United States District Court, D. Utah, Central Division
IHC HEALTH SERVICES INC., a nonprofit Utah corporation, Plaintiff,
ELAP SERVICES, LLC, a limited liability company, Defendants.
MEMORANDUM DECISION AND ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S MOTION TO DISMISS WITH LEAVE
N. PARRISH DISTRICT JUDGE
the court is the Defendant's Rule 12(b)(6) Motion to
Dismiss the Complaint and Jury Demand for insufficient
pleading and failure to state a claim. For the reasons
discussed below, the court hereby grants in part and denies
in part defendant ELAP Services's motion to dismiss and
grants IHC leave to amend.
Health Services, Inc. (“IHC”) is a non-profit
Utah corporation operating 22 hospitals and 185 clinics in
Utah and Idaho. Complaint and Jury Demand ¶¶ 1-2.
ELAP Services, LLC (“ELAP”) is a
limited-liability company organized and existing under the
laws of Pennsylvania. Compl. ¶ 4.
provides “health care cost containment services”
for its clients. Defendant's Rule 12(b)(6) Motion to
Dismiss (“Motion”) 3. ELAP's clients include
“small to medium sized companies” who
“sponsor their own ERISA self-funded healthcare
plans.” Motion 3. Companies contract with ELAP to
“audit hospital claims” incurred by members of
the self-funded plans at various medical providers. Motion 3;
Compl. ¶¶ 25, 28, 30. The ELAP-contracted plan
(“Plan”) submits the bills received to ELAP,
which then decides how much of any given Plan member's
hospital bill the Plan should pay, allegedly in accordance
with accepted Medicare rates. Compl. ¶¶ 30-31. ELAP
calls its role “Designated Decision Maker.”
Compl. ¶ 30.
dispute between the parties arises from the fact that IHC
does not recognize ELAP's authority to decide the amount
a Plan, or a patient, should pay absent a prior agreement
with IHC. Compl. ¶¶ 25, 31. When patients are
admitted to an IHC facility, they sign a “Patient
Agreement.” Compl. ¶ 20. By signing this contract,
the patients agree to pay their full medical bill as charged
by IHC, whatever that amount may be. Compl. ¶¶ 20,
24, 35. But patients who are enrolled in certain insurance
plans are eligible for discounts and reduced rates. Compl.
“regularly enters into contracts with health
insurers.” Compl. ¶ 18. These contracts,
“preferred-provider agreements, ” set mutually
negotiated rates that “determine what amount [IHC] will
accept as payment for the care provided.” Compl.
¶¶ 18-20. These amounts are at significantly
reduced rates, which benefit IHC and patients. Compl. ¶
has not entered into preferred-provider agreements with IHC.
Compl. ¶ 25. Nor have any of the ELAP Plans. Compl.
¶ 25. This means that IHC is under no contractual
obligation to lower its rates for these Plans, or the Plan
members who become IHC patients. Compl. ¶¶ 28-31.
Thus, when an ELAP Plan member is admitted to an IHC clinic
or hospital and signs a Patient Agreement with IHC, that
patient is contractually obligated to pay the full amount of
the bill and IHC is not obligated to accept the amount the
Plan, through ELAP, decides to pay. Compl. ¶¶
alleges that ELAP “purposefully, willfully,
intentionally and knowingly” encourages Plan members
“to obtain services and enter into Patient
Agreements” without any intention of paying the full
amount of the bill, but with the knowledge that IHC is not
obligated to respect ELAP's price determinations. Compl.
¶¶ 35-38. ELAP tells Plan members that they are not
liable for any bills the Plan and Plan members receive from
hospitals after the Plan pays the ELAP determined amount
because the bills are demands for “reimbursement in
excess of what [the Plan] has already paid.” Compl.
¶ 41. When IHC attempts to collect on these outstanding
bills, ELAP “institutes and funds litigation against
Intermountain.” Compl. ¶ 54.
alleges that the statements ELAP makes to its Plans and Plan
members, including but not limited to statements published in
advertising materials such as “Put Your Claims Costs
Back in the Box, ” (Opposition to Motion to Dismiss
(“Opposition”), Exhibit 1) and “Helpful
Facts to Assist You with Any Balance Bill or Collection
Notices” (Opposition, Exhibit 2), are “false,
misleading and deceptive” and made with malice. Compl.
