated in the Ingenix data collection maintained an incentive to provide
artificially low claims information, thus producing a “garbage in, garbage out” effect. On January
13, 2009, the NYAG issued “Health Care Report: The Consumer Reimbursement System is Code
Blue,” which concluded that the Ingenix database was an “industry-wide problem,” a “rigged
system,” “fraudulent,” and “critically ill.” (TAC ¶ 159.) The NYAG also found that use of the
Ingenix Database resulted in a substantial reduction of reimbursement for ONET care—the report
“ultimately revealed that insurers systematically under-reimburse[d] their insured patients for
doctors’ office visits in New York by 10-28%, and that up to 110 million Americans [were] harmed
by” their conduct. (TAC ¶ 158.) Aetna and UHG settled with the NYAG for $20 million and $50

7

million, respectively, and those funds were earmarked for the creation of an independent
organization, FAIR, which will own and operate a new database for UCR calculations. (TAC ¶
163.)
Defendants’ conduct also has been challenged in other civil actions. Parallel litigations
against related entities have been filed in the District Court of New Jersey in Franco v. Connecticut
General Life Insurance, Co., No. 07-6039 (D.N.J.) and in the Central District of California in In
re WellPoint, Inc. Out-of-Network “UCR” Rates Litigation, No. 09-2074 (C.D. Cal.). In Franco,
similarly situated plaintiffs asserted claims against Connecticut General Life Insurance (“Cigna”)
and the UHG defendants for their role in the alleged scheme to manipulate ONET reimbursements.
Judge Chesler partially granted defendants’ motion to dismiss in that action, dismissing all of the
claims raised by provider plaintiffs and association plaintiffs, several claims raised under ERISA,
and all of plaintiffs’ antitrust claims. He subsequently denied class certification, and granted
summary judgment for Cigna against the plaintiffs’ RICO claims and contract-based claims. In
WellPoint, in a series of three decisions, Judge Gutierrez dismissed with prejudice all of the
plaintiffs’ antitrust and RICO claims, and a number of the ERISA claims, and on September 3,
2014, denied plaintiffs’ motion for class certification.
II.

PROCEDURAL HISTORY
This action began back in July 2007, when Michele Cooper of Short Hills New Jersey filed

a class action complaint against Aetna, acting on behalf of herself and a putative class of similarly
situated subscribers to Aetna group health plans. [D.E. 1.] Very soon afterwards, attorneys for
Aetna filed a Notice to the Judicial Panel on Multi-District Litigation that Cooper might be a tagalong action to In re Managed Care, MDL No. 1334, then pending in the Southern District of
Florida. This engendered a letter response from Cooper’s co-counsel to the MDL Panel providing

8

a rationale for not considering Cooper as a potential tag-along case [D.E.10], which was followed
by Aetna’s formal motion to transfer [D.E. 32] filed in October 2007.
While this motion was being briefed [D.E. 34, 44], counsel for Cooper filed a first amended
complaint in October [D.E. 36] and a second amended complaint in November 2007. [D.E. 49.]
In December 2007, the MDL Panel issued an order [D.E. 63] that denied the motion to transfer on
grounds that the multidistrict litigation In re Managed Care had consolidated cases that were
brought by providers, whereas the Cooper litigation was brought on behalf of subscribers. Also,
the order noted, Cooper was “similar to other actions currently pending in … New Jersey involving
the Ingenix, Inc., system.”
Thereafter, Aetna moved to dismiss the second amended complaint. [D.E. 58.] The motion
was briefed [D.E. 70, 78, and 79] and on February 14, 2008, plaintiffs gave notice that they
intended to add a plaintiff who would be seeking injunctive relief, requiring the filing of a third
amended complaint. Ultimately this was done [D.E. 83], and Aetna moved to dismiss in March
2008. [D.E. 89.] This motion was fully briefed [D.E. 89-1, 96, and 104.]
Contemporaneously, pretrial orders were filed setting dates for ongoing discovery and any
related motions. In December 2008, Aetna sought an order from the MDL Panel consolidating
Cooper with a case then pending in the District of Connecticut, Weintraub v. Ingenix, Inc., which
also named UnitedHealth Group as a defendant. In its motion to transfer [D.E. 129], Aetna
described the Cooper and Weintraub plaintiffs as seeking to represent “overlapping classes with
millions of common class members ….” and argued for the benefits of “a rational, sequenced
pretrial program that [would] streamline discovery, minimize witness inconvenience and overall
discovery expense, reduce the opportunities for conflicting rulings, preserve judicial resources,
and generally permit all parties to benefit from the economies of scale that MDL proceedings

9

uniquely facilitate.” UHG and the Weintraub plaintiffs opposed; the Cooper plaintiffs responded
by proposing to add four other pending cases, three in the District of New Jersey and one in the
Southern District of New York. While the parties awaited a ruling from the MDL Panel, plaintiffs
sought leave to file a fourth amended complaint, which added new plaintiffs and new allegations.
[D.E. 154.]
As of March 2009, the fully briefed motion to dismiss the third amended complaint was
pending, various motions directed toward appointment of interim lead counsel were also pending,
and an order was signed that permitted a fourth amended complaint [D.E. 164] to be filed. On
April 8, 2009, the MDL consolidated the Cooper and Weintraub litigations. In June 2009, the first
Case Management Order was issued in what was now MDL No. 2020, In re Aetna UCR Litigation.
A consolidated amended complaint was filed on July 1, 2009 [D.E. 219], which was later
superseded on December 24, 2009 by the second consolidated amended complaint [D.E. 319].
Defendants moved to dismiss on two separate occasions, but neither motion was adjudicated.
Instead, the parties made known that they were actively engaging in settlement discussions,
both directly and in more than ten mediation sessions with the Hon. Nicholas Politan, since
deceased. The result was a settlement between the majority of the plaintiffs and Aetna, which this
Court preliminarily approved. [D.E. 899.] In the settlement agreement [D.E. 839-2], Aetna
reserved the right to terminate settlement if “the aggregate difference between charges billed for
Covered Services or Supplies from Out-Of-Network Health Care Providers or to Subscriber Class
Members who were mailed the Mailed Notice and submitted Opt-Out requests, and the
corresponding Allowed Amount for those Covered Services or Supplies [under the settlement]
exceeds $20 million.” [D.E. 839-2, Section 7.3(iii).] In what counsel acknowledged was an

10

unusual and unexpected development, the Opt-Out levels exceeded the agreed upon threshold by
hundreds of millions of dollars and Aetna filed a notice of termination.
On July 11, 2014, plaintiffs moved for leave to file a third amended joint consolidated
complaint (“TAC”) [D.E. 979], which purports to assert the following causes of action: (1) claims
for unpaid benefits under group plans covered by ERISA, under which plaintiffs also seek
declaratory relief “related to enforcement of the plan terms, and to clarify rights to future benefits”;
(2) breach of the plan provisions for benefits in violation of ERISA Section 502(a)(1)(B); (3)
failure to provide accurate Evidence of Coverage and Summary Plan Description, under which
plaintiffs seek “appropriate relief under ERISA, including declaratory relief, surcharge and
profits”; (4) violation of fiduciary duties of loyalty and due care, under which subscriber plaintiffs
seek “declaratory relief, removal as a breaching fiduciary, surcharge and profits”; (5) breach of
fiduciary duties of loyalty and due care in violation of ERISA Section 404, under which provider
and association plaintiffs seek declaratory relief and any other available equitable relief; (6) failure
to provide full and fair review of denied claims; (7) declaratory relief relating to Aetna’s violation
of ERISA; (8) violations of RICO, 18 U.S.C. § 1962(c), based on predicate acts of mail and wire
fraud; (9) embezzlement and/or conversion in violation of 18 U.S.C § 664; (10) RICO conspiracy
under 18 U.S.C. § 1962(d); (11) violation of Section 1 of the Sherman Act; and by plaintiff
Weintraub, (12) violation of New York’s General Business Law § 349, which prohibits deceptive
acts or practices in the conduct of any business in the state of New York; (13) breach of contract;
(14) breach of the implied covenant of good faith and fair dealing; and (15) unjust enrichment.
Aetna and the UHG defendants separately opposed plaintiffs’ motion for leave to amend
and cross-moved to dismiss most of the claims. [D.E. 995 and D.E. 996, respectively.] UHG and
Ingenix move to dismiss all claims raised against Ingenix and UHG (whether in the second

11

amended complaint or proposed third amended complaint) because neither complaint states a
viable claim against them. Aetna moves to dismiss all causes of action, with the exception of the
claims for benefits, maintaining that the arguments set out in its motion all apply with equal force
to the second amended consolidated complaint (“SAC”) and to the TAC. The Court held oral
argument with regard to these motions on October 27, 2014.
For the reasons that follow, the Court grants plaintiffs’ motion for leave to amend and, as
to the TAC, grants in part and denies in part Aetna’s cross-motion to dismiss, and grants in part
and denies in part UHG defendants’ cross-motion to dismiss.
DISCUSSION
III.

MOTION FOR LEAVE TO AMEND
Initially, the parties dispute whether the motion for leave to amend should be reviewed

under Fed. R. Civ. P. 15(a)(2) or the more demanding Rule 16.
Rule 16(b) requires, among other things, that scheduling orders include a time limit for
amended pleadings and, once that time has passed, that the moving-party demonstrate “good
cause” for leave to amend. Citing a pretrial scheduling order dated December 15, 2008, which
provides that “[a]ny motion to add claims or defendants shall be filed by April 9, 2009,” UHG
defendants argue that Rule 16 applies and therefore plaintiffs must show good cause before the
amended complaint may be considered. As plaintiffs argue, however, that “ship has sailed.”
(Plaintiffs Opp. at 2.) At the March 18, 2014 conference before this Court, the parties convened
to develop the plan for going forward following the collapse of the proposed settlement and the
Court directed them to work out dates for motion practice. The parties agreed on a motion
schedule, which contemplated plaintiffs’ motion for leave to amend to be filed by June 16, 2014—
a deadline later extended, with approval of the Court, to June 30, and then to July 11. [D.E. 976,

12

978.] The time has therefore passed to suggest that the motion now before the Court violates a
scheduling order entered into over six years ago. The motion for leave to amend was timely filed
under the Court’s direction, and its merits will be considered under Rule 15(a)(2), not Rule 16.
The decision to grant or deny leave to amend pleadings under Rule 15(a)(2) is committed
to the sound discretion of the Court. Gay v. Petstock, 917 F.2d 768, 772 (3d Cir. 1990). Leave to
amend is freely granted “when justice so requires,” but may be denied where there is “undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of
the amendment, [or] futility of the amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962).
Defendants argue that leave to amend should be denied based on the first and last Foman criteria—
undue delay and futility.
With regard to timeliness, proof of delay alone is insufficient; courts will deny a request
for leave to amend only where the delay becomes undue, such as when the amendment will create
an “unwarranted burden on the court.” Adams v. Gould, Inc., 739 F.2d 858, 868 (3d Cir. 1984).
Plaintiffs need only “demonstrate that its delay in seeking to amend is satisfactorily explained,”
Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990) (citations
omitted), and the record here provides satisfactory grounds for plaintiffs’ latest application. They
filed their second amended consolidated complaint on December 24, 2009, around which time the
parties “began a rather long process of settlement discussions, which ultimately led to [a]
settlement in principle in February 2012.” (Plaintiffs Br. at 6.) The settlement agreement was
submitted to the Court for preliminary approval in December 2012, but because “of the various
objections to the proposed settlement, and Judge Chesler’s recusal, final approval of the proposed
settlement was not scheduled until March 18, 2014.” (Plaintiffs Br. at 6.) The settlement was

13

terminated at around the same time, and discussions regarding the litigation’s future course of
action—including amendments to the then-operative pleading—began almost immediately. The
delay was thus not “undue” and the timeliness of plaintiffs’ request is not cause for denial.
Defendants also argue that the proposed amended complaint is “futile” because it fails to
state a viable claim for relief. The Court, in its discretion, will not consider this argument in
connection with its review of the motion for leave to amend. Defendants have cross-moved to
dismiss and made clear that all of the arguments apply with equal force to both the second and
third amended complaint. Accordingly, the Court declines to engage in a detailed futility analysis
at this juncture. Such arguments are better suited for consideration of defendants’ cross motions to
dismiss. See Strategic Envtl. Partners, LLC v. Bucco, 2014 WL 3817295 at *2 (D.N.J. Aug. 1,
2014) (Clark, Mag. J.) (preserving futility argument for anticipated motions to dismiss);
Diversified Indus., Inc. v. Vinyl Trends, Inc., 2014 WL 1767471 at *1 n.1 (D.N.J. May 1, 2014)
(Simandle, J.) (finding, “in the interest of judicial economy and in the absence of prejudice,” that
the amended counter-claim should be treated as the operative pleading for the purposes of motion
to dismiss despite the fact that the Court had not yet granted leave to amend). The Court therefore
grants plaintiffs’ motion for leave to amend, and considers defendants’ motions to dismiss as
directed to the third amended consolidated complaint—the operative pleading in this action,
hereinafter referred to as the complaint. 5

5

Plaintiffs argue that Rule 12(g) “precludes [d]efendants from raising certain arguments that
they could have asserted in their earlier motions to dismiss but did not.” (Plaintiffs Opp. at 8.)
Plaintiffs contend that the “rule provides that a party must not make a successive Rule 12 motion
raising a defense or objection that was available and omitted from an earlier motion.” (Plaintiffs
Opp. at 8). Plaintiffs’ position is contrary to the law of this circuit, Knight v. ChoicePoint, Inc.,
2010 WL 2667410, at *2 (D.N.J. June 28, 2010) (Hillman, J.) (finding that Rule 12(g) does not
apply where the court “never reached the merits of Defendants’ first motion to dismiss”), and is
also inconsistent with the Court’s instruction to “attack everything at once.” (UHG Reply Br. at
1) (citing July 29, 2014 Hearing Tr. at 8).
14

IV.

