Ketayi v. Health Enrollment Group

ERIC KETAYI and MIRYAM KETAYI, both individually and on behalf of all others similarly situated and for the benefit of the general public, Plaintiffs, v. HEALTH ENROLLMENT GROUP, a Florida corporation; ADMINISTRATIVE CONCEPTS, INC., a Pennsylvania corporation; AXIS, a Bermuda corporation d/b/a Axis Insurance Company; AXIS SPECIALTY U.S. SERVICES, INC., a Delaware corporation; ALLIANCE FOR CONSUMERS USA, a Nebraska corporation; HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC, a Delaware corporation; HEALTH INSURANCE INNOVATIONS HOLDINGS, INC., a Delaware corporation; FIRST HEALTH GROUP, CORP., a Delaware corporation; COST CONTAINMENT GROUP, Inc., a Delaware corporation, Defendants.

No. 20-cv-1198-GPC-KSC

United States District Court, S.D. California

July 8, 2021

ORDER:

(1) GRANTING IN PART AND DENYING IN PART DEFENDANT ADMINISTRATIVE CONCEPTS, INC.'S MOTION TO DISMISS COUNTS 1, 3, 4, 5, AND 7 OF THE SAC; AND

(2) GRANTING IN PART AND DENYING IN PART DEFENDANTS HEALTH PLAN INTERMEDIARIES HOLDINGS, LLC AND HEALTH INSURANCE INNOVATIONS HOLDINGS, INC.'S MOTION TO DISMISS COUNTS 1 2, AND 3 OF THE SAC

[ECF Nos. 109, 112.]

Hon Gonzalo P. Curiel United States District Judge

Before the Court are Motions to Dismiss in Part the Second Amended Complaint of Plaintiffs Eric Ketayi and Miryam Ketayi (“Plaintiffs”), filed by Defendants Administrative Concepts, Inc. (“ACI”), Health Plan Intermediaries Holdings, LLC (“HPI”), and Health Insurance Innovations Holdings, Inc. (“HII”) (collectively, “Moving Defendants”). ECF Nos. 109, 112. The motions have been fully briefed. ECF Nos. 123, 124, 127, 128. Upon consideration of the briefing of the parties and for the reasons set for the below, the Court GRANTS in part and DENIES in part the motions to dismiss.

I.BACKGROUND^[1]

Plaintiffs Eric and Miryam Ketayi are married with two children and live in San Diego County. ECF No. 95 (“SAC”) ¶¶ 16-17, 109. Until the fall of 2016, Plaintiffs had health insurance through Blue Cross/Blue Shield that provided coverage for themselves and their children. Id. ¶ 109. In the face of increasing premiums, Plaintiffs decided to look for less expensive insurance options that provided comparable PPO coverage to their existing plan. Id. Plaintiffs came across the website of Defendant Health Enrollment Group (“HEG”), which included statements like “Our PPO's work with over 80% of physicians Nationwide, ” and “We work with Major Insurance Companies in all 50 states” to provide “Private Health Insurance, ” “Obamacare, ” and “PPO” plans. Id. ¶ 110. During three separate calls on November 22, 2016, Plaintiffs spoke with representatives of HEG, HPI, HII, or Cost Containment Group (“CCG”), although the representatives did not identify what company they worked for. Id. ¶ 112, n.14. The representative, identified as David Martinez, described the plan to Plaintiffs as a PPO plan and compared it to Plaintiffs' existing Blue Cross/Blue Shield coverage. Id. The representative followed a script that confused Plaintiffs, and claimed that Plaintiffs would have small co-pays, no deductible, and that this seemingly comprehensive coverage would apply were Plaintiffs or their children to visit almost any doctor in the country. Id. ¶ 113. The representative also told Plaintiffs that the PPO plan would cost $379 per month, less than Plaintiffs' Blue Cross/Blue Shield plan, because Defendants aggregated individuals from all over the country and could negotiate “great deals” for consumers. Id. ¶ 114. In responding to Plaintiffs' questions about what the plan would cover, the representative stated the coverage was PPO and comprehensive and excluded pregnancy and mental health care. Id. ¶ 115. Relying on the Defendants' statements and omissions of material fact, Plaintiffs then decided to initiate the process of purchasing what they believed to be comprehensive health insurance. Id. ¶ 116.

