Lodi Memorial Hospital Association, Inc. v. American Pacific Corporation

Filing 21

ORDER signed by Judge John A. Mendez on 10/20/14 ORDERING for the reasons set forth above, the Court GRANTS Plaintiff's 11 Motion to Remand and finds that Defendant's 7 Motion to Dismiss is DENIED as moot. Copy of remand order sent to San Joaquin County Superior Court. CASE CLOSED. (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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LODI MEMORIAL HOSPITAL
ASSOCIATION, INC., a
California non-profit public
benefit corporation,

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Plaintiff,
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No.

2:14-cv-01865 JAM DAD

ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND AND DENYING
DEFENDANT’S MOTION TO DISMISS

v.
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AMERICAN PACIFIC CORPORATION,
a Nevada for profit
corporation, and DOES 1
THROUGH 25, INCLUSIVE,

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Defendant.

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Defendant American Pacific Corporation (“Defendant”) brings

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this Motion to Dismiss Plaintiff Lodi Memorial Hospital

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Association, Inc.’s (“Plaintiff”) Complaint.

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this Motion and requests that this Court, instead, remand this

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case to the San Joaquin County Superior Court. For the following

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reasons, Plaintiff’s Motion to Remand is GRANTED and Defendant’s

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Motion to Dismiss is DENIED as moot. 1

Plaintiff opposes

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
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I.

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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

Plaintiff Lodi Memorial Hospital Association is a non-profit

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public benefit California corporation.

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a Nevada Corporation, which maintains a health plan for its

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employees, pursuant to the Employee Retirement Income Security

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Act (“ERISA”).

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454 (9th Cir. 1994) (“documents whose contents are alleged in a

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complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered”

Compl. ¶ 2.

Compl. ¶ 1.

Defendant is

See Branch v. Tunnell, 14 F.3d 449,

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in ruling on a motion to dismiss).

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Patient J.P. was an employee of Defendant, and was an enrolled

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beneficiary in Defendant’s ERISA health plan.

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Defendant “provided, arranged, and/or paid for healthcare

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services for its beneficiaries and/or members, including

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Patient.”

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At all relevant times,

Compl. ¶ 7.

Compl. ¶ 8.

On July 1, 1990, Plaintiff entered into a written agreement

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(the “Agreement”) with CAPP Care, Inc. (“CAPP Care”).

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¶ 9.

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contracts with ‘Payor’ organizations offering health care

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insurance.”

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organizations.

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Plaintiff would render medical care to beneficiaries, including

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Patient J.P., of “Payor” organizations.

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exchange, CAPP Care “agreed to ‘bind’ ‘Payor’ organizations to

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pay” Plaintiff pursuant to the terms of the Agreement.

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¶ 12.

Pursuant to the Agreement, CAPP Care would “execute

Compl. ¶ 10.

Defendant was one of these “Payor”

Compl. ¶ 10.

Pursuant to the Agreement,

Compl. ¶ 11.

In

Compl.

Also pursuant to the Agreement, Plaintiff agreed to submit

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Compl.

scheduled for September 17, 2014.
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its bills to Defendant, which would then pay for medical services

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rendered by Plaintiff.

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Compl. ¶ 13.

From March 19, 2013 to March 26, 2013, Plaintiff rendered

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medical services to Patient J.P.

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that it billed Defendant for the services rendered to Patient

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J.P., but Defendant failed to pay the entirety of the amount,

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leaving a balance of $302,177.75.

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Compl. ¶ 14.

Plaintiff alleges

Compl. ¶¶ 15-19.

Defendant contends that, under the terms of the Agreement,
its obligation to pay Plaintiff for services rendered to Patient

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J.P. was linked to the employee benefit plan maintained by

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Defendant for its employees under ERISA.

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Specifically, Defendant contends that the Agreement only provides

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that Defendant would pay Plaintiff for services which are covered

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under the ERISA plan.

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only services it failed to pay for were those that were not

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covered under Patient J.P.’s ERISA plan.

