Negron v. Cigna Health & Life Ins. Co.

KIMBERLY A. NEGRON et al., Plaintiffs, v. CIGNA HEALTH AND LIFE INSURANCE COMPANY and OPTUMRX, INC., Defendants.

No. 3:16-cv-01702 (JAM)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

August 31, 2020

ORDER GRANTING PARTIAL MOTION TO DISMISS

In this putative class action, plaintiffs allege that defendants Cigna Health and Life Insurance Company ("Cigna") and OptumRx, Inc. schemed to overcharge them for prescription drugs in violation of the terms of their health plans.¹ Cigna now moves to dismiss two of plaintiff Billy Ray Blocker, Jr.'s common law claims for breach of contract and breach of the implied covenant of good faith and fair dealing on behalf of the Georgia sub-class. I will grant the motion.

BACKGROUND

The following facts as alleged in the second amended complaint are accepted as true only for purposes of this motion to dismiss. The prescription drug transactions at issue here implicate four contractual relationships between: (1) an employee and his or her employer that provides prescription drug benefits under a health plan; (2) the employer and a health insurance company that underwrites and/or administers those benefits; (3) the health insurance company and apharmacy benefit manager ("PBM") that assists in administering the benefits; and (4) the PBM and the pharmacy that fills prescriptions covered under the plan. Doc. #198 at 31 (¶ 70).

Plaintiffs' health plans describe what they must pay for prescription drugs in copayments and deductibles, id. at 32 (¶ 71), while the PBM-pharmacy contracts at issue in this case state what a pharmacy must charge patients, the fee that the PBM will pay the pharmacy for filling a prescription, and the difference or "spread" between the patient charge and the pharmacy fee that the PBM will "claw back" for remittance to the health insurance company. Id. at 32-34 (¶¶ 73, 80). Plaintiffs characterize these "clawbacks" as illegal "overcharges" because their pharmacies charged them drastically more for prescription drugs than they were required to pay under their health plans, which capped their copayments and deductibles at the pharmacies' transaction fee. Id. 10-17 (¶¶ 22-31). They say defendant health insurance company Cigna and its PBMs, including defendant OptumRx, conspired to leverage their market power to contractually require pharmacies to charge these exorbitant and unauthorized amounts, in part by threatening to cut them out of Cigna's network if they refused. Id. at 43-46 (¶¶ 116-28).

Plaintiff Blocker is a Georgia resident who received prescription drug benefits through his employer Cobb County's self-funded group health plans. Id. at 28 (¶ 65). Cobb County in turn contracted with defendant Cigna to administer the plans' prescription drug benefits. Ibid. Blocker had no direct contractual relationship with Cigna.

The health plans were drafted by Cigna to include boilerplate terms that are substantially the same as the other plaintiffs' health plans. Id. at (¶ 22). One such term was that copayments and deductibles for prescription drugs may not exceed the pharmacy's fee from a transaction. Id. at 11-12 (¶¶ 25-26). Nevertheless, Blocker was charged a $3.89 copayment for a prescription drug—a 122% premium over the pharmacy's $1.75 fee—resulting in a $2.14 overcharge, whichdefendants clawed back. Id. at 16-17 (¶ 31(s)). He was similarly overcharged for prescription drugs a number of times in 2015 and 2016. Id. at 65 (¶ 177). Blocker says these overcharges were caused by defendants' illegal clawback scheme. Id. at 29 (¶ 65).

In Counts IX and X of the second amended complaint, Blocker alleges on behalf of the Georgia sub-class members that Cigna's conduct breached the express terms of their health plans and breached the implied covenant of good faith and fair dealing under Georgia's common law. Id. at 101-03 (¶¶ 302-17). Pursuant to Fed. R. Civ. P. 12(b)(6), Cigna has moved to dismiss Counts IX and X on the ground that Cigna was not a party to Blocker's health plans and therefore cannot be held liable for breaching the plans' terms, express or implied. Doc. #202.

DISCUSSION

When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all factual matters alleged in a complaint, although a complaint may not survive unless it recites enough non-conclusory facts to state plausible grounds for relief. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Hernandez v. United States, 939 F.3d 191, 198 (2d Cir. 2019). Further, the Court may consider any documents attached as exhibits to, incorporated by reference in, or integral to the complaint. See Sierra Club v. Con-Strux, LLC, 911 F.3d 85, 88 (2d Cir. 2018).²

To prove a breach of contract under Georgia law, a plaintiff must show "(1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken." Roberts v. DuPont Pine Prod., LLC, 352 Ga. App. 659, 662 (2019) (internal quotations and citation omitted). If a contract's language is "clear and unambiguous," then a court "simply enforces the contract according to its clear terms." City of Baldwin v. Woodard & Curran, Inc.,293 Ga. 19, 30 (2013) (internal quotations and citation omitted). If its terms are ambiguous, then the court must "apply the rules of contract construction to resolve the ambiguity." Ibid.

