throbber
Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 1 of 19
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`PACIFIC RECOVERY SOLUTIONS, ET AL.,
`Plaintiffs,
`
`v.
`
`UNITED BEHAVIORAL HEALTH, ET AL.,
`
`Defendants.
`
`CASE NO. 4:20-cv-02249 YGR
`
`ORDER GRANTING MOTIONS TO
`DISMISS WITH LEAVE TO AMEND
`
`Re: Dkt. Nos. 38, 39
`
`
`
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`Plaintiffs1 bring this putative class action against defendants United Behavioral Health
`(“United”) and Viant, Inc. for claims arising out of United’s alleged failure to reimburse plaintiffs
`“a percentage” of the Usual, Customary, and Reasonable Rates (“UCR”) for Intensive Outpatient
`Program (“IOP”) services, which plaintiffs provided to patients with health insurance policies
`administered by United. In the complaint, plaintiffs assert, on their own behalf and on behalf of a
`proposed class of similarly-situated out-of-network IOP providers, claims under Section 1 of the
`Sherman Act and the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and multiple
`claims under California law.
`Now pending are two motions to dismiss all claims in the complaint under Federal Rule of
`Civil Procedure 12(b)(6) on the grounds that: (1) plaintiffs’ claims under Section 1 of the Sherman
`Act and RICO fail for lack of statutory standing; (2) plaintiffs’ state-law claims are preempted by
`the Employee Retirement Income Security Act of 1974 (“ERISA”); and (3) all claims in the
`complaint are inadequately pleaded.
`
`
`1 Plaintiffs are Pacific Recovery Solutions d/b/a Westwind Recovery, Miriam Hamideh
`PhD Clinical Psychologist Inc. d/b/a PCI Westlake Centers, Bridging the Gaps, Inc., and Summit
`Estate Inc. d/b/a Summit Estate Outpatient.
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`Northern District of California
`United States District Court
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`

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`Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 2 of 19
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`Having carefully considered the pleadings and the parties’ briefs, and for the reasons set
`forth below, the Court GRANTS the motions to dismiss WITH LEAVE TO AMEND.
`I.
`BACKGROUND
`Plaintiffs allege as follows. Plaintiffs are out-of-network healthcare providers who
`provided IOP services to patients who had health insurance policies that United administered.
`Compl. ¶ 2, Docket No. 1. Before providing treatment to these patients, “each of the Plaintiffs
`confirmed with United that the patients had active coverage and benefits for out of network IOP
`treatment services” through verification-of-benefits (“VOB”) calls, during which United
`“represented” that it would pay the patients’ claims in connection with such services. Id. ¶¶ 3, 17,
`188, 195, 202, 209. The complaint references payment both “at a percentage” of the UCR and “at
`the UCR rate.” See, e.g., id. ¶¶ 16, 25, 74. Due to the communications in question, plaintiffs and
`United “understood” UCR to be “consistent with United’s published definition of UCR rates.” Id.
`¶ 324; id. ¶ 17 n.6 (alleging that United published a definition of UCR on its webpage describing
`out-of-network benefits). Thus, plaintiffs provided IOP services to the patients in reliance of
`United’s representations. Id. ¶¶ 3, 17, 188, 195, 202, 209.
`United’s representations that it would pay a percentage of the UCR were false, because
`“United did not pay UCR amounts for any of the patient claims at issue in this litigation.” Id. ¶
`13. Instead, United engaged defendant Viant, a third-party “repricer,” to “negotiate”
`reimbursements with Plaintiffs. Id. United has a contract with Viant pursuant to which Viant has
`“financial incentives” to negotiate reimbursements “at well below the UCR rate.” Id. ¶ 33.
`During its negotiations with plaintiffs, Viant represented that it had authority to negotiate with
`providers on the patients’ behalf and that “the rate it offers is based on the UCR for the provider’s
`geographic location.” Id. ¶¶ 34, 48, 52. Viant’s negotiations with plaintiffs resulted in offers to
`reimburse them for IOP services at an amount below the UCR, and United paid the patients’
`claims at the “reduced Viant amount.” Id. ¶¶ 13-14. Neither United nor Viant disclosed to
`Plaintiffs the methodology they used for calculating the reimbursement rates for IOP services. Id.
