Port Medical Wellness v. Conn. Gen. Life Ins. Co. ( 2018 )

Filed 5/10/18; pub. order 6/1/18 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
PORT MEDICAL WELLNESS, B275874
INC.,
Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC497312
v.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Ernest M. Hiroshige, Judge. Affirmed.
Shernoff Bidart & Echverria, William M. Shernoff, Travis
M. Corby; Law Offices of Randy D. Curry, Randy D. Curry; The
Arkin Law Firm and Sharon J. Arkin for Plaintiff and Appellant.
Gibson, Dunn & Crutcher, Richard J. Doren, Timothy W.
Loose and Michael Holecek for Defendant and Respondent
Connecticut General Life Insurance Company.
Seyfarth Shaw, D. Ward Kallstrom, Eric M. Steinert,
Justin T. Curley; Leonard Carder, Peter Saltzman, Christine S.
Hwang and Sara B. Tosdal for Defendants and Respondents
ILWU-PMA Welfare Plan and ILWU-PMA Welfare Plan Board of
Trustees.
_______________________________________
INTRODUCTION
Port Medical Wellness, Inc. (Port Medical) sued the
International Longshore & Warehouse Union—Pacific Maritime
Association Welfare Plan (Plan), its Board of Trustees (Board),
and its former claims administrator, Connecticut General Life
Insurance Company (Connecticut General), seeking payment for
health care services provided to persons eligible for benefits
under the Plan. The trial court granted summary judgment in
favor of all defendants.1
State law causes of action seeking to recover unpaid
benefits under a welfare benefit plan regulated under the
Employee Retirement Income Security Act of 1974 (ERISA)
(29 U.S.C. § 1001 et seq.) are generally conflict preempted. We
conclude that Port Medical’s claims for breach of implied-in-fact
contract, intentional misrepresentation and quantum meruit—
each of which seeks payment for services covered under the
Plan—are conflict preempted under section 514 of ERISA. Port
Medical’s two remaining claims—unfair competition (Bus. & Prof.
Code, § 17200 et seq.) and intentional interference with
prospective economic advantage—are not preempted because
1 We refer to the Plan, the Board, and Connecticut General
collectively as defendants.
2
they are predicated on the theory that the Plan and Connecticut
General conspired to force Port Medical out of business in order
to benefit a competitor, rather than strictly on a claim for
benefits under the Plan. Nevertheless, we conclude Port Medical
failed to demonstrate there is a dispute of material fact with
respect to those claims. Accordingly, we affirm the judgment in
its entirety.
FACTS AND PROCEDURAL BACKGROUND
1. The Parties
1.1. The Plan and its Board of Trustees
The Plan is an employee benefit plan established and
operated under ERISA that provides health and welfare benefits
to members of the International Longshore and Warehouse
Union (Union) and their beneficiaries.2 The Board is the Plan’s
administrator as defined under ERISA and is the Plan’s named
fiduciary. The Plan and the Board do not administer claims for
benefits under the Plan. Instead, the Plan contracts with a third
party to administer benefit claims.
In addition, the Plan contracts with networks of health care
providers that in turn contract with individual practitioners. As
pertinent here, the Plan engaged Chiropractic Health Plan of
California (Network) as its chiropractic provider network. The
Plan covers 100 percent of the cost of covered services provided by
Network providers.
2 We refer to the union members and their beneficiaries who are
eligible for benefits under the Plan collectively as Plan members.
3
1.2. Connecticut General, the Plan’s Third-Party
Claims Administrator
Prior to the specific events which are the subject of the
present suit, Great-West Life & Annuity Insurance Company
(Great-West) administered medical benefits claims under the
Plan. According to the contract between Great-West and the
Plan, Great-West administered the claims as the Plan’s agent.
On April 1, 2008, Connecticut General’s parent company acquired
Great-West and Connecticut General became the administrator
of the Plan. Connecticut General operated the Coastwise Claims
Office (Coastwise) which received claims submitted by Port
Medical.
As the Plan’s administrator, Connecticut General processed
medical benefit claims under the direction of the Plan, which
retained the final responsibility for determining the Plan’s claims
liability. As part of its standard procedures, Connecticut General
verified that patients were covered under the Plan and confirmed
eligibility for the benefits requested. If Connecticut General
determined that a claim related to benefits covered under the
Plan, Connecticut General paid the claim using funds made
available by the Plan.
After processing medical claims and making coverage and
eligibility determinations, Connecticut General (through
Coastwise) issued Explanation of Benefits forms (EOBs) which
identified each service provided and the amount paid (if any) for
each service. In some cases, Connecticut General denied claims
and requested additional information about the services
provided. As required under ERISA, Connecticut General sent
EOBs to Plan members and their health care providers
4
explaining what medical services were approved for payment or
denied and the reason(s) for any denial.
1.3. Port Medical
Port Medical was a chiropractic and medical provider with
three office locations in the Los Angeles area. Port Medical was
an in-network provider with the Network and nearly all of its
patients were Plan members.
After treating Plan members, Port Medical submitted
claims for its services to Coastwise. For approximately two years
prior to the events at issue, Port Medical treated Plan members
and submitted claims to Coastwise and, largely, the claims were
paid.
2. Plan Coverage of Chiropractic Care
The Plan provides benefits for, among other things,
chiropractic services. Generally, the Plan covers only 40 visits per
calendar year. In addition, the Plan only provides a benefit for
services deemed medically necessary.
3. Network Provider Agreement
Each of Port Medical’s chiropractic practitioners joined the
Network as a “participating practitioner,” defined in the
“Participating Practitioner Agreement” (network agreement) as
“a duly licensed and/or certified practitioner of a healing art or
arts or other professional services who, upon application and
approval by [the Network], has agreed in writing to provide
Covered Services to Members in accordance with the terms and
conditions of this Agreement.” As participating practitioners in
the Network, Port Medical’s chiropractors could make their
services available to members of the Participating Payors who
5
contracted with the Network, including, as relevant here, the
Plan. Per the network agreement, the Network contracted with
“Participating Payor[s],” defined as “any organization that has a
contractual obligation to provide Covered Services to Members
and/or Member Groups.”
The Network agreed, among other things, to market
participating practitioners to Participating Payors. In return, the
participating practitioners agreed “to provide professional
services to Members in compliance with [the network agreement]
and as set forth in Participating Payor Agreements and Member
Agreements.” As defined in the network agreement, a
Participating Payor Agreement is an agreement “entered into by
a payor and a Member and/or Member Group whereby Members
and/or Member Groups may be eligible to receive Covered
Services designated therein.” A Member Agreement is defined as
an agreement “entered into by a payor and an individual or group
of individuals (Member Group) whereby individual(s) may be
eligible to receive Covered Services designated therein.” “Covered
Services means any services which are specified by the terms of a
Member Agreement for which Members are eligible.”
Under the network agreement, participating practitioners
agreed to comply with a range of conditions set forth in the
Network’s provider manual and with a quality assurance
program monitored by the Network. Participating practitioners
also authorized the Network to negotiate the reimbursement rate
for practitioner services with each payor, and agreed to accept the
reimbursement rate as payment in full for its services (with the
exception of copayments, coinsurance and deductibles, which
practitioners could collect directly from patients.) In addition,
participating practitioners agreed to submit their bills to payors
6
or their designated representatives as specified in the
Participating Payor Agreements.
Several specific provisions of the network agreement are at
issue here:
“4.03 Participating Practitioner shall be responsible for the
verification of the eligibility of Members and/or Member Groups
to receive Covered Services prior to the initiation of the provision
of professional services as specified in the Provider Manual.
