LD v. United Behavioral Health

Background

LD, DB, BW, RH, and CJ brought a proposed class action against United Behavioral Health and MultiPlan, Inc. The plaintiffs alleged that United underpaid claims for out-of-network intensive outpatient program services provided by Summit Estate, Inc. They alleged that their insurance plans required reimbursement based on usual, customary, and reasonable rates or on competitive fees in the relevant geographic area. According to the complaint, United and MultiPlan used a pricing database and tool that generated lower reimbursement amounts, causing the plaintiffs to pay amounts that United did not reimburse.

The amended complaint asserted claims under the Employee Retirement Income Security Act of 1974 (ERISA) for underpaid benefits, breach of plan terms, breach of fiduciary duties, equitable relief, and failure to provide a full and fair review. It also asserted claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), including a substantive claim under section 1962(c) and a conspiracy claim under section 1962(d). The court had dismissed the earlier complaint in full but allowed amendment.

Legal standard

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally adequate claim. At this stage, the court accepted well-pleaded factual allegations as true and asked whether they plausibly showed entitlement to relief. The court also considered the defendants’ arguments that the plaintiffs lacked RICO standing and could not satisfy RICO’s elements.

ERISA claims

The court denied United’s motion to dismiss the two claims under ERISA section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), concerning underpaid benefits and breach of plan provisions. The amended complaint identified plan language requiring reimbursement based on competitive fees in the relevant geographic area, or on usual, customary, and reasonable rates for one plaintiff’s plan. The plaintiffs also alleged that the pricing tool used data that was not representative of the relevant intensive outpatient services or geographic market. The court held that these allegations plausibly showed that United paid less than the plans required.

The court also denied the defendants’ motions to dismiss the claim against United for breach of fiduciary duties and the requests for equitable relief against both defendants under ERISA section 502(a)(3), 29 U.S.C. § 1132(a)(3). The plaintiffs plausibly alleged that United under-reimbursed claims for its own financial benefit and failed to disclose that its reimbursement method allegedly did not comply with the plans. The court found that the requested injunction, reprocessing of claims, surcharge, and disgorgement were equitable remedies at the pleading stage. It further held that the plaintiffs sufficiently alleged that MultiPlan knowingly participated in the alleged breach, even though MultiPlan was not alleged to be an ERISA fiduciary itself.

The court granted United’s motion to dismiss the ERISA section 1133 claim, which concerned notice and an opportunity to appeal benefit denials, with prejudice. The amended complaint replaced the earlier factual allegations with conclusory statements and did not explain how United failed to provide required procedures or disclosures. The court noted that the plaintiffs did not address this dismissal argument in their opposition.

RICO claims

The court concluded that the plaintiffs had RICO standing. It found a direct connection between the alleged scheme—representing that claims would be paid at usual, customary, and reasonable rates and then under-reimbursing them—and the plaintiffs’ alleged injury, payment of amounts that United allegedly should have reimbursed. The court also found that the allegations plausibly showed that a provider relied on United’s representations during pre-service benefit-verification calls.

The court denied United’s motion to dismiss the RICO section 1962(c) claim. The plaintiffs plausibly alleged an association-in-fact enterprise, meaning an informal group operating together for a common purpose. They alleged that United and MultiPlan collaborated on a database and pricing tool intended to generate low reimbursement rates and retain the difference between those rates and the amounts allegedly required by the plans. The court also found sufficient allegations that both defendants participated in directing the alleged enterprise’s affairs.

The court found that the plaintiffs adequately pleaded a pattern of racketeering activity as to United. The alleged predicate acts were mail fraud and wire fraud. The court determined that the pre-service calls between Summit Estate and United were the communications that could support reliance, and held that the allegations about United’s representations during those calls were sufficiently detailed at the pleading stage. The court granted MultiPlan’s motion to dismiss the section 1962(c) RICO claim against it, with leave to amend, because the plaintiffs had not alleged at least two relied-upon acts of mail fraud or wire fraud by MultiPlan.

The court denied the defendants’ motions to dismiss the RICO conspiracy claims under section 1962(d). Because the plaintiffs adequately pleaded a substantive RICO violation against United and alleged that both defendants intended to further the alleged scheme, the court found the conspiracy allegations sufficient at this stage.

Disposition

Judge Rogers granted MultiPlan’s motion to dismiss with leave to amend as to the RICO section 1962(c) claim against MultiPlan. She granted United’s motion to dismiss the ERISA section 1133 claim with prejudice. She otherwise denied the defendants’ motions to dismiss, including the ERISA benefit and fiduciary-duty claims, the equitable-relief claims, the RICO section 1962(c) claim against United, and the RICO section 1962(d) claims against both defendants. The order allowed the plaintiffs twenty-eight days to file an amended complaint concerning the claim dismissed against MultiPlan.