BOUFFARD v. LABORATORY CORPORATION OF AMERICA HOLDINGS

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

SHERYL ANDERSON, MARY CARTER, )

TENA DAVIDSON, ROBERT )

HUFFSTUTLER, RAMZI KHAZEN, )

CHAIM MARCUS, LILY MARTYN, )

JONAH MCCAY, HOLDEN SHERIFF, )

VICTORIA SMITH, MICHELLE )

SULLIVAN, SHONTELLE THOMAS, )

JOSEPH WATSON, and MICHAEL )

WILSON, individually and on )

behalf of all others similarly )

situated, )

)

Plaintiffs, )

)

v. ) 1:17cv193

)

LABORATORY CORPORATION OF )

AMERICA HOLDINGS, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

This putative class action challenging the billing practices

of Defendant Laboratory Corporation of America Holdings

(“LabCorp”) returns to the court on LabCorp’s motion to dismiss

Plaintiffs’ amended complaint or alternatively to strike its class

allegations. (Doc. 45.) For the reasons set forth below, the

motion to dismiss will be granted in part and denied in part, and

the motion to strike will be denied.

I. BACKGROUND

The allegations of the 555-paragraph amended complaint,

viewed in the light most favorable to Plaintiffs as the non-moving

parties, show the following:

LabCorp provides laboratory testing services to healthcare

recipients internationally. (Doc. 42 ¶ 1.) It has more than 115

million patient encounters annually and has “generated more

revenue from clinical lab testing services than any other company

in the world.” (Id.) Its “LabCorp Diagnostics” segment is an

independent clinical laboratory business that provides the

services that are the subject of Plaintiffs’ amended complaint.

(Id. ¶¶ 44–45.) LabCorp’s customers are managed care

organizations, biopharmaceutical companies, governmental

agencies, physicians and other healthcare providers, hospitals,

employers, patients, and consumers. (Id. ¶ 47.)

LabCorp routinely charges different customers different rates

for the same services. These rates include an undiscounted retail

rate, which Plaintiffs variously term the “fee schedule rate,”

“list price,” and “chargemaster rate” (hereinafter, “list price”1);

the discounted rates LabCorp has negotiated with certain third-

party payors, such as insurers; a standardized rate for Medicare

clients; and rates that LabCorp negotiates with certain uninsured

or underinsured individuals. (Id. ¶¶ 41, 48–49, 70–71, 87, 211.)

1 In its previous opinion in this case, the court referred to this rate

as the “rack rate,” tracking Plaintiffs’ terminology in the original

complaint. (Doc. 32 at 2.)

These rates vary greatly, but the list prices tend to be much

higher than the other rates. (Id. ¶¶ 5, 469.)

There are fourteen Plaintiffs. (Id. ¶¶ 23–36.) Their common

complaint is that they were provided services by LabCorp for which

they were charged the list price, which they allege is grossly too

high, without any prior agreement as to price. Some Plaintiffs —

Michelle Sullivan, Mary Carter, and Chaim Marcus — arranged for

their diagnostic testing at a LabCorp facility, presumably in their

states of residence, California, Maryland, and New Jersey,

respectively.2 (Id. ¶¶ 24, 28, 33, 149, 227, 323.) Others,

including Tena Davidson (resides in Florida), Shontelle Thomas

(resides in Tennessee), and Lily Martyn (resides in New York but

had services performed in North Carolina), authorized their

physicians to order laboratory testing without knowing what lab

would do the work. (Id. ¶¶ 168–170, 240–42, 345–47.) Still

others, including Sheryl Anderson (resides in Alabama) and Ramzi

Khazen (resides in Texas), had blood drawn by their health care

providers who sent the specimens to LabCorp without advising either

Plaintiff that the sample was being sent to any laboratory testing

company. (Id. ¶¶ 121–25, 203-05.) At the time the services were

rendered, none of these Plaintiffs had an express agreement with

2 Unlike the other Plaintiffs, Marcus procured testing services for his

two sons, not himself. (Doc. 42 ¶¶ 225–31.) LabCorp has not argued

that this fact makes any difference. (Doc. 46 at 7 n.1.)

LabCorp to pay the list prices LabCorp subsequently charged.3 (Id.

¶ 111.) Most Plaintiffs had health insurance, but the relevant

testing performed by LabCorp was not covered by their policies;

Martyn and Thomas were uninsured. (Id. ¶¶ 122, 148, 167, 176,

203, 225–26, 239, 253, 278, 297, 322, 344, 360, 379.) As a result,

Plaintiffs were charged LabCorp’s list prices. Some Plaintiffs

paid the charges under protest, while others have refused to pay.

The amended complaint expands on the original complaint in

this case that made similar allegations. On March 28, 2018, the

court granted LabCorp’s motion to dismiss the original complaint

in a memorandum opinion and order finding that the allegations

failed to state a claim upon which relief could be granted. See

Sullivan v. Lab. Corp. of Am. Holdings, No. 1:17cv193, 2018 WL

1586471 (M.D.N.C. Mar. 28, 2018). On August 10, 2018, after the

court granted leave, Plaintiffs filed an amended complaint. (Doc.

42.) The amended complaint brings eleven claims, each on behalf

of a putative class. In Count I, Plaintiffs seek a declaratory

judgment that they never contractually assented to LabCorp’s list

prices, and therefore that LabCorp’s right of recovery against

them for the relevant laboratory testing services is limited to an

implied-contract recovery of the “reasonable value” of the

3 Carter did sign a document authorizing “up to $484” in charges for her

testing. (Doc. 42 ¶ 156.) However, she was then billed $711. (Id.

