Blue Cross Blue Shield Response

7/23/2019 Blue Cross Blue Shield Response

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1412725.1

IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA

MANAGED HEALTH CARE

ADMINISTRATION, INC. and ALABAMA

PSYCHIATRIC SERVICES, P.C.,

Plaintiffs,

v.

BLUE CROSS BLUE SHIELD OF

ALABAMA; et al.,

Defendants.

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Case No.: 2015-cv-901979.00

BLUE CROSS BLUE SHIELD OF ALABAMA’S ANSWER AND DEFENSES TOPLAINTIFFS’ FIRST AMENDED AND RESTATED COMPLAINT

Defendant Blue Cross Blue Shield of Alabama (“Blue Cross”) responds to the individual

allegations of Plaintiffs Managed Health Care Administration, Inc.’s (“MHCA”) and Alabama

Psychiatric Services, P.C.’s (“APS”) (collectively, MHCA and APS are referred to herein as

“Plaintiffs”) First Amended and Restated Complaint (utilizing the headings of Plaintiffs’ First

Amended and Restated Complaint for the sake of clarity, though not adopting them) as follows:

PARTIES

1. Admitted.

2. Admitted.

3. Answering the allegations of Paragraph 3, Blue Cross admits that it is a non-profit

corporation organized under Alabama law to provide a health care service plan to subscribers.

Blue Cross admits that it does business in Jefferson County, Alabama. Any allegation of

Paragraph 3 inconsistent with the foregoing is denied.

JURISDICTION AND VENUE

4. Answering the allegations of Paragraph 4, Blue Cross admits that Defendant’s

11/23/2015 4:27 PM01-CV-2015-901979.00CIRCUIT COURT OF

JEFFERSON COUNTY, ALABAMANNE-MARIE ADAMS, CLERK



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purport to fictitiously describe other defendants, but denies that their identities or status as proper

defendants is unknown to Plaintiffs. Blue Cross further denies that it is responsible for the

conduct under the theories listed in this paragraph. Any allegation of Paragraph 4 inconsistent

with the foregoing is denied.

5. Blue Cross admits that this Court has personal jurisdiction over Blue Cross, but

denies the allegations of Paragraph 5.

ALLEGATIONS OF FACT

6. Blue Cross admits that venue is proper.

7.

Answering the allegations of Paragraph 7, Blue Cross admits that at times

pertinent to Plaintiffs’ claims, Blue Cross utilized the provider networks owned by MHCA and

its wholly owned subsidiary, APS, to provide networks of providers and that portions of the

pertinent times, to manage Behavioral Health Services for Blue Cross subscribers in Alabama.

Any allegation of Paragraph 7 not expressly admitted herein or inconsistent with the foregoing is

denied.

8.

Denied.

9. Denied as alleged, except that Blue Cross admits APS operates specialty

programs for chemical dependency and eating disorders.

10. Denied as alleged, except that Blue Cross admits that it paid APS on a capitation

basis and that while some Blue Cross executives may have held the personal opinion that APS

was a pillar of success, at times pertinent to this Complaint APS was no longer a pillar of

success.

11. Answering the allegations of the first sentence of Paragraph 11, Blue Cross

admits that one of its behavioral health products is known as EPS. Blue Cross admits the



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remaining allegations of Paragraph 11 except the last sentence, which Blue Cross denies as

alleged.

12. Denied as alleged.

13. Answering the allegations of the first sentence of Paragraph 13, Blue Cross denies

the first sentence of paragraph 13 as alleged, but it admits that MHCA owns a fee for service

network that provides services to subscribers of a product that Blue Cross markets under the

name Blue Choice® Behavioral Health Network. Blue Cross denies that MHCA owns the name

Blue Choice® Behavioral Health Network. Blue Cross denies the allegations of the second

sentence of Paragraph 13 as alleged. Any allegation of paragraph 13 inconsistent with the

foregoing is denied.

14. Answering the allegations of Paragraph 14, the allegations of this paragraph lack

the specificity necessary to permit a response, therefore, Blue Cross denies the allegations of

Paragraph 14.


16.

Denied as alleged.

17. Answering the allegations of Paragraph 17, Blue Cross admits that it entered an

Administrative Services Agreement with New Directions, which document speaks for itself.

