Dane v. UnitedHealthcare Ins. Co.

974 F.3d 183

Mark DANE, individually and on behalf of all others similarly situated, Plaintiff-Appellant,

v.UNITEDHEALTHCARE INSURANCE COMPANY, UnitedHealth Group, Inc., AARP, Inc., AARP Services, Inc., AARP Insurance Plan, Defendants-Appellees.

Docket No. 19-2330-cv

August Term, 2019

United States Court of Appeals, Second Circuit.

Argued: February 6, 2020

Decided: September 10, 2020

Andrew S. Love (Susan K. Alexander, Stuart A. Davidson, Christopher C. Gold, and Dorothy P. Antullis, on the brief), Robbins Geller Rudman & Dowd LLP, San Francisco, California and Boca Raton, Florida, and Sean K. Collins, Law Offices of Sean K. Collins, Boston, Massachusetts, for Plaintiff-Appellant.

Meaghan Vergow (Brian D. Boyle, Samantha M. Goldstein, and Jennifer B. Sokoler, on the brief), O'Melveny & Myers LLP, Washington, D.C. and New York, New York, for Defendants-Appellees United HealthCare Insurance Company and UnitedHealth Group, Inc.

Jeffrey S. Russell, Noah M. Weissman, and Alec Winfield Farr, Bryan Cave Leighton Paisner LLP, St. Louis, Missouri, New York, New York and Washington, D.C., and James T. Shearin, Pullman & Comley, LLC, Bridgeport, Connecticut, for Defendants-Appellees AARP, Inc., AARP Services, Inc., and AARP Insurance Plan.

Before: Jacobs, Calabresi, And Chin, Circuit Judges.

Chin, Circuit Judge:

In 1997, UnitedHealthcare Insurance Company ("UnitedHealthcare") entered into an agreement with AARP Insurance Plan (the "Plan") to license the intellectual property of AARP, Inc. ("AARP") for use with its Medicare supplement insurance program (the "1997 agreement"). Under the terms of the 1997 agreement, the Plan was permitted to deduct a royalty fee from member premiums in exchange for the license. Although the royalty fee is not described in the policies, UnitedHealthcare's advertisements identify and explain the royalty fee arrangement.

Plaintiff-appellant Mark Dane, individually and on behalf of all others similarly situated, commenced this action alleging that defendants-appellees UnitedHealthcare, UnitedHealth Group, Inc., AARP, AARP Services, Inc., and the Plan (collectively, "defendants"), participated in a unlawful royalty fee arrangement in violation of the Connecticut and District of Columbia ("D.C.") anti-rebating statutes. The district court dismissed the amended complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

As discussed more fully below, we hold that Dane did not state an unlawful rebate claim under Connecticut or D.C. law because he failed to plausibly allege any ascertainable loss or injury as a result of his purchase of Medicare supplement insurance ("Medigap") or the AARP royalty fee. We also agree with the district court that Dane failed to plausibly allege consumer fraud, statutory theft, or common law claims. Accordingly, the district court's judgment dismissing the amended complaint is AFFIRMED.

BACKGROUND

The facts alleged in the amended complaint are assumed to be true. UnitedHealth Group, Inc., an insurance company incorporated in Minnesota with its headquarters in Minnesota, conducts substantial business in Connecticut and maintains a wholly owned subsidiary, UnitedHealthcare, based in Hartford, Connecticut (collectively, "United"). UnitedHealthcare provides Medigap coverage to individual AARP members through a group plan. An individual can purchase a Medigap policy, sold by a private company (such as UnitedHealthcare), to help pay health care costs that are not covered by original Medicare. See 5 Soc. Sec. Law & Prac. § 66:36 (2020). State and federal law comprehensively regulate Medigap insurance policy terms, rates, and marketing. See 42 U.S.C. § 1395ss ; see also Vencor Inc. v. Nat'l States Ins. Co. , 303 F.3d 1024, 1026 (9th Cir. 2002) (describing regulatory scheme governing Medigap insurance).

AARP is a non-profit corporation organized under D.C. law, with its primary place of business in Washington D.C., that advocates for the interests of seniors. The Plan is a third-party grantor trust organized by AARP. The Plan serves as the group policy holder for AARP members enrolled in United's Medigap insurance. As the group policy holder, the Plan collects premium payments from member insureds (known as the "member contributions") and pays United the group plan premium.

Under the 1997 agreement, United is responsible for administering the Medigap program, including obtaining regulatory approvals for advertising materials and premium rates charged to insureds. The 1997 agreement instructs the Plan to deduct a 4.9% royalty fee and certain expenses from the AARP member contributions before transmitting the remaining funds to United. The royalty fee is a payment to license AARP's intellectual property in connection with the United Medigap program. See J. App'x at 247 (1997 Agmt. § 6.1 ("AARP shall be entitled to receive an allowance for AARP's sponsorship ... and the license to use the AARP Marks.")). The royalty payments are then transmitted from the Plan to AARP.

