Opinion
No. X06 CV 05 4010357 S
July 17, 2007
MEMORANDUM OF DECISION ON DEFENDANTS' MOTION TO STRIKE THE REVISED FIRST AMENDED CLASS ACTION COMPLAINT (#121)
SUMMARY OF DECISION
This is an action instituted by four doctors, Dr. Donald Austrian, Dr. Francis Garofalo, Dr. Kenneth Miller and Dr. Evangelos Xistris. The four defendants are: United HealthCare Insurance Company, UnitedHealth Group, Inc., Oxford Health Plans (CT), Inc., and Oxford Health Insurance, Inc. The plaintiffs assert claims against all the defendants under the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq., ("CUTPA"); the Connecticut Unfair Insurance Practices Act, § 38a-815 and § 38-816(4); tying in violation of Connecticut Antitrust Act, General Statutes § 36-26; and boycott in violation of the Connecticut Antitrust Act, General Statutes § 35-28(d). Against the defendant United HealthCare Insurance Company, the plaintiffs also claim breach of contract and violation of the implied duty of good faith and fair dealing. The plaintiffs also seek a declaratory judgment that United HealthCare Insurance Company, Oxford Health Plans (CT), Inc., and Oxford Health Insurance, Inc. are required to keep their approval offices open 24 hours a day, seven days a week, and that these defendants must endeavor to reduce hold times on their approval lines to a maximum of ten minutes.
On the defendants' motion to strike all the counts of the complaint, the court rules as follows:
The motion to strike is denied as to plaintiffs' claims against the defendants United HealthCare Insurance Company, Oxford Health Plans (CT), Inc., and Oxford Health Insurance, Inc., for violation of CUTPA (Second Count and Third Count).
The motion to strike is denied as to plaintiffs' claims against the defendant United HealthCare Insurance Company for breach of the implied duty of good faith and fair dealing (Fifteenth Count).
The motion to strike is granted as to counts one and counts four though fourteen.
STATEMENT OF THE CASE
The named plaintiffs in this proposed class action are four doctors who are licensed to practice medicine in Connecticut and who contract as participating providers with the defendant United HealthCare Insurance Company (UHC), a Connecticut corporation with its principal place of business in Hartford, Connecticut. Under the contract, UHC reimburses the plaintiffs for services rendered in accordance with a contracted fee schedule. The other defendants are as follows: UnitedHealth Group, Inc. ("UHG"), a corporation established under the laws of Minnesota, with its principal place of business in Minnetonka, Minnesota; Oxford Health Plans (CT), Inc., a Connecticut corporation with its principal place of business in Trumbull, Connecticut; and Oxford Health Insurance, Inc., a New York corporation also with its principal place of business in Trumbull, Connecticut. (In this opinion, as in the complaint, Oxford Health Plans (CT), Inc. and Oxford Health Insurance, Inc. will be referred to jointly as "Oxford"). The gravamen of the plaintiffs' fifteen-count complaint is that in order to continue their participation in UHC's provider network, UHC also is requiring the plaintiffs to participate in Oxford's health plans.
Dr. Donald Austrian specializes in internal medicine and is affiliated with Bridgeport Hospital; Dr. Francis Garofalo is a urologist who, at the time the complaint was initiated in 2005, was affiliated with Norwalk Hospital, but has since moved out-of-state; Dr. Kenneth Miller is a rheumatologist affiliated with Danbury, New Milford and Putnam Hospitals; and Dr. Evangelos Xistris is a neurologist affiliated with Stamford Hospital.
According to the complaint and its attachments, UHG is the ultimate parent corporation of UHC. In July 2004, UHG acquired control of Oxford through "merger, acquisition and/or affiliation," and thereafter, UHC and Oxford existed as subsidiaries of the same parent company. Complaint ¶ 16. Generally, UHC and Oxford have continued to operate as separate insurance companies, maintaining their own branded health plans, claims processing procedures and fee schedules. In 2005, providers for UHC and Oxford were informed by either UHC or Oxford that despite the fact UHC and Oxford would continue to operate as separate companies, their provider contracts would be amended so that physicians would now have to become an Oxford provider if they were solely a UHC provider and vice versa. Complaint ¶ 24. According to the amendment, its purpose was that "United and Oxford now wish to integrate their physician networks."
Practice Book § 10-29(a) permits the plaintiff to make any document a part of the complaint as fully as if it had been set out at length, and the court can consider such document(s) as part of the complaint on a motion to strike. Tracy v. New Milford Public Schools, 101 Conn.App. 560, 566 (2007).
The exact corporate relationships of the defendants are actually more involved. According to the complaint, the defendant UHC is a subsidiary of UHIC Holdings, Inc. UHIC Holdings, Inc. is a subsidiary of United HealthCare Services, Inc., which in turn is a subsidiary of the defendant UHG.
The defendant Oxford Health Plans (CT), Inc., is a subsidiary of Oxford Health Plans, LLC, which in turn is a subsidiary of the defendant UHG. The defendant Oxford Health Insurance, Inc., is a subsidiary of Oxford Health Plans (NY), Inc., which in turn is a subsidiary of Oxford Health Plans, LLC. As previously stated, Oxford Health Plans, LLC is a subsidiary of the defendant UHG.
According to the complaint, this requirement being imposed on the plaintiffs is known in the health care industry as an "all products" clause, whereby an insurer requires that a physician accept all of its offered coverage plans, not just the preferred plan. This clause was imposed upon the providers in a nonnegotiable, "take-it or leave-it" fashion, and evidences the "uneven playing field in bargaining power between individual physicians and the large insurance companies, which every day deteriorates more of the doctor-patient relationship." Complaint ¶ 25.
The complaint alleges the following about the "all products" clause: "Requiring physicians to accept inferior plans imposing inadequate reimbursement rates, unreasonable risk, limited coverage, burdensome administrative requirements, limited drug formularies and other inappropriate incentives forces those physicians into a situation where they cannot opt-out of the plans for financial reasons, and places them in a position where they cannot provide a reasonable level of care due to the restrictions of the inferior plan. Moreover, when the physician's agreement with one plan is cancelled solely due to his or her refusal to participate in other plans, that physician incurs a great financial burden and is prevented from continuing to furnish medical care to his or her current patients, who are thus deprived of access to and continuity of medical care." Complaint ¶ 26.
The complaint describes the named plaintiffs' history with Oxford. Plaintiff Austrian was an Oxford provider for approximately four years before he terminated his contract with Oxford due to the related high administrative costs and low fee schedule. He has been a UHC participating provider for more than five years, and approximately 26% of his practice is composed of UHC insureds. He informed UHC in June 2005 that he would not agree to become a provider for both Oxford and UHC. According to the complaint, UHC responded that it would terminate his participating provider agreement effective July 6, 2005. The complaint further alleges that UHC sent notice of his termination to plaintiff Austrian's patients, "giving them less than one month to find a new participating provider and failing to inform them that they could continue to receive treatment from Dr. Austrian on an out-of-network basis." Complaint, ¶ 31. The plaintiff Austrian claims that due to the all products clause, he "stands to lose more than one quarter of his patient base." Complaint, ¶ 32.
The language of the complaint makes it unclear whether Austrian's contract with UHC continued or was actually terminated.
A copy of a letter such as described here is attached to the complaint at Exhibit E.
