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Leary v. Centene Corporation

United States District Court, D. Kansas

March 10, 2015

Jacqueline Leary, Plaintiff/Counterclaim Defendant,
Centene Corporation; Centene Management Company, LLC; Sunflower State Health Plan, Inc.; Jean Rumbaugh Wilms; and Rob Hitchcock, Defendants/Counterclaimants.


JOHN W. LUNGSTRUM, District Judge.

Plaintiff Jacqueline Leary was employed by defendant Centene Management Company, LLC as Vice President of Contracting and Network Development for defendant Sunflower State Health Plan, Inc. ("SSHP"). According to the complaint, both Centene Management Company and SSHP are wholly-owned subsidiaries of defendant Centene Corporation, a managed care provider. Defendants Jean Wilms and Rob Hitchcock are also employees of defendant Centene Management Company. In her complaint, plaintiff alleges a claim against the three corporate defendants under the whistleblower protection provision of Sarbanes-Oxley, 18 U.S.C. § 1514A(a), as well as a state law claim for wrongful discharge in violation of Kansas public policy. She asserts a state law claim under Kansas law for tortious interference with a business relationship and/or expectancy against the individual defendants.

In their answers to plaintiff's complaint, each of the corporate defendants has asserted state law counterclaims against plaintiff for abuse of process and defamation. This matter is now before the court on plaintiff's motion to dismiss defendants' counterclaims (doc. 14). As will be explained, the court grants the motion with respect to defendants' counterclaims for abuse of process and denies the motion with respect to defendants' counterclaims for defamation.[1]


According to the parties' pleadings, the State of Kansas in 2011 began efforts to move virtually all of the State's Medicaid enrollees into health plans run by private entities. Toward that end, the State issued a Request for Proposal to obtain responses from potential partners as part of these privatization efforts. Defendant Centene Corporation, through its subsidiary SSHP responded to the RFP and was one of three managed care organizations selected by the State of Kansas in 2012. In August 2012, the State of Kansas submitted a Medicaid Section 1115 demonstration proposal entitled KanCare. That request was approved by the Centers for Medicare & Medicaid Services in late December 2012, effective from January 1, 2013 through December 31, 2017. Plaintiff asserts that the KanCare program has been "plagued by difficulties" reported by providers in the three managed care entities' networks since its inception in January 2013. According to plaintiff, defendant Centene Corporation and the two other private managed care entities with whom the State of Kansas contracted have reported significant financial losses as a result of their participation in the KanCare program.

Plaintiff began her employment with defendant Centene Management Company, LLC in December 2012 as defendant SSHP's Vice President of Contracting and Network Development. Plaintiff's provider contracting team was responsible for securing provider agreements with entities that agreed to participate in SSHP's provider network at various reimbursement rates negotiated by Centene's contract implementation team. Plaintiff reported directly to Jean Wilms, SSHP's Chief Executive Officer. In February 2013, plaintiff attended an internal meeting of upper management during which SSHP's poor preliminary financial performance was discussed and members of Centene's executive leadership allegedly expressed serious concerns about SSHP's financial performance and the manner in which that poor financial performance would impact the financial performance of its parent, Centene. Plaintiff alleges that during this discussion, defendant Rob Hitchcock, Centene's Executive Vice President of Health Plans, asked the SSHP representatives in attendance which entities in the SSHP provider network had contracted for reimbursement rates higher than 100% of standard Kansas Medicaid rates. According to plaintiff, when Mr. Hitchcock learned that the University of Kansas Medical Center ("KUMED") was among the entities which had contracted for higher rates of reimbursement, Mr. Hitchcock informed the attendees that SSHP would thereafter close its member panels in order to preclude new members from being assigned primary care physicians (PCPs) affiliated with KUMED so that SSHP could avoid incurring expenses related to referrals by KUMED PCPs and specialists to the hospital. Plaintiff alleges that Mr. Hitchcock asserted that such measures were necessary in order to dramatically improve SSHP's financial performance. According to plaintiff, Ms. Wilms, following the meeting, instructed plaintiff to take whatever steps were necessary to determine how SSHP could close the PCP panels to auto assignment.

