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Lodi Memorial Hospital Association, Inc., A California Public Benefit Corporation v. Blue Cross of California

August 21, 2012

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

Plaintiff Lodi Memorial Hospital Association Inc. initiated 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. In 2009, defendants removed the case to federal court, and this court granted plaintiff's motion to remand the case pursuant to 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction in an Order dated June 25, 2009 ("2009 Order"). After proceeding in state court for almost three years, defendants*fn1 removed the case to federal court a second time and plaintiff again moves to remand the case pursuant to § 1447(c).

I. Factual and Procedural Background Plaintiff is a hospital and healthcare provider located in Lodi, California. (Corrected First Am. Compl. ¶ 6.) Until March 31, 2007, plaintiff and defendant Blue Cross of California had a written contract under which plaintiff provided emergency medical services, post-stabilization inpatient medical services, and outpatient medical services to members and insureds of Blue Cross of California and its affiliates. (Id. ¶ 39.) After the written contract expired, plaintiff continued to provide medical services to these individuals and did not enter into a new contract with Blue Cross of California until January 1, 2009. (Id.)

In providing emergency services, plaintiff alleges that an implied-in-law agreement existed for defendants to reimburse plaintiff the reasonable and customary fair market value for the services provided based, in part, on plaintiff's statutory obligation to provide emergency services to all individuals without first confirming their ability to pay or insurance benefits. (Id. ¶¶ 48-51.) Before providing non-emergency and post-stabilization inpatient care to defendants' members and insureds, plaintiff allegedly contacted defendants to obtain authorization, and in turn, defendants either authorized the care, failed to arrange for a patient's transfer, or indicated that no authorization was necessary. (Id. ¶¶ 60-61.) 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. ¶ 70.) After providing the various services to defendants' members and insureds, plaintiff submitted claims to defendants, but defendants allegedly failed to sufficiently reimburse plaintiff for the services rendered. (Id. ¶¶ 53-56, 64-69, 72-90.)

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. This court granted plaintiff's motion to remand, concluding that its claims were not completely preempted by ERISA and thus the court lacked subject matter jurisdiction over plaintiff's state law claims.

After the case was remanded, and the parties proceeded with law and motion practice and discovery in state court. The state court granted defendants' demurrers based on plaintiff's "having 'lumped' all the Defendants together in making its allegations," (Docket No. 1 at Ex. I, ¶ 1), and plaintiff filed its First Amended Complaint on February 11, 2010 and a Corrected First Amended Complaint*fn2 ("FAC") shortly thereafter. Defendants filed another round of demurrers to the FAC, arguing, inter alia, that ERISA preempted plaintiff's state law claims. The state court overruled defendants' demurrers and rejected defendants' theory of ERISA preemption. (Id. at Exs. O & S, ¶ 6.)

After necessitating a discovery referee to resolve disputes between the parties, defendants obtained the discovery it relies on in removing this case to federal court a second time. Specifically, in plaintiff's Responses to Anthem Defendants' Requests for Admissions, Set Three, plaintiff admitted that a copy of a Conditions of Admission ("COA") that it had previously produced was a true and correct copy of its COA. (Ridley Decl. Exs. O & P (Docket No. 43).) Paragraph 8 of the COA is titled "Assignment of Insurance Benefits" and "authorizes . . . direct payment to the hospital of any insurance benefits otherwise payable to or on behalf of the undersigned." (Id. at Ex. O.) Paragraph 9 of the COA also states: "This hospital maintains a list of the health care service plans with which it currently contracts. A list of such plans is available upon request from the finance office. The hospital has no contract, express or implied, with any plan that does not appear on the list." (Id. at Ex. S.) Plaintiff also admitted that it was its regular business practice to have patients sign a copy of the COA upon registration and/or admission during the time period at issue in this lawsuit.*fn3 (Id. at Ex. P at 3:4-7.)