Plaintiff Garofalo also participated in the Oxford plan until 2003, when he terminated his contract with Oxford due to the related high administrative costs and low fee schedule. Prior to his moving to Utah, 12% of his practice involved treating UHC insureds. The complaint alleges that when plaintiff Garofalo received Oxford's letter informing him of the all products clause, and he learned that the acceptance of the all products clause was not negotiable, and considering his expectation that "as a direct result of being coerced to rejoin Oxford, he would devote less time to individual patients, making less money and working harder . . . he decided to stop practicing medicine in . . . Connecticut and to relocate to Utah . . ." Complaint, ¶ 36.
The complaint states that approximately 11% of plaintiff Miller's practice is comprised of UHC insureds; that he was an Oxford participating provider until "in or around" 2002, when he terminated his contract with Oxford as a result of the high administrative costs and low fee schedule; and upon receiving notification of the all products clause at issue, he attempted to negotiate with UHC, and was informed that he would have to agree to accept a decrease in his reimbursements from UHC if he expected Oxford to increase its fee schedule. Plaintiff Miller claims that he could not agree to such a condition and consequently rejoined Oxford "at the lower fee schedule." The complaint alleges that plaintiff Miller will be directly affected by his coerced acceptance of the all products clause by the threat of losing 11% of his patient base comprising UHC insureds, increased patient load and administrative burdens, less time with individual patients, working harder for less money, and not being able to afford additional staff as a result of Oxford's lower fee schedule.
Plaintiff Xistris is both a UHC participating provider (33% of his practice) and a participating provider with Oxford (10% of his practice). Prior to receiving notification of the provider agreement amendment at issue, plaintiff Xistris intended to terminate his contract with Oxford because of the related high administrative costs and low fee schedule. Plaintiff Xistris alleges that Oxford's fee schedule reimburses him in amounts lower than Medicare, "to the point where it often costs [him] more to bill Oxford than the payments he ultimately receives." Complaint, ¶ 42. He further alleges that Oxford's approvals office is closed on weekends, and so weekend emergency procedures are performed without approval, and this plaintiff often is denied reimbursement by Oxford for emergency procedures performed on weekends. As a result of his coerced acceptance of the all products clause, plaintiff Xistris claims that he will have to work harder for less money, and his patients will be deprived of continuity of care.
The plaintiffs assert the following claims against UHG: violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA) (first count); violation of the Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 and § 38-816(4) (fourth count); and violation of the Connecticut Antitrust Act based on tying, General Statutes § 35-26 (seventh count) and on boycott, General Statutes § 35-28(d) (tenth count). The plaintiffs assert claims against UHC for violation of CUTPA (second count) and CUIPA (fifth count), tying (eighth count) and boycott (eleventh count), breach of contract (fourteenth count) and breach of implied contract of good faith and fair dealing (fifteenth count). They assert claims against Oxford for violation of CUTPA (third count) and CUIPA (sixth count), tying (ninth count) and boycott (twelfth count). The plaintiffs also seek a declaratory judgment ordering that UHC and Oxford be required to keep their approvals offices open 24 hours a day, seven days a week, and that UHC and Oxford endeavor to reduce hold times on their approval lines to a maximum of ten minutes (thirteenth count).
The defendants move to strike the complaint in its entirety. The plaintiffs oppose the motion to strike.
DISCUSSION I
A motion to strike tests the legal sufficiency of a pleading. Practice Book § 10-39; Ferryman v. Groton, 212 Conn. 138, 142, 561 A.2d 432 (1989); Mingachos v. CBS, Inc., 196 Conn. 91, 108, 491 A.2d 368 (1985). "The purpose of a motion to strike is to contest the legal sufficiency of the allegations of any complaint to state a claim upon which relief can be granted. In ruling on a motion to strike, the court is limited to the facts alleged in the complaint. The court must construe the facts in the complaint most favorably to the plaintiff." (Citations and internal quotation marks omitted.) Novametrix Medical Systems v. BOC Group, Inc., 224 Conn. 210, 214, 618 A.2d 25 (1992). The trial court deciding a motion to strike must consider as true the well-pleaded facts, but not the legal conclusions, set forth in the complaint. Liljedahl Bros., Inc. v. Grigsby, 215 Conn. 345, 348, 576 A.2d 149 (1990); Blancato v. Feldspar Corp., 203 Conn. 34, 36, 522 A.2d 1235 (1987). The court should view the facts in a broad fashion, on one hand, to include facts that are necessarily implied by and fairly provable by the allegations, but on the other hand, to avoid enlarging the allegations of the complaint by assuming facts that are clearly not alleged. See Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997); Dennison v. Klotz, 12 Conn.App. 570, 577, 532 A.2d 1311 (1987).II Motion to Strike All Counts Against UHG
As previously stated, four statutory claims are asserted against UHG based on CUTPA, CUIPA, and antitrust tying and boycott. UHG has moved to strike all of these claims on the ground that the claims are unsupported by any facts. UHG contends that the plaintiffs have alleged a corporate relationship between it and the other corporate defendants, UHC and Oxford, but the plaintiffs have failed to allege any relationship between themselves and UHG that would support holding UHG independently liable for any of the statutory actions asserted against it. UHG insists that linking it to its subsidiaries' alleged activities on the basis of nothing more than general assertions arising from its parental status is insufficient as a matter of law. In response, the plaintiffs contend that they have sufficiently alleged that UHG is a participant in the challenged scheme, together with UHC and Oxford, and is accountable as an actor. The court agrees with UHG.
The law is established that the corporate veil may be pierced when facts show that the corporation is a mere shell and operates without corporate formalities for the benefit of the controlling shareholder. See, e.g., Toshiba America Med. Sys. v. Mobile Med. Sys., 53 Conn.App. 484, 730 A.2d 1219 (1999). However, the plaintiffs admit that they are not seeking to impose liability on UHG by piercing the corporate veil or through any form of "vicarious liability." Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Strike, 6 and 10. Additionally, the plaintiffs have not sued UHG for breach of any express or implied contract. The plaintiffs admitted during oral argument that they have no breach of contract claim against UHG. Furthermore, the plaintiffs deny that they are alleging any "intracorporate" conspiracy. Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Strike, 11; cf. Harp v. King, 266 Conn. 747, 853 A.2d 953 (2003) (under the intra-corporate conspiracy doctrine, employees of a corporation cannot conspire with the corporation itself).
The complaint alleges that UHG is the ultimate parent company of UHC and Oxford, acquiring control of Oxford in a corporate acquisition/merger. UHG has an economic interest in the products that UHC and Oxford sell; and UHG is the corporate link between UHC and Oxford, providing the business relationship between UHC and Oxford. Complaint, ¶¶ 19-20. On the basis of these allegations, the plaintiffs generally aver that UHG "materially aids and assists in the scheme, combination, conspiracy and agreement" that the plaintiffs are challenging. Complaint, ¶ 20. However, this statement that UHG "materially" assists the alleged wrongful conduct is nothing more than an unspecific, conclusory assertion. The complaint fails to describe any facts indicating how UHG is materially assisting any scheme and how such acts provide the elements to support any cause of action against UHG. Reading these allegations broadly in favor of the plaintiffs, it appears that this "material" aid that UHG is providing simply emanates from its status as being the parent or "corporate link" between UHC and Oxford. This "link" gives UHG an "economic interest" in the products of its subsidiaries and generates "revenue" flowing to UHG. Complaint, ¶¶ 18-21. These allegations, in effect, merely describe the nature of the parent-subsidiary relationship that UHG has with its subsidiaries, UHC and Oxford.
