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Wilmington Pain & Rehabilitation Center, P.A. v. USAA General Indemnity Insurance Co.

Superior Court of Delaware

October 17, 2017

WILMINGTON PAIN & REHABILITATION CENTER, P.A., on behalf of itself and all others similarly situated, Plaintiff,

          Date Submitted: September 7, 2017

         Upon Wilmington Pain & Rehabilitation Center, P.A. 's Motion for Class Certification: DENIED.

          John S. Spadaro, Esquire, John Sheehan Spadaro, LLC, Smyrna, DE, Attorney for Plaintiff.

          Sidney S. Liebesman, Esquire, Lisa Zwally Brown, Esquire, Montgomery McCracken Walker & Rhoads LLP, Wilmington, DE, Jay Williams, Esquire (pro hac vice) (argued), Paula M. Ketcham, Esquire (pro hac vice), Schiff Hardin LLP, Chicago, IL, Attorneys for Defendants.


          Jan R. Jurden, President Judge


         Wilmington Pain & Rehabilitation Center, P.A. ("WPRC") brings this putative class action against USAA General Indemnity Insurance Company and Garrison Property and Casualty Insurance Company ("USAA"), alleging that USAA has failed to pay reasonable medical expenses submitted by WPRC and other Delaware health care providers under their patients' Personal Injury Protection ("PIP") policies in violation of 21 Del. C. § 2118(a).[1] Now before the Court is WPRC's Motion for Class Certification ("Motion").[2] For the following reasons, WPRC's Motion is DENIED.


          A. The Parties and the Delaware PIP Statute

         WPRC is a Delaware professional association and outpatient care facility that specializes in physical medicine and rehabilitation.[3] It regularly treats Delaware residents for injuries suffered in automobile collisions.[4] USAA is a Texas corporation engaged in the business of insurance.[5] It regularly sells auto insurance in the State of Delaware.[6]

          Title 21, Section 2118 of Delaware Code, commonly referred to as the "Delaware PIP statute, " requires that every owner of a motor vehicle registered in Delaware must maintain specified insurance with specified minimum coverage.[7]This includes PIP coverage, defined as "[compensation to injured persons for reasonable and necessary expenses incurred within two years from the date of the accident" for medical and other related expenses.[8]

          B. USAA's Practice in Paying PIP Claims

         When a PIP policyholder submits a claim to USAA, USAA utilizes a computerized bill review system, which it calls "Reasonable Fee Methodology" ("RF System"), to determine the reasonableness of medical expenses.[9] The first step of the RF System is "benchmarking." The benchmarking step relies on a database compiled by the U.S. Department of Health and Human Services/Centers for Medicare and Medicaid Services ("CMS").[10] This database contains 1 billion records of charges billed by health care providers across the country and submitted to CMS.[11] The RF System organizes those charges in the CMS database by CPT Code, geozip, and time period.[12] It then lines them from lowest to highest and divides them into percentiles.[13] USAA uses the 80th percentile of those charges as a benchmark, which is the amount at which at least 80% of the charges are equal to or lower than. If a claim submitted by a health care provider is not higher than the 80th percentile, it would be deemed reasonable.[14]

         The second step of the RF System involves a "rounding up" rule. If a provider's charge is above the 80th percentile, in addition to paying the amount of the 80th percentile, USAA will pay an additional $10 or 5% of that 80th percentile, whichever is higher.[15] The amount calculated after "benchmarking" and "rounding up" is the final amount USAA will pay for the PIP claim, subject to the policy limits.[16]

          C. Procedural History

         WPRC filed its initial complaint in June 2015[17] and amended it in November 2015. USAA filed its answer to the amended complaint in December 2015.[18]From June 2015 to January 2016, the parties exchanged written discovery requests and responses. On October 19, 2016, after several months of no activity in the case, USAA filed a motion to dismiss for failure to prosecute.[19] Two days later, WPRC filed the instant Motion and supporting brief. On May 12, 2017, USAA filed its answering brief, and WPRC filed a reply brief on May 26, 2017. On July 21, 2017, the Court heard oral argument on the Motion.[20]

         In its amended complaint, WPRC asserts a single claim for declaratory judgment.[21] Specifically, WPRC seeks a judicial declaration that USAA, by using the RF System to determine the reasonableness of PIP claims, has wrongfully underpaid those claims in violation of 21 Del C. § 2118(a).[22] Through its Motion, WPRC seeks to certify the following class:

All care providers who, at any time since June 19, 2012, have billed medical-expense-related Delaware PIP claims to USAA, where USAA has subjected those claims to its "Reasonable Fee Methodology."[23]


         The requirements for certification of a class action are set forth in Superior Court Civil Rule 23 ("Rule 23"). When considering a motion for class certification, the Court conducts a two-step analysis. First, the proposed class must satisfy each of the four elements of Rule 23(a):

a. Numerosity: the class is so numerous that joinder of all members is impracticable;
b. Commonality: there are questions of law or fact common to the class;
c. Typicality: the claims or defenses of the representative parties are typical of the claims or defenses of the class;
d. Adequacy: the representative parties will fairly and adequately protect the interests of the class.

         Second, if the Rule 23(a) prerequisites are satisfied, the Court must determine whether the action falls within one of three categories set forth in Rule 23(b). In the instant action, WPRC seeks to certify a class under Rule 23(b)(1)(A) or Rule 23(b)(2):

Rule 23(b)(1)(A): The prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class;
Rule 23(b)(2): The party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.