Blue Cross admits that to minimize disruption in services to its subscribers, Blue Cross requested

that New Directions utilize MHCA/APS’s provider network. Blue Cross admits that New

Directions and MHCA negotiated and signed the Sub-Delegation Agreement. Any allegation of


18. Answering the allegations of Paragraph 18, Blue Cross admits that in April 2013,

MHCA/APS were advised that approximately half of the members covered under the capitated



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benefit managed by MHCA would be shifted over to the fee for service benefit managed by

MHCA during 2014. All other allegations of Paragraph 18 are denied. Any allegation of



20. Denied.

21. Answering the allegations of Paragraph 21, Blue Cross admits that MHCA and

New Directions signed the Sub-Delegation Agreement on October 1, 2013. Blue Cross denies

the remaining allegations of Paragraph 21.

22.

Denied as alleged.

23. Denied as alleged. This paragraph contains an allegation that impermissibly

refers to settlement negotiations and is due to be stricken.




PLAINTIFFS’ CLAIMS

Fraudulent Misrepresentations and Suppression of Material Facts

27. Blue Cross incorporates its responses to Paragraphs 1 through 26.

28. Denied.

29. Denied.

Fraudulent Misrepresentations

30. Denied.

31. Denied.

32. Denied.



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33. Denied.

34. Denied.

35. Answering the allegations of Paragraph 35, Blue Cross admits that Plaintiff seeks

such damages but denies that Plaintiffs are entitled to recover such damages.

Fraudulent Suppression

36. Denied.

37. Denied.

38. Denied.

39.

Denied.



Breach of Implied Contract


42. Denied.

43.

Denied.

44. Denied.

45. Denied.



Promissory Estoppel


48. Denied.

49. Denied.



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50. Denied.

51. Denied.

52. Denied.

53. Denied.

54. Answering the allegations of Paragraph 54, Blue Cross admits that Plaintiffs seek


Fictitious Defendants

55. Answering the allegations of Paragraph 55, Blue Cross admits that Defendants





56. Answering the allegations of Paragraph 56, Blue Cross admits that Defendants





57. Answering the allegations of Paragraph 57, Blue Cross denies that Plaintiffs are

entitled to any compensatory or other damages.

58. Denied.

DEMAND FOR RELIEF

59. This allegation impermissibly refers to settlement negotiations and is due to be

stricken.



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UNLESS EXPRESSLY ADMITTED IN ONE OF THE FOREGOING PARAGRAPHS,

ALL MATERIAL ALLEGATIONS OF PLAINTIFF’S FIRST AMENDED AND

RESTATED COMPLAINT, INCLUDING BUT NOT LIMITED TO ANY CONTAINED

IN UNNUMBERED PARAGRAPHS, ARE DENIED.

BLUE CROSS FURTHER DENIES THAT PLAINTIFFS ARE ENTITLED TO ANY OFTHE RELIEF REQUESTED, OR ANY RELIEF WHATSOEVER, FROM BLUE CROSS.

DEFENSES OF BLUE CROSS

First Defense

Each count of Plaintiffs’ First Amended and Restated Complaint fails to state a claim

upon which relief can be granted.

Second Defense

Blue Cross pleads lack of consideration.

Third Defense

Blue Cross pleads lack of privity of contract.

Fourth Defense

Blue Cross pleads the defense of the Statute of Frauds.

Fifth Defense

Blue Cross pleads the defense of failure of the meeting of the minds.

Sixth Defense

Blue Cross avers that Plaintiffs are not entitled to any of the relief requested, or to any

relief whatsoever, from Blue Cross based on any contract, implied contract, and/or theory of

contract law.



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Seventh Defense

Plaintiffs’ fraud-based counts (i.e., Plaintiffs’ claims for “Fraudulent Misrepresentations

and Suppression of Material Facts,” “Fraudulent Misrepresentations,” and “Fraudulent

Suppression”) fail as insufficiently pled pursuant to Alabama Rule of Civil Procedure 9(b).

Eighth Defense

Blue Cross avers that Plaintiffs’ count for “Fraudulent Misrepresentations and

Suppression of Material Facts” is impermissibly duplicative of their counts for “Fraudulent

Misrepresentations” and “Fraudulent Suppression;” Plaintiffs may not pursue or recoup any

measure of “double recovery” of damages from Blue Cross.

