San Joaquin General Hospital v. Blue Cross of CA ( 2020 )

1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 SAN JOAQUIN GENERAL HOSPITAL, No. 2:20-cv-01569-JAM-JDP 9 Plaintiff, 10 v. ORDER GRANTING PLAINTIFF’S MOTION FOR REMAND AND DENYING 11 BLUE CROSS OF CALIFORNIA, and DEFENDANT’S MOTION TO DISMISS DOES 1 through 25, inclusive, 12 Defendants. 13 14 This matter is before the Court on San Joaquin General 15 Hospital’s (“Plaintiff”) Motion to Remand, Mot. to Remand, ECF 16 No. 5, and Blue Cross of California’s (“Defendant”) Motion to 17 Dismiss, Mot. to Dismiss, ECF No. 6. Defendant filed an 18 opposition to Plaintiff’s Motion to Remand, Def.’s Opp’n, ECF No. 19 10, to which Plaintiff replied, Pl.’s Reply, ECF No. 14. 20 Plaintiff filed an opposition to Defendant’s Motion to Dismiss, 21 Pl.’s Opp’n, ECF No. 11, to which Defendant replied, Def.’s 22 Reply, ECF No. 15. After consideration of the parties’ written 23 arguments on the motions and relevant legal authority, the Court 24 GRANTS Plaintiff’s Motion to Remand and DENIES Defendant’s Motion 25 to Dismiss.1 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was 28 scheduled for November 10, 2020. 1 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 2 Plaintiff alleges that, beginning March 2018, it rendered 3 services to numerous patients who were members of a health plan 4 sponsored, administered, and/or financed by Defendant. Compl. 5 ¶ 7, ECF No. 1-A. Plaintiff claims it contacted Defendant to 6 verify its responsibility for the costs associated with the 7 services rendered. Compl. ¶ 8. In response, Defendant confirmed 8 it was the payor and authorized Plaintiff to perform the 9 services. Compl. ¶¶ 9-11. When Plaintiff submitted a bill for 10 those services, Defendant only partially paid. Compl. ¶¶ 13-14. 11 Plaintiff then brought this action for breach of implied-in-fact 12 contract, quantum meruit, and breach of oral contract in the San 13 Joaquin Superior Court to recover the full amount. See 14 generally, Compl. Defendant removed the case to federal court 15 based on federal question jurisdiction, claiming Plaintiff’s 16 state-law claims were completely preempted under the Employee 17 Retirement Income Security Act (“ERISA”). See Notice of Removal 18 at 3, ECF No. 1. Plaintiff now seeks remand back to state court 19 and Defendant moves to dismiss the case. Mot. to Remand; Mot. to 20 Dismiss. 21 22 II. OPINION 23 A. Legal Standard 24 Under 28 U.S.C. § 1441, a defendant may remove a civil 25 action from state to federal court if there is subject matter 26 jurisdiction over the case. See City of Chicago v. Int’l Coll. 27 of Surgeons, 522 U.S. 156, 163 (1997). Courts strictly construe 28 the removal statute against removal and federal jurisdiction 1 must be rejected if there is any doubt as to the right of 2 removal. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 3 1992). The party seeking removal bears the burden of 4 establishing jurisdiction. Emrich v. Touche Ross & Co., 846 5 F.2d 1190, 1195 (9th Cir. 1988). 6 B. Analysis 7 Federal question jurisdiction generally exists when a 8 federal question is presented on the face of a plaintiff’s well- 9 pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 10 392 (1987). However, when a federal statute, such as ERISA, 11 completely preempts the state-law cause of action “that 12 complaint is converted from an ordinary state common law 13 complaint into one stating a federal claim for purposes of the 14 well-pleaded complaint rule.” Marin Gen. Hosp. v. Modesto & 15 Empire Traction Co., 581 F.3d 941, 945 (9th Cir. 2009) (internal 16 quotation marks and citation omitted). Under the Supreme 17 Court’s decision in Davila, a state-law cause of action is 18 completely pre-empted by ERISA if (1) the claim, at some point 19 in time, could have been brought under ERISA § 502(a)(1)(B) and 20 (2) where there is no other independent legal duty that is 21 implicated by a defendant’s actions. Aetna Health Inc. v. 22 Davila, 542 U.S. 200, 210 (2004). 23 The Court finds Marin instructive. In that case, a 24 hospital allegedly phoned the administrator of an ERISA plan to 25 confirm a prospective patient had insurance. Marin, 581 F.3d at 26 943. The hospital claimed the administrator orally verified the 27 patient’s coverage, authorized treatment, and agreed to cover 28 90% of the patient’s medical expenses. Id. When the hospital 1 billed the plan for the services, the plan only partially paid. 2 Id. The hospital then filed suit in California state court 3 alleging breach of an implied contract, breach of an oral 4 contract, negligent misrepresentation, quantum meruit, and 5 estoppel. Id. The defendant removed the suit to federal court 6 on the ground that ERISA completely preempted the hospital’s 7 claims, and the hospital moved to remand. Id. 8 1. Davila’s First Prong 9 Applying Davila, the Ninth Circuit held that the hospital’s 10 state-law claims had not been completely preempted, making 11 removal improper. Id. In so holding, the Court found that the 12 first prong of Davila was not satisfied, as the hospital’s 13 claims could not have been brought under § 502(a)(1)(B) of 14 ERISA. Id. at 947. The Court reasoned that because the 15 hospital was alleging it was owed additional payments under a 16 contract formed between itself and the administrator, it was not 17 a breach that their patients could assert through the ERISA 18 plans. See id. at 948. In contrast with Davila, where the 19 patients complained “only about denials of coverage promised 20 under the terms of [their] ERISA-regulated employee benefit 21 plans,” Davila, 542 U.S. at 211, the hospital in Marin was 22 complaining about a denial of payment promised under the terms 23 of its own non-ERISA agreement with the administrator. Marin, 24 581 F.3d at 947. 