¶ 157.) Carter only challenges the additional $227 charged over the

$484 she had agreed to pay. (Id. ¶ 163.)

services rendered. (Id. ¶¶ 466–68.) Further, Plaintiffs seek a

declaration that LabCorp’s list prices exceed the “reasonable

value” of its services. (Id. ¶ 470.) In Count II, as to all

Plaintiffs who paid LabCorp’s list prices, Plaintiffs seek to

recoup the amounts they paid above the “reasonable value” of the

services rendered. (Id. ¶¶ 480–82.) In Counts III–XI, Plaintiffs

allege that LabCorp’s billing practices violate various consumer

protection statutes prohibiting unfair or deceptive trade

practices in North Carolina, Alabama, California, Florida,

Maryland, New Jersey, Tennessee, and Texas.

LabCorp now moves to dismiss the amended complaint pursuant

to Federal Rule of Civil Procedure 12(b)(6), largely on the basis

that Plaintiffs have failed to correct the defects of the original

complaint, as laid out in the court’s previous memorandum opinion

and order in this case. Plaintiffs contend in response that they

have rectified any defects in the original complaint by

recharacterizing their implied-contract theory, adding a

declaratory judgment claim, and backing off their earlier

insistence that the “reasonable value” of LabCorp’s services is

necessarily the rates LabCorp negotiates with insurers. The court

held argument on July 16, 2019, and the motion is ready for

decision.

II. ANALYSIS

A. Motion to Dismiss

In order to survive a Rule 12(b)(6) challenge, “a complaint

must contain sufficient factual matter, accepted as true, to ‘state

a claim to relief that is plausible on its face.’” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial

plausibility when the plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is

liable,” demonstrating “more than a sheer possibility that a

defendant has acted unlawfully.” Id.

1. Implied-Contract Declaratory Judgment Claim

In the amended complaint, Plaintiffs “seek a declaratory

judgment[4] that a contract implied-in-law (also referred to as a

quasi-contract . . .) or a contract implied-in-fact with an

omitted essential term (price) exists between LabCorp and each

4 Plaintiffs rely on N.C. Gen. Stat. § 1-253, which provides:

Courts of record within their respective jurisdictions shall

have power to declare rights, status, and other legal

relations, whether or not further relief is or could be

claimed. No action or proceeding shall be open to objection

on the ground that a declaratory judgment or decree is prayed

for. The declaration may be either affirmative or negative

in form and effect; and such declarations shall have the force

and effect of a final judgment or decree.

LabCorp has not challenged the propriety of declaratory judgment claims

per se in the context of this case.

Plaintiff and Class member.”5 (Doc. 42 ¶ 467 (emphasis omitted).)

In its briefing, LabCorp starts its attack on this claim with the

assumption that the court “has already held [in its memorandum

opinion and order dismissing Plaintiffs’ original complaint] that

Plaintiffs cannot state a claim using the law of quasi-contract.”

(Doc. 46 at 10.) LabCorp proceeds to argue that Plaintiffs’

implied-in-fact contract theory also fails because “North Carolina

law requires a meeting of the minds for formation of a valid and

enforceable agreement,” (id. at 13 (emphasis omitted)) and

Plaintiffs have admitted that “there was no mutual agreement or

intent to promise between LabCorp and any Plaintiff . . . prior or

subsequent to the performance of the clinical lab testing services

at issue herein.”6 (Doc. 42 ¶ 466.) Moreover, argues LabCorp, to

the extent there ever could have been any agreement on price, it

could only have been on the list price LabCorp always charges to

5 As previously noted, Plaintiffs also wish to bring each of their claims

on behalf of a class. The class allegations will be treated separately

below pursuant to LabCorp’s motion to strike.

6 First, LabCorp argues that there is no implied-in-fact contract formed

where there is no meeting of the minds on price. See, e.g., Rider v.

Hodges, 804 S.E.2d 242, 246 (N.C. Ct. App. 2017) (“A contract for service

must be certain and definite as to the nature and extent of . . . the

compensation to be paid, or it will not be enforced.” (quoting Croom v.

Goldsboro Lumber Co., 108 S.E. 735, 737 (N.C. 1921)) (emphasis omitted)).

Plaintiffs expressly allege that there was no meeting of the minds on

price. See, e.g., (Doc. 42 ¶ 12). Second, looking beyond price, LabCorp

points out that “many Plaintiffs disclaim having any knowledge of or

interaction with LabCorp whatsoever prior to performance of the

services.” (Doc. 46 at 14.)

consumers in Plaintiffs’ position.7 Plaintiffs contend that it is

possible to have an implied-in-fact contract absent agreement on

price, and that the remedy for a breach of such an implied-in-fact

contract is the “reasonable value of the services” contracted for.

Ellis Jones, Inc. v. W. Waterproofing Co., Inc., 312 S.E.2d 215,

218 (N.C. Ct. App. 1984).8 Plaintiffs conclude that “LabCorp is

entitled only to the reasonable value of its services regardless

of whether a contract implied-in-law (a quasi-contract), or a

contract implied-in-fact with an open price term governs.” (Doc.

47 at 16.)

The similarity in nomenclature between implied-in-fact and

implied-in-law contracts belies a significant doctrinal

distinction in North Carolina law. An implied-in-fact contract

“exists by virtue of the parties’ conduct, rather than in any

explicit set of words.” Kiousis v. Kiousis, 503 S.E.2d 437, 440

7 LabCorp also argues that Plaintiffs’ implied-contract claims “fl[y] in

the face of this Court’s previous holding that ‘LabCorp was under no

duty to volunteer its prices to patients who ordered testing through

their physicians before performing laboratory testing.’” (Doc. 46 at

18 (quoting Doc. 32 at 11) (emphasis omitted). This is a selective

reference to a phrase from the court’s statutory analysis. That LabCorp

had no affirmative legal duty to disclose its list prices to Plaintiffs

does not necessarily mean that LabCorp has the legal right to make

Plaintiffs pay those list prices in all instances, including where

LabCorp allegedly did not disclose them to customers.

8 Plaintiffs also cite a North Carolina statute adopting a provision of

the Uniform Commercial Code that permits formation of contracts for goods

“even though the price is not settled.” See (Doc. 47 at 16 (citing N.C.

