United States District Court, M.D. North Carolina
MICHELLE SULLIVAN and HOLDEN SHERIFF, individually and on behalf of all others similarly situated, Plaintiffs,
LABORATORY CORPORATION OF AMERICA HOLDINGS, Defendant.
MEMORANDUM OPINION AND ORDER
D. SCHROEDER UNITED STATES DISTRICT JUDGE.
a putative class action involving claims of unfair and
deceptive conduct related to the billing practices of
Defendant Laboratory Corporation of America Holdings
(“LabCorp”). Before the court is LabCorp's
motion to dismiss the complaint and strike class allegations.
(Doc. 11.) The motion has been fully briefed (Docs. 12, 20,
23), and the court held argument on December 19, 2017. For
the reasons set forth below, the motion to dismiss will be
granted, which renders the motion to strike moot.
allegations of the complaint, viewed in the light most
favorable to Plaintiffs as the non-moving parties, show the
LabCorp is a holding company of numerous subsidiaries that
provides laboratory testing services to healthcare recipients
internationally. (Doc. 1 ¶ 3.) It serves more than 110
million patients annually and has “generated more
revenue from laboratory testing than any other company in the
world.” (Id. ¶¶ 4, 36.) Its LabCorp
Diagnostics segment is an independent clinical laboratory
business that provides services that are the subject of
Plaintiffs' complaint. (Id. ¶¶ 5, 6,
routinely charges different customers different rates for the
same services. These rates include an undiscounted retail
rate (which Plaintiffs call the “rack rate”);
discounted rates LabCorp has negotiated with certain
third-party payors, such as insurers; a standardized rate for
Medicare clients; and rates that LabCorp negotiates with
certain uninsured or underinsured individuals. (Id.
¶¶ 7, 38, 97.) These rates vary greatly but tend to
be much higher for the uninsured and underinsured.
(Id. ¶ 42.)
Plaintiff is an insured who had testing performed by LabCorp
and whose insurance did not cover some or all of the cost.
The complaint is devoid of any allegation that either
Plaintiff ordered her testing directly from LabCorp. Rather,
at least one allegation suggests that a referring physician
ordered the tests on behalf of her patient (Id.
¶ 10), and a sample LabCorp invoice for Plaintiff Holden
Sheriff states, “This bill is for laboratory services
requested by your physician.” (Doc. 20-1 at 2.) In any
event, each Plaintiff was initially invoiced the rack rate
for the tests not covered by insurance. (Doc. 1 ¶¶
58, 68, 80, 92.) Plaintiffs are expected to pay this rate
even though their insurers, or others, would have been
charged a lesser amount for the same tests. (Id.
¶¶ 56-95.) Plaintiffs acknowledge they are liable
to LabCorp for some cost, but they contend they should only
have to pay the “fair market value of those specific
tests” which “would be substantially similar to
the rate the patient's insurer would have paid had the
lab services been covered.” (Id. ¶
Plaintiff Michelle Sullivan is a California resident who had
thirteen tests performed by LabCorp on October 4, 2016.
(Id.) LabCorp invoiced her the aggregate rack rate
for all tests, for a total of $992.25. (Doc. 1 ¶¶
68-69.) The invoice did not disclose which tests were covered
by her insurance, Independence Blue Cross, and, if so, how
much the insurer paid for the covered tests. (Id.
¶ 71.) However, twelve of the thirteen tests were
covered, leaving Sullivan liable for the full rack
rate of $132.00 for the uncovered test. (Id.)
Sullivan has paid the balance, “in whole or in part,
” under protest. (Id. ¶ 75.)
Sheriff is a Tennessee resident who had eighteen laboratory
tests conducted by LabCorp on November 22, 2016, in
Burlington, North Carolina. (Id. ¶¶ 78-81;
Doc. 20-1 at 2.) LabCorp invoiced her the aggregate rack rate
for the eighteen tests, for a total of $2, 988.00. (Doc. 1
¶ 77.) As with Sullivan, the invoice did not state which
tests were covered by her insurer, Cigna Corporation, and, if
so, how much the insurer paid for the covered tests.
(Id. ¶ 83.) Sheriff's insurance covered
fifteen of the eighteen tests,  leaving her liable for the full
rack rate of $1, 043.79 for the three uncovered tests.
(Id. ¶ 81.) She has yet to pay her invoice.
(Id. ¶ 87.)
point before accepting the tests did either Plaintiff inquire
as to the cost. (Id. ¶¶ 86, 94.) Instead,
each assumed she would be charged “a reasonable
amount.” (Id. ¶¶ 86, 94.) There is
no allegation that Plaintiffs based their assumptions on any
conduct or representation by LabCorp. Nor is there any
indication of what information, if any, the health care
providers who ordered tests on behalf of any Plaintiff knew
about the cost and pricing policies of LabCorp, or whether
any Plaintiff had any discussion with any provider about the
filed the present action on March 8, 2016. (Doc. 1.) They
allege that LabCorp's practice of charging uninsured and
underinsured customers multiples over the insured pricing,
failure to disclose in advance the price of each test, and
failure to itemize invoices to show how much of each test is
covered by insurance confuse patients as to what they owe,
constitute unfair and deceptive trade practices, and lie at
the root of a national healthcare crisis. (Id.
