Antitrust Law Daily Wrap Up, RICO—D. Colo.: Ambulatory surgery centers deflect Cigna’s racketeering counterclaims, (Mar 9, 2015)

By Greg Hammond, J.D.

Cigna Healthcare, Inc. was unable to state valid Racketeer Influenced and Corrupt Organizations (RICO) Act counterclaims against various ambulatory surgery centers, in an antitrust action alleging that Cigna conspired to restrain trade. The federal district court in Denver partially granted the surgery centers’ motion to dismiss Cigna’s counterclaims, finding that the RICO and Colorado Organized Crime Control Act (COCCA) claims were insufficiently pleaded (Arapahoe Surgery Center, LLC v. Cigna Healthcare, Inc., March 6, 2015, Martínez, W.).

Background. Six ambulatory surgery centers filed suit, alleging that Cigna and related companies used their market power to pressure physicians and insurers to not do business with plaintiffs, in an effort to reduce competition for ambulatory surgery services. Cigna filed, in part, RICO and COCCA counterclaims, alleging that the plaintiffs entered into separate enterprises with each other and, through these alleged enterprises’ billing schemes, committed acts of mail and wire fraud constituting a pattern of racketeering activity. Cigna moved to dismiss the counterclaims, alleging that the surgery centers lacked standing and insufficiently pleaded their RICO and COCCA counterclaims.

Standing. The surgery centers first argued that Cigna lacked standing to assert its RICO and state law claims because any injury suffered from the alleged overpayments was suffered by the entity funding the plan, not Cigna. The court noted that the surgery centers’ standing contention turned into an argument concerning the injury or damages element of each claim. Because Cigna asserted that it directly suffered an injury by overpaying reimbursements to the surgery centers, the court concluded that Cigna satisfied the minimal requirement of a “concrete and particularized” injury sufficient to confer standing on Cigna to bring its claims. The motion to dismiss was therefore denied with regard to the surgery centers’ standing argument.

RICO and COCCA. The surgery centers also alleged that: (1) Cigna failed to plausibly plead the predicate acts of mail and wire fraud because no misrepresentation was made; (2) Cigna failed to allege injury from the surgery centers’ conduct; and (3) Cigna failed to sufficiently allege an enterprise. The court agreed with the surgery centers’ first argument, finding that Cigna failed to plausibly plead that the surgery centers misrepresented their billing practices. Specifically, Cigna admitted that the surgery centers disclosed that they reduced the patients’ portion of the bill and made the patient responsible for only an in-network deductible and co-pay amount, conceding that it was given information from which it should have known that the surgery centers were reducing the amount billed to patients. Cigna was therefore aware that the surgery centers’ claims were higher than in-network rates. Because Cigna failed to plead misrepresentations constituting predicate acts under RICO, Cigna failed to allege a pattern of racketeering activity and therefore failed to state a RICO and COCCA claim. The motion to dismiss the RICO and COCCA claims was therefore granted.

The case number is 13-cv-3422-WJM-CBS.

Attorneys: Joe Ramon Whatley, Jr. (Whatley Kallas, LLP) for Arapahoe Surgery Center, LLC, Cherry Creek Surgery Center, LLC, Hampden Surgery Center, LLC, Kissing Camels Surgery Center, LLC, SurgCenter of Bel Air, LLC, and Westminster Surgery Center, LLC. Edwin Packard Aro (Arnold & Porter LLP) for Cigna Healthcare, Inc., Connecticut General Life Insurance Co., and Cigna Healthcare Mid-Atlantic, Inc., and Cigna Healthcare of Colorado, Inc.

Companies: Arapahoe Surgery Center, LLC; Cherry Creek Surgery Center, LLC; Hampden Surgery Center, LLC; Kissing Camels Surgery Center, LLC; SurgCenter of Bel Air, LLC; Westminster Surgery Center, LLC; Cigna Healthcare, Inc.; Connecticut General Life Insurance Co.; Cigna Healthcare Mid-Atlantic, Inc.; Cigna Healthcare of Colorado, Inc.

Cases: RICO ColoradoNews