As a matter of established corporate law, such allegations alone are insufficient to assert a cause of action against a parent corporation for the acts of its subsidiaries. The Connecticut Supreme Court recognizes the "fundamental principle of corporate law that the parent corporation and its subsidiary are treated as separate and distinct legal persons even though the parent owns all the shares of the subsidiary and the two enterprises have identical directors and officers. Such control, after all, is no more than a normal consequence of controlling share ownership." (Citations omitted; internal quotation marks omitted.) SFA Folio Collections, Inc. v. Bannon, 217 Conn. 220, 232, 585 A.2d 666, cert. denied, 501 U.S. 1223, 111 S.Ct. 2839, 115 L.Ed.2d 1008 (1991). Similarly, the United States Supreme Court expressed this principle in United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998). In Bestfoods, the plaintiff sought to impose liability on the parent company for pollution by the subsidiary. The court ruled that absent direct participation by the parent corporation in the pollution, or facts that would meet common law standards for piercing the corporate veil, the parent is not liable for the alleged deeds if it has not actually operated or participated in the operation of its subsidiary's facility.
In short, the plaintiffs have neither articulated any specific acts committed against them by UHG itself nor described in any particularized way how UHG participated in the contested conduct. The plaintiffs have alleged the interests that UHG, as a parent corporation, may have in the business activities of its subsidiaries or the control that this parent corporation may legitimately exercise over its subsidiaries. However, such allegations alone are insufficient to state a legally cognizable claim against UHG. As a matter of law, the existence of the control that a parent corporation may exercise over a subsidiary is insufficient to impose liability upon the parent for the acts of the subsidiary absent any other evidence to support the piercing of the corporate veil.
Therefore, for these reasons, the motion to strike counts one, four, seven and ten against UHG is granted. Alternatively, UHG also argues that these counts should be stricken because on their substantive merits they fail to state claims upon which relief may be granted. As discussed below, the court agrees with UHG's alternative arguments, except as to the CUTPA claim asserted in Count One.
III Motion to Strike Antitrust Counts A Antitrust Boycott Claims
In counts seven through twelve, the plaintiffs claim damages for violation of the Connecticut Antitrust Act, General Statutes §§ 35-26, 35-28. The legislative history of the Connecticut Antitrust Act establishes that it was intentionally patterned after the antitrust law of the federal government. Vacco v. Microsoft Corp., 260 Conn. 59, 72, CT Page 13109 793 A.2d 1048 (2002). In fact, the General Assembly amended the Connecticut Antitrust Act in 1992 to express its intent that the judiciary shall interpret the Connecticut Antitrust Act in accordance with the federal courts' interpretation of federal antitrust law. General Statutes § 35-44b ("[I]t is the intent of the General Assembly that in construing sections 35-24 to 35-46, inclusive, the courts of this state shall be guided by interpretations given by the federal courts to federal antitrust statutes.").
The tenth through twelfth counts of the complaint claim that UHG, UHC, and Oxford respectively engaged in a boycott in violation of the Connecticut Antitrust Act, General Statutes § 35-28. The anti-boycott provision of Section 35-28(d) is essentially a codification of what has been labeled a per se violation of § 1 of the Sherman Act. See Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959). "Section 1 of the Sherman Act . . . reaches unreasonable restraints of trade effected by a `contract, combination . . . or conspiracy' between separate entities. It does not reach conduct that is `wholly unilateral.'" Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731 (1984). "[A] plaintiff claiming a § 1 violation must first establish a combination or some form of concerted action between at least two legally distinct economic entities. Unilateral conduct on the part of a single person or enterprise falls outside the purview of this provision in the antitrust law." (Citation omitted.) Capital Imaging v. Mohawk Valley Medical Assoc., 996 F.2d 537, 542 (2nd Cir. 1993), cert denied, 510 U.S. 947, 114 S.Ct. 388, 126 L.Ed.2d 337 (1993).
The complaint alleges in pertinent part that the all products clause has exerted pressure on the plaintiffs and other physicians to accept Oxford through the threat of losing UHC patients, causing an unreasonable restraint of the freedom of physicians to choose which insurance plans they will participate in on the open market; and UHC and Oxford as affiliates and United as their parent have entered into a contract, combination, conspiracy or agreement to refuse to deal with UHC participating providers who do not agree to also become Oxford participating providers. The defendants move to strike the boycott claims on the grounds that a boycott violation requires that at least two, separate, unaffiliated corporations conspire and agree not to deal with a third, and the defendants, as affiliated companies, are legally incapable of conspiring with one another because under the antitrust laws they must be viewed as sharing unified business interests.
The plaintiffs, on the other hand, argue that UHC and Oxford attempted to merge their networks of participating provider physicians, not merge their businesses. Although the plaintiffs concede that UHG is the ultimate parent corporation of the defendants UHC and Oxford, this relationship is not accomplished directly, but is accomplished through UHG's control over intervening subsidiaries. See n. 3. As a result of this corporate structure, the plaintiffs contend that the affiliations of UHG, UHC, and Oxford are so distant and distinct that these companies must be viewed as being separate business entities, without having the unity of interest necessary to be treated as a single economic unit under antitrust law. The court is unpersuaded.
As previously indicated, in order to assert a boycott in violation of General Statutes § 35-28(d), the plaintiffs must allege concerted action between at least two legally distinct entities; a single entity is incapable of conspiring with itself. In Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 752, the Supreme Court rejected the intra-enterprise conspiracy doctrine and held that a corporation and its wholly owned subsidiary are legally incapable of conspiring with each other under § 1 of the Sherman Act.
The plaintiffs argue that Copperweld is distinguishable from the present case because of the corporate remoteness between UHG and its subsidiaries, UHC and Oxford, and because UHC and Oxford are sister corporations. The plaintiffs emphasize that the Supreme Court's decision in Copperweld was limited to conduct between a parent corporation and its wholly owned subsidiaries. Id., 767-68. The court rejects the plaintiffs' argument and finds that the factual distinction between this case and Copperweld relied on by the plaintiffs is without legal significance.
Whether affiliated companies owned or controlled by another should be viewed as a single economic entity for antitrust purposes turns less on the particular nature of the corporate structure, and more on whether the parent company's control over the subsidiaries or affiliates is such that the conglomerate must be viewed as an enterprise operating with singular, business interests or goals. Such a relationship is exactly what is alleged in the complaint. The complaint describes how UHG has structured its business operations so as to conduct "its business as a diversified health and well-being company through several operating divisions, including its Health Care Services business segment, of which UHC and Oxford are part." Complaint ¶ 18. As previously discussed, the complaint fails to describe any specific, independent acts committed by UHG individually against the plaintiffs, but complains about how UHG's control of UHC and Oxford has resulted in them committing the acts contested by the plaintiffs.