Gen. Stat. § 25-2-305)). Because the instant case involves the provision

of services, not goods — as counsel for LabCorp acknowledged at the

hearing — the cited provision is inapt.

(N.C. Ct. App. 1998). “However, although its terms may not be

expressed in words, or at least not fully in words, the legal

effect of an implied in fact contract is the same as that of an

express contract in that it too is considered a real contract or

genuine agreement between the parties.” Id. (internal quotation

marks omitted). Unlike implied-in-fact contracts, “[a] quasi

contract or a contract implied in law is not a contract. The claim

is not based on a promise but is imposed by law to prevent an

unjust enrichment.” Booe v. Shadrick, 369 S.E.2d 554, 556 (N.C.

1988). “In order to establish a claim for unjust enrichment in

North Carolina, a plaintiff must show that ‘(1) plaintiff conferred

a measurable benefit to defendant, (2) defendant knowingly and

voluntarily accepted the benefit, and (3) the benefit was not given

gratuitously.’” Sullivan, 2018 WL 1586471, at *6 (quoting TSC

Research LLC v. Bayer Chems. Corp., 552 F. Supp. 2d 534, 540

(M.D.N.C. 2008)). Under the doctrine of quantum meruit, “the

measure of damages for unjust enrichment is the reasonable value

of the goods and services to the defendant.” Booe, 369 S.E.2d at

556; see also Forsyth Cty. Hosp. Auth., Inc. v. Sales, 346 S.E.2d

212, 214 (N.C. Ct. App. 1986) (“Failure to agree on the amount of

compensation entitles the physician to the reasonable value of his

services . . . .”).

Because LabCorp has not shown that Plaintiffs failed to

plausibly plead a declaratory judgment claim based on principles

of quasi-contract, the court need not reach the parties’ extensive

arguments regarding implied-in-fact contract doctrine.9 LabCorp’s

argument as to Plaintiffs’ request for a declaratory judgment that

LabCorp’s remedy is limited to a quasi-contract theory of recovery

is conclusory and does not address whether Plaintiffs have met the

three-factor test for unjust enrichment laid out above. Instead,

LabCorp merely asserts that the court “has already held that

Plaintiffs cannot state a claim using the law of quasi-contract.”

(Doc. 46 at 10); see also (id. at 12, 14–15). This is not the

case. Nowhere in its rejection of Plaintiffs’ “affirmative claim

against LabCorp to recoup alleged overpayments based on

application of the measure of damages for unjust enrichment,”

Sullivan, 2018 WL 1586471, at *7, did the court state that

Plaintiffs could not appeal to the law of quasi-contract on some

other type of claim.

The court’s prior opinion cited two grounds for rejecting

Plaintiff’s quasi-contract recoupment claim. First, the court

9 Resolving this latter dispute would require reconciling what appears,

at least at first glance, to be conflicting decisions from North Carolina

courts. In some cases, North Carolina courts have apparently recognized

implied-in-fact contracts for services despite no agreement on price.

See, e.g., Ellis Jones, 312 S.E.2d at 218. In other cases, North Carolina

courts have rejected the proposition that any contract for services can

be formed without agreement on price. See, e.g., Rider, 804 S.E.2d at

246 (“[T]he [plaintiffs’] claim that [the defendant] breached a contract

also fails because the parties never reached a meeting of the minds with

regard to the compensation [the defendant] was to be paid for his

landscaping services. Compensation is an essential element to a contract

for services. Here, there was no agreement as to price, and therefore

there was no enforceable contract.” (citation omitted)).

found that North Carolina courts have only applied unjust

enrichment doctrine to situations where a “plaintiff provided

something to the defendant for which the defendant did not fully

pay” — not situations where a plaintiff pays a defendant for a

service and seeks return of some of the payment. Id. at *6. The

court concluded that Plaintiffs were attempting to apply the law

“backwards,” thus suggesting that, if anything (e.g., if there

were no express contract), it would be LabCorp that may have an

unjust enrichment remedy against a patient who failed to pay for

services rendered. Id. Second, the court rejected Plaintiff’s

argument that the rate LabCorp charges third-party payors “is as

a matter of law the only reasonable rate.” Id. at *7. Plaintiffs’

new declaratory judgment claim, however, is not an attempt to use

quasi-contract doctrine to recoup overpayments. Instead,

Plaintiffs request a declaration that LabCorp’s remedy against

customers who have not paid its list prices sounds in quasi-

contract and is therefore limited to recovery in quantum meruit.

Moreover, Plaintiffs have backed off of their original insistence

that the rate LabCorp charges third-party payors is necessarily

the reasonable value of its services in every case. See, e.g.,

(Doc. 42 at 110). While Plaintiffs certainly offer little insight

into how they will ultimately propose to calculate reasonable

value, see id. at ¶ 110 (“Plaintiffs also anticipate relying upon

an expert to analyze the private third-party payer and government

payer data to develop a formula to calculate the market rate for

any given clinical lab test.”), they have untethered themselves

from their original, fatally-constrained theory of reasonable

value.10

At the motion hearing, LabCorp expressed its view that the

parties have an implied-in-fact contract for LabCorp’s list

price.11 However, LabCorp admits in briefing that “the facts

alleged allow for [the] possibilit[y] . . . [that] no contract

exists” between the parties. (Doc. 46 at 12); see also id.

(“Plaintiffs fail to plead the existence of an implied-in-fact

contract.”). Because the court takes Plaintiffs’ plausibly-

pleaded factual allegations as true at this stage and construes

them in the light most favorable to Plaintiffs, LabCorp’s

contention that an implied-in-fact contract exists for its list

10 Whether this creates an insurmountable impediment to their effort to

certify a class remains to be determined.

