United States District Court, C.D. California
Healthcare Ally Mgmt. of California, LLC
Veolia ES Industrial Services, Inc.
PROCEEDINGS: IN CHAMBERS - ORDER
ANDERSON, UNITED STATES DISTRICT JUDGE
the Court is a Response to the Court’s May 25, 2016
Order to Show Cause (“OSC”) filed by defendant
Veolia ES Industrial Services, Inc.
(“Defendant”). (Docket No. 17.) Plaintiff
Healthcare Ally Management of California, LLC
(“Plaintiff”) has filed a Reply. (Docket No. 21.)
The OSC required Defendant to show cause why this action
should not be remanded to Los Angeles County Superior Court
for lack of federal subject matter jurisdiction.
Defendant’s Response asserts that federal jurisdiction
exists over Plaintiff’s claims on the basis of both
diversity jurisdiction, 28 U.S.C. § 1332, and federal
question jurisdiction based on ERISA preemption, 28 U.S.C.
courts are courts of limited jurisdiction, having subject
matter jurisdiction only over matters authorized by the
Constitution and Congress. See, e.g., Kokkonen v.
Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct.
1673, 1675, 128 L.Ed.2d 391 (1994). A suit filed in state
court may be removed to federal court if the federal court
would have had original jurisdiction over the suit. 28 U.S.C.
§ 1441(a). A removed action must be remanded to state
court if the federal court lacks subject matter jurisdiction.
28 U.S.C § 1447(c). “The burden of establishing
federal jurisdiction is on the party seeking removal, and the
removal statute is strictly construed against removal
jurisdiction.” Prize Frize, Inc. v. Matrix (U.S.)
Inc., 167 F.3d 1261, 1265 (9th Cir. 1999).
“Federal jurisdiction must be rejected if there is any
doubt as to the right of removal in the first
instance.” Gaus v. Miles, Inc., 980 F.2d 564,
566 (9th Cir. 1992).
Notice of Removal alleges that “Plaintiff’s
Complaint is essentially an action to recover benefits due
under the terms of an employee welfare benefit plan governed
exclusively by [ERISA]” and therefore “ERISA
‘completely preempts’ any state law claim or
remedy.” (Notice of Removal, ¶¶ 11, 15.)
Under 28 U.S.C. § 1331, this Court has original
jurisdiction over civil actions “arising under”
federal law. Removal based on § 1331 is governed by the
“well-pleaded complaint” rule. Caterpillar,
Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425,
2429, 96 L.Ed.2d 318 (1987). Under the rule, “federal
jurisdiction exists only when a federal question is presented
on the face of plaintiff’s properly pleaded
complaint.” Id. Generally, there is no federal
question jurisdiction simply because there is a federal
defense to the claim. Id. However, there is an
exception to this general rule, known as the complete
preemption doctrine. Toumajian v. Frailey, 135 F.3d
648, 653 (9th Cir. 1998). Under this exception, “even
if the only claim in a complaint is a state law claim, if
that claim is one that is ‘completely preempted’
by federal law, federal subject matter jurisdiction exists
and removal is appropriate.” Id.
Ninth Circuit has held that a medical provider’s claims
are not completely preempted by ERISA where the provider is
seeking payment based upon a separate agreement between it
and the insurer. Marin General Hospital v. Modesto &
Empire Traction Company, 581 F.3d 941, 951 (9th Cir.
2009). In Marin, the plaintiff hospital sued a
patient’s employer, the employer’s CEO, and a
benefits administrator in state court for breach of contract,
negligent misrepresentation, quantum meruit, and estoppel.
Id. at 943. The hospital’s claims were based
on allegations that the benefits administrator had orally
verified the patient’s coverage, authorized treatment
for the patient, and agreed to cover 90% of the medical
expenses incurred. Id. However, after the benefits
administrator was billed by the hospital, it refused to pay
the 90% that it had previously promised. Id. at
943-44. The defendants removed the action based on ERISA
preemption, and the district court denied the
hospital’s motion to remand. Id. at 944. On
appeal, the Ninth Circuit concluded that the action should
have been remanded. Id. at 951. Under the two-prong
test articulated by the Supreme Court in Aetna Health
Inc. v. Davila, 542 U.S. 200, 210, 124 S.Ct. 2488, 159
L.Ed.2d 312 (2004), 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; and (2) there is no other
independent legal duty that is implicated by the
defendant’s actions. Applying Davila, the
Ninth Circuit found that the hospital’s claims were not
completely preempted by ERISA because they were based upon an
alleged oral contract with the defendants, which gave rise to
an independent legal duty to pay the disputed medical
expenses, and prevented the claims from being brought under
ERISA. Id. at 949-50.
concluding that complete ERISA preemption did not apply, the
Ninth Circuit’s opinion in Marin distinguished
between ERISA § 502(a) complete preemption and conflict
preemption under ERISA § 514(a), which preempts
provisions of state law that “relate to” ERISA.
Id. at 945. While complete preemption under §
502(a) creates federal subject matter jurisdiction, conflict
preemption under § 514(a) is a defense that “does
not confer federal question jurisdiction on a federal
district court.” Id. As the Ninth Circuit has
explained complete preemption, “[i]f a complaint
alleges only state-law claims, and if these claims are
entirely encompassed by § 502(a), that complaint is
converted from ‘an ordinary state common law complaint
into one stating a federal claim for purposes of the
well-pleaded complaint rule.’” Id.