United's Medigap advertisements and disclosures identify and explain the AARP royalty fee arrangement and its purpose. See Dist. Ct. Dkt. 64-12 ("AARP endorses the AARP® Medicare Supplement Insurance Plans, insured by UnitedHealthcare Insurance Company.... UnitedHealthcare Insurance Company pays royalty fees to AARP for the use of its intellectual property."); 64-13 ("The AARP Medicare Supplement Insurance Plans carry the AARP name and UnitedHealthcare pays a royalty fee to AARP for use of the AARP intellectual property.").¹

Dane is an AARP member and United Medigap insured residing in Connecticut. He has been enrolled in United's Medigap plan in Connecticut since January 1, 2014. Dane has paid the premium for his coverage and has not alleged that he purchased or received his policy in D.C. Dane was alerted to defendants' allegedly unlawful scheme in March 2018 through his counsel. Dane alleges that "[b]ut for [d]efendants' unlawful and deceptive acts," he "would not have willingly agreed to pay an illegal 4.9% charge above the premiums due to" United. J. App'x at 22.

On behalf of a nationwide class of current and former insureds, Dane filed an amended complaint on August 17, 2018, asserting seven Connecticut-law claims and one claim under D.C. law. Dane alleged violations of consumer protections laws, including the Connecticut Unfair Trade Practices Act ( Conn. Gen. Stat. § 42-110b(a) ) ("CUTPA") and the D.C. Consumer Protection Procedures Act ( D.C. Code § 28-3904 ) ("CPPA"). Dane also asserted a variety of common law claims under Connecticut law, including, for example, breach of contract and breach of the implied covenant of good faith and fair dealing, as well as a claim for statutory theft under Conn. Gen. Stat. § 52-564. Dane contended that the AARP royalty fee constituted an unlawful "premium rebate" under Connecticut and D.C. law. J. App'x at 17, 25. More specifically, Dane asserted that defendants' illegal rebating scheme deceives "consumers into directly funding their illegal rebating activities" by permitting AARP to "siphon off" 4.9% from the "member contributions" paid by plaintiff and others similarly situated as a "royalty" or unlawful rebate. J. App'x at 16, 19, 40. Dane sought damages, injunctive relief, and "restitution and disgorgement" of revenues taken from the class and paid to AARP. J. App'x at 55. The district court had diversity jurisdiction over the case pursuant to 28 U.S.C § 1332(d)(2)(A), as modified by the Class Action Fairness Act of 2005.

Defendants moved to dismiss the amended complaint on September 17, 2018 for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

In an order issued June 24, 2019, the district court granted defendants' motion to dismiss. The district court concluded that the AARP royalty did not constitute an unlawful premium rebate in violation of Connecticut's and D.C.'s anti-rebating statutes because Dane failed to plausibly allege that the "payment to AARP induces AARP members to choose United Medigap [c]overage over other insurance options because individual insureds are not receiving any monetary award for choosing United." S. App'x at 4. Moreover, the district court concluded that Dane failed to allege that the Plan -- the third-party grantor trust serving as the group policy holder for AARP members -- was induced to insurance. The district court also held that even if the royalty was an unlawful rebate, the Connecticut filed rate doctrine independently barred the lawsuit. Finally, the district court also dismissed Dane's consumer fraud, statutory theft, and common law claims for failure to state a claim.

Judgment entered June 25, 2019. This appeal followed.

DISCUSSION

On appeal, Dane contends that the district court erred in granting defendants' motion to dismiss by improperly: (1) engaging in fact finding by concluding that the royalty was not an unlawful rebate in violation of state law; (2) applying the filed rate doctrine to bar the state law claims when no Connecticut court had previously relied on the doctrine; and (3) ignoring allegations in the amended complaint in dismissing Dane's consumer fraud and common law claims.

We "may affirm [the district court's decision] on any basis supported by the record." Coulter v. Morgan Stanley & Co. , 753 F.3d 361, 366 (2d Cir. 2014). We conclude, as a matter of law, that Dane did not state an unlawful rebate claim under Connecticut or D.C. law because he failed to plausibly allege any ascertainable loss or injury caused by his purchase of Medigap insurance or the AARP royalty fee arrangement. Consequently, we need not decide whether the royalty fee is an unlawful rebate or rely on the filed rate doctrine or certify a question to the Connecticut Supreme Court on the issues presented. We agree with the district court that Dane failed to plausibly allege consumer fraud or common law claims.

I. Unlawful Rebate Claims

This Court has not considered whether a royalty fee arrangement...