STANDING
Plaintiffs are comprised of the following putative classes:

(1) subscriber plaintiffs,

individually named and representative of a class that contracted for health insurance plans affected
by the alleged under-reimbursement scheme; (2) provider plaintiffs, individually named and
representative of a class of out-of-network medical providers that treated members of the
subscriber class; and (3) association plaintiffs, including the American Medical Association,
American Podiatric Medical Association and the New Jersey Psychological Association, suing
individually and on behalf of their members. Defendants argue that, for varied reasons, all putative
classes lack standing to assert certain of the claims they raise.
1. Subscriber Plaintiffs
The subscriber plaintiffs here include Michele Cooper, Michele Werner, Darlery Franco,
Paul and Sharon Smith, Carolyn Samit, John Seney, Alan John and Mary Ellen Silver, and Jeffrey
Weintraub. 6 All were insured under an Aetna-sponsored insurance plan, and all received care for
ONET services. Of these nine individuals, the UHG defendants contend that plaintiffs Samit,
Franco and the Silvers lack standing to pursue their antitrust or RICO claims because they fail to
allege out-of-pocket losses resulting from the challenged conduct.
Under both the Sherman Act and RICO, claims may be asserted only if the plaintiff was
“injured in his business or property.” See Agency Holding Corp. v. Malley-Duff & Assocs., Inc.,
483 U.S. 143, 151 (1987) (“Both RICO and the Clayton Act …. compensate the same type of
injury; each requires that a plaintiff show injury ‘in his business or property by reason of’ a

6

On July 21, 2011, plaintiff Michele Cooper, through counsel, stipulated to the voluntary
dismissal of her claims against UHG and Ingenix in the second amended consolidated complaint.
As plaintiffs concede, the “TAC as drafted cannot revive those claims.” As such, the claims she
now purports to raise against the UHG defendants are dismissed.
15

violation.”); Ethypharm S.A. v. Abbott Labs., 707 F.3d 223, 232 n.16 (3d Cir. 2013) (antitrust);
Maio v. Aetna, Inc., 221 F.3d 472, 483 (3d Cir. 2000) (RICO). This showing requires “proof of a
concrete financial loss and not mere injury to a valuable intangible property interest.” Maio, 221
F.3d at 483. The UHG defendants maintain that these subscribers have not sufficiently pled that
they suffered any injury to property or business “because they do not allege making out-of-pocket
payments to their ONET providers by reason of Aetna’s supposed under-reimbursement of their
medical claims due to the Ingenix Databases.” (UHG Br. at 34.) In support, defendants direct the
Court to this district’s decision in Franco, which relies on Maio.
In Maio, enrollees in an Aetna health maintenance organization (“HMO”) sued Aetna over
its “failure to disclose its restrictive and coercive internal policies and practices, which render[ed]
its advertising, marketing and membership materials false and misleading in violation of RICO.”
Maio, 221 F.3d at 474. The insureds alleged that Aetna “engaged in a massive nationwide
fraudulent advertising campaign designed to induce people to enroll in its HMO by representing
that Aetna affirmatively manages its members’ health care so as to … raise the quality of care to
a ‘level of health care never available under the old fee-for-service system,’ when in fact, Aetna
designed undisclosed internal policies to ‘improve defendants’ profitability at the expense of
quality of care.’” Id. at 474. With regard to the injury to business or property necessary to confer
standing under RICO, appellants claimed that “each member of the nationwide class paid too much
in premiums for an ‘inferior’ health care product, i.e., the inferior health insurance they received
from Aetna through its HMO plan.” Id. at 484. Aetna argued that this showing was insufficient
because “the value of appellants’ HMO memberships cannot be diminished unless and until
appellees’ alleged undisclosed policies actually cause a denial of medical care or some other
benefit to which appellants are entitled.” Id. at 486.

16

The Third Circuit agreed and affirmed the district court’s dismissal of plaintiffs’ claims for
lack of standing.

The court found that, because “appellants’ property interests in their

memberships in Aetna’s HMO plan take the form of contractual rights to receive a certain level
(quantity and quality) of benefits from Aetna through its participating providers …, it inexorably
follows that appellants cannot establish a RICO injury to those property rights (which in turn would
cause financial loss in the form of overpayment for inferior health insurance) absent proof that
Aetna failed to perform under their parties’ contractual arrangement.” Id. at 490. That failure to
perform, the court found, would be evidenced by the “receipt of inadequate, inferior or delayed
care, personal injuries resulting therefrom, or Aetna’s denial of benefits due under the insurance
arrangement.” Id.
The Maio decision was not predicated solely on the absence of an out-of-pocket loss. See
id. at 483 (finding that the “injury to business or property element of [RICO] can be satisfied by
allegations and proof of actual monetary loss) (emphasis supplied). Rather, what the court found
lacking was, among other things, some concrete, objective basis to find that Aetna failed to perform
under the policy by causing inferior care to be provided relative to the price paid. See id. at 496.
Appellants in Maio merely claimed that their health insurance was “inferior”—a conclusion
supported only by their “subjective determination that the policies and practices [were] so
inherently unsound that they inevitably [would] serve as the impetus for physicians to provide
substandard health care to their patients at the point at which the enrollees actually seek treatment.”
Id. at 496.
Subscriber plaintiffs here are not alleging injury based on their subjective determination of
plan value; they claim to have been harmed by Aetna’s underpayment of insurance benefits for
ONET services. And while the UHG defendants are correct that plaintiffs Samit, Franco and the

17

Silvers fail to show that they were forced to pay the difference out-of-pocket, the complaint does
allege that they suffered “out-of-pocket losses in the form of higher co-payments” and were
harmed “by having overpaid for their health insurance plans … and receiv[ing] policies that were
worth less than what they paid.” (TAC ¶ 414.) The Court finds that, drawing all inferences in
plaintiffs’ favor, the subscribers allege an injury that demonstrates—by an objective measure—
that Aetna “failed to perform under the parties’ contractual arrangement.” At this pleading phase,
that is sufficient. See Nat’l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 256 (1994) (“[A]t
the pleading stage, general factual allegations of injury resulting from the defendant's conduct may
suffice, for on a motion to dismiss we presume that general allegations embrace those specific
facts that are necessary to support the claim.”).
2. Provider Plaintiffs
The provider class asserts claims under ERISA for benefits and other relief, and for
violations of RICO, 18 U.S.C. §§ 1962(c), 664 and 1962(d). Aetna argues that the provider
representatives lack standing to assert these claims. 7
As to ERISA, provider plaintiffs argue that they may properly maintain a claim under
Section 502(a)(1)(B) because they received assignments of benefits from their ONET patients.
See CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 176 n.10 (3d Cir. 2014) (“We adopt the
7

The Third Circuit's holding in Nat'l Health Plan Corp. v. Teamsters Local 469, 585 F.
App’x 832, 835 (3d Cir. 2014), bears on the standing issue Aetna raises. Drawing on the Supreme
Court's instruction in Lexmark Int'l Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1387
(2014), the court found that a party's entitlement to bring suit under ERISA is not actually a
question of statutory standing. Id. at 835. Rather, the court must consider the issue under a
"straightforward cause-of-action analysis" to "determine, using traditional tools of statutory
interpretation, whether a legislatively conferred cause of action encompasses a particular plaintiff's
claim." Id. (quoting Lexmark, 134 S. Ct. at 1387). This Court therefore follows the Third Circuit's
guidance in considering whether the alleged assignment here is sufficient to place Mullins, and the
provider class by extension, "within the class of plaintiffs whom Congress has authorized to sue."
Id. at 835 (quoting Lexmark, 134 S. Ct. at 1387).
18

majority position that health care providers may obtain standing to sue by assignment from a plan
participant.”). When a provider obtains a valid assignment from an ERISA plan member, the
provider is deemed to “stand in the shoes” of the member with respect to the benefits owed and
may pursue those benefits in an action against the insurer under Section 502(a)(1)(B). Id. at 178.
Accordingly, to show that they fall within the class of individuals entitled to bring suit here,
provider plaintiffs are required to demonstrate that they have assignments from ERISA plan
members—and that the assignments encompass the ERISA claims pursued.
Citing CardioNet, among other authority, plaintiffs argue that provider Brian Mullins,
M.S., P.T., as an alleged assignee of his patient’s right to insurance reimbursement, is entitled to
enforce the terms of the Aetna plans implicated here and recover the ONET benefits allegedly
underpaid. 8 Mullins asserts that he “obtained an assignment of benefits from his patients during
the initial patient intake process, through which he is paid directly by Aetna for providing health
care to its Members.”

(TAC ¶ 303.)

Specifically, Mullins’s patients “authorize[d]” their

“insurance carrier to make payment directly to Eastern Monmouth Physical Therapy, LLC.” 9
Aetna, relying primarily on this district’s decision in Franco, argues that this so-called
“convenience assignment” is insufficient to assign away any ERISA cause of action asserted here.
Aetna maintains that the document merely “allows direct payment to the provider as a

8

The third amended consolidated complaint makes reference to Abraham I. Kozma, P.A.,
as an additional provider plaintiff. This was in error. Brian Mullins, according to plaintiffs, “is in
fact the only current Provider Plaintiff.” (Plaintiffs Opp. at 44 n.16.) Kozma’s claims are
dismissed.
9
The complaint here did not attach or include the terms of this assignment or authorization,
but defendants submitted to the Court a copy of the same. Because this form is the exclusive
means for provider plaintiffs’ recovery under their ERISA claims, the document is sufficiently
“integral to” the complaint to warrant review. As such, the document is proper for consideration
here, and does not necessitate conversion of this motion to one for summary judgment. See In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).
19

convenience, without transferring any of the underlying rights under the member’s plan,” rather
than “transferring the member’s right to benefits and his rights to sue for those benefits under
Section 502(a) of ERISA.” (Aetna Br. at 35 citing Franco, 818 F. Supp. 2d at 807); see also MHA,
LLC v. Aetna Health, Inc., 2013 WL 705612, at *8 (D.N.J. Feb. 23, 2013) (Chesler, J.) (“There is
simply nothing in the [assignment] language cited by Plaintiff that suggest that the parties intended
… a full transfer to take place. Rather, the only reasonable interpretation is that the parties, for
convenience, anticipated that provider would be able to receive payment directly from the insurer
without the beneficiary relinquishing his or her rights.”). Provider plaintiffs, naturally, disagree.
They argue that, as in Conn. State Dental Ass’n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1352
(11th Cir. 2009), “assignment of the right to payment is enough to create standing” under Section
502(a). See also Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371
F.3d 1291, 1294 (11th Cir. 2004) (“Healthcare provides may acquire derivative standing … by
obtaining a written assignment from a beneficiary or ‘participant’ of his right to payment of
benefits.”)
The Third Circuit has yet to decide whether assignment of a right to payment is alone
sufficient to permit providers to bring ERISA claims against the insurer—though as of the date of
this decision, it has been squarely raised in an appeal now pending in American Chiropractic Ass’n
v. American Specialty Health, Inc. (No. 14-1832) and North Jersey Brain & Spine Center v. Aetna,
Inc. (No. 14-2101). As Aetna points out, however, the authorization on which Mullins relies fails
to support his ERISA claims because it authorizes his patient’s insurance carrier “to make payment
directly to Eastern Monmouth Physical Therapy, LLC.” The language transfers no rights to
Mullins himself and Eastern Monmouth Physical Therapy LLC, a distinct legal entity, is not a
plaintiff in this action.

20

In Desantis v. Kahala Corp. Inc., 2008 WL 5156765 (D.N.J. Dec. 9, 2008) (Wolfson, J.),
an owner and shareholder of a limited liability company brought an action to remedy a fraud on
the company. The court granted defendants’ motion to dismiss, finding that the plaintiff lacked
standing to pursue claims on the company’s behalf because it was a distinct entity not party to the
action. Critical to this outcome was the plaintiff’s failure to allege that “he, personally, purchased
any of the rights alleged … in the Complaint; that he is the franchisee under the Franchise
Agreement that A Team signed with Cold Stone; that he personally entered into a transfer
agreement for the Ocean rights; and, finally, that he entered into the sublease for the Ocean store
premise.” Id. at *3 (emphasis added). Mullins fails to allege ownership of any rights to payment
for the ONET care he provided. To the extent validly transferred, those rights belong to Eastern
Monmouth Physical Therapy LLC. Accordingly, the ERISA claims Mullins asserts under counts
II, III, V and VII are dismissed.
3. Association Plaintiffs
The association class asserts claims similar to those raised by the provider plaintiffs—for
ERISA violations under counts II, V and VII, and for RICO violations under counts VIII through
X. The ERISA claims are asserted in a representative capacity, on behalf of each association’s
provider members, and the RICO claims are asserted by the associations in their individual
capacity.
To sue under ERISA in a representative capacity, the association plaintiffs must allege that
(1) their members would otherwise have standing to sue in their own right; (2) the interests they
seek to protect are germane to the organization’s purpose; and (3) neither the claim asserted nor
the relief requested requires the participation of individual members in the lawsuit. See Hunt v.
Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343 (1977). Aetna argues that the association

21

plaintiffs’ claims must be dismissed because they fail to satisfy the first and third requirements
under Hunt. The Court agrees.
As a threshold matter, the only provider plaintiff in this action, Mullins, has no basis to
pursue his claims under ERISA. While plaintiffs maintain that other providers will be joined or
rejoined to this action, the Court will not engage in a hypothetical analysis regarding the extent to
which they will have standing to pursue ERISA claims later on. The association plaintiffs therefore
cannot satisfy the first element under Hunt. They also fail to allege that the claims asserted will
not require the participation of individual provider members—provider plaintiffs are permitted to
sue under ERISA only upon proof of a valid assignment of benefits. Such a finding is necessary
to prove that the provider plaintiffs have standing, and therefore also is necessary to show that the
association plaintiffs have standing to sue in a representative capacity on the providers’ behalf.
Resolution of the ERISA claims thus requires “careful examination, on a provider-by-provider
basis, of the assignments signed by patients and whether they contain the language required for a
valid assignment of ERISA, RICO or antitrust claims to exist.” Franco, 818 F. Supp. 2d at 813;
see also Am. Chiropractic Ass’n v. Am. Specialty Health, Inc., 2014 WL 1301943, at *10 (E.D.
Pa. Mar. 27, 2014) (finding that medical association plaintiff’s claims under ERISA would require
“participation of its members in order to demonstrate … [that] its members had obtained sufficient
assignments of their patient’s rights and claims under ERISA.”). Consequently, the association
plaintiffs fail to satisfy the Hunt test on both the first and third prongs, and they lack standing to
pursue any claims in this action in a representative capacity.
V.