See generally, Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 772-73: "Antitrust liability should not depend on whether a corporate subunit is organized as an unincorporated division or a wholly owned subsidiary. A corporation has complete power to maintain a wholly owned subsidiary in either form. The economic, legal, or other considerations that lead corporate management to choose one structure over the other are not relevant to whether the enterprise's conduct seriously threatens competition. Rather, a corporation may adopt the subsidiary form of organization for valid management and related purposes. Separate incorporation may improve management, avoid special tax problems arising from multi-state operations, or serve other legitimate interests. Especially in view of the increasing complexity of corporate operations, a business enterprise should be free to structure itself in ways that serve efficiency of control, economy of operations, and other factors dictated by business judgment without increasing its exposure to antitrust liability."
See also, Chicago Prof. Sports v. Natl. Basketball Asso., 95 F.3d 593, 598 (7th Cir. 1996): " Copperweld does not hold that only conflict-free enterprises may be treated as single entities. Instead it asks why the antitrust laws distinguish between unilateral and concerted action, and then assigns a parent-subsidiary group to the `unilateral' side in light of those functions. Like a single firm, the parent-subsidiary combination cooperates internally to increase efficiency. Conduct that `deprives the marketplace of the independent centers of decision making that competition assumes' . . . without the efficiencies that come with integration inside a firm, go on the `concerted' side of the line." (Citations omitted; internal quotation marks omitted.)
The plaintiffs are correct that Copperweld involved actions between a parent and a wholly owned subsidiary, whereas this case involves, in part, the actions of two subsidiaries. Although this precise issue is one of first impression in Connecticut, the federal circuit courts addressing this or analogous issues indicate that Copperweld precludes a finding that two subsidiaries, wholly owned or ultimately controlled by a parent corporation, can conspire under § 1 of the Sherman Act. Advanced Health-Care Serv., Inc. v. Radford Community Hosp., 910 F.2d 139, 146 (4th Cir. 1990) ("we conclude that two subsidiaries of the same parent corporation are legally incapable of conspiring with one another for purposes of § 1 of the Sherman Act"); Odishelidze v. Aetna Life Casualty Co., 853 F.2d 21, 23 (1st Cir. 1988) ("[b]ecause unilateral action is not prohibited by § 1 of the Sherman Act . . . the actions of a parent corporation, its subsidiaries or sister corporations, and its employees cannot be considered concerted action."); Directory Sales Management Corp. v. Ohio Bell Tel. Co., 1833 F.2d 606, 611, (6th Cir. 1987) (" Copperweld precludes a finding that two wholly owned sibling corporations can combine" in violation of § 1 of the Sherman Act); Hood v. Tenneco Texas Life Ins. Co., 739 F.2d 1012, 1015 (5th Cir. 1984) (if two siblings cannot conspire with their parent in violation of § 1, they cannot conspire with each other); Century Oil Tool v. Production Specialties, 737 F.2d 1316, 1317 (5th Cir. 1984) (finding no relevant difference between a corporation wholly owned by another corporation and two corporations wholly owned by a third corporation); but see Tunis Bros. Co. v. Ford Motor Co., 763 F.2d 1482, 1495, n. 20 (3rd Cir. 1985), remanded on other grounds, 475 U.S. 1105, 106 S.Ct. 1509, 89 L.Ed.2d 909 (1986) (parent corporation could conspire with 79% owned subsidiary.) Interpreting General Statutes § 35-28 in a manner consistent with the weight of this federal authority, the activities of UHG, UHC, and Oxford as specifically alleged here do not provide the concerted action of legally distinct entities operating without unified business interests sufficient for the application of the anti-boycott provision of § 35-28(d).
The court appreciates that in today's modern climate of ever expanding corporate conglomerates, any broad unity of interest analysis may create a "gap" in state antitrust protection for anti-competitive, conspiratorial conduct. Two responses address this concern. First, any rigid or formalistic approach to this issue should be eschewed because antitrust liability is not invariably or stringently controlled by the corporate garb or structure of the defendants — "realities must dominate the judgment." Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 774. Moreover, this court, as the Supreme Court did in Copperweld, questions the true significance of any enforcement "gap" in light of other remedies under the state's antitrust and tort laws governing the anti-competitive conduct of individual actors. See, e.g., General Statutes § 35-27.
In regard to § 1 of the Sherman Act, the Supreme Court in Copperweld expressed the following on this issue: "Although we recognize that any "gap" the Sherman Act leaves [in the antitrust regulation of concerted activity] is the sensible result of a purposeful policy decision by Congress, we also note that the size of any such gap is open to serious question. Any anti-competitive activities of corporations and their wholly owned subsidiaries meriting antitrust remedies may be policed adequately without resort to an intra-enterprise conspiracy doctrine. A corporation's initial acquisition of control will always be subject to scrutiny under § 1 of the Sherman Act and § 7 of the Clayton Act, 15 U.S.C. § 18. Thereafter, the enterprise is fully subject to § 2 of the Sherman Act and § 5 of the Federal Trade Commission act, 15 U.S.C. § 45." Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 776-77.
General Statutes § 35-27 is patterned after § 2 of the Sherman Act. Shea v. First Fed. Savings Loan of New Haven, 184 Conn. 285, 304, 439 A.2d 997 (1981). The settled law is that "[t]he conduct of a single firm is governed by § 2 [of the Sherman Act] alone and is unlawful only when it threatens actual monopolization." Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 767. The plaintiffs have not made any claims under General Statutes § 35-27.
Thus, the motion to strike the tenth through twelfth counts is granted.
B Antitrust Tying Claims
The seventh, eighth and ninth counts of the complaint are asserted against UHG, UHC, and Oxford, respectively. These counts allege that the defendants are jointly and severally liable for engaging in anti-competitive tying in violation of the Connecticut Antitrust Act, General Statutes § 35-26. "[A] tying arrangement [is] an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier." Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). The practice is made illegal by Section 3 of the Clayton Act [ 15 U.S.C. § 14; Connecticut General Statutes § 35-29] if the product is a commodity, Tire Sales Corp. v. Cities Service Oil Corp., 410 F.Sup. 1222 (N.D.Ill. 1976); otherwise, it is a violation of Section 1 of the Sherman Act [ 15 U.S.C. § 1; Connecticut General Statutes § 35-26]. Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969)." Bobbins Flooring, Inc. v. Federal Floors, Inc., 445 F.Sup. 4, 10 (E.D.Penn.).
"Tying is a form of marketing in which a seller insists on selling two distinct products or services as a package. A supermarket that will sell flour to consumers only if they will also buy sugar is engaged in tying. Flour is referred to as the tying product, sugar as the tied product." Jefferson Parish Hosp. Dist No. 2 v. Hyde, 466 U.S. 2, 33, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984). As the Supreme Court has explained, however, "there is nothing inherently anticompetitive about packaged sales." Id. at 25. "Only when consumers are forced to purchase a tied product with a tying product, due to a defendant's substantial market power in the tying product market, are the protections of the antitrust laws triggered." Michigan Monument Builders of North America v. Michigan Cemetery Assoc., United States District Court, Docket No. 2:05 — CV 74721 (E.D. Mich. Southern Div. Oct. 27, 2006).
Section 35-26 provides that "Every contract, combination, or conspiracy in restraint of any part of trade or commerce is unlawful.
Section § 35-29 is patterned after section 3 of the Clayton Act. State v. Hossan-Maxwell, Inc., 181 Conn. 655, 661, 436 A.2d 284 (1980).
