United States District Court, N.D. California
ORDER GRANTING DEFENDANTS' MOTION FOR JUDGMENT ON
THE PLEADINGS WITHOUT PREJUDICE Re: Dkt. No. 20, 22
PHYLLIS J. HAMILTON United States District Judge
JP Morgan Chase (“defendant JPM”) and United
Healthcare Insurance Co.'s (“defendant United
Healthcare”) (collectively, “defendants”)
motion for judgment on the pleadings came on for hearing
before this court on December 18, 2019. Plaintiff California
Spine and Neurosurgery Institute (“plaintiff”)
appeared through its counsel, Anthony Maul. Defendant
appeared through their counsel, Jessica Hardy. Having read
the papers filed by the parties and carefully considered
their arguments and the relevant legal authority, and good
cause appearing, the court hereby GRANTS WITHOUT
PREJUDICE defendants' motion for the following
March 22, 2019, plaintiff filed this action against
defendants in Alameda County Superior Court. Dkt. 1-1
(Compl.). In its complaint, plaintiff alleges state law
claims for quantum meruit and promissory estoppel in
connection with plaintiff's provision of surgical
services to an unidentified insured patient,
19, 2019, defendants removed the action to this court. Dkt.
1. On November 13, 2019, defendants filed this motion for
judgment on the pleadings. Id. 20. At core,
defendants argue that plaintiff's state law claims are
expressly preempted by Title 29 U.S.C. § 1144(a). As
further explained below, the court's resolution of this
motion turns on whether plaintiff's state law claims
“relate to” the provisions of the Employee
Retirement Income Security Act of 1974 (“ERISA”),
as that phrase is understood under Title 29 U.S.C. §
1144(a). For that reason, the court details the allegations
of this otherwise straightforward dispute below.
The Operative Allegations
provides complex surgeries to patients in Mountain View.
Compl. ¶ 1. Defendant JPM (the investment bank) sponsors
an “employee health insurance plan” that is
administered on defendant JPM's behalf by defendant
United Health under an administrative services agreement.
Id. ¶ 4. Defendant United Health operates as a
managed care company and “insurers [sic] and
administers” health insurance policies. Id.
¶ 5. With respect to defendant United Health, plaintiff
is an “out of network” provider, which means that
plaintiff “has not contracted with [defendant United
Health] to participate in its provider network, or to provide
services to its insureds at particular reimbursement
rates.” Id. ¶ 8. BM is a middle-aged man
who received the subject surgical services on his lower back
pursuant to defendant JPM's plan. Id.
¶¶ 6, 7.
claims “arise from” defendants'
“drastic underpayment for highly complex and skilled
surgical services” that plaintiff provided to BM.
Id. ¶ 6. On or around August 23, 2018,
plaintiff's staff called defendant United Health
“to verify the details of BM's insurance coverage
and benefits.” Id. ¶ 9. According to
plaintiff, “[a] representative of [defendant United
Health] informed plaintiff's staff that [defendant United
Health's] payment for covered care rendered to BM by
out-of-network providers would be based on ‘usual and
customary rates.'” Id. Plaintiff's
staff recorded this information “on an insurance
verification form.” Id.
alleges that the phrase “usual and customary” is
“a term of art in the healthcare and insurance
industry” and “refers to the ordinary market
rates charged in a geographic area for similar medical
services provided under similar circumstances by providers
with similar training and expertise.” Id.
¶ 10. Plaintiff further alleges that the California
Department of Managed Health Care has adopted regulations
codifying the definition of “reasonable and
customary” to have a specific meaning and that
defendants are aware of the meaning of “usual and
customary” as defined by the California regulations.
Id. Plaintiff subsequently alleges that defendant
United Health “promised” to pay plaintiff the
“usual and customary rates.” Id. ¶
14. Plaintiff relies upon the parties' August 23, 2018
phone call as the basis for such alleged promise.
Id. ¶ 17.
performing the subject surgery on BM, plaintiff “sought
prior approval of coverage from defendant United
Health.” Id. ¶ 11. On or about August 27,
2018, defendant United Health sent plaintiff a letter
approving plaintiff's performance of back surgery on BM.
Id. Such approval cited certain service codes as
eligible for coverage. Id. Defendants did not
reverse their prior approval of coverage. Id. ¶
September 6, 2018, plaintiff performed surgery on BM.
Id. ¶ 12. Plaintiff then billed defendants for
its services using the cited service codes and applying
plaintiff's standard rates for such services.
Id. In total, plaintiff charged defendants $77, 000.
Id. Plaintiff alleges that the rates ultimately
charged to defendants “reflected the reasonable and
customary value of the services at issue” and that
plaintiff's standard rates “are based on payments
plaintiff has historically received from other payers, as
well as plaintiff's understanding of the prevailing
rates” in Silicon Valley for such services as provided
by comparable doctors. Id. ¶ 13.
United Health paid plaintiff only $2, 300 for the surgery
provided by plaintiff to BM. Id. ¶ 14.
Defendant United Health contended that the “allowed
amount” for all services provided by plaintiff was
“only $6, 600, $4, 300 of which was chargeable to
[BM's] deductible, copayment or coinsurance.”
Id. ¶ 14. Plaintiff alleges that such allowed
amounts “are far below even the average rates for such
services in plaintiff's geographic area, ” much
less the rates of a doctor with the qualifications of the
surgeon here. Id. ¶ 15. Plaintiff further
alleges that it “would not have performed the services
upon BM, let alone sought pre-approval of coverage from
[defendant United Health], had it known defendants would pay
an amount so far below usual and customary rates.”
in its complaint, plaintiff makes no reference to an
assignment of any rights, including those under an ERISA
plan, by BM to plaintiff.
Allegations in Support of ...