Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 1 of 19
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`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. 71, 72, 80
`
`Plaintiffs1 bring this putative class action against defendants United Behavioral Health
`(“United”) and MultiPlan, Inc. (“MultiPlan”) for claims arising out of United’s alleged failure to
`reimburse plaintiffs at “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. The Court dismissed a prior iteration of the complaint
`in its entirety, with leave to amend. Plaintiffs filed a First Amended Complaint (“FAC”), in which
`they 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 FAC with prejudice 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 FAC continue to be 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 Recovery Center, Inc.
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`Northern District of California
`United States District Court
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`Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 2 of 19
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`Having carefully considered the pleadings and the parties’ briefs2, and for the reasons set
`forth below, the Court GRANTS the motions to dismiss WITH PREJUDICE with respect to plaintiffs’
`claims under the Sherman Act and RICO, and plaintiffs’ state-law claims to the extent that they
`arise out of the alleged under-reimbursement of claims for IOP services that were covered by
`ERISA plans. The Court GRANTS the motions to dismiss WITH LEAVE TO AMEND with respect to
`plaintiffs’ state-law claims to the extent that they arise out of the alleged under-reimbursement of
`claims for IOP services that were covered by plans that fall outside of the scope of ERISA.3
`I.
`BACKGROUND
`A.
`Initial complaint
`In the first iteration of the complaint, plaintiffs alleged 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. The health insurance policies that
`United administered are “health care benefit programs” covered by ERISA. Id. ¶¶ 348-359.
`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 for such services at a percentage of the UCR. Id. ¶¶ 3, 17, 188, 195, 202, 209.
`Due to the communications in question, plaintiffs and United “understood” UCR to be “consistent
`with United’s published definition of UCR rates” on its website describing out-of-network plan
`benefits. Id. ¶ 324; id. ¶ 17 n.6 (alleging that United published a definition of UCR on its webpage
`describing out-of-network plan benefits). 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. ¶
`
`
`2 Plaintiffs moved for leave to file a sur-reply on December 14, 2020. See Docket No. 80.
`The Court GRANTS plaintiffs’ motion for leave to file a sur-reply.
`3 Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court
`finds this motion appropriate for decision without oral argument. Accordingly, the Court
`VACATES the hearing set for December 22, 2020.
`2
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`Northern District of California
`United States District Court
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`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
`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. Id.
`Plaintiffs asserted 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”), Cal. Bus. & Prof. Code § 17200 et seq.,
`against each defendant; (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.
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`Northern District of California
`United States District Court
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`Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 4 of 19
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`On August 25, 2020, the Court granted defendants’ motions to dismiss all claims in the
`initial complaint, and it did so with leave to amend. Docket No. 61.
`B.
`FAC
`In the FAC, plaintiffs continue to aver that United represented during VOB calls that it
`would pay for IOP services at a percentage of the UCR. See, e.g., FAC ¶¶ 269, 276, 292.
`Plaintiffs also continue to allege that their understanding as to what United meant when it
`represented that it would pay a percentage of the UCR was based on United’s published definition
`of UCR on its webpage describing out-of-network plan benefits, suggesting that the UCR
`definition has a connection to the terms of healthcare plans. See, e.g., FAC ¶ 529 (alleging that the
`“UCR rate” was “understood by both parties to be consistent with United’s published definition of
`UCR rates”); id. ¶ 154 & n.19 (alleging that United publishes on its webpage regarding out-of-
`network plan benefits a description of how it typically determines how to pay for out-of-network
`services at the UCR rate).
`The FAC differs from the initial complaint in the following ways: (1) plaintiffs deleted
`most of the allegations that the Court relied upon in its order dismissing the initial complaint; (2)
`plaintiffs added new allegations, some of which contradict the allegations in the initial complaint
`upon which the Court relied in its order dismissing that pleading; (3) plaintiffs substituted
`MultiPlan for Viant as a defendant; (4) plaintiffs added a claim for conspiracy in violation of
`RICO, 18 U.S.C. § 1962(d); and (5) plaintiffs deleted their request for injunctive relief under the
`Sherman Act.