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Mot. at 2.

Mot. at 2.

Defendant maintains that the

On April 8, 2014, Plaintiff filed the complaint in San

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Joaquin County Superior Court.

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removed the matter to this Court.

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following causes of action: (1) breach of written contract;

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(2) quantum meruit; and (3) breach of statutory duty – violation

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of California Health and Safety Code § 1371.4.

On August 7, 2014, Defendant
The complaint includes the

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II.

OPINION

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A.

Judicial Notice

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Defendant requests that the Court take judicial notice of

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the “California Department of Managed Health Care’s website which

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lists all licensed Knox-Keene Act plans[.]”
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Defendant’s Request

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for Judicial Notice (“DRJN”) (Doc. #18) at 1.

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oppose Defendant’s request.

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Plaintiff does not

Generally, the Court may not consider material beyond the

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pleadings in ruling on a motion to dismiss.

However, the Court

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may take judicial notice of matters of public record, provided

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that they are not subject to reasonable dispute.

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Sherman v. Stryker Corp., 2009 WL 2241664 at *2 (C.D. Cal. 2009)

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(citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.

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2001) and Fed. R. Evid. 201).

See, e.g.,

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The website contains information drawn from the public

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records of a state agency – the California Department of Managed

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Health Care.

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and the information is not subject to reasonable dispute.

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Therefore, it is the proper subject of judicial notice.

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R. Evid. 201.

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B.

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Plaintiff raises a number of evidentiary objections (Doc.

Plaintiff has also not opposed Defendant’s request,

See Fed.

Defendant’s request is granted.

Evidentiary Objections

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#14) to the Stratton Declaration (Doc. #10), submitted in support

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of Defendant’s motion to dismiss, and moves to strike the

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offending passages.

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relevance, lack of foundation, lack of personal knowledge, and

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speculation.

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objections are premature, and are better saved for argument

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within the briefs.

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433 F.Supp.2d 1110, 1119 (E.D. Cal. 2006).

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Plaintiff’s evidentiary objections are overruled and Plaintiff’s

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motion to strike is denied.

Plaintiff’s objections are based on

At this early stage in the proceedings, these

See Burch v. Regents of Univ. of California,

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Accordingly,

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C.

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Generally, a state civil action is removable to federal

Legal Standard

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court only if it might have been brought originally in federal

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court.

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be based either on diversity of the parties, or on the presence

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of a federal question in the state court complaint.

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the removing defendant bears the burden of proving the existence

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of jurisdictional facts.

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566 (9th Cir. 1992).

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See 28 U.S.C. § 1441.

This “original jurisdiction” may

On removal,

See Gaus v. Miles, Inc., 980 F.2d 564,

Federal question jurisdiction is governed by the “well-

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pleaded complaint rule.”

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jurisdiction is proper only when a federal question appears on

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the face of a proper complaint.

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Williams, 482 U.S. 386, 392 (1987).

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“may avoid federal jurisdiction by exclusive reliance on state

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law.”

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basis of a federal defense, including the defense of pre-emption,

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even if the defense is anticipated in the plaintiff's complaint,

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and even if both parties concede that the federal defense is the

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only question truly at issue” in the case.

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Id.

This provides that subject matter

See, e.g., Caterpillar Inc. v.
As a result, a plaintiff

Further, a defendant cannot remove solely “on the

Id. at 393.

“There does exist, however, a corollary to the well-pleaded

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complaint rule, known as the ‘complete preemption’ doctrine.

The

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Supreme Court has concluded that the preemptive force of some

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statutes is so strong that they ‘completely preempt’ an area of

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state law.

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preempted state law is considered, from its inception, a federal

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claim, and therefore arises under federal law.”

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Twentieth Century-Fox Film Corp., 208 F.3d 1102, 1107 (9th Cir.

In such cases, any claim purportedly based on that

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Balcorta v.

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2000) (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58,

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65 (1987)). In these cases, even a well-pleaded state law

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complaint may be properly removed to federal court.

