Healthcare Justice Coalition CA Corp. v. Aetna, Inc. ( 2024 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 HEALTHCARE JUSTICE Case No.: 2:24-cv-04681-CBM-RAOx COALITION CA CORP., a California 12 Corporation, ORDER RE: PLAINTIFF’S 13 Plaintiff, MOTION TO REMAND FOR LACK v. OF FEDERAL SUBJECT MATTER 14 JURISDICTION [20] [JS-6] AETNA, INC., a Connecticut 15 Corporation; AETNA HEALTH OF CALIFORNIA, INC., a California 16 Corporation; AETNA HEALTH & LIFE INSURANCE COMPANY, a 17 Connecticut Corporation; AETNA LIFE INSURANCE COMPANY, a 18 Connecticut Corporation; MERITAN HEALTH, INC., a New York 19 Corporation; and DOES 1 through 20, inclusive, 20 Defendants. 21 22 23 24 25 26 27 28 1 The matter before the Court is Plaintiff Healthcare Justice Coalition CA 2 Corp.’s Motion to Remand the case from this Court back to Los Angeles County 3 Superior Court for lack of federal subject matter jurisdiction. (Dkt. No. 20 4 (“Motion”).) 5 I. BACKGROUND 6 This is an action filed on April 24, 2024 in Los Angeles Superior Court by 7 Plaintiff Healthcare Justice Coalition CA Corp. (“Healthcare Justice”) against 8 Defendants (collectively referred to as “Aetna”)1 to recover the alleged under- 9 payment or lack of payment for emergency medical services that were rendered to 10 subscribers and plan members of Defendants’ healthcare service plans. Plaintiff is 11 an organization dedicated to obtaining full payment from insurance companies for 12 emergency medical services. (Compl., ¶ 5.) Defendants provide insurance 13 coverage to patients seen by medical service providers at facilities located in central 14 California. (Id., ¶ 4.) 15 Plaintiff alleges the following facts: Insurance companies like Aetna 16 regularly enter into contracts with medical service providers in which providers 17 agree to “accept less [from the insurer] than what they bill for services provided to 18 patients in exchange for various benefits of being contracted, including being listed 19 on insurers’ in-network rosters,” the “right to prompt and timely payment of claims, 20 the ability to submit electronic bills and communications to the payor, and certainty 21 over the rates of payment [they] will receive for their services.” (Id., ¶ 6.) In 22 contrast, “out-of-network” providers (those who are not contracted with a particular 23 insurer) can charge that insurer’s subscribers the providers’ regular rates, and an 24 insurer will typically pay out less on these claims and let the subscriber make up the 25 1 Defendants are Aetna, Inc., Aetna Health of California, Inc., Aetna Health & Life 26 Insurance Company, Aetna Life Insurance Company, and Meritan Health, Inc. (Dkt. 27 No. 1-1 (“Complaint”), ¶ 2.) In the Notice of Removal, Defendants clarify that it believes “Meritain Health, Inc.” is the correct defendant entity, erroneously named 28 1 difference via a steeper coinsurance payment. (Id., ¶ 7.) Plaintiff “does business 2 with emergency medicine practice groups,” and these healthcare service providers 3 (“Providers”) who rendered lifesaving, emergency healthcare services to members 4 of Defendants’ insurance plans “have assigned their claims and rights to payments 5 from insurers and payors to Plaintiff.” (Id., ¶¶ 3-4.) None of the Providers had 6 written contracts with [Aetna]” and were thus out-of-network providers. (Id., ¶ 9.) 7 Under the Knox-Keene Act, which “established required levels of payment for 8 emergency and certain post-emergency stabilization care for out-of-network 9 providers,” Aetna was “required to . . . pay . . . for emergency services based upon 10 the reasonable value of the emergency services provided by the Providers”—yet, 11 Aetna “either failed to pay anything at all to the Providers . . . or paid much less 12 than the reasonable value and less than the quantum meruit value of those services.” 13 (Id. at ¶¶ 8-10.) 14 Plaintiff brings the following state law claims: (1) common law breach of 15 implied contract; (2) common law open book accounting; and (3) a violation of the 16 Unfair Competition Law (Cal. Bus. & Prof. §§ 17200 et seq.). Plaintiff “explicitly 17 cho[se] not to pursue any rights or causes of action based on” the Employee 18 Retirement Income Security Act (“ERISA”) (29 U.S.C. §§ 1001 et seq.) or the 19 Medicare Act (42 U.S.C. §§ 1395 et seq.). (Compl., ¶ 18.) Instead, Plaintiff pursues 20 its claims “based on its assignment of the emergency physicians’ direct right to 21 reimbursement from [the] defendants,” and “does not seek to enforce the 22 contractual rights of AETNA’s members or subscribers through their members’ 23 insurance contracts . . . or other written insurance agreements or instruments, nor 24 does [Plaintiff] assert any rights to payment by or from defendants, based upon such 25 insurance contracts . . . or other written insurance agreements or instruments.” (Id., 26 ¶ 19 (emphasis in original).) 