Relying on plaintiff's responses to the Third Set of Requests for Admissions, defendants removed this action to federal court a second time on April 24, 2012. After plaintiff filed a Notice of Related Cases, the court related the cases pursuant to Eastern District Local Rule 123. Presently before the court are plaintiff's motion to remand, including its requests for costs and fees associated with defendants' second removal, and plaintiff's motion for sanctions pursuant to Federal Rule of Civil Procedure 11.

II. Motion to Remand "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." Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1243 (9th Cir. 2009). 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). Here, defendants contend that the federal court has subject matter jurisdiction over this action because ERISA completely preempts plaintiff's state law claims.

Pursuant to 28 U.S.C. § 1446(b)(3), "if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable." "Courts have found that a defendant may remove under the 'other paper' provision of section 1446(b) based on a plaintiff's discovery responses or deposition testimony." Steiner v. Horizon Moving Sys. Inc., 568 F. Supp. 2d 1084, 1087 (C.D. Cal. 2008).

When a case is remanded for lack of subject matter jurisdiction--as this court previously did in the 2009 Order--§ 1446(d) bars review of the remand order "on appeal or otherwise."

28 U.S.C. § 1146(d); Kircher v. Putnam Funds Trust, 547 U.S. 633, 640 (2006). "This language has been universally construed to preclude not only appellate review but also reconsideration by the district court." Seedman v. U.S. Dist. Ct. for Cent. Dist. of Cal., 837 F.2d 413, 414 (9th Cir. 1988).

In light of the prohibition against review of a remand order in § 1146(d), once a district court has remanded a case, a defendant generally may not remove the case to federal court a second time. See, e.g., In re La Providencia Dev. Corp., 406 F.2d 251, 252 (1st Cir. 1969) ("[T]he state court proceedings are to be interfered with once, at most. This is not only in the interest of judicial economy, but out of respect for the state court and in recognition of principles of comity. The action must not ricochet back and forth depending upon the most recent determination of a federal court."); Seedman, 837 F.2d at 141 ("[A] second removal petition based on the same grounds does not 'reinvest' the court's jurisdiction. A remand order returns the case to the state courts and the federal court has no power to retrieve it.").

Nonetheless, "a defendant who fails in an attempt to remove on the initial pleadings can file a removal petition when subsequent pleadings or events reveal a new and different ground for removal." Kirkbride v. Cont'l Cas. Co., 933 F.2d 729, 732 (9th Cir. 1991) (quoting FDIC v. Santiago Plaza, 598 F.2d 634, 636 (1st Cir. 1979); see also Sweet v. United Parcel Serv., Inc., Civ. No. 09-02653 DDP, 2009 WL 1664644, at *3 (C.D. Cal. June 15, 2009) ("[C]onsistent with a public policy that 'guards against premature and protective removals and minimizes the potential for a cottage industry of removal litigation,' successive removals must be based on new information." (quoting Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 698 (9th Cir. 2005))); Barahona v. Orkin, Civ. No. 08-04634-RGK, 2008 WL 4724054, at *2 (C.D. Cal. Oct. 21, 2008) ("Successive removals are allowed only where the second notice of removal is based on newly discovered facts not available at the time of the first removal.").

In their first notice of removal in this case, defendants represented that the court had jurisdiction under 28 U.S.C. § 1331 "based on the fact that the gravamen of the Complaint is to seek benefits from self-funded plans governed by [ERISA] that necessarily involve questions arising under ERISA, including pre-emption issues and defenses under ERISA." (Case No. 09-1178, Docket No. 1 at 3:23-26.) The court disagreed with defendants and remanded the case to state court, where it proceeded for almost three years. Defendants then filed a second notice of removal, again representing that the court has jurisdiction under § 1331 "based on the fact that the gravamen of the First Amended Complaint, as viewed in light of Plaintiff's Response to Defendants' Requests for Admission, is to seek benefits from self-funded plans governed by [ERISA] that necessarily involve questions arising under ERISA, including preemption issues and defenses under ERISA." (Docket No. 1 at 7:20-25.) Defendants specifically contend that removal is proper based on the assignments in the COAs that plaintiff admits it regularly had patients sign and the language in the COAs indicating that plaintiff did not have a contractual relationship with defendants.

