Sykes v. Health Network Solutions, Inc. ( 2019 )

IN THE SUPREME COURT OF NORTH CAROLINA
No. 251PA18
Filed 14 June 2019
SUSAN SYKES d/b/a ADVANCED CHIROPRACTIC AND HEALTH CENTER,
DAWN PATRICK, TROY LYNN, LIFEWORKS ON LAKE NORMAN, PLLC,
BRENT BOST, and BOST CHIROPRACTIC CLINIC, P.A.
v.
HEALTH NETWORK SOLUTIONS, INC. f/k/a CHIROPRACTIC NETWORK OF
THE CAROLINAS, INC., MICHAEL BINDER, STEVEN BINDER, ROBERT
STROUD, JR., LARRY GROSMAN, MATTHEW SCHMID, RALPH RANSONE,
JEFFREY K. BALDWIN, IRA RUBIN, RICHARD ARMSTRONG, BRAD
BATCHELOR, JOHN SMITH, RICK JACKSON, and MARK HOOPER
On discretionary review pursuant to N.C.G.S. § 7A-31, prior to a determination
by the Court of Appeals, of orders and opinions dated 18 August 2017 and 5 April
2018 entered by Judge James L. Gale, Chief Business Court Judge, in Superior Court,
Forsyth County, after the case was designated a mandatory complex business case
by the Chief Justice under N.C.G.S. § 7A-45.4. Heard in the Supreme Court on 5
March 2019.
Oak City Law LLP, by Samuel Pinero II and Robert E. Fields III; and Doughton
Blancato PLLC, by William A. Blancato, for plaintiff-appellants.
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Jennifer K. Van
Zant, Benjamin R. Norman, and W. Michael Dowling, for defendant-appellees.
HUDSON, Justice.
Plaintiffs appeal the North Carolina Business Court’s 18 August 2017 order
and opinion granting in part and denying in part defendants’ motions to dismiss and
SYKES V. HEALTH NETWORK SOLS., INC.
Opinion of the Court
for partial summary judgment and its 5 April 2018 order and opinion dismissing
plaintiffs’ remaining claims under Rule of Civil Procedure 12(b)(6). Plaintiffs are
licensed chiropractic providers in North Carolina who allege that defendants Health
Network Solutions, Inc. (HNS) and HNS’s individual owners have engaged in
unlawful price fixing ultimately resulting in a reduction of output of chiropractic
services in North Carolina. Specifically, plaintiffs allege that defendant HNS has
committed antitrust and other violations in its role as intermediary between
individual chiropractors and several insurance companies and third-party
administrators,1 who are the defendants in a separate action also before this Court.
In their Second Amended Class Action Complaint (the second amended
complaint), plaintiffs raise the following claims for relief: (1) declaratory judgment,
(2) price fixing, monopsony, and monopoly (the antitrust claims), (3) unfair and
deceptive trade practices and acts, (4) civil conspiracy, and (5) breach of fiduciary
duty. In addition, plaintiffs seek punitive damages, a remedy styled in the complaint
as a separate claim for relief.
Today, we affirm the Business Court’s dismissal of plaintiffs’ antitrust claims,
including the derivative claim of civil conspiracy, by an equally divided vote, meaning
that the Business Court’s opinion as to those claims will stand without precedential
1 Plaintiffs refer to these entities as the Insurers, while defendants refer to them as the Payors.
Several of these entities are defendants in a separate action filed by the same plaintiffs on 26 May
2015. An appeal from the Business Court in that companion case, Sykes v. Blue Cross & Blue Shield
of North Carolina (No. 248A18) (Sykes II), is also before this Court.
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value. We also hold that the Business Court did not err in dismissing each of
plaintiffs’ other claims. As for plaintiffs’ unfair trade practices claim, we hold that
this claim is barred by the learned profession exemption set out in N.C.G.S. § 75-
1.1(b). Regarding plaintiffs’ declaratory judgment claim, we hold that the relevant
statutes do not provide plaintiffs a private right of action to obtain the declaratory
relief that they seek. As for plaintiffs’ breach of fiduciary duty claim, we hold that no
fiduciary relationship existed between the parties, meaning no fiduciary duty was
ever created. The Business Court correctly noted that no freestanding claim exists
for punitive damages, see Funderburk v. JPMorgan Chase Bank, N.A., 241 N.C. App.
415, 425, 775 S.E.2d 1, 8 (2015), and plaintiffs have no remaining legal claim to which
punitive damages might attach. As so described, we affirm the decision of the
Business Court dismissing plaintiffs’ entire action.
Factual and Procedural Background
Plaintiffs brought this action as a putative class action lawsuit, defining the
class as “all licensed chiropractors practicing in North Carolina from 2005 to the
present who provided services in the North Carolina Market” and identifying as three
subsets of that class all licensed chiropractors participating in the HNS Market, the
Comprehensive Health Market, and the Insurance Market. Plaintiffs made the
following allegations in their second amended complaint, and for the purposes of our
review they are taken as true.
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Defendant HNS serves as an intermediary between individual chiropractors in
North Carolina and various insurance companies and third-party administrators for
insurance companies. Essentially, HNS contracts with various chiropractors, who,
as part of the HNS network, are able to provide chiropractic services “in-network” for
the various insurance payors with whom HNS has separately contracted. In
exchange for in-network access, members of the HNS network agree to permit HNS
to negotiate with the payors the prices to be charged for in-network chiropractic
services. A chiropractor must maintain an average per-patient cost at a certain level
or risk termination from the network. Individual defendants are themselves licensed
chiropractors who are current or former owners of HNS.
Plaintiffs are licensed North Carolina chiropractors (and their businesses) who
previously participated in the HNS network or have never participated in the
network. Plaintiffs fall within one of these three categories: they were removed from
the HNS network because their per-patient cost was too high, left the network based
on HNS’s policies, or declined to join the network because of HNS’s practices and
restraints. Plaintiffs argue that because HNS is the sole path to becoming an in-
network provider for the various participating insurance companies and other payors,
they are being deprived of access to the large number of patients that receive health
care coverage via the networks of the various payors.
Plaintiffs’ claims are largely based on the following allegations. Plaintiffs
contend that HNS, despite representing that it is an integrated independent practice
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association (IPA), in fact “operat[es] an involuntary cartel to control competition,
supply, and pricing of chiropractic services in North Carolina made possible by the
exclusive contracts with the Insurers and the market power provided by those
contracts.” Plaintiffs contend that HNS is operating as a medical service corporation,
as described in N.C.G.S. § 58-65-1, that has not become licensed as required by
N.C.G.S. § 58-65-50. In addition, they contend that HNS is conducting utilization
review based only on providers’ average per-patient cost, which does not take into
account medical necessity or appropriateness of treatment, in violation of N.C.G.S.