         Because Rule 23 is patterned after Federal Rule of Civil Procedure 23, cases interpreting Federal Rule 23 are persuasive authority in Delaware courts.[24] When analyzing Rule 23's federal counterpart, a federal court must engage in a "rigorous analysis" in order to decide whether to certify a class.[25] This "rigorous analysis" is similarly required under Delaware Rule 23.[26] When conducting this analysis, the Court must evaluate the whole record and examine the method by which the plaintiff proposes to prove its claims on a classwide basis, [27] and may "delve beyond the pleadings to determine whether the requirements for class certification are satisfied."[28]


         A. WPRC's Standing

         In USAA's opposition to the Motion, it contends that WPRC has no right to bring the instant action.[29] Specifically, USAA argues that WPRC purports to bring this action as an assignee of its patients but the assignment forms signed by WPRC's patients are unenforceable.[30] WPRC counters by arguing that it brings this action on its own behalf and as the assignee of its patients. WPRC cites Sammons v. Hartford Underwriters Ins. Co., [31] arguing that a health care provider who submits PIP claims to its patient's auto insurer qualifies as a "claimant" under 21 Del. C. § 2118B and has a private right of action to sue for unpaid/underpaid bills.[32] At oral argument, USAA did not address Sammons or respond to WPRC's argument on standing. The Court therefore assumes that USAA has abandoned its challenge to WPRC's standing.

         B. Rule 23(a)

         a. Numerosity

         The parties do not dispute that this requirement is satisfied.

         b. Commonality

         Generally, a purported class should share at least one common question of law or fact to meet the commonality requirement.[33] At first impression, as WPRC contends, there appear to be many factual and legal questions in common, such as: Is the proposed class member a Delaware care provider? Has it sent PIP claims to USAA and have those claims been subject to the RF System? Does the RF System violate the Delaware PIP statute?[34] But commonality requires more than that.

         The United States Supreme Court elaborated at length on the commonality element in Wal-Mart Stores, Inc. v. Dukes. In that case, three Wal-Mart female employees sought to certify a class consisting of all women employed at Wal-Mart retail stores who had been subjected to Wal-Mart's pay and promotion policies and practices.[35] They alleged that Wal-Mart's "uniform corporate culture" permitted discrimination against women when its managers exercised their discretionary power in making promotion and pay decisions.[36] The Supreme Court recognized in Dukes that "any competently crafted class complaint literally raises common 'questions'."[37] In Dukes, the purported common questions included, "Do all of us plaintiffs indeed work for Wal-Mart? Do our managers have discretion over pay? Is that an unlawful employment practice?"[38] The Supreme Court held that merely reciting these questions was not sufficient to establish commonality.[39] It further explained that commonality requires that the class members have all "suffered the same injury" which generated claims that can "productively be litigated at once."[40]Their claims must "depend upon a common contention" which must be "capable of classwide litigation."[41] Namely, the determination of that contention will "resolve an issue that is central to the validity of each one of the claims in one stroke."[42]

         WPRC contends that the one central claim common to all class members is whether U.S. AA, by applying the RF System to determine the reasonableness of PIP claims, fails to pay the reasonable medical expenses required under 21 Del. C. § 2118.[43] The Court finds that this claim cannot be resolved on a classwide basis. Under Delaware law, in order to prove an insurer's payment violates 21 Del. C. § 2118, the burden lies on the plaintiff to show the incurred medical expenses are "reasonable and necessary."[44] As noted by USAA, this is a factual determination and requires a particularized assessment of individual issues, for example, each plaintiffs injuries, treatment, and medical bills.[45]

         WPRC argues that the crux of this action is not about whether each plaintiffs charges are reasonable, but whether the amounts USAA ultimately paid are unreasonable.[46] But this cannot be resolved on a classwide basis either. The RF System calculates and determines a benchmark amount for each CPT code based upon geozip and time period. The PIP claims submitted by each putative class member presumptively contain medical procedures with different CPT codes, and the procedures presumptively have occurred at different times and in different geographic locations. It appears WPRC intends to prove that there is an objectively reasonable amount (or a range of amounts) for each CPT code within a specific geozip and time period, and every single benchmark amount calculated by the RF System is lower than that objectively reasonable amount. But WPRC has not offered or provided a convincing plan to prove that on a classwide basis.

          WPRC proposes three ways to prove its claim: (1) evidence that a number of other insurance companies pay WPRC the full amount charged for the same treatments for which USAA claims a discount; (2) USAA's business records which show that WPRC's charges are lower to those of the Delaware medical community; and (3) nonparty discovery about the fees charged by other prolific Delaware medical service providers.[47] With respect to the first mode of proof, it only concerns what other insurers pay for WPRC's own PIP claims. Without corresponding evidence regarding other class members' PIP claims, it has little probative value in a classwide trial where WPRC needs to demonstrate that the amounts USAA pays other class members are also unreasonable. As to the other two modes of proof, although WPRC says it would obtain and present at trial evidence regarding other Delaware providers' charges, WPRC has not submitted any such evidence. WPRC also does not explain how it intends to conduct such discovery, which supposedly will cover a huge number of Delaware doctors and medical facilities and seeks to obtain information about their charges for numerous ...

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