ERISA NON-BENEFITS CLAIMS
Counts III through VII of the third amended consolidated complaint assert ERISA claims

unrelated to benefits. Plaintiffs assert these causes of action against Aetna alone for failure to

22

provide an accurate explanation of coverage (“EOC”) and summary plan description (“SPD”)
(count III), violation of its fiduciary duties (counts IV and V), and failure to conduct a full and fair
review of the subscribers’ claims for coverage (counts VI and VII). Plaintiffs’ claims under counts
III, VI and VII hinge in part on how far Aetna was required to disclose the methodology underlying
its ONET reimbursement, as do some aspects of counts IV and V. The Court first considers that
issue as it relates to all counts.
1. Disclosure Obligations
Plaintiffs argue that “Aetna’s disclosure obligations under ERISA include[d] furnishing
accurate materials summarizing its group health plans, known as [summary plan description]
materials, under 29 U.S.C. § 1022 and supplying accurate EOCs, SPDs and other required
information.” (TAC ¶ 465.) They assert that “Aetna’s failure to disclose material information
about its ONET Benefit Reductions[,] its contribution of flawed data to Ingenix and its use of such
data … violated ERISA, federal regulations and federal common law” and are actionable under 29
U.S.C. § 1132(c). (TAC ¶ 466.)
In support, plaintiffs first rely on ERISA Section 102, which requires administrators like
Aetna to provide plan participants with summary plan descriptions that include certain information
listed in subsections (a) and (b) of the provision. Subsection (a) provides that the SPD shall be
“written in a manner calculated to be understood by the average plan participant, and [] be
sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries
of their rights and obligations under the plan.” Subsection (b) mandates that the SPD contain
information related to the plan, including, among other things, “the plan’s requirements respecting
eligibility for participation and benefits” and “circumstances which may result in disqualification,
ineligibility or denial or loss of benefits.” As the courts in Franco and WellPoint noted, however,

23

the statute does not “include information concerning the methodology for determining UCR in
particular or, more generally, for calculating the amount owed to the participant or beneficiary on
an ONET claim.” Franco, 818 F. Supp. 2d at 821; see also WellPoint II 903 F. Supp. 2d at 922,
(finding that because the “weight of persuasive authority holding that a health insurer is under no
obligation to disclose its UCR methodologies or physician compensation structure, combined with
the ERISA Subscribers' failure to point to any authority supporting their position, the Court sees
no reason to effectively let the same disclosure requirement in through the back door by requiring
insurers to disclose that their ‘UCR methodologies are corrupt,’ at least where they sufficiently
disclose that reimbursements for out-of-network services differ from reimbursements for innetwork services, and may be capped according to some reimbursement methodology.”) (citations
omitted). Plaintiffs’ opposition does not dispute the conclusion of either court, and fails to advance
any alternative basis for relief. Because plaintiffs identify no authority, either in the language of
Section 102 or elsewhere, that supports their expansive interpretation, their claim for nondisclosure is dismissed to the extent it relies on Section 102(a) and (b).
ERISA Section 104(b)(4), the only other statutory provision referenced in count III’s
disclosure claim, likewise does not support plaintiffs’ position. That section imposes a duty to
provide only certain types of information: “the latest updated summary[] plan description, and the
latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or
other instruments under which the plan is established or operated.” And the final leg of subsection
(b)(4)—requiring disclosure of any “instrument under which the plan is established or operated”—
does not extend to the deficiencies challenged here regarding UCR or ONET reimbursement data.
Rather, the phrase has been interpreted in this district and others to relate only to legal documents
governing the plan. See Morley v. Avaya, 2006 WL 2226336, at *17 (D.N.J. Aug. 3, 2006)

24

(Cooper, J.) (“A document ‘under which the plan is established or operated’ is not just ‘any
document relating to a plan, but only formal documents that establish or govern the plan.’”); see
also Ames v. Am. Nat’l Can Co., 170 F.3d 751, 758 (7th Cir. 1999) (“[T]he use of the term
‘instruments’ implies that the statute reaches only formal legal documents governing a plan.”).
Plaintiffs provide no authority suggesting that the information they seek, including UCR
calculations, is within Section 104(b)(4)’s disclosure requirement, or any other under ERISA, and
count III therefore is dismissed.
Plaintiffs further assert in counts VI and VII that Aetna failed to provide a “full and fair
review” of denied claims under ERISA Section 503 by “making ONET Benefit Reductions that
[were] inconsistent with or unauthorized by the terms of Members’ EOCs and SPDs, as well as by
failing to disclose data, its methodology and other critical information relating to its ONET Benefit
Reductions.” In so arguing, however, plaintiffs fail to identify any specific aspect of the statute
that they claim Aetna violated.
Section 503 has two requirements: (1) the plan must set forth its “specific reasons” for a
denial of benefits; and (2) it must afford participants the opportunity for a full and fair review of a
claim denial decision. 29 U.S.C. § 1133. But plaintiffs want this provision to go further and
require insurers to explain what information the plan considered in arriving at its decision—in this
case, ONET claims reimbursement methodology. This would add significantly to the disclosure
requirements already imposed by Section 503 and other ERISA provisions. Much more than the
“specific reason” for the insurer’s determination, Plaintiffs’ theory of liability assumes “that the
functional equivalent of a data report on the calculation of UCRs is a necessary component of
ERISA’s disclosure requirements.” Franco, 818 F. Supp. 2d at 823. This is contrary to the wellestablished canon of statutory construction that specific statutory language governs the general—

25

in light of which it has been held that courts “should not add to the specific disclosure requirements
that ERISA already provides.” See Ehlmann v. Kaiser Found. Health Plan of Texas, 198 F.3d
552, 555 (5th Cir. 2000) (“Given the canon of statutory construction that the specific language in
a statute rules the general, this court should not add to the specific disclosure requirements that
ERISA already provides.”). Because plaintiffs identify no authority supporting their broad vision
of Section 503, counts VI and VII are dismissed to the extent based on the failure to disclose the
ONET reimbursement methodology. 10
2. ERISA Fiduciary Duties
Finally, in counts IV and V, plaintiffs assert claims based on Aetna’s alleged breach of its
fiduciary duties as administrator under the plan. Specifically, plaintiffs allege that Aetna “violated
its fiduciary duties of loyalty and due care by, inter alia, making ONET Benefit Reductions that
were unauthorized by EOCs and SPDs; failing to inform Aetna Members of flaws in the Ingenix
Databases that make their use in calculating UCR reimbursement inappropriate; making false
representations regarding its ONET Benefit Reductions; failing to disclose in preauthorizing
services that Aetna’s ONET reimbursement practices would leave the member financially
responsible for the bulk of the ‘approved’ service; and violating federal and state law.” (TAC ¶
472.) Plaintiffs also allege separately that Aetna breached its fiduciary duties by “sending

10

Even if this Court were to accept plaintiffs’ interpretation of ERISA Section 503 and later
find a violation thereof, doubts remain as to how such conduct might be remedied. As then-Judge
Alito explained in Syed v. Hercules, Inc., 214 F.3d 155 (3d Cir. 2000), the typical relief “for a
violation of § 503 is to remand to the plan administrator so the claimant gets the benefit of a full
and fair review.” Id. at 162. Plaintiffs, however, request no such thing, and fail to respond to
defendants’ argument in this regard in their opposition to the motions to dismiss. Perhaps this is
why the WellPoint plaintiffs “appear[ed] to have abandoned [Section 503] as a basis for their
nondisclosure claims.” WellPoint II, 903 F. Supp. 2d at 922.
26

noncompliant EOBs” to plaintiffs and “using SPDs that did not comply with federal law.” (TAC
¶¶ 475-76.)
To the extent plaintiffs assert these claims on the basis of Aetna’s non-disclosure of ONETrelated information, counts IV and V are dismissed. ERISA Section 404, on which plaintiffs rely,
requires fiduciaries to discharge their duties according to the “prudent man” standard. 29 U.S.C.
§ 1104(a)(1)(B). With regard to disclosure obligations, the Third Circuit has interpreted this
standard to require plan fiduciaries to provide only “those material facts, known to the fiduciary
but unknown to the beneficiary, which the beneficiary must know for its own protection.” Glaziers
and Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Secs.,Inc., 93 F.3d 1171, 1182
(3d Cir. 1996). The test for determining materiality asks whether there is a substantial likelihood
that the omission of information “would mislead a reasonable employee in making an adequately
informed [] decision.” Jordan v. Fed. Express Corp., 116 F.3d 1005, 1015 (3d Cir. 1997).
Applying this standard, the court in Franco dismissed plaintiffs’ claim for breach of
fiduciary duty for failure to disclose, finding that “[p]laintiffs have not cited, nor has the Court’s
independent research uncovered, any binding authority holding that the fiduciary duty of
disclosure under ERISA requires that a plan fiduciary disclose the data the plan uses to determine
what constitutes the UCR or prevailing fee for a service.” Franco, 818 F. Supp. 2d at 822. The
WellPoint court held the same when it found that “courts which have considered the scope of an
ERISA fiduciary’s disclosure obligations in similar contexts have overwhelmingly concluded that
they do not extend to disclosure of UCR methodology or physician reimbursement schedules and
that courts ‘should not add to the specific disclosure requirements that ERISA already provides.’”
WellPoint II, 903 F. Supp. 2d at 921 (citing Weiss v. CIGNA Healthcare, Inc., 972 F. Supp. 748,
754 (S.D.N.Y. 1997) (“Had Congress seen fit to require the affirmative disclosure of physician

27

compensation arrangements, it could certainly have done so in ERISA §§ 101-111. The general
fiduciary obligations set forth in ERISA § 404 [also] do not refer to the disclosure of information
to Plan participants, and it would be inappropriate to infer an unlimited disclosure obligation on
the basis of general provisions that say nothing about such duties.”)).
Even assuming that this information was material, and potentially ripe for disclosure,
plaintiffs still fail to satisfy the remainder of the Third Circuit’s framework for review.
Specifically, they fail to allege how the absence of such information affected their ability to make
an “adequately informed decision.” Plaintiffs do not allege that knowledge of this information
would have permitted them to make more prudent choices with regard to their ERISA health
plan—and even that assumes that their employer provided plaintiffs with plan options. Nor do
they allege that “their ability to make an informed decision about whether to seek treatment from
an in-network provider or [out-of-network provider]” would have been aided by their knowledge
of Aetna’s ONET reimbursement practices. Franco, 818 F. Supp. 2d at 822. As the Franco court
points out, subscriber plaintiffs already were aware of the differences between in-network and outof-network coverage, and this Court agrees that plaintiffs have failed to allege how Aetna’s “failure
to provide even more information gives rise to an actionable violation of ERISA § 404.” Id. at
822.
Looking past plaintiffs’ allegations regarding the failure to disclose ONET information,
the fiduciary duty claim essentially is reduced to the allegation that Aetna “ma[de] ONET Benefit
Reductions that were unauthorized by EOCs and SPDs.” (TAC ¶ 472.) Viewed in this light,
plaintiffs’ claim for breach of fiduciary duty is indistinguishable from their claim for benefits and
must therefore be dismissed. See Chang v. Life Ins. Co. of N. Am., 2008 WL 2478379, at *4
(D.N.J. Jun. 17, 2008) (Brown, J.) (dismissing 502(a)(3) claim as duplicative of 502(a)(1)(B) claim

28

because the former “appears to be nothing more than an attempt to couch the request for relief it
had previously set forth [in the 502(a)(1)(B) count] in the language of equity.”). Section 502(a)(3),
the statutory vehicle for plaintiffs’ fiduciary duty claim, is a civil enforcement “catch all” that
provides only equitable relief for injuries not remedied elsewhere in Section 502. See Varity Corp.
v. Howe, 516 U.S. 489, 512 (1996). In Varity, the Supreme Court stated that when fashioning
“appropriate equitable relief” under Section 502(a)(3), courts must “keep in mind the special
nature and purpose of employee benefit plans, and … expect that where Congress elsewhere
provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable
relief.” Id. at 515 (internal citations omitted).
Plaintiffs’ claim for breach of fiduciary duties is revealed as duplicative of their claim for
benefits under Section 502(a)(1)(B) because they cannot identify with any degree of specificity
what equitable relief they want. Plaintiffs had asserted claims for injunctive and other prospective
relief, but abandoned them when Aetna stopped using the Ingenix database for ONET
reimbursement during the course of this litigation.

Plaintiffs now challenge past alleged

misconduct alone and assert generally that “[d]eclaratory relief is still available, and still
beneficial.” However, plaintiffs cannot avoid dismissal merely by labelling their claim for unpaid
benefits as one for prospective, equitable relief. They fail to adequately distinguish their claim
under Section 502(a)(3) from their claim for benefits under Section 502(a)(1)(B), and as a
consequence counts IV and V are dismissed.
VI.

PLAINTIFF FRANCO’S STATUTE OF LIMITATIONS
In its motion to dismiss, Aetna does not challenge the merits of plaintiffs’ claims for ERISA

benefits under Section 502(a)(1)(b). It does, however, argue that plaintiff Franco’s claims are
barred by the language of her plan, which establishes a contractual limitations period of three years

29

(Walsh Dec., Ex. 3 (“No action shall be brought after the expiration of (3) years after the time
written submission of claim is required to be furnished.”)) and requires that written proof of loss
be furnished within 90 days after the occurrence of a covered incident. 11 Franco’s surgery took
place on February 2, 2004, and proof of loss was required to be furnished to Aetna no later than
May 3, 2004. Under this timeline, Franco was obligated to file her lawsuit by May 2007. While
the Court assumes that Franco’s time to bring suit likely was tolled by the pendency of the Cooper
putative class action, that litigation was not filed until July 2007, two months after the expiration
of her contractual limitations period. Franco joined that action in November 2007, and Aetna now
argues that her claims must be dismissed as untimely under the Supreme Court’s decision in
Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. __, 134 S.Ct. 604 (2013).
At issue in Heimeshoff was an ERISA plan that contained an identical contractual
limitations period. The limitations provision provided that “[l]egal action cannot be taken against
The Hartford … [more than] 3 years after the time written proof of loss is required to be furnished
according to the terms of the policy.” Id. at 609. The Court found this provision to be enforceable
and held that, “[a]bsent a controlling statute to the contrary, a participant and a plan may agree by
contract to a particular limitations period, even one that starts to run before the cause of action
accrues, as long as the period is reasonable.” Id. at 610.
The limitations period governing Franco’s plan—three years from the time her claim was
due—is substantially identical to that in Heimeshoff, and no controlling statute prevents the
provision from otherwise taking effect.

As such, and under Heimeshoff, the provision is

enforceable on its face and renders Franco’s claim for ERISA benefits time barred. While

11

Darlery Franco is a named plaintiff both here and in Franco v. Connecticut General Life
Insurance, Co., No. 07-6039 (D.N.J.). She raises claims against Aetna in this action, and
asserted similar claims against Cigna in the Franco litigation.
30

plaintiffs ignore the Supreme Court’s decision, they attempt to get around the contractual
limitations provision in Franco’s plan by arguing, as plaintiffs did in Heimeshoff, that the
contractual limitations period should be tolled during the internal review process. Id. at 610
(“Because proof of loss is due before a participant can exhaust internal review, Heimeshoff
contends that this limitations provision runs afoul of the general rule that statutes of limitations
commence upon accrual of the cause of action.”). However, the Supreme Court rejected that same
argument, finding that such an approach would run afoul of the Court’s obligation to enforce
ERISA plans as drafted, and that a specific tolling provision in the ERISA regulations (inapplicable
here and in Heimeshoff) would be rendered superfluous by a blanket tolling period during the entire
internal review process.
Plaintiffs attempt to salvage Franco’s claim by relying on decisions of the Third Circuit
that pre-date Heimeshoff and deal with statutes of limitations on ERISA plans, rather than
contractual limitations provisions like those at issue here. See Romero v. Allstate Corp., 404 F.3d
212, 221 (3d Cir. 2005) (finding that the clock on the “applicable statute of limitations began to
tick … [only] after a claim for benefits due under an ERISA plan has been made and formally
denied.”); Miller v. Fortis Benefits Ins. Co., 475 F.3d 516, 520 (3d Cir. 2007) (same). The
difference is critical. As the Supreme Court in Heimeshoff observed, the language of “[t]he plan,
in short, is at the center of ERISA” and “once a plan is established, the administrator’s duty is to
see that the plan is maintained “‘pursuant to [that] written instrument.’” Heimeshoff, 134 S.Ct. at
612 (quoting 29 U.S.C. § 1102(a)(1)). That duty extends to the district court on review. See, e.g.
Bellas v. CBS, Inc., 221 F.3d 517 (3d Cir. 2000) (“This court is required to enforce the Plan as
written unless it can find a provision of ERISA that contains a contrary directive.”).