Plaintiff contends that when Ms. Wilms inquired in March 2013 about the status of her efforts to close the PCP panels to auto assignment, plaintiff explained that she believe that Mr. Hitchcock's instruction was unethical and perhaps unlawful because the providers had not requested to have the PCP panels closed to auto assignment and because the practice violated Centene's contractual obligations both to those providers and to the State of Kansas. Plaintiff alleges that Ms. Wilms dismissed her concerns and asserted that the providers at issue "did not want Medicaid patients anyway." In the following months, plaintiff contends that she orchestrated the closing of the member panels for KUMED and that Ms. Wilms ultimately instructed her to close the PCP panels to auto assignment for all PCPs employed by hospital systems with negotiated reimbursement rates higher than 100% of standard Kansas Medicaid rates.

According to plaintiff, in July 2013 Ms. Wilms instructed plaintiff to take the additional step of moving existing members assigned to PCPs employed by entities contracted for higher reimbursement rates to providers contracted at only 100% of standard Kansas Medicaid rates. Plaintiff alleges that she told Ms. Wilms that she was not willing to do so. At that point, plaintiff alleges that Ms. Wilms began a campaign of retaliation against her. Eventually, on January 13, 2014, plaintiff met with Virginia Picotte, SSHP's Vice President of Compliance and Regulatory Affairs. Plaintiff alleges that she advised Ms. Picotte about her concerns with the instructions of Mr. Hitchcock and Ms. Wilms and her belief that SSHP's practices violated Centene's ethics policy, state and/or federal law, and SSHP's contractual obligations with the State and with its providers. Plaintiff contends that Ms. Picotte never followed up on plaintiff's concerns and that plaintiff reached out to Ms. Picotte again on January 24, 2014 to inquire about the status of an investigation into plaintiff's concerns. According to plaintiff, plaintiff's employment was terminated that same afternoon.

The corporate defendants, in their counterclaims, assert that plaintiff, in February 2014, made a pre-suit settlement demand of $3 million which defendants contend was an outrageous and extortive amount. Defendants contend that they refused the demand and that plaintiff subsequently filed her lawsuit "not to recover on the cause of action stated in the Complaint, but in furtherance of" plaintiff's "extortive scheme." Defendants, on this basis, assert a counterclaim for abuse of process. Defendants further assert a counterclaim for defamation based on allegedly defamatory remarks that plaintiff made after her termination to Todd Lutz, the Director of Managed Care for Stormont Vail Hospital. Defendants contend that plaintiff told Mr. Lutz that defendants terminated her employment as a result of her contacting the compliance department; that defendants directed her to do something inappropriate during her employment; and that defendant SSHP engaged in unethical or unlawful business practices.

Abuse of Process

Defendants have asserted a counterclaim against plaintiff for abuse of process. Abuse of process exists when the defendant (or, of course, counterclaim defendant) "uses a legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it is not designed." Hokanson v. Lichtor, 5 Kan. App.2d 802, 809 (1981) (quoting Restatement (Second) of Torts § 682 (1977)). In Kansas, the elements of an abuse of process claim are as follows: (1) that the defendant made an illegal, improper, perverted use of the process, (a use neither warranted nor authorized by the process); (2) that the defendant had an ulterior motive or purpose in doing so; and (3) that damage resulted to the plaintiff from the irregularity. Porter v. Stormont-Vail Hosp., 228 Kan. 641, 646 (1980) (citations and quotations omitted). As explained in the Restatement,

For abuse of process to occur there must be use of the process for an immediate purpose other than that for which it was designed and intended. The usual case of abuse of process is one of some form of extortion, using the process to put pressure upon the other to compel him to pay a different debt or to take some other action or refrain from it.

Restatement (Second) of Torts 682 cmt. b (1977). The "gravamen of the tort is not the wrongfulness of the prosecution, but some extortionate perversion of lawfully initiated process to illegitimate ends." Heck v. Humphrey, 512 U.S. 477, 486 n.5 (1994).

Plaintiff moves to dismiss the abuse-of-process counterclaims under Rule 12(b)(6) on the grounds that defendants have failed to state a claim for abuse of process. For purposes of plaintiff's motion, then, the court accepts as true "all well-pleaded factual allegations in the [counterclaim] and view[s] them in the light most favorable to the [counterclaim] plaintiff." Burnett v. Mortgage Elec. Registration Sys., Inc., 706 F.3d 1231, 1235 (10th Cir. 2013) (citation omitted). "To survive a motion to dismiss, a [counterclaim] must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Id . (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. ...

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