Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BRIDGES v. BLUE CROSS & BLUE SHIELD ASS'N

August 2, 1996

RUSSELL P. BRIDGES, et al., Plaintiffs,
v.
BLUE CROSS AND BLUE SHIELD ASSOCIATION, et al., Defendants.



The opinion of the court was delivered by: HARRIS

 Before the Court are the following motions, oppositions, and replies: defendant Blue Cross and Blue Shield Association's (hereinafter "BCBSA") motion to dismiss Counts I, II, III, IV, and V of plaintiffs' second amended complaint; defendant Office of Personnel Management's (hereinafter "OPM") motion to dismiss Counts III, IV, V, and VI of plaintiffs' second amended complaint; plaintiffs' combined opposition to defendants' motions to dismiss; BCBSA's reply; and the OPM's reply. Upon careful consideration of the entire record, the Court grants defendant BCBSA's motion to dismiss Counts I through V of the complaint, allowing leave for BCBSA to move to intervene as a party defendant as to Count VI of the complaint if the Court later deems it to be necessary. The Court likewise grants defendant OPM's motion to dismiss Counts III, IV, and V of plaintiffs' complaint, but denies the OPM's motion to dismiss Count VI. The Court will, however, stay the case until the OPM has taken final action with regard to the physician-provider coinsurance issues currently under discussion at the agency.

 I. Background

 The background of this case has been set out to some extent in the Court's unpublished January 24, 1995, Opinion granting BCBSA's motion to defer consideration of plaintiffs' class allegations, and the published February 1995 Opinion granting BCBSA's motion for joinder of the OPM as a party defendant. 889 F. Supp. 502 (D.D.C. 1995). For the sake of clarity, however, the Court briefly recapitulates the background of this action and its current posture.

 The Federal Employee Health Benefits Act (hereinafter "FEHBA"), 5 U.S.C. § 8901 et seq. (1994), authorizes the OPM to procure and administer health benefits plans for federal workers by contracting with private health insurance carriers. In addition to procuring contracts with insurance carriers, 5 U.S.C. § 8902, the OPM selects the benefits provided by the carriers under the federal employee plans, 5 U.S.C. § 8902(d), fixes premium rates, 5 U.S.C. §§ 8902(i), 8906, distributes information on the available health plans to federal employees, 5 U.S.C. § 8907, and makes determinations on claim disputes when they arise, 5 U.S.C. § 8902(j).

 In "approximately 1960," according to plaintiffs, the OPM and BCBSA entered into a contract, renewable yearly, for a Service Benefit Plan (the "Plan") to provide insurance to federal employees who chose to enroll in the Plan. BCBSA represents a nationwide network of Blue Cross/Blue Shield entities; sixty-seven of those entities subcontract with and are licensed by BCBSA to provide health benefits to federal employees pursuant to the Plan. Employees who enroll in the Plan (or "enrollees") obtain physician and hospital services from BCBSA's member providers and facilities. Plaintiffs are current or retired federal employees who are enrolled with BCBSA's Plan.

 Enrollees in the Plan are obligated to pay coinsurance on each medical claim, which, until the latest Plan year, was a certain percentage (usually 20 or 25%) of the health care provider or facility's charges. *fn1" BCBSA's licensee entities are obligated to the provider or facility for the remainder of the claim. In plaintiffs' second amended complaint, filed on October 27, 1995, plaintiffs allege that BCBSA's licensee entities, with BCBSA's "knowledge and approval," secretly negotiated discounts on the cost of services of member facilities and physicians, and then failed to apply those discounts to the enrollees' coinsurance payments. *fn2" Plaintiffs further allege in their complaint that BCBSA sent Explanations of Benefits ("EOB's") to enrollees which cloaked the existence of the discounts. Thus, as plaintiffs put it, "while [Plan enrollees] believe they are paying a copayment percentage . . . based on the same billed amount as are the BCBSA subcontractor-licensees, this is not the case." Pls.' Second Am. Compl. at 3.

 Following this Court's Order of February 28, 1995, which required plaintiffs to join the OPM as a defendant, plaintiffs filed the second amended complaint. It contains six counts. *fn3" Counts I and II allege that BCBSA committed two separate violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq.. Count I alleges that BCBSA violated or conspired to violate RICO § 1962(a), which criminalizes the use or investment of racketeering income in an enterprise. Count II alleges that BCBSA violated or conspired to violate § 1962(c) of the statute, which criminalizes an entity's participation in a racketeering enterprise.

 Count III of plaintiffs' second amended complaint states a breach of contract claim (styled as a claim for "enforcement of contract") against both the OPM and BCBSA, and Count IV states a claim for breach of fiduciary duty, likewise against both defendants. Count V states a separate claim against both defendants for a declaratory judgment determining their rights under the Plan. Count VI is captioned as a claim for "breach of statutory duties," and plaintiffs bring this claim against the OPM only.

