Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 1 of 8
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`AUSTIN DIVISION
`
`ERIN ANGELO, et al.
`
`v.
`
`§
`§
`CENTENE MANAGEMENT COMPANY, §
`LLC, et al.
`§
`
`1:20-cv-0484-RP
`
`§§
`
`REPORT AND RECOMMENDATION
`OF THE UNITED STATES MAGISTRATE JUDGE
`
`TO:
`
`THE HONORABLE ROBERT PITMAN
`UNITED STATES DISTRICT JUDGE
`
`Before the Court is Defendants’ Motion to Dismiss Plaintiffs’ First Amended Complaint
`
`(Dkt. No. 25), Plaintiffs’ Response (Dkt. No. 35), and Defendants’ Reply (Dkt. No. 36). The District
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`Judge referred the above-motions to the undersigned for report and recommendation pursuant to 28
`
`U.S.C. §636(b)(1)(B), FED. R. CIV. P. 72, and Rule 1(d) of Appendix C of the Local Court Rules.
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`I. GENERAL BACKGROUND
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`Plaintiffs Cynthia Wilson and Erin and Nicholas Angelo are Texas residents who purchased
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`ACA Ambetter insurance policies from Defendants. Dkt. No. 1. Plaintiffs allege that Defendants
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`engage in “a classic bait-and-switch, targeting low-income customers with the promise of certified
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`quality health coverage including networks of medical providers to provide that care but providing
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`woefully little coverage after they signed up.” Dkt. No. 35 at 1. After Plaintiffs were denied
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`coverage under the policies for out-of-network healthcare providers, Plaintiffs filed a a purported
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`class action alleging three causes of action against Defendants: (1) breach of contract, (2) breach of
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`express warranty, and (3) violations of the Texas Deceptive Trade Practices Consumer Protection
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`Act (“DTPA”). Dkt. No. 19.
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF TEXAS
`AUSTIN DIVISION
`
`ERIN ANGELO, et al.
`
`v.
`
`§
`§
`CENTENE MANAGEMENT COMPANY, §
`LLC, et al.
`§
`
`1:20-cv-0484-RP
`
`§§
`
`REPORT AND RECOMMENDATION
`OF THE UNITED STATES MAGISTRATE JUDGE
`
`TO:
`
`THE HONORABLE ROBERT PITMAN
`UNITED STATES DISTRICT JUDGE
`
`Before the Court is Defendants’ Motion to Dismiss Plaintiffs’ First Amended Complaint
`
`(Dkt. No. 25), Plaintiffs’ Response (Dkt. No. 35), and Defendants’ Reply (Dkt. No. 36). The District
`
`Judge referred the above-motions to the undersigned for report and recommendation pursuant to 28
`
`U.S.C. §636(b)(1)(B), FED. R. CIV. P. 72, and Rule 1(d) of Appendix C of the Local Court Rules.
`
`I. GENERAL BACKGROUND
`
`Plaintiffs Cynthia Wilson and Erin and Nicholas Angelo are Texas residents who purchased
`
`ACA Ambetter insurance policies from Defendants. Dkt. No. 1. Plaintiffs allege that Defendants
`
`engage in “a classic bait-and-switch, targeting low-income customers with the promise of certified
`
`quality health coverage including networks of medical providers to provide that care but providing
`
`woefully little coverage after they signed up.” Dkt. No. 35 at 1. After Plaintiffs were denied
`
`coverage under the policies for out-of-network healthcare providers, Plaintiffs filed a a purported
`
`class action alleging three causes of action against Defendants: (1) breach of contract, (2) breach of
`
`express warranty, and (3) violations of the Texas Deceptive Trade Practices Consumer Protection
`
`Act (“DTPA”). Dkt. No. 19.
`
`
`
`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 2 of 8
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`In the instant motion Defendants assert that Plaintiffs’ claims should be dismissed for four
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`reasons: (1) all of Plaintiffs’ claims are precluded by the filed-rate doctrine; (2) Plaintiffs failed to
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`identify any specific insurance policy provision that was breached; (3) Plaintiffs have no basis to
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`make a claim for breach of express warranty on a contract that does not involve the sale of goods;
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`and (4) Plaintiffs’ DTPA claim fails to meet the heightened pleading standards applicable to claims
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`of fraud or misrepresentation. Dkt. No. 25.