25 Similarly, here, Plaintiff is not claiming it is owed 26 additional payments from Defendant based on the patients’ ERISA 27 plans. See generally Compl.; see also Pl.’s Mot. at 11. 28 Instead, Plaintiff is claiming it is owed this money because of 1 an alleged separate contract formed between itself and 2 Defendant. See generally Compl. Like in Marin, the patients 3 could not assert this claim as “the patients simply are not 4 parties to the provider agreements between the [hospital] and 5 Blue Cross.” Marin, 581 F.3d at 948 (internal quotation marks 6 and citation omitted). Because the patients themselves could 7 not bring this claim under ERISA, neither could Plaintiff as an 8 assignee of the patients’ rights. See Blue Cross of Cal. v. 9 Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1051 10 (9th Cir. 1999) (“[P]rovider-assignee stands in the shoes of the 11 beneficiary, [and hence] has standing to sue under 12 § 502(a)(1)(B) to recover benefits due under the plan.”). 13 Defendants argue that because Plaintiff could have sought 14 additional payments as an assignee of benefits under the ERISA 15 plans, the first Davila prong is satisfied. Def.’s Mot. at 14. 16 However, the Marin Court rejected this same argument. See 17 Marin, 581 F.3d at 948-49. The Ninth Circuit found that, while 18 the hospital may have had a claim under ERISA, that did not 19 preclude it from bringing “some other suit against Blue Cross 20 based on some other legal obligation.” Id. at 948. 21 Here, Plaintiff pled a breach of contract and quantum 22 meruit claim arising from interactions between itself and 23 Defendant. See Compl. ¶¶ 16-38. As in Marin, Plaintiff is not 24 suing based on any assignment from the patients of their rights 25 under ERISA, but rather on its own right pursuant to an 26 independent obligation. Pl.’s Mot. at 11. Thus, Plaintiff’s 27 “state-law claims based on its alleged [contract] were not 28 brought, and could not have been brought, under § 502(a)(1)(B),” 1 and the first prong of Davila is not satisfied. Marin, 581 F.3d 2 at 949. 3 2. Davila’s Second Prong 4 The Court in Marin also found the second Davila prong was 5 not met because the alleged contract imposed an independent 6 legal duty on the defendants to pay the hospital. Id. The 7 Court noted that the state-law claims were not based on an 8 obligation under an ERISA plan and would exist regardless of the 9 plans. Id. at 950. As such, they were based on independent 10 legal duties within the meaning of Davila. Id. 11 Like in Marin, Plaintiff has alleged a contract was formed 12 between itself and Defendant. Compl. ¶¶ 17-38. Such a contract 13 would create a claim for payment from Defendant regardless of 14 the ERISA plans. Defendant tries to distinguish Marin by 15 arguing that the claims administrators in Marin, unlike in this 16 case, agreed to pay a specific amount. Def.’s Opp’n at 18. 17 Thus, Defendant argues Plaintiff “cannot dispute that Blue 18 Cross’ payment of claims for medical services rests entirely on 19 the plans.” Def.’s Opp’n at 21. The Court disagrees. Lack of 20 an agreement to pay a specific amount, does not mean Plaintiff’s 21 only claim for payment is under the ERISA plans. See San 22 Joaquin Gen. Hosp. v. United Healthcare Ins. Co., No. 23 216CV01904KJMEFB, 2017 WL 1093835, at *3 (E.D. Cal. Mar. 23, 24 2017)(denying defendant’s motion to dismiss plaintiff’s oral and 25 implied-in-fact contract claims despite lack of agreement on 26 price because the court can fill in such a gap). Plaintiff has 27 alleged it is entitled to full reimbursement from Defendant 28 because of an implied-in-fact contract, oral contract, and nee enn meen en ne nn nnn nn nnn nnn on nnn nn ne on nn nn nn NN 1 quantum meruit, not because the ERISA plans so require. See 2 generally Compl. While the lack of specificity regarding price 3 may affect the merits of Plaintiff’s claims, it “does not change 4 the fact that those theories, as pleaded, do not implicate any 5 duty under ERISA.” Alta L.A. Hosps., Inc. v. Blue Cross of 6 | Cal., No. 217CVO36110DWMRWX, 2017 WL 3671156, at *3 (C.D. Cal. 7 | Aug. 24, 2017). Because Plaintiff’s state-law claims do not 8 derive from an obligation under ERISA, they are based on 9 independent legal duties within the meaning of Davila. See 10 | Marin, 581 F.3d at 950. As such, prong two of Davila is not 11 satisfied. 12 Because Plaintiff’s state-law claims could not have been 13 brought under ERISA § 502(a)(1)(B), and are based on independent 14 legal duties, they are not completely preempted. See Davila, 15 542 U.S. at 210. Accordingly, removal was improper, and this 16 case is remanded back to state court. 17 18 Til. ORDER 19 For the reasons set forth above, the Court GRANTS 20 Plaintiff’s Motion to Remand and REMANDS this case to the San 21 Joaquin Superior Court. The Court DENIES AS MOOT Defendant’s 22 | Motion to Dismiss. 23 IT IS SO ORDERED. 24 Dated: November 24, 2020 25 Me 26 HN A. MENDEZ, a UNITED STATES DISTRICT 27 28