“4.04 Participating Practitioner agrees to accept
assignment of Member benefits as they apply to Covered Services
and to obtain written acknowledgment from Members that
Members are personally responsible for co-insurance, co-
payments, deductibles and Non-Covered Services; Practitioner
further agrees not to bill Members for professional services
and/or supplies determined by Participating Payor or its designee
as not Medically Necessary” subject to exceptions not relevant
here.
“4.09 Participating Practitioner agrees to accept the lesser
of Participating Practitioner’s actual and accurate billed charges
or the Reimbursement Rate as payment in full for Covered
Services rendered to Members and not to seek additional
payments or compensation from Members with the exception of
co-insurance, co-payments and deductibles. Co-insurance, co-
payments and deductibles must be collected and cannot be
waived by Participating Practitioner. Participating Practitioner
shall not bill for or collect from Member, payment for co-
insurance, deductibles or Non-Covered Services prior to receipt of
an explanation of benefits (EOB) from Participating Payor or its
designee. Co-payments may be collected at the time of service.
Participating Practitioner agrees not to ‘balance bill’ Members
7
except for applicable deductibles, co-insurance, co-payments, and
Non-Covered Services in compliance with Article 4, Paragraph
4.04.”
4. Connecticut General’s Investigation
In 2008, Great-West received an anonymous tip alleging
Port Medical was billing the Plan for services not rendered. The
subsequent investigation revealed suspicious billing activity.
Connecticut General continued the investigation and eventually
brought the matter to the attention of the Board. Connecticut
General suggested it “flag” Port Medical and require it to submit
medical records to support each of its claims. Consistent with this
proposal, beginning in mid-2010, Connecticut General denied all
claims submitted by Port Medical and requested supporting
documentation. In some cases, Connecticut General denied
claims because it determined the patient had already received
the maximum number of chiropractic treatments covered by the
Plan. And in other cases, the company denied claims because
they were duplicative of claims previously submitted and denied.
Connecticut General also issued EOBs directing Port Medical to
provide additional information, such as MRIs and treatment
notes, to support its claims. According to Port Medical, a large
number of claims remain unpaid.
5. Port Medical Demands Payment
By August 2010, Connecticut General was declining to pay
virtually all of the claims submitted by Port Medical. Port
Medical did not understand why its claims were suddenly being
denied and it contacted Coastwise to determine the reason.
Consistent with its EOBs, Coastwise instructed Port Medical to
send additional medical documentation to support its claims.
8
Coastwise also indicated the denied claims were being audited.
Port Medical ceased operations in September 2010, purportedly
due to Connecticut General’s failure to pay Port Medical’s
outstanding claims.
In September, October and November of 2010, Port
Medical’s counsel sent letters to the Plan and Connecticut
General requesting payment on its claims.
6. Port Medical’s Complaint
Port Medical filed its initial complaint in December 2012,
naming Connecticut General and the union as defendants. Port
Medical subsequently amended the complaint, dropping the
union as a defendant and adding the Plan and its Board as
defendants.
The operative complaint asserts five causes of action
against the Plan: breach of implied-in-fact contract, intentional
misrepresentation, services rendered (quantum meruit), unfair
competition (Bus. & Prof. Code, § 17200 et seq.), and intentional
interference with prospective economic relations. Port Medical
asserted three of those causes of action—intentional
misrepresentation, unfair competition, and intentional
interference with prospective economic relations—against all
three defendants. Port Medical alleges it is owed approximately
$1.6 million in unpaid claims.
None of Port Medical’s causes of action is expressly styled
as a claim for benefits owed under the Plan. The first cause of
action, “implied-in-fact breach of contract,” alleges the network
agreement between Port Medical and the Network prohibited
Port Medical from billing Plan members for its services. Further,
the Plan paid for services provided to Plan members according to
the fee schedule set forth in the network agreement for several
9
years. According to Port Medical, these facts taken together
created an implied-in-fact contract between the Plan and Port
Medical that required the Plan to pay for services rendered to its
members.
The second cause of action for intentional
misrepresentation alleges defendants falsely represented that
Port Medical’s claims were “temporarily declined” or “denied
pending receipt of additional documentation” when in reality they
were purposefully, and wrongfully, withholding payment for
reasons unrelated to coverage and eligibility under the Plan. Port
Medical further alleges defendants intended for it to provide
services to Plan members even though they had no intention of
ever paying Port Medical for those services.
The third cause of action for “recovery of services
rendered,” alleges Port Medical “provided medically necessary
treatments and services” to Plan members and that the Plan
authorized Port Medical to perform those services. Further, the
network agreement prohibits Port Medical from collecting
payment for services from the Plan members. As a result, “the
Plan became indebted to” Port Medical for the services provided
to Plan members.
The fourth cause of action for unfair competition (Bus. &
Prof. Code, § 17200 et seq.) alleges a variety of wrongful acts by
defendants including failure to pay for services rendered to Plan
members, failure to advise Port Medical that Connecticut
General was conducting a fraud investigation, and conspiring to
help Port Medical’s competitor steal Port Medical’s patients.3
3 Confusingly, the competing entity also used the name Port
Medical. As a result, the plaintiff in this action began doing business
10
The final and fifth cause of action, for intentional
interference with prospective economic relations, alleges
defendants withheld payment on Port Medical’s claims and
conducted its fraud investigation in order to disrupt the
relationship between Port Medical and its patients, to the benefit
of Port Medical’s competitor.
7. Motions for Summary Judgment
The Plan and the Board, as well as Connecticut General,
separately moved for summary judgment or, in the alternative,
summary adjudication of Port Medical’s claims.
7.1. ERISA Conflict Preemption
Defendants argued that all of Port Medical’s claims were
preempted under section 514 of ERISA (29 U.S.C. § 1144(a)).
Under that provision, state law claims that relate to a welfare
benefit plan or the handling of claims for benefits under such a
plan are preempted. The Plan argued that all of Port Medical’s
claims are in essence a challenge to the Plan’s coverage
determinations. Because Port Medical would need to prove
entitlement to benefits under the Plan in order to prevail on its
claims, they are preempted under ERISA. Connecticut General
argued that each of Port Medical’s claims against it was, at its
core, based on alleged mishandling of claims for benefits due
under the Plan and was therefore preempted.
Port Medical responded that coverage and eligibility under
the Plan were not at issue. Rather, Port Medical claimed
defendants denied all claims, covered or not, as part of a scheme
as Guru Medical. In order to avoid confusion, we refer to Port Medical’s
competitor as the competitor.
11
to put Port Medical out of business in order to assist one of its
competitors. Further, Port Medical argued that ERISA regulates
the relationships among employers, employees, and welfare
benefit plans and therefore bars only state-law actions involving
these relationships. Health care providers, such as Port Medical,
stand outside those relationships and thus their claims are not
subject to preemption.
7.2. Statute of Limitations
Defendants also argued that Port Medical’s causes of action
for breach of implied-in-fact contract, services rendered, and
intentional interference with prospective economic relations,
were time-barred. Specifically, they noted Port Medical began
complaining about claim denials in September 2010 and hired
outside counsel to address its concerns with Connecticut General
and the Plan in October 2010. By that point, they argued, Port
Medical knew all the facts relevant to its claims and the two year
statute of limitations began to run. But Port Medical filed its
initial complaint in December 2012—more than two years after it
knew of defendants’ allegedly wrongful conduct—and did not add
the Plan as a defendant until April 2013.
In response, Port Medical stated it had ongoing discussions
with Connecticut General from October 2010 through April 2011,
during which time Connecticut General assured Port Medical
that it was conducting a routine audit and its denial of Port
Medical’s claims was temporary. Accordingly, Port Medical did
not learn that its claims were denied until mid-2011, at the
earliest.
