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Lodi Memorial Hospital Association, Inc. v. Blue Cross of California

June 25, 2009

LODI MEMORIAL HOSPITAL ASSOCIATION, INC., A CALIFORNIA PUBLIC BENEFIT CORPORATION, PLAINTIFF,
v.
BLUE CROSS OF CALIFORNIA, DOING BUSINESS AS ANTHEM BLUE CROSS, A CALIFORNIA CORPORATION; ANTHEM BLUE CROSS LIFE AND HEALTH INSURANCE CO., A CALIFORNIA CORPORATION; THE WELLPOINT COMPANIES, INC., AN INDIANA CORPORATION; WELLPOINT INC., AN INDIANA CORPORATION; ANTHEM HEALTH PLANS OF VIRGINIA, INC., A VIRGINIA CORPORATION; BLUE CROSS BLUE SHIELD OF TEXAS, A TEXAS CORPORATION; COMMUNITY INSURANCE COMPANY, DBA ANTHEM BLUE CROSS AND BLUE SHIELD OF OHIO, AN OHIO CORPORATION; MCLANE COMPANY, INC., A TEXAS CORPORATION; CARPENTERS HEALTH AND WELFARE TRUST FUND FOR CALIFORNIA; CEMENT MASONS HEALTH AND WELFARE TRUST FUND FOR NORTHERN CALIFORNIA; CALIFORNIA'S VALUED TRUST, FORMERLY KNOWN AS CENTRAL VALLEY TRUST; OPERATING ENGINEERS HEALTH AND WELFARE TRUST FUND; PIPE TRADES DISTRICT COUNCIL NO. 36 HEALTH AND WELFARE FUND; SMW LOCAL 104 HEALTH CARE PLAN; UFCW NORTHERN CALIFORNIA HEALTH AND WELFARE TRUST FUND; WESTERN GROWERS ASSURANCE TRUST; CALIFORNIA GROWER FOUNDATION BENEFIT PLAN; DOES 1-200, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO REMAND AND MOTION TO DISMISS

Plaintiff Lodi Memorial Hospital Association Inc. brought this action in state court against various trusts, benefit plans, health plans, plan administrators, and insurers to obtain reimbursement for healthcare services provided to their members and insureds. Having removed the case to federal court, defendants now move to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, and plaintiff moves to remand the case to state court pursuant to 28 U.S.C. § 1447(c).

I. Factual and Procedural Background

Plaintiff is a hospital and healthcare provider located in Lodi, California. (Notice of Removal Ex. A ("Compl.") ¶ 2.) Until March 31, 2007, plaintiff and defendant Blue Cross of California ("BCC") had a written contract under which plaintiff provided inpatient and outpatient medical services to members and insureds of BCC and its affiliates. (Id. ¶ 29.) After March 31, 2007, plaintiffs continued to provide healthcare services to these individuals, though the written contract had expired. (Id.)

Before providing non-emergency inpatient care to defendants' members and insureds, plaintiff contacted defendants to obtain authorization, and in turn, defendants either authorized the care, failed to arrange for the patients' transfer, or indicated that no authorization was necessary. (Id. ¶ 34.) Plaintiff alleges that it understood this conduct as a request that plaintiff provide inpatient services to the patients and that defendants would pay for those services. (Id. ¶ 34.) With regard to outpatient services, plaintiff similarly informed defendants that patients claiming coverage with defendants sought outpatient services, verified that the individuals were eligible members or insureds of defendants, and verified that plaintiff was authorized to provide outpatient services and care. (Id. ¶ 35.) After providing treatment, plaintiff sent claim information to defendants for pricing, processing, and payment. (Id. ¶ 36.) Defendants, however, allegedly failed to reimburse plaintiff for the services rendered. (Id. ¶ 37.)

Plaintiff subsequently filed a Complaint in San Joaquin County Superior Court on April 1, 2009, alleging claims for breach of implied-in-fact and implied-in-law contracts; services rendered; account stated; intentional and negligent misrepresentation; estoppel; intentional and negligent interference with contract; intentional and negligent interference with prospective economic advantage; and violations of California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200-17210. Defendants removed the action to federal court on April 30, 2009, asserting that plaintiff's claims were "completely preempted" by the Employee Retirement and Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, and therefore "ar[ose] under the . . . laws . . . of the United States." 28 U.S.C. § 1331; Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987); (see Docket No. 1 at 3:20-26). Presently before the court are defendants' motion to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted and plaintiff's motion to remand pursuant to 28 U.S.C. § 1447(c).