¶ 40. IHC alleges that ELAP purposefully disguises its
involvement in these self-funded Plans and intentionally
interferes with IHC's Patient Agreements. Compl.
¶¶ 38, 52-54.
denies that its business practice is tortious. ELAP alleges
that it establishes the “reasonable value of the
charges” and offers “ERISA plans the ability to
control unreasonable health care costs” and that it
does so in accordance with Utah law. Motion 4. ELAP denies
misrepresenting any facts to its clients, including Plans and
Plan members. Motion 5.
FEDERAL RULE OF CIVIL PROCEDURE 12(B)(6) STANDARD
moves under Fed.R.Civ.P. 12(b)(6) to dismiss IHC's
Complaint for failure to state a claim. A claim is properly
dismissed under Fed.R.Civ.P. 12(b)(6) if it fails to meet
either the general pleading requirements of Fed.R.Civ.P. 8 or
the specialized pleading requirements of Fed.R.Civ.P. 9.
Seattle-First Nat. Bank v. Carlstedt, 800 F.2d 1008,
1011 (10th Cir. 1986).
the general pleading standard of Fed.R.Civ.P. 8, “[t]o
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “The burden is on the plaintiff to frame a
complaint with enough factual matter (taken as true) to
suggest that he or she is entitled to relief.”
Robbins v. Oklahoma ex rel. Dept. of Human Servs.,
519 F.3d 1242, 1247 (10th Cir. 2008) (internal quotation
marks omitted). The “mere metaphysical possibility that
some plaintiff could prove some set of
facts in support of the pleaded claims is insufficient; the
complaint must give the court reason to believe that
this plaintiff has a reasonable likelihood of
mustering factual support for these claims.”
Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d
1174, 1177 (10th Cir. 2007). “Threadbare recitals of
the elements of a cause of action, supported by mere
conclusory statements, do not suffice.” Iqbal,
556 U.S. at 678.
IHC's claims for relief are governed by Fed.R.Civ.P. 9(b)
and (g). Fed.R.Civ.P. 9(b) requires that, “[i]n
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or
mistake.” However, “[m]alice, intent, knowledge,
and other conditions of a person's mind may be alleged
generally.” Id. Under Fed.R.Civ.P. 9(g),
special damages “must be specifically stated.”
When applying either standard to the factual allegations
levied against the defendant “[a]t the
motion-to-dismiss stage, we must accept all the well-pleaded
allegations of the complaint as true and must construe them
in the light most favorable to the plaintiff.”
Albers v. Bd. of Cty. Comm'rs of Jefferson Cty.,
771 F.3d 697, 700 (10th Cir. 2014) (quoting Cressman v.
Thompson, 719 F.3d 1139, 1152 (10th Cir. 2013)). In
evaluating a complaint on a motion to dismiss, “a court
should disregard all conclusory statements of law and
consider whether the remaining specific factual allegations,
if assumed to be true, plausibly suggest the defendant is
liable.” Kansas Penn Gaming, LLC v. Collins,
656 F.3d 1210, 1214 (10th Cir. 2011).
alleges six claims for relief against ELAP: 1. Tortious
Interference with Economic Advantage (“Count 1”);
2. Injurious Falsehood (“Count 2”); 3. Fraud
(“Count 3”); 4. Negligent Misrepresentation
(“Count 4”); 5. Declaratory Judgment
(“Count 5”); and 6. Preliminary and Permanent
Injunction (“Count 6”). Compl. ¶ 47-96.
However, the court concludes that IHC has failed to plausibly
allege Counts 2-5. Those counts are therefore dismissed, but
with leave to amend.
Count I: Intentional Interference with Economic
establish a prima facie case of intentional interference with
existing and potential economic relations, a plaintiff must
allege: “(1) that the defendant intentionally
interfered with the plaintiff's existing or potential
economic relations, (2) . . . by improper means, (3) causing
injury to the plaintiff.” Eldridge v.
Johndrow, 2015 UT 21, ¶ 70, 345 P.3d 553, 565. IHC
has made sufficient factual allegations, when accepted as
true, to state a plausible claim for tortious interference in
accordance with Twombley and Iqbal.
Existing or Potential Economic Relations
alleges that ELAP is intentionally interfering with the
Patient Agreements between IHC and its patients and also the
potential and existing economic relationships between
IHC's preferred-providers and their members. Compl.