12
7.3. Claims on the Merits
The Plan argued no implied-in-fact contract between itself
and Port Medical existed. The course of conduct identified by Port
Medical—the past payment of claims for benefits under the
Plan—could not reasonably be used to infer an independent
contract between the Plan and Port Medical. Port Medical
responded that a triable issue of fact exists regarding the
implied-in-fact contract claim because the Plan required it to
enter into the network agreement if it wanted to continue
treating Plan members and the network agreement required Port
Medical to give up its right to seek payment for services from
Plan members. Further, the Plan paid Port Medical in accordance
with the fee schedules included in the network agreement for
several years. Taken together, argued Port Medical, those facts
would support a finding of an implied-in-fact contract between
Port Medical and the Plan.
With respect to the intentional misrepresentation claim,
the Plan noted that each misrepresentation identified by Port
Medical was made by Connecticut General, not the Plan. For its
part, Connecticut General argued there is no evidence that any of
its statements were false. Specifically responding to the
allegations that the EOBs falsely represented that Port Medical’s
claims would be paid, Connecticut General noted that the EOBs
stated the claims were denied and Port Medical’s corporate
representative admitted no one at Connecticut General ever
promised the claims would all be paid. Further, Connecticut
General demonstrated that it had a legitimate basis to conduct
its fraud investigation and asserted there is no evidence to
support Port Medical’s conspiracy theory.
13
Port Medical responded that Connecticut General
misrepresented that it was denying claims pending the receipt of
additional medical records which would allow it to make coverage
determinations when in actuality it was denying all claims as
part of an undisclosed fraud investigation. By failing to disclose
the reason for the claim denials, defendants intended to (and did)
induce Port Medical to continue to provide services to its Plan
members.
As to Port Medical’s claim for “services rendered,” the Plan
argued Port Medical could not establish necessary elements of
the cause of action. Specifically, Port Medical would be unable to
prove that the Plan asked Port Medical to provide services, or
that Port Medical provided services to or for the benefit of the
Plan (as opposed to Plan members.) Port Medical asserted
defendants knowingly induced it to provide medical services to
Plan members with full knowledge Port Medical might never be
paid due to the ongoing (and undisclosed) fraud investigation.
All three defendants argued the unfair competition claim
was predicated on the same allegations of unlawful conduct as
the other claims, as to which there was no evidence. Further,
Connecticut General argued no relief was available against it, as
it was no longer the administrator for the Plan. Port Medical
responded that the Plan and Connecticut General denied its
legitimate claims in order to help a competitor steal its patients—
the very essence of “unfair competition.”
With respect to the intentional interference with
prospective economic relations claim, Connecticut General
asserted Port Medical would be unable to prove that its conduct—
denying as well as investigating claims—was wrongful, inasmuch
as it was properly discharging its duties to administer requests
14
for benefits under the Plan. Further, it argued there was no
evidence Connecticut General intended to put Port Medical out of
business or conspired to assist Port Medical’s competitor, as
alleged. Similarly, the Plan argued the only evidence supporting
Port Medical’s conspiracy theory was rumor and speculation,
which was insufficient to survive summary judgment. The Plan
also argued Port Medical did not have an economic relationship
with its patients; rather, it had an economic relationship with the
Plan, which paid for covered medical services.
Port Medical responded that Connecticut General
instigated the fraud investigation in part to make itself look good
in the eyes of the Plan by saving the Plan money. Connecticut
General was aware that the Plan had concerns about its
performance as its administrator and touted its fraud
investigation as a means of saving the Plan millions of dollars
every month.
8. Judgment and Appeal
The court granted defendants’ motions for summary
judgment. First, the court rejected their argument that Port
Medical’s claims were preempted under ERISA. Specifically, the
court found “[t]he gravamen of Plaintiff’s complaint is that Plan
Defendants had paid Plaintiff for several years under
predetermined fee schedules, but suddenly stopped, and that
Plaintiff continued to provide medical services to [Plan] members
based on Defendants’ prior payment history.… Thus, while
Plaintiff’s claim may refer to the Plan, it does not rely on it.” The
court also concluded that because Port Medical was in active
discussions with Connecticut General about its pending claims
and continued to receive EOBs into 2012, there was a triable
issue of fact whether Port Medical’s claims were time-barred.
15
With respect to the implied-in-fact contract claim, the court
examined the network agreement relied upon by Port Medical.
Although the court noted there was some evidence that the Plan
may have pressured Port Medical into entering into the network
agreement, that evidence did not tend to show that the Plan
impliedly agreed to a contract with Port Medical, independent of
its obligation to Plan members. Moreover, the court explained,
the terms of the network agreement prohibit implied contracts—
a point Port Medical did not dispute.
The court also concluded there was no dispute of material
fact regarding Port Medical’s intentional misrepresentation
claim. Specifically, the court found no evidence to support the
claim that Connecticut General intended to deny Port Medical’s
claims even if it eventually determined the claims related to
services covered under the Plan. Accordingly, no evidence
supported Port Medical’s assertion that the EOB denials
accompanied by requests for documentation were false. And
because Port Medical’s claim was premised on statements and
acts by Connecticut General, Port Medical could not maintain the
misrepresentation claim against the Plan or the Board.
As to Port Medical’s quantum meruit claim, the court noted
that in order to recover under that theory, a plaintiff must show
he was acting under an express or implied request for services
and the services rendered were intended to and did benefit the
defendant. Here, however, it is undisputed that defendants did
not request any services from Port Medical.
In addition, the court concluded Port Medical could not
prevail against defendants on its claim for intentional
interference with prospective economic relations. After noting
that Port Medical alleged defendants interfered with its
16
relationships with its patients, the court observed that Port
Medical received all its payments for services from the Plan—not
from Plan members. The court concluded the only economic
relationship at issue was between Port Medical and the Plan.
And the Plan could not, as a matter of law, interfere with its own
economic relationships.
Finally, the court found Port Medical’s unfair competition
claim failed because it was based on the same allegedly wrongful
acts as the other four causes of action, as to which the court had
already granted summary judgment.
The court entered judgment in favor of defendants on
May 23, 2016. Port Medical timely appeals.
DISCUSSION
Port Medical complains the trial court erred in granting
defendants’ motions for summary judgment. Although our
analysis is slightly different than that of the trial court, we reach
the same result and conclude summary judgment was proper as
to all defendants.
1. Standard of Review
The applicable standard of review is well established. “The
purpose of the law of summary judgment is to provide courts with
a mechanism to cut through the parties’ pleadings in order to
determine whether, despite their allegations, trial is in fact
necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield
Co. (2001) 25 Cal. 4th 826, 843 (Aguilar).) As such, the summary
judgment statute (Code Civ. Proc., § 437c), “provides a
particularly suitable means to test the sufficiency of the
plaintiff’s prima facie case and/or of the defendant’s [defense].”
(Caldwell v. Paramount Unified School Dist. (1995) 41
17
Cal. App. 4th 189, 203.) A summary judgment motion must
demonstrate that “material facts” are undisputed. (Code Civ.
Proc., § 437c, subd. (b)(1).) The pleadings determine the issues to
be addressed by a summary judgment motion. (Metromedia, Inc.
v. City of San Diego (1980) 26 Cal. 3d 848, 885, revd. on other
grounds by Metromedia, Inc. v. San Diego (1981) 453 U.S. 490;
see Nieto v. Blue Shield of California Life & Health Ins. Co.
(2010) 181 Cal. App. 4th 60, 74.)
