MVP Health Plan, Inc. v. OptumInsight, Inc.

Filing 35

MEMORANDUM-DECISION and ORDERED, that Defendants Motion (Dkt. No. 15) to dismiss Counts 2, 3, 4, 5 and 6 of the Complaint (Dkt. No. 1) is GRANTED. Signed by Senior Judge Lawrence E. Kahn on October 29, 2014. (sas)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
MVP HEALTH PLAN, INC.,
Plaintiff,
-against-

1:13-CV-1578 (LEK/CFH)

OPTUMINSIGHT, INC.,
Defendant.

MEMORANDUM-DECISION and ORDER
I.

INTRODUCTION
Plaintiff MVP Health Plan, Inc. (“MVP” or “Plaintiff”) alleges various claims arising out of

a contractual relationship with Defendant OptumInsight, Inc. (“Optum” or “Defendant”). Dkt. No. 1
(“Complaint”). Presently before the Court is Defendant’s Motion to dismiss certain claims as
duplicative pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. Nos. 15 (“Motion”); 15-2
(“Defendant’s Memorandum”). For the following reasons, the Motion is granted.
II.

BACKGROUND1
Plaintiff is a not-for-profit health care plan provider, offering employer group, individual,

Medicare Advantage, and Medicaid health care plans. Compl. ¶¶ 2, 12. Defendant provides
analytics, technology, actuarial, and consulting services to businesses in the healthcare industry. Id.
¶ 4.

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Because this case is before the Court on a motion to dismiss for failure to state a claim, the
allegations of the Complaint are accepted as true and form the basis of this section. See Boyd v.
Nationwide Mut. Ins. Co., 208 F.3d 406, 408 (2d Cir. 2000); see also Matson v. Bd. of Educ., 631
F.3d 57, 72 (2d Cir. 2011) (noting that, in addressing a motion to dismiss, a court must view a
plaintiff’s factual allegations “in a light most favorable to the plaintiff and draw[] all reasonable
inferences in her favor”).

For its Medicare health care plans, Plaintiff submits bids annually to the Center for Medicare
and Medicaid Services (“CMS”). Id. ¶ 14. To prepare its bids, Plaintiff entered into annual
agreements with Defendant for services between 2006 and 2012. Id. ¶¶ 17, 21. Plaintiff provided
Defendant with “benefit cost-sharing information,” which Defendant utilized to create a bid pricing
tool worksheet (“BPTW”). Id. ¶¶ 18-19, 24. Plaintiff then incorporated the BPTW into its final bid
to CMS. Id. If Plaintiff’s bids were accepted, it was required to provide health care coverage within
the pricing parameters set forth in the bids. Id. ¶ 15.
In 2012, as in previous years, the parties entered into an agreement (the “2012 Agreement”)
to provide actuarial services related to 2013 Medicare bids. Id. ¶ 22. In June 2012, Defendant
submitted its work product to Plaintiff, who then submitted bids to CMS. Id. ¶¶ 27-31. Plaintiff
fully performed its obligations under the 2012 Agreement by providing Defendant with all necessary
information to produce the BPTW, as well as paying all of Defendant’s invoices. Id. ¶¶ 33-34.
However, “Optum carelessly and in violation of the standard of care required of competent
actuaries, and in violation of the 2012 Agreement, failed to correctly apply and utilize MVP’s costsharing information to calculate formulas that it utilized in its BPT worksheet.” Id. ¶ 26.
Specifically, Defendant failed to carry the cost-sharing assumptions forward from 2012 to 2013, as
it had in prior years, which resulted in inaccurate Medicare bids. Id. ¶¶ 42-47. Due to the
inaccurate bids, which Plaintiff was obligated to fulfill, Plaintiff sustained significant monetary
losses. Id. ¶¶ 49-52.
In the Complaint, Plaintiff alleges the following claims: (1) breach of contract; (2)
negligence; (3) gross negligence; (4) negligent misrepresentation; (5) unjust enrichment; (6)
quantum meruit; and (7) return of moneys paid under the 2012 Agreement. Compl. ¶¶ 53-101.