§ 58-50-61 (2017). Thus, they contend, in addition to its failure to obtain proper
licensure, HNS is violating North Carolina’s antitrust statutes by fixing the prices
charged by more than one-half of the licensed chiropractors in the state and by
monopsony, a buyer-side form of monopoly,2 in which, rather than using its market
power as a sole seller to increase the price of services, HNS is using its market power
as a buyer of those services to restrict output of services. Plaintiffs allege four
relevant markets that have been adversely affected by the conduct of defendant HNS:
the North Carolina market, defined as the market for chiropractic services provided
2 Monopsony is “a market situation in which one buyer controls the market.” In re Duke
Energy Corp., 232 N.C. App. 573, 583, 755 S.E.2d 382, 389 (2014) (quoting BLACK’S LAW DICTIONARY
1023 (7th ed. 1999)). “[A] monopsony is to the buy side of the market what a monopoly is to the sell
side and is sometimes colloquially called a ‘buyer’s monopoly.’ ” Weyerhaeuser Co. v. Ross-Simmons
Hardwood Lumber Co., 549 U.S. 312, 320, 127 S. Ct. 1069, 1075, 166 L. Ed. 2d 911, 919 (2007) (citing
Roger D. Blair & Jeffrey L. Harrison, Antitrust Policy and Monopsony, 76 CORNELL L. REV. 297, 301,
320 (1991) and Thomas A. Piraino, Jr., A Proposed Antitrust Approach to Buyers’ Competitive Conduct,
56 HASTINGS L.J. 1121, 1125 (2005)).
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in North Carolina, and three submarkets within the North Carolina Market. Those
submarkets are (1) the HNS Market, “the market in which in-network managed care
chiropractic services . . . are provided to the Insurers and their North Carolina
patients through HNS”; (2) the Comprehensive Health Market, “the market for in-
network chiropractic services provided to individual and group comprehensive
healthcare insurers and their patients in North Carolina”; and (3) the Insurance
Health Market, “the market for insurance reimbursed chiropractic services in North
Carolina.”
The original complaint in this action was filed on 30 April 2013, and the case
was designated a mandatory complex business case on 31 May 2013, before passage
of the Business Court Modernization Act (BCMA). The BCMA established that, for
all cases designated as mandatory complex business cases after 1 October 2014,
appeals from the North Carolina Business Court would come directly to this Court,
rather than to the Court of Appeals. A second action involving essentially the same
factual allegations and similar legal claims, Sykes v. Blue Cross & Blue Shield of
North Carolina (Sykes II), was filed after the effective date of the BCMA, and
therefore the appeal in that case lay in this Court. We granted review of this case
before a determination by the Court of Appeals, thus giving us jurisdiction over the
appeals in both Sykes actions. Plaintiffs filed a motion to consolidate the two actions
in the Business Court, which the Business Court never addressed before dismissing
both lawsuits entirely.
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The Business Court dismissed the claims here (Sykes I) in two different stages.
Several months after plaintiffs filed their first amended complaint, the court on 5
December 2013 ordered limited discovery on the issue of market definition for the
purposes of plaintiffs’ antitrust claims. This limited discovery took place between
February 2014 and August 2015. Following fact and expert discovery on market
definition, plaintiffs filed their Sykes II complaint on 26 May 2015 and their second
amended complaint in this action on 16 July 2015. Defendants here filed a motion to
dismiss and for partial summary judgment, which the court granted in part and
denied in part in its 18 August 2017 order and opinion. In that document, the court
granted summary judgment for defendants on any claims stemming from their
participation in plaintiffs’ three proffered relevant submarkets but denied summary
judgment on antitrust claims related to the North Carolina Market and on other
claims connected to those remaining antitrust claims. The court also dismissed
plaintiffs’ breach of fiduciary duty claim as well as plaintiffs’ claim for declaratory
relief to the extent that claim was based on violations of Chapter 58. Finally, the
court ordered supplemental briefing on whether plaintiffs had adequately alleged
market power within the one relevant market, the North Carolina Market. Following
receipt of that supplemental briefing, the court filed a second decision on 5 April 2018
dismissing all of plaintiffs’ remaining claims. Plaintiffs appeal from both the 18
August 2017 and the 5 April 2018 orders and opinions of the Business Court.
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Analysis
I. Standard of Review
This Court reviews de novo legal conclusions of a trial court, including orders
granting or denying a motion to dismiss for failure to state a claim upon which relief
can be granted under Rule 12(b)(6) or a motion for summary judgment under Rule
56. See, e.g., Azure Dolphin, LLC v. Barton, ___ N.C. ___, ___, 821 S.E.2d 711, 725
(2018); Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520,
523, 723 S.E.2d 744, 747 (2012).
“We review a dismissal under Rule 12(b)(6) de novo, ‘view[ing] the allegations
as true and . . . in the light most favorable to the non-moving party.’ Dismissal is
proper when the complaint ‘fail[s] to state a claim upon which relief can be granted.’
‘When the complaint on its face reveals that no law supports the claim . . . or discloses
facts that necessarily defeat the claim, dismissal is proper.’ ” Christenbury Eye Ctr.,
P.A. v. Medflow, Inc., 370 N.C. 1, 5, 802 S.E.2d 888, 891 (2017) (first, second, and
fourth alterations in original) (first quoting Kirby v. N.C. DOT, 368 N.C. 847, 852,
786 S.E.2d 919, 923 (2016); then quoting Arnesen v. Rivers Edge Golf Club &
Plantation, Inc., 368 N.C. 440, 448, 781 S.E.2d 1, 7-8 (2015) (third alteration in
original)). Summary judgment is appropriate “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that any party is entitled
to a judgment as a matter of law.” N.C.G.S. § 1A-1, Rule 56(c) (2017). “All facts
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asserted by the adverse party are taken as true, and their inferences must be viewed
in the light most favorable to that party. The showing required for summary
judgment may be accomplished by proving an essential element of the opposing
party’s claim does not exist, cannot be proven at trial, or would be barred by an
affirmative defense . . . .” Variety Wholesalers, 365 N.C. at 523, 723 S.E.2d at 747
(ellipsis in original) (quoting Dobson v. Harris, 352 N.C. 77, 83, 530 S.E.2d 829, 835
(2000)). Thus, we do not defer to the conclusions of the Business Court but conduct
our own independent inquiry into the legal issues that resulted in the Business
Court’s orders dismissing all of plaintiffs’ claims. We now affirm the Business Court’s
rulings for the reasons set out below.
