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Aetna Life Insurance Company v. Bay Area Surgical Management

February 25, 2013


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

E-FILED on: 2/25/13


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 denies Aetna's request for 23 fees and costs.*fn1 24


On February 2, 2012, Aetna sued a group of San Francisco bay area surgical centers and 1 2 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 4 [d]efendants' facilities, unlawfully waived A[etna] members' coinsurance obligations, fraudulently 6 submitted false and inflated bills to A[etna], and violated California's prohibition on the corporate 7 practice of medicine." Pl.'s Br. 1-2, Dkt. No. 10. The complaint alleged six state law causes of 8 9 action: (1) unfair competition in violation of California's Unfair Competition Law ("UCL"); (2) intentional interference with Aetna's contractual relations with its members; (3) intentional interference with Aetna's contractual relations with its in-network participating providers; (4) 12 fraud; (5) declaratory judgment; and (6) unjust enrichment. Compl. ¶¶ 108-66. In support of 13 Aetna's UCL claim-to show that defendants' practices were "unfair"- paragraphs 48 and 49 of 14 the complaint referenced a "Special Fraud Alert" issued by the Department of Health and Human 15 Services, which deemed the waiver of Medicare copayments potentially unlawful and damaging to 16 17 the public. Defendants demurred and moved to strike, inter alia, paragraphs 48 and 49 of the complaint. 19

"unlawfully induced contracted physicians to refer members to (and render services at) 5

On October 1, 2012, the state court overruled defendants' demurrers and denied the 20 majority of defendants' motions to strike, but granted, in relevant part, defendants' motion to strike 21 paragraphs 48 and 49 relating to Medicare rules on the waiver of coinsurance, with leave to 22 amend. The state court held: 23

Medicare rules on the waiver of coinsurance are relevant as persuasive authority to 25 demonstrate the negative ramifications that result when providers waive coinsurance obligations. However, a complaint should contain only a statement of 26 facts constituting the cause of action and a demand for relief . . . , not legal arguments or citations to persuasive authority. [Aetna] further argues that some of 27 the claims involved in this action do involve Medicare claims. However, this 28 factual assertion appears to be extrinsic to the Complaint. Finally, Aetna argues Regarding the Medicare allegations, (paragraphs 48 and 49), [Aetna] argues that the language from the Medicare "Special Fraud Alert" is directly relevant to 1 the claim that the scheme is unfair under the UCL. Again, this seems to be an 2 argument about persuasive legal authority, which is an improper matter to be inserted in a pleading. 3

Order at 17 ll. 20-28, Dkt. No. 22-1. In response to the state court's order, on October 12, 2012, 4 5 Alert" in FAC paragraphs 56 and 57, and further including an allegation in FAC paragraph 55 that, "[o]f the provider charges at issue in this case, approximately eight (8) involve members who are 8 covered under Medicare." FAC ¶ 55, Dkt. No. 11-2. On that same day, Aetna served its first set 9 of discovery requests on defendants. 10

On November 14, 2012, after allegedly having "determined that federal law governs this 11 action," defendants filed a notice of removal on the basis of federal question jurisdiction.*fn2 On 12 13 notice of removal was untimely and facially defective; (2) Aetna's complaint does not invoke 15 federal question jurisdiction because it does not involve or rely on federal law; (3) Aetna's state 16 law claims are not completely preempted by, nor do they arise under, the Medicare Act; and (4) 17 there is no federal question jurisdiction based on preemption by the Employee Retirement Income 18 Security Act ("ERISA"). 19

Defendants request judicial notice of: (1) the state court opinion and order dated October 1, 23 Aetna filed a first amended complaint ("FAC"), maintaining the references to the "Special Fraud January 11, 2013, Aetna filed the present motion to remand on the grounds that: (1) defendants'


A. Evidentiary Rulings

2012 ("Oct. 1, 2012 Order"); (2) the defendants' March 5, 2012 motion to strike portions of the 24 complaint ("motion to strike"); and (3) a brief for the United States Secretary of Labor as Amicus 25 Curiae Supporting Plaintiff-Appellant Tri3 Enterprises, LLC, in an action entitled Tri3 26

