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Community Hospital of Monterey Peninsula v. Aetna Life Insurance Co.

United States District Court, N.D. California, San Jose Division

January 9, 2015

COMMUNITY HOSPITAL OF THE MONTEREY PENINSULA, Plaintiff,
v.
AETNA LIFE INSURANCE COMPANY, et al., Defendants.

ORDER REMANDING TO STATE COURT (Re: Docket No. 13)

PAUL S. GREWAL, Magistrate Judge.

Two years ago, Plaintiff Community Hospital of the Monterey Peninsula ("CHOMP") admitted a patient for various emergency medical services.[1] The patient was a member of an employer self-funded health plan administered by Defendants Aetna Life Insurance Company, Valueoptions of California, Inc. and Valueoptions Inc.[2] Although CHOMP continued to provide care to the patient, it says Defendants declined to provide authorization for the continued hospital care.[3] CHOMP then filed suit in state court, alleging various causes of action under California state law.[4] After Aetna removed to this court based on ERISA preemption, CHOMP moved to remand.[5] Because ERISA does not preempt any of CHOMP's claims, the court remands the case to Monterey Superior Court.[6]

I.

The Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002(1), contains "expansive pre-emption provisions... which are intended to ensure that employee benefit plan regulation would be exclusively a federal concern.'"[7] One form of ERISA preemption is "complete preemption" under § 502(a)(1)(B), 29 U.S.C. § 1132(a) (" Section 502").[8] Under Section 502, "[a]ny state-law cause of action that duplicates, supplements, or supplants ERISA's civil enforcement remedy" is preempted because it "conflicts with clear congressional intent to make that remedy exclusive."[9] Indeed, "the ERISA civil enforcement mechanism is one of those provisions with such extraordinary pre-emptive power' that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'"[10]

Under Section 502, "a state-law cause of action is completely preempted if (1) an individual, at some point in time, could have brought [the] claim under ERISA § 502(a)(1) (B), ' and (2) where there is no other independent legal duty that is implicated by a defendant's actions'" (the " Davila test").[11] In Davila, the Supreme Court determined that the first prong was met because the plaintiffs' only claims related to "denial of benefits promised under the terms of the ERISA regulated employee benefit plans, " and the plaintiffs could have brought an action under Section 502.[12] The second prong was met because the plaintiffs' civil action sought only to "rectify a wrongful denial of benefits promised under [an] ERISA-regulated plan[], and [did] not attempt to remedy any violation of a legal duty independent of ERISA."[13]

According to the complaint, on September 10, 2012, CHOMP admitted to its emergency room a patient belonging to a health plan administered by Defendants.[14] Over the next week, CHOMP provided the patient emergent and necessary medical services. At the time of Patient's admission, Defendants had verified the patient's eligibility for healthcare benefits. A few days later, CHOMP contacted Defendants and requested concurrent authorization for continued post-stabilization-medically necessary services. This time, Defendants refused to provide authorization and failed to take any action to procure an alternate level of care for patient or to assume responsibility for patient's care. When CHOMP sent Defendants a bill for the services rendered, Defendants refused to pay.[15]

CHOMP then filed this suit in the Superior Court for the County of Monterey.[16] The complaint asserts four causes of action, each of which arises under California law.[17] The first cause of action alleges violation of California's Unfair Competition Law based on state statutes and the second, third and fourth causes of action allege that Defendants owe CHOMP monies for services rendered.[18] The specific acts giving rise to these claims include Defendants' alleged failure to pay for emergency services as mandated by California law, including California Health & Safety Code § 1371.4. These acts also include Aetna's alleged failure to take legally required action to the extent they disputed the medical necessity of the treatment provided to the patient by CHOMP at the time it was reported to Defendants.[19]

Aetna removed the case to this court, prompting CHOMP to move for remand.

II.

The court has removal jurisdiction under 28 U.S.C. § 1441 and 1446(a). Defendants claim removal jurisdiction under 28 U.S.C. § 1331.[20] The parties further consented to the jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed.R.Civ.P. 72(a).[21]

Because the court remands the case, it does not consider substantive defenses brought by Defendants, such as those regarding Aetna's role as administrator.[22]

III.

Davila 's two-prong test for removal of state law claims is straightforward: (1) could the plaintiff have brought its claims under Section 502 of ERISA and (2) do the defendant's actions implicate any independent legal duty? Neither prong is satisfied here.

First, CHOMP could not bring its claims as an ERISA beneficiary. Aetna highlights the patient's assignment to CHOMP of all benefits under the plan. "ERISA preempts the state claims of a provider suing as an assignee of a beneficiary's rights to benefits under an ERISA plan."[23] But CHOMP explicitly disavows any claim based on the patient's right to benefits under its employer's ERISA plan. CHOMP instead bases its claim on state law payment standards for emergency and ...


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