Sykes v. Health Network Solutions, Inc., 13 CVS 2595

2013 NCBC 55

SUSAN SYKES d/b/a ADVANCED CHIROPRACTIC AND HEALTH CENTER; DAWN PATRICK; TROY LYNN; LIFEWORKS ON LAKE NORMAN, PLLC; BRENT BOST; and BOST CHIROPRACTIC CLINIC, P.A., Plaintiffs, v. HEALTH NETWORK SOLUTIONS, INC. f/k/a CHIROPRACTIC NETWORK OF THE CAROLINAS, INC.; MICHAEL BINDER; STEVEN BINDER; ROBERT STROUD, JR.; LARRY GROSMAN; MATTHEW SCHMID; RALPH RANSONE; JEFFREY K. BALDWIN; IRA RUBIN; RICHARD ARMSTRONG; BRAD BATCHELOR; JOHN SMITH; RICK JACKSON; and MARK HOOPER, Defendants.

No. 13 CVS 2595

Superior Court of North Carolina, Forsyth

December 5, 2013

Oak City Law, LLP, by Robert E. Fields III and Samuel Piñero II, Doughton Rich Blancato PLLC by William A. Blancato, and Wells, Jenkins, Lucas & Jenkins, PLLC, by Leon E. Porter and Ellis B. Drew III, for Plaintiffs.

Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, by Jennifer K. Van Zant, Benjamin R. Norman, and W. Michael Dowling for Defendants.

ORDER ON MOTION TO DISMISS

Gale, Judge.

{1} THIS MATTER is before the court on Defendants' Motion to Dismiss Plaintiffs' Amended Complaint ("Motion") pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)"). The Motion is DENIED, subject to the limitations expressed below.

{2} On October 29, 2013, the court heard consolidated oral argument on Plaintiffs' Motion for Preliminary Injunction and Defendants' Motion to Dismiss. On November 25, 2013, the court entered its Order denying Plaintiffs' Motion for Preliminary Injunction, finding that Plaintiffs had not demonstrated a likelihood of success on their claims. The current Motion to Dismiss is determined on a standard more favorable to Plaintiffs. In determining whether Plaintiffs have adequately pleaded their claims, the court accepts their allegations as true and draws inferences in their favor. See, e.g., Sutton v. Duke, 277 N.C. 94, 98, 176 S.E.2d 161, 164 (1970); Crouse v. Mineo, 189 N.C.App. 232, 237, 658 S.E.2d 33, 36 (2008). The Motion does not turn on the strength of the claims, but only on whether the allegations are sufficient to state any claim. Concrete Serv. Corp. v. Investors Grp., Inc., 79 N.C.App. 678, 681, 340 S.E.2d 755, 758 (1986). In considering the Motion to Dismiss, the court restricts its inquiry to the Amended Complaint and other documents which are specifically referred to or adopted by the pleadings. Oberlin Capital, L.P. v. Slavin, 147 N.C.App. 52, 60–61, 554 S.E.2d 840, 847 (2001).

{3} The court provided a detailed factual summary of Plaintiffs' claims in its November 25, 2013 Order. The court does not now repeat that summary, but is mindful that the facts recited there included matters raised in defense of the injunction request which are not properly considered when ruling on the Motion to Dismiss. Particular facts important to this Motion are noted.

{4} Accepting all of Plaintiffs' allegations as true, as it must for the present Motion, the court concludes that Plaintiffs have adequately alleged the essential elements for the claims in the Amended Complaint, and the Amended Complaint therefore withstands the initial Motion to Dismiss. ^[1] The court has separately considered Defendants' standing argument, as it is cast, in part, as a challenge to the court's subject matter jurisdiction. The court concludes that Plaintiffs' have properly invoked the court's jurisdiction and the litigation may proceed toward a more detailed fact inquiry. That inquiry may include a reexamination of the arguments underlying the Rule 12(b)(1) motion.

{5} While the court allows the Amended Complaint to survive the Motion, it further concludes that the imprecision of Plaintiffs' allegations, particularly as to the "market" within which Defendants are alleged to have acted, do not justify the typical full range of discovery before the contentions are refined with greater precision. The need for further clarification of the market may inform not just the competition claims, for other claims interrelate common facts. This clarification may be essential to inform determinations necessary for the resolution of any claim, including, for example, the issue of whether a class or subclasses should be certified and, if so, who would be a proper representative, and the standard or lens through which damage claims should be discovered and determined.

{6} Accordingly, the court denies the Motion to Dismiss but will undertake to implement appropriate procedures to conform efficient discovery and consideration of other necessary pre-trial issues

{7} It appears that Plaintiffs' Second Claim and Third Claim are the most critical, for the First, Fourth and Fifth Claims are substantially or totally dependent on them. The court refers to the Second and Third Claims collectively as the "competition claims, " although the Third Claim further extends the claim of unfair and deceptive acts or trade practices. The First Claim essentially casts the remaining claims in the form of declaratory judgment. The Fifth Claim is a derivative claim for punitive damages.