`Specifically, whereas in the initial complaint plaintiffs alleged that the plans administered
`by United are healthcare benefit programs covered by ERISA, Compl. ¶¶ 348-59, the FAC
`contains no such allegations. Plaintiffs aver that each of the patients who received the IOP
`services at issue had an insurance plan whose premiums were paid by the patient’s employer, see,
`e.g., FAC ¶¶ 403, 388, but they also allege that a “large percentage” of these plans are not covered
`by ERISA, FAC ¶ 33 (alleging that “[a] large percentage of the claims which underlie this lawsuit
`do not involve ERISA plans”). In the FAC, plaintiffs do not specify which of the allegedly under-
`reimbursed claims for IOP services at issue were covered by an ERISA plan, and which were not.
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`Northern District of California
`United States District Court
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`In the initial complaint, plaintiffs alleged that their patients are liable for any amounts not
`reimbursed by United for IOP services, and that their injuries arose from their patients’ failure to
`pay outstanding balances for IOP services and from having to seek reimbursement from their
`patients for any amounts not reimbursed by United. The allegations in the FAC attribute
`plaintiffs’ injuries, not to their patients’ failure to pay outstanding balances, but to United’s failure
`to properly reimburse the claims for IOP services in question. See, e.g., FAC ¶ 20.
`Plaintiffs also modified their allegations with respect to the process that United allegedly
`used to reprice the claims for IOP services at issue. In the initial complaint, plaintiffs alleged that
`United had engaged Viant to “negotiate” reimbursements with plaintiffs; that Viant’s negotiations
`with plaintiffs resulted in offers to reimburse them for IOP services at an amount below the UCR;
`and that United paid the patients’ claims for IOP services at the “reduced Viant amount.” See
`Compl. ¶¶ 13-14. In FAC, by contrast, plaintiffs allege that United entered into a contract with
`MultiPlan, Viant’s parent company, to use a database that allowed defendants to generate
`“fraudulent UCR rates” for IOP services, which they used to under-reimburse for the cost of the
`IOP services at issue. FAC ¶¶ 121, 13-62. Plaintiffs deleted all allegations as to Viant’s alleged
`negotiations with plaintiffs from the FAC.
`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
`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
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`United States District Court
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`Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 6 of 19
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`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 FAC continue to
`be 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).
`Plaintiffs assert a Section 1 claim for damages against defendants, which is predicated on
`the theory that defendants entered into a “horizontal price fixing” conspiracy pursuant to which
`United and “its competitors” fixed the prices that insurers paid to providers for IOP services,
`which they achieved by using Multiplan’s database and pricing tool. FAC ¶¶ 389-394, 403.
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`Plaintiffs allege that they were injured by the alleged conspiracy because they “sold their services
`for less than they would have sold for in a free, open and competitive market.” Id. ¶ 558.
`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 because plaintiffs have otherwise not stated a claim under Section 1.
`The Court first turns to the question of whether plaintiffs have shown that they have
`antitrust 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” 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 for antitrust standing 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, which is to preserve competition. Knevelbaard Dairies v. Kraft
`Foods, Inc., 232 F.3d 979, 988 (9th Cir. 2000) (“[T]he central purpose of the antitrust laws, state
`and federal, is to preserve competition.”).
`In the initial complaint, plaintiffs alleged that their patients had “agreed” to be liable for
`any amounts that United did not reimburse for IOP services, and that plaintiffs suffered injury
`only to the extent that their patients failed to pay them the difference between the amount
`reimbursed by United and the amount their patients owed them pursuant to this agreement. See,
`e.g., Compl. ¶ 151 (“[E]ach patient agreed to be liable for the difference between the amount the
`treating provider billed, and the amount United reimbursed.”); id. ¶ 155 (alleging that plaintiffs
`“balance bill their patients for the amounts that they are owed” as a result of United’s alleged
`under-reimbursement); Id. ¶ 406 (alleging that plaintiffs were injured by the alleged conspiracy
`because it caused them to be “underpaid” for their services and to incur “significant additional
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`United States District Court
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`expenses in seeking proper payment”). Based on these allegations, the Court concluded that
`plaintiffs’ alleged injury “would arise directly from the patients’ failure to comply with their
`financial obligations to plaintiffs, and not from defendants’ conduct.” Order at 5-6, Docket No.
`61. The Court further concluded that this type of injury, which arises out of the breach of
`agreements between plaintiffs and each of their patients, was not of the type that the antitrust laws
`were intended to prevent, because the breach of a contract by individual patients has nothing to do
`with competition. Id.
`Although plaintiffs deleted from the FAC most of the allegations suggesting that plaintiffs’
`injury arises from their patients’ failure to pay them the balance remaining for the IOP services at
`issue, the FAC still contains some allegations that support that proposition. See, e.g., FAC ¶¶ 62
`(alleging that “[m]ost patients cannot shoulder the full costs of MH/SUD treatment” and as a
`result, “in the vast majority of cases . . . the provider bears the full cost of treatment services”); id.