II. Discussion

"Where subject-matter jurisdiction will involve no arduous inquiry . . . both expedition and sensitivity to state courts' coequal stature should impel the federal court to dispose of that issue first." Mothershed v. Justices of Supreme Court, 410 F.3d 602, 607 (9th Cir. 2005) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587-88 (1999)) (internal quotation marks omitted). Because plaintiff's motion to remand is predicated upon the absence of original subject matter jurisdiction, the court will adjudicate this motion before proceeding to defendants' motion to dismiss.

A motion to remand "is the proper procedure" for challenging the removal of an action to federal court. Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th Cir. 2009) (citing 28 U.S.C. § 1447(c)). "Under 28 U.S.C. § 1441, a defendant may remove an action filed in state court to federal court if the federal court would have original subject matter jurisdiction over the action." Id. Federal courts have original subject matter jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.

To determine whether an action "arises" under federal law, courts apply the "well-pleaded complaint rule," which provides that "a claim arises under federal law 'only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.'" Moore-Thomas, 553 F.3d at 1243 (quoting Valles v. Ivy Hill Corp., 410 F.3d 1071, 1075 (9th Cir. 2005)). As a corollary to the well-pleaded complaint rule, the "complete preemption doctrine" instructs that Congress "may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Id. (quoting Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir. 1998)) (internal quotation marks omitted). Under this doctrine, "if a federal cause of action completely preempts a state cause of action[,] any complaint that comes within the scope of the federal cause of action necessarily 'arises under' federal law." Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 24 (1983).

As mentioned previously, defendants assert that the court has subject matter jurisdiction because ERISA completely preempts plaintiff's claims. For ERISA to completely preempt a state law claim, the claim must not only "relate[] to" an ERISA plan within the meaning of § 1144(a)," but must also "fall[] within the scope of ERISA's civil enforcement found in § 1132(a)." Toumajian, 135 F.3d at 654.

"Section 1132(a) of ERISA, by its express terms, limits the causes of action that are available under the statute, as well as by whom and against whom they may be brought." Id. Specifically, § 1132(a) limits potential ERISA plaintiffs to participants, beneficiaries, fiduciaries, employers, States, and the Secretary of Labor. 29 U.S.C. § 1132(a)(1)-(10); see Harris v. Provident Life & Accident Ins. Co., 26 F.3d 930, 933 (9th Cir. 1994) ("[T]he Supreme Court has held that a federal court has no jurisdiction to hear a civil action under ERISA that is brought by a person who is not a 'participant, beneficiary, or fiduciary.'") (citation omitted). ERISA's definitions of the aforementioned litigants preclude plaintiff--a third-party medical provider--from qualifying as a potential plaintiff vested with enforcement rights under ERISA. 29 U.S.C. § 1002(5), (7), (8), (10), (13), (21)(A).*fn1 Therefore, because plaintiff is excluded from ERISA's enforcement provision, it would appear that plaintiff's claims cannot be "completely preempted" by the statute. Toumajian, 135 F.3d at 654.

Nonetheless, courts have found that third-party medical providers may bring a claim under § 1132(a) if the provider is "suing as an assignee of a beneficiary's rights to the benefits under an ERISA plan." Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999); see also id. ("ERISA does not prohibit the assignment by a beneficiary of his or her right to reimbursement under a health care plan to the health care provider."). In such cases, the beneficiary has a right to reimbursement from the ERISA plan and assigns that right to the provider. The provider, in turn, "stands in the shoes of the beneficiary" and "the terms of the benefit plan [are] the provider's only basis for his reimbursement claim." Id.

Defendants contend that plaintiff's claims are necessarily premised on an assignment of rights from beneficiaries. (See Opp'n Mot. Remand 7-13.) Specifically, defendants assert,

Plaintiff itself could only have relied on representations regarding coverage if [plaintiff] had obtained an assignment of benefits. Otherwise, any representations of coverage by defendants would have been with respect to the patient plan member's right to be reimbursed pursuant to his or her ERISA plan for the charges associated with her or her treatment. (Id. at 8:11-15.) Defendants continue, "[I]n the absence of a written provider agreement, any alleged 'assurances' by [defendants] to reimburse [plaintiff] . . . would be oral promises to stand for the debt of another, which are unenforceable pursuant to the statute of frauds." (Id. at 8 n.8.) These arguments, however, go to the merits of plaintiff's claims; although further litigation may reveal that defendants' alleged representations were legally insufficient to create independent, non-derivative legal obligations between plaintiff and defendants, these allegations are ultimately the source from which the court must discern the presence or absence of ...


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