CZ Services, Inc. v. Anthem Insurance Companies, Inc. ( 2022 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CZ SERVICES, INC., et al., Case No. 19-cv-04453-JD 8 Plaintiffs, SECOND ORDER RE PERSONAL 9 v. JURISDICTION 10 ANTHEM INSURANCE COMPANIES, Re: Dkt. Nos. 110, 111 INC., et al., 11 Defendants. 12 13 This order resolves defendants’ motions to dismiss the Second Amended Complaint (SAC) 14 of plaintiffs CZ Services, Inc., d/b/a CareZone Pharmacy, CareZone Pharmacy LLC (CZ), for lack 15 of specific personal jurisdiction. Dkt. Nos. 104-4 (SAC); 110, 111 (motions).1 The Court 16 dismissed the prior complaint for the same shortfall, and allowed the parties to conduct limited 17 discovery targeted to the jurisdictional question. See Dkt. Nos. 77, 99. The amended allegations 18 in the SAC demonstrate that discovery did not yield facts showing that CZ’s claims arise out of or 19 relate to defendants’ contacts or conduct within California. See Dkt. No. 77 at 2. Consequently, 20 the SAC is dismissed without prejudice, and the case will be closed. 21 Before getting to the main event, a word about defendants’ failure to follow the Court’s 22 order is warranted. The Court expressly advised defendants that they could file a post-discovery 23 “motion challenging the adequacy of the amended jurisdictional allegations,” and that “[n]o other 24 grounds for dismissal will be taken up.” Dkt. No. 99. Even so, Anthem and Blue Cross and Blue 25 Shield of Kansas City (BCBSKC) made lengthy arguments for dismissal on non-jurisdictional 26 27 1 The citations to the SAC are to an unredacted version the parties filed under a request to seal. 1 grounds under Rule 12(b)(6), without the Court’s prior approval. See Dkt. No. 110 at 6-15. Those 2 arguments are stricken from the docket under Rule 41(b), and were not considered by the Court. 3 The parties’ familiarity with the record is assumed, and the discussion in the prior 4 dismissal order is incorporated here. The Court has detailed the standards governing the pleading 5 of personal jurisdiction in several other decisions. See, e.g., Sharpe v. Puritan’s Pride, Inc., No. 6 16-cv-06717-JD, 2019 WL 188658 at *4-5 (N.D. Cal. Jan. 14, 2019); Zithromia Ltd. v. Gazeus 7 Negocios De Internet SA., No. 3:17-cv-06475-JD, 2018 WL 6340875 at *2-3 (N.D. Cal. Dec. 5, 8 2018). As the Supreme Court recently summarized, specific personal jurisdiction requires that: (1) 9 a defendant must purposefully avail itself of the privilege of conducting activities within the forum 10 state; and (2) a plaintiff’s claims must arise out of or relate to the defendant’s contacts with the 11 forum state. See Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1019 (2021). 12 It is certainly true that specific personal jurisdiction does not require “a strict causal 13 relationship between the defendant’s instate activity and the litigation.” Id. at 1026. But it also 14 true that this “does not mean anything goes,” and that “the phrase ‘relate to’ incorporates real 15 limits, as it must to adequately protect defendants foreign to a forum.” Id. General business 16 contacts that defendants might have had in California will not in themselves give rise to specific 17 personal jurisdiction. See Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco 18 Cnty., 137 S. Ct. 1773, 1781 (2017). Rather, the SAC must plausibly allege that the claims relate 19 to defendants’ conduct within California. See Morrill v. Scott Fin. Corp., 873 F.3d 1136, 1145 20 (9th Cir. 2017); Puritan's Pride, Inc., 2019 WL 188658, at *4; Zithromia Ltd., 2018 WL 6340875, 21 at *3. 22 For the first element in Ford, the SAC adequately alleges purposeful availment in 23 California. According to the SAC, defendants market insurance within California and cover 24 Californians through their health insurance plans. Dkt. No. 104-4 ¶¶ 12-20. Defendants do not 25 contest that they insure individuals in California and have provided services there, but dispute the 26 relevance of those services. Dkt. No. 110 at 4; Dkt No. 111 at 6-8. These contacts are more than 27 enough to demonstrate a meaningful connection to California, and to make it reasonably 1 their contacts. See Williams v. Yamaha Motor Co., 851 F.3d 1015, 1022-23 (9th Cir. 2017). 