¶ 2.) Each Plaintiff initially seeks recovery under the
North Carolina Unfair and Deceptive Trade Practices Act
(“UDTPA”), N.C. Gen. Stat. §§ 75-1,
et seq. (Count I). Alternatively, each seeks
recovery under her own state's law: Sullivan seeks
recovery under the California Consumers Legal Remedies Act
(“CLRA”), Cal. Civ. Code §§ 1750,
et seq. (Count III), and the California Unfair
Competition Law (“UCL”), Cal. Bus. & Prof.
Code §§ 17200, et seq. (Count IV); and
Sheriff seeks recovery under the Tennessee Consumer
Protection Act (“TCPA”), Tenn. Code §§
47-18-101, et seq. (Count V). Both Plaintiffs also
allege claims of implied contract and unjust enrichment
(Count VII), as well as common law fraud (Count VIII).
seek to certify a national class on behalf of “all
persons who were charged fees for services by LabCorp that
were in excess of the negotiated or mandated fair value
market rates established for those services between LabCorp
and private or public health insurers.” (Id.
¶ 98.) To this extent, they rely on North Carolina's
UDTPA (id. ¶¶ 115-123 (Count I)), as well
as the law of implied contract and unjust enrichment
(id. ¶¶ 162-168 (Count VII)) and
“common law fraud” (id. ¶¶
169-179 (Count VIII)), which they contend in their briefing
should be that of North Carolina, too. Plaintiffs also seek
to bring their action on behalf of two sub-classes for class
members made up of the two states from which they hail and
under that state's law: Tennessee and Maryland.
(Id. ¶¶ 99, 104.) Plaintiffs seek a
declaration that LabCorp has engaged in unlawful conduct,
damages, a constructive trust, an injunction, and
attorneys' fees. (Id. at 38.)
now moves to dismiss Plaintiffs' complaint for failure to
state a claim upon which relief can be granted, and to strike
class allegations. (Doc. 11.) The motion is fully briefed and
ready for decision.
Rule of Civil Procedure 8(a)(2) requires only “a short
and plain statement of the claim.” Under Federal Rule
of Civil Procedure 12(b)(6), however, “a complaint must
contain sufficient factual matter ... to ‘state a claim
to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570,
(2007)). A claim is plausible “when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Bell,
Twombly, 550 U.S. at 556). A Rule 12(b)(6) motion to
dismiss “challenges the legal sufficiency of a
complaint considered with the assumption that the facts
alleged are true.” Francis v. Giacomelli, 588
F.3d 186, 192 (4th Cir. 2009) (citations omitted). If a
complaint does not meet this standard, it should be
noted, each plaintiff seeks recovery under North Carolina law
and alternatively under her own state's law. The claims
under North Carolina law will be addressed first, followed by
the state-specific claims.
North Carolina's UDTPA
neither Plaintiff is a resident of North Carolina, Sullivan
and Sheriff seek recovery in Count I under North
Carolina's UDTPA. LabCorp contends that North Carolina
law does not apply to these out-of-state Plaintiffs'
claims. Alternatively, LabCorp argues that neither Plaintiff
states a claim under the UDTPA. Plaintiffs contend there is
sufficient connection to North Carolina to apply the
state's law and that they have stated a claim under the
the UDTPA applies to Plaintiffs' claims raises a
difficult question. The court applies the forum state's
choice of law rules, New England Leather Co. v. Feuer
Leather Corp., 942 F.2d 253, 255 (4th Cir. 1991), and
claims under North Carolina's UDTPA are “neither
wholly tortious nor wholly contractual in nature, ”
Bernard v. Cent. Carolina Truck Sales, Inc., 68
N.C.App. 228, 230, 314 S.E.2d 582, 584 (1984) (quoting
Slaney v. Westwood Auto, Inc., 366 Mass. 688, 704,
322 N.E.2d 768, 779 (1975)). North Carolina courts have split
as to the proper choice of law rule to apply to a UDTPA
claim. Stetser v. TAP Pharm. Prods., Inc., 165
N.C.App. 1, 15, 598 S.E.2d 570, 580 (2004); New England
Leather Co., 942 F.2d at 255. At least one panel of the
North Carolina Court of Appeals followed the traditional lex
loci rule, holding that “the law of the state where the
injuries are sustained should govern” UDTPA claims.
See Stetser, 165 N.C.App. at 15, 598 S.E.2d at 580
(quoting United Va. Bank v. Air-Lift Assocs., Inc.,
79 N.C.App. 315, 321, 339 S.E.2d 90, 93 (1986)). Another
panel of that same court held much earlier that “the
law of the state having the most significant relationship to
the occurrence giving rise to the action” should apply.