The moving party “bears the burden of persuasion that
there is no triable issue of material fact and that he is entitled to
judgment as a matter of law.” (Aguilar, supra, 25 Cal.4th at
p. 850, fn. omitted.) A defendant moving for summary judgment
must “ ‘show[ ] that one or more elements of the cause of action …
cannot be established’ by the plaintiff.” (Id. at p. 853 [quoting
Code Civ. Proc., § 437c, subd. (o)(2)].) A defendant meets its
burden by presenting affirmative evidence that negates an
essential element of plaintiff’s claim. (Guz v. Bechtel National,
Inc. (2000) 24 Cal. 4th 317, 334 (Guz).) Alternatively, a defendant
meets its burden by submitting evidence “that the plaintiff does
not possess, and cannot reasonably obtain, needed evidence”
supporting an essential element of its claim. (Aguilar, supra, 25
Cal.4th at p. 855.)
On appeal from summary judgment, we review the record
de novo and independently determine whether triable issues of
material fact exist. (Saelzler v. Advanced Group 400 (2001) 25
Cal. 4th 763, 767 (Saelzler); Guz, supra, 24 Cal.4th at p. 334.) We
resolve any evidentiary doubts or ambiguities in favor of the
party opposing summary judgment. (Saelzler, at p. 768.)
In performing an independent review of the granting of
summary judgment, we conduct the same procedure employed by
18
the trial court. We examine (1) the pleadings to determine the
elements of the claim, (2) the motion to determine if it establishes
facts justifying judgment in the moving party’s favor, and (3) the
opposition—assuming movant has met its initial burden—to
decide whether the opposing party has demonstrated the
existence of a triable, material fact issue. (Oakland Raiders v.
National Football League (2005) 131 Cal. App. 4th 621, 629–630.)
We need not defer to the trial court and are not bound by the
reasons in its summary judgment ruling; we review the ruling of
the trial court, not its rationale. (Ibid.)
“The interpretation of ERISA, including whether ERISA
preempts state law, is a question of law which we review de
novo.” (In re Marriage of Padgett (2009) 172 Cal. App. 4th 830,
839; Morris B. Silver M.D., Inc. v. International Longshore &
Warehouse etc. (2016) 2 Cal.App.5th 793, 798 (Silver).)
2. The court properly granted summary judgment in
favor of defendants.
In the operative pleading, Port Medical avoids stating
directly that it is seeking payment for medical services rendered
to Plan beneficiaries. Nevertheless, even Port Medical
acknowledges that is the core of its case. Port Medical alleges its
practitioners treated Plan members, rendered services covered by
the Plan, and that it has not been paid fees of approximately $1.6
million attributable to those services. As we will explain, state
law claims for benefits under an ERISA welfare benefit plan are
preempted by ERISA under the doctrine of conflict preemption.4
4 Port Medical asserts defendants may not raise arguments
relating to ERISA or the statute of limitations because they did not file
a cross-appeal. Not so. As defendants were not aggrieved by the
19
ERISA provides that civil actions may be brought by plan
participants, beneficiaries, fiduciaries, and the United States
Secretary of Labor. (29 U.S.C. § 1132(a).) Typically, a health care
provider in Port Medical’s position would bring a claim for
benefits under ERISA in a derivative capacity (standing in the
shoes of the patient) under an assignment of reimbursement
rights. (Misic v. Building Service Employees Health (9th Cir.
1986) 789 F.2d 1374, 1377–1379 [health care provider with valid
assignment of benefits has standing to sue under ERISA].) The
Ninth Circuit explained how such assignments further the goal of
ERISA:
“Health and welfare benefit trust funds are designed to
finance health care. Assignment of trust monies to health care
providers results in precisely the benefit the trust is designed
to provide and the statute is designed to protect. Such
assignments also protect beneficiaries by making it
unnecessary for health care providers to evaluate the solvency
of patients before commencing medical treatment, and by
eliminating the necessity for beneficiaries to pay potentially
large medical bills and await compensation from the plan.
Moreover, assignments permit a trust fund to obtain
improved benefits for beneficiaries by bargaining with health
care providers for better coverage and lower rates.”
(Id. at p. 1377.)
Here, Port Medical’s assertions to the contrary
notwithstanding, the provider agreement Port Medical’s
judgment in their favor, they had no standing to appeal. Further, as
our review is de novo, we may address any argument raised below,
even if it did not form the basis of the court’s ruling.
20
practitioners signed provides for such an assignment.
(“Practitioner agrees to accept assignment of Member benefits as
they apply to Covered Services … .”) For whatever reason, Port
Medical did not bring a derivative claim for benefits under
ERISA. Instead, it asserted contract and tort claims against the
Plan and Connecticut General which it contends fall outside the
scope of ERISA conflict preemption. Yet “ ‘ERISA preemption
extends even to state common-law causes of action that “do not
explicitly refer to employee benefit plans.” [Citation.] Thus, many
courts have found preemption where the plaintiff’s claims,
although formed under theories of state common-law, were really
ways of restating claims for employee benefits governed by
ERISA. [Citations.]’ [Citation.] If ERISA claims are pleaded as
state law claims, they must be tried under federal law ‘when
stripped of their state law disguises.’ [Citation.]” (AT&T
Communications, Inc. v. Superior Court (1994) 21 Cal. App. 4th
1673, 1678, first and second brackets in original.)
We briefly discuss conflict preemption under ERISA and
then, to the extent any of Port Medical’s claims or theories are
not preempted, we consider whether the court properly granted
summary judgment.
2.1. Conflict Preemption Under Section 514 of ERISA
“ERISA is a comprehensive federal law designed to promote
the interests of employees and their beneficiaries in employee
pension and benefit plans. [Citation.] As a part of this integrated
regulatory system, Congress enacted various safeguards to
preclude abuse and to secure the rights and expectations that
ERISA brought into being. [Citations.] Prominent among these
safeguards is an expansive preemption provision, found at section
514 of ERISA (29 U.S.C. § 1144; [citations].)” (Marshall v.
21
Bankers Life & Casualty Co. (1992) 2 Cal. 4th 1045, 1050–1051
(Marshall); see Aetna Health Inc. v. Davila (2004) 542 U.S. 200,
208 [“The purpose of ERISA is to provide a uniform regulatory
regime over employee benefit plans. To this end, ERISA includes
expansive pre-emption provisions, [citation], which are intended
to ensure that employee benefit plan regulation would be
‘exclusively a federal concern.’ ”].)
ERISA has two distinct preemption provisions: Preemption
under section 514 (29 U.S.C. § 1144), known as conflict or
ordinary preemption; and so-called complete preemption under
section 502(a) (29 U.S.C. § 1132(a)). Complete preemption is a
doctrine that recognizes federal jurisdiction over what would
otherwise be a state law claim, an issue that typically arises
when the defendant has removed the plaintiff’s state court
lawsuit to federal court. Conflict preemption—our focus here—is
an affirmative defense to a plaintiff’s state law cause of action
that entirely bars the claim; that is, the particular claim involved
cannot be pursued in either state or federal court. (Silver, supra,
2 Cal.App.5th at p. 799.)5
Section 514(a) of ERISA provides, in relevant part: “Except
as provided in subsection (b) of this section, the provisions of
[titles I and IV of ERISA] shall supersede any and all State laws
insofar as they may now or hereafter ‘relate to’ any employee
benefit plan ....” (29 U.S.C. § 1144(a), italics added.) Initially, the
Supreme Court interpreted the “relate to” language very broadly,
holding, “A law ‘relates to’ an employee benefit plan, in the
normal sense of the phrase, if it has a connection with or
5 We adopt this opinion, recently published by our colleagues in
Division Seven of this Court, in significant part.