`¶ 89. Plaintiffs have cited no case that supports the proposition that the antitrust laws were
`intended to prevent injury that arises from the breach of an agreement to pay for the cost of
`healthcare services. Accordingly, the Court concludes that the nature of plaintiffs’ injury is not of
`the type that the antitrust laws were intended to forestall.
`The second factor for antitrust standing 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. Plaintiffs alleged in the prior
`iteration of the complaint 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. Plaintiffs deleted that allegation from the FAC and replaced it with
`conclusory allegations that contradict it. See, e.g., FAC ¶¶ 285, 314, 344 (alleging that plaintiffs
`have “been directly harmed by [United’s] underpayment”). The Court does not consider these
`new allegations that contradict the allegations in the initial complaint. See Azadpoour v. Sun
`Microsys., Inc., No. 06–3272, 2007 WL 2141079, at *2 n. 2 (N.D. Cal. July 23, 2007) (“Where
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`allegations in an amended complaint contradict those in a prior complaint, a district court need not
`accept the new alleged facts as true, and may, in fact, strike the changed allegations as ‘false and
`sham.’”) (citations omitted); Reddy v. Litton Indus., Inc., 912 F.2d 291, 296-97 (9th Cir. 1990)
`(holding that an “amended complaint may only allege other facts consistent with the challenged
`pleading”) (citation omitted). As discussed above, plaintiffs’ injury arises only to the extent that
`their patients do not pay the amounts that United does not reimburse. Accordingly, the proximate
`cause of plaintiffs’ injuries is their patients’ failure to pay outstanding balances pursuant to their
`agreements with plaintiffs, and not defendants’ alleged conduct.
`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 it is certain that none of their patients who have outstanding balances will not pay
`such balances in the future. To the contrary, plaintiffs admit in their briefs that it remains possible
`that they could receive a payment of the outstanding balances from their patients, as well as from
`United to the extent that plaintiffs prevail in this lawsuit. See, e.g., Opp’n at 13, Docket No. 76
`(“In the off-chance that a patient and United both paid Plaintiffs the underpayment amount, that
`payment would be refused or promptly refunded by Plaintiffs.”).
`The remaining factors for antitrust standing 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, which weighs against finding that plaintiffs here, whose alleged injuries are less
`direct than those of their patients, have antitrust standing.
`In an analogous action brought by healthcare providers against United for failure to
`properly reimburse United-policy subscribers (i.e., patients) for covered out-of-network services,
`the court dismissed with prejudice the providers’ claims under the Sherman Act for lack of
`antitrust standing. See In re Wellpoint, Inc. Out-of-Network “UCR” Rates Litig., 903 F. Supp. 2d
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`880, 902 (C.D. Cal. 2012) (“In re Wellpoint”). The court reasoned that “there exist more direct
`victims in the form of the Subscribers [patients]” and that the providers’ alleged injury was
`“entirely derivative of the injury inflicted on the Subscribers,” as the providers’ alleged injury
`“merely flows from the misfortunes visited upon the Subscribers by” the defendants’ alleged
`conspiracy. Id. Even though the Court relied upon this opinion in its order dismissing plaintiffs’
`Section 1 claim in the prior iteration of the complaint, Order at 6, Docket No. 61, Plaintiffs have
`not distinguished In re Wellpoint. Nor have plaintiffs cited any authority that supports the
`proposition that a plaintiff can have antitrust standing where, as here, the plaintiff’s injury flows
`from the injury of another.4
`In light of the foregoing, the Court cannot conclude that plaintiffs have antitrust standing.
`Because plaintiffs’ lack of antitrust standing requires the dismissal of plaintiffs’ Sherman Act
`claim, the Court need not address defendants’ alternative arguments with respect to that claim.
`The Court GRANTS defendants’ motions to dismiss plaintiffs’ Sherman Act claim WITH
`PREJUDICE.
`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
`
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`4 The authorities upon which plaintiffs rely in their opposition are inapposite. In none of
`these cases did the plaintiff’s injury flow from the injury of another. In these cases, the alleged
`injury was the plaintiff’s alleged exclusion from the market in which the defendants also
`competed; this injury flowed directly from the alleged anticompetitive conduct, and not from the
`injury of some other person or entity. See Oltz v. St. Peter's Community Hospital, 861 F.2d 1440
`(9th Cir. 1988) (denying motion to dismiss antitrust claim brought by nurse anesthesiologist
`against four anesthesiologists and a hospital based on an alleged conspiracy to exclude the plaintiff
`nurse anesthesiologist from the market for providing anesthesia services in a county); N.
