United States District Court, W.D. Arkansas, Fayetteville Division
CHRISTOPHER CODY LITTLETON, on behalf of himself and all others similarly situated, Plaintiff.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
MEMORANDUM OPINION AND ORDER
TIMOTHY L. BROOKS, District Judge.
On November 12, 2014, the parties appeared before the Court for a hearing on Defendant State Farm Mutual Automobile Insurance Company's ("State Farm") Motion for Summary Judgment (Doc. 26), and Plaintiff Christopher Cody Littleton's Motion for Partial Summary Judgment (Doc. 32) and Motion to Certify Class (Doc. 45). The Court entertained oral argument and DENIED all three Motions from the bench.
The following Order sets forth the Court's reasoning in support of its rulings, beginning with the parties' cross-motions for summary judgment (Docs. 26, 32), followed by Plaintiff's request for class certification (Doc. 45), and concluding with a discussion regarding the basis for the Court's continuing jurisdiction over Plaintiff's individual claims. To the extent this Order conflicts with statements or rulings issued from the bench, this Order will control.
This class action Complaint was first filed in the Circuit Court of Washington County, Arkansas, on December 10, 2013. According to the Complaint, Plaintiff Littleton was injured in a car accident and relied on State Farm, his automobile insurer, to reimburse his medical care providers for medical costs incurred, up to the $5, 000 med-pay coverage limit included in Littleton's policy ("the Policy"). Littleton alleges that State Farm failed to pay the total billed amounts, and as a result, Littleton still owes money to his medical care providers even though he did not exhaust his Policy's coverage limit. Littleton claims that State Farm paid reduced rates by improperly tapping into so-called "PPO network reductions, " which, in Littleton's view, were negotiated by doctors and third-party "repricers" on behalf of health insurance providers-not on behalf of auto insurance providers like State Farm.
Littleton now argues that because State Farm was not entitled to in-network reductions, he and other similarly-situated insureds of State Farm remain personally liable to their medical providers for the difference between the bills they actually incurred and the reduced amounts State Farm paid, even though their insurance coverage limits were not exhausted. He alleges that in paying reduced rates for medical services, State Farm breached the terms of the Policy. Littleton also demands declaratory and injunctive relief regarding State Farm's practice of improperly tapping into in-network reductions.
In response, State Farm maintains that it is legally entitled to access in-network rates in the same manner as health insurance providers. Further, State Farm believes this practice actually benefits its insureds by lowering their total medical bills and leaving them with more med-pay dollars available for future medical care. State Farm disputes that Littleton or any other insured has suffered an injury-in-fact as a result of State Farm's practice of accessing in-network reduced rates; indeed, counsel for both parties have highlighted in their briefing and in response to the Court's questioning during the November 14th hearing that a material dispute of fact currently exists as to whether Littleton owed money to either of his two medical care providers-Washington Regional Medical Center ("WRMC") and Blair Masters, a chiropractor-at the time the instant lawsuit was filed.
Littleton admits he signed agreements authorizing WRMC and Masters to collect medical payments on his behalf directly from State Farm. After State Farm received Littleton's bills, they forwarded them to a "repricing" company known as Mitchell, International, which in turn reviewed the bills and recommended that State Farm pay discounted in-network PPO rates for the medical services provided. The basis for State Farm's claim to these discounted rates stems from two contracts: first, a contract between WRMC and USA Managed Care Organization ("USA MCO"); and second, a contract between Masters and Integrated Health Plan, Inc. ("IHP"). State Farm did not enter into a contract directly with WRMC or Masters and was not a signatory either to the WRMC/USA MCO contract or the Masters/IHP contract. Instead, State Farm contracted with a third party called Cofinity, Inc. ("Cofinity"), which in turn entered into agreements with USA MCO and IHP on behalf of State Farm.
It appears that at some point, USA MCO sent letters to its health care provider partners informing them that State Farm would begin accessing the USA MCO reduced-rate network ordinarily accessed by health insurance providers. According to the sample letter provided by State Farm, USA MCO informed its health care providers that they were to accept State Farm's "network discount fee [as] payment in full for services rendered." (Doc. 26-13). Similarly, IHP sent letters to its health care providers under contract, informing them that State Farm would be accessing in-network rates. The IHP letter stated, "[p]lease let your billing staff, or outside billing service know of this relationship." (Doc. 26-12).