27 On June 5, 2024, Defendants removed the case to federal court on the grounds 28 that the Plaintiff’s causes of action were preempted in whole or in part by ERISA, 1 thus giving the district court both federal question jurisdiction and supplemental 2 jurisdiction over any remaining causes of action arising from state law. (Dkt. No. 3 1 (“Notice of Removal”), ¶¶ 6-7.) On July 17, 2024, Plaintiff filed a Motion to 4 Remand. (Dkt. 20.) On August 20, 2024, Defendants filed an opposition, and on 5 August 27, 2024, Plaintiff filed its reply.2 (Dkt. Nos. 23, 24.) 6 II. STATEMENT OF THE LAW 7 “Only state-court actions that originally could have been filed in federal court 8 may be removed to federal court by the defendant.” Caterpillar Inc. v. Williams, 9 482 U.S. 386, 392 (1987). Pursuant to 28 U.S.C. § 1331, district courts have 10 original jurisdiction over “all civil actions arising under the Constitution, laws, or 11 treaties of the United States.” 28 U.S.C. § 1331. “The general rule, referred to as 12 the ‘well-pleaded complaint rule,’ is that a civil action arises under federal law for 13 purposes of § 1331 when a federal question appears on the face of the complaint.” 14 City of Oakland v. BP PLC, 969 F.3d 895, 903 (9th Cir. 2020) (citing Caterpillar, 15 482 U.S. at 392). However, complete preemption is “an exception to the well- 16 pleaded complaint rule.” Saldana v. Glenhaven Healthcare LLC, 27 F.4th 679, 686 17 (9th Cir. 2020) (citing City of Oakland, 969 F.3d at 905). Complete preemption 18 applies if a well-pleaded complaint establishes a state-law cause of action but 19 “requires resolution of a substantial question of federal law in dispute between the 20 parties.” Franchise Tax Bd. of State of Cal. v. Construction Laborers Vacation Trust 21 for Southern Cal. et al., 463 U.S. 1, 13 (1983); see also Caterpillar Inc. v. Williams, 22 482 U.S. 386, 393 (1987) (complete preemption is invoked when “the pre-emptive 23 force of a statute is so ‘extraordinary’ that it ‘converts an ordinary state common- 24 law complaint into one stating a federal claim for purposes of the well-pleaded 25 complaint rule’”) (citing Metropolitan Life Ins. Co v. Taylor, 481 U.S. at 65). 26 27 2 Plaintiff’s reply brief did not comply with the Court’s standing order, which limits the length of reply briefs to ten (10) pages. However, the reply has been considered 28 1 However, there is a “strong presumption against removal jurisdiction,” and “the 2 court resolves all ambiguity in favor of remand to state court.” Hunter v. Philip 3 Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009) (citation omitted); see also 28 4 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district 5 court lacks subject matter jurisdiction, the case shall be remanded”). 6 III. DISCUSSION 7 “There are two strands of ERISA preemption: (1) ‘express’ preemption under 8 ERISA § 514(a), 29 U.S.C. § 1144(a); and (2) preemption due to a ‘conflict’ with 9 ERISA’s exclusive remedial scheme set forth in ERISA § 502(a), 29 U.S.C. § 10 1132(a).” Fossen v. Blue Cross and Blue Shield of Montana, Inc., 660 F.3d 1102 11 (9th Cir. 2011) (brackets omitted). “Conflict preemption under ERISA § 502(a), 12 however, also confers federal subject matter jurisdiction for claims that nominally 13 arise under state law.” Id. Defendants here assert that this Court has jurisdiction 14 over Plaintiff’s claims under 29 U.S.C. 1132(e)(1) and (f), and that Plaintiff’s claims 15 are preempted under 29 U.S.C. § 1132(a). (Dkt. No. 1, ¶¶ 21-22.) 29 U.S.C. § 16 1132(a)(1)(B) states: 17 “A civil action may be brought—(1) by a participant or beneficiary— (B) to recover benefits due to him under the terms of his plan, to enforce 18 his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 19 20 In Aetna Health Inc. v. Davila, the Supreme Court developed a two-prong 21 test to determine whether a state law cause of action is preempted by § 502(a) of 22 ERISA: 23 (1) if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B); and (2) where there is no other 24 independent legal duty that is implicated by a defendant’s actions, then the individual’s cause of action is completely preempted…” 25 26 542 U.S. 200, 210 (2004). This two-prong test is conjunctive—a state-law 27 cause of action can only be preempted by ERISA if both prongs of the test are 28 satisfied. See Fossen, 660 F.3d at 1108. 