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Association of New Jersey Chiropractors, et al., Individually and v. Aetna

June 17, 2011

ASSOCIATION OF NEW JERSEY CHIROPRACTORS, ET AL., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILAR SITUATED PLAINTIFFS,
v.
AETNA, INC., ET AL.
DEFENDANTS.



The opinion of the court was delivered by: Pisano, District Judge.

NOT FOR PUBLICATION

OPINION

Plaintiffs Association of New Jersey Chiropractors, New York Chiropractors Council, Illinois Chiropractic Society, International Chiropractors Association ("Association Plaintiffs"), Donna Restivo, Todd Carnucci, Christopher Fogila, Peter Manz, Mark Vincent, Jeffrey Shirlty, Vicky Yarns, Caroline Grossman, and Leon Egozi ("Individual Plaintiffs;" together with Association Plaintiffs, "Plaintiffs") bring this putative class action against Aetna, Inc., Aetna Health Inc., Aetna Health Inc. (DE), Aetna Health Inc. (PA), Aetna Health Plans of New Jersey, Inc., Aetna Health Management, Inc., Aetna Health Administrators, LLC, Aetna Health Management, LLC, Aetna Life Insurance Company, Corporate Health Insurance, Inc., and Aetna Insurance Company of Connecticut (collectively, "Aetna" or "Defendants") alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. Presently before the Court are the following five motions: (1) motion by Defendants to dismiss the First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6); (2) motion by Defendants to strike Plaintiff's class action allegations; (3) motion by Defendants to enforce a settlement agreement and release and to dismiss Plaintiff Foglia's claims; and (4) motion by Defendants to compel arbitration and to dismiss Plaintiffs Egozi's and Manz's claims; and (5) cross-motion by Plaintiffs under the theory of judicial estoppel for an order precluding Defendants from denying that ERISA applies to the conduct alleged in the FAC. For the reasons below, Defendants' motion to dismiss is granted as to Plaintiff's RICO claims and denied in all other respects. Defendants' motion to enforce the settlement agreement and their motion to compel arbitration are granted. Defendants' motions to strike class allegations and Plaintiffs' cross-motion are denied.

I. Background*fn1

The plaintiffs in this case are licensed medical providers or chiropractic professional associations. Defendant Aetna is an insurer that offers, underwrites and administers commercial health plans ("Plans") through which healthcare expenses incurred by Plan participants for services covered by the Plans are reimbursed by Aetna pursuant to the terms of the Plan.

At times relevant to this case, the Individual Plaintiffs regularly submitted claims for reimbursement to Aetna for healthcare services they provided to Aetna insureds. Their claims for benefits were submitted directly to Aetna on behalf of the insureds, and Aetna paid benefits for such services directly to the provider. Prior to making such payment, Aetna would evaluate the claim and make the determination that the treatments in question were "Covered Services", i.e., covered under the terms the insured's respective Plan. Benefit payments were made only for such Covered Services.

Aetna maintains a Special Investigation Unit ("SIU") to detect, investigate and prevent insurance fraud. According to Plaintiffs, the primary means by which the SIU identifies false or fraudulent insurance claims is through "Post Payment Audits." FAC ¶ 6. Such audits are primarily directed to providers of medical services. Plaintiffs describe the audits as a "retrospective review of previously paid insurance benefits to evaluate whether payments for Covered Services were properly made" to an insured or a provider. Id. In selecting a provider to audit, "Aetna relies upon a variety of complex statistical analyses and data-mining to identify providers that exhibit potentially problematic or non-traditional billing patterns." Id.

In conducting certain of these Post Payment Audits, the SIU works in conjunction with the National Healthcare Anti-Fraud Association ("NHCAA") and International Business Machines Corporation ("IBM"), both of whom assist Aetna in developing and implementing policies relative to these audits. For Post Payment Audits resulting from employer groups retroactively reporting individual insureds' terminations, Aetna works in conjunction with AfterMath Claim Science ("AfterMath"), an overpayment recovery company. According to Plaintiffs, Aetna outsources these audits to Aftermath, who performs the audits and engages in efforts to recoup overpayments.

Aetna conducted Post Payment Audits of each Individual Plaintiff. As a result of these audits, Aetna determined that certain benefits paid to the Individual Plaintiffs were in fact overpaid and Aetna, by letter, demanded reimbursement from the providers for those amounts. Specifically, Aetna demanded that Dr. Restivo repay $50,650.02; Dr. Carnucci repay $597,643.00; Dr. Foglia repay $15,609.88; Dr. Manz repay $20,290.09; Dr. Vincent repay $8,879.96; Dr. Shirley repay $96,819.69; Dr. Yarns repay $368,556.14; Dr. Grossmann repay $648.00; and Dr. Egozi repay $299,796.22. Plaintiffs have received numerous communications from Aetna and its counsel seeking to compel payments of these amounts, including correspondence from the SIU's outside legal counsel that the FAC describes as "threatening." FAC ¶10. Further, the Individual Plaintiffs have been subject to a pre-payment review process by which every claim a provider submits to Aetna is reviewed prior to payment. Plaintiffs allege that under this process, claims submitted by the providers are uniformly denied regardless of validity and no means of appeal is provided.