¶ 50-55. ELAP admits to acting as an intermediary to
protect small businesses and their employees from IHC's
exorbitant healthcare costs. Motion 3. ELAP
“audits” IHC's bills and instructs Plans and
members how much to pay. ELAP does not deny this behavior,
and the court finds that IHC has sufficiently pled the first
element of this claim.
asserts that IHC has failed to allege the second element of a
tortious interference claim, improper means. Motion 9-12.
According to ELAP, a deliberate breach of contract and/or any
alleged actions encouraging a deliberate breach of contract
cannot constitute improper means. Motion 10. As IHC has not
alleged that ELAP itself has breached any contracts, the
court does not reach whether a deliberate breach can be
grounds for tortious interference. As to the second argument,
ELAP is correct that, “[m]erely persuading another
company to withdraw its business from a competitor is not,
without more, an improper means under Utah law.”
SCO Grp., Inc. v. Int'l Bus. Machines Corp., 879
F.3d 1062, 1083-84 (10th Cir. 2018). But the real question is
whether IHC has met its burden to establish that ELAP has
done “more” than just merely
SCO Grp., 879 F.3d at 1083, the Tenth Circuit,
quoting Leigh Furniture & Carpet Co. v. Isom,
657 P.2d 293, 308 (Utah 1982), held “[t]he
improper-means requirement is satisfied where the means used
to interfere with a party's economic relations are
contrary to law, such as violations of statutes, regulations,
or recognized common-law rules. Commonly included among
improper means are violence, threats or other intimidation,
deceit or misrepresentation, bribery, unfounded litigation,
defamation, or disparaging falsehood.” (internal
quotation marks omitted). Improper means can also include
violations of “an established standard of a trade or
profession.” Leigh Furniture, 657 P.2d at 308.
alleges that ELAP interfered with IHC's economic
relations through unfounded litigation (Compl. ¶ 32),
which is “[c]ommonly included among improper means. . .
.” Leigh Furniture, 657 P.2d at 308. But
IHC's conclusory allegation that ELAP's litigation is
“unfounded” is insufficient to establish the
improper means required to state a claim for tortious
interference. Under Utah law, the torts of “wrongful
civil proceedings and abuse of process” are
“narrowly defined, ” and IHC has done nothing to
plead the elements of either tort. Anderson Dev. Co. v.
Tobias, 2005 UT 36, ¶ 59, 116 P.3d 323, 339 (citing
Gilbert v. Ince, 1999 UT 65, ¶¶ 17, 19,
981 P.2d 841). Nevertheless, the court does not dismiss
IHC's tortious interference claim on this ground, because
IHC has also alleged that ELAP interfered with IHC's
economic relations through false statements to IHC patients
and fraudulent misrepresentations, potentially made in
violation of false advertising laws. Compl. ¶ 28-31, 40;
Opposition 18-19. “[D]eceit or misrepresentation”
and “violations of statutes, ” both constitute
improper means under Utah law. SCO Grp, 879 F.3d, at
the pleading standard of Fed.R.Civ.P. 8, IHC has met its
burden of alleging wrongful means. But ELAP argues that the
more demanding pleading standard of Fed. R. Civ. P 9(b)
applies, and that under Fed. R. Civ. P 9(b), IHC has failed
to plead with particularity facts in support of a tortious
interference claim. Motion 13. According to ELAP,
Fed.R.Civ.P. 9(b) applies to all false statements, and any
claim based on a false statement must be pled with
particularity. Motion 13.
Civ. P. 9(b) states that “in all averments of fraud or
mistake, the circumstances constituting the fraud or mistake
shall be stated with particularity.” This pleading
requirement must be applied to any case brought in federal
court where federal law has held that it should be
applied. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d
1097, 1103 (9th Cir. 2003). “It is established law, in
this circuit and elsewhere, that Rule 9(b)'s
particularity requirement applies to state-law causes of
action.” Id. “[W]hile a federal court
will examine state law to determine whether the elements of
fraud have been pled sufficiently to state a cause of action,
the Rule 9(b) requirement that the circumstances of
the fraud must be stated with particularity is a federally
imposed rule.” Id. (emphasis in original)
(quoting Hayduk v. Lanna,775 F.2d 441, 443 (1st
Cir.1985). Although there is no Tenth Circuit case on point,
Vess cites to First, Sixth, Eighth, and Ninth
Circuit cases. See ...