22
reference to such a plan.” (Shaw v. Delta Air Lines, Inc. (1983)
463 U.S. 85, 96–97; see Ingersoll–Rand Co. v. McClendon (1990)
498 U.S. 133, 139 (Ingersoll–Rand) [“[u]nder this ‘broad common-
sense meaning,’ a state law may ‘relate to’ a benefit plan, and
thereby be pre-empted, even if the law is not specifically designed
to affect such plans, or the effect is only indirect”].)
The Supreme Court subsequently recognized the difficulty
of reconciling such a broad and potentially limitless definition
with the competing presumption that Congress generally does
not intend to supplant state law. To that end, the Court later
concluded it “simply must go beyond the unhelpful text and the
frustrating difficulty of defining its key term, and look instead to
the objectives of the ERISA statute as a guide to the scope of the
state law that Congress understood would survive.” (New York
State Conference of Blue Cross & Blue Shield Plans v. Travelers
Ins. Co. (1995) 514 U.S. 645, 656 (Travelers) [holding New York
statute requiring hospitals to collect surcharges from patients
covered by a commercial insurer but not from patients insured by
a Blue Cross/Blue Shield plan or certain health maintenance
organizations was not preempted]; see Gobeille v. Liberty Mut.
Ins. Co. (2016) ––– U.S. –––– [136 S. Ct. 936, 943] [“In Travelers,
the Court observed that ‘[i]f “relate to” were taken to extend to
the furthest stretch of its indeterminacy, then for all practical
purposes pre-emption would never run its course.’ [Citation.]
That is a result ‘no sensible person could have intended.’ ”].) The
Travelers court explained that Congress’s intent in enacting
section 514(a) was “ ‘to ensure that plans and plan sponsors
would be subject to a uniform body of benefits law; the goal was
to minimize the administrative and financial burden of complying
with conflicting directives among States or between States and
23
the Federal Government ..., [and to prevent] the potential for
conflict in substantive law ... requiring the tailoring of plans and
employer conduct to the peculiarities of the law of each
jurisdiction.’ ” (Travelers, at pp. 656–657; see Silver, supra, 2
Cal.App.5th at p. 800.)
Applying the doctrine of conflict preemption, the Supreme
Court has held common law causes of action brought by an
ERISA plan participant or beneficiary “based on alleged improper
processing of a claim for benefits under an employee benefit plan,
undoubtedly meet the criteria for pre-emption under § 514(a).”
(Pilot Life Ins. Co. v. Dedeaux (1987) 481 U.S. 41, 48 [action by an
employee against employer’s disability insurance provider]; see
Marshall, supra, 2 Cal.4th at p. 1049 [action seeking state law
remedies for improper denial of benefits preempted];
Hollingshead v. Matsen (1995) 34 Cal. App. 4th 525, 541–542
[state law claims by plan participants and administrator of estate
of plan participant against insurance agency and agent, including
negligent and intentional infliction of emotional distress, were
“fundamentally a claim for recovery of unreimbursed medical
expenses” and thus preempted by ERISA].) The touchstone of
conflict preemption analysis is the purpose of section 514(a):
“ERISA’s comprehensive preemption of state law affords
employers the advantages of a uniform set of regulations
governing plan fiduciary responsibilities and governing
procedures for processing claims and paying benefits.” (Memorial
Hosp. System v. Northbrook Life Ins. Co. (5th Cir. 1990) 904 F.2d
236, 245 (Memorial Hospital).)
“Even before the Court recognized in Travelers its
interpretation of the ‘relate to’ language was too broad to provide
meaningful limits, it had recognized that ‘[s]ome state actions
24
may affect employee benefit plans in too tenuous, remote, or
peripheral a manner to warrant a finding that the law “relates
to” the plan.’ [Citations.] Additionally, ‘relatively commonplace’
‘lawsuits against ERISA plans for run-of-the-mill state-law
claims such as unpaid rent, failure to pay creditors, or even torts
committed by an ERISA plan’ are not preempted even though
they ‘obviously affect[ ] and involve[ ] ERISA plans and their
trustees.’ [Citation.]” (Silver, supra, 2 Cal.App.5th at p. 802.) Port
Medical argues its claims fall into this category.
Several federal circuit courts have recognized that, in
limited circumstances, claims by third-party health care
providers may not be preempted under ERISA. The leading case
on point is Memorial Hospital. There, the plaintiff hospital relied
on representations by the defendant employer and the employer’s
insurer that a new employee’s wife was covered by the insurance
plan and “would not have extended treatment to her without
such an assurance of payment.” (Memorial Hospital, supra, 904
F.2d at p. 238.) The health insurer later denied the hospital’s
request for payment because the new employee had not yet
worked for the employer for 30 days and, as a result, his wife was
ineligible for health care benefits. The hospital filed a state court
action against the employer and insurer asserting several state
law claims including breach of contract as an assignee of a plan
beneficiary seeking recovery of plan benefits. It also asserted a
claim for deceptive and unfair trade practices under the Texas
Insurance Code, essentially a codified claim for negligent
misrepresentation, in its independent capacity as a third-party
health care provider. After the lawsuit was removed to federal
court, the district court dismissed the claims for breach of
contract and deceptive trade practices on preemption grounds
25
and remanded the remaining pendent state law claims to state
court. (Id. at pp. 238–239.) The Court of Appeals for the Fifth
Circuit affirmed the portion of the judgment dismissing the
breach of contract claim but vacated that portion of the judgment
dismissing the deceptive trade practices claims and remanded it
to the state court. (Id. at p. 239.)
In holding the deceptive trade practices claim was not
preempted, the Memorial Hospital court, reading “the preemption
clause of ERISA ... in context with the Act as a whole, and with
Congress’s goal in creating an exclusive federal enclave for the
regulation of benefit plans,” found cases holding state law claims
conflict preempted under ERISA had “at least two unifying
characteristics: (1) the state law claims address areas of exclusive
federal concern, such as the right to receive benefits under the
terms of an ERISA plan; and (2) the claims directly affect the
relationship among the traditional ERISA entities—the
employer, the plan and its fiduciaries, and the participants and
beneficiaries.” (Memorial Hospital, supra, 904 F.2d at pp. 244–
245, fn. omitted.) The court concluded the hospital’s
misrepresentation claim did not implicate either of those two
factors.
With respect to the first factor, the court described the
“commercial realities” health care providers face: Healthcare is
expensive, and providers have limited budgets for indigent care
and losses due to nonpayment. They routinely determine before
deciding to treat a patient whether they can reasonably expect
payment and must rely on an insurance company or plan
administrator’s representations. (Memorial Hospital, supra, 904
F.2d at p. 246.) The court explained: “If providers have no
recourse under either ERISA or state law in situations such as
26
the one sub judice (where there is no coverage under the express
terms of the plan, but a provider has relied on assurances that
there is such coverage), providers will be understandably
reluctant to accept the risk of non-payment, and may require up-
front payment by beneficiaries—or impose other
inconveniences—before treatment will be offered. This does not
serve, but rather directly defeats, the purpose of Congress in
enacting ERISA.” (Id. at pp. 247–248.) Moreover, “[i]f a patient is
not covered under an insurance policy, despite the insurance
company’s assurances to the contrary, a provider’s subsequent
civil recovery against the insurer in no way expands the rights of
the patient to receive benefits under the terms of the health care
plan. If the patient is not covered under the plan, he or she is
individually obligated to pay for the medical services received.…
A provider’s state law action under these circumstances would
not arise due to the patient’s coverage under an ERISA plan, but
precisely because there is no ERISA plan coverage.” (Id. at p.
246.)