Franco’s

plan specified a time period within which a lawsuit must be filed that was deemed reasonable by

31

the Supreme Court in Heimeshoff. She failed to comply with that requirement, and her ERISA
claims in counts I, III, IV and VI are dismissed.
VII.

SHERMAN ACT SECTION 1
Section 1 of the Sherman Act prohibits agreements in restraint of trade. 15 U.S.C. § 1

(“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade
… is declared to be illegal.”). Though the plain language of the statute “would make illegal every
agreement in restraint of trade,” it has been interpreted to bar only unreasonable restraints. In re
K-Dur Antitrust Litig., 686 F.3d 197, 208-09 (3d Cir. 2012), vacated on other grounds by UpsherSmith Labs., Inc. v. La. Wholesale Drug Co., 133 S. Ct. 2849 (2013). At the same time, however,
Section 1 of the Sherman Act “does not prohibit [all] unreasonable restraints of trade …[,] only
restraints effected by a contract, combination, or conspiracy.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 553 (2007) (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 775
(1984)). To plead a claim under Sherman Act section 1, plaintiffs must allege (1) an agreement
(2) imposing an unreasonable restraint of trade within a relevant product market (3) resulting in
injury “of the type the antitrust laws were intended to prevent and … that flows from that which
makes defendants’ acts unlawful.” In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 315-16 (3d
Cir. 2010).
According to the third amended consolidated complaint, “[t]he combination or conspiracy
alleged … consisted of a continuing agreement, understanding or concert of action by the
Defendants and their other Co-Conspirators, the substantial terms of which were to fix and depress
ONET reimbursements.” (TAC ¶ 544.) All defendants seek dismissal of this claim based on
plaintiffs’ purported failure to satisfy any of the above elements.

32

1. Have Plaintiffs Alleged an Anticompetitive Agreement?
To state a claim under Section 1 of the Sherman Act, plaintiffs must first demonstrate the
existence of a “contract, combination or conspiracy.” This element requires “some form of
concerted action,” which the Third Circuit has defined to include either a “unity of purpose or a
common design and understanding or a meeting of the minds” or “a conscious commitment to a
common scheme.” Burtch v. Milberg Factors, 662 F.3d 212 (3d Cir. 2011). At the heart of this
element is “the existence of an agreement.” Id. at 221 (citing Howard Hess Dental Lab. Inc. v.
Dentsply Int’l., Inc., 602 F.3d 237, 254 (3d Cir. 2010) (“Section 1 claims are limited to
combinations, contracts and conspiracies and thus always require the existence of an
agreement.”)). Plaintiffs claim to have plausibly alleged that, on a “date unknown, but … at least
as early as January 1, 1998, and continuing through August 1, 2011” (TAC ¶ 543), defendants
“agreed to fix and depress ONET reimbursements” and that they did so by “agreeing to use Ingenix
UCR price schedules, which they manipulated to determine ONET reimbursements.” (Plaintiffs
Opp. at 11.)
As a threshold matter, however, the complaint has no direct, factual allegations supporting
the existence of an agreement or conspiracy either to fix the “price” of ONET reimbursement or
to create a flawed database. See Burtch, 662 F.3d at 225 (“Direct evidence of a conspiracy is
evidence that is explicit and requires no inferences to establish the proposition or conclusion being
asserted.”). To the contrary, plaintiffs’ allegations undermine such a finding. They argue that they
have plausibly pleaded an agreement to fix the “price” of ONET reimbursements—that Aetna,
UHG and their co-conspirators manipulated the data each submitted to Ingenix, that Ingenix
scrubbed that data further to skew downward the UCR schedules, and that this was accomplished
by all with the singular “purpose” of “establish[ing] an artificially low range of UCRs.” (Plaintiffs

33

Opp. at 12.) But plaintiffs acknowledge that the outputs on which defendants Aetna and UHG
allegedly relied were ranges of provider charge amounts expressed in percentiles—not actual
amounts to reimburse—and they fail to allege facts about an agreement to fix at a stated level
either the percentile range of provider charges or the specific reimbursement amount. Rather, as
defendants argue, plaintiffs could not allege that the actual amounts to be reimbursed were fixed
because they also allege that variations in each plan’s out-of-pocket obligations required that Aetna
reimburse different ONET amounts under different plan terms regardless of the underlying UCR.
See, e.g. TAC ¶¶ 204 (Cooper is responsible for 30% of the UCR amount as a coinsurance
payment), 213-15 (Werner is responsible for 40% of the UCR amount), 301 (Weintraub is
responsible for 50% of the UCR amount). Plaintiffs also fail to reconcile their (conclusory)
allegations regarding agreement to fix the “price” of ONET reimbursement with their assertions
that insurers were using methods of reimbursement other than the Ingenix database, such as
reimbursements “based on a percentage of the Medicare fee schedule” (TAC ¶ 172), “some other
faulty methodology” (TAC ¶ 307), or “other improper pricing methods.” (TAC ¶¶ 484, 485.)
Plaintiffs’ remaining, circumstantial allegations are also deficient.

They assert that

following its purchase of the databases, Ingenix permitted Aetna and its co-conspirators to
participate in the maintenance of the database (TAC ¶¶ 326-28); that Ingenix agreed to a ten-year
cooperation agreement, and gave HIAA members a say in the operation of the database through
the “Ingenix PHCS Advisory Committee” (TAC ¶ 331); that “flaws” in the database were
uncovered by the “Dataspan” project, including the revelation that submissions consisted of only
four data points (TAC ¶¶ 341-42); that, around this time, “members of HIAA/AHIP” discussed
these same alleged flaws (TAC ¶ 342); and that, despite knowing the “Ingenix UCR schedules did
not represent accurate UCRs,” defendants Aetna, UHG and their alleged co-conspirators each used

34

the Ingenix schedules to determine ONET reimbursements. (TAC ¶¶ 345-47.) But while plaintiffs
alleged that defendants had opportunities to confer, this alone does not plausibly create the
inference that defendants took that opportunity. See American Dental Ass’n v. Cigna Corp., 605
F.3d 1283, 1295-96 (11th Cir. 2010) (“As for Plaintiffs’ allegation that a conspiracy may be
inferred from Defendants’ participation in trade associations and other professional groups, it was
well-settled before Twombly that participation in trade organizations provides no indication of
conspiracy.”); see also Consol. Metal Prods., Inc. v. Am. Petroleum Inst., 846 F.2d 284, 293–94
(5th Cir.1988) (“A trade association by its nature involves collective action by competitors.
Nonetheless, a trade association is not by its nature a ‘walking conspiracy’ .... [T]he establishment
and monitoring of trade standards is a legitimate and beneficial function of trade associations.”);
Venture Tech., Inc. v. Nat'l Fuel Gas Co., 685 F.2d 41, 45 (2d Cir. 1982), cert. denied, 459 U.S.
1007 (1982) (“[F]requent meetings between the alleged conspirators ... will not sustain a plaintiff's
burden absent evidence which would permit the inference that those close ties led to an illegal
agreement.”).
Viewed as a whole, the complaint sets out a series of independent actions taken by Aetna,
UHG and Ingenix without factual allegations that tie together what they did. Unilateral action,
“regardless of the motivation, is not a violation of Section 1.” Burtch, 662 F.3d at 221. As the
Third Circuit has long held, “in order to avoid deterring innocent conduct that reflects enhanced,
rather than restrained, competition, and in order to enforce the Sherman Act’s requirement of an
agreement, the Supreme Court has required that a ‘[Section 1] plaintiff’s offer of conspiracy
evidence must tend to rule out the possibility that the defendants were acting independently.’” In
re Ins. Brokerage, 618 F.3d at 321 (quoting Twombly, 550 U.S. at 554). “Parallel conduct is, of
course, consistent with the existence of an agreement; in many cases where an agreement exists,

35

parallel conduct—such as setting prices at the same level—is precisely the concerted action that is
the conspiracy’s object.” In re Ins. Brokerage, 618 F.3d at 321. But as the Supreme Court has
consistently held, parallel conduct is “just as much in line with a wide swath of rational and
competitive business strategy unilaterally prompted by common perceptions of the market.”
Twombly, 550 U.S. at 556-57 (“Without more, parallel conduct does not suggest conspiracy, and
a conclusory allegation of agreement at some unidentified point does not supply facts adequate to
show illegality.”)
The pleadings here show that defendants’ conduct is just as easily explained by reference
to their own self-interest. As to Aetna and UHG, plaintiffs explicitly alleged that the insurers were
“incentivized to provide flawed claims data that result in lower UCR rates in order to pay lower
reimbursements for ONET.” (TAC ¶ 365.) For these entities, lower insurer inputs resulted in
lower Ingenix outputs, which, taken together, likely resulted in higher insurer profits. And Ingenix
had a similar motive to engage in this conduct separate and apart from the alleged conspiracy—
according to plaintiffs, “Ingenix had an incentive” to avoid preventing or investigating the risk of
flawed data “because, by turning a blind eye to the quality and reliability of the data submitted to
it, and then manipulating the data to support artificially low UCR rates, Ingenix supported its
parent company by assisting UHG to perpetuate low reimbursement rates.” (TAC ¶ 365.) This
desire to please extended to Aetna as well—in fact, all of Ingenix’s insurer customers stood to
benefit from lower ONET reimbursement, and Ingenix therefore could benefit derivatively in
offering (and charging for) the flawed product. See American Dental Ass’n, 605 F.3d at 1295
(“The use of automated systems that bundle and downcode may just as easily have developed from
independent action in a competitive environment as it would from an illegal conspiracy, because

36

each insurer would have an economic interest in decreasing physicians’ costs and increasing
profits.”).
A claim of antitrust conspiracy predicated on parallel conduct must be dismissed “if
‘common economic experience,’ or the facts alleged in the complaint itself, show that independent
self-interest is an ‘obvious alternative explanation’ for defendants’ common behavior.” In re Ins.
Brokerage, 618 F.3d at 326. These defendants’ individual economic motivation to engage in the
activity alleged is glaring and unavoidable—the insurers, to effect a direct cost savings by lowering
their reimbursement obligations, and Ingenix, both to please its parent company and safeguard its
“dominant market position” by stamping industry approval on artificially low provider charge data.
The strength of these independent incentives seriously weakens the reasonable inference of
“conspiracy,” and under Twombly exposes plaintiffs’ claims to dismissal claims in the absence of
evidence tending to “rule out the possibility that the defendants were acting independently.”
Twombly, 550 U.S. at 554.
To identify this kind of evidence, the Third Circuit instructs that “at least three types of
facts, often referred to as ‘plus factors,’ … tend to demonstrate the existence of a conspiracy: (1)
evidence that the defendant had a motive to enter a price fixing conspiracy; (2) evidence that the
defendant acted contrary to its own interests; and (3) evidence implying a traditional conspiracy.”
Burtch, 662 F.3d at 226 (quoting In re Ins. Brokerage, 618 F.3d at 321-22.). While the Court
likely can infer that the defendants had a motive to join forces to fix and depress ONET
reimbursement—at least in the sense they could achieve together, and maybe more effectively,
what they desired individually—the Third Circuit has “cautioned” that this first factor may “simply
restate that (legally insufficient) fact that market behavior is interdependent and characterized by
conscious parallelism.” Id. at 226; see also White v. R.M. Packer Co., 635 F.3d 571, 582 (1st Cir.

37

2011) (“Taking as a given that all of the defendants had motive to conspire with one another to
earn high profits, all such a motive shows is that the defendants could reasonably expect to earn
higher profits by keeping prices at a supracompetitive level through parallel pricing practices.”).
Consequently, the Court attaches little weight to the first plus factor.
In re Flat Glass Antitrust Litig., 385 F.3d 350, 360-61 (3d Cir. 2004), defined the kind of
evidence required for the second plus factor: “Evidence that the defendant acted contrary to its
interests means evidence of conduct that would be irrational assuming that the defendant operated
in a competitive market.” In their motion papers, plaintiffs argue that the “[third amended
consolidated complaint] explains how the insurers acted against their economic self-interest in
using the Ingenix UCR price schedules,” but tellingly they fail to identify which allegations
provide that explanation. Having thoroughly reviewed the latest iteration of plaintiffs’ complaint,
the Court is satisfied that while detailed allegations set forth each defendant’s individual interest
in depressing ONET reimbursement, that very specificity cuts against, rather than supports, a
finding that the defendants were acting contrary to their own interest.
Finally, the complaint fails to allege traditional hallmarks of a conspiracy—the third plus
factor under Burtch. As a threshold matter, the complaint does not allege any direct or indirect
“assurances of common action” among the defendants. See Burtch, 662 F.3d at 230 (citing In re
Ins. Brokerage, 618 F.3d at 322). In fact, the reverse appears to be the case. According to
plaintiffs, during the class period Ingenix sought to merge the MDR and PHCS data into a
combined database called “DataSpan,” which was intended to be a “statistically valid” and
“scientific database subject to peer review of methodology, white papers, documentation of the
methodology and results, and periodic external review.” (TAC ¶ 115.) Plaintiffs allege that, in
connection with this initiative, Ingenix consulted with its employees and outside statisticians from

38

2004 to 2006 and determined that the databases were flawed for some of the same reasons
identified in this litigation. This begs the question—why would Ingenix “invest[] … time and
funds” to uncover flaws that it purportedly caused (and desired) to exist in the first place? While,
as plaintiffs allege, the program was “inexplicably shut down” after a period of approximately
three years with no reforms ever implemented, the very fact of DataSpan’s existence during the
class period suggests the absence of a conspiracy.
The complaint also fails to allege another common hallmark of antitrust agreement—a
sensible timeline of the conspiracy itself. Plaintiffs provide no clear indication about when the
conspiracy or agreement first arose, or which individuals were involved in its formation. See
Burtch, 662 F.3d at 225-26 (affirming dismissal where “none of the[] allegations specify a time or
place that an actual agreement to fix credit terms occurred,” or “indicate that any particular
individuals or [defendants] made such an agreement”); see also Twombly, 550 U.S. at 565 n.10
(explaining that plaintiff’s failure to allege a “specific time, place or person involved in the alleged
conspiracies” left “no clue as to which of the [defendants] supposedly agreed, or when and where
the illicit agreements took place”). The complaint also fails to explain why some of the conduct
happened well before and well after the alleged conspiracy. For example, plaintiffs argue that the
Ingenix database was flawed because it was centered around only four data points, but the
complaint itself alleges that these same data points have been in use since 1973—decades before
the inception of the alleged agreement to restrain here. (TAC ¶¶ 339-340.) Similarly, plaintiffs
complain about Ingenix’s use of three-digit geozips to define the geographic areas for which it
provided ranges of provider charge data. (TAC ¶ 134.) But, as defendants point out, FAIR Health,
the non-profit entity whose database replaced the defendant’s, “continues to use three-digit
geozips, three years after the databases were divested from Ingenix.” (Aetna Br. at 14.)

