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Roche v. Zenith Insurance Co.

March 12, 2009

KATHLEEN ROCHE, D.C., INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, D/B/A BACK DOCTORS CHIROPRACTIC, PLAINTIFF,
v.
ZENITH INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Reagan, District Judge

MEMORANDUM AND ORDER

A. Introduction

On July 11, 2007, Roche filed this putative class action in the Central District of California (Doc. 2). On December 7, 2007, that court granted Roche's motion to transfer the case to the Southern District of Illinois (Doc. 38). On March 21, 2008, Roche filed an amended complaint alleging breach of contract (Count 1), unjust enrichment (Count 2), and violations of the Illinois Consumer Fraud and Deceptive Businesses Act (Count 3) (Doc. 60).

On April 14, 2008, Zenith Insurance Company filed a motion to dismiss under FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6) (Doc. 63). Having fully considered the parties' filings, the Court hereby GRANTS IN PART AND DENIES IN PART the motion dismiss.

B. Legal Standards Governing a Motion to Dismiss

Dismissal is warranted under Rule 12(b)(6) of the FEDERAL RULES OF CIVIL PROCEDURE if the complaint fails to set forth "enough facts to state a claim to relief that is plausible on its face."Bell Atlantic Corp. v. Twombly, --U.S.--, 127 S.Ct. 1955, 1965 (2007); EEOC v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007).

Stated another way, the question in a Rule 12(b)(6) motion is whether the complaint gives the defendant fair notice of what the suit is about and the grounds on which the suit rests. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002); Mosely v. Board of Education of City of Chicago, 434 F.3d 527, 533 (7th Cir. 2006). Additionally, although federal complaints need only plead claims, not facts, the pleading regime created by Bell Atlantic requires the complaint to allege a plausible theory of liability against the defendant. Sheridan v. Marathon Petroleum Co., LLC, 530 F.3d 590, 596 (7th Cir. 2008); see also Limestone Dev. Corp. v. Village of Lemont, Ill.,520 F.3d 797, 803-04 (7th Cir. 2008).

In Tamayo v. Blagojevich, the Seventh Circuit emphasized that even though Bell Atlantic "retooled federal pleading standards" and "retired the oft-quoted Conley formulation," notice pleading is still all that is required. 526 F.3d 1074, 1083 (7th Cir. 2008). "A plaintiff still must provide only enough detail to give the defendant fair notice of what the claim is and the grounds upon which it rests and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief." Id.; Accord Pugh v. Tribune Co., 521 F.3d 686, 699 (7th Cir. 2008) ("surviving a Rule 12(b)(6) motion requires more than labels and conclusions"; the allegations "must be enough to raise a right to relief above the speculative level").

In making this assessment, the District Court accepts as true all well-pled factual allegations and draws all reasonable inferences in plaintiff's favor. Tricontinental Industries, Inc., Ltd. v. PriceWaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir.), cert. denied, 128 S.Ct. 357 (2007); Marshall v. Knight, 445 F.3d 965, 969 (7th Cir. 2006); Corcoran v. Chicago Park District, 875 F.2d 609, 611 (7th Cir. 1989).

C. Factual Background

Roche is a chiropractor in Illinois. In 1999, she entered an agreement with First Health to become a preferred provider in its preferred provider organization (PPO) network (Doc. 60-3, Exh. 2). Roche alleges that the gist of the PPO agreement is that First Health will contract with payors, the payors will direct patients to the preferred providers in the network, and the preferred providers, will accept reimbursement rates below the usual and customary charges for medical care. The benefit to Roche and other preferred providers is that they receive a higher volume of patients due to these referrals.

Zenith is a workers' compensation carrier, which insures employers with respect to injured workers' claims. Zenith is in fact one of First Health's payors, having entered a separate Payor Agreement with First Health in 2004 (Sealed Doc. 61). In exchange for access to discounted rates via First Health's PPO network, Zenith agreed to compensate First Health by paying it a percentage of Zenith's savings. Roche also claims that the agreement obligated Zenith to encourage its claimants to use First Health's preferred providers. Though Zenith took discounts from those in First Health's PPO network, however, Zenith failed to establish any programs directing its covered claimants to Roche and other Illinois preferred providers.

In early 2007, Zenith submitted payment to Roche for one of its claimants but took a $160.63 discount (See Doc. 60-2, Exh. 1). In doing so, Zenith stated on its explanation of payment (EOP) form: "A PREFERRED PROVIDER DISCOUNT HAS BEEN TAKEN ON YOUR BILL IN ACCORDANCE WITH YOUR FIRST HEALTH CONTRACT." However, Zenith took no steps whatsoever to encourage its claimants to use Roche's services, nor those of any other preferred provider in Illinois. Roche refers to Zenith's use of First Health's discount without fulfilling its obligation to encourage clients to use preferred providers as a "silent PPO scheme."

D. Analysis

1. Breach of Contract Claim

a. Whether the Provider and Payor Agreements Constitute a Unified Contract

Roche first claims that Zenith's actions constitute a breach of contract. The general theory as stated in the complaint is that Roche's Provider Agreement with First Health and Zenith's Payor Agreement with First Health constitute a unified contract requiring Zenith to take steps to encourage its claimants to use providers in the First Health PPO network in exchange for discounts. Zenith argues that these are separate agreements, and that there is no privity of ...


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