With respect to the second factor, the court explained it had
previously found “the most important factor for a court to
consider in deciding whether a state law affects an employee
benefit plan ‘in too tenuous, remote, or peripheral a manner to be
preempted’ is whether the state law affects relations among
ERISA’s named entities. ‘[C]ourts are more likely to find that a
state law relates to a benefit plan if it affects relations among the
principal ERISA entities—the employer, the plan, the plan
fiduciaries, and the beneficiaries—than if it affects relations
between one of these entities and an outside party, or between
two outside parties with only an incidental effect on the plan.’ ”
(Memorial Hospital, supra, 904 F.2d at p. 249.) Because third-
27
party providers are not parties to the bargain “struck in ERISA”
between plaintiffs and employers, the court concluded Congress
could not have “intended the preemptive scope of ERISA to shield
welfare plan beneficiaries from the consequences of their acts
toward non-ERISA health care providers when a cause of action
based on such conduct would not relate to the terms or conditions
of a welfare plan, nor affect—or affect only tangentially—the
ongoing administration of the plan.” (Id. at pp. 249–250.)
Another case cited by Port Medical, this one from the Ninth
Circuit, illustrates a similar point. In Blue Cross of California v.
Anesthesia Care Assoc. (9th Cir. 1999) 187 F.3d 1045 (Blue
Cross), a group of medical providers sued Blue Cross over a fee
dispute relating to an ERISA health care plan. Each of the
providers had entered into a “Participating Physician Agreement”
with Blue Cross. (Id. at p. 1048.) Blue Cross promoted the
physicians to its plan members as preferred providers and, in
turn, the physicians agreed to accept payment from Blue Cross
for services rendered to plan members according to specified fee
schedules. (Ibid.) As in the present case, the plan members in
Blue Cross were almost entirely removed from the billing process.
(Ibid.) In the participating physician agreements, the providers
agreed to “ ‘accept and maintain evidence of assignment for the
payment of Medical Services provided to Members by
PHYSICIAN under the applicable’ ” Plan. (Ibid.) The physicians
also agreed to seek payment only from Blue Cross and to accept
the fees listed in the agreement as payment in full for all medical
services provided to plan members. (Ibid.)
The dispute arose when Blue Cross allegedly changed the
fee schedules. According to the physicians, Blue Cross breached
the participating physician agreements by improperly amending
28
the fees schedules and violated the implied duty of good faith and
fair dealing under California law. Blue Cross filed petitions to
compel arbitration in federal district court; the physicians
responded by filing a joint class action in state court. Blue Cross
removed the case to federal court and moved to dismiss the
physicians’ claims under ERISA section 502(a) (complete
preemption) and, alternatively, under ERISA section 514(a)
(conflict preemption).
The district court concluded the physicians’ claims were not
preempted by ERISA under either provision and the Ninth
Circuit affirmed. As pertinent here, the court observed that the
physicians were not litigating entitlement to benefits under a
welfare benefit plan as assignees of the plan members—the core
area of concern with respect to ERISA preemption. Instead, the
providers’ claims arose from their independent contracts with
Blue Cross which set their fees—contracts not subject to
regulation by ERISA because they involve only the fee for a
physician’s services, not the entitlement to benefits under a
regulated welfare benefit plan. “[B]ecause the Providers’ claims
arise from contracts that a health care provider makes with its
medical providers, the difficulties that Congress sought to avoid
with ERISA’s preemption clause are not implicated here. The
state law that the Providers invoke does not create an alternative
enforcement mechanism for securing benefits under the terms of
ERISA-covered plans.” (Blue Cross, supra, 187 F.3d at p. 1054.)
Stated differently, the parties all agreed the physicians provided
medical services covered under the plan at issue. The dispute
related to the rate of pay, which was the subject of the
“Participating Physician Agreement” between Blue Cross and the
plaintiff physicians—not the ERISA plan.
29
Stated simply, these cases (and others cited therein) stand
generally for the proposition that a health care provider that
treats a beneficiary of a welfare benefit plan may assert a claim
in state court against the plan if it is based on an obligation
between the plan and the provider separate from the welfare
benefit plan itself and does not inquire into entitlement to
benefits under the plan. Thus, where a plan assures a provider
that a proposed treatment is covered under the plan but later
determines it is not covered, the provider may sue based upon the
plan’s independent promise to the provider to pay for the services
rendered. And where a provider has an agreement with a welfare
benefit plan directly, it may sue for breach of that agreement,
notwithstanding the fact that it relates generally to the provision
of services under an ERISA plan.
With these principles in mind, we now review Port
Medical’s causes of action to determine whether, and to what
extent, Port Medical’s claims avoid conflict preemption under
ERISA.
2.2. Three of Port Medical’s causes of action are
conflict preempted under ERISA.
2.2.1. Breach of Implied-In-Fact Contract
Port Medical contends there is a dispute of material fact as
to whether an implied-in-fact contract exists between the Plan
and Port Medical obligating the Plan to pay Port Medical for
healthcare services Port Medical provided to Plan members. We
conclude this cause of action is fundamentally a claim for benefits
under ERISA and is therefore preempted under section 514(a) of
ERISA.
30
A contract is either express or implied. (Civ. Code, § 1619.)
The terms of an express contract are stated in words. (Civ. Code,
§ 1620.) By contrast, the existence and terms of an implied
contract are manifested by conduct. (Civ. Code, § 1621.) “The
distinction reflects no difference in legal effect but merely in the
mode of manifesting assent. [Citation.] Accordingly, a contract
implied in fact ‘consists of obligations arising from a mutual
agreement and intent to promise where the agreement and
promise have not been expressed in words.’ [Citation.]” (Retired
Employees Assn. of Orange County, Inc. v. County of Orange
(2011) 52 Cal. 4th 1171, 1178.)
Port Medical’s implied contract theory, as we understand it,
begins with the network provider agreement signed by its
practitioners. Port Medical acknowledges the network agreement
is not a contract that binds the Plan, but asserts “that contract
established the parameters of the relationship between [Port
Medical] and the Plan: If [Port Medical] provided healthcare
services to the Plan’s members, the Plan would reimburse [Port
Medical] for those services at established rates.” It then urges an
implied-in-fact contract between Port Medical and the Plan arose
because “[Port Medical] did provide healthcare services to the
Plan’s members for over two years before the present dispute
arose, and the Plan paid [Port Medical] the reimbursements as set
forth in the [network] agreement.” (Original italics.) Based on that
course of conduct, Port Medical asserts, a jury could reasonably
find an implied-in-fact contract arose between Port Medical and
the Plan.
The Plan argues this cause of action is conflict preempted
under ERISA because it is predicated on the Plan’s history of
paying claims for benefits due under the Plan. Moreover, the
31
Plan asserts, Port Medical’s implied contract claim is
fundamentally a claim for unpaid ERISA plan benefits—the
precise type of claim section 514(a) of ERISA preempts. We agree.
Although Port Medical ignores the existence of the Plan in
pleading its implied contract cause of action, we do not. Stated
simply, the Plan is obligated to reimburse its members for the
cost of covered health care services. As a convenience to Plan
members, and in exchange for “preferred provider” status, Port
Medical agreed in the network agreement to bill the Plan
(through its administrator, Connecticut General) for covered
services provided to Plan members and to accept the Plan’s
payment as full compensation for the services it provided. Thus,
the Plan, through Connecticut General, pays Port Medical
because—and only because—it is obligated to reimburse Plan
members for the cost of covered healthcare services. The fact that
Port Medical agreed to bill the Plan after providing services to
Plan members, rather than requiring Plan members to pay for
services at the time they are rendered and leaving them to seek
reimbursement from the Plan, does not alter the fundamental
nature of the Plan’s obligations to its members.