`¶ 54. United “unjustly retained” the difference between the amounts it “should have paid” to
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`plaintiffs for the IOP services at issue and the amount that United actually did pay based on
`Viant’s negotiated reimbursements. Id. ¶ 15.
`“[L]iability for the cost of care” that plaintiffs provided to patients ultimately falls on the
`patients. Id. ¶¶ 55, 155, 4. Plaintiffs “make every effort to recover unpaid amounts, first from
`United, then from patients.” Id. ¶ 55. Plaintiffs “balance bill” patients for the amounts that the
`patients owe after taking into account any amounts that United reimbursed. Id. ¶¶ 155, 4.
`Further, United and other insurers were required as part of the settlement of an unrelated
`litigation (“Ingenix litigation”) to underwrite the creation of a database called the “FAIR health”
`database, which contains rates for the reimbursement for IOP treatment. Id. ¶ 20. However,
`United and the other insurers were not required by the Ingenix litigation settlement to use the
`FAIR health database.2 Id.
`Plaintiffs assert the following claims on their own behalf and on behalf of a proposed class
`of similarly-situated out-of-network IOP providers in the United States: (1) a claim for violations
`of the Unfair Competition Law (“UCL”), Bus. & Prof. Code § 17200 et seq.; (2) intentional
`misrepresentation and fraudulent inducement; (3) negligent misrepresentation; (4) civil
`conspiracy; (5) breach of oral or implied contract; (6) promissory estoppel; (7) a claim under
`RICO, 18 U.S.C. § 1962(c); and (8) a claim under Section 1 of the Sherman Act, 15 U.S.C. § 1.
`II.
`LEGAL STANDARD
`To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual
`matter that, when accepted as true, states a claim that is plausible on its face. Ashcroft v. Iqbal,
`556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads factual
`content that allows the court to draw the reasonable inference that the defendant is liable for the
`misconduct alleged.” Id. While this standard is not a probability requirement, “[w]here a
`complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the
`line between possibility and plausibility of entitlement to relief.” Id. (internal quotation marks and
`
`
`2 Plaintiffs argue in their opposition that United represented to them that it would
`reimburse them based on UCR rates in the FAIR health database. Opp’n at 9, Docket No. 47. But
`plaintiffs do not allege that theory in the complaint.
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`Northern District of California
`United States District Court
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`

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`Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 4 of 19
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`citation omitted). In determining whether a plaintiff has met this plausibility standard, the Court
`must “accept all factual allegations in the complaint as true and construe the pleadings in the light
`most favorable” to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). “[A]
`court may not look beyond the complaint to a plaintiff’s moving papers, such as a memorandum in
`opposition to a defendant’s motion to dismiss.” Schneider v. California Dep’t of Corr., 151 F.3d
`1194, 1197 n.1 (9th Cir. 1998). A court should grant leave to amend unless “the pleading could
`not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v. N. Cal.
`Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990).
`III. DISCUSSION
`As noted, defendants move to dismiss all claims in the complaint on the grounds that (1)
`plaintiffs’ claims under Section 1 of the Sherman Act and RICO fail for lack of statutory standing;
`(2) plaintiffs’ state-law claims are preempted by ERISA; and (3) all claims in the complaint are
`inadequately pleaded.
`The Court addresses each of these arguments in turn.
`A.
