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Scripps Health, A California Corporation v. Schaller anderson

June 22, 2012

SCRIPPS HEALTH, A CALIFORNIA CORPORATION,
PLAINTIFF,
v.
SCHALLER ANDERSON, LLC, AN ARIZONA LIMITED LIABILITY COMPANY;
AETNA LIFE INSURANCE COMPANY, A CONNECTICUT CORPORATION; AND DOES 1 THROUGH 15, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Anthony J. BattagliaU.S. District Judge

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT AND DENYING DEFENDANTS' MOTION TO STRIKE [Doc. No. 6]

Presently before the Court is Defendants' Motion to Dismiss Plaintiff's First Amended Complaint and Motion to Strike. (Doc. No. 6.) For the reasons set forth below, the Court DENIES Defendants' Motion to Dismiss Plaintiff's First Amended Complaint and DENIES Defendants' Motion to Strike.

Background

Plaintiff Scripps Health is a healthcare delivery network with a self-funded employee health benefit plan ("the Plan"). (Compl. at ¶¶ 1, 8.) At all times relevant, Defendant health insurance companies Schaller Anderson, LLC ("SAC") and Aetna Life Insurance Company ("Aetna") (collectively "Defendants") administered claims as Plaintiff's health benefit plan administrator.*fn1

Plaintiff first entered into an Administrative Services Agreement ("SAC Agreement") with SAC in 2002, in which SAC agreed to provide administrative services to the Plan. (Id. at ¶ 14.) In 2007, Aetna acquired SAC. (Id. at ¶ 20.) In April 2008, Plaintiff elected to use the Aetna Signature Administrators PPO as its provider network, allowing access to Aetna's discounted rates with the non-Scripps, Aetna-contracted providers ("Wrap Network"). (Id. at ¶¶ 26, 27.) Plaintiff contends that, during the transition from SAC to Aetna, Defendants never represented to Plaintiff that they intended to eliminate the Wrap Network. (Id. at ¶ 30.) In fact, Plaintiff entered into an amendment to the SAC Agreement, effective January 1, 2009, which extended the term of the SAC Agreement through at least January 31, 2009, and provided that SAC agreed to cooperate with the transition of services to a new administrator, Aetna, who was in fact the new owner of SAC. (Id. at ¶¶ 38, 39.) Between January 31, 2009 and September 15, 2009, Plaintiff contends that Defendants administered the Plan "without a written contract in place, as though the SAC contract never ended." (Id. at ¶ 45.) On September 15, 2009, Plaintiff entered into an Administrative Services Agreement ("Aetna Agreement") with Aetna, which stated that no discounts would be given to providers outside of the Aetna network, but implying that discounts would still be available for services provided by in-network providers. (Id. at ¶ 49.) The Aetna Agreement terminated effective December 31, 2009. (Id. at ¶ 51.)

Plaintiff claims that, according to a performance assessment audit of Defendants' work for Plaintiff for the year 2009, Defendants failed to apply Aetna discounted contractual rates to the Wrap Network for claims effective January 1, 2009. (Id. at ¶¶ 52-53.) As a result, Plaintiff asserts that Defendants overpaid an estimated $4.4 million*fn2 on Plaintiff's employee health claims for providers outside of the Aetna network. (Id. at ¶¶ 54, 61.)

On January 31, 2012, Plaintiff brought this action against Defendants, alleging that they were the administrators of Plaintiff's self-funded employee health benefit plan and had a fiduciary duty to Plaintiff under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et Plaintiff additionally brought ten state common law and statutory claims against Defendants: (1) common law breach of fiduciary duty; (2) breach of written contract (SAC contract); (3) breach of written contract (Aetna contract); (4) breach of implied contract; (5) intentional misrepresentation; (6) negligent misrepresentation; (7) unfair business practices; (8) negligence; (9) estoppel; and (10) declaratory relief.

By the present motion, Defendants seek to dismiss and strike Plaintiff's First Amended Complaint. (Doc. No. 6.) Plaintiffs filed an Opposition on March 16, 2012, and Defendants filed a Reply on March 27, 2012.

Legal Standard

Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings and allows a court to dismiss a complaint upon a finding that the plaintiff has failed to state a claim upon which relief may be granted. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court only reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citations omitted). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Motion to Strike

Federal Rule of Civil Procedure 12(f) provides that a court may, on its own or on a motion, "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f) (2009). Motions to strike "are generally disfavored because they are often used as delaying tactics and because of the limited importance of pleadings in federal practice." Rosales v. Citibank, 133 F. Supp. 2d 1177, 1180 (N.D. Cal. 2001). In most cases, a motion to strike should not be granted unless "the matter to be stricken clearly could ...


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