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Smith v. Life Investors Insurance Company of America

December 11, 2008

WILLIAM E. SMITH, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
LIFE INVESTORS INSURANCE COMPANY OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM ORDER

Pending before the Court are the following: PLAINTIFFS' MOTION TO DISMISS OR STRIKE DEFENDANT'S COUNTERCLAIM (Document No. 55); PLAINTIFFS' MOTION FOR LEAVE TO AMEND CAPTION AND FILE THIRD AMENDED COMPLAINT (Document No. 63)*fn1; OBJECTIONS TO SUBPOENA PURSUANT TO F.R.C.P. 45(c)(2)(B) filed by Excela Health Westmoreland Hospital ("Westmoreland") (Document No. 72); PLAINTIFFS' MOTION TO MODIFY SUBPOENA TO FRICK HOSPITAL (Document No. 73); PLAINTIFFS' MOTION TO MODIFY SUBPOENA TO HIGHMARK BLUE CROSS BLUE SHIELD ("Highmark") (Document No. 74); PLAINTIFFS' MOTION TO MODIFY SUBPOENA TO UNIVERSITY OF PITTSBURGH CANCER INSTITUTE ("UPCI") (Document No. 75); PLAINTIFFS' MOTION TO QUASH SUBPOENA TO WESTMORELAND HOSPITAL (Document No. 76); DEFENDANT LIFE INVESTORS' MOTION FOR ENTRY OF AN ORDER AMENDING STIPULATED PROTECTIVE ORDER (Document No. 82); HIGHMARK INC.'S MOTION TO QUASH, IN PART, SUBPOENA (Document No. 88); and THIRD PARTY, UNIVERSITY OF PITTSBURGH CANCER INSTITUTE'S MOTION TO QUASH AND/OR AMEND SUBPOENA (Document No. 98). These matters have been thoroughly briefed and are ripe for resolution.

Procedural History

This case was originally filed in the Court of Common Pleas of Westmoreland County and was removed to this Court in May 2007. After Life Investors filed a motion to dismiss for failure to join an indispensable party, namely Frances J. Smith, Plaintiffs filed an amended complaint in July 2007. After the Court denied Defendant's second motion to dismiss, Life Investors filed an answer in November 2007. The case was subsequently stayed pending resolution of Defendant's motion to transfer the case to the Judicial Panel on Multidistrict Litigation ("MDL Panel"). The MDL Panel denied the motion and the case remained in this Court for further proceedings.

Pursuant to the case management order, the deadline to amend the pleadings was April 30, 2008. On August 20, 2008, the Court granted Plaintiffs' motion to file a Second Amended Complaint to expand the definition of the class to include all policies "administered" by Life Investors, which would encompass policies issued by a former but now merged subsidiary, Bankers United Life Assurance Company ("Bankers"). On September 2, 2008, Defendant filed an Answer to the Second Amended Complaint and, for the first time, asserted a Counterclaim (Document No. 48).

Motions Relating to the Pleadings

The Court will first resolve the motions that relate to the pleadings, as those determinations will affect the relevant scope of discovery. Plaintiffs seek to to strike Defendant's counterclaim, and to amend the caption and file a Third Amended Complaint. The Court will address these motions seriatim.

1. Plaintiff's Motion to Strike Counterclaim

Plaintiffs ask the Court to strike the counterclaim that Defendants filed in response to the Second Amended Complaint. In the counterclaim, Life Investors seeks declaratory relief regarding future claims, application of the "actual charges" language to fictional list prices and arbitrary chargemaster rates, and whether "phony" bills or statements can constitute proof of loss. In State Auto Ins. Co. v. Summy, 234 F.3d 131(3d Cir. 2000), the Court of Appeals explained that the Declaratory Judgment Act, 28 U.S.C. § 2201, affords courts unique and substantial discretion to decide whether or not to declare the rights of litigants. That discretion must be exercised with an eye to "considerations of practicality and wise judicial administration." Id. at 136 (citing Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)).

Plaintiffs first argue that the counterclaim is merely a redundant mirror-image of their complaint. However, as Defendant accurately points out, the relief sought in the counterclaim is extensive and goes far beyond the relatively narrow issue presented by Plaintiffs. Indeed, Defendant's counterclaim would involve a rather far-reaching inquiry into past and future health care industry billing practices.*fn2

It is the very breadth of the counterclaim that troubles the Court. Plaintiffs are seeking a narrow determination which primarily involves contractual interpretation of the term "actual charges."*fn3 The Counterclaim will have an adverse affect on the just, speedy and inexpensive determination of this action by multiplying and complicating the issues. As the pending motions to quash subpoenas illustrate, numerous difficult discovery issues will arise as a result of this broad inquiry into health care industry billing practices.

In addition, the Court has an interest in promoting judicial economy by preventing duplicative and piecemeal litigation. Summy, 234 F.3d at 135. This case was originally filed in the state court. This Court's jurisdiction is based solely upon diversity of citizenship and there is no federal interest at issue. Defendant may obtain the broader declaratory relief that is sought in the counterclaim in another forum. In its motion to transfer this case to the MDL Panel, Defendant noted that there are several pending actions that involve largely the same issues and argued that Arkansas was the "center of gravity" for these cases. Indeed, it appears that Life Investors is currently engaged in discovery relating to health care industry billing practices in the Pipes case in the United States District Court for the Eastern District of Arkansas. See Life Investors' Response to UPCI's Motion to Quash. Further, the counterclaim was not asserted in this case until Plaintiffs filed their third complaint, long after the pleadings deadline in the case management order had expired. In summary, the Court will exercise its discretion under the Declaratory Judgment Act and declines to hear and declare the rights sought in the counterclaim. In accordance with the foregoing, PLAINTIFFS' MOTION TO DISMISS OR STRIKE DEFENDANT'S COUNTERCLAIM (Document No. 55) is GRANTED.

2. Plaintiff's Motion to Amend Caption and File Third Amended Complaint

This motion has two prongs. First, Plaintiffs seek to amend the caption to reflect the October 2, 2008 merger of Life Investors into Transamerica Life Insurance Company ("Transamerica"). More substantively, however, Plaintiffs also seek leave to file a third-amended complaint which would expand the proposed class to include persons who purchased cancer insurance policies from Transamerica, to include persons who purchased non-cancer ...


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