II. Antitrust Claims
As to plaintiffs’ antitrust claims, the members of the Court are equally divided;
accordingly, the decision of the Business Court on these claims stands without
precedential value. See, e.g., Faires v. State Bd. of Elections, 368 N.C. 825, 825, 784
S.E.2d 463, 464 (2016) (per curiam) (affirming on this basis the judgment of a three-
judge panel of the Superior Court, Wake County); Burke v. Carolina & Nw. Ry. Co.,
257 N.C. 683, 683, 127 S.E.2d 281, 281 (per curiam) (1962) (“The other Justices, being
equally divided as to the propriety of the nonsuit, the judgment of the superior court
is affirmed without the decision becoming a precedent.”); see also Piro v. McKeever,
369 N.C. 291, 291, 794 S.E.2d 501, 501 (2016) (per curiam) (affirming a Court of
Appeals opinion without precedential value by an equally divided vote); CommScope
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Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 56, 790 S.E.2d 657, 663 (2016)
(same).
III. Unfair Trade Practices
Plaintiffs allege that defendants have committed a number of unfair trade
practices in violation of N.C.G.S. § 75-1.1. Some of these allegations describe the
same conduct that is the subject of plaintiffs’ antitrust claims. Thus, per our
discussion above, to the extent that these allegations overlap, we affirm the trial
court’s dismissal of plaintiffs’ N.C.G.S. § 75-1.1 claims. Plaintiffs’ remaining
allegations under section 75-1.1 are rooted in various provisions of the Insurance
Law, found in Chapter 58 of the North Carolina General Statutes. Specifically,
plaintiffs allege that HNS has engaged in unfair trade practices through its failure
to meet the licensure and utilization review requirements set out in N.C.G.S. §§ 58-
65-50 and 58-50-61 and through other acts, which plaintiffs contend fall within the
unfair and deceptive insurance practices that are catalogued at N.C.G.S. § 58-63-15.
We do not need to directly address whether the alleged violations of Chapter 58 can
support plaintiffs’ claims of unfair trade practices because we conclude, as the
Business Court did, that plaintiffs’ claims are barred by the learned profession
exemption.3
Section 75-1.1 states, in pertinent part:
3 We will address plaintiffs’ reliance on the Insurance Law further in our discussion of their
claims for declaratory relief.
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(a) Unfair methods of competition in or affecting
commerce, and unfair or deceptive acts or practices in or
affecting commerce, are declared unlawful.
(b) For purposes of this section, “commerce” includes all
business activities, however denominated, but does not
include professional services rendered by a member of a
learned profession.
....
(d) Any party claiming to be exempt from the provisions
of this section shall have the burden of proof with respect
to such claim.
N.C.G.S. § 75-1.1 (2017) (emphasis added).
This Court has not previously addressed the language of section 75-1.1(b)
exempting professional services rendered by “learned professionals” from the
coverage of our state’s unfair and deceptive trade practices (UDTP) statute. However,
as our Court of Appeals has recognized, we conduct a two-part inquiry to determine
whether the “learned profession” exemption applies: “[F]irst, the person or entity
performing the alleged act must be a member of a learned profession. Second, the
conduct in question must be a rendering of professional services.” Wheeless v. Maria
Parham Med. Ctr., Inc., 237 N.C. App. 584, 589, 768 S.E.2d 119, 123 (2014) (quoting
Reid v. Ayers, 138 N.C. App. 261, 266, 531 S.E.2d 231, 235 (2000)), appeal dismissed
and disc. rev. denied, 368 N.C. 247, 771 S.E.2d 284 (2015). In determining what sort
of conduct is exempted, the Court of Appeals has also explained that “a matter
affecting the professional services rendered by members of a learned profession
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. . . falls within the exception in N.C.G.S. § 75-1.1(b).” Burgess v. Busby, 142 N.C.
App. 393, 407, 544 S.E.2d 4, 11-12 (citations omitted), appeal dismissed, 353 N.C.
525, 549 S.E.2d 216, and disc. rev. improvidently allowed per curiam, 354 N.C. 351,
553 S.E.2d 679 (2001).
Our Court of Appeals has long held that members of health care professions
fall within the learned profession exemption to N.C.G.S. § 75-1.1, and “[t]his
exception for medical professionals has been broadly interpreted.” Shelton v. Duke
Univ. Health Sys., Inc., 179 N.C. App. 120, 126, 633 S.E.2d 113, 117 (2006) (first citing
Phillips v. A Triangle Women’s Health Clinic, Inc., 155 N.C. App. 372, 377-79, 573
S.E.2d 600, 604-05 (2002); then citing Burgess, 142 N.C. App. 393, 544 S.E.2d 4
(2001); then citing Gaunt v. Pittaway, 139 N.C. App. 778, 534 S.E.2d 660 (2000); then
citing Abram v. Charter Med. Corp. of Raleigh, Inc., 100 N.C. App. 718, 722-23, 398
S.E.2d 331, 334 (1990); and then citing Cameron v. New Hanover Mem’l Hosp., Inc.,
58 N.C. App. 414, 447, 293 S.E.2d 901, 921 (1982)), disc. rev. denied, 643 S.E.2d 591
(N.C. 2007). For example, in Wheeless v. Maria Parham Medical Center, Inc., the
Court of Appeals determined that the learned profession exemption barred a
section 75-1.1 claim by a medical doctor against a hospital and individual physicians
in which the plaintiff physician alleged that the defendants had made an anonymous
complaint about him to the North Carolina Medical Board. 237 N.C. App. at 585-86,
768 S.E.2d at 121. The court rejected Wheeless’s argument that the exemption did
not apply “because, by ‘illegally access[ing], shar[ing], and us[ing] Plaintiff's peer
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review materials and patients’ confidential medical records out of malice and for
financial gain for illegal improper purpose[,]’ ” defendants did not render professional
services. Id. at 589, 768 S.E.2d at 123 (alterations in original). Rather, the court
viewed “defendants’ alleged conduct in making a complaint to the Medical Board as
integral to their role in ensuring the provision of adequate medical care”; accordingly,
the learned profession exemption barred plaintiff’s action. Id. at 591, 768 S.E.2d at
124.