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`II. LEGAL STANDARD
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`Rule 12(b)(6) allows for dismissal of an action “for failure to state a claim upon which relief
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`can be granted.” While a complaint attacked by a Rule 12(b)(6) motion does not need detailed
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`factual allegations in order to avoid dismissal, the plaintiff’s factual allegations “must be enough to
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`raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
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`555 (2007). A plaintiff’s obligation “requires more than labels and conclusions, and a formulaic
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`recitation of the elements of a cause of action will not do.” Id. The Supreme Court has explained
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`that a complaint must contain sufficient factual matter “to state a claim to relief that is plausible on
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`its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim
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`has facial plausibility when the plaintiff pleads factual content that allows the court to draw the
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`reasonable inference that the defendant is liable for the misconduct alleged.” Id. In evaluating a
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`motion to dismiss, the Court must construe the complaint liberally and accept all of the plaintiff’s
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`factual allegations in the complaint as true. See In re Katrina Canal Breaches Litigation, 495 F.3d
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`191, 205 (5th Cir. 2009).
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`Claims subject to Rule 9(b) must “state with particularity the circumstances constituting
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`fraud or mistake.” FED. R. CIV. P. 9(b). The Fifth Circuit “interprets Rule 9(b) strictly, requiring a
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`2
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 3 of 8
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`plaintiff pleading fraud to specify the statements contended to be fraudulent, identify the speaker,
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`state when and where the statements were made, and explain why the statements were fraudulent.”
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`Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). “Put simply, Rule 9(b) requires
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`‘the who, what, when, where, and how’ to be laid out.” Shandong Yinguang Chem. Indus. Joint
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`Stock Co. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010). “Facts and circumstances constituting
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`charged fraud must be specifically demonstrated and cannot be presumed from vague allegations.”
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`Schnurr v. Preston, 2018 WL 8584292, at *3 (W.D. Tex. May 29, 2018) (quoting Howard v. Sun
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`Oil Co., 404 F.2d 596, 601 (5th Cir. 1968)).
`
`III. ANALYSIS
`
`A.
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`Filed Rate Doctrine
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`Defendants first assert that all of Plaintiffs’ claims should be dismissed because they are
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`precluded by the filed rate doctrine. Dkt. No. 25 at 4-14. The filed rate doctrine is a doctrine of
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`deference that “bars judicial recourse against a regulated entity based upon allegations that the
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`entity’s ‘filed rate’ is too high, unfair or unlawful.” Tex. Comm. Energy v. TXU Energy, Inc., 413
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`F.3d 503, 507 (5th Cir. 2005). Whether a state agency has the authority to approve reasonable rates
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`is critical to determining if the filed rate doctrine applies in any given case. Thus, in Texas, “[t]he
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`application of the filed rate doctrine . . . is necessarily circumscribed by the legislative grant of
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`authority” to the administrative agency. Mid–Century Ins. Co. of Texas v. Ademaj, 243 S.W.3d 618,
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`625 (Tex. 2007).
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`Defendants contend all of Plaintiffs’ claims are barred by the filed rate doctrine as each of
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`the claims would require the Court to “reevaluate the reasonableness of insurance rates filed with
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`and approved by the Texas Department of Insurance.” Dkt. No. 25 at 8. While Defendants are
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`3
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 4 of 8
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`correct that Tex. Ins. Code § 1701.057(c) “require[s] an insurer to file the rates charged by that
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`insurer for individual accident and health insurance policies,” the rates are not filed for any purpose
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`having anything remotely to do with ratemaking or approval of rates. In fact, the Texas Insurance
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`Code makes explicit that the authority granted to the TDI to require rate filings “does not grant the
`
`commissioner the authority to determine, fix, prescribe, or promulgate rates to be charged for an
`
`individual accident and health insurance policy.” TEX. INS. CODE § 1701.057(e). Defendants cite
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`to no authority that the filed rate doctrine is applicable where rates are filed with an agency that lacks
`
`authority to approve or reject them. As such, dismissal based on the filed rate doctrine is
`
`unwarranted. See Harvey v. Centene Mgmt. Co. LLC, 357 F. Supp. 3d 1073, 1084 (E.D. Wash.