`California Minimally Invasive Cardiovascular Surgery, Inc. v. Northbay Healthcare Corp., No. C
`15-06283 WHA, 2016 WL 1570015, at *4 (N.D. Cal. Apr. 19, 2016) (denying motion to dismiss
`antitrust claim brought by a doctor against another doctor and a hospital based on an alleged
`conspiracy to exclude the plaintiff doctor from the market for providing cardiovascular surgery in
`two counties). Relying on these authorities, plaintiffs argue in their opposition that they have
`antitrust standing because the alleged conspiracy “excluded” providers (i.e., plaintiffs) “from
`serving any patients insured under United plans.” Opp’n at 12, Docket No. 76. This argument is
`unpersuasive because it contradicts plaintiffs’ allegations that they did and continue to provide
`services to patients insured under United plans. See, e.g., FAC ¶¶ 259, 289, 318, 348; id. ¶ 19
`(“Without Court intervention, this scheme will continue and continue to damage Plaintiffs and the
`class.”).
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`Northern District of California
`United States District Court
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`Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 11 of 19
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`such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.”
`18 U.S.C. § 1962(c).
`Section 1962(d) provides, “It shall be unlawful for any person to conspire to violate any of
`the provisions of subsection (a), (b), or (c) of this section.” A defendant cannot be liable for a
`RICO conspiracy under Section 1962(d) if the defendant is not liable under the substantive RICO
`provisions, namely Sections 1962(a), (b), or (c). See Howard v. Am. Online Inc., 208 F.3d 741,
`751 (9th Cir. 2000) (“Plaintiffs cannot claim that a conspiracy to violate RICO existed if they do
`not adequately plead a substantive violation of RICO.”).
`Here, plaintiffs allege that defendants violated RICO Sections 1962(c) and 1962(d) by
`committing wire fraud and mail fraud in violation of 18 U.S.C. §§ 1341 and 1343 to under-
`reimburse plaintiffs for the IOP services that plaintiffs provided to patients with United insurance
`policies. FAC ¶¶ 13-62. Plaintiffs allege that defendants used a database and pricing tool that
`allowed them to generate “fraudulent UCR rates” for IOP services, which they used to under-
`reimburse for the cost of the IOP services at issue. Id. ¶¶ 121, 13-62.
`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 RICO Sections 1962(c) and
`1962(d).
`The Court first turns to the question of whether plaintiffs have shown that they have RICO
`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); Holmes v. Sec.
`Inv’r Prot. Corp., 503 U.S. 258, 268 (1992) (same). In determining whether a plaintiff’s injury
`has a sufficient causal nexus to the RICO predicate offense, courts look 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)
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`Northern District of California
`United States District Court
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`Case 4:20-cv-02249-YGR Document 83 Filed 12/18/20 Page 12 of 19
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`(“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.”).
`Here, 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.
`As discussed above, the proximate cause of plaintiffs’ injury is the non-payment by their patients
`of any amounts that United did not reimburse. Plaintiffs’ injury is, therefore, derivative of their
`patients’ injuries and too remote to confer them with RICO standing. Further, the risk of
`duplicative recoveries and of having to engage in fact-intensive damages calculations to prevent
`such duplication is high to the extent that plaintiffs and their patients sue defendants for the same
`conduct. Indeed, plaintiffs admit that their patients have already filed a lawsuit against defendants
`captioned L.D. v. United, Case No. 4:20-cv-02254, which is also pending before this Court. FAC
`¶ 8. In that case, the patients assert claims under RICO arising out of the same alleged enterprise
`that forms the basis of plaintiffs’ RICO claims here. See First Amended Complaint, Docket No.
`57, Case No. 4:20-cv-02254.
`In In re Wellpoint, which, as noted above, is an analogous action brought by healthcare
`providers against United for failure to properly reimburse subscribers (patients) for covered out-
`of-network services, the district court dismissed the providers’ RICO claims with prejudice for
`lack of RICO standing on the basis that the providers’ claims were derivative of those of their
`patients. 903 F. Supp. 2d at 902. In re Wellpoint, which plaintiffs have not distinguished,
`supports the dismissal of plaintiffs’