39

Taken together, plaintiffs’ allegations corresponding to the Third Circuit’s “plus factors”
do not advance their theory. Antitrust allegations “must be placed in a context that raises a
suggestion of a precedent agreement, not merely parallel conduct that could just as well be
independent action.” In re Ins. Brokerage, 618 F.3d at 322.

While defendants’ actions may have

resulted in underpayment for out-of-network services, the complaint fails to plausibly allege that
their actions were undertaken collectively, and their claims under Section 1 of the Sherman Act
therefore are dismissed.
2. Per Se Treatment?
Even assuming an agreement to fix and depress ONET reimbursement was adequately
pled, its object would not qualify for per se treatment—the only theory of liability alleged here.
Plaintiffs once included Sherman Act claims under both rule of reason and per se analysis, but
have since abandoned the rule of reason theory. 12 Now they assert that defendants Aetna, Ingenix,
and UHG acted in concert to artificially suppress reimbursement for ONET services, and that such
conduct amounted to price-fixing—traditionally a per se violation of Section 1 of the Sherman
Act.
In evaluating whether an agreement constitutes an “unreasonable restraint of trade”—and
thus, a presumptive violation of Section 1 of the Sherman Act—courts typically use one of two
forms of analysis. Under the traditional “rule of reason” analysis, the “factfinder weighs all of the
circumstances of a case in deciding whether a restrictive practice should be prohibited.” Toledo
Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204, 218 (3d Cir. 2008). The plaintiff

12

This strategy, as plaintiffs are aware, is not without risk. If this Court “determines that the
restraint at issue is sufficiently different from the per se archetypes to require application of the
rule of reason,” the plaintiffs’ claim must be dismissed. See In re Ins. Brokerage, 618 F.3d at 317.

40

bears the initial burden of demonstrating that the alleged agreement caused an “adverse,
anticompetitive effect within the relevant geographic market,” and, if that burden is carried, the
court must then decide “whether the anticompetitive effects of the practice are justified by any
countervailing pro-competitive benefits.” In re Ins. Brokerage, 618 F.3d at 315-16. Judicial
application of this standard has, however, shown that “some classes of restraints have redeeming
competitive benefits so rarely that their condemnation does not require application of the fullfledge rule of reason”—a paradigmatic example of which is a “horizontal agreement[] among
competitors to fix prices.” Id. at 316 (quotations and citations omitted).
Restraints of trade like price-fixing arrangements “are ordinarily condemned as a matter of
law under an ‘illegal per se’ approach because the probability that these practices are
anticompetitive is so high; a per se rule is applied when ‘the practice facially appears to be one
that would always or almost always tend to restrict competition and decrease output.’” Nat’l
Collegiate Athletic Ass’n v. Board of Regents of University of Oklahoma, 468 U.S. 85, 100 (1984).
Because application of the per se rule forecloses an analysis of the purpose and effects of a
restraint, a “per se rule is appropriate only after courts have had considerable experience with the
type of restraint at issue, and only if courts can predict with confidence that it would be invalidated
in all or almost all instances under the rule of reason.” Leegin Creative Leather Products, Inc. v.
PSKS, Inc., 551 U.S. 877, 886-87 (2007) (internal citations omitted). Courts have thus expressed
“reluctance to adopt per se rules with regard to restraints imposed in the context of business
relationships where the economic impact of certain practices is not immediately obvious.” State
Oil Co. v. Khan, 522 U.S. 3, 10 (1997) (emphasis supplied); see also Eichorn v. AT&T Corp., 248
F.3d 131, 144 (3d Cir. 2001) (“[P]er se rules of illegality are the exception to antitrust analysis and
are only employed in certain recognized categories.”).

41

Plaintiffs claim to state a price-fixing agreement warranting per se treatment on the basis
of their allegation that defendants “agreed to fix and depress ONET reimbursements” through use
of the Ingenix database. But while labelling such conduct as an agreement to fix price, plaintiffs
actually fail to allege that the price of any product or service has been fixed or restrained. Instead,
they allege that “Aetna paid less than it was contractually obligated to pay for” out-of-network
benefits. (TAC ¶ 1; see also TAC ¶ 10 (“When Aetna and other Insurance Conspirators utilized
False UCRs to calculate ONET reimbursements, the resulting payments to subscribers and
providers were artificially low.”)
As many courts have noted, however, the price of health insurance is the premium. See,
e.g., Ironworkers Local Union 68 v. AstraZeneca Pharms., LP, 634 F.3d 1352 (11th Cir. 2011)
(“In general, health insurers enter into a contractual bargain with enrollees in which, in exchange
for their service—assuming the risk of payment for enrollees’ future health care costs—they
receive a ‘premium,’ an up-front fee that represents the price of the insurance policy.”); see also
United States v. IBM, 517 U.S. 843, 879 (1996) (Kennedy, J., dissenting) (“Premiums, i.e., the
price of insurance, depend on risk of loss, and value of the goods is only one component factor of
risk.”) Plaintiffs seem to accept this categorization. In describing the differences among common
health insurance plans, they allege that “[h]ealth insurance plans that permit insured individuals []
to seek medical care from out-of-network providers are more expensive than plans that limit
Members to care provided by in-network providers – i.e., they require higher premium payments.”
(TAC ¶ 3.) But, plaintiffs do not allege that the premium charged for their health insurance plans
has been fixed by any action undertaken by the conspiracy alleged. Rather, they allege a cost to
the seller was fraudulently restrained, which resulted in a product that was worth less than
anticipated.

Equating such conduct with price-fixing—concerted action for the purpose of

42

“raising, depressing, fixing, pegging, or stabilizing the price of a commodity in interstate or foreign
commerce”—stretches the bounds of per se treatment beyond its intended limits.
To support their contention that per se treatment is warranted, plaintiffs rely on the
Supreme Court’s decision in Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643 (1980) and Freeman
v. San Diego Ass’n of Realtors, 322 F.3d 1133 (9th Cir. 2003), both of which are distinguishable.
In Catalano, plaintiffs challenged the defendant beer retailers’ concerted refusal to extend interestfree credit to their purchasers. Treating this conduct as a per se price-fixing agreement, the Court
found that “credit terms must be characterized as an inseparable part of the price”—finding it
“virtually self-evident that extending interest-free credit for a period of time is equivalent to giving
a discount equal to the value of the use of the purchase price for that period of time.” Id. at 648.
In Freeman, the Ninth Circuit considered a price-fixing agreement regarding real estate listing
databases that were maintained and serviced by real estate associations. The associations charged
fees for that effort, and thereafter licensed the databases to real estate agents and agencies for a
subscription fee. Following consolidation of all databases covering San Diego County into an
entity called Sandicor, the associations agreed among themselves to fix the price for their support
services at supracompetitive levels. Sandicor used this predetermined price directly in setting the
subscription fee for use of the new database. “Subscribers [did not] pay the associations for
support services directly; they [paid] only Sandicor’s [subscription fee], and Sandicor then
return[ed] part of that fee as a support fee to the associations.” Id. at 1141. The Ninth Circuit
found that the associations engaged in price fixing, and that the plaintiffs were permitted to sue
under an exception to the indirect purchaser rule. Significantly, in so holding, the court found
clear “evidence that Sandicor not only considered its costs in setting [the subscription fee] but, in

43

fact, priced near cost and thus may have passed on the inflated support fees almost dollar for
dollar.” Id. at 1145.
Plaintiffs maintain that these cases stand for the proposition that “agreements to fix any
term of sale that affects the price that the customer must pay”—in this case, the cost of the
insurance premium—“are per se unlawful.” But in both Catalano and Freeman, the restraint of
trade had a direct and unmistakable impact—in Freeman, likely dollar-for-dollar—on the price
charged. Here, even accepting plaintiffs’ allegation that the defendants collectively sought to fix
and depress ONET reimbursements, the complaint fails to allege that such conduct was undertaken
to standardize or fix some aspect of the insurance premium for each plan. Unlike the price of beer
in Catalano and the price for subscription services in Freeman, health insurance premiums are not
simply dictated by common economic forces like cost and market demand. Rather, the “price” of
insurance is informed by a “technical actuarial analysis” that necessarily considers “future losses
and expenses, which in turn takes into account predicted claims costs, the uncertainty of predicted
claims, the insurer’s predicted income from investments of premiums received, projected
administrative expenses, tax considerations and a profit margin.” Franco, 818 F. Supp. 2d at 833
(citing AstraZeneca, 634 F.3d at 1365 n.26). The insurer may also adjust that “price” upon the
insured’s renewal of his policy “to reflect such factors as increases in healthcare costs, increases
in the use of health care, costs borne from new technologies, changes in enrollment, changes in
regulations, or to adjust actuarial assumptions based on actual experience from the past year.”
AstraZeneca, 634 F.3d at 1365 n.26
Given this complexity in determining the premium charged, the Court concludes that the
connection between defendants’ alleged conduct and the premium charged is too attenuated to
support a finding of price-fixing. Further, it is significant that the Court has to make this analysis

44

on a conceptual basis, because plaintiffs have failed to provide factual allegations to establish a
connection. Going along with their invitation that the Court use a “more flexible” per se rule
would disregard the Third Circuit’s long-standing “hesitance to extend the per se rule to new
categories of antitrust claims.” Eichorn, 248 F.3d at 143. Plaintiffs’ failure to allege a price-fixing
agreement warranting per se treatment therefore serves as an additional basis for dismissal of their
antitrust claims.
VIII. RICO CLAIMS
Plaintiffs also claim that defendants’ conduct violated the Racketeer Influenced and
Corrupt Organizations (RICO) Act, 18 U.S.C. § 1962(c). Section 1962(c) makes it unlawful for
“any person employed by or associated with any enterprise engaged in, or the activities of which
affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering activity.” To plead a RICO
claim under this section, “the plaintiff must allege (1) conduct (2) of an enterprise (3) through a
pattern (4) of racketeering activity.” In re Ins. Brokerage, 618 F.3d at 362. Because this claim is
grounded in fraud, the cause of action must be stated with the specificity required by Rule 9(b).
See Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004) (“Where, as here, plaintiffs rely on mail
and wire fraud as a basis for a RICO violation, the allegations of fraud must comply with Federal
Rule of Civil Procedure 9(b), which requires that [such allegations] be pled with specificity.”)
Plaintiffs contend that defendants undertook an “elaborate fraudulent scheme” to underpay
for ONET services rendered to the subscriber plaintiffs and that such conduct constitutes a RICO
violation under Section 1962(c). (TAC ¶ 374.) The complaint alleges a two-stage process. First,
the insurer defendants and conspirators used “the U.S. mails and interstate wire facilities” to
transmit the allegedly flawed data to Ingenix “in order to create the false UCR amounts arrived at

45

by the Defendants and to under-reimburse [plaintiffs] for ONET claims.” (TAC ¶ 374.) Second,
the resulting pricing schedules were provided by Ingenix to the defendants “through the U.S. mails
or electronically over interstate wire facilities,” and such information was used by defendants to
reimburse plaintiffs for ONET claims. (TAC ¶ 374.) Plaintiffs argue that the third amended
consolidated complaint plausibly alleges that defendants operated this scheme to defraud them,
distinct from the other ordinary commercial dealings each defendant conducted, from
approximately 2001 to 2009. (TAC ¶ 377.)
1. Have Plaintiffs Alleged the Existence of an Enterprise?
Plaintiffs must first demonstrate the existence of a RICO enterprise. Section 1962(c)
provides that an “enterprise” includes “any individual partnership, corporation, association, or
other legal entity, and any union or group of individuals associated in fact although not a legal
entity.” 18 U.S.C. § 1961(4). Plaintiffs provide three alternate enterprise theories: (1) “singleentity” enterprises, consisting of defendants Aetna, UHG and Ingenix standing alone (TAC ¶ 403);
(2) a bilateral association-in-fact enterprise comprised of Aetna and Ingenix (TAC ¶ 402); and (3)
an association-in-fact enterprise comprised of Aetna, UHG and Ingenix. (TAC ¶ 376). The Court
addresses each in turn.
A. Single-Entity Enterprises
Defendants argue that plaintiffs’ so-called “single-entity” enterprises fail as a matter of law
because they violate RICO’s “separateness” requirement, pursuant to which a plaintiff must
“allege and prove the existence of two distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that
is not simply the same ‘person’ referred to by a different name.” Cedric Kushner Promotions, Ltd.
v. King, 533 U.S. 158, 161-62 (2001). The Court agrees.

46

In Cedric Kushner Promotions, plaintiff sued Don King, the president and sole shareholder
of Don King Productions, a corporation, claiming that King had conducted the corporation’s affairs
in part through a RICO “pattern”—“through the alleged commission of at least two instances of
fraud and other RICO predicate crimes.” Cedric Kushner Promotions, 533 U.S. at 161. In
affirming the district court’s dismissal, the Second Circuit held that King was an employee of the
corporation and, as acting within the scope of his employment, “was part of, not separate from, the
corporation.”

Id. at 161.

