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Roche v. Liberty Mutual Managed Care

September 23, 2008


The opinion of the court was delivered by: J. Phil Gilbert District Judge


This matter comes before the Court on Defendant's Motion to Dismiss (Doc. 33) to which Plaintiff has responded (Doc. 38) and Defendant has replied (Doc. 44). Also before the Court is Defendant's Motion to Stay Pursuant to the Colorado River Doctrine (Doc. 35) to which Plaintiff has responded (Doc. 39) and Defendant has Replied (Docs. 42 and 43).*fn1 For the following reasons, the Court DENIES Defendant's Motion to Stay and GRANTS Defendant's Motion to Dismiss.


Plaintiff Kathleen Roche is a licenced healthcare provider who signed a provider agreement with First Health Group Corp. (First Health), thereby becoming a provider with the First Health Preferred Provider Organization (PPO).*fn2 Defendant Liberty Group (Liberty) signed a payor agreement with First Health, thereby becoming a payor with the First Health PPO.*fn3

Liberty was not a party to the Provider Agreement. Roche was not a party to the Payor Agreement.

In 2003, Roche treated a patient, who was a covered claimant under a Liberty insurance policy, at her offices in St. Clair County, Illinois. The claimant sustained injuries in a covered occurrence, and was entitled to have Liberty pay for her medical services. However, the claimant was not covered under a Preferred Provider or Exclusive Provider insurance plan. In fact, Liberty had never even established a Preferred Provider or Exclusive Provider program for its claimants or beneficiaries. Accordingly, neither Liberty nor First Health referred the patient to use Roche's services. They did nothing to steer or direct the patient in any way to Roche, nor did they make any attempt to discover if Roche was a PPO provider before Roche provided her services to the patient.

Roche submitted a bill for her usual and customary charges to Liberty. Liberty then submitted the bill to First Health for review. Upon determining that Roche was a First Health PPO provider, Liberty tendered payment to Roche at the PPO discounted rate for the services provided, along with an explanation of reimbursement form (EOR). The EOR represented that the claim had been reimbursed pursuant to the First Health Network and stated, "This preferred provider has agreed to reduce this charge below fee schedule or usual and customary charges for your business." It also explained "This bill was reviewed in accordance with your contract with First Health." Roche contends that Liberty was not entitled to take the PPO discount and is liable to her for the difference between her usual and customary rate and the PPO rate Liberty paid. Roche advances the alternate theories of breach of contract, unjust enrichment, and violation of the Illinois Consumer Fraud Act.


For purposes of a motion to dismiss, the court must accept all factual allegations in the complaint as true and draw all reasonable inferences from those facts in favor of the plaintiff. Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (per curiam ) (quoting Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007)); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.2007). The federal system of notice pleading requires only that the plaintiff provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). In order to provide fair notice of the grounds for his claim, the plaintiff must allege sufficient facts "to raise a right to relief above the speculative level." Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir.2007)(quoting Twombly, 127 S.Ct. at 1965 (2007)) (internal quotations omitted).

The complaint must offer "more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly, 127 S.Ct. at 1965. Moreover, the Court is "not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim."

R.J.R. Services Inc. v. Aetna Casualty and Surety Co., 895 F.2d 279, 281 (7th Cir.1989). However, "when a complaint adequately states a claim, it may not be dismissed based on a district court's assessment that the plaintiff will fail to find evidentiary support for his allegations or prove his claim to the satisfaction of the factfinder." Twombly, 127 S.Ct. at 1969 n.8.

I. Breach of Contract Claim

Liberty contends that Roche has failed to state a claim for breach of contract because she can point to no contractual duty owed her by Liberty. "In Illinois, in order to plead a cause of action for breach of contract, a plaintiff must allege: (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages." TAS Distributing Co., Inc. v. Cummins Engine Co., Inc., 491 F.3d 625, 631 (7th Cir. 2007). Only a duty imposed by the terms of a contract can give rise to a breach. Id. Roche concedes that she has no direct contract with Liberty, but urges the Court to read the Payor Agreement and the Provider Agreement as one instrument. Therefore, Roche contends, Liberty can be held liable to Roche for breaching the terms of either the Provider Agreement or the Payor Agreement.

Under Illinois law, "different instruments executed by the same parties, at the same time, for the same purpose, and in the course of the same transaction, are regarded as one instrument and will be read and construed together." Illinois Housing Development Authority v. LaSalle Nat'l Bank, 478 N.E. 2d 772, 775 (Ill. App. Ct. 1995) (citing Thread & Gage Co. v. Kucinski, 451 N.E.2d 1292 (Ill. App. Ct. 1983)). However, "two agreements executed by different parties cannot be regarded as one instrument." Id.; Susmano v. Associated Internists ...

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