Ninth Defense

Blue Cross did not owe any duty to Plaintiffs in regards to any of the allegations made

the bases of this action. Alternatively, Blue Cross avers that it did not breach any duty owed to

Plaintiffs.

Tenth Defense

Any damages that Plaintiffs may have suffered were the direct or proximate result of the

acts or omissions of Plaintiffs and/or third parties.

Eleventh Defense

Blue Cross avers that Plaintiffs caused their alleged damages and/or that Plaintiffs’

alleged damages were the result of an independent, unforeseeable, intervening, and/or

superseding cause.

Twelfth Defense

Plaintiffs have failed to mitigate their damages, if any.



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Thirteenth Defense

Some or all of Plaintiffs’ claims are barred by the doctrines of waiver, estoppel, accord

and satisfaction, ratification, laches, consent, release, unclean hands, and/or acquiescence.

Fourteenth Defense

Plaintiffs’ First Amended and Restated Complaint, in whole or in part, fails due to lack of

standing.

Fifteenth Defense

To the extent Plaintiffs’ fraud-based counts (i.e., Plaintiffs’ claims for “Fraudulent

Misrepresentations and Suppression of Material Facts,” “Fraudulent Misrepresentations,” and

“Fraudulent Suppression”) seek damages relating to alleged conduct that occurred prior to May

15, 2013, such claims are barred by the applicable statute of limitations.

Sixteenth Defense

To the extent Plaintiffs’ promissory estoppel count seeks damages relating to alleged

conduct that occurred prior to May 15, 2013, such claim is barred by the applicable statute of

limitations.

Seventeenth Defense

In the response to Plaintiffs’ count for “Implied Contract,” Blue Cross pleads the defense

of the applicable statute of limitations.

Eighteenth Defense

Blue Cross avers that Plaintiffs may not pursue claims sounding in tort or implied

contract where such claims depend on the existence of a contract between Blue Cross and

Plaintiffs and where no such underlying, applicable contract exists between Plaintiffs and Blue

Cross.



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Nineteenth Defense

Plaintiffs are not entitled to any award of punitive damages, and Blue Cross asserts that to

the extent punitive damages are claimed by Plaintiffs:

A. Awarding punitive damages against Blue Cross in this case would violate

the constitutional safeguards afforded to it under the Constitution of the State of Alabama;

B. Awarding punitive damages in this case would violate the constitutional

safeguards afforded to Blue Cross under the Constitution of the United States;

C. Awarding punitive damages in this case would violate the constitutional

safeguards afforded to Blue Cross under the Due Process Clause of the Fourteenth Amendment

to the Constitution of the United States in that punitive damages are vague, excessive, not

rationally related to any legitimate governmental interest, not appropriate under the facts in this

case, and cannot be constitutionally imposed;

D. Awarding punitive damages in this case would violate Article 1, Section 6,

of the Constitution of the State of Alabama, which provides that no person shall be deprived of

life, liberty or property except by due process of law, in that punitive damages are vague,

excessive, not rationally related to any legitimate governmental interests, not appropriate under

the facts in this case, and cannot be constitutionally imposed;

E. Awarding punitive damages in this case would violate the procedural

safeguards provided to Blue Cross under the Sixth Amendment to the Constitution of the United

States in that punitive damages are penal in nature, and, consequently, Blue Cross is entitled to

the same procedural safeguards accorded to criminal parties under the Constitution of the United

States and under the Constitution of the State of Alabama;



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F. Imposing punitive damages, which are penal in nature, against Blue Cross

and compelling Blue Cross to testify and disclose potentially incriminating documents into

evidence violates the Self-Incrimination Clause of the Fifth Amendment to the Constitution of

the United States;

G. Imposing punitive damages, which are penal in nature, against Blue Cross

and compelling Blue Cross to disclose potentially incriminating documents into evidence

violates Article 1, Section 6, of the Constitution of the State of Alabama;

H. Imposing punitive damages, which are penal in nature, against Blue Cross

and placing a burden of proof on Plaintiffs which is less than the “beyond a reasonable doubt”

burden of proof required in criminal cases violates the rights guaranteed by the Constitution of

the United States and the Constitution of the State of Alabama;

I. Imposing punitive damages in an excessive amount, under the

circumstances of this case, and/or in excess of criminal fines which could be imposed for the

same conduct, would be discriminatory, a deprivation of due process, and a violation of equal

protection rights guaranteed by the Fourteenth Amendment to the Constitution of the United