11 The parties agreed at the hearing that if an implied-in-fact contract

does appear from the evidence, quasi-contractual recovery would be

precluded. This conclusion appears to accord with North Carolina law,

despite some contrary statements. Compare Whitfield v. Gilchrist, 497

S.E.2d 412, 415 (N.C. 1998) (“[Q]uantum meruit is not an appropriate

remedy when there is an actual agreement between the parties.”), and 1

Richard A. Lord, Williston on Contracts § 1:6 (4th ed.) (“A court

properly resorts to quasi-contract only in the absence of an express

contract or contract implied-in-fact.”), with Hall v. Mabe, 336 S.E.2d

427, 429 (N.C. Ct. App. 1985) (“[P]laintiff’s evidence showed an

agreement implied in fact, not an express contract, and an implied

agreement does not bar a claim based on unjust enrichment.”), and 1 John

N. Hutson Jr. & Scott A. Miskimon, North Carolina Contract Law § 2-5

(2001) (“[A]lthough an express contract will bar a claim based on a

contract implied in fact, a contract implied in fact does not bar a claim

based on a contract implied in law.”).

price will depend on factual development.

LabCorp cites several hospital rate cases for the proposition

that it has a contract with Plaintiffs for its list price, but all

are distinguishable from the facts alleged here. See DiCarlo v.

St. Mary Hosp., 530 F.3d 255 (3rd Cir. 2008); Allen v. Clarian

Health Partners, Inc., 980 N.E.2d 306 (Ind. 2012); Banner Health

v. Med. Sav. Ins. Co., 163 P.3d 1096 (Ariz. 2007). In each of

these cases, the patients signed an express agreement to pay the

hospital, and the court construed that written contract to

reference the hospital’s list prices. See DiCarlo, 530 F.3d at

259, 264 (contract stated patients “guarantee[d] payment of all

charges and collection costs for services rendered” and court found

that “‘all charges’ unambiguously can only refer to [the

hospital’s] uniform charges set forth in its Chargemaster”);

Allen, 980 N.E.2d at 309, 311 (contract stated patients

“guarantee[d] payment of the account” and court found that

“Patients’ agreement to pay ‘the account’ in the context of [the

hospital’s] contract to provide medical services is not indefinite

and refers to [the hospital’s] chargemaster); Banner Health, 163

P.3d at 1098, 1100 (some contracts stated patients agreed to “pay

the hospital[’]s usual and customary charges,” while others stated

patients agreed to “pay the account” — court found the contract

“incorporated” Arizona’s hospital price regulation scheme and

therefore referred to the prices set via that scheme).12 No written

contract is alleged here. Nor does LabCorp attempt to address the

hospital rate cases reaching the opposite result. See Doe v. HCA

Health Services of Tenn., Inc., 46 S.W.3d 191, 194, 197 (Tenn.

2001) (contract stated patients agreed to be “financially

responsible to the hospital for charges” and court found the

contract unenforceable because “the price term . . . is

indefinite”).

In conclusion, nothing in the court’s prior memorandum

opinion and order bars Plaintiffs’ claim seeking a declaratory

judgment that LabCorp is limited to a quasi-contract theory of

recovery against Plaintiffs, and LabCorp offers no other

persuasive reason that the claim should fail at this early stage.

The motion to dismiss will therefore be denied as to Count I.

2. Implied-Contract Recoupment Claim

Unlike Plaintiffs’ declaratory judgment claim, Plaintiffs’

recoupment claim is substantively the same one the court previously

rejected. Plaintiffs once again assert a theory of unjust

12 Moreover, these cases were decided in “the peculiar circumstances of

hospitals,” where the contractual language used was “the only practical

way in which the obligations of the patient to pay can be set forth,

given the fact that nobody yet knows just what condition the patient

has, and what treatments will be necessary to remedy what ails him or

her.” DiCarlo, 530 F.3d at 263–64. That may not be the case here,

where patients or their doctors order specific laboratory testing from

LabCorp.

enrichment13 never before recognized by a North Carolina court:

that — absent fraud or mistake of fact — a person who has received

services and has knowingly paid the price demanded for those

services can sue for unjust enrichment to recoup whatever part of

the price the defendant could not have obtained if it had instead

sued the plaintiff for unjust enrichment.14 See Sanders v. Ragan,

90 S.E. 777, 778 (N.C. 1916) (creating equitable exceptions to the

normal requirements of unjust enrichment claims where payment was

made “under a mistake of fact” or “was induced . . . by the

[defendant’s] fraud”).

As the court previously noted, North Carolina courts have

generally applied the doctrine of unjust enrichment to suits

“seek[ing] to return to the plaintiff the reasonable value of the

services and goods provided to the defendant.” Sullivan, 2018 WL

1586471, at *7 (quoting W.F. Magann Corp. v. Diamond Mfg. Co., 775

13 Plaintiffs’ one-sentence argument also references an alternative claim

“under a theory of breach of implied contract.” (Doc. 47 at 22.) If

“implied contract” here references implied-in-law contracts, then it is

duplicitous of Plaintiffs’ unjust enrichment claim. See Whitfield, 497

S.E.2d at 414–15 (“Quantum meruit is a measure of recovery for the

reasonable value of services rendered in order to prevent unjust

enrichment. It operates as an equitable remedy based upon a quasi

contract or a contract implied in law.” (citations omitted)). If it

references implied-in-fact contracts: Plaintiffs represented at the

motion hearing that “there is no contract here” because “[t]here’s no

agreement on price.” See also (Doc. 42 ¶ 466 (“[T]here was no mutual

agreement or intent to promise between LabCorp and any Plaintiff or

member of the Class prior or subsequent to the performance of the

clinical lab testing services at issue herein.”)).

14 This claim is only brought on behalf of those Plaintiffs (and purported

class members) who actually paid LabCorp’s list prices.

F.2d 1202, 1208 (4th Cir. 1985)). Here, LabCorp provided a service

to Plaintiffs, not the other way around. See Krebs v. Charlotte

Sch. of Law, LLC, No. 3:17-cv-00190-GCM, 2017 WL 3880667 (W.D.N.C.