The Supreme Court reversed, finding that the “corporate

owner/employee, a natural person, is distinct from the corporation itself, a legally different entity
with different rights and responsibilities due to its different legal status.” Id. at 158. Underlying
its holding was the “distinctiveness” requirement for a RICO enterprise, pursuant to which “one
must allege and prove the existence of two distinct entities.” Id. at 162.
The distinctiveness requirement has long been recognized by courts of this Circuit. See
Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., Inc., 46 F.3d 258, 268 (3d Cir. 1995) (“[A] claim
simply against one corporation as both ‘person’ and ‘enterprise’ is not sufficient.”) Applying this
principle, the court in Ass’n of New Jersey Chiropractors v. Aetna, Inc., 2011 WL 2489954 (D.N.J.
Jun. 20, 2011) (Pisano, J.) found that “[b]ecause a corporate entity may not be both the person and
the RICO enterprise …, a corporation must associate with others to form an enterprise that is
sufficiently distinct from itself” to be liable as a defendant under section 1962(c). Id. at *6. The
court then found that the enterprise alleged, “consisting of Aetna Inc., several of its subsidiaries
and affiliates, and third-parties acting as Aetna's agents” was “not sufficient to fulfill the
distinctiveness requirement of § 1962(c).” Id. at *6. This reasoning is persuasive. Plaintiffs
advance identical theories here, each of which violates the Third Circuit’s distinctiveness

47

requirement. Consequently, plaintiffs’ RICO claims are dismissed to the extent they rely on
single-entity enterprises.
B. Association-in-fact Enterprises
Plaintiffs do, however, adequately plead both an association-in-fact enterprise comprised
of Aetna, UHG and Ingenix, and a bilateral enterprise comprised of Aetna and Ingenix. To state
a RICO association-in-fact enterprise, plaintiffs must demonstrate the existence of a “continuing
unit that functions with a common purpose.” See Boyle v. United States, 556 U.S. 938, 948 (2009).
Interpreting this standard, the Third Circuit has found that “the RICO statute defines an ‘enterprise’
broadly, such that the ‘enterprise’ element of a Section 1962(c) claim can be satisfied by showing
a ‘structure,’ that is, a [1] common ‘purpose, [2] relationships among those associated with the
enterprise, and [3] longevity sufficient to permit these associates to pursue the enterprise’s
purpose.’” In re Ins. Brokerage, 618 F.3d at 368 (quoting Boyle, 556 U.S. at 945). After Boyle,
“an association-in-fact enterprise need have no formal hierarchy or means for decision-making,
and no purpose or economic significance beyond or independent from the group’s pattern of
racketeering activity.” Id. at 368.
Under Boyle, the Court finds plaintiffs’ allegations sufficient to state a RICO enterprise
here, either as an association-in-fact enterprise consisting of Aetna, UHG and Ingenix, or,
alternatively, a bilateral enterprise comprised of Aetna and Ingenix. The enterprise, plaintiffs
allege, collectively sought to achieve a dual purpose: (1) “to create a mechanism through which
Aetna, UHG and the Insurer Conspirators could under-reimburse subscribers … for Nonpar
services through use of flawed and invalid data” (TAC ¶ 503) and (2) to increase insurer profits
by deceptively underpaying ONET benefits to their policy holders. And the conduct attendant to
defendants’ realization of these goals demonstrates the existence of enterprise relationships. The

48

defendants allegedly “became beneficiaries of [each other’s] scrubbed data in the future, after it
was processed (and further scrubbed) by Ingenix” and had opportunities to interact regarding their
collective purpose through their participations in trade associations, which allegedly played a role
in the “management” of Ingenix.

(Plaintiffs Br. at 16-17, 36-37.) Finally, as in Franco, the

enterprise alleged has demonstrated sufficient longevity to allow its associates to accomplish their
alleged intended purpose as it “came into existence in 1998.” Id. at 826. The Court finds these
allegations sufficient to satisfy Boyle’s “low threshold” for pleading the existence of an
association-in-fact.
2. Did Defendants “Conduct” the Affairs of the Enterprise?
Proof of the entity’s structure, however, is not alone sufficient to state a claim under Section
1962(c). Plaintiffs also must show that each defendant “conduct[ed] or participate[d], directly or
indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity.”
This has been described as “a very difficult test to satisfy,” Dubai Islamic Bank v. Citibank, N.A.,
256 F. Supp. 2d 158, 164 (S.D.N.Y. 2003), because mere association with an enterprise does not
violate the statute. See In re Ins. Brokerage, 618 F.3d at 370-71. Rather, the “conduct or
participate” element requires a defendant to “have some part in directing those affairs.” Reves v.
Ernst & Young, 507 U.S. 170, 179 (1993); see also Schmidt v. Fleet Bank, 16 F. Supp. 2d 340, 346
(S.D.N.Y. 1998) (“There is a substantial difference between actual control over an enterprise and
association with an enterprise in ways that do not involve control; only the former is sufficient
under Reves because ‘the test is not involvement but control.”) (internal quotation marks omitted).
Reves held that plaintiffs must allege that the defendant “participated in the operation [and]
management of the enterprise itself” or played “some part in directing the enterprise’s affairs.” Id.

49

This requires a “showing that the defendant[] conducted or participated in the conduct of the
‘enterprises’ affairs,’ not just [its] own affairs.” Id. at 185 (emphasis in original).
Plaintiffs claim to satisfy this element through their allegations that “Ingenix owned the
Database, it directed the manner of the submission of the data from Defendants and CoConspirators, it collected the scrubbed data that it further manipulated and disseminated …, and it
controlled 75-85% of the data market. UHG, in turn, owned Ingenix, and both it and Aetna were
vital contributors of scrubbed data and used the data … to under-reimburse Subscribers.”
(Plaintiffs Opp. at 34.)

Plaintiffs also allege that “Aetna’s and UHG’s memberships in

HIAA/AHIP and positions on HIAA/AHIP’s board of directors, gave them additional awareness
as to the nature and scope of the scheme and allowed them, through HIAA/AHIP’s representatives
on the Ingenix Liaison Committee, to participate in the making of decisions concerning the
direction and use of the Database as well.” (TAC ¶ 393).
Aetna and UHG argue that plaintiffs parrot the statutory language of Section 1962(c), but
fail to offer any factual allegations sufficient to suggest that either of them participated in the
operation or management of any enterprise. The Court agrees. With regard to defendants’
submission of flawed data for use in the Ingenix database, plaintiffs point only to Aetna’s and
UHG’s commercial interactions with Ingenix, and assert that such contributions were vital to the
enterprise’s common purpose. But providing goods or services to an alleged RICO enterprise is
insufficient to compel liability. See Reves, 507 U.S. at 179; University of Maryland at Baltimore
v. Peat, Marwick, Main & Co., 996 F.2d 1534 (3d Cir. 1993) (“Simply because one provides goods
or services that ultimately benefit the enterprise does not mean that one becomes liable under
RICO.”) And as in WellPoint I, “submission of [their] own data does not plausibly show that
[Aetna or UHG] controlled the other members in the associated-in-fact enterprise.” WellPoint I,

50

865 F. Supp. 2d at 1034. In fact, “all it really establishes is that [each insurer] was acting on its
own when submitting data to the Ingenix database.” Id. at 1034.
Plaintiffs argue that the conduct of each defendant was “integral” to the enterprise’s
operation, and that Aetna and UHG were “vital contributors” of data and thus necessary to the
scheme alleged. They claim to find support in the Third Circuit’s decision in In re Ins. Brokerage,
which considered, among other things, RICO claims arising out of a bid-rotation scheme whereby
“insurers furnished purposefully uncompetitive sham bids on policies in order to facilitate the
steering of business to other insurer-partners, on the understanding that the other insurers would
later reciprocate.” The Third Circuit found that, with regard to the conduct element, “if defendants
band together to commit [violations] they cannot accomplish alone … then they cumulatively are
conducting the association-in-fact enterprise’s affairs, and not [simply] their own affairs.” In re
Ins. Brokerage, 618 F.3d 300 (quoting Gregory P. Joseph, Civil RICO: A Definitive Guide 106,
at 74 (3d ed. 2010)) (emphasis in original). On that basis, the court found that “defendants’ alleged
collaboration in the Marsh-centered enterprise, most notably the bid rigging, allowed them to
deceive insurance purchasers in a way not likely without such collusion.”
The decision in In re Ins. Brokerage is plainly distinguishable. Plaintiffs here allege a
scheme that, at its essence, consists of two stages of activity: (1) multiple insurers submit
artificially low provider cost data, thus incrementally decreasing the final output they expect to
receive and ultimately rely upon; and (2) Ingenix then scrubs that same data to remove high-end
outliers, thus decreasing the final output once more and only to the extent desired. Viewed in this
light, the Court fails to see how an elimination of either stage of conduct would bring about failure
of the enterprise overall. The conduct alleged aided the goals of the enterprise only incrementally,
and each defendant was free to take such action with or without assistance. Plaintiffs emphasize

51

the significant amount of contributions made by Aetna and UHG to show that their conduct was
“vital” to the organization’s purpose, but from that fact the Court infers that each insurer could
(individually) reduce ONET reimbursements on a significant—though still incremental—basis.
Taken together, and assuming the truth of plaintiffs’ allegations, the Court finds that the defendants
achieved collectively nothing that would have been impossible to achieve individually. And for
that reason, plaintiffs’ allegations regarding defendants’ conduct are insufficient to show that any
defendant controlled or directed the alleged RICO enterprise here.
Their allegations regarding the insurer defendants’ business relationships with Ingenix fare
no better. Plaintiffs submit in their opposition that the third amended complaint alleges “HIAA
representatives were on the Ingenix ‘Liaison Committee,’ … that Aetna and UHG were members
of HIAA/AHIP … that an advisory committee composed of HIAA members was also created …
and that these committees participated in the management of the Ingenix Database.” (Plaintiffs
Opp. at 36-37.) They also allege that Aetna and UHG executives were members of the board of
directors of the HIAA/AHIP for an unspecified period of time. Plaintiffs’ focus in this line of
argument thus concerns only defendants’ membership and participation in the HIAA/AHIP
organization—but, as plaintiffs represented to the court in WellPoint, this is an organization in
which “virtually every major health insurer in the United States” is a member. See WellPoint III,
at *21 (“[T]here is a difference between alleging that WellPoint is an HIAA member and that
HIAA members were on the Advisory and Liaison Committees, and specifically alleging that
WellPoint was on the Advisory and Liaison Committees.”) Accepting plaintiffs’ allegations as
true, they at best demonstrate that Aetna and UHG, among others, were members in some
unidentified capacity of two committees that played some unidentified role in the Ingenix
database’s maintenance and operation. After nearly eight years of discovery, the pleadings

52

critically lack non-conclusory indications that either insurer participated (in any capacity) in the
decision-making or direction of a RICO enterprise
To show that Ingenix directed the operations of this enterprise, plaintiffs allege as follows:
“[t]he scheme involved Ingenix’s obtaining of scrubbed data from Defendants and CoConspirators; in return for this submission of the data, Ingenix, after scrubbing the data,
disseminated to Defendants and conspirators the false uniform pricing schedules, and gave higher
discounted pricing (or subscription) rates to those who supplied Ingenix with greater amounts of
data.” (TAC ¶ 384.) But plaintiffs’ allegation that Ingenix “played an active and crucial role in
directing the submission of the data from Aetna, UHG and the Insurer Conspirators,” only
describes how Ingenix conducted its otherwise legitimate business operations. 13 See United Food
and Commercial Workers Unions and Employers Midwest Health Benefits Fund v. Walgreen Co.,
719 F.3d 849 (7th Cir. 2013) (plaintiffs must allege that the defendants engaged in a degree of
cooperation “that fell outside the bounds of the parties’ normal commercial relationships.”) As
Ingenix argues, “[its] development and licensing of database products reflects only Ingenix’s
conduct of its own business affairs, not the operation of some hypothetical RICO enterprise.”
(UHG Br. at 30) (emphasis in original.) What is missing is some—any—indication that Ingenix
guided the alleged scheme to defraud insureds. Plaintiffs fail to allege, for example, that Ingenix

13

For this reason, plaintiffs’ lower/upper rung theory of control also fails. Plaintiffs allege
in the alternative that Aetna participated in the conduct of the RICO enterprise as a lower-rung
participant under the direction of Ingenix. Specifically, plaintiffs maintain that Aetna acted under
Ingenix’s direction “because Ingenix (1) knew the data submitted by Aetna was flawed and that
the pricing schedules disseminated by Ingenix were used by Defendants and Insurer Conspirators
to reimburse subscribers for ONET benefits, but (2) nonetheless tacitly approved the submission
of such data to it … and sought the Defendants’ reliance upon its pricing schedules to underreimburse subscribers.” (TAC ¶ 386.) Knowledge and “tacit approval” of another’s conduct does
not amount to direction by “upper management,” and, with no other factual allegations in support,
the Court rejects plaintiffs alternate theory of liability.
53

instructed the insurers as to the manner in which they should submit flawed data, that insurers were
provided greater or different incentives to submit flawed data, or that the insurers were disciplined
for utilizing other methodologies in determining ONET reimbursement.
The Seventh Circuit’s decision in United Food and Commercial Workers Unions and
Employers Midwest Health Benefits Fund v. Walgreen Co. is instructive in evaluating the alleged
conduct of all entities here. There the plaintiff, an employee benefit plan, sued on behalf of a
similarly situated class in a RICO action in which it alleged that Walgreen Company
(“Walgreens”) and Par Pharmaceutical Companies, a drug manufacturer, engaged in a scheme to
defraud insurers by “filling prescriptions for several generic drugs with a dosage form that differed
from, and was more expensive than, the dosage form prescribed to the customer.” Id. at 850. Par
produced two different generic prescription drugs that, because of their high price and consequent
unpopularity in the market, received a higher rate of reimbursement from insurers and other thirdparty payors. Realizing that pharmacies stood to profit from this payment structure, Par tried to
convince Walgreens to use its products even though they were more expensive.

Par’s

“presentations [to the pharmacies] implied (at the least) that the pharmacies could legally fill
prescriptions written for one dosage form with an alternative dosage form without seeking
approval from the prescribing physician, a suggestion that directly contravened the FDA’s position
that the tablets and capsules are not bioequivalent.”

Id. at 852.

