Healthcare Ally Management of California, LLC v. DirecTV, LLC

Filing 24

MINUTES (IN CHAMBERS) by Judge S. James Otero: ORDER GRANTING PLAINTIFF'S MOTION TO REMAND 14 . This case is REMANDED to the Superior Court for Los Angeles County. The Court DENIES AS MOOT Defendant DIRECTV, LLC's Notice of Motion and Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) 16 . Case Remanded to Los Angeles Superior Court, Santa Monica, No. SC12775. MD JS-6. Case Terminated (lc)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

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CIVIL MINUTES - GENERAL

CASE NO.: CV 17-05981 SJO (MRWx)

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DATE: September 14, 2017

TITLE:

Healthcare Ally Management of California, LLC v. DIRECTV, LLC and
Does 1-10
========================================================================
PRESENT: THE HONORABLE S. JAMES OTERO, UNITED STATES DISTRICT JUDGE
Victor Paul Cruz
Courtroom Clerk

Not Present
Court Reporter

COUNSEL PRESENT FOR PLAINTIFF:

COUNSEL PRESENT FOR DEFENDANTS:

Not Present

Not Present

========================================================================
PROCEEDINGS (in chambers): ORDER GRANTING PLAINTIFF'S MOTION TO REMAND
[Docket No. 14]
This matter comes before the Court on Plaintiff Healthcare Ally Management of California, LLC's
("HAMOC " or "Plaintiff") Motion to Remand Case to the Los Angeles Superior Court ("Motion"),
filed on August 29, 2017. Defendant DIRECTV, LLC ("DIRECTV" or "Defendant") filed an
opposition to the Motion ("Opposition") on September 5, 2017, to which the Plaintiff replied
("Reply") on September 11, 2017. The Court found this matter suitable for disposition without oral
argument and vacated the hearing set for September 25, 2017. See Fed. R. Civ. P. 78(b). For
the reasons stated herein, the Court GRANTS Plaintiff's Motion.
I.

FACTUAL AND PROCEDURAL BACKGROUND
a.

Procedural Background

On June 28, 2017, Plaintiff filed the instant lawsuit in the Superior Court for Los Angeles County
against Defendants (the "State Action"). (Defs.' Notice of Removal ("Notice"), ECF No. 1, Ex. 1
("State Action Compl."). ) Plaintiff alleged the following causes of action: (1) quantum merit (State
Action Compl. ¶¶ 65-77); (2) breach of oral contract (State Action Compl. ¶¶ 78-83); and (3)
promissory estoppel. (State Action Compl. ¶¶ 84-90.) On August 11, 2017, Defendant removed
the State Action to this Court pursuant to 28 U.S.C. § 1331, 1441, and 1446, asserting complete
preemption of Plaintiff's claims under the Employee Retirement Income Security Act of 1974
("ERISA"). (Notice 1.) In the instant Motion, Plaintiff seeks to remand the action to the Los
Angeles Superior Court for lack of subject matter jurisdiction because the causes of action are not
preempted by ERISA. (See Mot. 1, ECF No. 14.)
b.

Factual Background

Plaintiff alleged the following. Plaintiff is the assignee of La Peer Surgery Center ("Medical
Provider"). (Notice, Ex. 1.) Defendant is an insurance company and Does 1-10 are unknown
individuals who are "legally responsible in some manner for the events and happenings referred
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

CASE NO.: CV 17-05981 SJO (MRWx)

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DATE: September 14, 2017

to herein and legally caused injury and damages proximately thereby to [Plaintiff]." (State Action
Compl. ¶ 3-4.) Patients ("Patients") are "insureds, members, policyholders, certificate-holders
or were otherwise covered for health, hospitalization and major medical insurance through policies
or certificates of insurance issued and underwritten by Defendant and Does 1 through 10,
inclusive." (State Action Compl. ¶ 7.) The action stems from the alleged "failure to make proper
payment and/or the underpayment to Medical Provider by Defendant and Does 1 through 10,
inclusive, of amounts due and owing now to [Plaintiff] for use of facilities at which surgical care,
treatment and procedures were provided to Patients." (State Action Compl. ¶ 7.) "Medical
Provider and the doctors who performed surgeries or procedures upon the Patients were 'out-ofnetwork providers' or 'non-participating providers' who had no preferred provider contracts or other
such standing, written contracts with Defendant setting their rates of pay for services rendered,
prior to the date that the surgeries or procedures were performed upon the Patients." (State
Action Compl. ¶ 10.)
Plaintiff alleges that three unnamed Patients received surgical procedures using Medical
Provider's facilities. (State Action Compl. ¶¶ 19, 35, 50.) Prior to each surgical procedure, an
employee of Medical Provider "obtained promises and information from Defendant's
representative... to be assured that Defendant would pay for the facilities to be provided to [the
respective Patient] and under what terms that payment would be made." (State Action Compl.
¶¶ 20, 36, 51.) "Medical Provider relied and provided services solely based on Defendant's
statements...which had no relation to Defendant and [Patients'] policy document[s]." (State Action
Compl. ¶¶ 29, 44, 59.) Following each surgery, Defendant paid Medical Provider "unreasonably
low payment[s]" for the procedures and refused to pay the full amount that was agreed to. (State
Action Compl. ¶¶ 30-34, 45-49, 60-64.)
II.

DISCUSSION
A.

