Moda Assurance Co. v. New Life Treatment Ctr.

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MODA ASSURANCE CO., Plaintiff, v. NEW LIFE TREATMENT CENTER, Defendant.

No. 3:23-cv-00132-SLG

United States District Court, D. Alaska

January 17, 2024

ORDER RE DEFENDANT'S MOTION TO DISMISS OR TRANSFER TO CENTRAL DISTRICT OF CALIFORNIA AND PLAINTIFF'S MOTION TO AMEND COMPLAINT

SHARON L. GLEASON UNITED STATES DISTRICT JUDGE

Before the Court at Docket 12 is Defendant New Life Treatment Center's “Motion to Dismiss Complaint under Fed.R.Civ.P. 12(b)(1), (b)(2), (b)(3), and (b)(6); or in the alternative to transfer under 28 U.S.C. § 1404 to the Central District of California.” Plaintiff Moda Assurance Co. responded in opposition at Docket 17, to which Defendant replied at Docket 23. Also before the Court is Plaintiff's Motion to Amend Complaint at Docket 18. Defendant responded in opposition at Docket 21, to which Plaintiff replied at Docket 24. Oral argument was not requested on either motion and was not necessary to the Court's determination.

BACKGROUND

Moda Assurance Co. (“Moda”) is a health insurance company and Alaska corporation with its principal place of business in Anchorage, Alaska.^[1]It brings this suit against New Life Treatment Center (“New Life”), a substance abuse treatment center and California company with its principal place of business in California.^[2]Moda's complaint asserts that “New Life orchestrated a deceptive and unlawful scheme through which it defrauded Moda of approximately $3.3 million,” and that “Moda has so far paid an estimated $550,000 in claims (of a total of $3.3 million in claims for which New Life has so far sought payment from Moda) for individuals whose health-insurance applications contained information that New Life falsified or caused to be falsified.”^[3]Moda contends that New Life's alleged scheme was propelled by an Alaska regulation, Title 3 of the Alaska Administrative Code (“AAC”), section 26.110(a), which “provides that private health care insurers must pay claims for health care services based on an amount that is equal to or greater than the 80th percentile of charges in a geographical area” (the “80th percentile rule”).^[4]Moda explains that “[t]he effect of Alaska's 80th percentile rule is that out-of-network providers like New Life receive a much higher payment from private health insurers like Moda than they would from (a) private insurers in states without such a rule; and (b) public insurers like Medicaid.”^[5]Thus, Moda contends that “New Life or its employees or agents purposefully availed itself of the privilege of conducting business in Alaska by inducing Alaska residents to seek treatment for substance abuse at its treatment center.”^[6]In its initial complaint, Moda alleges six causes of action against New Life: (1) fraud/misrepresentation; (2) negligent misrepresentation; (3) violation of the Alaska Consumer Protection Act; (4) violation of the California Insurance Frauds Prevention Act; (5) violation of California's Unfair Competition Law; and (6) civil conspiracy.^[7]Moda's initial complaint seeks compensatory damages, civil penalties, punitive damages restitution, attorney fees, and pre- and post-judgment interest.^[8]

New Life filed a Motion to Dismiss, asserting that Moda lacks standing; the Court lacks personal jurisdiction over New Life; the District of Alaska is not the appropriate venue and that Moda fails to state a claim upon which relief can be granted.^[9]Moda then filed a Motion to Amend Complaint and submitted a proposed amended complaint (“PAC”) in which it asserts only three causes of action: (1) fraud/intentional misrepresentation under Alaska law; (2) negligent misrepresentation under Alaska law; and (3) civil conspiracy under Alaska law.^[10] In this order, the Court first addresses Moda's Motion to Amend Complaint, and for the reasons stated below, the Court grants Moda's Motion to Amend Complaint and denies New Life's Motion to Dismiss without prejudice to its renewal after Moda has filed a clean copy of its amended complaint.

JURISDICTION

The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 because there is diversity of citizenship between Moda and New Life and because Moda alleges an amount in controversy exceeding $75,000.

LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 15(a), if 21 days have passed since a pleading was served or since a motion under Rule 12(b), (e), or (f) was served-whichever is earlier-then “a party may amend its pleading only with the opposing party's written consent or the court's leave.” That rule also provides that courts should “freely give leave [to amend] when justice so requires”; the Ninth Circuit has held that “this policy is to be applied with extreme liberality.”^[11]“Five factors are taken into account to assess the propriety of a motion for leave to amend: bad faith, undue delay, prejudice to the opposing party, futility of amendment, and whether the plaintiff has previously amended the complaint. Futility alone can justify the denial of a motion to amend.”^[12]However, “[n]ot all of the factors merit equal weight”; in the Ninth Circuit, “it is the consideration of prejudice to the opposing party that carries the greatest weight.”^[13]And “[a]bsent prejudice, or a strong showing of any of the remaining . . . factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend.”^[14]

DISCUSSION

Moda filed its Motion to Amend Complaint more than 21 days after it filed its original complaint and after New Life's Motion to Dismiss was served.^[15]Accordingly, given New Life's lack of consent, a court order permitting leave to amend is necessary for any amendment.^[16]In its opposition to the motion, New Life maintains that the PAC still fails to establish standing, personal jurisdiction, and venue, and that it still fails to state viable claims for relief, such that Moda's motion to amend should be denied because allowing the proposed amendments would be futile.^[17] Moda has not previously amended its complaint, and the Court finds that there is no evidence of bad faith, undue delay, or prejudice to New Life if the Court permits Moda to file an amended complaint. Although New Life contends that “Moda's suit is merely a bad faith nuisance suit designed to harass New Life in the hopes of avoiding paying the legitimate claims of Moda insureds,”^[18]New Life provides no factual basis for its assertion of bad faith.^[19]Nor has there been any undue delay by Moda in seeking amendment: the case was initiated in June 2023, New Life filed its motion to dismiss in August 2023, and Moda filed its motion seeking to amend its complaint in October 2023.^[20]New Life has not yet filed an answer to the complaint and it has not claimed that it would be prejudiced by amendment to the complaint.^[21]Indeed, as Moda points out, the PAC removes three of the six original causes of action that Moda asserted.^[22]

The only factor at issue is whether allowing Moda to amend its complaint would be futile. New Life asserts that permitting the PAC would be futile because Moda would still lack standing, personal jurisdiction over New Life would still be lacking, venue in the District of Alaska would still be improper, and Moda would still fail to state a viable claim for which relief can be granted.^[23]The Court addresses each issue in turn.

I. Standing

Standing requires a plaintiff to show (1) an injury in fact, meaning an “invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical”; (2) causation; and (3) redressability, meaning that “the injury will likely be redressed by a favorable decision.”^[24]New Life contends that Moda has not alleged that it suffered an injury in fact because Moda paid “legitimate claims at a statutory rate” under Alaska law.^[25]New Life asserts that, “[a]t best, Plaintiff's new theory alleges a harm to the government only.”^[26]

In its PAC, Moda alleges it paid over $650,000 in claims to New Life after New Life “falsified or caused to be falsified” income information on its recruits' applications to the federal health exchange, which resulted in New Life “enroll[ing] or caus[ing] to enroll at least 25 . . . patients in Moda health plans.”^[27]Moda contends that, absent New Life's false income reporting, the patients that New Life recruited would have been eligible for Medicaid and would not have “enroll[ed] in an insurance plan like Moda's[] because doing so would be cost-prohibitive,” because they would not have been eligible for premium subsidies.^[28]Thus, Moda has adequately alleged an injury that is fairly traceable to New Life's alleged actions.^[29]And Moda asserts that a favorable judicial decision in the form of compensatory damages “would redress the monetary injury that Moda suffered as a result of New Life's misrepresentations.”^[30]Accordingly, Moda's PAC adequately alleges the three requirements for standing.

II. Personal Jurisdiction

New Life contends that the PAC fails to adequately allege facts to permit this Court to exercise personal jurisdiction over New Life in this case. Unless an applicable federal statute provides otherwise, personal jurisdiction is governed by the law of the state in which a district court sits.^[31]Alaska's long-arm statute, Alaska Statute § 09.05.015, “authorizes Alaska's courts ‘to assert jurisdiction to the maximum extent permitted by due process.'”^[32]Due process, in turn, permits courts to exercise personal jurisdiction over nonresident defendants as long as the defendants “have at least ‘minimum contacts' with the relevant forum such that the exercise of jurisdiction ‘does not offend traditional notions of fair play and substantial justice.'”^[33]

“There are two categories of personal...