Good Samaritan Hospital L.P. v. MultiPlan, Inc. ( 2023 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 GOOD SAMARITAN HOSPITAL, L.P., Case No. 22-cv-02139-AMO 8 Plaintiff, ORDER GRANTING PLAINTIFF’S 9 v. MOTION TO REMAND 10 MULTIPLAN, INC., et al., Re: Dkt. No. 92 Defendants. 11 12 13 Before the Court is Plaintiff’s Motion to Remand. The matter is fully briefed and suitable 14 for decision without oral argument. See Civ. L.R. 7-6. Accordingly, the hearing set for July 6, 15 2023, was vacated. Having read the parties’ papers and carefully considered their arguments and 16 the relevant legal authority, and good cause appearing, the Court hereby rules as follows. 17 BACKGROUND 18 Plaintiff Good Samaritan Hospital, L.P. (“Good Samaritan”), is a 474-bed acute care 19 hospital in San Jose, California, that operates a 24-hour emergency room and includes a state-of- 20 the art NICU center for the care of infants. Second Amended Complaint (“SAC”) ¶ 4. Good 21 Samaritan is a citizen of Tennessee and Delaware. Defendant MultiPlan, Inc. (“MultiPlan”), is a 22 health network provider that arranges, manages, and offers national preferred provider 23 organization plans. SAC ¶ 5. MultiPlan is a citizen of New York. Defendant Trustmark Health 24 Benefits, formerly known as CoreSource, Inc. (“Trustmark”) is a third-party administrator of 25 healthcare benefits who acts on behalf of employers to administer health care benefits in 26 accordance with the terms of the health plans and the terms of the contracts between plans and 27 providers. SAC ¶ 6. Trustmark is a citizen of both Illinois and Delaware. Altimetrik Corp. 1 A. Factual Background 2 MultiPlan and Good Samaritan operate in accordance with the MPI Participating Facility 3 Agreement (the “Network Agreement”). SAC ¶ 16. Through this Network Agreement, Good 4 Samaritan agreed to participate in MultiPlan’s network and accept payment for services at 5 discounted rates for Good Samaritan’s otherwise applicable billed charges, in part based on the 6 assurance that MultiPlan would ensure timely compensation to Good Samaritan in accordance 7 with the terms of the Network Agreement for services rendered to members of the plans sold by 8 MultiPlan. SAC ¶ 17. This case arises out of Defendants’ alleged failures to honor and properly 9 apply the Network Agreement. That is, Good Samaritan avers that Defendants have refused to 10 properly pay for the medically necessary services provided to an infant patient. SAC ¶ 30. 11 Good Samaritan asserts that Defendants “fail[ed] to pay or cause payment for” medical 12 services in excess of $970,000. SAC ¶ 3. Plaintiff alleges that the bill in question was underpaid, 13 in part, because Defendants applied improper Line Item Disallowances (“LIDs”), unilaterally 14 striking portions of Good Samaritan’s charges. SAC ¶ 31. The Network Agreement prohibits 15 such unilateral adjustments to billed charges. SAC ¶ 32. Good Samaritan also alleges that 16 Defendants further underpaid the bill by improperly deeming the medical level of care provided by 17 Good Samaritan, as purportedly non-medically necessary or justified, and then applying a lower 18 rate than what the contract required for the medically necessary services. SAC ¶ 39. 19 Good Samaritan asserts ten contract-based state law causes of action against Defendants 20 relating to purported breaches of the Network Agreement: 21 1. Breach of written contract against MultiPlan; 22 2. Breach of written contract against Trustmark; 23 3. Breach of written contract against Altimetrik; 24 4. Breach of implied covenant of good faith and fair dealing against MultiPlan; 25 5. Breach of the Client Trust Agreement against Trustmark – Third party beneficiary; 26 6. Breach of the User Agreement against Altimetrik – Third party beneficiary; 27 7. Intentional interference with contractual relations and/or prospective economic 1 8. Intentional interference with contractual relations and/or prospective economic 2 advantage against Trustmark; 3 9. Intentional interference with contractual relations and/or prospective economic 4 advantage against Altimetrik; and 5 10. Relief from forfeiture against all Defendants. 6 B. Procedural Background 7 On February 8, 2022, Plaintiff Good Samaritan filed its initial complaint in the Santa Clara 8 Superior Court against Defendants MultiPlan, Trustmark, and Altimetrik. ECF 1, Ex. D. 9 On April 4, 2022, Defendant Trustmark filed a notice of removal solely “on the basis of 10 diversity jurisdiction under 28 U.S.C. § 1332,” with the consent of all other Defendants. ECF 1. 11 The notice of removal alleged “complete diversity of citizenship” between the parties based on the 12 assertion that “Plaintiff is a citizen of California,” “Trustmark is a citizen of Delaware and Illinois, 13 Multiplan is a citizen of New York, and Altimetrik is a citizen of Michigan for removal and 14 diversity purposes.” ECF 1, ¶ 2. At the time, no party contested removal. 15 Following some amendments to the pleadings, Plaintiff filed the instant Motion to Remand 16 on May 19, 2023. ECF 92. Defendant Altimetrik filed an opposition brief (ECF 95),1 which 17 Trustmark joined (ECF 97). 