 II. Discussion

 Plaintiffs' factual allegations must be presumed true and liberally construed in their favor when reviewing the adequacy of a complaint for purposes of a Rule 12(b)(6) motion. Phillips v. Bureau of Prisons, 192 U.S. App. D.C. 357, 591 F.2d 966, 968 (D.C. Cir. 1979) (citing Miree v. Dekalb County, Georgia, 433 U.S. 25, 27 n.2, 53 L. Ed. 2d 557, 97 S. Ct. 2490 (1977)). In addition, plaintiffs must be given every favorable inference that may be drawn from their allegations of fact. Scheuer v. Rhodes, 416 U.S. 232, 236, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). "However, the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Communications Corp., 305 U.S. App. D.C. 60, 16 F.3d 1271, 1276 (D.C. Cir. 1994); see also Haynesworth v. Miller, 261 U.S. App. D.C. 66, 820 F.2d 1245, 1254 (D.C. Cir. 1987). Dismissal is only appropriate if it appears beyond doubt that no set of facts proffered in support of plaintiffs' claims would entitle them to relief. Haynesworth, 820 F.2d at 1254 (citations omitted); Phillips, 591 F.2d at 968.

 Plaintiffs' RICO claims against BCBSA must be dismissed, pursuant to the opinion of the United States Court of Appeals for the District of Columbia Circuit in Danielsen v. Burnside-Ott Aviation Training Ctr., 291 U.S. App. D.C. 303, 941 F.2d 1220 (D.C. Cir. 1991). The Danielsen court held that several RICO plaintiffs' claims against their government-contractor employer were subsumed by the statutory remedies offered under the Service Contract Act, 41 U.S.C. § 351 et seq. Although the governing statute in this case is different, the underlying principles are the same, and the claims cannot stand. Plaintiffs' breach of contract claim against BCBSA and the OPM must also be dismissed, because this claim likewise is nullified by the administrative remedies provided in the FEHBA. Plaintiffs' breach of fiduciary duty claim against both defendants must also be dismissed, because neither BCBSA nor the OPM has a cognizable fiduciary duty toward plaintiffs.

 Plaintiffs' claim for a declaratory judgment will be dismissed by consent, because such a claim is properly brought as part of plaintiffs' prayer for relief, not as a separate cause of action. Finally, Count VI, plaintiffs' claim against the OPM for breach of its "statutory duties," will not be dismissed. However, Count VI, which the Court treats as an Administrative Procedure Act ("APA") claim challenging the OPM's oversight of BCBSA, will be stayed pending completion of the OPM's review of carrier practices regarding coinsurance paid for services rendered by physicians.

 A. Plaintiffs' RICO Claims

 Plaintiffs allege in Count I of their second amended complaint that BCBSA violated RICO through the "use or investment" of racketeering income in its enterprise -- that is, that BCBSA invested money derived from acts of racketeering back into BCBSA. *fn4" Plaintiffs allege in Count II that BCBSA also violated RICO by participating in the conduct of its affairs "through a pattern of racketeering activity." *fn5" Counts I and II must be dismissed. The FEHBA leaves no room for a remedy under RICO; the broad enforcement and oversight powers of the OPM established in the statute indicate that the exclusive remedy for an action cognizable under the FEHBA lies under the FEHBA, not under another federal statute. In addition, even if the Court could somehow allow plaintiffs' RICO claims to proceed in the face of direct precedent to the contrary, plaintiffs' claim in Count I that BCBSA violated 18 U.S.C. § 1962(a) would also be dismissed because plaintiffs have failed to allege that they were injured by BCBSA's alleged "use or investment" of racketeering income in their enterprise.

 
1. FEHBA sets forth an exclusive enforcement mechanism, and Congress did not intend that remedy to be supplemented by RICO actions.

 In Danielsen v. Burnside-Ott Aviation Training Ctr., several employees of Navy aircraft maintenance contractors brought suit against their employers, alleging four separate counts of RICO violations and a common-law fraud claim. 941 F.2d at 1222. The Danielsen plaintiffs alleged that the defendant contractors had entered into contracts with the government using improper wage classifications and had repeatedly used the mails to further the contracts (thus committing, in the plaintiffs' view, mail fraud). Under the Service Contract Act ("SCA"), government service contracts and bid specifications must contain, among other things, "a provision specifying the minimum monetary wages to be paid the various classes of service employees." 41 U.S.C. § 351(a)(1). The SCA vests the Secretary of Labor with the responsibility to make a determination of the applicable minimum wages based on prevailing rates in the area in which the service contract is to be performed. See Danielsen, 941 F.2d at 1223. Pursuant to that grant of authority, the Secretary of Labor promulgated an extensive series of regulations governing the wage determination process, including procedures for enforcement and review. Id.

 Plaintiffs in Danielsen challenged defendants' classification of their job positions, arguing that they should have been classified as "aircraft workers," not "technicians," and that they should have been paid a higher wage as a result of the misclassifications. Their RICO action was based on these misclassifications. The Court of Appeals affirmed the district court's dismissal of plaintiffs' RICO claims, holding that a "private civil action, even couched in RICO terms, will not lie for an alleged breach of the SCA." *fn6"

 The Court of Appeals in Danielsen drew from the opinion of the Ninth Circuit in Miscellaneous Service Workers v. Philco-Ford Corp., 661 F.2d 776 (9th Cir. 1981), which also addressed the availability of a private civil action against a government contractor arising from violations of the SCA. The Danielsen court and the Ninth Circuit, in turn, used the standards set out in Cort v. Ash, 422 U.S. 66, 95 S. Ct. 2080, 45 L. Ed. 2d 26 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.