Judge Partially Grants Motion to Dismiss ERISA Underpayment Allegations Against Cigna, Viant

Judge Edward J. Davila of the Northern District of California on Tuesday partially granted and partially denied Cigna Behavioral Health Inc.’s and Viant Inc.’s motions to dismiss a complaint brought by an individual who alleged that the health plan administrator defendants failed to fully reimburse claims for the mental health services of the plaintiff’s child.

The plaintiff’s child, SJ, is a beneficiary of a Cigna health plan governed by the Employee Retirement Income Security Act (ERISA). SJ sought treatment for behavioral and mental health disorders at Summit Estate, a treatment provider out of Cigna’s network, which contacted Cigna to verify the out-of-network benefits and said the benefits were to be paid at 70% of usual, customary, and reasonable (UCR) rates. Under a treatment contract executed among the plaintiff, Cigna, and Summit Estate, the plaintiff was responsible for paying for any services for which Cigna had no obligation, the court explained.

However, the plaintiff alleged that Cigna forwarded every claim to Viant for “repricing,” arguing that Cigna never informed them that the claims would be subject to third-party repricing until after they already entered into the treatment contract.

“Viant purported to offer payments at UCR rates, but in reality, the amount offered bore no relationship to UCR rates as that term is defined in SJ’s Cigna policy,” the court explained, citing the plaintiff’s allegations. “Viant offered essentially the same flat, lower rate that it offers across the entire country. … This rate is the “product of a secret, proprietary, database and/or pricing method.’ … For every dollar Viant “save(d)” Cigna, Viant received a kick-back.”

Accordingly, Cigna only agreed to cover $6,225.12 of the total bill of $51,175.00, leaving the plaintiff responsible for paying the rest, which they did directly to their provider.

Against both defendants, the plaintiff asserted Racketeer Influenced and Corrupt Organizations (RICO) Act violations and two claims for relief under ERISA, and against just Cigna, the plaintiff additionally asserted various ERISA violations and requested other relief under ERISA.

Cigna moved to dismiss the entire complaint, pointing out purported deficiencies in the pleadings of each of the plaintiff’s claims, with Viant seeking dismissal of the three claims against it for failure to state claims and allege with enough particularity.

In its analysis, the court sided with the plaintiff on certain claims, but fully dismissed others. Among those dismissed was the RICO claim; the plaintiff relied on Odom v. Microsoft Corp. and other case law to argue that the contractual treatment relationship the plaintiff described could be characterized as an “association-in-fact enterprise,” of which the plaintiff in any RICO case must prove the existence. However, the court found here that the plaintiff did not meet its burden in plausibly showing that Cigna and Viant “knowingly formed an enterprise to fraudulently underpay claims at below the UCR rates,” the court explained.

The surviving claims were the second and third, which alleged ERISA underpayment, and the fifth, which alleged breach of ERISA fiduciary duties of loyalty and due care.

The plaintiff is represented by Napoli Shkolnik PLLC and DL Law Group. Cigna is represented by McDermott Will & Emery and Viant by Phelps Dunbar LLP and Sheppard, Mullin, Richter & Hampton.