Walgreens eventually

“reconfigured its internal computer systems so that all prescriptions” were automatically filled
with Par’s drugs “regardless of the dosage form actually prescribed.” Id. This practice continued

54

for some time and, attracting scrutiny from a number of states’ attorneys general and the Justice
Department, was later described as “false and deceptive” by the Illinois Department of Health. 14
In its RICO claims plaintiff alleged that Walgreens and Par “conducted an association-infact RICO enterprise for the purpose of overcharging insurers by switching dosage forms of [Par’s
drugs].” Id. at 853. The district court granted defendants’ motion to dismiss after concluding that
plaintiff failed to allege sufficiently that Walgreens and Par conducted the affairs of the alleged
enterprise and the Seventh Circuit affirmed. Despite noting that the plaintiff alleged detailed
communications between the entities regarding Par’s proposal, that both entities engaged in
conduct which seemingly benefited the alleged enterprise—namely, “that Par manufactured the
expensive dosage forms and that Walgreens rigged its internal computer systems automatically to
switch” prescriptions to Par’s product—the court nonetheless found that “nothing in the complaint
reveals how one might infer that these communications or actions were undertaken on behalf of
the enterprise as opposed to on behalf of Walgreens and Par in their individual capacities, to
advance their individual self-interests.” Id. at 854-55. This type of interaction “show[ed] only
that the defendants had a commercial relationship, not that they had joined together to create a
distinct entity for purposes of improperly filling [Par’s prescriptions].” Id. at 855-56. The court
thus concluded that, without some indication that the “cooperation” alleged “exceeded that
inherent in every commercial transaction between a drug manufacturer and pharmacy,” it could
not plausibly infer that “Walgreens and Par were conducting the enterprise’s affairs.”
This case likewise has a history of investigation, findings, and action by state regulatory
authorities—here the New York Attorney General. But as the Seventh Circuit held, “RICO does

14

As here, Walgreens’ conduct resulted in substantial penalty. In 2008, Walgreens paid $35
million to the federal government, 46 states, and Puerto Rico to settle claims under the False
Claims Act and related state laws.
55

not penalize parallel, uncoordinated fraud,” even where the complaint “describe[d] conduct that
might plausibly state a claim for fraud (among other things) against either defendant.” Id. at 855.
These plaintiffs have not made factual allegations demonstrating that any defendant knowingly
“conducted or participated in the conduct of the ‘enterprise’s affairs,’ [as opposed to its] own
affairs,” and that it “did so through a pattern of racketeering activity.” In re Ins. Brokerage, 618
F.3d at 371-72 (quoting Reves, 507 U.S. at 185) (emphasis in original). This deficiency is fatal to
plaintiffs’ RICO claims, particularly where, even in the absence of coordination, each defendant
maintained an independent incentive to engage in the conduct alleged. See Section VIII(1), supra.
3. Were Plaintiffs’ Injuries Caused by the Alleged Predicate Acts?
Even assuming that defendants were conducting the affairs of the alleged enterprise,
plaintiffs fail to show that the scheme proximately caused their alleged harm. A cause of action
for RICO violation may be stated only by a person “injured in his business or property by reason
of a” RICO predicate act. This phrase—“by reason of”—has been held to require proof that “a
RICO predicate offense ‘not only was a ‘but for’ cause of [their] injury, but was the proximate
cause as well.’” Hemi Grp., LLC v. City of New York, 559 U.S. 1, 9 (2010).
Plaintiffs allege that their RICO injury was overpaying for health insurance due to false
reimbursement rates for ONET services:
Subscriber Plaintiffs were underpaid or under-reimbursed for ONET
benefits paid to them as a direct result of the Defendants’ pattern of
racketeering activity, and thereby suffered direct consequential and
concrete financial loss flowing from the injury to their business or
property (their health insurance plans) by having overpaid for their
health insurance plans (the ONET component of which became
compromised and diminished in value as a direct result of
Defendants’ systematic underpayment scheme) and received
policies that were worth less than what they paid.

56

(TAC ¶ 414.) They argue that the predicate acts of mail and wire fraud causing this harm consisted
of “the transmission of data for use in the Ingenix Database … and related communications
including between Aetna’s offices in Minnesota or Wisconsin and Ingenix’s offices in Utah.”
(TAC ¶ 405.) 15
In connection with the causation requirement, the parties first dispute the extent to which
plaintiffs must demonstrate reliance, an issue addressed by the Supreme Court in Bridge v. Phoenix
Bond & Indem. Co., 553 U.S. 639 (2008), which dealt with a bid-rigging scheme to obtain tax
liens. The taxing authority in Bridge periodically held auctions for liens on unpaid taxes, and
interested purchasers would bid an amount that they were willing to accept from the delinquent
taxpayer to clear the lien. Because there frequently were ties for the winning bid—multiple parties
willing to accept nothing from the taxpayer to clear the lien—a rotating system was created, in
connection with which bidders were required to affirm that the bids were submitted in their own
name and that no agent or related entity had submitted a competing bid on their behalf. Losing
bidders filed a RICO action when it became apparent that the defendants were filing fraudulent
affidavits.
At issue was whether the losing bidders themselves were required to demonstrate that they
relied on the affidavits in dispute. The Court answered this question in the negative. Rejecting
defendants’ position that first-party reliance was an express element of a RICO claim, the Court
found that “a person [could] be injured ‘by reason of’ a pattern of mail fraud even if he has not
relied on any misrepresentations.” Bridge, 553 U.S. at 649. Notwithstanding, “none of this is to

15

As defendants point out, this “theory of predicate acts is different from Plaintiffs’ theory
in their Second Amended Complaint, in which Plaintiffs alleged that various communications to
plan members—such as UCR determinations and explanations of benefits (EOBs)—formed the
predicate acts giving rise to RICO liability.” (Aetna Br. at 19.)
57

say that a RICO plaintiff who alleges injury ‘by reason of’ a pattern of mail fraud can prevail
without showing that someone relied on the defendant’s misrepresentation.” Id. at 658 (emphasis
in original). Significantly, the Court found that “it may well be that a RICO plaintiff alleging
injury by reason of a pattern of mail fraud must establish at least third-party reliance in order to
prove causation.” Id. at 658-59 (“In most cases, the plaintiff will not be able to establish even butfor causation if no one relied on the misrepresentation.”).
Interpreting Bridge, the WellPoint court found that it was dealing with “a case where proof
of reliance, and likely first-party reliance, is a ‘mile post on the road to causation.’” WellPoint II,
at 903 F. Supp. 2d at 915; see also WellPoint III, at *25 (“[B]ecause Plaintiffs still allege the RICO
injury that the Subscriber Plaintiffs overpaid for health insurance coverage due to false
reimbursement rates, this requires a showing that someone relied on misrepresentations about
reimbursement rates.”) (emphasis in original). WellPoint II and III held that plaintiffs failed to
show reliance—either first- or third-party—and dismissed plaintiffs’ RICO claims on that basis.
See WellPoint III, at *25 (“Plaintiffs have failed to plead that someone relied on Defendants’
misrepresentations and therefore cannot sustain a cause of action as to mail fraud.”).
Applying these holdings, defendants argue that because plaintiffs fail to allege reliance in
any fashion, they cannot prove that their RICO injury was proximately caused by the alleged
scheme to defraud. This argument goes too far. In Wallace v. Midwest Fin. & Mortg. Servs., 714
F.3d 414, 419-22 (6th Cir. 2013), the court noted that, “[f]or RICO purposes, reliance and
proximate cause remain distinct—if frequently overlapping—concepts.” Id. at 420. And while
reliance is “‘often used to prove … the element of causation,’ that does not mean it is the only way
to do so, nor does that ‘transform reliance itself into an element of the cause of action.” Id. at 420

58

(quoting Bridge, 553 U.S. at 659); see also Bridge, 553 U.S. at 658-59 (“[T]he complete absence
of reliance may prevent the plaintiff from establishing proximate cause.”) (emphasis supplied).
In an industry where the end consumer generally has no choice but to enter, with little say
in the selection process, it strikes the Court as overly harsh to conclude, as defendants insist, that
first-party reliance should be incorporated as a necessary “mile post” in the Court’s causation
analysis. And, given the nature of the scheme at issue (if capable of proof), the same may be true
with regard to defendants’ argument that the absence of third-party reliance now defeats proximate
cause. The Court need not decide, however, because the causal chain is too attenuated to support
a finding of proximate causation, separate and apart from the issue of reliance.
As the Supreme Court explained in Bridge, proximate cause is a “flexible concept” that
demands “some direct relation between the injury asserted and the injurious conduct alleged.”
Bridge, 553 U.S. at 654. “When a court evaluates a RICO claim for proximate causation, the
central question it must ask is whether the alleged violation led directly to the plaintiffs’ injuries.”
Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461 (2006). “[A] link that is ‘too remote,’ ‘purely
contingent,’ or ‘indirec[t]’ is insufficient.” Hemi, 559 U.S. at 9. The direct-relation requirement,
the Court found, “avoids the difficulties associated with attempting to ascertain the amount of a
plaintiff’s damages attributable to the violation, as distinct from other, independent factors;
prevents courts from having to adopt complicated rules apportioning damages among plaintiffs
removed at different levels of injury …; and recognizes the fact that directly injured victims can
generally be counted on to vindicate the law as private attorneys general, without any of the
problems attendant upon suits by plaintiffs injured more remotely.” Bridge, 553 U.S. at 654-55
(internal quotations and citations omitted).

59

Plaintiffs claim defendants’ racketeering conduct injured them because they were underreimbursed for ONET benefits and, consequently, received health insurance plans that were worth
less than what they paid. To show that such harm was proximately caused by defendants’
racketeering conduct, plaintiffs must first establish several distinct steps.
First, they must demonstrate that the Ingenix database was the basis on which defendants’
calculated the ONET reimbursement. But while plaintiffs allege that this purported scheme
involved “use of the Ingenix Database to provide false, artificially low reimbursement amounts for
ONET,” they make no showing that defendants exclusively relied on this methodology for
reimbursement. 16 What is more, plaintiffs allege that, in determining ONET amounts, the insurer
defendants at times “reimbursed based on a percentage of the Medicare fee schedule” (TAC ¶
172), or “some other faulty methodology” (TAC ¶ 307), or “other improper pricing methods.”
(TAC ¶ 484, 485). And even where the database was used to determine ONET reimbursements,
the insurers were free to make independent decisions about reimbursements. The Ingenix database
“reported not the amounts to be reimbursed, but a range of provider charge amounts expressed in
terms of ‘percentiles’” (Aetna Br. at 12), and plaintiffs make no allegation that the insurers relied
on the same percentile in all cases. 17 Plaintiffs must also demonstrate that the amount defendants

16

In granting plaintiffs’ motion for leave to amend, the Court is limited to the third amended
consolidated complaint for the purposes of this analysis, see W. Run Student Hous. Assocs., LLC
v. Huntington Nat’l Bank, 712 F.3d 165, 172 (3d Cir. 2013), which asserts that the Ingenix database
was “automatically applied” to determine ONET reimbursement—a conclusory allegation that
sidesteps what was laid out in the second amended consolidated complaint. Plaintiffs previously
alleged in great detail the extent to which defendants used other methodologies to determine ONET
amounts, such as Medicare rates (SAC ¶¶ 33, 35, 60, 358, 402, 445), in-network fee schedules
(SAC ¶¶ 33, 60), or unidentified means (“some other faulty methodology” SAC ¶432). On those
facts, the Court would have no trouble in finding that the causal chain was broken.
17
Defendants also point out that, because of variations in reimbursement terms of certain
Aetna health plans, Aetna necessarily “reimburses different amounts under different plan terms,
separate and apart from variations in the UCR amount.” (Aetna Br. at 12 (citing TAC ¶¶ 204
(Cooper is responsible for 30% of the UCR amount as a coinsurance payment), 213-15 (Werner is
60

chose to reimburse was incorrect—and, as Aetna argues, that it was incorrect “in a way that made
the payment lower than it should have been if Aetna had used some hypothetical ‘True UCR’
database.” (Aetna Br. at 23.) Finally, plaintiffs must demonstrate that the subscribers were balance
billed for any uncovered amounts. (TAC ¶ 568 (“Aetna’s agreements … state that the Member is
financially responsible for the difference between the allowed expenses and provider’s billed
charge for ONET.”).) Plaintiffs argue that this step is irrelevant to the Court’s consideration of
proximate cause and claim that the argument “preposterously posits that RICO proximate cause
depends not on a direct injury from predicate acts but on the actions of a third party.” (Plaintiffs
Opp. at 28.) But such third party conduct becomes relevant where it has the potential to disrupt
the causal chain, and it stands to reason that if the subscribers here were not billed for the difference
owed, they suffered no actionable harm.
Seen in its best light, plaintiffs’ causal chain depends on layered contingencies, similar to
Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010), in which the City asserted RICO mail
and wire fraud claims against Hemi Group, an online cigarette retailer. While not required to
collect taxes on its sales, Hemi Group did have to submit customer information to the states into
which its wares were shipped. The City claimed that Hemi failed to file those statements with the
State of New York, and alleged that such failure caused the loss of tens of millions of dollars in
unrecovered cigarette taxes. In considering whether the City’s injury occurred “by reason of” the
defendant’s alleged racketeering activity, the Court characterized the causal chain as follows:
“Without the reports from Hemi, the State could not pass on the information to the City, even if it

responsible for 40% of the UCR amount), 301 (Weintraub is responsible for 50% of the UCR
amount)).) Such factual allegations highlight the difficulty in ascertaining the extent of harm
suffered—a pertinent issue in the proximate cause analysis. See Schrager, 542 F. App’x at 104
(finding “the ease of apportioning damages among other plaintiffs affected by the alleged
violation” a point of consideration in analyzing proximate cause.).
61

had been so inclined. Some of the customers legally obligated to pay the cigarette tax to the City
failed to do so. Because the City did not receive the customer information, the City could not
determine which customers had failed to pay the tax. The City thus could not pursue those
customers for payment. The City thereby was injured in the amount of the portion of back taxes
that were never collected.” Id. at 2. Finding such a theory “too indirect” and “anything but
straightforward,” the Court held that the City “ha[d] no RICO claim” on that basis. In so holding,
the Court was persuaded in part by the fact that “independent factors [] accounted for [the
plaintiff’s] injury”—specifically, that “[t]he City’s theory of liability rest[ed] on the independent
actions of third and even fourth parties.” Id. at 3.
Such is the case here. Plaintiffs’ theory of causation rests on independent action in at least
two critical links of the chain. First, the insurers would each need to determine they would strictly
use the Ingenix database in making their ONET reimbursements. This is an assumption the Court
may not freely make given the presence of contrary findings in the pleadings themselves. And
second, the out-of-network physicians would need to bill subscribers for the balance owed on their
services in all cases—an expectation plaintiffs offer no meaningful allegations about. As such,
plaintiffs have not presented an adequate case for proximate cause and, based on all the foregoing,
the RICO claims are dismissed. 18

18

Aetna also claims that the “indirectness” of this causal chain supports a finding that the
association plaintiffs lack standing under RICO, and that the provider plaintiffs lack standing under
both RICO and Section 1 of the Sherman Act. See Aetna Br. at 42 (arguing that the association
plaintiffs’ “daisy chain” of causation “comes nowhere close to establishing RICO standing); Aetna
Br. at 38 (“Derivative claims based on injuries from economic ripples emanating from the
challenged conduct are insufficient to confer antitrust or RICO standing.”). Because the Court has
decided that the substantive counts fail on the merits—RICO, in part due to the remote chain of
causation—it need not consider whether the directness or indirectness of the injury prevents
standing here.
62

4. Alternative Predicate Acts: Embezzlement or Conversion, 18 U.S.C. § 664
Plaintiffs argue that, in addition to the mail and wire fraud grounds, they state predicate
acts of “embezzlement or conversion” under 18 U.S.C. § 664. This section imposes civil RICO
liability for “[a]ny person who embezzles, steals, or unlawfully and willfully abstracts to his own
use or to the use of another, any of the moneys … or other assets of any employee welfare benefit
plan.” 18 U.S.C. § 664. This alternative theory of liability fails for the same reasons set forth by
the district court decisions in Franco, WellPoint II, and WellPoint III.
Embezzlement involves the conversion or misappropriation of funds belonging to another,
and its elements include: (1) the unauthorized (2) taking or appropriation (3) of benefit plan funds
(4) with specific criminal intent. See Mehling v. N.Y. Life Ins. Co., 163 F. Supp. 2d 502, 508 (E.D.
Pa. 2001) (citing United States v. Adreen, 628 F.2d 1236, 1241 (9th Cir. 1980)). Plaintiffs maintain
that Aetna’s conduct satisfies the required elements because its under-reimbursements wrongfully
converted the assets of the ONET subscribers. “The plan funds that Aetna and Ingenix unlawfully
converted and diverted to their use or to the use of another were those plan funds specifically
earmarked as guaranteed benefits for Aetna Members, for which Aetna and Ingenix, through the
predicate acts, made or knowingly caused to be made a false payment on claims for reimbursement
of out-of-network charges.” (TAC ¶ 522.) Aetna and Ingenix “caused these funds to be withheld
or diverted for their own financial gain or to the use of another, and Aetna benefitted from the
revenues generated from its administration (either as plan administrator or claim administrator) of
certain of Aetna’s Healthcare plans.” (TAC ¶ 522.) Plaintiffs also claim that, with regard to selffunded plans, Aetna was able to extract additional administrative fees and, through its use of the
Ingenix database, “improperly cause self-funded plans to keep rather than pay what the policies
required to be paid.” (TAC ¶ 523.)