`Section 1 of the Sherman Act
`Section 1 of the Sherman Act makes it unlawful to form a “contract, combination in the
`form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several
`States[.]” 15 U.S.C. § 1. “To establish a claim under Section 1 of the Sherman Act, Plaintiffs
`must show 1) that there was a contract, combination, or conspiracy; 2) that the agreement
`unreasonably restrained trade under either a per se rule of illegality or a rule of reason analysis;
`and 3) that the restraint affected interstate commerce.” Cnty. of Tuolumne v. Sonora Cmty. Hosp.,
`236 F.3d 1148, 1155 (9th Cir. 2001) (citation and internal quotation marks omitted). In addition
`to these elements, plaintiffs also must show that they were “harmed by the defendant’s anti-
`competitive contract, combination, or conspiracy, and that this harm flowed from an anti-
`competitive aspect of the practice under scrutiny.” Brantley v. NBC Universal, Inc., 675 F.3d
`1192, 1197 (9th Cir. 2012) (citation and internal quotation marks omitted). This requirement is
`generally referred to as “antitrust standing.” Id. (citation omitted).
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`Plaintiffs assert a Section 1 claim for damages and injunctive relief against defendants,
`which is predicated on the theory that defendants entered into a horizontal conspiracy to fix the
`amount that United reimbursed plaintiffs for the IOP services they provided to patients. Compl. ¶¶
`395-98. Plaintiffs allege that they were injured by the alleged conspiracy because it caused them
`to be “underpaid” for their services and to incur “significant additional expenses in seeking proper
`payment.” Id. ¶ 406.
`Defendants move to dismiss plaintiffs’ Section 1 claim on the grounds that plaintiffs lack
`antitrust standing because the injuries they allegedly suffered are derivative of their patients’
`injuries, and that plaintiffs have not alleged that competition in any market was restrained, or that
`plaintiffs’ injuries resulted from any such injury to competition.
`1.
`Damages
`a.
`Standing
`Section 4 of the Clayton Act permits private parties to sue for damages arising out of
`injuries caused by violations of the federal antitrust laws. 15 U.S.C. § 15. In determining whether
`a private party has “antitrust standing” to sue under Section 4, courts consider the following
`factors: “(1) the nature of the plaintiff’s alleged injury; that is, whether it was the type the antitrust
`laws were intended to forestall; (2) the directness of the injury; (3) the speculative measure of the
`harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages.”
`American Ad Management, Inc. v. General Tel. Co., 190 F.3d 1051, 1054-55 (9th Cir. 1999).
`Here, the first factor is not met, because plaintiffs’ allegations do not raise the reasonable
`inference that the type of injury they suffered is of the type that the antitrust laws were intended to
`prevent. “[T]he central purpose of the antitrust laws, state and federal, is to preserve competition.”
`Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 988 (9th Cir. 2000). Plaintiffs allege that
`their patients are liable for the difference between the amount reimbursed by United and the
`amount owed for the cost of the IOP services at issue. Plaintiffs are “injured” only to the extent
`that their patients fail to pay them that difference. It appears that any such injury would arise
`directly from the patients’ failure to comply with their financial obligations to plaintiffs, and not
`from defendants’ conduct. Plaintiffs have cited no case that shows that the antitrust laws were
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`intended to prevent this type of injury, which, based on the allegations in the complaint, has
`nothing to do with competition.
`The second factor also is not met, because plaintiffs’ injury, if any, was not proximately
`caused by the alleged conspiracy. To assess the directness of the plaintiff’s injury, courts “look to
`the chain of causation between [plaintiff’s] injury and the alleged restraint in the market.”
`American Ad Management, 190 F.3d at 1058. Here, plaintiffs allege that the direct victims of the
`alleged conspiracy were “United’s members” (i.e., plaintiffs’ patients) because they “incurred
`liability for illegally inflated out-of-pocket payments for out-of-network IOP services than they
`would have paid” in the absence of the conspiracy. Compl. ¶ 407. As noted above, plaintiffs
`allege that their own injury arises only to the extent that their patients do not pay the amounts that
`United does not reimburse. Accordingly, plaintiffs’ injuries appear to be derivative of injuries that
`their patients allegedly suffered as a result of defendants’ alleged conspiracy.