Having now clarified the nature of the obligation at issue, it
is plain that Port Medical’s implied contract cause of action is
fundamentally a claim for unpaid ERISA plan benefits. The
network agreement, which Port Medical contends “established
the parameters of the relationship between [Port Medical] and
the Plan,” expressly relates to the provision of covered healthcare
services to Plan members. The recitals at the beginning of the
network agreement state the “Practitioner desires to make
professional services available to Members … of Participating
Payors” such as the Plan, the Network “provides administrative
32
services including management tools for the provision of Covered
Services to Members … of Participating Payors,” and the
Network contracts with “Participating Payors who execute
Member Agreements with Members and/or Member Groups for
the provision of Covered Services.” Moreover, the provisions
relating to payment for healthcare services, quoted in full ante,
all anticipate that practitioners are providing covered services to
members of a welfare benefit plan and that practitioners will bill
either the plan or its designee (here, Connecticut General) for the
cost of those services.
In short, despite Port Medical’s creative pleading, it is
apparent that this cause of action is fundamentally a claim for
unpaid benefits under an ERISA plan and it is therefore
preempted under section 514(a) of ERISA.
2.2.2. Intentional Misrepresentation
Port Medical also asserts disputes of material fact exist
regarding its intentional misrepresentation claim. We conclude
this claim is also conflict preempted under ERISA.
The essential elements of a count for intentional
misrepresentation are (1) a misrepresentation, (2) knowledge of
falsity, (3) intent to induce reliance, (4) actual and justifiable
reliance, and (5) resulting damage. (Lazar v. Superior Court
(1996) 12 Cal. 4th 631, 638.) Here, Port Medical contends
defendants made misrepresentations by asserting that the delay
in paying Port Medical’s claims was due to a “ ‘routine audit’ ”
when in fact Connecticut General was engaged in a fraud
investigation, and issuing EOBs that contained “half truth[s],” in
that the EOBs suggested Port Medical’s claims would be paid if
Port Medical submitted the requested documentation when in
fact defendants always intended to deny Port Medical’s valid
33
claims. According to Port Medical, it reasonably relied on these
misrepresentations when it continued treating Plan members
despite nonpayment of its claims.
On the issue of preemption, Silver is of assistance. Silver is
similar to Memorial Hospital, discussed ante, in that it involved a
claim by a doctor who rendered services to a patient based on the
assurance of coverage by a welfare benefit plan. When the plan
later denied the claim, the doctor sued in state court, asserting
claims for breach of oral contract, promissory estoppel and
quantum meruit. Relying on Memorial Hospital, our colleagues in
Division Seven of this court found the doctor’s claims were not
preempted under ERISA because the causes of action were based
upon the plan’s misrepresentation of coverage, not entitlement to
benefits under the plan. (Silver, supra, 2 Cal.App.5th at pp. 806–
808.)
Of interest here, however, the doctor also asserted a cause
of action for intentional interference with contractual relations.
According to the doctor, the plan interfered with his contractual
relationship with his patients by sending the patients EOBs
indicating that their total financial responsibility for the services
rendered by the plaintiff was zero. (Silver, supra, 2 Cal.App.5th
at p. 808.) In considering whether the cause of action was
“related to” an ERISA plan, and therefore conflict preempted, the
court observed that an EOB, or something similar, is required
under ERISA. (Ibid.; see 29 U.S.C. § 1133 [requiring “adequate
notice in writing to any participant or beneficiary whose claim for
benefits under the plan has been denied, setting forth the specific
reasons for such denial, written in a manner calculated to be
understood by the participant”].) However, the doctor asserted (in
an attempt to avoid preemption) his claim was predicated not on
34
the EOB, but on “the Plan’s extraneous tortious conduct of
improperly directing policyholders in the EOB to disregard their
financial obligations to Silver.” (Silver, at p. 808.) The court
rejected that argument because “the Plan’s allegedly tortious
conduct cannot be separated from the Plan’s discharge of its
obligations to notify participants of an adverse determination
under ERISA.… The Plan’s alleged interference with contractual
relations was accomplished not by an individual advising
policyholders not to pay Silver, but instead by the manner in
which its preprinted EOB was designed, completed and
potentially interpreted …. Whether use of the form essentially
constituted a tort—a question with wide-ranging implications for
any plan using a similar form—is precisely the kind of decision
that conflict preemption is intended to eliminate ….” (Id. at p.
809.)
We agree with the court’s analysis in Silver and, applying
that reasoning here, we conclude Port Medical’s intentional
misrepresentation claim is conflict preempted under ERISA. Port
Medical contends Connecticut General’s EOBs contained “half-
truths,” because they denied Port Medical’s claims and requested
further documentation. But the statements contained in the
EOBs are, as the court explained in Silver, inseparable from
Connecticut General’s duty to provide a written explanation of
claim denials under ERISA.
We reach a similar conclusion regarding Connecticut
General’s statements that it was conducting a routine audit of
Port Medical’s claims although it was actually reviewing all of
Port Medical’s submissions to determine whether Port Medical
was engaging in fraud. As we have said, a misrepresentation
claim is not preempted if a plan or administrator makes a
35
representation to a healthcare provider that services will be
covered, the provider relies on that representation and provides
services, and the plan later denies a reimbursement claim after
determining the services are not covered. (Memorial Hospital,
supra, 904 F.2d at p. 250; Silver, supra, 2 Cal.App.5th at pp. 805–
806.) In that instance, the provider’s suit does not relate to the
ERISA plan precisely because the services provided are not
covered under the plan. Instead, the provider’s suit relates to the
misrepresentation of coverage upon which the provider relied to
its detriment in providing healthcare services to the plan
member. But here, Port Medical seeks to hold defendants liable
for Connecticut General’s failure to disclose that it was
conducting an internal investigation into Port Medical’s billing
practices. That activity by Connecticut General goes to the core of
the claims handling function and as such, is conflict preempted.
2.2.3. Quantum Meruit
Port Medical also asserted a cause of action entitled
“services rendered,” which appears to be an equitable claim for
quantum meruit. “Quantum meruit refers to the well-established
principle that ‘the law implies a promise to pay for services
performed under circumstances disclosing that they were not
gratuitously rendered.’ [Citation.] To recover in quantum meruit,
a party need not prove the existence of a contract [citations], but
it must show the circumstances were such that ‘the services were
rendered under some understanding or expectation of both
parties that compensation therefor was to be made’ [citations].”
(Huskinson & Brown v. Wolf (2004) 32 Cal. 4th 453, 458.) The
requisite elements of quantum meruit are (1) the plaintiff acted
pursuant to “an explicit or implicit request for the services” by
the defendant, and (2) the services conferred a benefit on the
36
defendant. (Day v. Alta Bates Medical Center (2002) 98
Cal. App. 4th 243, 249.)
Of all Port Medical’s causes of action, this one is most
plainly preempted under ERISA. According to the operative
complaint, Port Medical “provided medically necessary
treatments and services to [Plan] members,” the treatments were
authorized by the Plan, “[a]s a result, the Plan became indebted
to [Port Medical] for the services rendered by [Port Medical] to
[Plan] members,” and “the Plan unilaterally decided to deny
payment” to Port Medical.
The present case is unlike Memorial Hospital, in which a
healthcare provider’s misrepresentation claim was not
preempted. There, the plan assured a health care provider that
its fees would be paid but later denied the request for payment
because the services were not covered by the plan. Here, the
opposite is true. Port Medical contends it provided covered
services to Plan members and now seeks payment for those
services.