Similar to General Statutes § 35-28(d), § 35-26 is patterned after and is to be construed consistent with § 1 of the Sherman Act, and therefore, § 35-26 requires the concerted action of two or more persons. Shea v. First Federal Savings Loan of New Haven, 184 Conn. 285, 305, 439 A.2d 997 (1981). Consequently, the plaintiffs' claims under § 35-26 fail because as previously discussed, the plaintiffs cannot establish concerted action between two legally distinct, economic entities. See generally, Copperweld Corp. v. Independence Tube Corp., supra, 467 U.S. 767; Shea v. First Federal Savings Loan of New Haven, supra, 184 Conn. 305-6. In addition, the court agrees with the defendants that the plaintiffs have failed to allege facts sufficient to satisfy the basic elements of an illegal tying arrangement.
The elements of a tying violation are described as follows: "First, there must be in fact a tying arrangement. Second, the seller must possess sufficient economic power with respect to the tying product to restrain free competition appreciably for the tied product. Third, a substantial amount of commerce in the tied product must be restrained. In less demanding Clayton Act cases, plaintiff must only demonstrate the existence of a tying arrangement and either of the second or third elements to make out a violation. To establish a violation under the more stringent non-commodity Sherman Act, all three elements must be present." Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 609-10, 73 S.Ct. 872, 881, 97 L.Ed. 1277 (1953).
Although the defendants argue that the plaintiffs fail to meet any of the elements necessary for a tying claim, the court limits its consideration to the plaintiffs' failure to assert facts sufficient to satisfy the first element — the existence of an unlawful tying arrangement.
The tying arrangement alleged in this case is "the unlawful effect of conditioning the physicians' purchase of or participation in the `tying product' (a UHC participating provider agreement) upon their purchase of or participation in the `tied product' (an Oxford participating provider agreement)." Complaint, ¶ 49, p. 29. Although the plaintiffs have alleged a "tying" arrangement in the very general sense that participation in the UHC network is being conditioned on participation in the Oxford network, the type of tying addressed by the antitrust statutes has a more narrow, long established meaning because "[i]t is clear . . . that not every refusal to sell two products separately can be said to restrain competition." Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 11, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984).
"The common core of the adjudicated unlawful tying arrangements is the forced purchase of a second distinct commodity with the desired purchase of a dominant `tying' product, resulting in economic harm to competition in the `tied' market." Times-Picayune Publishing Co. v. United States, supra, 345 U.S. 614. Consequently, no cognizable cause of action under the antitrust laws for tying can be established in the absence of allegations demonstrating that the defendants "have foreclosed competition on the merits in a product market distinct from the market for the tying item." Jefferson Parish Hosp. Dist No. 2 v. Hyde, supra, 466 U.S. 22. "[A] tying arrangement cannot exist unless two separate product markets have been linked." Id., 20-21.
Therefore, the first question which must be addressed in determining whether an unlawful tying claim has been asserted under § 35-26 is whether two separate product or service markets are involved in the alleged tying arrangement. The allegations of the complaint clearly indicate that only one market is involved here. UHC and Oxford are both managed care organizations operating in the state of Connecticut market. Complaint ¶ 50 (because of the all products clause, the defendants "now maintain a significant portion of the applicable market for managed care organizations in the State of Connecticut); Complaint ¶ 51, pp. 30-31 ("[t]here are approximately five (5) other commercial managed care organizations in the State of Connecticut, the small number of which contributes to the appreciable market power that [the defendants] now maintain."). Despite other conclusory, generalized statements in the complaint to the contrary, UHC and Oxford offer contracts in this managed health care market that have different terms, but in this context, the "services" provided by these defendants in this market are legally indistinguishable.
Thus, the motion to strike the seventh through ninth counts is granted.
IV Motion To Strike CUTPA Counts
The first through third counts of the complaint seek damages under CUTPA against UHG, UHC and Oxford, respectively, alleging that the amendment to the physician provider contracts constitutes an unfair trade practice. The defendants move to strike the CUTPA claims on the grounds that the plaintiffs lack standing to assert them, and even if they do have standing, the plaintiffs have failed to allege any unfair trade practice prohibited by CUTPA.
"Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action . . ." (Internal quotation marks omitted.) Ardmare Construction Co. v. Freedman, 191 Conn. 497, 501, 467 A.2d 674 (1983). A person may file suit under CUTPA upon suffering "any ascertainable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited by [General Statutes § 142-110b.]" Section 42-110b, in turn, states that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." Finally, General Statutes § 42-110a provides the following definitions of essential terms used in the foregoing statutes.
As used in this chapter: (3) "Person" means a natural person, corporation, limited liability company, trust, partnership, incorporated or unincorporated association, and any other legal entity; (4) "Trade" and "commerce" means the advertising, the sale or rent or lease, the offering for sale or rent or lease, or the distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value in this state.
There is no dispute that the plaintiffs have neither a consumer nor competitor relationship with the defendants. Consequently, the defendants argue that the plaintiffs lack standing to assert a CUTPA claim because the plaintiffs do not "operate in the market for defendants' goods and services (i.e., the market for the sale of health insurance and/or health benefit plans) such that defendants' alleged conduct could fairly be alleged to affect competition [in] that marketplace." Memorandum of Law In Support of Defendants' Motion to Strike dated February 16, 2007, p. 18. The court rejects the defendants' argument as too narrowly defining the scope of CUTPA's remedial design.
A plaintiff asserting a cause of action under CUTPA must have some consumer or business relationship with the defendant, as "it strains credulity to conclude that CUTPA is so formless as to provide redress to any person, for any ascertainable harm, cause by any person in the conduct of any "trade" or "commerce." Jackson v. R.G. Whipple, Inc., 225 Conn. 705, 725-26 (, A.2d (1993). In describing the business relationship necessary for a plaintiff to have standing to assert a CUTPA claim, the cases indicate that a business person must have a direct commercial relationship with the defendant, or some other relationship with the defendant in a commercial marketplace, so that a nexus exists between this relationship and an ascertainable loss caused by the defendant's unfair or deceptive practices. See, e.g., Connecticut Water Co. v. Town of Thomaston, Superior Court, judicial district of Hartford, Docket No. CV 94 0535590, (Nov. 25, 1996; Corradino, J.); "[A]t the very least, other business people, who are not direct competitors, must have some type of commercial relationship with the alleged wrongdoer — commercial relationship not being so much a business-to-business relationship but some kind of relationship in the marketplace so that the particular acts of wrongdoing alleged will interfere with fair and open competition in that particular marketplace." Accord, Mar v. WMX Technologies, Inc. et al., Superior Court, judicial district of Litchfield, Docket No. CV 96 0071542 (Nov. 6, 1998; Sheldon, J.); Nolfi v. Melson, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 00 0360876 (June 12, 2000; Moran, J.).
In this case, the plaintiffs have alleged a direct business relationship or involvement with UHC and Oxford and they have alleged injury emanating from this relationship sufficient to assert a claim under CUTPA. All the named plaintiffs explain that they had business contracts with UHC or both UHC and Oxford, and that the gravamen of their CUTPA complaint is that they all were "informed by letter from either UCH or Oxford that despite the fact that UHC and Oxford would continue to operate as separate companies, physicians would now have to become an Oxford provider if they were solely a UHC provider and vice versa. Any physician who did not agree to become a provider for both UHC and Oxford would have their provider agreement terminated." Complaint, ¶ 24. According to the complaint, the "all products clause" violates CUTPA because, inter alia, it is being imposed upon the plaintiffs in an "uneven playing field [of] bargaining power" and it operates to "deteriorate" the doctor-patient relationship. Complaint, ¶ 25. If accepted, the requirement operates to impose unreasonably high administrative fees and unreasonable low fee schedules, and if not accepted, a termination of both UHC and Oxford contracts occurs. On the basis of these claims, the argument by UHC and Oxford that the plaintiffs have not alleged a direct business relationship with them sufficient to establish standing under CUTPA is meritless.