`The third factor also is not met, because plaintiffs’ injuries are speculative. To the extent
`that a patient pays the balance owed to plaintiffs for the IOP services at issue, then plaintiffs
`would suffer no injury as to that patient. Plaintiffs’ allegations do not raise the reasonable
`inference that all patients with United coverage have failed to pay the balances they owe to
`plaintiffs, or that it is certain that none of these patients will pay such balances in the future.
`The remaining factors also are not satisfied, because plaintiffs’ allegations do not foreclose
`the possibility that their patients, as the direct victims of the alleged conspiracy, could also sue
`defendants to recover damages for the alleged conspiracy. If both the patients and plaintiffs were
`to sue defendants under the Sherman Act, the risk of duplicative recoveries would be significant.
`Avoiding such duplication would require fact-intensive inquiries and calculations.
`In light of the foregoing, the Court cannot reasonably infer that plaintiffs have antitrust
`standing. See In re Wellpoint, Inc. Out-of-Network “UCR” Rates Litig., 903 F. Supp. 2d 880, 902
`(C.D. Cal. 2012) (dismissing claims by healthcare providers for lack of antitrust standing because
`“there exist more direct victims in the form of the Subscribers [patients]” and because the
`plaintiffs’ injury “is entirely derivative of the injury inflicted on the Subscribers”). Accordingly,
`plaintiffs’ Section 1 claim for damages is subject to dismissal on that basis.
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`b.
`Elements of a Section 1 Claim
`Even if plaintiffs had alleged facts to show that they have antitrust standing, their claim for
`damages would nevertheless be subject to dismissal because plaintiffs have not alleged facts to
`satisfy the first and second elements required to state a claim under Section 1.
`To satisfy the first element of a Section 1 claim, the plaintiff must plead that “there is some
`restraint of trade.” Newman v. Universal Pictures, 813 F.2d 1519, 1522 (9th Cir. 1987). Here,
`plaintiffs allege conclusorily that defendants engaged in a horizontal conspiracy to “fix” the
`amount that United reimbursed plaintiffs for their IOP services. Compl. ¶ 397. This allegation
`does not raise the reasonable inference that defendants’ alleged conspiracy restrained trade
`through price-fixing, because plaintiffs allege that Viant negotiated the amounts that United
`reimbursed plaintiffs, which suggests that the amounts that United reimbursed plaintiffs differed
`based on the outcome of each negotiation and were, therefore, not fixed. Further, plaintiffs admit
`in their opposition that, if they had not provided IOP services to United patients, they would have
`provided them to patients who were “insured by other health insurance providers or self-pay
`patients,” suggesting that the conditions in the marketplace were such that plaintiffs were not
`bound to accept United patients despite the allegedly “fixed” prices. Opp’n at 8, Docket No. 47.
`Accordingly, the Court cannot reasonably infer that the alleged conspiracy restrained trade.
`To satisfy the second element of a Section 1 claim, the plaintiff must plead that the
`restraint at issue unreasonably restrained trade under either the per se rule or the rule of reason.
`Cnty. of Tuolumne, 236 F.3d at 1155. Here, plaintiffs have not pleaded an unreasonable restraint
`of trade under either the per se rule or the rule of reason.
`The per se rule applies to restraints that are unlawful per se, such as horizontal agreements
`among competitors to fix prices or to divide markets, which “always or almost always tend to
`restrict competition and decrease output.” Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551
`U.S. 877, 886 (2007) (internal citation omitted). Where the per se rule applies, the conduct at
`issue is deemed to be unlawful under Section 1 without any inquiry into its actual effect on
`competition. In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1191 (9th Cir.
`2015) (“Once the agreement’s existence is established, no further inquiry into the practice’s actual
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`Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 8 of 19
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`effect on the market or the parties’ intentions is necessary to establish a § 1 violation.”). Here,
`there are no allegations in the complaint suggesting that defendants are competitors. Plaintiffs
`allege that Viant negotiates rates with providers on behalf of United, suggesting that Viant is
`United’s agent. Plaintiffs cite no authority showing that a conspiracy between a principal and an
`agent who do not compete constitutes a horizontal restraint subject to the per se rule.