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Plaintiff seeks monetary damages. See id. Defendant moves to dismiss counts two through four
(the “tort claims”) and five and six (the “quasi-contract claims”) as duplicative of the breach of
contract claim. See generally Mot.
III.

LEGAL STANDARD
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a

“complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also FED. R. CIV. P. 12(b)(6). A court must accept as true
the factual allegations contained in a complaint and draw all inferences in favor of a plaintiff. See
Allaire Corp. v. Okumus, 433 F.3d 248, 249-50 (2d Cir. 2006). A complaint may be dismissed
pursuant to Rule 12(b)(6) only where it appears that there are not “enough facts to state a claim to
relief that is plausible on its face.” Twombly, 550 U.S. at 570. Plausibility requires “enough fact[s]
to raise a reasonable expectation that discovery will reveal evidence of [the alleged misconduct].”
Id. at 556. The plausibility standard “asks for more than a sheer possibility that a defendant has
acted unlawfully.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “[T]he pleading
standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than
an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (citing Twombly, 550 U.S. at
555). Where a court is unable to infer more than the mere possibility of the alleged misconduct
based on the pleaded facts, the pleader has not demonstrated that she is entitled to relief and the
action is subject to dismissal. See id. at 678-79.

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IV.

DISCUSSION
A. Tort Claims
Defendant argues that Plaintiff’s tort claims should be dismissed as duplicative of its breach

of contract claim because the underlying facts and the damages sought in each are virtually
identical. Def.’s Mem. at 2-5.2
“Generally, a tort cause of action that is based upon the same facts underlying a contract
claim will be dismissed as a mere duplication of the contract cause of action particularly where . . .
both seek identical damages.” Envirocon, Inc. v. Alcoa, Inc., No. 06-CV-0549, 2006 WL 2460640,
at *3 (N.D.N.Y. Aug. 23, 2006) (quoting Reade v. SL Green Operating P’ship, LP, 817 N.Y.S.2d
230, 231 (App. Div. 2006)). However, a breach of contract will give rise to a tort claim where a
legal duty independent of the contract itself has been violated. Bayerische Landesbank, New York
Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 58 (2d Cir. 2012) (citing Clark-Fitzpatrick v.
Long Island R.R. Co., 516 N.E.2d 190, 193-94 (N.Y. 1987)). Such “legal duty must spring from
circumstances extraneous to, and not constituting elements of, the contract, although it may be
connected with and dependent on the contract.” Clark-Fitzpatrick, 516 N.E.2d at 193-94. If,
however, the basis of a party’s claim is a breach of solely contractual obligations, such that the
plaintiff is merely seeking to obtain the benefit of the contractual bargain through an action in tort,
the claim is precluded as duplicative. See New York Univ. v. Cont’l Ins. Co., 662 N.E.2d 763, 770
(N.Y. 1995).

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Although not explicitly stated, the parties appear to agree that this dispute is governed by
New York law. See Compl. ¶¶ 7-12; Def.’s Mem. at 1 n.1.
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An independent duty sufficient to support a tort claim alongside breach of contract has been
found where: (1) the defendant is engaged in an occupation subject to professional malpractice
claims, or (2) the nature of the damages sought implicates a larger public interest. See Hydro
Investors, Inc. v. Trafalgar Power, Inc., 227 F. 3d 8, 18 (2d Cir. 2000); Avazpour Networking
Servs., Inc. v. Falconstor Software, Inc., 937 F. Supp. 2d 355, 362-64 (E.D.N.Y. 2013). Defendant
argues that it has no independent or special duty to Plaintiff—their relationship is defined
exclusively by the contract. Def.’s Mem. at 5. Plaintiff responds that Defendant’s role as an actuary
imposes a separate and independent professional duty. Dkt. No. 16 (“Plaintiff’s Memorandum”) at
9.
1. Professional Malpractice
New York law provides that “[b]ecause an actuary is not required to be licensed, is not
regulated, and is not subject to a State-created disciplinary system, an actuary is not a ‘professional’
for purposes of a malpractice cause of action.” Health Acquisition Corp. v. Program Risk Mgmt.,
Inc., 964 N.Y.S.2d 554, 557 (App. Div. 2013) (citing Castle Oil Corp. v Thompson Pension Empl.
Plans, 750 N.Y.S.2d 629, 631 (App. Div. 2002)); see also Chase Scientific Research v. NIA Group,
749 N.E.2d 161, 166-67 (N.Y. 2001). However, an actuary who owes a fiduciary duty—one who
exercises “superiority and influence on the other”—can be held liable for the negligent performance
of its services. AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 896 N.E.2d 61, 68
(N.Y. 2008).
Plaintiff does not allege that Defendant owed it a fiduciary duty. See generally Compl.
Rather, Plaintiff alleges that Defendant “owed [it] a special duty, independent from its contractual
obligations and duties under the 2012 Agreement.” See id. ¶¶ 64, 69 (emphasis added). However,