The defendants next argue that the plaintiffs have failed to allege an unfair trade practice cognizable under CUTPA. Because the complaint alleges that the defendants are engaged in the business of insurance and are subject to CUIPA, the cases indicate that the plaintiffs must allege facts sufficient to state a claim under CUIPA in order to maintain a CUTPA claim. The Supreme Court expressed this point in both Lees v. Middlesex Ins. Co., 229 Conn. 842, 643 A.2d 1282 (1994) and Mead v. Burns, 199 Conn. 651, 509 A.2d 11 (1986), where the court held that conduct which does not violate CUIPA does not constitute an unfair act or practice under CUTPA. Specifically in Lees, the supreme court held that "[b]ecause the plaintiffs evidence was insufficient to satisfy the requirement under CUIPA that the defendant's alleged unfair claim settlement practices constituted a `general business practice,' the plaintiff's CUTPA claim could not survive the failure of her CUIPA claim." Id., 851. Accord, Nazami v. Patrons Mutual Insurance Co., 280 Conn. 619, 625, 910 A.2d 209 (2006) ("[i]n order to sustain a CUIPA cause of action under CUTPA, a plaintiff must allege conduct that is proscribed by CUIPA."); Anley v. Allstate Ins. Co., Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. CV 98 0166413 (Jan. 9, 2002; D'Andrea, J.) ("one cannot maintain a CUTPA claim against an insurer absent an underlying CUIPA claim."); Delpier v. Connecticut Interlocal Risk Management Agency, Superior Court, judicial district of Waterbury, Docket No. CV 01 0164366 (Nov. 28, 2001; Pittman, J.) ("defendant correctly asserts that the plaintiff can only maintain a CUTPA count against an insurer if she alleges a violation of the standards of CUIPA"). To support their CUTPA claims, the plaintiffs allege violation of § 38a-816(4) of CUIPA. This provision states that an unfair method of competition and an unfair and deceptive action or practice in the business of insurance include: "[e]ntering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance." General Statutes § 38a-816(4).
This provision prohibits any agreement or concerted action monopolizing or unreasonably restraining the insurance business through boycott, coercion or intimidation. The defendants contend that because the plaintiffs' antitrust claims fail, this CUIPA claim must fail as well. The defendants, however, have not cited any authority to support this position. Indeed, neither the defendants nor the plaintiffs have cited any case law or even addressed in any specific way how this CUIPA provision should be interpreted or applied viz-a-viz the Connecticut antitrust statutes generally or more particularly viz-a-viz the two antitrust provisions asserted in this case — General Statutes § 35-26 and § 35-28(d). The court has not located any cases on these questions, which appear to raise issues of first impression.
The defendants surmise that because the language of the two statutes is identical, the CUIPA and antitrust provisions should be treated alike. However, a close examination reveals that the language of these provisions is similar, but not identical. A reasonable interpretation might be that the legislature intended to provide more expansive rather then mere co-extensive, anti-monopoly protection through this CUIPA provision than that provided by § 35-26 and § 35-28(d), but on this record, and with the parties not fully addressing the matter, the court declines to reach this issue.
Consequently, on the present record, the court cannot conclude that as a matter of law, the plaintiffs have failed to state a CUIPA claim cognizable under CUTPA, and the motion to strike counts two and three against UHC and Oxford is denied.
V Motion To Strike CUIPA Counts
The fourth, fifth and sixth counts of the complaint are asserted against UHG, UHC, and Oxford, respectively. In each of these counts, the complaint alleges that these defendants individually and jointly committed "acts of boycott, coercion, and intimidation to force physicians to accept the inferior Oxford plan as a condition of continuing as a UHC provider" in violation of CUIPA, General Statutes § 38-816(4). The defendants move to strike the CUIPA claims on the grounds that the allegations do not state a claim and that CUTPA does not provide for a private right of action. The court agrees with the defendants that CUIPA does not provide for a private right of action.
Under CUIPA, the insurance commissioner is authorized to investigate CUIPA violations and institute administrative enforcement proceedings "[w]henever the commissioner has reason to believe that any such person has been engaged in or is engaging in . . . any unfair method of competition or any unfair or deceptive act or practice . . ." General Statutes § 38a-817(a). No private right of action is provided under the statute. Therefore, the precise question at issue is whether such a private right of action should be implied. This question is somewhat academic because as just discussed, an action under CUTPA may be asserted for a CUIPA violation, and CUTPA allows recovery of actual damages, as well as attorney fees and punitive damages. Any relief provided by an implied cause of action under CUIPA would therefore be redundant, and most likely, less extensive.
Our appellate courts have not had the opportunity to squarely address whether a private cause of action exists under CUIPA. In Carford v. Empire Fire and Marine Insurance Co., 94 Conn.App. 41, 53, 891 A.2d 55 (2006), the appellate court decided that with certain exceptions, a right to assert a private cause of action for CUIPA violations through CUTPA does not extend to third parties, but the question whether CUIPA alone allows a private cause of action was not squarely presented, and therefore, was not reached. The court, however, did provide some guidance on this issue by noting that "it is the province of the legislature to create new rights and remedies contained within the highly regulated industry of insurance." The court also explained the following about the legislative history of CUIPA, suggesting that no private right of action should be implied:
CUIPA is based on a legislative proposal in 1944 by the National Association of Insurance Commissioners (association), which Connecticut enacted in 1955. The model act was amended in 1971 to include a section regulating unfair claim settlement practices, and this state enacted these new provisions in 1973. The specific language of § 38a-816(6) is not enlightening, and the legislative history of the statute is silent as to a third party's right to bring a claim against an insurance company . . .
In 1990, the association expressly considered for the first time whether the model act should allow a private cause of action and rejected the idea. The unequivocal rejection was accompanied by a drafting note, stating that a jurisdiction choosing to provide for a private cause of action should consider a different statutory scheme. This [claims settlement practices act] is inherently inconsistent with a private cause of action. This is merely a clarification of original intent and not indicative of any change in position.
(Citations omitted; internal quotation marks omitted.) Carford v. Empire Fire and Marine Insurance Co., supra, 94 Conn.App. 49-53.
