United States District Court, N.D. California, San Jose Division
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO
DISMISS WITH LEAVE TO AMEND RE: DKT. NO. 15
H. KOH United States District Judge.
Salinas Valley Memorial Healthcare System
(“Plaintiff”) sues Envirotech Molded Products,
Inc. (“Envirotech”) and Envirotech Molded
Products Inc. Employee Benefit Plan (the “Plan”)
(collectively, “Defendants”) for causes of action
arising from Defendants' alleged failure to properly pay
Plaintiff for medical care that Plaintiff provided to a
beneficiary of a health plan administered by Defendants.
See ECF No. 1 (“Compl.”) ¶ 1.
Before the Court is Defendants' motion to dismiss. ECF
No. 15 (“Def. Mot.”). Having considered the
submissions of the parties, the relevant law, and the record
in this case, the Court hereby DENIES Defendant's motion
is a “public hospital district and health system”
located in Monterey County, California. Compl. ¶ 6.
Defendant Envirotech is a Utah corporation with its primary
place of business in Salt Lake City, Utah. Id.
¶ 7. Plaintiff alleges that Defendant Envirotech
“is the designated Plan Administrator, ”
“Named Fiduciary, ” and sponsor of Defendant
Plan, which is a self-insured ERISA health benefits plan.
Id. ¶¶ 7-8. Plaintiff also asserts that
Defendant Plan “has no in-network hospitals.”
Id. ¶ 33. Thus, Plaintiff alleges that
“as far as emergency services and hospital care is
concerned, Defendants intentionally set up a Plan structure
where there is no network at all.” Id.
2016, Plaintiff admitted a very ill woman
(“Patient”) on two separate occasions for
“intensive inpatient care.” Id.
¶ 1. At that time, the Patient was a beneficiary of
Defendant Plan. Id. ¶ 8. In mid-January 2016,
“when the Patient was still at [Plaintiff's]
Hospital, ” Plaintiff called Defendants to verify the
Patient's benefits under the Plan. Id. ¶
37. Plaintiff alleges that “an individual speaking on
behalf of the Plan” named “Jennifer”
confirmed that (1) the Plan “had a $1, 000 deductible
for calendar year 2016”; (2) the Plan covered, among
other benefits, “semiprivate inpatient care (e.g., a
hospital room)” for the Patient effective January 1,
2016; (3) “such care would initially be covered at 70%
up to $10, 000, and then would be paid at 100%
thereafter”; and (4) “the Plan had a Maximum
Out-of-Pocket limit of $3, 000 in calendar year 2016, which
had not yet been met.” Id. Then, in mid-March
2016, Plaintiff called Defendants again to verify the
Patient's benefits under the Plan. This time, Plaintiff
spoke with someone named “Heidi, ” who confirmed
that the Plan had a $1, 000 deductible for 2016, verified
that Patient's coverage was effective January 1, 2016,
and “represented that the Plan would actually pay 80%
for inpatient care up to $20, 000, and after that point,
would pay 100% for such care.” Id.
38. Plaintiff alleges that the “customary
meaning” of Defendants' representations about
paying for certain percentages, such as 70%, 80%, and 100%,
is that Defendants would pay those percentages of the
Plaintiff's charges for the services that Plaintiff
provided to the Patient. Id. ¶ 40. Plaintiff
also alleges that Heidi disclosed only one limitation on
“inpatient care benefits”: “that the Plan
would pay for up to 60 days of inpatient care in any given
calendar year.” Id.
on these representations, Plaintiff provided intensive
inpatient care to the Patient. Plaintiff's bill for
Defendants' portion of the charges for the Patient's
care totaled $200, 444.85. Id. ¶ 1. However,
Defendants paid only $63, 581.36, or less than a third of the
bill. Id. Plaintiff states that Defendants arrived
at this figure by relying on “the unsupported
assumption that they never have to pay more than [120% of]
the rate that the federal government pays under the Medicare
program.” Id. ¶ 23. Thus, instead of
paying percentages of Plaintiff's charges for the
services that Plaintiff provided, Defendants paid only
percentages of 120% of the Medicare rates for those services.
See id.¶ 28. For example, instead of paying
100% of Plaintiff's charges for services rendered after
the Maximum Out-of-Pocket (“MOOP”) threshold was
met, Defendants paid 100% of 120% of the Medicare rates for
those services. Id. Plaintiff alleges that 120% of
Medicare rates is “just a fraction of the standard
charges by [Plaintiff] and all other hospitals in this
geographic area (as well as many others).” Id.