Plaintiffs argue that the exemption should not apply here because, although
the individual defendants are all licensed chiropractors, HNS itself is not a member
of a learned profession and, in any event, HNS’s role as an intermediary between
providers and insurers is a business activity that cannot be properly described as
“render[ing]” professional services.
Plaintiffs point us to the recently decided case of Hamlet H.M.A., LLC v.
Hernandez, ___ N.C. App. ___, 821 S.E.2d 600 (2018), disc. rev. denied, ___ N.C. ___,
822 S.E.2d 637 (2019), and disc. rev. denied, ___ N.C. ___, 822 S.E.2d 640 (2019), in
support of their argument that the activities alleged in this case do not fall within the
ambit of “professional services rendered.” In Hamlet the Court of Appeals considered
whether a physician’s UDTP counterclaim rooted in a dispute over an employment
contract was barred by the learned profession exemption. Id. at ___, 821 S.E.2d at
602-03. The Court of Appeals concluded that the learned profession exemption did
not bar the claim, reasoning that “cases addressing UDTP claims in a medical context
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do not suggest that negotiations regarding a business arrangement, even between a
physician and a hospital, are ‘professional services rendered by a member of a learned
profession’ ” under N.C.G.S. § 75-1.1(a). Id. at ___, 821 S.E.2d at 608. The Court of
Appeals further concluded: “If we were to interpret the learned profession exception
as broadly as plaintiffs suggest we should, any business arrangement between
medical professionals would be exempted from UDTP claims. The learned profession
exception does not cover claims simply because the participants in the contract are
medical professionals.” Id. at ___, 821 S.E.2d at 608.
While we agree that the mere status of a defendant as a member of a “learned
profession” does not shield that defendant from any claim under N.C.G.S. § 75-1.1
regardless of how far removed the claim is from that defendant’s professional
practice, we conclude that the conduct alleged here does fall within the exemption.
All individual defendants, as well as all members of HNS, are licensed chiropractors,
thus meeting the exemption’s first prong. We also agree with defendants and the
court below that the activity alleged in the second amended complaint constitutes
rendering of professional services under the statute.
The alleged conduct that is at the heart of this action is directly related to
providing patient care. Plaintiffs argue that HNS is engaged both in violations of our
state’s antitrust laws and in conduct forbidden under our Insurance Law, in that HNS
terminates providers’ in-network access to patients when those providers exceed a
certain average cost per patient. Thus, plaintiffs contend, in order to retain in-
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network status with the insurance payors with whom HNS contracts, chiropractic
providers must limit their average cost of services per patient and, thus, the number
of treatments provided to their patients. If a particular chiropractor renders services
to patients who require, on average, more extensive chiropractic care than the
patients of other providers who contract with HNS, that provider risks exceeding
HNS’s allowable average cost and losing access to patients served via the networks
of the various payors.
In addition, plaintiffs allege that—through the operation of HNS’s
monopsony—chiropractic services are being reduced, meaning that North
Carolinians who were previously receiving care from providers in HNS’s network
have either ceased receiving this care or have received fewer services due to HNS’s
enforcement of its average cost cap on providers. Since the basis for plaintiffs’ UDTP
claim is that chiropractors are reducing the level of services patients receive, we
conclude that the conduct alleged in the second amended complaint is sufficiently
related to patient care to fall within the rendering of professional services, as that
term has been previously interpreted by the courts of this state. Thus, we affirm the
Business Court’s dismissal of plaintiffs’ unfair trade practice claims under N.C.G.S.
§ 75-1.1.
IV. Declaratory Judgment
In their second amended complaint, plaintiffs also sought relief under the
Declaratory Judgment Act as follows:
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a. HNS is an unlicensed medical service corporation
without the authority to enter into an agreement to provide
chiropractic services to the Insurers;
b. HNS is an unlicensed medical service corporation
without the authority to enter into participation
agreements with Providers;
c. HNS is not licensed or authorized to provide
utilization review of chiropractors including the Providers;
d. The purported agreements between HNS and
Providers are illegal and unenforceable;
e. The purported agreements between HNS and
Providers are an illegal restraint of trade and anti-
competitive;
f. The purported agreements between HNS and the
Insurers are illegal and unenforceable;
g. The purported agreements between HNS and the
Insurers are an illegal restraint of trade and anti-
competitive;
h. The exclusivity provisions of the contracts and the
exclusivity practices between HNS and the Insurers are
illegal, anti-competitive unreasonable restraints of trade,
unfair trade practices, and unenforceable;
i. HNS’s Utilization Review Process is an illegal unfair
trade practice;
and
j. Defendants have restrained trade, committed unfair
trade practices, and monopsonized the market for
chiropractic services in violation of N.C. Gen. Stat. §§ 75-2
and 75-2.1.
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As demonstrated above, much of the declaratory relief plaintiffs seek comes in the
form of legal conclusions that we have already addressed in our earlier discussion of
plaintiffs’ antitrust claims and their claim that defendants have engaged in unfair
trade practices under N.C.G.S. § 75-1.1. Thus, we also affirm the Business Court’s
denial of declaratory relief to the extent that claim relates to plaintiffs’ Chapter 75
claims.
Several of the declarations sought by plaintiffs, however, relate to their claims
that defendants fail to comply with various provisions of the state’s Insurance Law
found in Chapter 58 of the North Carolina General Statutes. The Business Court
ruled that Chapter 58 does not provide plaintiffs a private cause of action, meaning
that their claims for declaratory relief under Chapter 58 must be dismissed. We
agree.
As discussed by the Business Court, a statute may authorize a private right of
action either explicitly or implicitly, see Lea v. Grier, 156 N.C. App. 503, 508-09, 577
S.E.2d 411, 415-16 (2003), though typically, “a statute allows for a private cause of
action only where the legislature has expressly provided a private cause of action
within the statute,” Time Warner Entm’t Advance/Newhouse P’ship v. Town of
Landis, 228 N.C. App. 510, 516, 747 S.E.2d 610, 615 (2013) (quoting Vanasek v. Duke
Power Co., 132 N.C. App. 335, 338 n.2, 511 S.E.2d 41, 44 n.2, cert. denied, 350 N.C.
851, 539 S.E.2d 13 (1999).
