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Aetna Life Insurance Company v. Bay Area Surgical Management

January 11, 2013


The opinion of the court was delivered by: Ronald M. Whyte United States District Judge

E-FILED on: 1/11/13


On November 29, 2012, plaintiff Aetna Life Insurance Company ("Aetna") moved for: (1) an order of the court remanding this action to the Superior Court for the County of Santa Clara 20 California ("state court"); and (2) an award of fees and costs incurred as a result of the removal. 21 Having considered the papers submitted by the parties and the arguments of counsel, and for the 22 reasons set forth below, this court grants Aetna's motion to remand and awards fees and costs to 23 Aetna.


On February 2, 2012, Aetna sued a group of San Francisco bay area surgical centers and individual defendants (collectively "defendants") in state court for fraudulently securing payments from Aetna for services rendered to members of its health plans. Aetna alleged that defendants 1 2 [d]efendants' facilities, unlawfully waived A[etna] members' coinsurance obligations, fraudulently 4 submitted false and inflated bills to A[etna], and violated California's prohibition on the corporate 5 practice of medicine." Pl.'s Br. 1-2, Dkt. No. 10. The complaint alleged six state law causes of 6 action: (1) unfair competition in violation of California's Unfair Competition Law ("UCL"); (2) 7 intentional interference with Aetna's contractual relations with its members; (3) intentional 8 9 interference with Aetna's contractual relations with its in-network participating providers; (4) fraud; (5) declaratory judgment; and (6) unjust enrichment. Compl. ¶¶ 108-66. In support of Aetna's UCL claim-to show that defendants' practices were "unfair"- paragraphs 48 and 49 of 12 the complaint referenced a "Special Fraud Alert" issued by the Department of Health and Human 13

Services, which deemed the waiver of Medicare copayments potentially unlawful and damaging to 14 the public. Defendants demurred and moved to strike, inter alia, paragraphs 48 and 49 of the 15 complaint. 16 17

majority of defendants' motions to strike, but granted, in relevant part, defendants' motion to strike 19 paragraphs 48 and 49 relating to Medicare rules on the waiver of coinsurance, with leave to 20 amend. The state court held: 21

Medicare rules on the waiver of coinsurance are relevant as persuasive authority to demonstrate the negative ramifications that result when providers waive 23 coinsurance obligations. However, a complaint should contain only a statement of facts constituting the cause of action and a demand for relief . . . , not legal 24 arguments or citations to persuasive authority. [Aetna] further argues that some of 25 the claims involved in this action do involve Medicare claims. However, this factual assertion appears to be extrinsic to the Complaint. Finally, Aetna argues 26 that the language from the Medicare "Special Fraud Alert" is directly relevant to the claim that the scheme is unfair under the UCL. Again, this seems to be an 27 argument about persuasive legal authority, which is an improper matter to be 28 inserted in a pleading.

"unlawfully induced contracted physicians to refer members to (and render services at)

On October 1, 2012, the state court overruled defendants' demurrers and denied the Regarding the Medicare allegations, (paragraphs 48 and 49), [Aetna] argues Order at 17 ll. 20-28, Dkt. No. 22-1. In response to the state court's order, on October 12, 2012, 2

Aetna filed a first amended complaint ("FAC"), maintaining the references to the "Special Fraud 3 Alert" in FAC paragraphs 56 and 57, and further including an allegation in FAC paragraph 55 that, 4 5 covered under Medicare." FAC ¶ 55, Dkt. No. 11-2. On that same day, Aetna served its first set of discovery requests on defendants. 8

"[o]f the provider charges at issue in this case, approximately eight (8) involve members who are On November 14, 2012, after allegedly having "determined that federal law governs this 9 action," defendants filed a notice of removal on the basis of federal question jurisdiction.*fn1 On 10

January 11, 2013, Aetna filed the present motion to remand on the grounds that: (1) defendants' 11 notice of removal was untimely and facially defective; (2) Aetna's complaint does not invoke 12 13 federal question jurisdiction because it does not involve or rely on federal law; (3) Aetna's state

law claims are not completely preempted by, nor do they arise under, the Medicare Act; and (4) 15 there is no federal question jurisdiction based on preemption by the Employee Retirement Income 16

