National class against Travelers whittled down courtesy of Avery

Steve Korris Nov. 8, 2007, 6:47am

Jeffrey Millar

Jeffrey Millar of the Lakin Law Firm has abandoned his plan for a national class action against Travelers Casualty and Surety.

At an Oct. 11 hearing, Millar told Madison County Circuit Judge Daniel Stack he would seek to certify a class in Illinois and maybe three or four other states.

Millar represents chiropractors Richard Coy and Frank Bemis, who allege that Travelers underpaid them for treating patients with workers compensation claims.

Coy and Bemis charge that Travelers discounted payments in exchange for a promise to steer patients to them but did not keep the promise.

They seek damages for breach of contract, though in nearly three years Millar has not proved that a contract existed.

In case he can't prove it, he has asserted alternative claims of consumer fraud, unjust enrichment and civil conspiracy.

Stack held the hearing because Travelers sought a short cut to escape a class action.

Instead of opposing class certification, Travelers moved to strike the class allegations in Millar's complaint.

Travelers also moved to dismiss.

At the hearing the insurer's attorney, Lisa Lilly of Chicago, told Stack that Travelers had no contract with Coy or Bemis.

She said Coy and Bemis had a contract with First Health stating that they should use their best efforts to refer patients to other providers in the First Health network.

"Not only does the contract not say that First Health is going to make insurers steer, it talks about steering expressly and puts that on to the providers," Lilly said.

"The only Illinois administrative code provision they cite applies to health insurance. They don't cite anything from worker's compensation because they can't."

She said that under the Illinois Supreme Court decision in Avery v. State Farm, a plaintiff alleging deception must allege that he or she was actually deceived.

"Plaintiffs haven't alleged that here," Lilly said.

She said that under Avery, a plaintiff cannot bring a breach of contract and call it consumer fraud.

"That's exactly what plaintiffs are doing," Lilly said.

"Instead of bringing a breach of contract with First Health to address that, they are here asking your honor to basically write them a different contract or impose obligations on Travelers that don't appear anywhere in a contract or the law."

She said Coy and Bemis lacked standing as consumers to allege consumer fraud.

She said that if any of their causes of action survived the motion to dismiss, their plan for a national class was inappropriate.

"You can't apply Illinois law to all the outside of Illinois class members," Lilly said.

"We are talking about class members all over the country who treated patients in their home states. The patients resided there.

"The discounts that they complain about, the injury they say they sustained, was in their home states, so the court will need to apply the law of all those states.

"You would have to look at the workers compensation laws, which is a highly regulated and very different area from state to state.

"The fraud laws differ even more."

Millar told Stack, "You hear 'nationwide class' thrown about quite a lot."

"We have already had conversations with counsel about limiting this case, frankly, to an Illinois only class, if not maybe to three or four states that are similar to it," Millar said,

"It is enough that the factual allegations are sufficiently broad in scope to plead – and this is the key – the possible existence of a class action.

"If a contract does not exist, or your honor finds that a contract does not exist, then it's a matter of well, was it a fraudulent misrepresentation to claim one existed when one didn't.

"Our position is that Illinois law allows, under the Crawley case, for contracts to contain multiple parts, and under the Hathaway case, for those contracts to incorporate each other.

"This is an example of a case where it's not sort of merely the existence of two contracts. Well, it is the existence of two contracts and they relate to the same subject matter."

He said he stated a valid breach of contract and if not, the fraud count was properly pled and there was unjust enrichment because Travelers retained the discounts.

Stack said, "What about civil conspiracy?"

Millar said, "With respect to pleading requirements, because conspiracies are by their nature shrouded in mystery, it doesn't require the same level of pleading after discovery can be had in the true nature of the conspiracy."

Robert Schmieder of the Lakin firm told Stack, "It's either going to be breach, or fraud or unjust enrichment. We are not going after both."

"Their point is, we have no standing," Schmieder said. "There is no contractual link between us, only to the extent they are stealing our clients' money.

"That is basically what Miss Lilly says, and I can say that because Miss Lilly and I used to work together at the same firm."

Lilly said, "So I know what Rob is like."

Stack said, "I think you've got enough here on the contract count. I'm going to strike the civil conspiracy count."

He told Schmieder, "I don't think you can come close to getting this a nationwide class, so plead it as whatever you are going to make it."

Schmieder asked if he couldn't just submit a class certification motion.

Stack said he needed to amend his complaint.

Stack said, "You can file your motion to certify the class but if you are already aware of the fact that you know you can't get a nationwide class –"

Schmieder said, "We are."

Stack said, "Pick what you think you can get and plead it as to that."

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