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Chapter 58 does not explicitly provide a private cause of action and, as noted
by the Business Court, several decisions in recent years from both our Court of
Appeals and our state’s federal district courts have determined that no private cause
of action exists under other portions of Chapter 58. See, e.g., Cobb v. Pa. Life Ins. Co.,
215 N.C. App. 268, 281, 715 S.E.2d 541, 552 (2011) (finding no private cause of action
under N.C.G.S. § 58-3-115); Defeat the Beat, Inc. v. Underwriters at Lloyd’s London,
194 N.C. App. 108, 117-18, 669 S.E.2d 48, 54 (2008) (stating that no private right of
action exists under N.C.G.S. § 58-21-45(a)). Rather, courts have previously concluded
that alleged violations of this Chapter may only be remedied through action by the
Commissioner of Insurance. Thus, the Business Court concluded that there was “no
legislative implication that sections 58-50-61, 58-65-1, and 58-65-50 allow for
enforcement by a private party.”
Plaintiffs seek declarations that HNS is required to be licensed as a medical
service corporation under N.C.G.S. § 58-65-50 or as a utilization review organization
defined by N.C.G.S. § 58-50-61(a)(18). Section 58-65-50 states that “[n]o corporation
subject to the provisions of this Article and Article 66 of this Chapter shall issue
contracts for the rendering of hospital or medical and/or dental service to subscribers,
until the Commissioner of Insurance has, by formal certificate or license, authorized
it to do so” and then describes the materials to be provided to the Commissioner as
part of the licensure application. N.C.G.S. § 58-65-50 (2017).
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Section 58-50-61 governs the procedures for utilization review, defined as “a
set of formal techniques designed to monitor the use of or evaluate the clinical
necessity, appropriateness, efficacy or efficiency of health care services, procedures,
providers, or facilities.” Id. § 58-50-61(a)(17) (2017). A “utilization review
organization” is “an entity that conducts utilization review under a managed care
plan, but does not mean an insurer performing utilization review for its own health
benefit plan.” Id. § 58-50-61(a)(18). According to N.C.G.S. § 58-50-61(o), a violation
of the utilization review provisions is subject to the penalties set out in N.C.G.S. § 58-
2-70. Section 58-2-70, in turn, provides that “[w]henever the Commissioner has
reason to believe that any person has violated any of the provisions of this
Chapter, . . . the Commissioner may, after notice and opportunity for a hearing,
proceed under the appropriate subsections of this section.” Id. § 58-2-70(b) (2017).
Plaintiffs argue that our state’s Declaratory Judgment Act gives them a path
to declaratory relief, notwithstanding Chapter 58’s language vesting enforcement
authority in the Commissioner of Insurance. In addition, plaintiffs argue that the
Business Court erred in ignoring a line of cases declining to enforce contracts entered
into by unlicensed professionals. For example, plaintiffs point us to Bryan Builders
Supply v. Midyette, 274 N.C. 264, 162 S.E.2d 507 (1968) (recognizing that state law
bars an unlicensed contractor from maintaining a breach of contract action against
the owner of a building valued at more than the minimum sum specified in the
licensing statutes governing general contractors) and Gower v. Strout Realty, Inc., 56
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Opinion of the Court
N.C. App. 603, 289 S.E.2d 880 (1982) (recognizing that our courts have held contracts
by unlicensed real estate brokers to be invalid).
We conclude that the language of the statutory provisions, as well as the
previous cases interpreting other portions of Chapter 58, vest enforcement of the
requirements of the statutory sections identified by plaintiffs in the Commissioner of
Insurance, meaning that plaintiffs do not have a private right of action for declaratory
relief under these provisions. We also agree with the Business Court that the cases
cited by plaintiffs are distinguishable in that “[t]hose cases did not seek to substitute
a court’s judgment for that of a regulatory agency to which the legislature has
entrusted enforcement.” Thus, we conclude that the Business Court properly denied
all of plaintiffs’ claims for declaratory relief.
V. Breach of Fiduciary Duty
Finally, plaintiffs contend that defendants breached a fiduciary duty that they
owed to plaintiffs and all members of the putative class.4 To establish a claim for
breach of fiduciary duty, a plaintiff must show that: (1) the defendant owed the
plaintiff a fiduciary duty; (2) the defendant breached that fiduciary duty; and (3) the
breach of fiduciary duty was a proximate cause of injury to the plaintiff. Green v.
Freeman, 367 N.C. 136, 141, 749 S.E.2d 262, 268 (2013). Thus, to make out a claim
This claim necessarily applies only to those plaintiffs who participated at one time in the
4
HNS network.
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SYKES V. HEALTH NETWORK SOLS., INC.
Opinion of the Court
for breach of a fiduciary duty, plaintiffs must first allege facts that, taken as true,
demonstrate that a fiduciary relationship existed between the parties. A fiduciary
relationship “has been broadly defined by this Court as one in which ‘there has been
a special confidence reposed in one who in equity and good conscience is bound to act
in good faith and with due regard to the interests of the one reposing confidence.’ ”
Dalton v. Camp, 353 N.C. 647, 651, 548 S.E.2d 704, 707 (2001) (quoting Abbitt v.
Gregory, 201 N.C. 577, 598, 160 S.E. 896, 906 (1931)). “The very nature of some
relationships, such as the one between a trustee and the trust beneficiary, gives rise
to a fiduciary relationship as a matter of law. The list of relationships that we have
held to be fiduciary in their very nature is a limited one, and we do not add to it
lightly.” CommScope Credit Union, 369 N.C. at 52, 790 S.E.2d at 660 (first citing
Wachovia Bank & Tr. Co. v. Johnston, 269 N.C. 701, 711, 153 S.E.2d 449, 457 (1967);
then citing Dallaire v. Bank of Am., N.A., 367 N.C. 363, 367, 760 S.E.2d 263, 266
(2014)). Our courts have been clear that general contractual relationships do not
typically rise to the level of fiduciary relationships. “[P]arties to a contract do not
thereby become each other’s fiduciaries; they generally owe no special duty to one
another beyond the terms of the contract . . . .” Branch Banking & Tr. Co. v.
Thompson, 107 N.C. App. 53, 61, 418 S.E.2d 694, 699 (citations omitted), disc. rev.
denied, 332 N.C. 482, 421 S.E.2d 350 (1992).
Plaintiffs allege that they have a fiduciary relationship with defendants
because they entered into a joint venture with HNS. In the alternative, plaintiffs
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Opinion of the Court
argued before the Business Court and this Court that a fiduciary relationship was
created under agency law, in that HNS purported to act as plaintiffs’ agent in
negotiations with the insurance payors. We agree with the Business Court that
plaintiffs’ allegation of a fiduciary duty—and, therefore, their claim of a breach of
that duty—fails as a matter of law.