18 DISCUSSION 19 Good Samaritan moves to remand on the basis that diversity of citizenship is lacking 20 where it and Defendant Trustmark are both corporate citizens of the State of Delaware. ECF 92 at 21 5-7. Because diversity is not complete, Good Samaritan reasons, subject matter jurisdiction is 22 lacking and the case should be remanded. Defendants counter that the case should not be 23 remanded because federal subject matter jurisdiction exists based on federal question jurisdiction 24 because the claims are completely preempted by ERISA. 25 26 27 1 Defendant Altimetrik moves to seal portions of its brief opposing remand as well as certain 1 A. Legal Standard 2 A defendant may remove a class action from state to federal court by filing a notice of 3 removal that lays out the grounds for removal. 28 U.S.C. § 1453(b); 28 U.S.C. § 1446(a). “A 4 motion to remand is the proper procedure for challenging removal.” Moore-Thomas v. Alaska 5 Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009). Grounds for remand include either lack of 6 subject matter jurisdiction or a procedural defect in the notice of removal. See, e.g., Smith v. 7 Mylan Inc., 761 F.3d 1042, 1044 (9th Cir. 2014); Maniar v. F.D.I.C., 979 F.2d 782, 784-85 (9th 8 Cir. 1992) (citing 28 U.S.C. § 1447(c)). The “strong presumption against removal jurisdiction 9 means that the defendant always has the burden of establishing that removal is proper, and that the 10 court resolves all ambiguity in favor of remand to state court.” Hunter v. Philip Morris USA, 582 11 F.3d 1039, 1042 (9th Cir. 2009) (internal quotation marks omitted). 12 “Only state-court actions that originally could have been filed in federal court may be 13 removed to federal court by the defendant,” and “[a]bsent diversity of citizenship, federal-question 14 is required.” Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987). Whether federal question 15 jurisdiction exists “is governed by the ‘well-pleaded complaint rule,’ which provides that federal 16 jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly 17 pleaded complaint.’” Id. Thus, federal question jurisdiction cannot rest upon an actual or 18 anticipated defense or counterclaim. Id.; Vaden v. Discover Bank, 556 U.S. 49, 60 (2009). Thus, 19 an action can only be removed to federal court “where original federal jurisdiction exists” – “it is 20 now settled law that a case may not be removed to federal court on the basis of a federal defense, 21 including the defense of pre-emption.” Id. 22 B. Federal Question – ERISA and Complete Preemption 23 “Ordinarily, federal question jurisdiction does not lie where a defendant contends that a 24 state-law claim is preempted by federal law.” Fossen v. Blue Cross & Blue Shield of Montana, 25 Inc., 660 F.3d 1102, 1107 (9th Cir. 2011) (citations omitted). “But state-law claims may be 26 removed to federal court if the ‘complete preemption’ doctrine applies.” Id. (citations omitted). 27 “ERISA § 502(a) sets forth a comprehensive civil enforcement scheme that completely preempts 1 and internal quotation marks omitted) (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 208-09 2 (2004)). “Thus, [Section] 502 dictates whether a federal court can exercise jurisdiction over a 3 particular claim for benefits.” Rudel v. Hawai’i Mgmt. All. Ass’n, 937 F.3d 1262, 1270 (9th Cir. 4 2019). “According to its terms, an action to recover benefits due under the terms of a plan to 5 enforce rights under the terms of the plan, or to clarify rights to future benefits will be heard in a 6 federal court.” Id. (simplified). 7 Under the test set out by the Supreme Court in Davila, ERISA completely preempts a 8 state-law claim if: “(1) the individual could have brought his claim under this ERISA provision; 9 and (2) no other independent legal duties are implicated by the defendant’s actions.” Rudel, 542 10 U.S. at 1269 (citing Davila, 542 U.S. at 210). To show complete preemption, both elements must 11 be met. Hansen v. Grp. Health Coop., 902 F.3d 1051, 1059 (9th Cir. 2018). The Court considers 12 each element in turn. 13 1. The First Prong 14 The first prong of the Davila test asks “whether a plaintiff seeking to assert a state-law 15 claim at some point in time, could have brought the claim under ERISA § 502(a)(1)(B).” Marin 16 Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 947 (9th Cir. 2009) (simplified) 17 (citing Davila, 542 U.S. at 210). As summarized by the Davila court, Section 502(a)(1)(B), 18 otherwise known as ERISA’s civil enforcement provision, provides that: 19 If a participant or beneficiary believes that benefits promised to him under the terms of the plan are not provided, he can bring suit 20 seeking provision of those benefits. A participant or beneficiary can also bring suit generically to “enforce his rights” under the plan, or 21 to clarify any of his rights to future benefits. 22 Davila, 542 U.S. at 210. 