Id. (quoting Andrew Jackson Sales v. Bi-Lo
Stores, Inc., 68 N.C.App. 222, 225, 314 S.E.2d 797,
799 (1984)). The North Carolina Supreme Court has not
resolved this split of authority. See Window World of
Baton, Rouge, LLC v. Window World, Inc., No. 15 CVS 1,
2017 WL 2979142, at *9 ( N.C. Business Ct. Jul. 12, 2017).
court need not delve into the lengthy analysis offered by the
parties, however. That is because even assuming Plaintiffs
were correct that North Carolina's UDTPA could apply to
them as out-of-state consumers under the facts alleged, their
claims would not survive the motion to dismiss because
Plaintiffs fail to plausibly state a claim under the act.
establish a claim under North Carolina's UPDTA, a
plaintiff must allege facts plausibly showing that (1) a
defendant committed an unfair or deceptive act or practice,
(2) which was in or affecting commerce, and (3) proximately
caused injury to the plaintiff. Dalton v. Camp, 353
N.C. 647, 656, 548 S.E.2d 704, 711 (2001). An act or practice
is unfair if it is “immoral, unethical, oppressive,
unscrupulous, or substantially injurious to consumers,
” and is deceptive “if it has the capacity or
tendency to deceive.” Ace Chem. Corp. v. DSI
Transp., Inc., 115 N.C.App. 237, 247, 446 S.E.2d 100,
106 (1994) (internal citations and quotations omitted).
Whether conduct constitutes an unfair or deceptive trade
practice is a question of law for the court to decide.
First Atl. Mgmt. Corp. v. Dunlea Realty Co., 131
N.C.App. 242, 252-53, 507 S.E.2d 56, 63 (1998).
North Carolina prohibits price gouging in the event of an
emergency or an abnormal market disruption, N.C. Gen. Stat.
§ 75-38, the North Carolina Supreme Court has rejected a
claim that excessive price alone can state a claim under the
UDTPA. See Bumpers v. Cmty. Bank of N. Virginia, 367
N.C. 81, 92-93, 747 S.E.2d 220, 228-29 (2013) (noting that
where there was no element of exigency, misrepresentation, or
compulsion, high price alone did not violate the UDTPA).
Rather, only where a customer was systematically charged more
than what was contracted for and delivered has a North
Carolina court found the practice unfair. Sampson-Bladen
Oil Co. v. Walters, 86 N.C.App. 173, 356 S.E.2d 805
(1987) (finding unfair trade practice and affirming jury
verdict where oil supplier systematically overcharged
customer for two years for 2, 600 gallons of oil never
delivered). Plaintiffs have not cited any North Carolina
authority to the contrary.
neither Plaintiff argues that LabCorp took any action to
induce her to order the testing or to mislead her, either
affirmatively or by concealment, as to the price of the
testing. Indeed, no Plaintiff claims to have even inquired as
to price. Rather, Plaintiffs appear to have authorized their
healthcare providers to order the testing they deemed
professionally appropriate. No party has cited a North
Carolina decision supporting the proposition that a service
provider must disclose its price to a customer before
rendering its service. The court's own review has found
no such case, either. Thus, LabCorp was under no duty to
volunteer its prices to patients who ordered testing through
their physicians before performing laboratory testing.
Cf. Chiarella v. United States, 445 U.S. 222, 228
(1980) (noting that at common law, fraud doctrine did not
impose a duty to disclose in the absence of a fiduciary or
other similar relation of trust and confidence); Langford
v. Rite Aid of Alabama, Inc., 231 F.3d 1308, 1313-1314
(11th Cir. 2000) (rejecting claim that federal law obliges
retailers to disclose pricing structure to consumers);
Bonilla v. Volvo Car Corp., 150 F.3d 62, 71 (1st
Cir. 1998) (also finding that federal law imposes no
obligation on retailers to disclose their pricing structure
to consumers, and rejecting fraud claim based on contention
that car buyers would not have paid for accessories had they
known the seller's mark-up was so high and the
accessories so minor).
neither Plaintiff has made any claim of exigency or any
circumstance that would have prevented her from inquiring
about the price of her tests. Instead, both allege that they
assumed that the prices of the tests they ordered
would be reasonable, which they contend must be the rate
charged to their insurers. (Doc. 1 ¶¶ 74, 86; Doc.
26 at 40 (arguing that the reasonable, fair market rate must
be the insurance rate).)
Plaintiffs' UDTPA claims rest on the contention that
LabCorp's effort to charge anything more than its insured
rates for uninsured tests rendered the invoices unfair and/or
deceptive. But there can be nothing deceptive where there is
no allegation that LabCorp represented anything to any
Plaintiff about its rates. On the contrary, each Plaintiff
relied on her assumption - not grounded in any alleged fact -
that she would be charged an insured rate for all tests, even
though neither knew what that was. And Bumpers