Ruling on Dismissal in Business Tort Case Against Blue Cross Changes Little

Last Friday, Judge Holly L. Teeter considered but disposed of Orchestrate HR Inc. and Vivature Inc.’s (together, Vivature) added claims that Blue Cross Blue Shield Kansas (Blue Cross) mislabeled health insurance claims it submitted as fraudulent or improper. The District of Kansas opinion cautioned that the operative complaint failed to address prior versions’ defects, “leaving the case in essentially the same position it was in November 2019.”

The complaint centers on Vivature’s partnership with universities to help them bill insurers for medical services performed by licensed athletic trainers. Vivature reportedly contracts with schools, assists them in filing insurance claims, and receives a share of the billings collected. The conflict arose when Blue Cross denied many of the claims submitted by Vivature for its university clients and began marking them as fraudulent or improper.

According to the second amended complaint, Blue Cross owes close to $6 million in unpaid claims. Vivature argues that Blue Cross fraudulently induced it to change its claims-filing practices on a promise that claims would be paid. The health insurance company then allegedly tried to avoid paying those claims by engaging in a damage campaign beginning in March 2017.

Vivature asserted that Blue Cross also fraudulently failed to disclose certain information, defamed Vivature to Washburn University and other schools, and tortiously interfered with Vivature’s contracts with Washburn University and other schools. Vivature claimed that it “suffered tens of millions of dollars in damages resulting from other (Blue Cross) entities improperly targeting Vivature in a similar manner as (Blue Cross Kansas) has done,” and asserted added claims for fraud through non-disclosure, defamation, and tortious interference with contract.

The court declined to accept Vivature’s claim of fraud by nondisclosure, finding that it was not pleaded with the requisite particularity. “At most, Vivature has alleged that Blue Cross did not disclose certain facts. But missing from the second amended complaint is the significance of these facts or why Blue Cross was obligated to disclose them,” the court wrote.

The court also rejected Vivature’s additional defamation and tortious interference with contract claims, finding the allegations too general. Judge Teeter refused to “sift through the 1500 pages of exhibits referenced to determine whether any of them support a defamation claim against Blue Cross.” As for contractual interference, the court ruled that Vivature’s allegations were neither tied to any particular contract, nor were there specific contentions that the conduct interfered with any contract.

In a concluding footnote, Judge Teeter also encouraged the parties, “at the risk of yet another round of amended pleadings and motions to dismiss,” to consider “how to best move this dispute towards resolution.”

Vivature is represented by Goodell Stratton Edmonds & Palmer LLP and Stanton LLP. Blue Cross is represented by Spencer Fane LLP.