1 A. Prong One 2 ERISA provides a right of action to plan participants, beneficiaries, the 3 Secretary of Labor, employers of participants, and employee organizations with an 4 obligation to contribute to a multiemployer plan. 29 U.S.C. § 1132(a). Participants 5 and beneficiaries also have the power to assign their rights to benefits under an 6 ERISA plan to their healthcare providers, thus giving providers the right to act in 7 the place of the plan participant. See S. Coast Specialty Surgery Ctr., Inc. v. Blue 8 Cross of California, 90 F.4th 953, 960 (9th Cir. 2024) (recognizing derivative 9 authority to sue under ERISA where patients assigned provider “the right to sue for 10 non-payment of benefits under [ERISA]”); Misic v. Bldg. Serv. Emps. Health & 11 Welfare Tr., 789 F.2d 1374, 1377 (9th Cir. 1986) (“ERISA does not forbid 12 assignment by a beneficiary of his right to reimbursement under a health care plan 13 to the health care provider”); Brown v. BlueCross BlueShield of Tennessee, Inc., 14 827 F.3d 543, 547 (6th Cir. 2016) (“there is now a broad consensus that when a 15 patient assigns payment of insurance benefits to a healthcare provider, that provider 16 gains standing to sue for that payment under ERISA § 502(a)”) (internal quotations 17 omitted). 18 Here, Healthcare Justice does not fall under any of the categories of persons 19 “empowered to bring a civil action” under 29 U.S.C. 1132(a), nor is it a healthcare 20 provider to whom patients have assigned their ERISA plan rights. Plaintiff is an 21 organization that appears to have “aggregated [several] unrelated claims from 22 numerous different health facilities, akin to a bill-collector.” S. Coast Specialty 23 Surgery Ctr., 90 F.4th at 962. Thus, Plaintiff does not have direct or derivative 24 rights to bring claims under ERISA. Defendants argue that the first prong does not 25 focus on whether Plaintiff lacks standing to sue under ERISA, but instead asks 26 whether “an individual, at some point in time, could have brought this claim under 27 ERISA.” (Dkt. No. 23 at 13 (quoting Davila, 542 U.S. at 210).) But the Ninth 28 Circuit has interpreted Davila as asking whether “the litigant could have brought 1 the claim under ERISA’s civil enforcement provision,” and Defendants cite to no 2 authority to the contrary. DB Healthcare, LLC v. Blue Cross Blue Shield of Arizona, 3 Inc., 852 F.3d 868, 878 (9th Cir. 2017) (emphasis added) (finding providers could 4 not bring ERISA claims but noting that its conclusions “do not necessarily preclude 5 Providers from contesting the recoupment and offsetting actions they dispute,” as 6 “[a]ny state law claims for breach of the provider agreements could not have been 7 brought under ERISA and would have an independent legal basis” that “would not 8 be preempted by ERISA”). Plaintiff here could not have brought claims pursuant 9 to ERISA. 10 More importantly, the Complaint does not allege that Plaintiff seeks to 11 enforce rights created by ERISA plans at all. Indeed, the Complaint spends several 12 paragraphs alleging that Plaintiff’s claims are solely based on independent, 13 individual rights of the Providers separate from any ERISA derivative rights the 14 Providers may have obtained from patients, and expressly disclaiming “any intent 15 to assert, in this action, any derivative right to benefits from any ERISA-governed 16 plan, any Medicare Advantage plan or any delegee of such Medicare Advantage 17 Plan.” (Compl., ¶¶ 17-20.) Defendants’ assertion that “Plaintiff is a double 18 assignee” and “its authority to recover benefits originates from the ERISA-plan 19 beneficiary” (Dkt. No. 23 at 14) is unsupported by the allegations in the Complaint. 