23 Here, though Defendants argue that the first Davila prong is met, Good Samaritan could 24 not have brought its claim for breach of contract under ERISA § 502(a)(1)(B). Good Samaritan is 25 neither a “participant” nor a “beneficiary” of an ERISA plan as those terms are defined in the 26 statute. See 29 U.S.C. § 1132(a). Thus, Good Samaritan is not empowered to bring a civil action 27 under Section 502(a). Though a plan participant could have ostensibly assigned their Section 502 1 participant’s entitlement to benefits, and Good Samaritan could not have brought such a claim. 2 The first Davila prong is not satisfied, the case is not completely preempted by ERISA, and this 3 case should be remanded. In the interest of completeness, the Court proceeds to assess the second 4 Davila prong below. 5 2. The Second Prong 6 The second inquiry in the Court’s analysis under Davila is “whether a claim relies on the 7 violation of a legal duty that arises independently of the plaintiff’s, or their assignor’s, ERISA 8 plan.” Hansen, 902 F.3d at 1059 (citing Davila, 542 U.S. at 210). “If there is some other 9 independent legal duty beyond that imposed by an ERISA plan, a claim based on that duty is not 10 completely preempted under § 502(a)(1)(B).” Id. (quoting Marin Gen. Hosp., 581 F.3d at 949). 11 In Marin General Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 948 (9th Cir. 12 2009), the plaintiff brought state law claims arising out of an alleged verbal promise to pay 90% of 13 the hospital’s charges. The appellate panel determined that the promise to pay created a legal duty 14 independent from a claim for benefits under ERISA because the promise to pay 90% of billed 15 charges was not a matter of plan interpretation. Id. at 948-49. Similarly, in Blue Cross of 16 California v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999), 17 plaintiff providers sued Blue Cross to recover for alleged breaches of contracts between Blue 18 Cross and the providers, and the Ninth Circuit determined that those contracts created independent 19 legal duties. 20 Here, Good Samaritan advances breach of contract and interference claims based on 21 Defendants’ respective obligations owed to it under the Network Agreement. Like the contractual 22 claims at issue in both Marin General Hospital and Blue Cross of California, Defendants’ legal 23 duties to Good Samaritan are independent of the patient’s right to benefits under an ERISA plan. 24 Good Samaritan’s claims do not require an assessment of whether care provided was covered 25 under an employee benefit plan. The Network Agreement is a service contract establishing Good 26 Samaritan’s right to payment, not an ERISA plan document that grants Defendants discretion to 27 determine coverage. In sum, Good Samaritan’s contractual claims arise independently from an 1 Having determined that there is no federal question jurisdiction because there is not 2 complete preemption under ERISA, the Court turns to whether it has diversity jurisdiction over the 3 matter. 4 C. Diversity of Citizenship 5 To establish jurisdiction based on diversity, a party must show an amount in controversy in 6 excess of $75,000 and complete diversity of citizenship between the parties. 28 U.S.C. § 1332. 7 Diversity jurisdiction “requires complete diversity of citizenship; each of the plaintiffs must be a 8 citizen of a different state than each of the defendants.” Morris v. Princess Cruises, Inc., 236 F.3d 9 1061, 1067 (9th Cir. 2001). Limited Partnerships are citizens of all the states of which its partners 10 are citizens, and “like a partnership, an LLC is a citizen of every state of which its 11 owners/members are citizens.” Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 12 899 (9th Cir. 2006). “If at any time before final judgment it appears that the district court lacks 13 subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). 14 Trustmark removed this lawsuit based on diversity jurisdiction under Title 28 U.S.C. 15 § 1332. In its removal papers, it stated, “Plaintiff is a citizen of California, Trustmark is a citizen 16 of Delaware and Illinois, Multiplan is a citizen of New York, and Altimetrik is a citizen of 17 Michigan for removal and diversity purposes.” ECF 1 at 2. Good Samaritan has finally 18 investigated and determined that this was incorrect – it is not a citizen of California. Good 19 Samaritan, a limited partnership, is instead a citizen of Delaware and Tennessee. ECF 92 at 5-7. 20 Defendant does not rebut this determination at all, spending its opposition brief focused on the 21 assessment of federal question jurisdiction as discussed above. Both Plaintiff Good Samaritan and 22 Defendant Trustmark are citizens of the State of Delaware, and complete diversity does not exist 23 between the parties. Therefore, the Court does not have diversity jurisdiction over this matter. 24 // 25 // 26 // 27 // 1 CONCLUSION 2 Because both federal question and diversity jurisdiction are lacking, the Court GRANTS 3 || Plaintiffs Motion to Remand. This case is hereby remanded the Superior Court of California for 4 || the County of Santa Clara. 5 IT IS SO ORDERED. 6 || Dated: September 15, 2023 cob Weck 8 ARACELI MARTINEZ-OLGUIN 9 United States District Judge 10 11 12 © 15 16 = 17 Z 18 19 20 21 22 23 24 25 26 27 28