Georgia law also implies in every contract "a duty of good faith and fair dealing in its performance and enforcement." Davis v. VCP S., LLC, 297 Ga. 616, 625 (2015). But this implied covenant "cannot be breached apart from the contract provisions it modifies and therefore cannot provide an independent basis for liability." Oconee Fed. Sav. & Loan Ass'n v. Brown, 351 Ga. App. 561, 570 (2019). In other words, if there is no viable breach of contract claim, then a claim for breach of the implied covenant of good faith and fair dealing must also fail. Id. at 570-71.

Cigna argues it cannot be liable for breaching the health plans because it was not a party to them. Doc. #202-1 at 8-11. It further argues that, because it cannot be liable for breaching the plans' express terms, it also cannot be liable for breaching their implied terms, including the implied covenant of good faith and fair dealing. Id. at 11-13.

Blocker does not dispute the general proposition under Georgia law that a person may not be liable for breaching a contract if the person was not a party to the contract. "It is . . . fundamental that a person who is not a party to a contract (i.e., is not named in the contract and has not executed it) is not bound by its terms." Plaza Properties, Ltd. v. Prime Bus. Investments, Inc., 240 Ga. App. 639, 642 (1999) (cleaned up), aff'd, 273 Ga. 97 (2000). Nor does Blocker dispute that Cigna was not a party to the health plans or that a claim for breach of the implied covenant of good faith and fair dealing cannot survive apart from a viable breach of contract claim.

Instead, Blocker argues that Cigna "expressly agreed to be sued for failure to properly administer prescription drug benefits," which shows that it "intended that it could be liable under the Plan." Doc. #215 at 8-9. He relies on a clause in the plans entitled "Legal Action" that states:"In most instances, you may not initiate a legal action against Cigna until you have completed the Level-One and Level-Two appeal processes. If your appeal is expedited, there is no need to complete the Level-Two process prior to bringing legal action." Doc. #215 at 8-9 (emphasis added by Blocker). But Blocker omits the prefatory sentence: "If your plan is governed by ERISA, you have the right to bring a civil action under section 502(a) of ERISA if you are not satisfied with the outcome of the Appeals Procedure." Doc. #202-2 at 24 (emphasis added); Doc. #202-3 at 21 (same). Viewed in context, the language that Blocker relies on makes clear that "Cigna" acknowledged only that it could be sued under ERISA (not Georgia common law), and even then only if it applies to the plan in question.³ Blocker did not bring an ERISA claim because he could not; as he concedes, his health plans were "governmental plans" as defined by 29 U.S.C. § 1002(32), Doc. #198 at 28 (¶ 65), and they are therefore exempt from ERISA, see 29 U.S.C. § 1003(b)(1). Blocker does not cite any authority to support his argument that contracting parties can write in a non-party's willingness to be sued, and that such a term would be enforceable in Georgia, let alone any other State.

Blocker further argues that Cobb County delegated to Cigna its obligations to administer the plans in accordance with their terms and that, as the plans' primary obligor, Cigna is liable toplan obligees like Blocker. Doc. #215 at 4-8. But the record does not show that Cigna assumed any obligations under the health plans between Blocker and Cobb County, to which it was not privy.⁴

Blocker misplaces his reliance on Monroe v. Bd. of Regents of Univ. Sys. of Georgia, 268 Ga. App. 659 (2004), a case in which the Georgia Court of Appeals held that because the claims administrator Blue Cross & Blue Shield of Georgia, Inc. "signed the Health Plan Document under language reading, 'The Claims Administrator hereby agrees to administer for the employees of the Plan Sponsor,'" it "expressly undertook certain obligations 'for the employees.'" Id. at 666. In other words, "Blue Cross directly obligated itself to the Plan beneficiaries by signing the Health Plan Document." Id. at 667 n.5. The Monroe decision is distinguishable because Blocker cannot show that Cigna signed his health plans, and a review of the plans does not reveal any such signature by Cigna.

Nor do the other cases cited by Blocker support him. In Directory v. William Muhr, LLC, 2006 WL 8434072 (C.D. Cal. 2006), the court noted that a delegate assumes a delegating party's duties "if the delegate expressly promises the delegating party to perform that party's duties" under an "assumption agreement." Id. at *4 (internal quotations and citation...