`Additionally, as discussed above, plaintiffs’ allegations do not support the inference that
`defendants “fixed” the amount they reimbursed plaintiffs for their services. Accordingly, the
`allegations in the complaint do not raise the inference that defendants unreasonably restrained
`trade through a horizontal price-fixing conspiracy subject to the per se rule. Cf. Arizona v.
`Maricopa Cty. Med. Soc., 457 U.S. 332, 356, (1982) (holding that agreement among medical
`practitioners “who compete with one another for patients” to fix the prices of their medical
`services was per se unlawful under Section 1).
`The rule of reason applies to all other restraints that are not subject to the per se rule.
`Leegin, 551 U.S. at 885-86. “[T]he inquiry mandated by the Rule of Reason is whether the
`challenged agreement is one that promotes competition or one that suppresses competition.” Nat’l
`Soc’y of Prof’l Engrs v. United States, 435 U.S. 679, 691 (1978). Courts in the Ninth Circuit
`employ a burden-shifting framework to apply the rule of reason, which requires the plaintiff, as
`the first step, to “delineate a relevant market and show that the defendant plays enough of a role in
`that market to impair competition significantly.” Cnty. of Tuolumne, 236 F.3d at 1150 (citation
`and internal quotation marks omitted). The relevant market must “encompass the product at issue
`as well as all economic substitutes for the product[,]” and it must include “the group or groups of
`sellers or producers who have actual or potential ability to deprive each other of significant levels
`of business.” Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044 (9th Cir. 2008)
`(citations and internal quotation marks omitted). Only if the plaintiff makes the threshold
`showing of a relevant market in which the defendant has sufficient market power to impair
`competition does the court then consider, at the second step, whether defendants can show that a
`legitimate procompetitive effect is produced by the challenged behavior, and if so, whether the
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`plaintiffs can demonstrate, at the third step, that there are less restrictive alternatives to the
`challenged conduct. Cnty. of Tuolumne, 236 F.3d at 1150.
`In the complaint, plaintiffs do not define the relevant market, the entities that compete in
`that market, the market power of each competitor, the product or products at issue, or the
`substitutes for the product or products. Plaintiffs also have not alleged facts showing that
`defendants have sufficient market power in the relevant market to impair competition. Further,
`plaintiffs have averred no facts showing that defendants’ conduct lacks any procompetitive effect.
`Accordingly, the Court cannot infer that defendants’ alleged conspiracy unreasonably restrained
`trade under the rule of reason.
`Accordingly, in light of the foregoing, plaintiffs’ claim for damages under Section 1 is
`subject to dismissal.
`2.
`Injunctive Relief
`In the complaint, plaintiffs request, in addition to damages, “any necessary injunctions” to
`bar defendants’ allegedly anticompetitive conduct. Compl. ¶ 409.
`Section 16 of the Clayton Act governs claims for injunctive relief “against threatened loss
`or damage by a violation of the antitrust laws[.]” 15 U.S.C. § 26. To obtain injunctive relief, “a
`private plaintiff must generally meet all the requirements that apply to the damages plaintiff,
`except that the injury itself need only be threatened, damage need not be quantified, and
`occasionally a party too remote for damages might be granted an injunction.” Lucas Auto. Eng’g,
`Inc. v. Bridgestone/Firestone, Inc., 140 F.3d 1228, 1234 (9th Cir. 1998). Threatened injury of the
`type the antitrust laws were intended to prevent is a prerequisite to obtaining equitable relief. Id.
`(citation omitted).
`Here, as discussed above, plaintiffs have not alleged factual matter showing that they have
`suffered or are likely to suffer injury of the type that the antitrust laws were intended to prevent.
`Plaintiffs also have not averred facts to raise the inference that defendants’ alleged conspiracy
`unreasonably restrained trade and thus violated the antitrust laws.
`Accordingly, plaintiffs’ claim for injunctive relief is subject to dismissal.