Sept. 5, 2017) (finding that a “[p]ayment . . . cannot be unjust

if the [plaintiffs] received the benefit for which they paid” and

rejecting “[a]ny inquiry into the . . . value of the services

provided” once payment has been made). Thus, even if — assuming

that Plaintiffs succeed in showing that only a quasi-contract

exists between the parties — LabCorp’s remedy against those

Plaintiffs who refuse to pay is limited to quantum meruit, it does

not follow that those Plaintiffs who have paid the price LabCorp

charged have a quantum meruit remedy against LabCorp. “[U]njust

enrichment [i]s an appropriate remedy only in situations where the

complaining party . . . undertook an action with an expectation of

compensation or other benefit in return.” Butler v. Butler, 768

S.E.2d 332, 339 (N.C. Ct. App. 2015); see also Stout v. Smith, 165

S.E.2d 789, 791 (N.C. Ct. App. 1969) (“A promise to pay for

services is implied when they are rendered and received in such

circumstances as authorize the party performing to entertain a

reasonable expectation of payment for them by the party

benefited.”). Plaintiffs cannot have reasonably expected LabCorp

to provide them with some additional benefit in compensation for

their payment of charges for services LabCorp had already rendered.

Plaintiffs do not attempt to address these issues. Rather,

they cite two cases in support of their one-sentence recoupment

argument. In Amwest Surety Insurance Co. v. Republic National

Bank, 977 F.2d 122 (4th Cir. 1992), the Fourth Circuit held that

— under South Carolina law — a plaintiff could recover funds a

bank appropriated from the plaintiff and used to pay down a third-

party debt (all in breach of the parties’ line of credit and loan

documentation) without the plaintiff’s consent. In Root v.

Allstate Insurance Co., 158 S.E.2d 829 (N.C. 1968), the North

Carolina Supreme Court reversed the trial court’s dismissal of a

claim that the defendant/lessee was unjustly enriched by having

used part of the plaintiff/lessor’s building without paying for

it. Neither case has any bearing on whether North Carolina law

allows a plaintiff to recover monies knowingly paid for services

requested and rendered.15

In sum, the court can discern no reason why its prior

dismissal of Plaintiffs’ recoupment claim should come out

differently this time around. Thus, LabCorp’s motion to dismiss

will be granted as to Count II.

3. Statutory Claims

In Counts III through XI, Plaintiffs claim that LabCorp’s

billing and collection practices violate consumer protection

15 This result is consistent with that in Leslie v. Quest Diagnostics,

Inc., No. 17-1590(ES)(MAH), 2018 WL 1535235 (D.N.J. Mar. 29, 2018), which

dismissed similar claims of unjust enrichment against another laboratory

services provider. See id. at *7.

statutes in North Carolina, Alabama, California, Florida,

Maryland, New Jersey, Tennessee, and Texas — all essentially

variations on what in North Carolina is the Unfair and Deceptive

Trade Practices Act, N.C. Gen. Stat. § 75-1 et seq. (“UDTPA”).

The parties largely treat these claims collectively, and (lacking

any present argument to the contrary) the court will therefore

assume for purposes of this motion that authority supporting a

claim in any of these jurisdictions supports that claim across the

board, and vice versa.

Plaintiffs propose three different bases for liability under

the state statutes:

First, LabCorp systematically overcharges individuals

with no contract by egregious amounts. Second, LabCorp

manipulates self-pay patients into paying its knowingly

excessive chargemaster rates by sending non-transparent

invoices that omit the CPT code[16] or LabCorp test code

and the medical diagnosis code . . . . Third, LabCorp

uses intimidating letters to extract payment . . . .

(Doc. 47 at 25.) LabCorp argues that the court has already

rejected Plaintiffs’ overcharging and non-transparent invoice

claims, and further that the mere fact that its collection letters

would have violated the Fair Debt Collection Practices Act

(“FDCPA”), 15 U.S.C. § 1692, had they been sent by a third-party

collection agency, does not make sending the letters an unfair or

deceptive act.

16 “‘CPT code’ means Current Procedural Terminology code, and is a set

of medical codes for healthcare-related laboratory procedures, and is

maintained by the American Medical Association.” (Doc. 42 ¶ 6 n.1.)

Each of the state statutes at issue in this case requires, in

one form or another, that the plaintiff “allege facts plausibly

showing that . . . a defendant committed an unfair or deceptive

act.” Sullivan, 2018 WL 1586471, at *4 (referencing the North

Carolina UDTPA); see also Ala Code. § 8-19-1, et seq. (prohibiting

“deceptive acts or practices in the conduct of any trade or

commerce”); Cal. Civ. Code § 1770 et seq. (prohibiting “unfair or

deceptive acts or practices undertaken by any person in a

transaction intended to result or that results in . . . services

to any consumer”); Cal. Bus. & Prof. Code § 17200, et seq.

(prohibiting “unfair or fraudulent business act[s] or

practice[s]”); Fla. Stat. Ann. § 501.201, et seq. (prohibiting

“unconscionable acts or practices[] and unfair or deceptive acts

or practices in the conduct of any trade or commerce”); Md. Code

Ann., Com. Law § 13-101, et seq. (prohibiting “any unfair or

deceptive trade practice”); N.J. Stat. Ann. § 56:8-1 et seq.

(prohibiting “any unconscionable commercial practice, deception,

fraud, false pretense . . . misrepresentation, or the knowing

concealment, suppression, or omission of any material fact with

intent that others rely upon such concealment, suppression or

omission”); Tenn. Code § 47-18-101, et seq. (prohibiting “[u]nfair

or deceptive acts or practices affecting the conduct of any trade

or commerce”); Tex. Bus. & Com. Code § 17.41, et seq. (prohibiting

“[f]alse, misleading, or deceptive acts or practices in the conduct

of any trade or commerce” and “any unconscionable action or course

of action by any person” that causes “economic damages or damages

for mental anguish”).17 North Carolina courts have stated that

business practices are unfair if they are “immoral, unethical,

oppressive, unscrupulous, or substantially injurious to

consumers,” and are deceptive if they have “the capacity or

tendency to deceive.” Ace Chem. Corp. v. DSI Transp., Inc., 446

S.E.2d 100, 106 (N.C. Ct. App. 1994).