The superior court decisions considering this question are split, with a majority of these decisions concluding that CUIPA alone does not provide for a private right of action. Compare Bragg v. New London County Mutual, Superior Court, judicial district of New London, Docket No. CV 05-4102853 (Oct. 31, 2006; Jones, J.); Starview Ventures, LLC v. Acadia Insurance, Superior Court, judicial district of New Haven, Docket No. CV 06 5003463 (Oct. 17, 2006; Skolnick, J.); Carter v. Cambridge Mutual Fire Ins. Co., Superior Court, judicial district of Hartford, Docket No. CV 03 0824460 (September 9, 2004; Shapiro, J.); Lee v. Scottsdale Ins. Co., Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 98 350438 (February 8, 1999; Nadeau, J.) (not recognizing a private right of action); with Agency Rent A Car v. ITT Hartford, Superior Court, judicial district of Hartford — New Britain at Hartford, Docket No. 93 053053 (Sept. 26, 1994; Corradino, J.); Polchlopek v. Aetna Life Ins. Co., judicial district of Hartford-New Britain at Hartford, Docket No. 93 0530360 (June 3, 1994; Hennessey, J.); Covino v. Jacovino, Superior Court, judicial district of Waterbury, Docket No. 107889 (July 20, 1993; Sullivan, J.) [9 Conn. L. Rptr. 377]; Sansone v. Esis, Inc., Superior Court, judicial district of New Haven, Docket No. 92 0327409 (Jan. 4, 1993; Maiocco, J.) [8 Conn. L. Rptr. 171]; Sygiel v. Clifford, Ban Loos, Insurance Agency, Superior Court, judicial district of New Haven, Docket No. 360149 (July 27, 1995; Licari, J.) [14 Conn. L. Rptr. 561] (recognizing a private right of action.).
The court concludes that on the basis of the specific statutory language and the overall statutory scheme, the cases holding that CUIPA alone does not authorize a private right of action present the more persuasive evaluation of this issue. Therefore, the defendants' motion to strike the fourth, fifth and sixth counts is granted.
VI Motion To Strike Contract Counts A Breach of Express Contract Provisions
In the fourteenth count, the plaintiffs allege that UHC breached its obligations under the participating provider contract which requires, among other things, that UHC "respect and support the physician /patient relationship [while] adhering fairly to the contract for benefits it provides its customers; and to allow the physicians to make independent treatment decisions." Complaint, Fourteenth Count, ¶ 50. According to the complaint, the alleged breach of contract has had the effect of curtailing the time that these physicians can spend with their patients; Complaint, Fourteenth Count, ¶ 51; and has forced them to deal with Oxford when they otherwise would avoid that insurer because of associated administrative burdens. Complaint, Fourteenth Count, ¶ 52.
As noted by UHC, its contracts with the plaintiffs, as evidenced by the agreement attached as Exhibit A to the complaint, provide that UHC has the unilateral right to amend the contract, and if any such amendment creates a "material adverse change" in the agreement that is deemed unacceptable to the plaintiff providers, the plaintiffs have the right to terminate the contracts. This fact is not addressed in the substance of the complaint. In response to the motion to strike, the plaintiffs fail to explain convincingly how UHC's exercise of its unrestricted right to amend the contract to impose the so-called all products clause violates any express provision of the contract. For example, the plaintiffs insist that the proposed amendment involving the all products clause conflicts with other provisions of the contract, by violating UHC's obligation "to respect and support the physician/patient relationship . . . and to allow the physicians to make independent treatment decisions." Complaint ¶ 50, p. 40. Nevertheless, to the extent that the proposed amendment imposing the all products clause constitutes a material change to the agreement, or even conflicts with other provisions of the agreement, no express violation of the contract has occurred because under the contract, UHC has the unilateral right to amend the agreement. This authority includes the right to make an amendment representing "a material adverse change to [the] agreement." Complaint, Exhibit A, p. 4; see n. 14. In short, as to any express breach of contract claim, the plaintiffs have failed to explain how they can complain about an adverse, material amendment to the agreement when UHC is expressly authorized under the agreement to make such an amendment.
Exhibit A to the complaint under the heading "How long our agreement lasts; how it gets amended; and how it can end," states the following in pertinent part:
Upon our execution of this agreement, you will receive a copy from us with the effective date noted on the signature page. It continues until one of us terminates it.
We can amend this agreement or any of the appendices on 90 days' written or electronic notice by sending you a copy of the amendment. Your signature is not required to make the amendment effective. However, if you do not wish to continue your participation with our network as changed by an amendment that is not required by law or regulation but that includes a material adverse change to this agreement, then you may terminate this agreement on 60 days' written or electronic notice to us so long as you send this termination notice within 30 days of your receipt of the amendment.
In their objection to the motion to strike, the plaintiffs also make the following argument. The right to terminate the agreements because of an unacceptable amendment belonged to the plaintiffs, not UHC. Consequently, according to the plaintiffs, the breach of contract count states a bona fide claim because UHC wrongly terminated the agreements itself in response to the plaintiffs' unwillingness to accept Oxford. Such a claim must be supported by allegations in the complaint before it can be considered on a motion to strike. Faulkner v. United Technologies Corp., supra, 240 Conn. 580; accord, Cayer v. Western Connecticut State University, Superior Court, judicial district of Hartford, Docket No. CV 04 4001958 (Feb. 16, 2005; Shapiro, J.) (on a motion to strike, trial court may not consider additional allegations by the plaintiff in his response to the motion).
The court also notes the inaccuracy of the plaintiffs' unqualified statement that only the physicians had the right to terminate the contracts. The terms of the contracts indicate that either party has the right to terminate the agreements upon ninety days prior written notice to the other. See Complaint, Ex. A, p. 4 ("[u]pon our execution of this agreement . . . [i]t continues until one of us terminates it . . . In addition, either you or we can terminate this agreement, effective on an anniversary of the date this agreement begins, by providing 90 days written or electronic notice.").
None of the named plaintiffs specifically claim that UHC actually terminated their contracts, except possibly Dr. Austrian (if the complaint is read broadly). See Complaint, ¶ 31, p. 10. However, even as to Dr. Austrian, the express terms of the contract require him to accept the amendment regarding Oxford unless he terminates the agreement. Consequently, as a matter of law, the alleged termination by UHC would have no legal significance (i.e., would not be a proximate cause to any harm to Dr. Austrian) unless he also claims that he would not have terminated the contract himself and would have accepted Oxford. The complaint makes no such claim. A complaint must allege facts sufficient to satisfy all the elements of the purported cause of action, and a breach of contract for which no injury is alleged fails to state a legally compensable claim. See generally, Rosato v. Mascardo, 82 Conn.App. 396, 410-11, 844 A.2d 893 (2004) ("[t]he elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages."). For similar reasons, the case relied on by the plaintiffs, Martin v. Kavanewsky, 157 Conn. 514, 255 A.2d 619 (1969), involving a quantum meruit claim based on a defendant's anticipatory breach of a contract, is distinguishable and inapposite. The plaintiffs' complaint makes an express breach of contract claim and does not assert a claim based on quantum meruit, an equitable claim applied to avoid unjust enrichment.
To further support their claim that UHC breached an express provision of the provider agreements, the plaintiffs also emphasize that the agreements are adhesion contracts. However, there is no per se prohibition against adhesion contracts; see generally, Aetna Casualty Surety Co. v. Murphy, 206 Conn. 409, 416-18, 538 A.2d 219 (1988) (observing that insurance policies, generally, are contracts of adhesion); and the "adhesive" nature of a contract, without more, does not render a contract invalid or unenforceable.
B Breach of Implied Covenant of Good Faith and Fair Dealing
The fifteenth count of the complaint alleges a breach of the implied covenant of good faith and fair dealing against UHC. The doctrine of implied covenant of good faith and fair dealing has been frequently described.
