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Foster v. Wellpoint Health Networks

June 3, 2009

DEEANNA FOSTER ET AL. [GERARDO GOMEZ ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED], PLAINTIFF,
v.
WELLPOINT HEALTH NETWORKS, INC., A DELAWARE CORPORATION; BLUE CROSS OF CALIFORNIA; BLUE SHIELD OF CALIFORNIA; CIGNA HEALTHCARE OF CALIFORNIA, INC.; PACIFICARE OF CALIFORNIA, INC.; AET HEALTH CARE PLAN OF CALIFORNIA, INC.; AETNA HEALTH OF CALIFORNIA, INC.; HEALTH NET OF CALIFORNIA, INC.; KAISER FOUNDATION HEALTH PLAN, INC., DEFENDANTS.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER GRANTING BLUE SHIELD'S MOTION TO DISMISS SIXTH AMENDED COMPLAINT [Motion filed on April 21, 2009]

This matter comes before the Court on Defendant Blue Shield's Motion to Dismiss the Sixth Amended Complaint. Pursuant to a mandate issued December 1, 2008, the Ninth Circuit reversed this Court's decision dismissing Plaintiff's complaint for lack of Article III standing. The Ninth Circuit's order remanded the action to this court "to consider whether Gomez should be excused from his failure to exhaust administrative remedies under ERISA and thus be allowed to amend his petition." In accordance with the Ninth Circuit's order, Plaintiff filed his Sixth Amended Complaint ("SAC") on March 24, 2009. Defendant Blue Shield moves to dismiss the Complaint because (1) Plaintiff failed to exhaust his administrative remedies and (2) Plaintiff's remaining state law unfair competition claim is inappropriate in light of the Ninth Circuit's opinion and considerations of judicial standing. Although Plaintiff argues that he has adequately alleged futility, Plaintiff does not oppose the Motion as to the First Cause of Action. After reviewing the materials submitted by the parties and hearing oral argument, the Court grants the Motion in full and dismisses the action without prejudice.

I. BACKGROUND

A. Procedural History

This action was originally filed in California Superior Court on March 28, 2005. The original defendants removed the action on the basis of ERISA preemption. As a result of motions, court rulings, and stipulations, additional iterations of the Complaint followed; those iterations added and dropped parties and claims.

Plaintiff Gerardo Gomez ("Gomez" or "Plaintiff") filed his Fifth Amended Complaint ("FAC") on October 20, 2006. Docket No. 39. Defendant California Physicians' Service dba Blue Shield ("Blue Shield" or "Defendant") moved to dismiss the FAC on the grounds that Gomez lacked Article III standing, that his state law claim was completely preempted by ERISA, and that his fiduciary ERISA claim could not be brought because he already had a claim for benefits under ERISA. Docket No. 40. Dismissing for lack of Article III standing, the Court granted the motion on February 5, 2007. Docket No. 48.

On November 5, 2008, the Ninth Circuit entered an order reversing this Court's February 5, 2007 dismissal. See Gomez v. California Physicians' Service dba Blue Shield of California, 299 Fed. Appx. 687, 689 (9th Cir. 2008). The Ninth Circuit described this Court's order as finding "no injury-in-fact because it was unclear whether Gomez is an 'insured person' under his contract with the other insurance company . . . and because it is unclear whether the med-pay insurer would have allowed for double-payment of benefits." Id. The Ninth Circuit reversed. The court found that "for the purposes of a motion to dismiss, Gomez has alleged sufficient facts establishing the plausibility that he has suffered an injury-in-fact." Id. The court likewise concluded that Gomez had alleged a redressable injury. Id. The court found, however, that "because Gomez's claim is one for the recovery of benefits, his claim for equitable relief under 29 U.S.C. § 1132(a)(3) cannot stand." Id. at 690. The Ninth Circuit therefore "remand[ed] this case to the district court to consider whether Gomez should be excused from his failure to exhaust administrative remedies under ERISA and thus be allowed to amend his petition." Id.

At a status conference regarding the Ninth Circuit's remand, the parties agreed that the best way to comply with the Ninth Circuit's order would be for Plaintiff to file a Sixth Amended Complaint and for Defendant to file a Motion to Dismiss.

B. The Sixth Amended Complaint ("SAC")

Plaintiff filed the Sixth Amended Complaint ("SAC") on March 24, 2009. The SAC alleges that Blue Shield "improperly and illegally us[es] its subscribers' 'medical payments' liability insurance coverage (a first-party insurance benefit typically found in most homeowner and liability policies) to fund the cost of emergency medical treatment" Blue Shield is obligated to pay. SAC ¶ 1. Plaintiff alleges that the scheme works generally as follows. When a subscriber is involved in an accident and taken to one of the Plan's contracted medical provider's facilities to obtain emergency-room services, the provider bills both the Plan and the subscriber's medical payments carrier ("med-pay") at their higher, non-contracted rate. When both the Plan and the med-pay carrier pay, the provider refunds the Plan 100% of the amount of the lower contracted rate. As a result, the subscriber loses a collateral source which would have resulted in payment directly to the subscriber for the cost of the emergency room bill. Id. at ¶ 2. Plaintiff alleges that Blue Shield directs the provider to use the patient's med-pay coverage first, when in fact it should use the patient's primary coverage.

The SAC sets forth two causes of action. In the First Claim for Relief, Gomez alleges that Blue Shield's practices were unfair, unlawful, and fraudulent in violation of Cal. Bus. & Prof. Code § 17200. SAC ¶¶ 50-53. In the Second Claim for Relief, Gomez seeks benefits pursuant to Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). Id. at ¶ 55. With respect to exhaustion, the Complaint alleges:

59. Gomez is informed and believes, and based thereon alleges, that Blue Shield denies that it instructs its provider hospitals to bill med-pay as primary insurance, and that Gomez or any member of the class has been damaged or deprived of benefits in any manner whatsoever. Blue Shield has already taken this position in its pleadings and papers filed in this Court and in the U.S. Court of Appeals for the Ninth Circuit, when this case was on appeal. It would therefore be futile for Gomez to file any type of administrative claim with Blue Shield seeking relief, or for any members of the Plan to pursue their administrative remedies under ERISA.

60. In addition, Blue Cross has failed to provide Gomez or any member of the class with information necessary to allow them to pursue any administrative remedy. It has not informed them that it has used the scheme described above to deprive them of their benefits, nor has it advised them of the manner in which they might seek administrative relief. Accordingly, Gomez ...


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