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Foothill Church v. Rouillard

United States District Court, E.D. California

August 31, 2017

MICHELLE ROUILLARD, in her official capacity as Director of the California Department of Managed Health Care, Defendant.


         This action arises from letters the California Department of Managed Health Care (“DMHC”) issued to seven private health insurers, which required them to remove any limitations on or exclusions of abortion services from the health care coverage they offer. First Am. Compl. (“FAC”), Ex. 1, ECF No. 42-1. Plaintiffs Foothill Church, Calvary Chapel Chino Hills and Shepherd of the Hills Church (“plaintiffs” or the “Churches”), three churches who allegedly offer their employees DMHC-regulated health coverage through these insurers, filed this action against defendant Michelle Rouillard (“defendant” or “Director”), Director of the DMHC, alleging the letters violate the Churches' constitutional rights under the First and Fourteenth Amendments. This matter is before the court on defendant's motion to dismiss the FAC. ECF No. 47. Plaintiffs oppose the motion. ECF No. 54. The motion was submitted without argument and, as explained below, the court now GRANTS the motion.


         In California, the DMHC and the California Department of Insurance (“CDI”) oversee regulation of the health care industry. The DMHC regulates “health care service plans” under the Knox-Keene Health Care Service Plan Act of 1975 (“Knox-Keene Act” or “Act”), Cal. Health & Safety Code §§ 1340-1399.864, including by approving or disapproving language submitted in evidence of coverage (“EOC”) filings. The Knox-Keene Act defines “health care service plans” as “[a]ny person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees.” Id. § 1345(f)(1). Health maintenance organizations (“HMOs”) and other structured managed care organizations (“MCOs”) are “health care service plans” under this definition. Rea v. Blue Shield of Cal., 226 Cal.App.4th 1209, 1215 (2014).

         The Knox-Keene Act requires health care service plans secure a license from the Director of the DMHC. Cal. Health & Safety Code § 1349. One requirement for licensure is that “[a] health care service plan contract [must] provide to subscribers and enrollees all the basic health care services” specified in the statute. Id. § 1367(i). Relevant to this action, the Director has promulgated regulations defining the scope of this requirement to include “a variety of voluntary family planning services.” Cal. Code Regs. tit. 28, § 1300.67(f)(2). The letters assert that, in conjunction with “the California Reproductive Privacy Act and multiple California judicial decisions that have unambiguously established under the California Constitution that every pregnant woman has the fundamental right to choose to either bear a child or to have a legal abortion, ” the Knox-Keene Act requires health care service plans to cover elective abortions. FAC, Ex. 1.

         The Knox-Keene Act also provides for a number of categorical and individualized exemptions. For example, the Act offers religious employers exemptions from providing coverage for “FDA-approved contraceptive methods that are contrary to [their] religious tenets, ” Cal. Health & Safety Code § 1367.25(c), or coverage for “forms of treatment of infertility in a manner inconsistent with [their] religious and ethical principles, ” id. § 1374.55(e).


         On August 1, 2016, plaintiffs filed an amended complaint, ECF No. 42, which contains the following allegations that largely parallel the allegations of their original complaint. On August 22, 2014, the Director of the DMHC sent letters to seven private health insurers stating the DMHC had reviewed their contracts and the relevant legal authorities and “concluded that it erroneously approved or did not object to” language in some previous EOC filings that may discriminate against women by limiting or excluding coverage for terminations of pregnancies. FAC ¶¶ 1, 47 & Ex. 1. Some private insurers had previously submitted EOC filings to the DMHC notifying the defendant of benefit plan options that excluded coverage for voluntary and elective abortions, and defendant and the DMHC had not objected. FAC ¶¶ 54-55.

         Plaintiffs are three non-profit Christian churches located in Southern California. Id. ¶¶ 20-22. Each plaintiff has more than fifty full-time employees and must, therefore, provide health coverage for its employees under the federal Patient Protection and Affordable Care Act of 2010. Id. ¶¶ 77-78. The Churches offer health insurance plans to their employees through various insurers, each of which received a letter from the DMHC as described above. Id. ¶¶ 20- 22; FAC, Ex. 1. Plaintiffs all hold what they describe as “historic and orthodox” Christian teachings on the sanctity of human life. FAC ¶ 25. They “believe and teach that abortion destroys an innocent human life” and that “participation in, facilitation of, or payment for an elective abortion is a grave sin.” Id. ¶¶ 27-28. In furtherance of these beliefs and principles, plaintiffs consulted with their insurance brokers and/or insurers in an effort to provide employee group health plans that do not pay for abortions. Id. ¶¶ 36-37. However, plaintiffs' insurance brokers and/or insurers have informed them that the DMHC's letters prevent their group health insurance plans from excluding or limiting coverage for abortions. Id. ¶ 38.

         This action followed. The original complaint alleged that the DMHC's letters violate plaintiffs' rights under the Free Exercise, Establishment, Free Speech and Equal Protection clauses of the U.S. Constitution. See Compl. ¶¶ 104, 114, 119, 126, ECF No. 1. The court previously dismissed the Establishment and Free Speech claims with prejudice, but allowed the plaintiffs to file an amended complaint to cure defects in their Free Exercise and Equal Protection claims. Order 22. In support of their Free Exercise claim, plaintiffs allege “[t]he Knox-Keene Act, as interpreted and applied by Defendant, is neither neutral nor generally applicable.” FAC ¶ 117. Specifically, plaintiffs allege the Director has used her discretion to provide exemptions to some religious employers, but refuses to give an exemption to them. Id. ¶ 121. Thus, they allege, “Defendant has interpreted and selectively applied the Knox-Keene Act and its ‘basic health care services' requirement against the Churches to suppress specific religious beliefs about when it is morally permissible to provide health insurance coverage for elective abortions.” Id. ¶ 130. Plaintiff's Equal Protection claim is similarly based on alleged disparate treatment of different religious employers. See Id. ¶¶ 135-37.


         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) tests the court's subject matter jurisdiction. See, e.g., Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039-40 (9th Cir. 2003). When a party moves to dismiss for lack of subject matter jurisdiction, “the plaintiff bears the burden of demonstrating that the court has jurisdiction.” Boardman v. Shulman, No. 2:12-cv-00639-MCE-GGH, 2012 WL 6088309, at *2 (E.D. Cal. Dec. 6, 2012), aff'd sub nom. Boardman v. Comm'r, 597 F. App'x 413 (9th Cir. 2015). If a plaintiff lacks standing, the court lacks subject matter jurisdiction under Article III of the U.S. Constitution. Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004).

         Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). The motion may be granted only if the complaint “lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Hartmann v. Cal. Dep't of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013) (citation omitted).

         Although a complaint need contain only “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), in order to survive a motion to dismiss, this short and plain statement “must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must include more than “an unadorned, the-defendant-unlawfully-harmed-me accusation” or “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action.'” Id. (quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to dismiss for failure to state a claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679. Ultimately, the inquiry focuses on the interplay between the factual allegations of the complaint and the dispositive issues of law in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

         In making this context-specific evaluation, this court must construe the complaint in the light most favorable to the plaintiff and accept its factual allegations as true. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule, however, does not apply to “a legal conclusion couched as a factual allegation, ” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)), “allegations that contradict matters properly subject to judicial notice, ” Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001), or material attached to or incorporated by reference into the complaint, see Id. A court's consideration of documents attached to a complaint, documents incorporated by reference in the complaint, or matters of judicial notice will not convert a motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington, 51 F.3d 1480, ...

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