According to Plaintiffs, Aetna has made and continues to make similar demands for the repayment of previously paid benefits against members of the Association Plaintiffs throughout the country. Plaintiffs contend that the actions of Aetna described in the FAC violate ERISA and RICO. Accordingly, they seek, inter alia, (1) unpaid benefits and interest; (2) declarations that Aetna violated various obligations under federal law; (3) an order enjoining Aetna from seeking to further recover alleged overpayments and directing Aetna to return any funds it collected based on its allegedly improper recoupment efforts; and (4) treble RICO damages.

II. Discussion

A. Motion to Dismiss Under Rule 12(b)(6)

1. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a court may grant a motion to dismiss if the complaint fails to state a claim upon which relief can be granted. The Supreme Court set forth the standard for addressing a motion to dismiss under Rule 12(b)(6) in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Twombly Court stated that, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ... a plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.]" Id. at 555 (internal citations omitted); see also Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir. 2007) (stating that standard of review for motion to dismiss does not require courts to accept as true "unsupported conclusions and unwarranted inferences" or "legal conclusion[s] couched as factual allegation[s]") (internal quotation marks omitted). Therefore, for a complaint to withstand a motion to dismiss under Rule 12(b)(6), the "[f]actual allegations must be enough to raise a right to relief above the speculative level, ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact) ..." Twombly, 550 U.S. at 555 (internal citations and footnote omitted).

The Supreme Court has emphasized that, when assessing the sufficiency of a civil complaint, a court must distinguish factual contentions and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). When evaluating a motion to dismiss for failure to state a claim, district courts conduct a three-part analysis.

First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Ashcroft v. Iqbal, 129 S.Ct. 1937');">129 S. Ct. 1937, 1947 (2009). Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 1950. Third, "whe[n] there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."

Id. This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged.

Malleus v. George, --- F.3d --- (3d Cir. 2011). A complaint will be dismissed unless it "contain[s] sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. at 1949 (quoting Twombly, 550 U.S. at 570). This "plausibility" determination will be "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Fowler, 578 F.3d at 211 (citations omitted).

2. Analysis

Defendants argue that the FAC fails to state a claim upon which relief can be granted because (1) Plaintiffs' claims are barred by the Noerr-Pennington doctrine; (2) Plaintiffs have failed to state a RICO violation; (3) Plaintiffs have failed to state a claim under ERISA; and (4) the Association Plaintiffs have no standing. The Court addresses each of these in turn.

a. Noerr-Pennington Doctrine

The Noerr--Pennington doctrine derives from the Supreme Court's decisions in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), which recognized that a party is immune from liability for exercising his or her First Amendment right to petition the government. "The doctrine nominally began as a judicially-created limitation on the scope of the Sherman Act with respect to activities by parties to petition the government to take a certain course of action beneficial to them and harmful to their competitors." In re Neurontin Antitrust Litigation, 2009 WL 2751029, *17 (D.N.J. 2009). However, it has been extended to protect those who petition for other forms of governmental action. Id. (citing Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 92 S. Ct. 609, 30 L. Ed.2d 642 (1972) (administrative and judicial proceedings); City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991) (municipal ordinances); Professional Real Estate Investors v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (litigation to protect patent rights).

Defendants argue that Aetna's conduct of sending letters seeking to recoup the alleged overpayments, constitutes petitioning activity protected by the First Amendment. Defendants rely upon Sosa v. DIRECTTV, Inc., 437 F.3d 923, 940 (9th Cir. 2006), which held that sending a pre-suit demand letter is conduct incidental to a lawsuit and, therefore, falls within the protection of the Noerr-Pennington doctrine.

The Court finds that Defendants, in making their argument, construe the nature of Plaintiffs' claims too narrowly. In contrast to the circumstances in Sosa, the FAC does not simply challenge Defendants' act of sending out demand letters. See id. at 932 ("Sosa's lawsuit seeks to impose RICO liability on DIRECTV for sending the demand letters.") Rather, under a reading appropriate for a 12(b)(6) motion, Plaintiffs are alleging that when Defendants have pursued repayment of allegedly incorrectly benefits paid they have failed to comply with, for example, ERISA's disclosure and review procedures. Consequently, the Court rejects Defendants' argument that dismissal is warranted at this time under Noerr-Pennington. The Court shall deny Defendants' motion without prejudice to Defendants raising the issue in a future summary judgment motion should it be appropriate after relevant discovery and further factual development of Plaintiffs' claims.

b. RICO claim

Next, Defendants argue that Plaintiffs have failed to state a ...


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