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There are only a “handful of extraordinary situations” in

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which “complete preemption” provides an adequate basis for

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removal of a state complaint.

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994 F.2d 666, 668 (9th Cir. 1993).

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identified only two federal acts whose preemptive force is so

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“extraordinary” as to warrant removal of any “well-pleaded” state

See Holman v. Laulo-Rowe Agency,
The Supreme Court has

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law claim: (1) the Labor Management Relations Act, 29 U.S.C.

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§ 185(a) (see Caterpillar, 482 U.S. at 392); and (2) the Employee

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Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (see

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Metropolitan Life Ins. Co., 481 U.S. at 65).

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D.

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Analysis
a.

ERISA Preemption

Two distinct forms of ERISA preemption exist: (1) “complete

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preemption,” and (2) “conflict preemption.”

As noted by the

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Supreme Court, a state law claim may be “completely preempted”

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under ERISA because § 502(a) reflects Congress’ intent to “so

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completely pre-empt a particular area that any civil complaint

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raising this select group of claims is necessarily federal in

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character.”

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(1987).

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can establish federal question jurisdiction by showing that a

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state law claim is “completely preempted” by § 502(a) of ERISA.

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Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941,

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945 (9th Cir. 2009).

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prong test for complete preemption under § 502(a), which is

Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64

The Ninth Circuit has held that a party seeking removal

The Supreme Court has established a two-

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discussed below.

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(2004).

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Aetna Health Inc. v. Davila, 542 U.S. 200, 210

Conversely, an affirmative defense of “conflict preemption”

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arises under § 514(a) of ERISA, when a provision of a state law

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“relates to” an ERISA benefit plan.

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Ninth Circuit has held that “a defense of conflict preemption

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under § 514(a) does not confer federal question jurisdiction on a

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federal district court.”

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question jurisdiction does not exist in the present case unless

Marin, 581 F.3d at 945.

Id. at 945.

The

Accordingly, federal

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Plaintiff’s state law claims are “completely preempted” by §

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502(a) of ERISA.

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b.

The Davila Test

The Ninth Circuit has adopted the two-prong Davila “complete

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preemption” test: “Under Davila, a state-law cause of action is

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completely preempted if (1) an individual, at some point in time,

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could have brought [the] claim under ERISA § 502(a)(1)(B), and

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(2) where there is no other independent legal duty that is

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implicated by a defendant’s actions.”

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(citing Davila, 542 U.S. at 200).

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this test “is in the conjunctive.”

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“[a] state-law cause of action is preempted by § 502(a)(1)(B)

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only if both prongs of the test are satisfied.”

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Marin, 581 F.3d at 946

As noted by the Ninth Circuit,
Id. at 947.

In other words,

Id. at 497.

Under the first prong of Davila, Defendant must establish

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that Plaintiff “could have brought the claim under ERISA

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§ 502(a)(1)(B).”

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that a civil action may be brought “by a participant or

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beneficiary . . . to recover benefits due to him under the terms

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of his plan, to enforce his rights under the terms of the plan,

Marin, 581 F.3d at 947.

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This section provides

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or to clarify his rights to future benefits under the terms of

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the plan.”

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not an ERISA plan participant or a beneficiary; rather, Plaintiff

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is a hospital.

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prong of the Davila test is not satisfied, because Plaintiff

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could not have “brought the claim under ERISA § 502(a)(1)(B).”

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Marin, 581 F.3d at 946.

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29 U.S.C. § 1132.

In the present case, Plaintiff is

Thus, at first blush, it appears that the first

The Ninth Circuit has applied the first prong of Davila in a
factually analogous case.

Marin, 581 F.3d at 946.

In Marin, the

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defendants similarly removed a plaintiff-hospital’s state law

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claims for breach of contract and quantum meruit, among others.

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Id. at 943-44.

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that its causes of action against the ERISA plan administrator

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were not subject to complete preemption under § 502(a).

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944.

