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Universal American Corp. v. Partners Healthcare Solutions Holdings, L.P.

United States District Court, D. Delaware

July 24, 2014

UNIVERSAL AMERICAN CORP., Plaintiff,
v.
PARTNERS HEALTHCARE SOLUTIONS HOLDINGS, L.P., GTCR GOLDER RAUNER II, L.L.C., GTCR PARTNERS IX, L.P., GTCR FUND IX/A, L.P., GTCR FUND IX/B, L.P., GTCR CO-INVEST III, L.P., DAVID KATZ, GREGORY SCOTT, JEROME VACCARO, and JOHN McDONOUGH, Defendants

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[Copyrighted Material Omitted]

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Blake Rohrbacher, Esq., RICHARDS, LAYTON & FINGER, P.A., Wilmington, DE; Andrew J. Levander, Esq. (argued), DECHERT LLP, New York, NY; Linda C. Goldstein, Esq., DECHERT LLP, New York, NY; Paul C. Kingsbery, Esq., DECHERT LLP, New York, NY, Attorneys for Plaintiff Universal American Corp.

Jon E. Abramczyk, Esq., MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, DE; Scott A. McMillin, Esq. (argued), KIRKLAND & ELLIS LLP, Chicago, IL; Richard U.S. Howell, Esq., KIRKLAND & ELLIS LLP, Chicago, IL, Attorneys for Defendants Partners Healthcare Solutions Holdings, L.P., et al.

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MEMORANDUM OPINION

Richard G Andrews, U.S. District Judge.

Before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint (D.I. 17) filed on December 23, 2013. The motion is fully briefed (D.I. 18, 21 & 26) and oral argument was held on May 23, 2014. For the reasons that follow, the Court will grant the Defendants' motion to dismiss Counts I-VI and VIII, with leave to amend.

I. BACKGROUND

This dispute arises out of a merger between plaintiff Universal American Corporation (" Universal" ) and Partners Healthcare Solutions, Inc. (" APS" ). Universal provides insurance and health benefits mainly to enrollees in the federal Medicare program. (D.I. 1, ¶ 22). APS offers specialty health care solutions that enable its customers, primarily state Medicaid agencies, to improve the quality of care and decrease costs. These services include case management and care coordination, clinical quality and utilization review, and behavioral health services. ( Id., ¶ ¶ 23-24).

APS's post-merger performance fell substantially short of both parties' expectations. Universal claims this was due to an organized fraud scheme, and Universal filed suit against the individuals and entities that it claims were in charge of APS. Prior to the merger, APS was a portfolio company of GTCR, a private equity firm. David Katz is a Managing Director of GTCR, which is the general partner of GTCR Co-Invest and GTCR Partners IX. GTCR Partners IX, in turn, is the general partner of GTCR Fund IX/A and GTCR Fund IX/B.[1] GTCR Co-Invest, GTCR Fund IX/A, and GTCR Fund IX/B are all

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limited partners of APSLP,[2] a Delaware limited partnership that was formed to hold APS. The leadership of APS was organized as follows: Gregory Scott served as the CEO, Jerome Vaccaro was the President and COO, and John McDonough acted as the CFO. ( Id., ¶ ¶ 13-15). McDonough, Scott, and Vaccaro [3] are all named defendants in this case, and served as limited partners of APSLP. Defendants Katz and Scott also sat on APS's five-member board.

Universal asserts nine counts ranging from securities fraud and common law fraud to aiding and abetting and unjust enrichment. The Defendants have moved to dismiss the Complaint in its entirety for failure to state a claim upon which relief can be granted. (D.I. 17). Each count will be addressed in order.

II. LEGAL STANDARD

When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the Complaint's factual allegations as true. See Bell A. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Rule 8(a) requires " a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a " formulaic recitation" of the claim elements. Id. (" Factual allegations must be enough to raise a right to relief above the speculative level . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." ). Moreover, there must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The facial plausibility standard is satisfied when the complaint's factual content " allows the court to draw the reasonable inference that the defendant is liable for the misconduct ...


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