As to Plaintiffs’ argument that LabCorp should be liable for

its failure to provide CPT codes in its invoices, the court agrees

with LabCorp that its prior opinion already rejected the theory

that LabCorp’s aggregate billing method is unfair or deceptive.

See Sullivan, 2018 WL 1586471, at *5, 9, 11. Although Plaintiffs

have modified their claim slightly by focusing more on test-by-

test CPT codes rather than test-by-test insurance adjustments,

neither omission “render[s] the invoices misleading.” Id. at *9.

Moreover, Plaintiffs do not indicate where in their amended

complaint they plausibly plead that they would not have paid the

charges had LabCorp provided CPT codes — let alone that a

significant number of consumers in their position would not have

paid. See, e.g., Bank of Am., N.A. v. Jill P. Mitchell Living

Trust, 822 F. Supp. 2d 505, 534 (D. Md. 2011) (noting that

17 For purposes of this motion, the court assumes — as do the parties —

that Plaintiffs can bring claims under the laws of each of these states.

plaintiffs proceeding on a material omission theory of unfair or

deceptive trade practices must show both reliance and that “a

significant number of unsophisticated consumers likely would not

have made the disputed choice had the commercial entity not omitted

the information in question”); cf. Tex. Bus. & Com. Code § 17.46

(establishing material omission liability where the “failure to

disclose [the] information was intended to induce the consumer

into a transaction into which the consumer would not have entered

had the information been disclosed”). Instead, most of the

Plaintiffs who paid LabCorp’s charges specifically allege that

they did so only because of LabCorp’s allegedly coercive tactics;

i.e., “to avoid continuing collection efforts” and/or “harm to

[their] credit rating.” (Doc. 42 ¶¶ 164, 249, 375.)

As to Plaintiffs’ excessive pricing claim, however, the court

disagrees with LabCorp that its prior opinion requires dismissal.

As to the original complaint, Plaintiffs had argued that the act

of “billing them [LabCorp’s list prices] violates the UDTPA” — in

other words, that the prices LabCorp charged were unfair or

deceptive simply because they were so “excessive.” (Doc. 20 at

24.) The court rejected that argument because, as the North

Carolina Supreme Court explained in Bumpers v. Community Bank of

Northern Virginia, 747 S.E.2d 220 (N.C. 2013), it is not normally

unfair or deceptive to charge a price — even an exorbitant one.

Id. at 228–29. However, as the court pointed out, Bumpers

qualified its holding by noting that “there may be

circumstances . . . when an unreasonably excessive price would

constitute a violation of [the UDTPA].” Id. at 229; see Sullivan,

2018 WL 1586471, at *4 (describing Bumpers as holding that “where

there was no element of exigency, misrepresentation, or

compulsion, high price alone did not violate the UDTPA”); cf.

Leslie, 2018 WL 1535235, at *4 (rejecting a claim that excessive

pricing alone is unfair or deceptive, but noting that it might be

unfair or deceptive when paired with “other factors”). As relevant

here, the plaintiffs in Bumpers “entered into [the challenged]

transactions freely and without any compulsion,” such that their

claims were governed by the rule that “when transacting parties

willingly and honestly negotiate a transaction, generally the

transaction is not said to be unfair or deceptive.” 747 S.E.2d at

228–29.

In the amended complaint, Plaintiffs’ overcharging claim is

not merely an accusation that LabCorp’s prices are excessive, but

that “LabCorp has a number of business practices that trick and

harass customers into paying excessive prices.” (Doc. 42 ¶ 417);

see also (Doc. 47 at 26 (“Plaintiffs’ allegations in the aggregate

are not simply ‘excessive pricing’ . . . claims, but encompass

targeting individual patients and systematically overcharging them

using aggressive and manipulative billing and collection

techniques for services that are critical to a patient’s

health.”)). In the amended complaint, Plaintiffs allege that

LabCorp declines to disclose its prices to patients until they

have already received services, whereupon LabCorp charges them

amounts grossly exceeding the reasonable value of the services

rendered and coerces them into paying the inflated prices by

threatening to damage their credit ratings and to foreclose them

from using LabCorp’s services in the future. (Doc. 42 ¶¶ 3–11,

338, 427.) These additional elements distinguish LabCorp’s

alleged business practices from the transactions at issue in

Bumpers, as well as from Plaintiffs’ arguments in the prior round

of briefing, where the argument was simply that the prices at issue

were too high.

LabCorp argues that the question whether its collection

letters would have violated the FDCPA had they been sent by a

third-party collection agency “simply ha[s] no bearing on

Plaintiffs’ claims,” given that the letters were not so sent.

(Doc. 46 at 21.) LabCorp cites no authority for this proposition,

and courts in this district treating North Carolina’s analogue to

the FDCPA — the North Carolina Debt Collection Act (“NCDCA”), N.C.

Gen. Stat. § 75-51 — have previously found that even where a

defendant “cannot be directly liable under the NCDCA, provisions

of that statute provide examples of behavior that will be

considered unfair and deceptive within the broader scope of the

UDTPA’s restrictions.” DIRECTV, Inc. v. Cephas, 294 F. Supp. 2d

760, 765 (M.D.N.C. 2003). At any rate, the court need not reach

arguments pertaining to whether the threatening letters in

isolation would support a claim for unfair or deceptive trade

practices, as it construes Plaintiffs’ excessive-pricing and

threatening-letter theories together as a general challenge to

LabCorp’s billing practices.18 Lacking any persuasive argument to

the contrary, the court cannot say that Plaintiffs have failed to

plead a claim under the state consumer protection statutes at

issue.