We begin by addressing plaintiffs’ alternative argument: that agency
principles dictate that HNS was acting as an agent for plaintiffs as a matter of law
when negotiating the terms governing in-network providers’ relationship with the
medical payors. As discussed above, typical contractual relationships do not give rise
to the special status of a fiduciary relationship. We believe that plaintiffs’ agency
argument ignores this principle and seeks to establish a fiduciary relationship arising
out of the operation of a general business relationship.
Next we address plaintiffs’ argument that they are in a fiduciary relationship
with HNS by virtue of a joint venture. As the Business Court pointed out, plaintiffs
cannot show that they are in a joint venture with defendants for two reasons. First,
“[a] joint venture exists when there is: ‘(1) an agreement, express or implied, to carry
out a single business venture with joint sharing of profits, and (2) an equal right of
control of the means employed to carry out the venture.’ ” Rifenburg Constr., Inc. v.
Brier Creek Assocs. Ltd. P’ship, 160 N.C. App. 626, 632, 586 S.E.2d 812, 817 (2003),
aff’d per curiam, 358 N.C. 218, 593 S.E.2d 585 (2004) (quoting Rhoney v. Fele, 134
N.C. App. 614, 620, 518 S.E.2d 536, 541 (1999), disc. rev. denied, 351 N.C. 360, 542
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SYKES V. HEALTH NETWORK SOLS., INC.
Opinion of the Court
S.E.2d 217 (2000)). Plaintiffs’ own allegations of lack of control and unequal sharing
of profits and losses defeat this argument. Second, as the Business Court points out,
plaintiffs’ own agreements with HNS specifically disclaim any joint venture between
the parties, stating that “[n]o work, act, commission, or omission of either party
pursuant to the terms and conditions of this Agreement shall make or render HNS or
Participant an agent, servant, or employee of, or joint venture with the other.”
(Emphasis added.) Thus, on the face of their contracts with HNS, plaintiffs agreed
that no joint venture was formed via the parties’ contractual relationship.
Plaintiffs seek to avoid the plain language of their agreements with HNS
through their broader argument that these contracts are illegal because HNS has not
complied with the licensure requirements of Chapter 58 and thus had no authority to
enter into the agreements at issue here. Because we have concluded that the
licensure provisions of Chapter 58 fall squarely within the purview of the
Commissioner of Insurance and that, therefore, the General Statutes do not provide
plaintiffs a private right of action to seek a declaratory judgment that their
agreements with HNS are void, we have already rejected plaintiffs’ collateral
challenge to the contracts. Thus, based on the joint venture elements that are not
met here as well as the language of the contracts, we are persuaded that plaintiffs
have no joint venture with defendants. Because plaintiffs’ contractual relationship
with HNS is insufficient to establish a fiduciary relationship as a matter of law, we
affirm the Business Court’s dismissal of plaintiffs’ breach of fiduciary duty claim.
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Opinion of the Court
Conclusion
Because we affirm the Business Court’s rulings dismissing each of plaintiffs’
substantive claims alleged in their second amended complaint, as well as all
derivative claims, we affirm the Business Court’s orders dismissing plaintiffs’ entire
action. As noted above, the members of the Court being equally divided on plaintiffs’
antitrust claims, including the derivative claim of civil conspiracy, the Business
Court’s dismissal of these claims stands without precedential value.
AFFIRMED.
Justice DAVIS did not participate in the consideration or decision of this case.
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Justice EARLS concurring in part and dissenting in part.
I dissent from the holding of Section III of the majority opinion concerning the
extent to which plaintiffs’ allegations of unfair and deceptive trade practices that are
not based on the same allegations as their antitrust claims are barred by the “learned
profession” exclusion of N.C.G.S. § 75-1.1(a). In all other respects I concur with the
remainder of the opinion. This Court has not previously interpreted the scope of the
statutory learned profession exception to the general prohibition on unfair methods
of competition and unfair and deceptive trade practices. In my view, the specific
allegations of the complaint relating to that claim in this case do not properly fall
within the scope of that exception because the alleged unfair and deceptive conduct
in question was not the rendering of professional services, namely chiropractic
services, to patients. Therefore, I would reverse the 18 August 2017 ruling of the
business court, Sykes v. Health Network Solutions, Inc., No. 13 CVS 2595, 2017 WL
3601347 (N.C. Super. Ct. Forsyth County (Bus. Ct.) Aug. 18, 2017) (Sykes I), with
regard to claims under the unfair and deceptive trade practices act, N.C.G.S. § 75-1.1
(UDTP) that are based on allegations separate and distinct from the antitrust claims,
and remand for further proceedings on those claims.
Most of the allegations in this case relate to plaintiffs’ claims that defendant
Health Network Solutions, Inc. (HNS) operates an intermediary network for
chiropractic services that functions as a monopsony, a buyer-side form of restraint of
trade to control competition, supply, and the pricing of chiropractic services in North
SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
Carolina. Indeed, almost all of the trial court’s first order, which is the order
dismissing the UDTP claims, actually addresses the antitrust claims. There has been
scant attention to the UDTP allegations that are separate and apart from the
antitrust claims.
The UDTP claim for relief in plaintiffs’ second amended complaint alleges
thirteen grounds, of which seven relate to antitrust violations and anticompetitive
conduct.1 Of the remaining six, one is a conclusory characterization that does not
specify any particular behavior.2 The five allegations based on distinct conduct not
encompassed by the antitrust claims are that “Defendants’ actions and conduct that
constitute unfair and deceptive trade practices include, but are not limited to:”
d. implementing a utilization review procedure
without being authorized or licensed to do so;
e. failing to follow statutory requirements for
utilization review;
....
g. organizing a medical service corporation without
being licensed to do so;
....
i. failing to disclose their conflicts of interest;
1 The antitrust and anticompetitive conduct are alleged in subparagraphs a-c, f, h, k.
& l of paragraph 162 of the Second Amended Class Action Complaint filed on 20 July 2015.
2 Paragraph 162(m) alleges that defendants have violated the UDTP by “acting
unfairly and oppressively toward Plaintiff and the Class in their dealings with them in an
abuse of power and position to achieve ends and using means contrary to the public policy of
this State.”
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
j. misrepresenting their services and the benefits
provided to Providers participating in the HNS
Network[.]