(quoting Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58, 65-66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)).
to Defendant’s description of the Complaint as bringing
claims based on the terms of an ERISA plan, Plaintiff’s
Complaint, which alleges claims for quantum meruit, breach of
oral contract, and promissory estoppel, disclaims any
reliance on the ERISA plan’s terms. According to the
Complaint, Plaintiff “does not in any way, seek to
enforce the contractual rights of the Medical
Provider’s Patient, through the Patient’s
insurance contract, policies, certificates of coverage or
other written insurance agreements.” (Notice of
Removal, Ex. A, ¶ 7.) Instead, the Complaint’s
claims “are based upon the individual and proper rights
of [Plaintiff] in its own individual capacity and are not
derivative of the contractual or other rights of the Medical
Provider’s Patient.” (Id.) According to
Plaintiff, all “of the claims asserted in this
complaint arise out of the Medical Provider’s
interactions with Defendant . . . and are derived from the
representations and warranties made during those
conversations amongst those parties.”
(Id.) In support of these allegations, the Complaint
alleges details of a conversation between Defendant and
Plaintiff’s medical provider-assignor concerning the
terms of payment. ( Id. ¶¶ 1, 21-26.)
on the Complaint’s allegations, this case falls
squarely under Marin. In an attempt to avoid this conclusion,
Defendant urges the Court to rely on Montefiore Medical
Center. v. Teamsters Local 272, 642 F.3d 321 (2d Cir.
2011), a Second Circuit case applying Davila. However, the
Second Circuit’s interpretation of Davila is
“directly at odds” with the Ninth Circuit, and is
therefore unpersuasive authority for finding federal subject
matter jurisdiction based on ERISA preemption. See
John Muir Health v. Cement Masons Health & Welfare
Trust Fund for N. California, 69 F.Supp.3d 1010, 1019
(N.D. Cal. 2014) (“Because Montefiore’s holding
is directly at odds with the Ninth Circuit’s reasoning
in Marin General Hospital, the Court declines to follow the
Second Circuit’s determination that a providers
correspondence with a health plan, which is relied upon for
the provision of services, holds no legal
significance.”).1/ Numerous district courts to consider
factual allegations similar to those in the Complaint have
concluded that ERISA preemption is inapplicable.
See, e.g., id.; Healthcare Ally Mgmt.
of California, LLC v. U.S. Airways, Inc., No. CV 16-1411
PA (JCx), 2016 WL 1069944 (C.D. Cal. Mar. 17, 2016); Los
Angeles Sleep Studies Inst. v. Anthem Blue Cross Life
& Health Ins. Co., No. CV 14-3545 JAK (ASx), 2014 WL
5421044 (C.D. Cal. Oct. 23, 2014); Lodi Mem’l Hosp.
Ass’n, Inc. v. Am. Pac. Corp., No. CV 14-1865
JAM DAD, 2014 WL 5473540 (E.D. Cal. Oct. 20, 2014).
the Court concludes that Plaintiff’s claims are not
completely preempted by ERISA, and therefore this Court lacks
federal subject matter jurisdiction under 28 U.S.C. §
attempting to invoke this Court’s diversity
jurisdiction, Defendant must prove that there is complete
diversity of citizenship between the parties and that the
amount in controversy exceeds $75, 000. 28 U.S.C. §
1332. Although a plaintiff may not use a post-removal
stipulation to reduce its demand for damages as a means to
defeat diversity jurisdiction, St. Paul Mercury Indem.
Co. v. Red Cab Co., 303 U.S. 283, 293, 58 S.Ct. 586,
592, 82 L.Ed. 845 (1938), a plaintiff may clarify that
federal jurisdiction did not exist at the time of removal.
See 14AA Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 3702.1, n. 15.50 (4th
ed.); see also Gillette v. Peerless Ins.
Co., No. CV 13-3161 DDP (RZx), 2013 WL 3983872, at *3-4
(C.D. Cal. July 31, 2013). In support of Defendant’s
contention that the Court possesses diversity jurisdiction
over this matter, the Notice of Removal alleges that
Plaintiff billed $82, 300 worth of services, but only
received $3, 008.54 in payments, leaving $79, 291.46 as the
amount in controversy. (Notice of Removal, ¶ 28.)
However, Plaintiff has clarified that its Complaint seeks
less than $75, 000 in damages. (Declaration of Jonathan A.
Steiglitz in Support of Plaintiff’s Request for a
Continuance, ¶¶ 5-6.) And, in its Reply, Plaintiff
reaffirms that the amount in controversy in this action is,
and always has been, less than $75, 000. (Reply, 7, n. 4.)
Response asserts that Plaintiff has made a post-removal
stipulation that limits, rather than clarifies, the recovery
sought in Plaintiff’s Complaint to below the
jurisdictional minimum. (Response, 10-11). However, the cases
relied on by Defendant concern situations where the removed
complaint included a demand for damages in excess of $75,
000, or the plaintiff filed a post-removal stipulation
limiting damages. See, e.g., Hill v. Hill
Love, 509 F. App’x 605 (9th Cir. 2013) (affirming
denial of motion to remand where the complaint sought damages
in excess of $100, 000); Burke Family Living Trust v.
Metro. Life Ins. Co., No. C09-5388 FDB, 2009 WL 2947196,
at *3 (W.D. Wash. Sept. 11, 2009) (same); Hargis v.
Access Capital Funding, LLC,674 F.3d 783, 789 (8th Cir.
2012) (post removal stipulation to reduce nationwide class
was insufficient to limit damages). Additionally, Defendant
asserts that the Complaint’s request for declaratory
relief represents an additional cost which must be considered
in determining the amount in controversy. See In re
Ford Motor Co., 264 F.3d 952, 958 (9th Cir. 2001). However,