To be clear, Plaintiffs will ultimately have the considerable

burden of showing that LabCorp’s list prices were so excessive and

its billing practices so coercive, that — together with LabCorp’s

nondisclosure of price — LabCorp’s billing practices were

sufficiently “egregious or aggravating” as to be an unfair or

deceptive trade practice. Becker v. Graber Builders, Inc., 561

S.E.2d 905, 910 (N.C. Ct. App. 2002). Moreover, Plaintiffs will

have to meet the other elements of an unfair or deceptive trade

practices claim, unchallenged in the current motion: that the

18 LabCorp points out that Plaintiffs alleged threatening letters in the

original complaint, which the court dismissed for failure to state a

claim. However, the original complaint only mentioned collection letters

once in its 179 paragraphs, and Plaintiffs did not mention them at all

in briefing — let alone make an argument that the collection letters

were relevant to their UDTPA claim. The amended complaint heavily

emphasizes the collection letters, and Plaintiffs in briefing link the

letters directly to their excessive pricing claim. See (Doc. 47 at 26).

allegedly unfair or deceptive act was (1) in or affecting commerce

and (2) proximately caused injury to Plaintiffs. Dalton v. Camp,

548 S.E.2d 704, 711 (N.C. 2011). At present, suffice it to say

that LabCorp’s contention that “Plaintiffs’ [UDTPA] claim still

reduces to the simple fact that they think LabCorp’s prices are

too high” (Doc. 46 at 21) is mistaken.19

As a result, LabCorp’s motion to dismiss will be granted as

to any unfair or deceptive trade practices claim in the amended

complaint based on nondisclosure of CPT codes, but will be denied

as to any claim based on allegations that LabCorp was limited to

payment for the reasonable value of its services under a quasi-

contract theory and nevertheless attempted to collect undisclosed

and grossly excessive prices through coercive billing practices.

B. Motion to Strike Class Allegations

Plaintiffs purport to bring claims under Federal Rules of

Civil Procedure 23(b)(2) & 23(b)(3)

on behalf of themselves and on behalf of a national

Class, defined . . . as all LabCorp patients in the

United States who, without any express contract with

LabCorp that establishes the amount of fees to be paid

to LabCorp, were charged fees for clinical lab testing

services performed by LabCorp that were in excess of the

reasonable market rates for the same services.

19 However, Plaintiffs’ proposed sub-classes appear to include all

customers who were “charged” LabCorp’s list prices, rather than all

customers who were charged and also received collection letters. It may

be that the claims of proposed class members who did not receive

collection letters would in fact “reduce[] to the simple fact that they

think LabCorp’s prices are too high.” (Doc. 46 at 21.)

(Doc. 42 ¶ 449.) Plaintiffs also allege nine sub-classes, eight

of which mirror the national class definition but are confined to

a specific state: Alabama, California, Florida, Maryland, New

Jersey, North Carolina, Tennessee, and Texas. (Id. ¶ 450.) The

final sub-class is a national class for LabCorp patients who were

not only charged LabCorp’s list prices, but who also paid them.

(Id.)

LabCorp moves to strike Plaintiffs’ class allegations under

Rules 12(f) and 23(d)(1)(D) on the basis that the merits claims

require too many individualized inquiries. LabCorp first argues

that

determining the so-called reasonable value of services

rendered would require examining at least: (1) the price

LabCorp charged for each and every test provided to each

and every class member for an indeterminate period of

time; (2) the cost basis for each of those thousands of

tests; (3) all the prices charged to all other buyers —

including third-party payers, the government, and

uninsured patients — for each one of those tests based

on the place and time those tests were performed; (4)

the prices for each and every available competitor who

offers the same testing services; (5) the amount charged

to each class member; (6) the value of the services

rendered to each class member; and (7) the amount paid

by each class member, if any, including discounts or

other relief obtained.

(Doc. 46 at 24.) Next, LabCorp argues that Plaintiffs’ implied-

contract claims necessarily involve fact-specific inquiries into

whether a given Plaintiff assented to a specific price or any of

the other elements of a contract. LabCorp points out that

Plaintiffs’ interactions with it vary factually: some Plaintiffs

went to a LabCorp clinic directly; others knew their doctor would

send their specimens to a lab but didn’t know it would be LabCorp;

and at least one appears to have assumed his healthcare provider

would perform the test in-house.

Plaintiffs respond that the number of lab tests at issue is

finite and could be narrowed further if necessary; that it is

speculative to assume at this early stage that they will be unable

to establish a uniform valuation theory after discovery; and that

LabCorp’s practice of not affirmatively disclosing its list prices

in advance renders mutual assent to price impossible.

In order to certify a class in this case, Plaintiffs will

need to show that

(1) the class is so numerous that joinder of all members

is impracticable; (2) there are questions of law or fact

common to the class; (3) the claims or defenses of the

representative parties are typical of the claims or

defenses of the class; and (4) the representative

parties will fairly and adequately protect the interests

of the class.

Fed. R. Civ. P. 23(a). They will also need to show that “the party

opposing the class has acted or refused to act on grounds that

apply generally to the class, so that final injunctive relief or

corresponding declaratory relief is appropriate respecting the

class as a whole” or that “the questions of law or fact common to

class members predominate over any questions affecting only

individual members, and that a class action is superior to other

available methods for fairly and efficiently adjudicating the

controversy.” Id. 23(b)(2) & (3).

However, Plaintiffs have not yet moved to certify a class and

therefore need not yet meet these standards. Instead, it is

LabCorp that must meet the demanding standard of showing that

Plaintiffs’ class allegations should be struck. Because “an

evidentiary hearing is typically held” prior to certification,

Monroe v. City of Charlottesville, 579 F.3d 380, 384 (4th Cir.