Based on these letters, as well as State Farm's direct contract with Cofinity, Inc., it is State Farm's position that it was entitled to access the reduced-rate network and pay reduced rates for medical services billed to its insureds, including WRMC and Masters. State Farm also maintains that WRMC and Masters accepted these discounted rates, cashed State Farm's checks, and released all medical liens related to Littleton's care.
Littleton counters that Masters does not agree now, nor did he agree at the time the Complaint was filed, that Littleton's medical bills were paid in full by State Farm. An employee of Masters named Carmen Ivy submitted conflicting affidavits on two different occasions during the course of this lawsuit. (Docs. 26-4, 34-2). On April 14, 2014, after the lawsuit was filed, she indicated "[t]he amount paid [by State Farm] constitutes payment in full." (Doc. 26-4). However, as of May 20, 2014, she reversed her position and stated in a second affidavit that as of February 26, 2013, prior to the filing of the lawsuit, there was, in fact, a balance due on the account of $202.50, and Masters' office "never agreed to take reductions from any med pay carriers including State Farm." (Doc. 34-2).
As for Littleton's debt to WRMC, State Farm submits the affidavit of WRMC's manager of collections, Susan Spaeth, in which she affirms on behalf of WRMC that the medical lien pertaining to Littleton was released on October 29, 2012, before the Complaint was filed. Further, Ms. Spaeth agrees in her affidavit that WRMC accepted the reduced rate on medical bills paid by State Farm, and that Littleton currently owes nothing on his bill to WRMC. (Doc. 26-3).
The Court is now faced with the task of ruling on cross-motions for summary judgment. State Farm's Motion asserts the following three arguments: (1) the case should be dismissed because Littleton has suffered no injury-in-fact and therefore lacks standing to pursue this action because his medical providers accepted State Farm's reduced rates as payment in full; (2) even if it were determined that Littleton owed money to one of his medical providers, Littleton is not the real party in interest because he "assigned away any and all rights to payment of med-pay benefits under the Policy to his medical providers" (Doc. 26, p. 2); and (3) State Farm's payment of benefits comported with its own Policy and with Arkansas law, so Littleton's medical providers are contractually obligated to accept reduced rates as payment in full.
Littleton's Motion for Partial Summary Judgment argues that it was illegal as a matter of law for State Farm to tap into discounted in-network rates because: (1) State Farm did not enter into a contract with Littleton's medical providers for discounted rates, so there was no "agreement" as to these rates; (2) State Farm failed to provide Littleton with a subscriber identification card as required by Ark. Code Ann. § 23-63-113(c), which is a prerequisite for accessing in-network rates; (3) State Farm failed to provide WRMC and Masters with "annual notice" of access to discounted rates as required of health insurance providers by Ark. Code Ann. § 23-63-113(b)(2); (4) State Farm failed to obtain specific authorization to access reduced rates as required by Ark. Code Ann. § 23-63-113(b)(1); (5) State Farm failed to provide any consideration to the medical providers in exchange for the benefit of accessing the reduced-rate network; and (6) State Farm failed to remit timely "full" payment of Littleton's medical bills within 30 days in compliance with Ark. Code Ann. § 23-89-208.
In addition to the cross-motions for summary judgment, the Court must also consider whether to certify a class of individuals defined as follows:
Residents of the State of Arkansas who, during the Class Period of January 1, 2008, through the date of resolution of this action;
(a) have, had, or were covered under a contract of automobile insurance (the "Policy") with State Farm that includes or included "med pay" coverage;
(b) submitted a claim to State Farm for payment of medical bills under the Policy's med-pay coverage;
(c) had State Farm pay a lesser amount on a billed item than what was submitted based on a PPO Discount Rate applied under reason code 340, 352, 509, 513, 518, 550, 578, 614, 652, 705, 707, 711, 713, 715, 717, 719, 723, and/or 731; and
(d) were paid and/or their medical providers were paid by State Farm a total, combined amount less than the Policy's med-pay policy limit.
(Doc. 46, p. 21).
As the issues to be considered in the context of the cross-motions for summary judgment will impact class certification, the Court will begin its analysis by determining whether any of the claims at issue may be disposed of as a ...