{8} The Second Claim sets forth the alleged anti-competitive conduct of which Plaintiffs complain and is premised on N.C. Gen. Stat. §§ 75-1, 75-2 and 75-2.1. The claim is labeled as "price fixing, monopsony and monopoly, " but it also includes allegations of conspiracy and attempt to monopolize or monopsonize. The Amended Complaint does not assert a separate independent conspiracy claim, but the court has depended on the conspiracy allegations in allowing claims to continue at this time against the Individual Defendants. A definition of the "market" and "market power" is essential to the monopoly, monopsony, and attempt theories of the Second Claim. See R.J. Reynolds Tobacco Co. v. Philip Morris, 199 F.Supp.2d 362, 394 (M.D. N.C. 2002); In re Se. Milk Antitrust Litig., 801 F.Supp.2d 705, 724 (E.D. Tenn. 2011); Powderly v. Blue Cross & Blue Shield of N.C. , 3:08-cv-00109-W, 2008 U.S. Dist. Lexis 89406, at *4 (W.D. N.C. Sept. 4, 2008).^[2]

{9} The Third Claim is premised on N.C. Gen. Stat. § 75-1.1, but draws heavily from the same underlying facts anchoring the Second Claim. Adding to the competition claims, the Third Claim adds alleged violations of the Insurance Code as unfair and deceptive acts, most particularly that HNS (1) should be licensed, but is not and (2) should but does not include considerations of medical necessity when assessing efficiencies which govern a provider's ability to remain in the Network. Plaintiffs additionally allege that HNS unfairly represents its functions and benefits to its members and unfairly retains a percentage of fees resulting from member chiropractic services.

{10} Assuming first without deciding at this time that Plaintiffs can ground their private cause of action on the insurance statutes they invoke, the court makes no present determination whether the insurance-related claims can stand independently if the completion claims fail. But, as presently alleged, the claims are interrelated so as to suggest further critical inquiry at the same time under a more fully developed record.

{11} Plaintiffs ground their claims solely in state law. But in the absence of guiding state precedent, the court properly looks to federal approaches to similar issues for guidance. As indicated in its November 25, 2013 Order, the court finds the federal enforcement policy regarding IPAs to be instructive as to the record necessary to assess the claims.^[3] Although the factors necessary to the record vary in accord with the nature of the agreements under attack, any meaningful analysis must be governed by an understanding of the "market" impacted by the claims and the allocation of power within that market.

{12} Before discussing further how that record might be developed, the court turns to Defendants' challenge to the court's subject matter jurisdiction. Defendants assert the court has no such jurisdiction because Plaintiffs have not and cannot assert "antitrust standing, " and therefore cannot pursue competition claims under Section 75-1, 75-2 or 75-2.1 and cannot pursue a private cause of action based on the insurance laws because of the exclusive enforcement authority of the Insurance Commissioner.

{13} Standing arguments can be presented under both Rule 12(b)(1) and Rule 12(b)(6), as Defendants have done here. See Teague v. Bayer, 195 N.C.App. 18, 21-–22, 671 S.E.2d 550, 554 (2009); Meadows v. Iredell County, 187 N.C.App. 785, 787, 653 S.E.2d 925, 928 (2007). The concepts underlying the rules and the standards of review are not necessarily the same. As a jurisdictional matter, a Rule 12(b)(1) motion may draw upon and depend upon a more complete record than just the pleading upon which the Rule 12(b)(6) motion turns. The Rule 12(b)(1) motion is in the nature of determining whether there is a concrete controversy suitable for judicial resolution and inquires whether the plaintiff has suffered an actual concrete injury that is not speculative, conjectural, or hypothetical. Meadows, 187 N.C.App. at 21–22, 671 S.E.2d at 554 (quoting Neuse River Found., Inc. v. Smithfield Foods, Inc., 166 N.C.App. 110, 114, 574 S.E.2d 4 8, 52 (2009), disc. rev. denied, 356 N.C. 675, 577 S.E.2d 628 (2003)). Standing arguments brought under Rule 12(b)(6) inquire whether the alleged facts fall within the scope and ambit of the underlying substantive claims.

{14} Accepting Plaintiffs' allegations as true, the court concludes that Plaintiffs have alleged injuries sufficiently concrete and particularized to present a justiciable claim over which the court has present subject matter jurisdiction. To the extent that later proceedings warrant a reexamination of subject matter jurisdiction, ruling on a defect in subject matter jurisdiction has not been waived or foreclosed. Wood v. Guilford Cnty., 355 N.C. 161, 164, 558 S.E.2d 490, 493 (2002).

{15} The court believes that that challenge to standing for lack of "antitrust injury" is more properly a Rule 12(b)(6) ...