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Health Net Life Insurance Co. v. Morningside Recovery, LLC

United States District Court, C.D. California

November 13, 2019

HEALTH NET LIFE INSURANCE CO.
v.
MORNINGSIDE RECOVERY, LLC ET AL.

          PRESENT: THE HONORABLE DAVID O. CARTER, JUDGE

          ORDER

         PROCEEDINGS (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO REMAND AND FOR ATTORNEYS' FEES AND COSTS [20], AND DENYING AS MOOT DEFENDANTS' MOTION TO DISMISS [19]

         Before the Court is Plaintiff Health Net Life Insurance Company's (“Plaintiff”) Motion to Remand and for Attorneys' Fees and Costs (“Motion”) (Dkt. 20). The Court finds this matter appropriate for resolution without oral argument. See Fed. R. Civ. P. 78; L.R. 7-15. Having reviewed the moving papers submitted by the parties, the Court GRANTS Plaintiff's Motion to Remand and DENIES Plaintiff's request for attorneys' fees and costs. Accordingly, the Court also DENIES AS MOOT Defendants' Motion to Dismiss (Dkt. 19).

         I. Background

         A. Facts

         The following facts are drawn from Plaintiff's Complaint (Dkt. 1-2). Between 2013 and 2015, Plaintiff's insurance payments to out-of-network substance abuse treatment providers jumped from $251, 000 to $190, 000, 000. Compl. ¶ 4. This is a result, Plaintiff contends, of widespread insurance fraud conducted by said providers, facilitated by the lesser regulation to which substance abuse treatment facilities are subject. Id. ¶¶ 1, 3. The fraudulent scheme works as follows: First, third-party “body-brokers” identify potential patients-who are frequently homeless, unemployed, or experiencing financial hardship-and refer them, for a kickback, to substance abuse treatment facilities. Id. ¶ 6. Second, because these “purchased patients” tend to be uninsured and ineligible to apply for coverage in the commercial market, their treatment providers procure insurance coverage for them using false information. Id. Third, treatment providers encourage their newly-insured patients to receive services by paying their premiums, waiving cost-sharing obligations, providing free housing and transportation, and giving the patients gift cards. Id. These inducements effectively reduce the patients' costs to zero. Id.

         Then, fourth, treatment providers overbill their patients' insurers for the services allegedly rendered, which, if rendered at all, may not have been medically necessary. Id. ¶ 7. This is exacerbated by the fact that out-of-network services are more costly than in-network options. See Id. ¶ 22-23. Finally, when treatment providers can no longer bill a patient's insurer, they discharge the patient and stop paying the patient's premiums. Id. ¶ 7.

         B. Procedural History

         Plaintiff originally filed suit in the Superior Court of California, County of Orange, on June 17, 2019 (Dkt. 1-2). Plaintiff brings the following causes of action:

(1) common law fraud;
(2) intentional interference with contractual relations;
(3) violation of the Unfair Competition Law, California Business and Professional Code sections 17200 et seq.; and
(4) declaratory relief.

See generally Compl. Defendants removed the action to this Court on July 8, 2019 (“Notice of Removal”) (Dkt. 1). Defendants filed a Motion to Dismiss (Dkt. 19) on July 20, 2019, and Plaintiff filed the instant Motion to Remand on July 22, 2019. Defendants filed their Opposition to the Motion (Dkt. 30) on ...


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