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`2018) (rejecting application of the filed rate doctrine in suit against Centene with substantially
`
`similar claims); Houston v. Centene Mgmt. Co., LLC, 2019 WL 7971713, at *2 (S.D. Fla. Oct. 20,
`
`2019) (same).
`
`B.
`
`Breach of Contract Claim
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`Defendants next argue that Plaintiffs’ breach of contract claims fail to state a claim by failing
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`to identify a specific material breach of a contract provision and by relying on general and conclusory
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`allegations. Dkt. No. 25 at 9. To state a claim for breach of contract under Texas law, a plaintiff
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`must allege “(1) the existence of a valid contract; (2) performance or tendered performance by the
`
`plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as
`
`a result of the breach.” Harris v. Meridian Sec. Ins. Co., 2019 U.S. Dist. LEXIS 183727, at *7-9
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`(N.D. Tex. October 24, 2019).
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`Plaintiffs adequately plead each of these elements. Plaintiffs’ Complaint identifies the
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`Ambetter Contract as the signed contract between Plaintiffs and Defendants. Dkt. No. 19 at. ¶¶ 57,
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`4
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`
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 5 of 8
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`60, 66. They identify specific promises and obligations Defendants made to Plaintiffs in the
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`Ambetter Contract in exchange for their premium payments. Those promises include providing
`
`insureds with
`
`•
`
`•
`
`•
`
`•
`
`an accurate list of network providers;
`
`“Complete medical coverage that meets [their] medical needs and contains all of the
`Essential Health Benefits;”
`
`a QHP that Centene has certified meets ACA’s network adequacy requirements; and
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`adequate access to physicians and medical practitioners and treatments or services.
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`Id. at ¶¶ 12, 27-32, 37-41, 58-59, 91-92. Plaintiffs allege that Defendants failed to fulfill these
`
`obligations, and that as a result, Plaintiffs suffered damages. Id. ¶ 97, 108-110. These are adequate
`
`allegations to support a plausible breach of contract claim, and to overcome the 12(b)(6) motion.
`
`See Rapid Tox Screen LLC v. Cigna Healthcare of Tex. Inc., 2017 U.S. Dist. LEXIS 136218 (N.D.
`
`Tex. August 24, 2017).
`
`C.
`
`Breach of Express Warranty Claim
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` Defendants next argue Plaintiffs cannot state a claim for breach of express warranty because
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`they do not allege that any“good” has been sold. Dkt. No. 25 at 13-14. Defendants further assert
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`that Plaintiffs’ breach of warranty claim merely repeats their breach of contract claim. Id. The Court
`
`agrees. Under Texas law, “[i]n order to preserve the distinction between contract and express
`
`warranty, breach of warranty claims must involve something more than a mere promise to perform
`
`under the contract.” Staton Holdings, Inc. v. Tatum, L.L.C., 2014 WL 2583668, at *3 (Tex. App.
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`June 10, 2014). Here, Plaintiffs allege express warranties made by Defendants in the Ambetter
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`Contract, including a promise to provide essential benefits under the ACA and a promise that
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`insureds could access specific health care providers listed on the website as in-network. Dkt. No. 35
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`5
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`
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 6 of 8
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`at 27. However, as Defendants point out in their Reply, Plaintiffs allege nothing more than that
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`Defendants have not performed under the contract. Dkt. No. 36 at 6-7. As such, Defendants are
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`correct that Plaintiffs have failed to state a claim for breach of express warranty. The undersigned
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`recommends that Plaintiffs’ breach of express warranty claims be dismissed.
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`D.
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`DTPA Claim
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`Lastly, Defendants move for dismissal of Plaintiffs’ DTPA claims on the basis that they are
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`barred by the statute of limitations, and alternatively, that Plaintiffs fail to satisfy the heightened
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`pleading standard for claims involving fraud or misrepresentation. Dkt. No. 25 at 14-18. The DTPA
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`provides for a two-year limitations period. TEX. BUS. & COM. CODE § 17.565. In their Response,
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`Plaintiffs do not dispute that Plaintiff Wilson’s DTPA claim is time-barred. Dkt. No. 35 at 22.
