• Love v. Blue Cross and Blue Shield of Arizona, Inc. Case No. 03-21296 (S.D. Fla. 2/25/09)
  • April 1, 2009 | Authors: Arthur N. Lerner; Bruce O. Tavel
  • Law Firm: Crowell & Moring LLP - Washington Office
  • On February 25, 2009, Magistrate Judge Torres of the United States District Court for the Southern District of Florida issued a report and recommendation that if upheld will dismiss with prejudice RICO conspiracy and related claims against eleven Blue Cross Blue Shield plans, seven of whom are represented by Crowell & Moring. Judge Torres found that Plaintiffs' allegations of a RICO conspiracy and the predicate acts of mail and wire fraud lacked adequate specificity under Twombly and Federal Rule of Civil Procedure 9(b).

    The case is part of the In re Managed Care multidistrict litigation pending since 2000. Various other defendants facing these claims have entered into settlements paying over a billion dollars to physicians and hundreds of millions of dollars in attorneys' fees, as well as committing to significant business practice changes.

    The Magistrate found that plaintiffs' allegations of a RICO conspiracy and the predicate acts of mail and wire fraud lacked adequate specificity under Bell Atlantic Corp. v. Twombly and Federal Rule of Civil Procedure 9(b). He held that plaintiffs failed to provide any specific factual allegations regarding how and why the defendants agreed to defraud physicians. The Court rejected as insufficient plaintiffs' conclusory allegations of an agreement, inferences from parallel conduct that could "be easily explained by a theory of rational independent action," and evidence that merely showed an opportunity to conspire rather than direct evidence of a conspiratorial agreement.

    In addition, Judge Torres found that plaintiffs' mail and wire fraud allegations failed to meet Rule 9(b)'s heightened pleading requirements, because they did not provide the "who, when, when, where and how" of the allegedly fraudulent misrepresentations and omissions and did not allege facts about each defendant's participation in the fraud. He stated "the Sixth Amended Complaint does not adequately plead a single incidence of fraudulent conduct" and "does not set out for each Defendant how that Defendant participated in the fraud." Judge Torres rejected plaintiffs' argument that a prior Supreme Court decision rendered Rule 9(b) inapplicable to RICO mail and wire fraud allegations. He found that neither plaintiffs' Complaint nor RICO Case Statement described with sufficient particularity how provider agreements, manuals, claim forms, patient lists, payments, and reports misled plaintiffs into believing that they would be paid in accordance with the Current Procedural Terminology ("CPT").

    While Judge Torres found that plaintiffs had alleged with particularity their claims regarding defendants' mailing of Explanations of Benefits forms to plaintiffs, he found that the "allegations regarding the information contained in the EOBs do not identify any statements that were fraudulent or misleading," and "[i]f anything, the EOBS helped to reveal the fraud as they put Plaintiffs on alert that they were not properly paid in accordance with CPT," and therefore could not have furthered an illegal scheme.

    Judge Torres' report and recommendation is subject to review by Federal District Court Judge Moreno.