Motion to Remand

"Complete preemption removal is an exception to the otherwise applicable rule that a 'plaintiff is
ordinarily entitled to remain in state court so long as its complaint does not, on its face,
affirmatively allege a federal claim.'" Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581
F.3d 941, 945 (9th Cir. 2009) (quoting Pascack Valley Hosp. v. Local 464A UFCW Welfare
Reimbursement Plan, 388 F.3d 393, 398 (3d Cir. 2004)). "A party seeking removal based on
federal question jurisdiction must show . . . that the state-law causes of action are completely
preempted by § 502(a)[, 29 U.S.C. § 1132(a),] of ERISA." Id. "[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 § 502(a)(1)(B),' and (2) 'where there is no other independent legal duty that is
implicated by a defendant's actions.'" Id. at 946 (quoting Aetna Health Inc. v. Davila, 542 U.S.
200, 210 (2004)) (internal alterations omitted). "The two-prong test of Davila is in the conjunctive.
A state-law cause of action is preempted by § 502(a)(1)(B) only if both prongs of the test are
satisfied." Id. at 947.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

CASE NO.: CV 17-05981 SJO (MRWx)

1.

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First Prong

To be completely preempted, the first prong under Davila requires that the plaintiff was able to
bring the claim under ERISA § 502(a)(1)(B) at some point in time. Davila, 542 U.S. at 210.
Section 502(a)(1)(B) permits a plan participant or beneficiary to bring a civil action "to recover
benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan,
or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B).
ERISA applies to any "employee benefit plan" if it is established or maintained "by any employer
engaged in commerce or in any industry or activity affecting commerce." 29 U.S.C. § 1003(a)(1).
Defendant argues that the first element of the Davila test is satisfied because Medical Provider
possess an assignment from Patients and has standing to assert Patients' ERISA claim. (Notice
¶ 17.) However, Plaintiff's claims are brought "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 Patients." (State Action Compl. ¶ 6.) Furthermore, this argument directly
contradicts the Ninth Circuit's previous conclusion on the subject. Marin, 581 F.3d at 949 (quoting
Blue Cross, 187 F.3d at 1052) (holding that, "even though the Providers had received an
assignment of the patient's medical rights and hence could have brought a suit under ERISA,
there was no basis to conclude that the mere fact of assignment converts the Providers' claims
[in this case] into claims to recover benefits under the terms of an ERISA plan.") (citation and
internal quotation marks omitted).
Defendant further contends that this prong was met because Plaintiff is seeking to recover
amounts that it was promised under the terms of the Plan. (Opp'n 7-10.) Contrary 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. (See generally State Action Compl.)
Plaintiff's claims arise out of alleged violations of an oral agreement made between the Medical
Provider's employee and Defendant's representative prior to the procedures. (State Action Compl.
¶ 20, 36, 51.) Plaintiff's complaint alleges that "Medical Provider relied and provided services
solely based on Defendant's statements. Statements which had no relation to Defendant and [the
Patients'] policy document[s], as the statements may or may not have been based in Defendant
or [the Patients'] policy documents, but that bore no consideration when Medical Provider agreed
to provide facilities for the performance of the procedure. Medical Provider took Defendant at its
word and provided the facility for the procedures based solely on that information." (State Action
Compl. ¶ 29.) Under these agreements, until the Patients' Max Out of Pocket ("MOOP") expenses
were met, Defendant agreed to pay fifty percent of the customary and reasonable rate. After the
MOOP expenses were met, Defendant agreed to pay one hundred percent of the customary and
reasonable rate of the medical services. (State Action Compl. ¶ 22, 38, 53) Like Marina,
Defendant's obligation to pay "stems from the alleged oral contract between" Medical and Provider
and Defendant, not from the ERISA plan. Marin, 581 F.3d at 949. Plaintiff's state-law claims
MINUTES FORM 11
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

CASE NO.: CV 17-05981 SJO (MRWx)

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DATE: September 14, 2017

based on its oral contract with Defendant "were not brought, and could not have been brought,
under § 502(a)(1)(B)." Id.
The first prong of Davila is not satisfied.
2.

Second Prong

"If there is some other independent legal duty beyond that imposed by an ERISA plan, a claim
based on that duty is not completely preempted under § 502(a)(1)(B)." Marin, 581 F.3d at 949.
"The question under the second prong of Davila is whether the complaint relies on a legal duty that
arises independently of ERISA." Id. at 950. State-law claims are based on "other independent
legal dut[ies]" where the claims "are in no way based on an obligation under an ERISA plan" and
the claims "would exist whether or not an ERISA plan existed." Id. For example, in Marin, the
claims were based on an separate oral contract created by a telephone call, and not an ERISA
plan. See 581 F.3d at 949-50. Thus, the court concluded that an independent legal duty existed
between the plaintiff and the defendant. Id. at 950. Plaintiffs use Marin to support their argument
that an independent duty exists here under state law. (Motion 5-6.) Defendant argues that this
prong "requires a practical, rather than a formalistic, analysis because '[c]laimants simply cannot
obtain relief by dressing up an ERISA benefits claim in the garb of a state law tort.'" Fossen v. Blue
Cross & Blue Shield of Montana, Inc., 660 F.3d 1102, 1110-11 (9th Cir. 2011) (quoting Cleghorn
v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005). However, the plaintiffs in the Fossen
case brought their claim under a state law that is "expressly dependent on federal law... because
the statute, by its very terms, applies only to ERISA plans." Fossen, 660 F.3d at 1111. Unlike
Fossen, Plaintiff's state law claims are independent of federal law. Like Marin, Plaintiff alleges an
oral contract binding Defendant's actions separate from the Patients' policies. Thus, the holding
from Marin applies and the second prong of Davila is not satisfied.
III.

RULING

For the foregoing reasons, the Court GRANTS Plaintiff's Motion to Remand. This case is
REMANDED to the Superior Court for Los Angeles County. The Court DENIES AS MOOT
Defendant DIRECTV, LLC's Notice of Motion and Motion to Dismiss Pursuant to Fed. R. Civ. P.
12(b)(6) (ECF No. 16).
IT IS SO ORDERED.

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