`
`//
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`B.
`RICO
`Section 1962(c) of RICO provides, “It shall be unlawful for any person employed by or
`associated with any enterprise . . . to conduct or participate, directly or indirectly, in the conduct of
`such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.”
`18 U.S.C. § 1962(c).
`Here, plaintiffs allege that defendants violated RICO Section 1962(c). This claim is
`premised on allegations that United and Viant are engaged in an illegal “kick-back” scheme
`through which United and Viant conspired to take and retain for their own benefit funds given to
`them by plan members. Compl. ¶ 360. Plaintiffs allege that “United’s agents” lied to plaintiffs
`during “the initial VOB and Provider calls” by representing that “benefits were available and paid
`based on the UCR,” id. ¶ 355, and that Viant misrepresented during its negotiations with plaintiffs
`that it had authority to negotiate the rates of reimbursement on behalf of patients, id. ¶ 358.
`Plaintiffs allege that United and Viant’s representations were false because United had a contract
`with Viant to underpay the claims, which was not disclosed to plaintiffs. Plaintiffs further aver
`that they were injured by this alleged scheme because they were underpaid for the IOP services
`they provided to United patients. Id. ¶ 386. Plaintiffs allege that the predicate offenses for their
`RICO claim are wire fraud and mail fraud in violation of 18 U.S.C. §§ 1341 and 1343, as well as
`“Health Care Offenses” in violation of 18 U.S.C. § 24 and ERISA, 18 U.S.C. § 1027. Id. ¶¶ 354-
`59.
`
`Defendants move to dismiss this claim on the grounds that plaintiffs lack RICO standing
`and that plaintiffs’ allegations are insufficient to state a claim under Section 1962(c).
`1.
`Standing
`To establish RICO standing, a plaintiff must plead an injury to business or property that
`was proximately caused by the alleged RICO predicate offense. Hemi Grp., LLC v. City of New
`York, 559 U.S. 1, 2 (2010) (“To establish that an injury came about by reason of a RICO violation,
`a plaintiff must show that a predicate offense not only was a but for cause of his injury, but was
`the proximate cause as well.”) (citation and internal quotation marks omitted). In determining
`whether a plaintiff’s injury has a sufficient causal nexus to the RICO predicate offense, courts look
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`to the same factors that courts consider to determine whether a plaintiff has antitrust standing. See
`Oregon Laborers-Employers Health & Welfare Tr. Fund v. Philip Morris Inc., 185 F.3d 957, 963
`(9th Cir. 1999) (“To determine whether an injury is ‘too remote’ to allow recovery under RICO
`and the antitrust laws, the Court applies the following three-factor ‘remoteness’ test: (1) whether
`there are more direct victims of the alleged wrongful conduct who can be counted on to vindicate
`the law as private attorneys general; (2) whether it will be difficult to ascertain the amount of the
`plaintiff’s damages attributable to defendant’s wrongful conduct; and (3) whether the courts will
`have to adopt complicated rules apportioning damages to obviate the risk of multiple recoveries.”).
`The Court concludes that plaintiffs’ allegations do not raise the inference that they have
`RICO standing for the same reasons that such allegations do not raise the inference that plaintiffs
`have antitrust standing. By plaintiffs’ own allegations, defendants’ conduct appears to have
`caused injury, first and foremost, to plaintiffs’ patients, because it increased the amounts that the
`patients owed to plaintiffs for IOP services. See, e.g., Compl. ¶ 364 (“The excessive balance bills
`that Plaintiffs are forced to issue is a clear harm to the patients as they now owe large sums that
`were properly United’s responsibility to pay.”). The proximate cause of plaintiffs’ own injury
`appears to be the non-payment by their patients of any amounts that United did not reimburse.
`Plaintiffs’ injury appears to be, therefore, derivative of their patients’ injuries and too remote to
`confer them with standing. Further, as discussed above, the risk of duplicative recoveries and of
`having to engage in fact-intensive damages calculations to prevent such duplication is high if both
`plaintiffs and their patients sue defendants for the same conduct.