20 Nor have Defendants submitted evidence establishing that Plaintiff is a double 21 assignee. Defendants “bear[] the burden of proving the existence of jurisdictional 22 facts.” Roohipour v. ILWU-PMA Welfare Plan, 2020 WL 472921, at*4 (C.D. Cal. 23 Jan. 28, 2020) (granting motion to remand where defendants failed to mount 24 sufficient evidence that an assignment of rights from an ERISA plan beneficiary to 25 the plaintiffs had occurred). “[A]bsent evidence of an assignment to establish 26 complete preemption removal over a third-party provider’s state-law claims, 27 Defendant[s] cannot satisfy the first prong of the Davila test.” Id. Even if such 28 assignment occurred, the Complaint is clear that Plaintiff’s claims are solely based 1 on the Providers’ independent relationships with Defendants. The Ninth Circuit has 2 found that such claims are not preempted by ERISA. See Cath. Healthcare W.-Bay 3 Area v. Seafarers Health & Benefits Plan, 321 F. App’x 563, 564 (9th Cir. 2008) 4 (finding district court lacked jurisdiction where ERISA preemption did not apply 5 because “[a]lthough St. Mary’s could have brought an ERISA claim derivatively as 6 an assignee, the Complaint does not assert a derivative claim” and instead “asserts 7 claims based on a direct contractual relationship that arose between St. Mary’s and 8 Seafarers”). 9 Therefore, Defendants have not met their burden to show that prong one of 10 the Davila test is met. 11 B. Prong Two 12 Because Defendants fail to make a showing under prong one, the Court need 13 not reach prong two. However, to be thorough, the Court analyzes prong two below. 14 Plaintiff argues that the second prong of the Davila test is met because 15 Plaintiff has eschewed pursuing any entitlement to ERISA benefits and because 16 Plaintiff’s theory of liability is based on state law rights and obligations (both 17 common law and California statutory) that exist independent of ERISA. (Mot. at 18 17–19.) Defendants argue that “the only legal obligations implicated by Plaintiff’s 19 allegations arise from Aetna’s duties and obligations to its members under their 20 ERISA-governed health benefit plans” because “whether Aetna paid the proper 21 amount is dictated directly and exclusively by the terms of the patient’s benefit 22 plan.” (Dkt. No. 23 at 16–17.) Defendants cite Cleghorn v. Blue Shield of Cal., 23 408 F.3d 1222, 1226 (9th Cir. 2005) in support of their position. 24 In Cleghorn v. Blue Shield of California, Cleghorn was a member of a Blue 25 Shield program through his employer that received emergency medical treatment 26 he believed would be covered under his plan. Cleghorn v. Blue Shield of California, 27 408 F. 3d 1222, 1223 (2005). When Cleghorn’s claim was denied, he filed state 28 law claims against Blue Shield, alleging the insurer had violated the UCL and the 1 Consumer Legal Remedies Act (“CLRA”). Id. at 1224. Blue Shield removed the 2 action to federal court on the grounds that the plan at issue in the case was governed 3 by ERISA and therefore subject to preemption. Id. Despite amending his original 4 complaint to remove mentions to individual claims for damages under the CLRA— 5 an amendment Cleghorn believed removed any implications of ERISA from his 6 complaint—the Ninth Circuit affirmed the district court’s denial of his motion to 7 remand because: 8 the only factual basis for relief pleaded in Cleghorn’s complaint is the 9 refusal of Blue Shield to reimburse him for the emergency medical care he received. Any duty or liability that Blue Shield had to reimburse him 10 ‘would exist here only because of [Blue Shield’s] administration of 11 ERISA-regulated benefit plans.’ 12 Id. at 1226 (quoting Davila, 542 U.S. at 213). 13 Here, Plaintiff does not allege claims for recovery of ERISA benefits. It 14 alleges claims that “arise out of the interactions of [the] Providers with 15 [Defendants]” which resulted in rights that “belonged to and were owned by the 16 Providers . . . in their own individual and proper capacities and were not derivative 17 of the contractual or other rights of the Providers’ patients.” (Id., ¶ 19.) The 18 Complaint also alleges facts about Defendants’ prior “custom and practice of claims 19 submission and [] payment that had historically transpired between the Providers 20 and [Defendants].” (Id., ¶¶ 48, 56.) Finally, the Complaint alleges that Defendants 21 used data analytics firms or vendors that depreciated the value of Providers’ claims 22 to justify “flawed, unfair, collusive, and/or fraudulent rates.” (Id., ¶¶ 32-33.) 23 Cleghorn is thus inapposite to this case because Cleghorn involved rights that 24 existed under ERISA. Where providers’ claims are based on independent legal 25 duties of insurers to provide reimbursement, the Ninth Circuit has held that those 26 claims are not preempted by section 502(a) of ERISA. See, e.g., Blue Cross of 27 California v. Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1051 (9th 28 1 Cir. 1999) (affirming district court’s ruling that providers’ claims did not fall within 2 ERISA’s enforcement provision because “although beneficiaries of ERISA-covered 3 plans have assigned their rights to reimbursement to the Providers, the Providers are 4 asserting state law claims arising out of separate agreements for the provision of 5 goods and services”); Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of 6 U.S., 497 F.3d 972, 978 (9th Cir. 2007) (holding Federal Employee Health Benefits 7 Act did not preempt plaintiff’s third-party claims for damages based on ERISA case 8 law stating the same); Emergency Grp. of Arizona Pro. Corp. v. United Healthcare, 9 Inc., 838 F. App’x 299, 300 (9th Cir. 2021) (reversing and remanding with 10 instructions to remand to state court because providers “assert[ing] legal duties 11 arising under an implied-in-fact contract based on a course of dealing between the 12 parties” had claims and rights that “would exist whether or not an ERISA plan 13 existed and thus are independent from the legal obligations imposed by the ERISA 14 plans”) (internal quotations omitted); Cath. Healthcare, 321 F. App’x at 564 15 (reversing and remanding where none of plaintiff’s claims “rest on the assignment 16 of benefits under and ERISA plan” and instead were “involve[d] a contract and 17 representations made between a third party provider and a plan—a relationship that 18 is not governed by ERISA”).3 19 Defendants’ argument that reimbursement rates are determined by the terms 20 of ERISA plans (Dkt. No. 23 at 17; Dkt. No. 23-1 (“Adinolfi Decl.”), ¶ 13) is 21 unpersuasive. Plaintiff identifies independent duties, that do not rely on the terms 22 of any ERISA plans, for its claims that Defendants owed the Providers more than 23 the reimbursement Providers received. (Compl., ¶¶ 19, 48, 56, 32-33.) Further, 24 “[w]here the meaning of a term in the Plan is not subject to dispute, the bare fact 25 3 See also Plastic Surgery Ctr., P.A. v. Aetna Life Ins. Co., 967 F.3d 218, 236 (3d 26 Cir. 2020) (collecting cases indicating that “the Courts of Appeals have 27 overwhelmingly held that claims akin to [the plaintiff’s] are not expressly preempted because, as pleaded, they arise out of a relationship ERISA did not intend 28 1 | that the Plan may be consulted in the course of litigating a state-law claim does not 2 | require that the claim be extinguished by ERISA’s enforcement provision.” 3 | Anesthesia Care Assocs., 187 F.3d at 1051. Defendants’ cites to other cases are 4 | inapposite because those cases involved claims where either providers attempted to 5 || recover payment based on an assignment of benefits from their patients, or patients 6 | themselves claimed insurers owed them reimbursement.’ As pleaded in the 7 | Complaint—which, absent other evidence, the Court must take as true—Plaintiff is 8 | not bringing suit as a “double assignee” of benefits that were at one point held by 9 | ERISA beneficiaries. 10 Therefore, Defendants have not met their burden to show that prong two of 11 | the Davila test is met. 12 IV. CONCLUSION 13 Accordingly, Plaintiff's Motion to Remand is GRANTED. 14 15 IT IS SO ORDERED. 16 17 | DATED: OCTOBER 10, 2024. Ce (6 CONSUELO B. MARSHALL 18 UNITED STATES DISTRICT JUDGE 19 —— 50 4 See Sagebrush LLC vy. Cigna Health & Life Ins. Co., 2024 WL 2152458 (C.D. Cal. May 13, 2024) (denying motion to remand where plaintiff “conceded that it 21 | ‘obtained assignment of benefits from at least one of the at-issue patients’” and plaintiffs UCL claim was “entirely dependent on the existence of ERISA-regulated plans”); Sanjiv Goel, M.D., Inc. v. United Healthcare Servs., Inc., 2024 WL 23 | 1361800 (C.D. Cal. Mar. 29, 2024) (denying motion to remand where plaintiff alleged “no . . . additional contract” between provider and insurer claims and thus claims “would not exist but-for the ERISA plan between the underlying patient and 25 | Defendant’); Leonard v. MetLife Ins. Co., 2013 WL 12210177 (C.D. Cal. Feb. 25, 26 2013) (denying motion to remand where plaintiff sought reimbursement from insurer based on benefits under her ERISA plan); Lodi Mem’! Hosp. Ass’n v. Tiger 27 | Lines, LLC, 2015 WL 5009093, at *5 (E.D. Cal. Aug. 20, 2015) (denying motion to 28 remand after finding assignment of benefits from patient occurred, based on evidence submitted by defendant) (internal quotations omitted). 11