¶ 23. Further, because Plaintiff's charges for the
services it provided to the Patient were “well above
120% of Medicare, ” Defendants' refusal to pay any
more than 100 % of 120% of Medicare rates for those services
left “the Patient on the hook for the vast bulk of
hospital bills.” Id. ¶ 28.
alleges that the Summary Plan Description (“SPD”)
for Defendant Plan did not disclose the fact that Defendants
would pay only 120% of the Medicare rates (at most) for
covered services in “sufficiently close
proximity” to the Plan's description or summary of
benefits. Id. ¶ 31. Plaintiff also alleges that
at no time during Plaintiff's two authorization and
verification phone calls with Defendants' representatives
did those representatives “identify any limitations or
exclusions” or disclose that Defendants “would
not pay more than 120% of Medicare.” Id.
¶ 41. Plaintiff “pursued all available levels of
internal appeal[s] under the Plan with respect to the
Patient's medical care, ” but “the Plan has
refused to pay a cent more” than the $63, 581.36 it
already paid. Id. ¶¶ 2, 52.
10, 2017, Plaintiff sued Defendants in this Court.
See Compl. Plaintiff's complaint alleged four
causes of action against Defendants: (1) violation of the
Employee Retirement Income Security Act (“ERISA”)
of 1974, 29 U.S.C. § 1132(a)(1)(B); (2) violation of 42
U.S.C. § 300gg-6(b); (3) intentional misrepresentation;
and (4) negligent misrepresentation.
August 2, 2017, Defendants filed a motion to dismiss all but
Plaintiff's first cause of action. See ECF No.
15 (“Def. Mot.”). On August 28, 2017, Plaintiff
opposed Defendants' motion to dismiss. See ECF
No. 18 (“Pl. Opp.”). On September 8, 2017,
Defendants filed a Reply. ECF No. 20.
Motion to Dismiss Under Rule 12(b)(6)
8(a)(2) of the Federal Rules of Civil Procedure requires a
complaint to include “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” A complaint that fails to meet this standard
may be dismissed pursuant to Federal Rule of Civil Procedure
12(b)(6). The United States Supreme Court has held that Rule
8(a) requires a plaintiff to plead “enough facts to
state a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). “The plausibility
standard is not akin to a probability requirement, but it
asks for more than a sheer possibility that a defendant has
acted unlawfully.” Id. (internal quotation
marks omitted). For purposes of ruling on a Rule 12(b)(6)
motion, the Court “accept[s] factual allegations in the
complaint as true and construe[s] the pleadings in the light
most favorable to the nonmoving party.” Manzarek v.
St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031
(9th Cir. 2008).
Court, however, need not accept as true allegations
contradicted by judicially noticeable facts, see Schwarz
v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and
it “may look beyond the plaintiff's complaint to
matters of public record” without converting the Rule
12(b)(6) motion into a motion for summary judgment, Shaw
v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor
must the Court “assume the truth of legal conclusions
merely because they are cast in the form of factual
allegations.” Fayer v. Vaughn, 649 F.3d 1061,
1064 (9th Cir. 2011) (per curiam) (internal quotation marks
omitted). Mere “conclusory allegations of law and
unwarranted inferences are insufficient to defeat a motion to
dismiss.” Adams v. Johnson, 355 F.3d 1179,
1183 (9th Cir. 2004).
Leave to Amend
Court determines that a complaint should be dismissed, it
must then decide whether to grant leave to amend. Under Rule
15(a) of the Federal Rules of Civil Procedure, leave to amend
“shall be freely given when justice so requires,
” bearing in mind “the underlying purpose of Rule
15 to facilitate decisions on the merits, rather than on the
pleadings or technicalities.” Lopez v. Smith,
203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations
and internal quotation marks omitted). When dismissing a
complaint for failure to state a claim, “a district
court should grant leave to amend even if no request to amend
the pleading was made, unless it determines that the pleading
could not possibly be cured by the allegation of other
facts.” Id. at 1130 (internal quotation marks
omitted). Accordingly, leave to amend generally shall be
denied only if allowing amendment would unduly prejudice the
opposing party, cause undue delay, or be futile, or if the
moving party has acted in bad faith. Leadsinger, Inc. v.
BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).