Defendants' argument that ERISA completely preempts plaintiff's state law claims because the patients assigned their rights to plaintiff is not a new ground for removal raised for the first time in defendants' second removal. In opposing plaintiff's first motion to remand, defendants repeatedly argued in their briefs and at oral argument "that plaintiff's claims are necessarily premised on an assignment of rights from beneficiaries." (June 25, 2009 Order 7:13-16 (citing Defs.' Opp'n Mot. Remand at 7-13).) At oral argument, defendants insisted that it "is very clear from the allegations in the complaint [] that the plaintiff is in fact an assignee . . . while they don't say, hey, I'm an assignee, that is the only way those claims make sense." (June 22, 2009 Tr. 6:2-4, 7:10-11; see also id. at 6:23-25, 8:9-13 ("But what the reality is, for them to assert the claims they have in the complaint, they have to do so based on a position of being an assignee. . . . In order to make statements with regard to confirming coverage and determining representation, it again goes back to the plans. And the only way that they can come back to the plans and make allegations regarding payments are that they have a position as assignee.").)

Similarly, defendants' argument that plaintiff lacks a contractual relationship with them is not a new ground for removal because defendants advanced the same theory in opposition to plaintiff's first motion to remand. For example, in their opposition to plaintiff's first motion to remand, defendants argued that "Plaintiff admits that there are no written agreements between it and Defendants and does not allege that Defendants, through the purported misrepresentations, assumed an obligation to pay Plaintiff independent of the benefits due to members of the Defendant ERISA plans." (Case No. 09-1178, Docket No. 38 at 1:18-22.) At oral argument on the first motion to remand, defense counsel argued that "the claims brought by plaintiff[] do not bring an independent claim and is counter to and distinguishable from the cases they cite in particular because there is no contractual relationship between the defendants and the plaintiff[]. In fact, the complaint itself acknowledges this fact." (June 22, 2009 Tr. 3:22-4:2.)

Defendants thus advance the same theories of complete preemption giving rise to federal question jurisdiction in their second notice of removal and raise the same arguments in opposition to plaintiff's second motion to remand as they did in 2009. The only difference--or "new information"--is that defendants now have the evidence to prove*fn4 the assertions they made in support of their first notice of removal and in opposition to plaintiff's first motion to remand. It is not enough, however, that defendants may have discovered new evidence if the new evidence does not advance a new factual basis for removal. Cf. Sweet, 2009 WL 1664644, at *4.

Defendants erroneously interpret the court's 2009 Order as dependent on the absence of evidence establishing an assignment or the lack of a contractual relationship between the parties. In previously remanding this case, the court's analysis focused on the allegations and claims in plaintiff's Complaint, not defendants' ability or inability to prove whether plaintiff had obtained assignments from the patients or had a contractual relationship with defendants. Simply because it may now be undisputed that the patients assigned their rights to plaintiff does not alter the court's prior conclusion that plaintiff can chose--and indeed did choose--to pursue independent state law claims.

In Seafarers, which this court relied on heavily in the 2009 Order, the Ninth Circuit recognized that the ability to bring an ERISA claim does not require a plaintiff to pursue the ERISA claim in lieu of independent state law claims:

Although [plaintiff] could have brought an ERISA claim derivatively as an assignee, the Complaint does not assert a derivative claim. The Complaint does not mention an assignment and does not predicate its alleged right to recovery on any assignment. Rather, the Complaint asserts claims based on a direct contractual relationship that arose between [plaintiff] and [defendant] and misrepresentations made to [plaintiff] by [defendant]. None of these claims rest on the assignment of benefits under an ERISA plan, the claims are based on independent state law, and the dispute involves a contract and representations made between a ...


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