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Plaintiff does not argue that a “special” duty gives rise to an independent duty sufficient to bring a
tort claim alongside breach of contract. See generally Pl.’s Mem. Instead, Plaintiff cites to a
number of cases where actuaries were subject to simultaneous tort and breach of contract claims.
See id. at 9. However, those cases are inapplicable to the instant case.
Plaintiff first relies on a set of cases brought against actuaries pursuant to the Employee
Retirement Income Security Act (“ERISA”), where the courts noted that the defendant actuaries
may be subject to tort liability alongside breach of contract where the defendants served as
fiduciaries. Pl.’s Mem. at 9; see also I.B.E.W. Local No. 241 Pension Plan v. First Allmerica Fin.
Life Ins. Co., 354 F. Supp. 2d 203, 207 (N.D.N.Y. 2005); Toussaint v. James, No. 01 Civ. 1004,
2003 WL 21738974, at *22 (S.D.N.Y. July 25, 2003); Gerosa v. Savasta, 189 F. Supp. 2d 137, 151
(S.D.N.Y. 2002). However, those cases are not irrelevant for two important reasons. First, Plaintiff
has not alleged that Defendant owed Plaintiff a fiduciary duty. Second, those cases all arose out of
the context of ERISA, where the defendant actuaries were charged with employee benefit plan
administration governed by federal regulations. See, e.g., Gerosa, 189 F. Supp. 2d at 141 (noting
that “[a]n actuary is not normally a fiduciary” but “can be considered a fiduciary only if he exercises
authority or control or discretion over the plan, or renders investment advice concerning plan assets
[under 29 C.F.R. § 2509.75-5]”). No such relationship exists here, as Plaintiff has not alleged that
Defendant exercised any level of “authority or control or discretion.” These cases involving
fiduciary duties under ERISA are therefore inapplicable to this case.
Next, Plaintiff relies on two state decisions, which acknowledge that, while actuaries are not
considered professionals for purposes of malpractice claims, they may owe a fiduciary duty where
they have “develop[ed] relationships of trust and confidence.” Pl.’s Mem. at 9. However, again,