The representative then told Plaintiffs they would be transferred to an agent who could verify that they qualified for the Plan, who Plaintiffs believe was an employee of ACI, CCG, or Axis Defendants.^[2] Id. ¶ 117. Before the representative transferred Plaintiffs to the agent, he told them that the agent would read them a series of statements and that Plaintiffs would need to say yes to all of the statements if they wished to purchase Defendants' product, that Plaintiffs should ignore statements that did not apply to them or the product they were purchasing, and that Plaintiffs should not interrupt or ask questions, or they would be forced to start the process over. Id. Plaintiffs felt pressured to agree to the agent's verification statements based on the representative's directions and accordingly answered yes to every question, despite not understanding or agreeing with everything that was being said. Id. ¶ 118.

On the same day, November 22, 2016, Plaintiffs purchased Defendants' product (the “Liberty Health Plan”) and continued to pay “premiums” for Defendants' coverage from November 2016 until at least August 2017. Id. ¶¶ 16-17, 119, 124. After Plaintiffs' purchase, Defendants mailed Plaintiffs a card that said “Preferred Provider (PPO) Network Access” and included the URL to a website which stated it was their “national choice for PPO network solutions.” Id. ¶ 120. Plaintiffs assert that Defendants made these representations with the knowledge that they had not actually sold, underwritten, or provided any sort of PPO plan or otherwise comprehensive coverage to Plaintiffs. Id.

On July 29, 2017, Plaintiff Eric Ketayi was admitted to Cedars-Sinai Hospital for back surgery. Id. ¶ 122. For his six-night hospital stay, surgery, and other necessary care, the health plan Plaintiffs had purchased from Defendants covered $1, 500. Id. ¶ 124. Plaintiffs were responsible for $194, 366.73. Id. Plaintiffs attempted to dispute the lack of coverage, but Axis Defendants-the only Defendant Plaintiffs were able to reach-did not alter its level of coverage or agree to further contribute. Id. ¶ 125.

On June 26, 2020, Plaintiffs filed their initial putative class action complaint.^[3]ECF No. 1. On September 11, 2020, Plaintiffs filed their First Amended Complaint (“FAC”). ECF No. 53. On February 2, 2021, the Court granted in part and denied in part Defendants' motions to dismiss the FAC. ECF No. 89. On April 23, 2021, Plaintiffs filed the SAC, asserting putative class claims for (1) violations of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; (2) false and misleading advertising under the False Advertising Law (“FAL”) (against HEG, HPI, HII, Axis Defendants, and CCG), Cal. Bus. & Prof. Code § 17500 et seq. (against HEG, HPI, HII, Axis Defendants, and CCG); (3) fraud and deceit, Cal. Civ. Code § 1709; (4) aiding and abetting fraud; (5) conspiracy to commit fraud; (6) violation of Cal. Ins. Code § 781 (against Axis only); (7) violation of the Racketeer Influence and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq.; and (8) conspiracy to violate federal civil RICO, 18 U.S.C. § 1961 et seq. SAC ¶¶ 141-222. On May 19, 2021, ACI filed its motion to dismiss counts 1, 3, 4, 5, and 7 of the SAC. ECF No. 109. On May 21, 2021, HII and HPI filed their motion to dismiss counts 1, 2, and 3 of the SAC. ECF No. 112.

II. LEGAL STANDARD

Rule 12(b)(6) permits dismissal for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990). Under Rule 8(a)(2), the plaintiff is required only to set forth a “short and plain statement of the claim showing that the pleader is entitled to relief, ” and “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (citations omitted).

III. DISCUSSION

Moving Defendants each move to dismiss claims from the SAC. ACI seeks to dismiss the UCL claim (count 1), the claim for fraud and deceit as well as aiding and abetting fraud and conspiracy to commit fraud (counts 3, 4, and 5), and the direct RICO claim (count 7). ECF No. 109. HII and HPI seek to dismiss the UCL claim (count 1), FAL claim (count 2), and claim for fraud and deceit (count 3). ECF No. 112. Plaintiffs oppose. ECF Nos. 123, 124.

A. Counts 3, 4, and 5: Fraud and Deceit and Related Claims

The Court first addresses whether the SAC states a claim for fraud and deceit against ACI, HII, and HPI and aiding and abetting fraud or conspiracy to commit fraud against ACI.

i. Fraud and Deceit under Cal. Civ. Code § 1709

Under California law, “one commits fraudulent deceit ‘who willfully deceives another with intent to induce him to alter his position to his injury or risk.'” Wilson v. Hewlett-Packard Co., 668 F.3d 1136,...