Plaintiffs make additional allegations relevant to this claim, including that
defendants were engaged in commerce and that these unfair and deceptive practices
have caused plaintiffs damages in excess of $10,000. Thus, on a motion to dismiss
under Rule 12(b)(6), reviewed de novo by this Court, the question is whether, if true,
the allegations state a claim for relief under some legal theory. Corwin ex rel. Corwin
Tr. v. British Am. Tobacco PLC, ___ N.C. ___, ___, 821 S.E.2d 729, 736 (2018) (citing
CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51, 790 S.E.2d 657,
659 (2016)).
The General Assembly enacted N.C.G.S. § 75-1.1 almost exactly fifty years ago,
stating that:
The purpose of this Section is to declare, and to provide
civil legal means to maintain, ethical standards of dealings
between persons engaged in business, and between persons
engaged in business and the consuming public within this
State, to the end that good faith and fair dealings between
buyers and sellers at all levels of commerce be had in this
State.
Act of June 12, 1969, ch. 833, sec. 1(b), 1969 N.C. Sess. Laws 930, 930. In 1977 the
statute was “amended . . . to define ‘commerce’ inclusively as ‘business activit[ies],
however denominated,’ ” Bhatti v. Buckland, 328 N.C. 240, 245, 400 S.E.2d 440, 443
(1991), subject to the express limitation for “professional services rendered by a
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
member of a learned profession,” Act of June 27, 1977, ch. 747, sec. 2, 1977 N.C. Sess.
Laws 984, 984. As this Court explained in Bhatti, consistent with the purpose of the
law to protect the consuming public and the generally broad definition of the term
“business,” the statute is intended to have an inclusive scope, 328 N.C. at 245-46, 400
S.E.2d at 443-44, and the 1977 amendments in particular were “intended to expand
the potential liability for certain proscribed acts,” United Roasters, Inc. v. Colgate-
Palmolive Co., 485 F. Supp. 1049, 1057 (E.D.N.C. 1980), aff’d, 649 F.2d 985 (4th Cir.),
cert. denied, 454 U.S. 1054 (1981).
The statute is not limited to cases involving consumers only. “After all, unfair
trade practices involving only businesses affect the consumer as well.” United Labs.,
Inc. v. Kuykendall, 322 N.C. 643, 665, 370 S.E.2d 375, 389 (1988). The Court has
previously explained that “ ‘[b]usiness activities’ is a term which connotes the manner
in which businesses conduct their regular, day-to-day activities, or affairs, such as
the purchase and sale of goods, or whatever other activities the business regularly
engages in and for which it is organized.” HAJMM Co. v. House of Raeford Farms,
Inc., 328 N.C. 578, 594, 403 S.E.2d 483, 493 (1991). Moreover, “ ‘[c]ommerce’ in its
broadest sense comprehends intercourse for the purposes of trade in any form.” Sara
Lee Corp. v. Carter, 351 N.C. 27, 32, 519 S.E.2d 308, 311 (1999) (quoting Johnson v.
Phoenix Mut. Life Ins. Co., 300 N.C. 247, 261, 266 S.E.2d 610, 620 (1980)).
Our courts have employed a three-prong test to establish a prima facie case
under this statute. Spartan Leasing Inc. of N.C. v. Pollard, 101 N.C. App. 450, 400
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
S.E.2d 476 (1991). A plaintiff must show “(1) an unfair or deceptive act or practice,
or an unfair method of competition, (2) in or affecting commerce, (3) which
proximately caused actual injury to the plaintiff.” Id. at 460-61, 400 S.E.2d at 482
(citing Marshall v. Miller, 302 N.C. 539, 276 S.E.2d 397 (1981)); see also First Atl.
Mgmt. Corp. v. Dunlea Realty Co., 131 N.C. App. 242, 252, 507 S.E.2d 56, 63 (1998)
(same). Unfair competition has been described generally as conduct “which a court
of equity would consider unfair.” Pinehurst, Inc. v. O’Leary Bros. Realty, Inc., 79 N.C.
App. 51, 59, 338 S.E.2d 918, 923 (citing William B. Aycock, North Carolina Law on
Antitrust and Consumer Protection, 60 N.C. L. Rev. 207, 217 (1982)), disc. rev. denied,
316 N.C. 378, 342 S.E.2d 896 (1986). “[A] practice is unfair when it offends
established public policy as well as when the practice is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to consumers.” Barbee v. Atl.
Marine Sales & Serv., 115 N.C. App. 641, 646, 446 S.E.2d 117, 121 (quoting Marshall,
302 N.C. at 548, 276 S.E.2d at 403), disc. rev. denied, 337 N.C. 689, 448 S.E.2d 516
(1994). “[A]ll the facts and circumstances surrounding the transaction” are relevant
to determining “[w]hether an act or practice is unfair or deceptive.” Id. at 646, 436
S.E.2d at 121 (citing Marshall, 302 N.C. at 548, 276 S.E.2d at 403). Bad faith or
deliberate acts of deceit do not need to be shown. Boyd v. Drum, 129 N.C. App. 586,
593, 501 S.E.2d 91, 97 (1998) (citing Forsyth Mem’l Hosp., Inc. v. Contreras, 107 N.C.
App. 611, 614, 421 S.E.2d 167, 169-70 (1992), disc. rev. denied, 333 N.C. 344, 426
S.E.2d 705 (1993)), aff’d per curiam, 350 N.C. 90, 511 S.E.2d 304 (1999).
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
In this case, plaintiffs’ allegations, as summarized in subparagraphs d, e, g, i,
and j of the claim for relief (hereinafter “the non-antitrust conduct”) if true, establish
all three elements of a prima facie case of unfair and deceptive trade practices
affecting commerce that have injured plaintiffs. The only argument made by
defendants on the motion to dismiss, and the only ground found by the trial court,
was that none of these allegations can support a claim for relief because chiropractors
are learned professionals and “[t]he impact of the Plaintiffs’ claim is to fundamentally
change the marketplace in which chiropractors deliver their services and the way in
which insurance companies contract for the delivery of those services.” Thus, the only
question before this Court is whether defendants’ actions as alleged, summarized in
those five counts of the claim for relief and as more fully described throughout the
second amended complaint, are subject to the exception for “professional services
rendered by a member of a learned profession.” N.C.G.S. § 75-1.1(b) (2017).
I agree with the majority that our Court of Appeals has followed, and we do
well to adopt, a two-part inquiry to determine whether the “learned profession”
exclusion applies: “[F]irst, the person or entity performing the alleged act must be a
member of a learned profession. Second, the conduct in question must be a rendering
of professional services.” Wheeless v. Maria Parham Med. Ctr., Inc., 237 N.C. App.