States and Article 1, Sections 1, 6, and 22 of the Constitution of the State of Alabama;

J. Any punitive damages claimed by Plaintiffs violate the Excessive Fines

Clause of the Eighth Amendment to the United States Constitution;

K. Allowing the imposition of private civil fines against Blue Cross violates

the Separation of Powers doctrine embodied by Article I, Section 1, Article II, Section 1, and

Article III, Section 1 of the Constitution of the United States and Sections 43 and 44 of the

Constitution of the State of Alabama;



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L. Blue Cross asserts that under any circumstances punitive damages should

not exceed those listed in Alabama Code § 6-11-21;

M. Blue Cross asserts that it is not liable for punitive damages based on the

alleged acts or omissions of an agent, employee or servant under the provisions listed in

Alabama Code § 6-11-27;

N. Plaintiffs’ claims for punitive damages violates Blue Cross’s right to due

process and equal protection of the law as guaranteed by the United States Constitution and the

Alabama Constitution because the procedure for post-trial review of punitive damages set forth

in Hammond v. City of Gadsden and Green Oil Company v. Hornsby are unconstitutionally

vague and inadequate in the following respects:

1. The Hammond and Green Oil procedure provides no clearly

defined standard for courts to apply in reviewing punitive damages;

2. The Hammond and Green Oil procedure provides inadequate

review as to the need to deter, whether deterrence has been accomplished, and whether

punishment is appropriate for Blue Cross;

3. The Hammond and Green Oil procedure provides inadequate

review and a vague standard regarding the relationship of the punitive damage award to the

harm;

4. The Hammond and Green Oil procedure does not address or cure

the lack of guidelines given regarding the assessment of punitive damages;

5. The Hammond and Green Oil procedure is inadequate in that the

trial court, according to Hammond and Green Oil , “may” take certain factors into account and,



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thus, this procedure lacks predictable and objective standards of review, permits for inconsistent

application of the factors, and invites unpredictable and inconsistent results;

6. The Hammond and Green Oil procedure fails to provide definite

and meaningful constraints in awarding punitive damages;

7. The Hammond and Green Oil procedure does not constitute the de

novo review mandated by the U.S. Supreme Court; and

8. The Hammond and Green Oil procedure does not satisfy the

requirements of Philip Morris USA v. Williams, 127 S. Ct. 1057 (2007).

O. Any admission of evidence of conduct relating to non-parties to this

lawsuit violates the right to due process and equal protection of the law as guaranteed by the

United States Constitution and the Alabama Constitution; and

P. Blue Cross pleads the constitutional limitations on punitive damages set

forth in BMW of North America v. Gore, 517 U.S. 559 (1996); State Farm Mut. Auto. Ins. Co. v.

Campbell , 538 U.S. 408 (2003); Philip Morris USA v. Williams, 549 U.S. 346 (2007); and Exxon

Shipping Company v. Baker , 128 S. Ct. 2605 (2008).

Twentieth Defense

Blue Cross generally denies all material allegations of Plaintiffs’ First Amended and

Restated Complaint and demands strict proof thereof.

Twenty-First Defense

Blue Cross expressly reserves the right to amend this Answer and Defenses to assert any

additional defenses as may become available or apparent during the course of discovery.

/s/ Cavender C. KimbleOne of the Attorneys for Defendant,

Blue Cross Blue Shield of Alabama



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OF COUNSEL:

Cavender C. Kimble

Thomas R. DeBray, Jr.

Kimberly L. BellBALCH & BINGHAM, LLP

1901 6th Avenue North, Suite 1500

Birmingham, Alabama 35203Telephone: (205) 251-8100

CERTIFICATE OF SERVICE

I hereby certify that I have electronically filed the foregoing with the Clerk of the Court

using the AlaFile system which will send notification of such filing to the following counsel of

record, on this the 23rd day of November, 2015:

P. Michael Yancey

J. Matthew Stephens

Rodney E. MillerMCCALLUM, METHVIN & TERRELL, P.C.

2201 Arlington Avenue South

Birmingham, Alabama 35205

Telephone: (205) 939-0199

/s/ Cavender C. KimbleOf Counsel

Blue Cross Blue Shield Response

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