2 The problem for CZ arises under the second element in Ford. The claims in the SAC have 3 nothing to do with defendants’ conduct in California. They are based on the termination of a 4 contract by Express Scripts, Inc. (ESI) from ESI’s networks. See, e.g., Dkt. No. 104-4 ¶ 1. ESI is 5 a pharmaceutical benefits manager, not a health insurance issuer. CZ Servs., Inc. v. Express 6 Scripts Holding Co., Case No. 3:18-CV-04217-JD, 2020 WL 4368212, at *6 (N.D. Cal. July 30, 7 2020). The Court presided over a long-running dispute between ESI and CZ that was tried by a 8 jury and resulted in a verdict that rejected all of CZ’s claims. See CZ Servs., Inc., 2022 WL 9 3650733, at *1 (N.D. Cal. Aug. 24, 2022). ESI is not a party here, which is almost certainly 10 because CZ had a separate case against ESI, and because the Court determined that ESI was not 11 within the scope of the Tennessee AWP statute, which applies only to health insurance issuers. 12 See CZ Servs., Inc., 2020 WL 4368212, at *6. 13 The SAC addresses at length the ESI contract termination, and this event is the heart of 14 CZ’s case here. But nothing in these allegations demonstrates that CZ’s claims are connected to 15 conduct by the named defendants within California. They all go to conduct by ESI outside of 16 California. 17 CZ’s main argument to get around this barrier is to say that ESI was acting as an agent for 18 defendants. See Dkt. No. 104-4 at 12-14. Agency is a legal relationship in which an agent acts 19 “on the principal’s behalf and subject to the principal’s control.” Williams, 851 F.3d at 1024 20 (citing Restatement (Third) Of Agency § 1.01 (2006)). The principal must have the right to 21 substantially control the agent’s activities for an agency relationship to arise. Id. at 1025. Agency 22 relationships “may be relevant to the existence of specific jurisdiction,” but do not inherently give 23 rise specific jurisdiction. See Daimler AG v. Bauman, 571 U.S. 117, 135 n.13 (2014). For this 24 issue, the Court accepted all of the uncontroverted allegations in the SAC as true, and otherwise 25 gave CZ the benefit of the doubt on disputed facts in the parties’ declarations and other evidence. 26 See LNS Enterprises LLC v. Cont’l Motors, Inc., 22 F.4th 852, 858 (9th Cir. 2022). 27 The SAC and the evidence do not demonstrate that ESI was an agent of any defendant. 1 that defendants exercised the control of a principal over ESI. See, e.g., Dkt. No. 38-2, Ex. A at 11; 2 see also United States v. Bonds, 608 F.3d 495, 506 (9th Cir. 2010). It may be, as plaintiffs allege, 3 that ESI agreed in some contracts to allow a health insurer to propose the termination of a 4 || pharmacy from the ESI network, see, e.g., Dkt. No. 104-4 | 65-68, but that free-standing 5 || provision is not tied to CZ’s claims or California. Neither the SAC nor the declarations and 6 || evidence derived from the jurisdictional discovery demonstrate that any of the defendants ordered 7 or required ESI to terminate CZ from its networks in California. See Dkt. No. 110-1; Dkt. No. 8 111-1. That is consistent with CZ’s theory of its case in the other action before the Court, in 9 || which CZ sought to pin the termination decision entirely on ESI for reasons specific to ESI’s 10 business practices and interests. See, e.g., CZ Servs., Inc. v. Express Scripts Holding Co., 2020 11 WL 4368212, at *8. The SAC says the same, in effect. See Dkt. No. 104-4 9] 72-77. CZ 12 || mentions an email indicating that ESI advised Premera that it was going to terminate CZ from its 5 13 networks, see Dkt No. 111-1, Ex. A, but that announcement does not establish that Premera 14 compelled ESI to act on Premera’s behalf, or that Premera ratified ESI’s decision. See Williams, 3 15 851 F.3d at 1025. Overall, with every benefit given to CZ, it has not proffered evidence 16 || demonstrating that the SAC arises out of or relates to an agency relationship between ESI and the 3 17 defendants. See Daimler, 571 U.S. at 135; Dkt. No. 77 at 2. That was CZ’s main theory of 18 || personal jurisdiction in this Court, and it does not carry the day for it. 19 Consequently, the SAC is dismissed without prejudice under Federal Rule of Civil 20 || Procedure 12(b)(2). Because CZ has now had an ample opportunity, including discovery, to 21 allege jurisdiction, further amendment is not warranted, and the case will be closed. CZ is 22 || certainly free to pursue its claims in a Tennessee or other appropriate court, as circumstances 23 warrant. 24 IT IS SO ORDERED. 25 Dated: September 9, 2022 26 27 28 JAMES/ONATO United Btates District Judge