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`Plaintiffs argue that the Angelo Plaintiffs’ claims were timely filed because the Angelos disputed
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`Defendants’ denial of payment for two years after the initial denial of coverage, asserting that
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`because the case was closed sometime in 2019 the Angelos timely filed within the statue of
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`limitations. Id. In support of this position, Plaintiffs rely on the case United Neurology, P.A. v.
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`Hartford Lloyd’s Ins. Co., 101 F. Supp. 3d 584, 607 (S.D. Tex. 2015), for the proposition that where
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`“there is no express denial of a claim by the insurer for an accrual date, the legal injury to the insured
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`occurs at the latest when the claim file is closed.” Id. As Defendants point out, however, there was
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`an express denial of the Angelos’ claim by the insurer in this case, as the Plaintiffs’ Complaint
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`alleges. Dkt. No. 36 at 7. Because the Angelos’ claim was expressly denied by Defendants in 2017,
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`the claim accrued then, and expired two years later, in 2019. Because the Angelos did not file this
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`suit until 2020, their DTPA claims are time-barred. See Irwin v. Country Coach Inc., 2006 WL
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`6
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`
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 7 of 8
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`278267, at *5 (E.D. Tex. Feb. 3, 2006). As a result, all of the Plaintiffs’ DTPA claims are untimely
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`and should be dismissed.
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`E.
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`Leave to Amend
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`When a plaintiff’s complaint fails to state a claim, the court should generally give the plaintiff
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`at least one chance to amend the complaint before dismissing the claim with prejudice. See Great
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`Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir.2002). Granting
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`leave is not required when “it is clear that the defects are incurable or the plaintiffs advise the court
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`that they are unwilling or unable to amend in a manner that will avoid dismissal.” Id. The Fifth
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`Circuit has indicated that “[l]eave to amend should be freely given, and outright refusal to grant leave
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`to amend without a justification . . . is considered an abuse of discretion.” United States ex rel.
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`Adrian v. Regents of the Univ. of Cal., 363 F.3d 398, 403 (5th Cir. 2004)
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`It is not obvious that it would be futile for the Plaintiffs to attempt to cure the breach of
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`warranty claim with an amended complaint. But because Plaintiffs’ DTPA claims are time-barred
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`amendment cannot cure that defect. Accordingly, the Court recommends that the DTPA claim be
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`dismissed with prejudice, but that the breach of warranty claim be dismissed without prejudice to
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`the Plaintiffs filing an amended complaint, by a date certain, restating the breach of warranty claim
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`should they so choose.
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`IV. RECOMMENDATION
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`Based upon the foregoing, the undersigned RECOMMENDS that Defendants’ Motion to
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`Dismiss (Dkt. No. 25) be GRANTED IN PART and DENIED IN PART. Specifically, the
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`undersigned RECOMMENDS that the District Court DENY Defendants’s Motion to Dismiss the
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`breach of contract claims, GRANT the motion and DISMISS WITHOUT PREJUDICE the
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`7
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`Case 1:20-cv-00484-RP Document 37 Filed 02/02/21 Page 8 of 8
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`Plaintiffs’ breach of express warranty, subject to the Plaintiffs right to replead within a time set by
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`the District Court, and GRANT the motion and DISMISS WITH PREJUDICE the DTPA claims.
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`The Clerk is directed to remove this case from the undersigned’s docket and return it to the
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`docket of the Honorable Robert Pitman.
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`V. WARNINGS
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`The parties may file objections to this Report and Recommendation. A party filing
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`objections must specifically identify those findings or recommendations to which objections are
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`being made. The District Court need not consider frivolous, conclusive, or general objections. See
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`Battle v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987). A party’s failure to file
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`written objections to the proposed findings and recommendations contained in this Report within
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`fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo
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`review by the District Court of the proposed findings and recommendations in the Report and, except
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`upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed
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`factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C);
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`Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415,
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`1428-29 (5th Cir. 1996) (en banc).
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`SIGNED this 2nd day of February, 2021.
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`_____________________________________
`ANDREW W. AUSTIN
`UNITED STATES MAGISTRATE JUDGE
`
`8
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