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Circuit wrote as follows:

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The plaintiff-hospital moved to remand, arguing

Id. at

In applying the first prong of the Davila test, the Ninth

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“[I]n the case before us the patient assigned to the
Hospital any claim he had under his ERISA plan.
Pursuant to that assignment, the Hospital was paid the
money owed to the patient under the ERISA plan. The
Hospital now seeks more money based upon a different
obligation. The obligation to pay this additional
money does not stem from the ERISA plan, and the
Hospital is therefore not suing as the assignee of an
ERISA plan participant or beneficiary under
§ 502(a)(1)(B). Rather, the asserted obligation to
make the additional payment stems from the alleged
oral contract between the Hospital and [defendant
ERISA plan administrator].” Id. at 948.

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Accordingly, the Ninth Circuit concluded that the first prong of

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Davila was not satisfied and the hospital’s claim was not

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completely preempted.

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plaintiff-hospital’s state law claims only satisfy the first

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prong of Davila if two criteria are met: (a) the patient has

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Id. at 948. After Marin, it appears that a

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“assigned to the [h]ospital any claim he had under his ERISA

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plan;” and (b) the alleged obligation of the ERISA plan

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administrator to pay the plaintiff-hospital “stem[s] from the

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ERISA plan.”

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Id. at 948.

In the present case, Defendant has not established that

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Patient J.P. has “assigned to the [h]ospital any claim he had

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under his ERISA plan.”

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Defendant does not allege that such an assignment has occurred.

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Nor does this argument appear in its Motion to Dismiss or Reply

Id. at 948.

In its Notice of Removal,

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briefs.

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necessarily based on the terms of the ERISA plan, Defendant has

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only addressed the second element of the first-prong of the

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Davila test: that Defendant’s alleged obligation to pay Plaintiff

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“stem[s] from the ERISA plan.”

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the Ninth Circuit’s opinion in Marin makes it clear that the

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“assignment” of Patient J.P.’s rights under ERISA to Plaintiff is

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a necessary element of the first prong of Davila.

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failure to address the issue of “assignment” is fatal to its

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argument, as the removing party bears the burden of proving the

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existence of jurisdictional facts. See Gaus v. Miles, Inc., 980

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F.2d 564, 566 (9th Cir. 1992).

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Arguing that Plaintiff’s contractual claims are

Marin, 581 F.3d at 948.

However,

Defendant’s

Briefly, the Court notes that Defendant’s reliance on Lone

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Star is misplaced.

Mot. at 7 (citing Lone Star OB/GYN Associates

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v. Aetna Health Inc., 579 F.3d 525 (5th Cir. 2009)).

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Defendant maintains that Lone Star is “the controlling case,” it

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is an out-of-circuit case and is non-binding on the Court.

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Ninth Circuit case is referenced in Lone Star, but that case does

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not support the proposition for which it is cited.
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Although

See Lone

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Star, 579 F.3d at 530 (citing Blue Cross of California v.

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Anesthesia Care Associates Med. Grp., Inc., 187 F.3d 1045 (9th

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Cir. 1999)).

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that is directly on point, the Court declines to follow the Fifth

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Circuit’s decision in Lone Star.

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Given that there is a recent Ninth Circuit case

Having failed to satisfy the first prong of the Davila test,

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none of Plaintiff’s causes of action are subject to “complete

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preemption” under ERISA § 502(a). See Marin, 581 F.3d at 947

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(noting that the Davila test is “in the conjunctive”).

As the

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sole grounds for federal question jurisdiction was complete

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preemption under ERISA § 502(a), Plaintiff’s Motion to Remand is

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GRANTED, as to all three causes of action in this matter.

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Court need not reach the parties’ remaining arguments.

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as the matter is remanded to state court, Defendant’s Motion to

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Dismiss is DENIED as moot.

The

Moreover,

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III.

ORDER

For the reasons set forth above, the Court GRANTS

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Plaintiff’s Motion to Remand and finds that Defendant’s Motion to

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Dismiss is DENIED as moot.

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IT IS SO ORDERED.
Dated: October 20, 2014

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