`Accordingly, plaintiffs’ RICO claim is subject to dismissal for lack of statutory standing.
`See Oregon Laborers, 185 F.3d at 963-67 (holding that health care trust funds lacked standing
`under RICO to sue tobacco companies because their injury was derived from the smokers’ injury
`and was therefore too remote).
`2.
`Elements of RICO Section 1962(c) Claim
`To state a claim under Section 1962(c), a plaintiff must allege: “(1) conduct (2) of an
`enterprise (3) through a pattern (4) of racketeering activity.” Odom v. Microsoft Corp., 486 F.3d
`541, 547 (9th Cir. 2007) (en banc). “Rule 9(b)’s requirement that ‘[i]n all averments of fraud or
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`Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 12 of 19
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`mistake, the circumstances constituting fraud or mistake shall be stated with particularity’ applies
`to civil RICO fraud claims.” Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th Cir.
`2004) (internal citation omitted).
`Even if plaintiffs had RICO standing, their RICO claim under Section 1962(c) would
`nevertheless be subject to dismissal for failure to allege facts to satisfy the following elements.
`a.
`Enterprise
`“An enterprise that is not a legal entity is commonly known as an ‘association-in-fact’
`enterprise.” Id. at 940 (citation omitted). To plead an association-in-fact enterprise, a plaintiff
`must allege: (1) a common purpose of engaging in a course of conduct; (2) an ongoing
`organization, either formal or informal; and (3) facts that the associates function as a continuing
`unit. Odom, 486 F.3d at 553 (citation omitted).
`Here, plaintiffs have not averred factual matter suggesting that defendants acted with a
`common purpose of engaging in a course of conduct. The allegations in the complaint describe a
`contractual relationship between defendants that required Viant to negotiate reimbursements on
`behalf of United. Plaintiffs allege no facts to raise the inference that defendants’ activities
`pursuant to this contractual relationship were contrary to United’s obligations under the ERISA
`plans it administered or to the terms of such plans. Courts routinely hold that the “common
`purpose” requirement is not met where, as here, the allegations in the complaint are consistent
`only with the execution of a routine contract or commercial dealing. See, e.g., Gardner v. Starkist
`Co., 418 F. Supp. 3d 443, 461 (N.D. Cal. 2019) (“Simply characterizing routine commercial
`dealing as a RICO enterprise is not enough.”); Gomez v. Guthy–Renker, LLC, No. 14-cv-01425-
`JGB, 2015 WL 4270042, at *11 (C.D. Cal. Jul. 13, 2015) (“RICO liability must be predicated on a
`relationship more substantial than a routine contract between a service provider and its client.”).
`b.
`Conduct
`To satisfy the “conduct” element of a Section 1962(c) claim, a plaintiff must allege facts
`that the defendant had “some part in directing [the enterprise’s] affairs.” Walter v. Drayson, 538
`F.3d 1244, 1249 (9th Cir. 2008) (citation and internal quotation marks omitted). Simply being “a
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`United States District Court
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`Case 4:20-cv-02249-YGR Document 61 Filed 08/25/20 Page 13 of 19
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`part” of the enterprise or “performing services” for the enterprise does not rise to the level of
`direction required. Id.
`Here, plaintiffs have not alleged facts to raise the inference that either United or Viant
`directed the affairs of the alleged scheme for RICO purposes. Allegations showing that a
`defendant conducted its own affairs is insufficient to raise the inference that the defendant
`conducted the affairs of an enterprise. See Bias v. Wells Fargo & Co., 942 F. Supp. 2d 915, 939
`(N.D. Cal. 2013) (Gonzalez Rogers, J.) (holding that RICO liability “depends on showing that the
`defendants conducted or participated in the conduct of the ‘enterprise’s affairs,’ not just their own
`affairs”) (emphasis in the original). As discussed above, the allegations in the complaint are
`consistent only with defendants

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