[I]t is axiomatic that the duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship. In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement. The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term. To constitute a breach of the implied covenant of good faith and fair dealing, the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith. Bad faith has been defined in our jurisprudence in various ways. Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive. Bad faith means more than mere negligence; it involves a dishonest purpose. Bad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain.
(Citations omitted; internal quotation marks omitted.) Landry v. Spitz, 102 Conn.App. 34, 42-3 (2007).
"[A]n action for breach of the covenant of good faith and fair dealing requires proof of three essential elements, which the plaintiff must duly plead: first, that the plaintiff and the defendant were parties to a contract under which the plaintiff reasonably expected to receive certain benefits; second, that the defendant engaged in conduct that injured the plaintiff's right to receive some or all of those benefits; and third, that when committing the acts by which it injured the plaintiff's right to receive benefits it reasonably expected to receive under the contract, the defendant was acting in bad faith." Ruiz v. Dunbar Armored, Inc., Superior Court, judicial district of Fairfield, Docket No. CV 03 0404213 (July 19, 2005; Hiller, J.).
UHC moves to strike the fifteenth count alleging breach of the implied covenant of good faith on two grounds. The defendant first argues that the plaintiffs' claim that the all products clause breaches the covenant of good faith is inconsistent with the express provision of the contracts that give UHC the unrestricted, unilateral right to make material amendments to the agreements. See generally, Southbridge Assoc. v. Garofalo, 53 Conn.App. 11, 17, 728 A.2d 1114 (1999) (as a general rule, the breach of the implied covenant of good faith is a principle that "cannot be applied to achieve a result contrary to the clearly expressed terms of a contract.") UHC's second argument is that the plaintiffs have not sufficiently pleaded that UHC acted in bad faith. Although UHC's motion presents a close question, the court concludes that at this stage of the proceedings and on these pleadings, UHC's motion to strike the fifteenth count must be denied.
Although the court has concluded that the plaintiffs have not stated a cause of action based on an express breach of the agreements, no such finding is necessary to support a claim for breach of the implied covenant of good faith. Landry v. Spitz, supra, 102 Conn.App. 46-7. Similarly, contrary to UHC's position, the plaintiffs' implied covenant claim does not find its primary premise on UHC's contractual right to amend the agreements. The focus of the issue concerns the manner in which this right has been exercised. As previously stated, "[t]he covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application . . . of a contract term." Landry v. Spitz, supra, 102 Conn.App. 42. As applied here, there is no question that under the terms of the agreement, UHC has the right to amend the contracts, but the dispositive issue is whether this right was exercised in such an unreasonable, oppressive, or onerous way that it represents a bad faith deprivation of the physicians' reasonable expectations under the agreements.
The plaintiffs allege that they expected to receive timely and efficient services, reasonable and prompt reimbursement for medical services provided to patients, respect for the physician/patient relationship, and the right to make independent health decisions; Complaint, Fifteenth Count, ¶ 49; and those expectations have been defeated by the coerced acceptance of Oxford insureds by way of the all products clause. They allege that forcing them to accept Oxford and consequently treat patients whom they otherwise would not choose to treat curtails the time they can spend with their other patients, which is contrary to UHC's obligation to respect the physician/patient relationship. Complaint, Fifteenth Count, ¶ 51. They further assert that UHC has acted in bad faith by the "take it or leave it" nature of the proposed contract amendment.
Additionally, the reasonableness of UHC's conduct must be considered in the specific context of the alleged circumstances. The plaintiffs were not presented with contracts containing the all products clause in the first instance and faced with a decision whether to accept or reject affiliation with UHC. The plaintiffs were presented with this clause after they had agreed to become UHC providers and after UHC patients comprised a significant percentage of their medical practices. According to the complaint, the plaintiffs' ability to continue to practice medicine effectively and to earn a living was put at stake by the defendant's actions.
Furthermore, as previously stated, the complaint expressly alleges the unilateral, unnegotiable "take it or leave it" nature of UHC's conduct, made under circumstances in which the physicians were without equal bargaining power. Complaint, ¶ 25. Thus, in evaluating the reasonableness of UHC's actions, the "adhesive" nature of these contracts is indeed a relevant consideration. An essential feature of an adhesion contract is that it is not subject to negotiation and is imposed on a "take it or leave it" basis upon a party having little or no bargaining power. See Brown v. Soh, 280 Conn. 494, 504-5, 909 A.2d 43 (2006).
Lastly, contrary to the UHC's position, and on this record, the plaintiffs have sufficiently alleged bad faith because "bad faith may include one party's performance or interpretation of the contract in a manner that evades its spirit and is unfaithful to its purpose, resulting in a denial of the justified expectations of the other party." Landry v. Spitz, supra, 102 Conn.App. 48.
Therefore, UHC's motion to strike the fifteenth count of the complaint is denied.
VII Motion To Strike Declaratory Judgment Count
The plaintiffs in the thirteenth count of their complaint seek a judgment against UHC and Oxford pursuant to Practice Book § 17-55, declaring that UHC and Oxford be required to keep their approvals offices open for 24 hours a day, seven days a week, and that UHC and Oxford endeavor to reduce hold times on their approval lines to a maximum of ten minutes.
The conditions for a declaratory judgment under Practice Book § 17-55 are that the plaintiffs: (1) have an interest by reason of danger of loss or of uncertainty as to their rights; (2) there is an actual bona fide and substantial issue in dispute and substantial uncertainty of legal relations requiring settlement between the parties; and (3) there is not another proceeding that provides them with immediate redress. UHC and Oxford move to strike the thirteenth count arguing that the subject matter of the plaintiffs' concerns is expressly addressed by statute, and therefore, no judicial "declaration" is required. The court agrees.
General Statutes § 38a-226c(a)(8) addresses the requirement that pre-certification review staff must be available forty hours per week during normal business hours. General Statutes § 38a-226c(e) provides the statutory procedure for an attending physician to transmit an expedited review request upon a covered patient's admission to an acute care hospital. There is no need for the court to "declare" rights that are expressed by statute. In short, the plaintiffs fail to allege facts demonstrating the existence of a substantial controversy or uncertainty of legal relations requiring settlement between the parties.
Moreover, any ruling by the court that the defendants should "endeavor" to limit to ten minutes the amount of time that they place the plaintiffs on hold would be too ephemeral, commenting more on the defendants' telephone etiquette than providing substantive relief, and as such it would be an advisory opinion, adjudicating nothing and binding on no one.
For these reasons, the motion to strike the thirteenth count is granted.
CONCLUSION
For the foregoing reasons, the defendants' motion to strike the plaintiffs' revised first amended class action complaint is denied as to the Second Count and the Third Count against the defendants United HealthCare Insurance Company, Oxford Health Plans (CT), Inc., and Oxford Health Insurance, Inc., alleging violation of the Connecticut Unfair Trade Practices Act.
The motion to strike is further denied as to the Fifteenth Count against the defendant United HealthCare Insurance Company, alleging breach of the implied duty of good faith and fair dealing.
The motion to strike is granted as to counts one and counts four through fourteen.
Within twenty (20) days, the plaintiffs may file a new pleading, and in the absence of such a filing, the defendants shall move, within twenty (20] days thereafter, for judgment in accordance with this decision. See Practice Book § 10-44.
A status conference is hereby scheduled in this case for Monday, September 10, 2007, at 10:00 a.m.
So ordered this 16th day of July 2007.