Enterprises, LLC v. Aetna, Inc., Case No. 12-2308 (3d Cir. Nov. 31, 2012) ("Tri3 Amicus Brief"). 1 2

the public record in this case and directly relevant to the present issue. The court declines to take 4 judicial notice of the Tri3 Amicus Brief, which defendants rely on solely as a persuasive legal 5

"authority" in support of removal based on an ERISA claim. Tri3 is inapposite to the present case 6 because the claim in that case was actually based on an ERISA violation, see Tri3 Enterprises, 7

The court takes judicial notice of the Oct. 1, 2012 Order and the motion to strike as they are part of LLC v. Aetna, Inc., Case No. 11-3921, 2012 WL 1416530 at *1 (D.N.J. Apr. 24, 2012), unlike the 8 9 claims here, which are explicitly brought under state law. Moreover, the district court in Tri3 held

that defendants failed to state a federal cause of action under ERISA, and thus the existing law is actually contrary to defendants' position on that issue, which, as stated, is not even present in this 12 case. For these reasons, the Tri3 Amicus Brief is not helpful to the court in deciding the present 13 issues. 14

Aetna objects to paragraph 7 of the declaration of Katherine M. Dru (submitted with 15 defendants' response brief at Dkt. No. 21) "on the basis that it lacks foundation, assumes facts not 16 17 in evidence, and asserts legal arguments and conclusions." Aetna's Reply Br. 5 n.5. Paragraph 5 of the Dru declaration states: "In the course of this process of gathering responsive information, 19

[d]efendants learned for the first time that many of the individual claims at issue in this action are 20 claims for benefits under ERISA, and are governed by the federal scheme under 29 U.S.C. § 1002, 21 et seq." Civil Local Rule 7-5(b) provides that "[a]n affidavit or declarations may contain only 22 facts . . . and must avoid conclusions and argument" and allows the court to strike any declaration 23 not in compliance. The court declines to strike paragraph 7, but considers it only as a declaration 24 25 of fact regarding the defendants' subjective belief, and not for any conclusion stated therein.

B. Legal Standard for Removal

Under 28 U.S.C. § 1441(a), an action may be removed to the federal district court 1 2 have original jurisdiction." "Generally speaking, '[a] cause of action arises under federal law only 4 when the plaintiff's well pleaded complaint raises issues of federal law.'" Marin Gen. Hosp. v. 5 Modesto & Empire Traction Co., 581 F.3d 941, 944 (2009) (citing Hansen v. Blue Cross of Cal., 6 891 F.2d 1384, 1386 (9th Cir.1989)). Courts strictly construe the removal statute against removal 7 jurisdiction. See, e.g., Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 8 9 2008). "A defendant seeking removal has the burden to establish that removal is proper and any doubt is resolved against removability." Luther,533 F.3d at 1034 (citation omitted); see also 12 Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) ("[A]ny doubt about 13 the right of removal requires resolution in favor of remand."). 14

"embracing the place where such action is pending" when "the district courts of the United States (9th Cir. 2009); Luther v. Countrywide Home Loans Servicing, LP, 533 F.3d 1031, 1034 (9th Cir.

C. Timeliness of Defendants' Removal Notice

A defendant must normally seek removal within thirty days of the initial pleading or, if the 16 17 initial pleading does not establish a basis for removal, within thirty-days of receipt of "a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the 19 case is one which is or has become removable." 28 U.S.C. § 1446(b)(1), (3). Moreover, "all 20 defendants who have been joined and served must join in or consent to the removal of the action." 21

28 U.S.C. § 1446(b)(2)(a). 22

The primary issue is whether the defendants' alleged basis for removal was present prior to 23

October 12, 2012, the date that Aetna filed the FAC. If so, it is undisputed that defendants' 24 25 removal was untimely. According to Aetna, defendants had knowledge of all of the relevant

Medicare-related facts as of the date of the original complaint, February 2, 2012. If not at that 27 time, Aetna asserts that the defendants certainly had ...

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