Security Act ("ERISA"). 17


A. Evidentiary Rulings

Defendants request judicial notice of: (1) the state court opinion and order dated October 1, 20 21

complaint ("motion to strike"); and (3) a brief for the United States Secretary of Labor as Amicus 23 2012 ("Oct. 1, 2012 Order"); (2) the defendants' March 5, 2012 motion to strike portions of the Curiae Supporting Plaintiff-Appellant Tri3 Enterprises, LLC, in an action entitled Tri3 24

Enterprises, LLC v. Aetna, Inc., Case No. 12-2308 (3d Cir. Nov. 31, 2012) ("Tri3 Amicus Brief"). 25

The court takes judicial notice of the Oct. 1, 2012 Order and the motion to strike as they are part of 26 the public record in this case and directly relevant to the present issue. The court declines to take 1 2 judicial notice of the Tri3 Amicus Brief, which defendants rely on solely as a persuasive legal "authority" in support of removal based on an ERISA claim. Tri3 is inapposite to the present case 4 because the claim in that case was actually based on an ERISA violation, see Tri3 Enterprises, 5 LLC v. Aetna, Inc., Case No. 11-3921, 2012 WL 1416530 at *1 (D.N.J. Apr. 24, 2012), unlike the 6 claims here, which are explicitly brought under state law. Moreover, the district court in Tri3 held 7 that defendants failed to state a federal cause of action under ERISA, and thus the existing law is 8 9 actually contrary to defendants' position on that issue, which, as stated, is not even present in this case. For these reasons, the Tri3 Amicus Brief is not helpful to the court in deciding the present issues.

Aetna objects to paragraph 7 of the declaration of Katherine M. Dru (submitted with 13 defendants' response brief at Dkt. No. 21) "on the basis that it lacks foundation, assumes facts not 14 in evidence, and asserts legal arguments and conclusions." Aetna's Reply Br. 5 n.5. Paragraph 5 15 of the Dru declaration states: "In the course of this process of gathering responsive information, 16 17 claims for benefits under ERISA, and are governed by the federal scheme under 29 U.S.C. § 1002, 19 et seq." Civil Local Rule 7-5(b) provides that "[a]n affidavit or declarations may contain only 20 facts . . . and must avoid conclusions and argument" and allows the court to strike any declaration 21 not in compliance. The court declines to strike paragraph 7, but considers it only as a declaration 22 of fact regarding the defendants' subjective belief, and not for any conclusion stated therein.

"embracing the place where such action is pending" when "the district courts of the United States 27 have original jurisdiction." "Generally speaking, '[a] cause of action arises under federal law only [d]efendants learned for the first time that many of the individual claims at issue in this action are

B. Legal Standard for Removal

Under 28 U.S.C. § 1441(a), an action may be removed to the federal district court when the plaintiff's well pleaded complaint raises issues of federal law.'" Marin Gen. Hosp. v. 1 2

891 F.2d 1384, 1386 (9th Cir.1989)). Courts strictly construe the removal statute against removal 4 jurisdiction. See, e.g., Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 5

(9th Cir. 2009); Luther v. Countrywide Home Loans Servicing, LP, 533 F.3d 1031, 1034 (9th Cir. 6

2008). "A defendant seeking removal has the burden to establish that removal is proper and any 7 doubt is resolved against removability." Luther,533 F.3d at 1034 (citation omitted); see also 8 9

the right of removal requires resolution in favor of remand.").

Modesto & Empire Traction Co., 581 F.3d 941, 944 (2009) (citing Hansen v. Blue Cross of Cal., Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) ("[A]ny doubt about

C. Timeliness of Defendants' Removal Notice

A defendant must normally seek removal within thirty days of the initial pleading or, if the 13 initial pleading does not establish a basis for removal, within thirty-days of receipt of "a copy of 14 an amended pleading, motion, order or other paper from which it may first be ascertained that the 15 case is one which is or has become removable." 28 U.S.C. § 1446(b)(1), (3). Moreover, "all 16 17 defendants who have been joined and served must join in or consent to the removal of the action."

28 U.S.C. § 1446(b)(2)(a). 19

October 12, 2012, the date that Aetna filed the FAC. If so, it is undisputed that defendants' 21 removal was untimely. According to Aetna, defendants ...

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