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Plaintiff has not alleged that Defendant owed it a fiduciary duty, and Plaintiff’s reliance on these
cases is therefore misplaced.
Finally, the remaining cases upon which Plaintiff relies all concern landlord-tenant disputes.
See Pl.’s Mem. at 7. These cases do not support Plaintiff’s position, as New York expressly
recognizes “a common-law duty, independent of any contractual obligation imposed by [a] lease,”
incumbent on landlords. Aegis Ins. Servs., Inc. v. The Port Auth. of New York & New Jersey, 435
F. App’x 18, 22 (2d Cir. 2011). As stated supra, absent a fiduciary relationship, no such commonlaw duty exists under New York law for actuaries. Therefore, none of these cases supports
Plaintiff’s argument that Defendant had a legal duty independent of the contractual relationship.
2. Public Interest
Although not raised by the parties, the Court briefly addresses whether Plaintiff’s tort claims
may otherwise stand alongside its breach of contract claim. The New York Court of Appeals has set
forth certain factors to consider when determining whether a plaintiff can state a claim for breach of
contract alongside a claim in tort in the absence of an independent, professional duty. Avazpour,
937 F. Supp. 2d at 362-63 (citing Sommer v. Fed. Signal Corp., 593 N.E.2d 1365, 1369-72 (N.Y.
1992)). First, courts are to consider the nature of the injury alleged. Sommer, 593 N.E.2d at 1370.
Where “the nature of the harm” alleged is “catastrophic,” the behavior involved may give rise to a
duty of care that exists outside of the contract. Id. Next, courts consider the way in which the injury
occurred, and the harm that followed. Id. Courts look to whether the injury resulted from “an
abrupt, cataclysmic occurrence,” or “a process of failure of the product to perform as anticipated
under normal business conditions.” Id. Finally, courts consider the nature of the relief sought.
Where the plaintiff seeks “enforcement of the bargain, the action should proceed under a contract

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theory.” Id. at 1369.
Here, all factors weigh in favor of dismissing Plaintiff’s tort claims. First, the nature of the
harm at issues does not involve widespread catastrophic harm or otherwise implicate the public
interest. See Avazpour, 937 F. Supp. 2d at 364-65; cf. Sommer, 593 N.E.2d at 1370-71 (finding
failure to transmit fire alarms implicated significant public interest); Reade, 817 N.Y.S.2d at 231
(permitting tort claims to proceed where landlord’s failure to protect water supply pipes and to
install a flow alarm were part of comprehensive scheme to promote fire safety and “for the
protection of the general public”). Moreover, while Plaintiff’s damages may be substantial, such
harm involves private, and not the public interest. See Avazpour, 937 F. Supp. 2d at 364-65.
Second, Plaintiff has not alleged that the harm suffered resulted from “an abrupt, cataclysmic
occurrence.” Finally, Plaintiff is not seeking relief for a harm suffered beyond the contractual
relationship but is merely seeking to enforce the bargain and to acquire damages for the alleged
breach thereof.
In sum, New York does not recognize professional malpractice against actuaries in the
absence of a fiduciary relationship, which has not been alleged here. Moreover, the alleged harm at
issue does not involve widespread catastrophic harm or otherwise implicate the public interest. If “a
tort claim does no more than assert violations of a duty which is identical to and indivisible from the
contract obligations which have allegedly been breached, the tort claim cannot be sustained.”
Metro. West Asset Mgmt., LLC, v. Magnus Funding, Ltd., No. 03 Civ. 5539, 2004 WL 1444868, at
*9 (S.D.N.Y. June 25, 2004). Therefore, Plaintiff’s tort claims are hereby dismissed.

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B. Quasi-Contract Claims
Defendant argues that Plaintiff’s unjust enrichment and quantum meruit claims should also
be dismissed as duplicative of its breach of contract claim. Def.’s Mem. at 6-7.
“The existence of a valid and enforceable written contract governing a particular subject
matter ordinarily precludes recovery in quasi contract for events arising out of the same subject
matter. . . .” Envirocon, 2006 WL 2460640, at *2 (quoting Clark-Fitzpatrick, 70 N.Y.2d at 388);
see also Kimball Assocs., P.A. v. Homer Cent. Sch. Dist., No. 00-CV-897, 2000 WL 1720751, at *8
(N.D.N.Y. Nov. 9, 2000) (“Under New York law, ‘[t]he existence of a valid and enforceable written
contract governing a particular subject . . . precludes recovery in quasi-contract[,] which includes
both quantum meruit and unjust enrichment theories.”) (citing Valley Juice Ltd. v. Evian Waters of
France, Inc., 87 F.3d 604, 610 (2d Cir. 1996)). However, “[w]here . . . there is a bona fide dispute
whether the contract covers the controversy in issue, ‘a plaintiff may proceed upon a theory of
quantum meruit as well as contract, and will not be required to elect his or her remedies.’” Fisher v.
A.W. Miller Technical Sales, Inc., 762 N.Y.S.2d 205, 207 (App. Div. 2003) (quoting Sforza v.
Health Ins. Plan of Greater N.Y., 619 N.Y.S.2d 734, 736 (App. Div. 2004)); see also deCiutiis v.
Nynex Corp., No. 95 Civ. 9745, 1996 WL 512150, at *4 (S.D.N.Y. Sept. 9, 1996).
Defendant asserts that courts in this circuit routinely dismiss quasi-contract claims that stem
from an express contractual relationship. See Dkt. No. 20 (“Reply”) at 2-3; see also Kimball, 2000
WL 1720751, at *8 (dismissing quasi-contract claims at motion to dismiss stage); Pilarczyk v.
Morrison Knudsen Corp., 965 F. Supp. 311, 323 (N.D.N.Y. 1997) (dismissing unjust enrichment
claim due to the existence of an express contract); Foxley v. Sotheby’s Inc., 893 F. Supp. 1224,
1234 (S.D.N.Y. 1995) (“This cause of action fails to state a claim because quasi-contractual claims

