United States District Court, W.D. Texas, Austin Division
REPORT AND RECOMMENDATION OF THE UNITED STATES
W. AUSTIN, UNITED STATES MAGISTRATE JUDGE.
HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE
the Court are Defendant's Motion to Dismiss (Dkt. No.
30); Plaintiff's Response (Dkt. No. 34); and
Defendants' Reply (Dkt. No. 35). The District Court
referred the above motion to the undersigned Magistrate Judge
for a report and recommendation pursuant to 28 U.S.C. §
636(b) and Rule 1(c) of Appendix C of the Local Rules.
& Hearing brings this case against Blue Cross and Blue
Shield of Texas (“BCBSTX”) alleging violations of
the Texas Insurance Code, Texas Administrative Code, Texas
Business & Commercial Code, and Texas common law. Ears
& Hearing provides hearing screening services for
newborns. BCBSTX sells private insurance plans known as
Preferred Provider Organization plans (“PPOs”).
Preferred providers are healthcare providers who have entered
into a contract with BCBSTX and have agreed on a
contractually specified reimbursement rate for services
provided to BCBSTX insureds. By contrast, non-preferred
providers have not entered into any contractual relationship
feature of PPOs is that insureds retain the right to seek
medical care from non-preferred providers, however, insureds
who choose to seek medical care from a non-preferred provider
may be responsible for paying a higher percentage of the
provider's fee than they would for a preferred provider.
Ears & Hearing is a non-preferred provider and claims to
have treated patients insured by BCBSTX. However, Ears &
Hearing alleges that BCBSTX has failed to provide proper
reimbursement for these services, in violation of the Texas
Insurance Code and Texas Administrative Code. Ears &
Hearing contends that, although it is a non-preferred
provider, it is entitled to be reimbursed at the same rate as
a preferred provider for certain services it performs because
several of the areas it serves do not have a preferred
provider available to render the services. In addition, Ears
& Hearing asserts that BCBSTX's failure to properly
pay certain claims constitutes an unfair claim settlement
practice in violation of Chapter 542 Subchapter A of the
Texas Insurance Code and a violation of the Prompt Payment of
& Hearing further alleges that it attempted to enter into
a preferred provider contract with BCBSTX but was offered a
reimbursement rate that is 90% below its usual fee for its
services. Based on these facts, Ears & Hearing asserts
that BCBSTX has unreasonably prevented Ears & Hearing
from being designated a preferred provider in violation of
Texas Insurance Code section 1301. In addition, Ears &
Hearing alleges that BCBSTX's actions constitute an
unfair or deceptive trade practice in violation of Chapter
541 Subchapter B of the Texas Insurance Code and the
Deceptive Trade Practices Act.
& Hearing initially filed suit in Travis County District
Court, anf BCBSTX removed it to this Court. BCBSTX now moves
to dismiss Ears & Hearing's First Amended Complaint
pursuant to Fed. R. Civ. P 12(b)(6).
Rule of Civil Procedure 12(b)(6) allows a party to move to
dismiss an action for failure to state a claim upon which
relief can be granted. Fed.R.Civ.P. 12(b)(6). In deciding a
Rule 12(b)(6) motion to dismiss for failure to state a claim,
“[t]he court accepts all well-pleaded facts as true,
viewing them in the light most favorable to the
[nonmovant].” In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal
quotation marks omitted), cert. denied, 552 U.S.
complaint attacked by a Rule 12(b)(6) motion does not need
detailed factual allegations in order to avoid dismissal, the
plaintiff's factual allegations “must be enough to
raise a right to relief above the speculative level.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). The Supreme Court has explained that a court need not
accept as true conclusory allegations or allegations stating
a legal conclusion. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“mere conclusions[ ] are not entitled to
the assumption of truth.”). A complaint must contain
sufficient factual matter “to state a claim to relief
that is plausible on its face.” Id. (quoting
Twombly, 550 U.S. at 570). “A claim has facial
plausibility when the [nonmovant] pleads factual content that
allows the court to draw the reasonable inference that the
[movant] is liable for the misconduct alleged.”
Rule of Civil Procedure 9(b) imposes a heightened pleading
requirement for allegations of fraud or mistake and requires
a party that alleges fraud or mistake to “state with
particularity the circumstances constituting fraud or
mistake.” Fed.R.Civ.P. 9(b). “To plead fraud
adequately, the plaintiff must ‘specify the statements
contended to be fraudulent, identify the speaker, state when
and where the statements were made, and explain why the
statements were fraudulent.' ” Sullivan v. Leor
Energy, LLC, 600 F.3d 542, 551 (5th Cir. 2010).
“Rule 9(b) requires, at a minimum, that a plaintiff set
forth the who, what, when, where, and how of the alleged
fraud.” U.S. ex rel. Steury v. Cardinal Health,
Inc., 625 F.3d 262, 266 (5th Cir. 2010) (citations and
internal quotation marks omitted).
district courts have consistently applied Rule 9(b)'s
heightened pleading standard to claims under the Texas
Insurance Code and Deceptive Trade Practices Act. Bige,
Inc. v. Penn-America Ins. Co., 1-15-CV-292 RP, 2015 WL
5227726, at *4 (W.D.Tex. Sept. 8, 2015); see also DiNoto
v. USAA Cas. Ins. Co., Civil Action No. H-13-2877, 2014
WL 4923975, at *6 (S.D.Tex. Sept.30, 2014) (plaintiff's
Tex. Ins. Code and DTPA claims subject to 9(b) pleading
standard); Shakeri v. ADT Sec. Services, Inc., 2014
WL 5780955, at *3 (N.D.Tex. Nov. 6, 2014) (applying 9(b)
pleading standard to plaintiff's DTPA claim).
Accordingly, the Rule 9(b) pleading standard applies to Ears
& Hearing's claims of misrepresentation under the
Texas Insurance Code and DTPA.
Breach of Contract Claim
diversity case such as this one, the court must apply state
substantive law. Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78 (1938); Ashland Chem. Inc. v. Barco Inc., 123
F.3d 261, 265 (5th Cir. 1997). To prevail on a breach of
contract claim in Texas, the plaintiff must establish the
following elements: (1) the existence of a valid contract,
(2) performance or tendered performance by the plaintiff, (3)
a breach of the contract by the defendant, and (4) damages
caused to the plaintiff by the defendant's breach.
Mullins v. TestAmerica, Inc., 564 F.3d 386, 418 (5th
Cir. 2009); Aguiar v. Segal, 167 S.W.3d 443, 450
(Tex.App.-Houston [14th Dist.] 2005). This Court and other
district courts throughout the Fifth Circuit have
consistently held that “a plaintiff must identify a
specific provision of the contract that [the defendant]. . .
allegedly breached.” Jane Doe 12 v. Baylor
Univ., 336 F.Supp.3d 763, 789 (W.D.Tex. 2018);
Bedgood v. Nissan N. Am., Inc, A-16-CA-00281-SS,
2016 WL 3566689, at *5 (W.D.Tex. June 24, 2016). However,
while a plaintiff must allege sufficient facts to show that
he or ...