This case is also unlike Blue Cross, in which the dispute
concerned the rate of pay set forth in the participating provider
agreement. There, it was undisputed that the providers rendered
covered services and the only issue was the manner in which
Blue Cross amended the participating provider agreements which
set the providers’ rate of pay. Here, by contrast, Port Medical
seeks payment on claims for Plan benefits which Connecticut
General rejected, but which Port Medical contends should have
been paid because they concerned covered services.
Finally, and as we have said, state law claims creating an
alternative enforcement mechanism to secure benefits under the
terms of ERISA-covered plans are preempted. (See Blue Cross,
37
supra, 187 F.3d at p. 1054.) It is difficult to imagine a more
apparent claim for unpaid benefits under an ERISA plan than
Port Medical’s quantum meruit claim.
2.3. Port Medical’s remaining causes of action are not
preempted. Summary judgment was proper on
those claims.
2.3.1. As alleged, the causes of action for unfair
competition and intentional interference with
prospective economic relations are not conflict
preempted under ERISA.
Port Medical’s remaining theory of liability is hinted at
throughout the complaint but is most directly presented in the
causes of action for unfair competition and intentional
interference with contractual relations. There, Port Medical
alleges the Plan and Connecticut General refused to pay
legitimate, covered claims because they were conspiring to put
Port Medical out of business. According to Port Medical, the Plan
and Connecticut General embarked on this campaign against
Port Medical in order to assist another chiropractic provider (not
coincidentally run by persons affiliated with the union) in
stealing Port Medical’s patients. Further, Port Medical asserts
Connecticut General gave it the impression its claims would
eventually be paid in order to induce Port Medical to continue
treating Plan members, even though defendants planned to deny
the claims Port Medical would later submit for those services.
Because Port Medical treated Plan members almost exclusively
and Connecticut General was not paying any of Port Medical’s
claims, Port Medical generated no income for an extended period
and it eventually went out of business.
38
Although the scope of ERISA’s conflict preemption
provision is broad, we do not believe it was meant to shield
welfare benefit plans and administrators from liability for
intentional torts of the type pled in this case. As we have said,
welfare benefit plans may be sued for garden-variety torts
unrelated to claims for benefits under an ERISA plan. And these
torts, as alleged, involve intentional acts well beyond claims
evaluation and processing. As defendants point out, however,
Port Medical would need to establish that defendants refused to
pay legitimate claims for benefits covered under a welfare benefit
plan in order to prevail. But that does not necessarily mean the
causes of action “relate to” an ERISA plan. The focus of these
causes of action is the tortious withholding of payment for the
purpose of inflicting financial harm on a medical provider, to the
benefit of a competitor. Surely Congress did not intend to shield
welfare benefit plans from liability for such conduct. Accordingly,
we conclude these causes of action are not conflict preempted and
we proceed to analyze whether the court properly granted
summary judgment.
2.3.2. There is no evidence defendants intentionally
withheld payment on valid claims in order to
benefit Port Medical’s competitor.
To prevail on a claim for unfair competition, a plaintiff
must show an “unlawful, unfair or fraudulent business act or
practice.” (Bus. & Prof. Code, § 17200.) According to Port Medical,
defendants violated this statute by “implicitly” assuring Port
Medical “that if they provided healthcare services to the Plan’s
members, they would be paid according to the rates set forth in
the [network provider] agreement between [Port Medical] and
[the Network]—and actually did so for a period of years.” Stated
39
slightly differently, “defendants continued to imply to [Port
Medical] that its claims would be paid once additional
documentation was submitted when, in fact, defendants were
conducting a fraud investigation and had no intention of paying
any claims at all—even claims that were being incurred on an on-
going basis.”
Port Medical’s intentional interference cause of action has a
similar foundation. The elements of the tort of intentional
interference with prospective economic advantage are (1) an
economic relationship between the plaintiff and some third party,
with the probability of future economic benefit to the plaintiff; (2)
the defendant’s knowledge of the relationship; (3) intentional acts
on the part of the defendant designed to disrupt the relationship;
(4) actual disruption of the relationship; and (5) economic harm to
the plaintiff proximately caused by the acts of the defendant.
(Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th
1134, 1153.) The operative complaint alleges “Defendants
engaged in wrongful conduct by misrepresenting to Port Medical
Wellness that it was temporarily declining payment of claims
pending receipt of medical records when it knew it already had
the requested information; by secretly sending all of Port Medical
Wellness’s claims to its SIU department without informing Port
Medical Wellness; by unlawfully failing to timely pay claims
according to the Participating Practitioner Agreement; by
continuing to pay Port Medical Wellness for benefits already
provided to [Plan] members according to the Participating
Practitioner Agreement [sic]; and by conspiring to help [a union]
affiliated company steal Port Medical Wellness’s patients.”
As to both causes of action, there are at least two critical
facts Port Medical must establish to prevail under the theory it
40
advances: defendants assured Port Medical it would be paid on
all its claims, and defendants intended to withhold payment on
all Port Medical’s claims without regard to their validity. There is
no evidence to support either of these contentions.
Regarding assurances of payment, it is undisputed that
Port Medical received no oral assurances of payment from
Connecticut General or Coastwise. Specifically, Stella Redenski,
Port Medical’s office manager, testified about her interactions
with Coastwise, Connecticut General’s claims processing office.
And she admitted Coastwise never told her Port Medical’s claims
would be paid: “Nobody told me that I’m not going to get paid or
that I will get paid. No one instructed me one way or another.”
Moreover, the written assurances of payment Port Medical
points to are EOBs plainly stating the claims were denied. In all
cases, the EOBs state that the billed services are “not covered”
and provide a code indicating the reason for that determination.
The reasons provided were that the patient exceeded the
permitted 40 annual visits, the billed services had already been
billed and denied, or additional medical records were needed to
substantiate the claim. Furthermore, representatives from Port
Medical confirmed that the EOBs denied the claims and did not
promise to pay the claims at a later time. Although the request
for additional documents leaves open the possibility that the
claim might be paid in the future, no reasonable person could
construe the EOBs denying Port Medical claims as assurances,
express or implicit, that the rejected claims would definitely be
paid if additional documentation was provided.
In any event, there is no evidence defendants intended to
withhold payment on valid claims for any reason, or specifically
in order to help Port Medical’s competitor steal Port Medical’s
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patients. There is no evidence of any contact between the
competitor and defendants, and nothing in the record to indicate
any collusion. Port Medical’s only contention on this point is: “But
that conclusion [that there is no evidence defendants intended to
deny valid claims] is belied by the fact: (1) The treatment was
covered; (2) [Connecticut General] admitted it has never been
able to find evidence of provider fraud; and (3) The claims were
still never paid. A jury could properly infer from that evidence
that neither [Connecticut General] or [sic] the Plan intended that
payment would be made.” This bare argument, notably
unsupported by any evidence that the claims at issue were
covered under the Plan, fails to create a dispute of material fact
sufficient to survive summary judgment.
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DISPOSITION
The judgment is affirmed. Respondents to recover their
costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, Acting P. J.
WE CONCUR:
EGERTON, J.
DHANIDINA, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
43
Filed 6/1/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
PORT MEDICAL WELLNESS, B275874
INC.,
Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC497312
v.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, et al.,
Defendants and Respondents.
BY THE COURT: *
The ILWU-PMA Welfare Plan and ILWU-PMA Welfare
Plan Board of Trustees have requested that our opinion in the
above-entitled matter, filed May 10, 2018, be certified for
publication. It appears that our opinion meets the standards set
forth in California Rules of Court, rule 8.1105(c). The opinion is
ordered published in the Official Reports.
44
* LAVIN, Acting P.J. EGERTON, J. DHANIDINA, J.* 6
* 6 Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
45