2009), it is normally only appropriate to strike class allegations

when a defendant “demonstrate[s] from the face of plaintiffs’

complaint that it will be impossible to certify the classes alleged

by the plaintiffs regardless of the facts the plaintiffs may be

able to prove.” Whitt v. Seterus, Inc., No. 3:16-2422-MBS, 2017

WL 1020883, at *2 (D.S.C. Mar. 16, 2017) (emphasis added); see

also 5C Charles Alan Wright et al., Federal Practice & Procedure

§ 1380 (3d ed. 2011) (noting that “striking a portion of a pleading

is a drastic remedy” and that Rule 12(f) motions are therefore

“viewed with disfavor by the federal courts and are infrequently

granted” (footnotes omitted)). Some courts in this circuit have

therefore denied motions to strike out of hand as premature. See

Alig v. Quicken Loans Inc., 2015 WL 13636655, at *3 (N.D.W. Va.

Oct. 15, 2015) (“[C]lass allegations should not be addressed at

the pleading stage, before plaintiff has had full opportunity for

discovery and to revise the class definition as necessary.”); see

also Mungo v. CUNA Mut. Ins. Soc., No. 0:11-464-MBS, 2012 WL

3704924, at *6 (D.S.C. Aug. 24, 2012) (declining to “consider

Defendants’ arguments relating to the typicality or adequacy of

Plaintiff’s representation of the proposed class” on a motion to

strike “as these arguments are premature”).

With these standards in mind, the court finds that — although

LabCorp identifies serious hurdles Plaintiffs will have to

overcome to achieve class certification — Plaintiffs’ chances of

attaining certification are not so wholly nonexistent as to justify

the drastic remedy of striking their class allegations. To be

sure, each of the specific valuation theories Plaintiffs mentions

is flawed; using “the amounts paid by third-party payers” as the

reasonable value (Doc. 42 ¶ 84) is very similar if not identical

to the theory the court previously rejected, and the court is

skeptical that using the Medicare or Medicaid rates (id. ¶¶ 89–

106) would be any improvement. Unlike in the original complaint,

however, Plaintiffs do not commit themselves to any one of these

theories to the exclusion of others, representing instead that

they “anticipate relying upon an expert to analyze” cost and price

data obtained through discovery “to develop a formula to calculate

the market rate for any given clinical lab test.” (id. ¶ 110.)

Vague though this proposal may be, LabCorp does not explain why

Plaintiffs should be required to enunciate a specific valuation

theory in their initial pleadings — especially when Plaintiffs

lack the data on which they intend to rely and have not had any

opportunity for discovery.20 Moreover, Plaintiffs suggested at the

hearing on the present motion that they may seek certification

limited to what they contend would be a more manageable number of

tests. See also (Doc. 47 at 30 (Plaintiffs noting the possibility

that “trial [could] proceed[] only with a selection of lab tests,”

for instance “those that [the named] Plaintiffs were billed for or

the twenty most common”).) While such noncommittal positions on

reasonable value and certification do not justify striking the

class allegations at this early stage, they will not translate

into fishing-expedition-style class discovery. Instead,

Plaintiffs should be permitted the opportunity to demonstrate how

some targeted discovery can be had that is reasonable and

proportional to the necessary issues.

As to the mutual assent issue, LabCorp’s skepticism is

legitimate, but the arguments are better fit for consideration on

a motion for class certification. Although LabCorp cites cases

disapproving of class actions in the context of contract claims,

each of those cases involves a motion for class certification, not

a pre-answer motion to strike class allegations. See Broussard v.

Meineke Discount Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998);

Kreger v. Gen. Steel Corp., No. 07-575, 2010 WL 2902773 (E.D. La.

20 This does not account for the method of proof LabCorp may contend is

necessary to prove reasonable value of its services, if the case proceeds

to that stage.

July 19, 2010); Harrison v. Wal-Mart Stores, Inc., 613 S.E.2d 322

(N.C. Ct. App. 2005). Moreover, LabCorp barely acknowledges

Plaintiffs’ argument, reiterated at the motions hearing, that lack

of knowledge of price forecloses any possibility of mutual assent

as to price, and thus forecloses an implied-in-fact contract. See

also Forsyth Cty. Hosp. Auth., Inc. v. Sales, 346 S.E.2d 212, 214

(N.C. Ct. App. 1986) (“Failure to agree on the amount of

compensation entitles the physician to the reasonable value of his

services . . . .”). As these cases demonstrate, the prudent

course is to allow the parties to more fully marshal their

certification arguments with the benefit of at least preliminary

discovery.21

As a result, LabCorp’s motion to strike class allegations

will be denied without prejudice to those challenges being raised

in opposition to Plaintiffs’ motion for class certification.

21 Moreover, this will also allow the parties to develop a factual record

to address the lingering question raised by the court at the motions

hearing: whether an agency relationship existed between any parties

and/or non-parties that would materially affect the legal claims in this

case. At the hearing, Plaintiffs’ counsel noted that “we’re presuming

for the purposes of this case that the doctor was authorized to order

the tests they ordered.” Counsel for LabCorp commented that “[i]n

effect, the doctors are acting as [the patients’] agents in this

situation.” Another counsel for LabCorp represented that there were

situations in which “the physician [is] acting on our behalf.” If there

is any relevant agency relationship between medical professionals and

any of the parties, the amended complaint is silent as to its scope.

See generally Manecke v. Kurtz, 731 S.E.2d 217 (N.C. Ct. App. 2012)

(discussing liability of principals for contracts entered into by their

agents).

III. CONCLUSION

For the reasons stated,

IT IS THEREFORE ORDERED that LabCorp’s motion to dismiss is

GRANTED as to Count II and as to any claim in Counts III—XI based

on nondisclosure of CPT codes; as to all other claims, the motion

is DENIED.

IT IS FURTHER ORDERED that LabCorp’s motion to strike class

allegations is DENIED WITHOUT PREJUDICE.

/s/ Thomas D. Schroeder

United States District Judge

August 16, 2019