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are not available where an express contract exists.”); Cross v. State Farm Ins. Co., No. 10-CV-1179,
2011 WL 4916534, at *5 (N.D.N.Y. Oct. 17, 2011) (“Here, the unjust enrichment claim clearly
stems from the contractual relationship. Accordingly, the unjust enrichment claim . . . is dismissed.”).
Plaintiff argues that it would be premature to dismiss its quasi-contract claims. Pl.’s Mem.
at 4. In support, Plaintiff relies exclusively on Envirocon, which denied the defendant’s motion to
dismiss quasi-contract claims as premature because the defendant had not yet answered the
complaint or stated whether it intended to dispute the contract. Id. at 5. Plaintiff argues that,
similarly, here, Defendant has not yet answered the Complaint, and has neither admitted nor denied
the existence or scope of the alleged contract. Id.
However, Envirocon is distinguishable from this case. In that case, the parties were
contracting for the first time, and despite strong evidence of an express agreement, it was unclear
whether the defendant intended to dispute the existence or validity of the contract. See id. at *1-2.
Here, in contrast, the parties had an ongoing contractual relationship for approximately six
consecutive years leading up to the current dispute. See Compl. ¶ 22 (“Consistent with its
agreements with Optum in previous years, in early 2012 MVP entered into an agreement with
Optum for Optum to provide outside actuarial services to MVP. . . .”). Moreover, the central issue
in Envirocon was whether the subject of the dispute—the proper calculation for determining
payments upon defendant’s termination of the contract—was covered by the contract. See
Envirocon, 2006 WL 2460640, at *1-2. Here, the dispute concerns only whether Defendant
breached its performance obligations under the contract in properly calculating the BPTW for
Medicare bids. Thus, as opposed to Envirocon, here the subject of the dispute is clearly governed
by the contractual relationship. See id. Therefore, Envirocon is inapplicable to this case, and

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Plaintiff’s claims for unjust enrichment and quantum meruit must be dismissed.3
V.

CONCLUSION
Accordingly, it is hereby:
ORDERED, that Defendant’s Motion (Dkt. No. 15) to dismiss Counts 2, 3, 4, 5 and 6 of the

Complaint (Dkt. No. 1) is GRANTED; and it is further
ORDERED, that the Clerk of the Court serve a copy of this Memorandum-Decision and
Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.

DATED:

October 29, 2014
Albany, NY

3

In addition to the factual distinctions, the Court also notes that Envirocon does not rely on
any legal authority for its holding that the defendant was required to state a position on the contract
before moving to dismiss the quasi-contract claims. See Envirocon, 2006 WL 2460640, at *2. As
discussed supra, courts routinely dismiss quasi-contract claims at the motion to dismiss stage before
the defendant has answered the complaint or otherwise stated a position on the validity of the
contract. Thus, the Court views Envirocon narrowly, and finds no basis to apply its holding to this
case.
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