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Excel Pharmacy Services, LLC v. Liberty Mutual Insurance Co.

United States District Court, E.D. Pennsylvania

September 12, 2019

EXCEL PHARMACY SERVICES, LLC, Individually and on behalf of all others similarly situated Plaintiff,


          RUFE, J.

         Plaintiff Excel Pharmacy Services, LLC (“Excel”), acting on behalf of a proposed class, filed this action in the Philadelphia Court of Common Pleas against Defendants Liberty Mutual Insurance Company and related entities (collectively “Liberty Mutual”). Defendants removed the action to this Court. Excel alleges that Liberty Mutual engaged in a systemic, years-long pattern of conduct in violation of the Pennsylvania Workers' Compensation Act (“WCA”)[1] and Unfair Insurance Practices Act (“UIPA”)[2] by refusing to reimburse Excel and the members of the proposed class for prescribed pharmaceuticals dispensed to injured workers. Excel seeks a declaratory judgment that these actions violated the WCA and UIPA, injunctive relief, and an accounting. Moving Defendants seek dismissal of the action, arguing that WCA claims must be pursued under the administrative process set forth in the statute and that there is no private right of action under the UIPA.[3]


         Under Federal Rule of Civil Procedure 12(b)(6), dismissal of a complaint for failure to state a claim upon which relief can be granted is appropriate where a plaintiff's “plain statement” lacks enough substance to demonstrate that he is entitled to relief.”[4] In determining whether a motion to dismiss should be granted, the court must consider only those facts alleged in the complaint, accepting the allegations as true and drawing all logical inferences in favor of the non-moving party.[5] Courts are not, however, bound to accept as true legal conclusions framed as factual allegations.[6] Something more than a mere possibility of a claim must be alleged; a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.”[7] The complaint must set forth “direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory.”[8]


         A. Count I: The WCA

         In Pennsylvania, “[t]he work[er]'s compensation system encompasses all disputes over coverage and the payment of benefits, whether they arise from actions taken by the employer, the employer's insurance carrier, or the insurance carrier's employees or agents.”[9] The statute and accompanying regulations set forth the procedures to be followed when a medical provider disputes the amount or timeliness of payment from an insurer. An application for fee review is filed with the Pennsylvania Department of Labor & Industry, Bureau of Workers' Compensation (the “Bureau”), which renders a decision within 30 days.[10] An adverse ruling may be contested and is assigned to a hearing officer for a de novo review; that decision then may be appealed to Pennsylvania Commonwealth Court.[11]

         Excel alleges in the Complaint that it “has submitted a myriad of petitions for Fee Review to the [Bureau] in connection with these disputes” but that “even when a Hearing Officer has ordered reimbursement, ” Liberty Mutual has refused to pay and “is improperly utilizing the administrative process to delay payment” to Excel, causing Excel to incur additional costs.[12] It seeks to represent a proposed class of providers that “were denied proper reimbursement in whole or in part by Defendants, contrary to the WCA and/or its applicable regulations.”[13]

         It is undisputed that under Pennsylvania law, the question of whether or not reimbursement is proper is reserved to the Bureau. However, Excel alleges that its claims “are not properly within the jurisdiction of these [sic] WCA's processes.”[14] This argument appears to rest on Excel's allegation that Liberty's actions “raise significant questions regarding the continued validity of the WCA's statutory framework (i.e., if [Defendants are] able to violate the WCA with repeated impunity, the enforcement mechanisms in the WCA would be rendered futile).”[15] Thus, Excel argues that it should be able to challenge Liberty Mutual's actions away from the administrative process.

         “The doctrine of exhaustion of administrative remedies is intended to prevent the premature interruption of the administrative process, which would restrict the agency's opportunity to develop an adequate factual record, limit the agency in the exercise of its expertise, and impede the development of a cohesive body of law in that area.”[16] Exhaustion is not required where the plaintiff challenges the jurisdiction of an agency, the constitutionality or validity of a statutory scheme, or where legal or equitable remedies are unavailable or inadequate or the agency cannot provide the requested relief.[17] Here, Excel does not challenge the constitutionality of the WCA, nor does it seek a judgment that the WCA is unenforceable through the process established in the statute, and in any event such an action presumably would have to be brought against the Commonwealth, not against Liberty Mutual.[18] In addition, Plaintiff has not alleged that the administrative agency cannot provide the requested relief; indeed, Excel alleges that the Bureau has ordered Liberty Mutual to provide reimbursement in various cases, and Excel may seek enforcement of such orders through the appropriate state-law mechanism.

         The declaratory judgment sought by Excel would require this Court to engage in a detailed factual evaluation of the prescriptions written, the appropriate reimbursement level, and the amounts paid by Liberty Mutual, in addition to the processes employed by Liberty Mutual. Because these factual determinations under the WCA have been reserved to the Bureau and the statutory process must be followed, there is no independent basis by which this Court may assert jurisdiction over such claims.[19]

         B. Count II: The UIPA

         The UIPA prohibits any unfair methods of competition or unfair or deceptive acts or practices in the business of insurance.[20] The statutory provisions are enforced by the Pennsylvania Insurance Commissioner who is empowered to investigate whether the UIPA has been violated, and to hold hearings and impose sanctions as warranted, as well as to seek civil penalties.[21] The UIPA does not create a private right of action, but does not preclude common law claims for fraud or for violations of the consumer protection laws.[22]

         The Complaint seeks a declaration that Liberty Mutual has violated the UIPA in 11 different ways, including failing to effectuate prompt and equitable settlements of claims, failing to affirm or deny coverage within a reasonable time period, and falsely claiming that the pharmaceutical products dispensed are not appropriately prescribed or reimbursable under the WCA.[23] “Allowing [Excel] to proceed in a declaratory judgment action with the [UIPA] as the source of the underlying substantive law is tantamount to allowing a private cause of action.”[24] The claims under the UIPA cannot be independently decided as a declaratory judgment.

         C. The ...

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