584, 589, 768 S.E.2d 119, 123 (2014) (quoting Reid v. Ayers, 138 N.C. App. 261, 266,
531 S.E.2d 231, 235 (2000) (citation omitted)). I also agree that the first prong is met
here even though HNS is itself an association of chiropractors acting as an
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
intermediary between providers and insurers. What seems clear to me is that the
non-antitrust conduct alleged in the complaint does not involve providing
professional services. Therefore, the second prong of the test is not met here.
The Court of Appeals cases addressing this question have held that when a
doctor or lawyer or other member of a learned profession is engaging in business
negotiations or contractual arrangements, advertising his or her practice, or buying
real estate, even though those activities “affect” the provision of professional services,
they are not themselves professional services entitled to an exemption. See Hamlet
H.M.A., LLC v. Hernandez, ___ N.C. App. ___, ___ 821 S.E.2d 600, 608 (2018) (“This
case involves a business deal, not rendition of professional medical services.”), disc.
rev. denied, ___ N.C. ___, 822 S.E.2d 637, and disc. rev. denied, ___ N.C. ___, 822
S.E.2d 640 (2019). In Reid v. Ayers, for example, while the conduct at issue involved
the provision of professional services by an attorney, the Court of Appeals explained
that:
[N]ot all services performed by attorneys will fall within
the exemption. Advertising is not an essential component
to the rendering of legal services and thus would fall
outside the exemption. See 47 N.C. Op. Att’y Gen. 118, 120
(1977) (“Advertising by an attorney is a practice apart from
his actual performance of professional services. Indeed, it
is not a professional practice at all, but rather a commercial
one.”). Likewise, the exemption would not encompass
attorney price-fixing. Id. Although no bright line exists,
we think that the exemption applies anytime an attorney
or law firm is acting within the scope of the traditional
attorney-client role. It would not apply when the attorney
or law firm is engaged in the entrepreneurial aspects of
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
legal practice that are geared more towards their own
interests, as opposed to the interests of their clients.
138 N.C. App. at 267-68, 531 S.E.2d at 236 (citing Short v. Demopolis, 103 Wash. 2d
52, 60-61, 691 P.2d 163, 168 (1984) (en banc)). The dividing line between what is,
and what is not, the rendering of professional services should turn on whether
learned professional knowledge and judgment that the ordinary person does not
possess is required to provide the services at issue. That is what distinguishes cases
involving staff privileges at hospitals and complaints to medical boards, as were at
issue in Cameron v. New Hanover Memorial Hospital, Inc., 58 N.C. App. 414, 293
S.E.2d 901, appeal dismissed and disc. rev. denied, 307 N.C. 127, 297 S.E.2d 399
(1982), and Wheeless, respectively, from this case and from Hamlet H.M.A. “The
rendering of a professional service is limited to the performance of work ‘[c]onforming
to the standards of a profession’ and ‘commanded or paid for by another.’ ” Phillips
v. A Triangle Women’s Health Clinic, Inc., 155 N.C. App. 372, 381, 573 S.E.2d 600,
605 (2002) (citations omitted), aff’d per curiam in part and disc. rev. improvidently
allowed in part, 357 N.C. 576, 597 S.E.2d 669 (2003). In Cameron, the Court of
Appeals explained that the actions complained of by the plaintiffs were not
commercial activities subject to UDTP coverage because they involved professional
judgments about the competency of podiatrists.
This evidence indicates that defendants were acting
in large measure pursuant to an “important quality control
component” in the administration of the hospital. As one
court described it, the hospital’s obligation is “to exact
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
professional competence and the ethical spirit of
Hippocrates as conditions precedent to . . . staff privileges.”
We conclude that the nature of this consideration of whom
to grant hospital staff privileges is a necessary assurance
of good health care; certainly, this is the rendering of
“professional services” which is now excluded from the
aegis of G.S. 75-1.1.
Cameron, 58 N.C. App. at 446-447, 293 S.E.2d at 920-921 (alteration in original) (first
quoting Walter Wadlington, Jon R. Waltz, & Roger B. Dworkin, Cases and Materials
on Law and Medicine 209 (1980); then quoting Sosa v. Bd. of Managers of Val Verde
Mem’l Hosp., 437 F.2d 173, 174 (5th Cir. 1971)). Clearly it takes medical knowledge
to be able to assess the skills and competency of medical doctors. But, in this case,
ironically, it is precisely the lack of professional judgment in HNS’s utilization
management procedures that has led plaintiffs here to allege that the organization is
committing an unfair trade practice. Plaintiffs allege that, instead of using
professional judgment to decide what services in-network patients need, HNS is
simply using a mathematical formula based on the average costs of all its providers.
But more fundamentally, if HNS is indeed failing to identify conflicts of interest in
some manner that is deceptive, or misrepresenting its services and benefits to
providers, those are matters relating to how it conducts its business dealings. To
illustrate this principle, if HNS had a routine practice of repeatedly leasing medical
office space without disclosing that the buildings were uninhabitable, the learned
professions exception would not apply even though the routine practice might keep
them in business, which, in turn, would facilitate insured patients receipt of
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SYKES V. HEALTH NETWORK SOLS., INC.
Earls, J., concurring in part, and dissenting in part
chiropractic services. Cf. Creekside Apts. v. Poteat, 116 N.C. App. 26, 36-38, 446
S.E.2d 826, 833-34 (failure to maintain dwellings in a safe, fit, and habitable
condition while demanding rent is an unfair and deceptive trade practice), disc. rev.
denied, 338 N.C. 308, 451 S.E.2d 632 (1994). Typically, specialized medical
knowledge is not necessary to ascertain that a building is uninhabitable. Similarly,
specialized medical knowledge is not necessary to determine whether HNS is
implementing a utilization review procedure without being authorized or licensed to
do so or is failing to follow statutory requirements for utilization review.
It may be that plaintiffs cannot prove their allegations, but the sufficiency of
their evidence is not at issue here. The allegations of the complaint, taken as true,
establish a UDTP claim independent of the antitrust allegations. Expanding the
learned profession exception to apply here goes further than what the General
Assembly intended when it amended the statute in 1977. When chiropractors are
treating patients, the learned profession exception should apply. But when they are
running a business processing, administering, and negotiating payments by
insurance companies to networked chiropractors, they are in commerce like every
other business and should be governed accordingly.
Chief Justice BEASLEY joins in this opinion.
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