63

Even drawing all inferences in plaintiffs’ favor, however, these allegations state only that
the insurer defendants denied them ONET payments to which they may have been entitled. The
“common thread” uniting violations of § 664 is that “the defendant, at some stage of the game, has
taken another person’s property or caused it to be taken, knowing that the other person would not
have wanted that to be done.” Andreen, 628 F.2d at 1241 (quoting United States v. Silverman, 430
F.2d 106, 126-27 (2d Cir. 1970)). Under this standard, plaintiffs’ allegations that the insurer
defendants “decreased [their] own expenses, albeit improperly,” WellPoint II, 903 F. Supp. 2d at
917, are insufficient. Plaintiffs have not, for example, alleged that the subscriber plaintiffs “paid
their premiums into a trust with the understanding that the funds paid in were reserved for ONS
reimbursements, or that [the insurer defendants’] decision to artificially reduce [their] ONS
payments somehow resulted in the improper diversion of moneys from any such funds.” Id. at
917.
And while plaintiffs allege funds were “earmarked” for ONET subscribers, the funds in
dispute belong to the defendants, not the plaintiffs or some other person or entity. To succeed, the
plaintiffs would be required to allege that the funds were “earmarked for an intended recipient”
out of plan assets, not the insurer’s assets, and then were directed for an alternate purpose.
WellPoint III, *28-29 (citing United States v. Whiting, 471 F.3d 792, 800 (7th Cir. 2006) (holding
that contributions withheld from employee paychecks and delivered to the employee’s benefit
plans were plan assets, not company assets, for purposes of § 664 embezzlement)). Because
plaintiffs fail to allege that “the earmarked funds were … converted from the beneficiaries’
assets”—as opposed to Aetna’s own assets—the claim for embezzlement and conversion must be
dismissed. WellPoint III, at 29. To permit a cause of action for embezzlement on these facts

64

would “open the door to an embezzlement claim every time a participant brought a run-of-the-mill
action for nonpayment of benefits under ERISA.” WellPoint II, 903 F. Supp. 2d at 917.
5. RICO Conspiracy, 18 U.S.C. § 1962(d)
Finally, plaintiffs argue that the complaint plausibly suggests that the defendants knew
about and agreed to the requisite scheme to defraud, thus giving rise to a RICO § 1962(d)
conspiracy claim. This requires plaintiffs to allege facts sufficient to support the inference that the
UHG defendants agreed to facilitate a scheme that includes the operation or management of a
RICO enterprise.
As the Third Circuit has made clear, however, a claim under § 1962(d) “must be dismissed
if the complaint does not adequately allege an endeavor[,] which, if completed would satisfy all of
the elements of a substantive [RICO] offense.” In re Ins. Brokerage, 618 F.3d at 373 (quoting
Salinas v. United States, 522 U.S. 52, 65 (1997)). Having found that the complaint fails to state
an underlying RICO violation, the Court dismisses plaintiffs’ conspiracy claim under § 1962(d).
IX.

STATE LAW CLAIMS
Along with the federal claims under RICO and the Sherman Act, plaintiff Weintraub also

raises four claims against all defendants under New York state law: (1) breach of contract; (2)
violation of Gen. Bus. Law § 349; (3) breach of the implied covenant of good faith and fair dealing;
and (4) unjust enrichment. The UHG defendants move to dismiss, Aetna does not.
1. Breach of Contract as Against UHG Defendants (Count XIII)
Weintraub participated in an individual and family health plan offered by New York
University. It was issued and administered by Aetna, but not subject to or governed by ERISA.
The plan differentiated between in-network and out-of-network services, promised to reimburse

65

50% of the “reasonable charge” for ONET services, and defined “reasonable charge” as the lower
of “the provider’s usual charge for furnishing it; and the charge Aetna determines to be appropriate;
based on factors such as the cost of providing the same or similar service or supply and the manner
in which charges for the service or supply are made; and the care Aetna determines to be the
prevailing charge level made for it in the geographic area where it is furnished.” (TAC ¶ 566.)
After receiving treatment from an ONET provider in December 2007, Weintraub claims that
“Aetna failed to comply with the terms of [its agreement] … by making reimbursement
determinations for ONET that had the effect of covering less than the stated percentage of either
the providers’ actual charges or the UCR without valid data to support such determinations, rather
relying on the flawed and artificially deflated data provided by Ingenix.” (TAC ¶ 573.) To survive
dismissal on this claim, the complaint must allege facts plausibly establishing (1) the existence of
a contract between Weintraub and the defendants, (2) adequate performance of the contract, (3)
breach of the contract by the defendants, and (4) damages resulting from that breach. See Brooklyn
13th St. Holding Corp. v. Nextel of New York, Inc., 495 F. App’x 112, 113 (2d Cir. 2012).
The Weintraub claim fails to plead any of the required elements as to Ingenix or UHG, but
attempts to correct this deficiency by arguing that the UHG defendants may be held liable as coconspirators for the alleged breach committed by Aetna. This would require proof of (1) a “corrupt
agreement” between the parties; (2) an overt act; (3) “intentional participation in furtherance of a
plan or purpose”; and (4) the resulting damage. See Kashi v. Gratsos, 790 F.2d 1050, 1054-55 (2d
Cir. 1986). Apart from referring to a collection of paragraphs in the third amended complaint,
Weintraub makes no effort to explain this theory of conspiracy liability for breach of contract. The
Court found the referenced allegations insufficient to state an agreement in restraint of trade,
Section VII(1), supra, insufficient to state a RICO conspiracy, Section VIII(2), supra, and now

66

finds them insufficient to state an agreement in furtherance of a breach of contract. Consequently,
count XIII is dismissed as against UHG and Ingenix, but is preserved as against Aetna.
2. Independent Injury Rule
To plausibly state the remaining state law claims—violation of GBL § 349, breach of the
implied covenant of good faith and fair dealing, and unjust enrichment—the complaint must allege
an injury separate and apart from any damages flowing from the alleged breach. See, Spagnola v.
Cubb Corp., 574 F.3d 64, 74 (2d Cir. 2009) (“Although a monetary loss is a sufficient injury to
satisfy the requirement under § 349, that loss must be independent of the loss caused by the alleged
breach of contract.”) (emphasis supplied); Harris v. Provident Life and Accident Insurance Co.,
310 F.3d 73, 81 (2d Cir. 2002) (“New York law … does not recognize a separate cause of action
for breach of the implied covenant of good faith and fair dealing when a breach of contract claim,
based upon the same facts, is also pled.”) (emphasis supplied); Law Debenture v. Maverick Tube
Corp., 2008 WL 4615896, at *12-13 (S.D.N.Y. Oct. 15, 2008) (surveying cases and concluding
that, under New York law, "a claim for unjust enrichment, even against a third party, cannot
proceed when there is an express agreement between two parties governing the subject matter of
the dispute") (emphasis supplied).
The Weintraub claim fails to differentiate, alleging that the breach occurred because “Aetna
failed to comply with the terms of [its agreement] with Plaintiff Weintraub … by making
reimbursement determinations for ONET that had the effect of covering less than the stated
percentage of either the providers’ actual charges or the UCR data without valid data to support
such determinations, rather relying on the flawed and artificially deflated data provided by
Ingenix.” (TAC ¶ 573.) The complaint thereafter does little more than restate these allegations in
describing Weintraub’s remaining state law claims. In identifying the injury caused by the alleged

67

violation of GBL § 349, Weintraub merely states that he “suffered and continue[s] to suffer injury,
including in particular, the overpayment of out-of-pocket expenses related to ONET.”
The same applies to the implied covenant and unjust enrichment claims. New York law is
clear in that “[a] claim for breach of the covenant of good faith and fair dealing will be duplicative
of a breach of contract claim where they are based on the same allegations or where the same
conduct is the predicate for both claims.” Spread Enterprises, Inc. v. First Data Merch. Servs.
Corp., 2012 WL 3679319, at *4 (E.D.N.Y. Aug. 22, 2012). The implied covenant claim is
supported only by Aetna’s “fail[ure] to reimburse ONET based on actual UCRs” (TAC ¶ 580.)
Similarly, a claim for unjust enrichment is “unavailable where … an express contract covers the
subject matter.” Karmilowicz v. Hartford Fin. Servs. Group, 494 Fed. App’x 153, 157 (2d Cir.
2012). Given the primary basis for his unjust enrichment claim—that defendants “benefited from
their intentional under-reimbursement for ONET”—the Court finds that Weintraub’s agreement
with Aetna definitively “covers the subject matter here.” This finding compels dismissal as against
both Aetna and non-party UHG defendants. See AQ Asset Mgt., LLC v. Levine, 119 A.D.3d 457,
462 (1st Dep’t 2014 (dismissing claims for unjust enrichment “because a valid contract (the SPA)
covers the subject matter of the claims …. notwithstanding that ASA and Zimmerman were not
parties to the SPA”); see also Law Debenture, 2008 WL 4615896, at *12-13 (“[A] claim for unjust
enrichment, even against a third party, cannot proceed when there is an express agreement
between two parties governing the subject matter of the dispute.”) (emphasis added).
X.

DISMISSAL WITH OR WITHOUT PREJUDICE
Having concluded that plaintiffs have failed to state a claim upon which relief could be

granted with respect to some of the causes of action asserted, the Court must next determine

68

whether to dismiss those causes of action with or without prejudice. To properly do so, a recap is
in order.
Plaintiffs assert fifteen causes of action that essentially fall into one of four categories:
ERISA claims, both for benefits and other violations, RICO claims, antitrust claims, and state law
claims. The claims for ERISA benefits, against Aetna alone, appear in counts I and II with the
former asserted by insurance subscribers and the latter raised by provider and association plaintiffs.
Aetna does not move to dismiss these claims, but because this Court finds that the providers
currently named (and the association plaintiffs, by extension) do not have standing to assert ERISA
claims count II is dismissed. The remaining ERISA claims—for varied violations, procedural and
otherwise—are asserted by all plaintiffs in counts III through VII and are dismissed on their merits.
Counts VIII through X raise the RICO violations. These claims are asserted by the subscribers,
providers and associations (in their individual capacity), and also are dismissed on their merits.
The antitrust claim, asserted by the subscriber plaintiffs only, is asserted in count XI and is
dismissed on its merits. Finally, counts XII through XV raise state law claims asserted by plaintiff
Weintraub alone—violation of GBL § 349, breach of contract, breach of the implied covenant of
good faith and fair dealing, and unjust enrichment, respectively. Weintraub’s claim for breach of
contract in count XIII is raised against all defendants. Aetna does not move to dismiss that claim,
and it is dismissed as against UHG and Ingenix only. The remaining state law claims are dismissed
on their merits as to all defendants.
A court may, in exercise of its discretion, dismiss claims with prejudice and thus refuse
leave to amend if amendment would be futile. See Alston v. Parker, 363 F.3d 229, 235 (3d Cir.
2004). This is particularly true when a plaintiff has had multiple opportunities to improve the
pleadings. This action started nearly eight years ago and plaintiffs have amended their pleadings

69

six times since then. According to plaintiffs, the complaint on which this Court now rules “is
based upon facts learned in discovery and is intended to narrow and focus the claims set forth in
the original complaint based upon the evidence adduced in discovery, and to adjust the allegations
in the complaint to existing law.” Fact discovery closed nearly five years ago on July 19, 2010
and, on October 31, 2011, Judge Chesler ordered that “no further discovery may be conducted.”
Plaintiffs recognized this fact in representing to the Court that adoption of the third amended
complaint would “not cause any significant change in the expenditure of resources for trial
preparation because both parties will prepare for trial based upon existing discovery.” (Plaintiffs
Br. at 4.)
The Court now holds plaintiffs to that representation, and dismisses their claims with
prejudice. Limited exception, however, is made for certain claims asserted by provider plaintiffs.
In a letter to the Court, dated November 10, 2014 [D.E. 1014], plaintiffs’ counsel indicated their
intent to reinstate the claims of certain provider plaintiffs dismissed earlier in this action due to an
order issued by Judge Federico A. Moreno in the Southern District of Florida, which held that their
participation in this suit violated an injunction arising from a 2003 settlement of another case. To
the extent these providers may be properly added to this action, plaintiffs may so move following
entry of the order accompanying this opinion. However, this leave to amend extends only to the
claim now asserted in count II of the third amended consolidated complaint. Provider plaintiffs’
remaining claims under ERISA and RICO were dismissed on their merits and may not be restated
going forward. Furthermore, the association plaintiffs previously enjoined by Judge Moreno’s
order may not attempt to reinstate their claims here—they lack representative standing for the
reasons expressed in this opinion, and the claims they assert in their individual capacities are
dismissed on the merits.

70

XI.

CONCLUSION
For the foregoing reasons, and having granted plaintiffs motion for leave to amend, the

Court grants in part and denies in part the motions to dismiss filed by defendants Aetna, UHG
and Ingenix. The following claims remain viable: (1) count I for unpaid ERISA benefits; (2)
count XII for breach of contract, as against Aetna alone.
/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J.
Date: June 30, 2015

71