Lodi Memorial Hospital Association, Inc. v. Tiger Lines, LLC et al

Filing 20

MEMORANDUM AND ORDER signed by District Judge Morrison C. England, Jr. on 5/12/2016 GRANTING 16 Motion to Dismiss to the extent it asks that the plaintiff be required to provide a more definite statement of its claims in accordance with Rule 12(e); DENYING 16 Motion to Dismiss without prejudice to being renewed should the plaintiff's further effort to amend prove unavailing; GRANTING the plaintiff thirty (30) days to file an Second Amended Complaint. (Michel, G.)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
11
12

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

13
14
15
16
17

Plaintiff,

No. 2:15-cv-00319-MCE-KJN

MEMORANDUM AND ORDER

v.
TIGER LINES, LLC, a California limited
liability company; GROUP & PENSION
ADMINSTRATORS, INC., a Texas
corporation; and DOES 1 through 25,
inclusive,

18

Defendants.

19
20

Through the present action, Plaintiff Lodi Memorial Hospital Association

21

(“Plaintiff”) seeks additional payment for medical services it provided to patients insured

22

under the self-insured medical plan (“Plan”) administered by Defendants Tiger Lines,

23

LLC (“Tiger Lines”) and Group & Pension Administrators, Inc. (“GPA”) (collectively,

24

“Defendants”). Plaintiff’s lawsuit, originally filed in state court, was subsequently

25

removed here on grounds that Plaintiff’s claims are completely preempted by the

26

provisions of the Employee Retirement Income Security Act (“ERISA”).1 By

27

Memorandum and Order filed August 20, 2015 (ECF No. 14), the Court granted

28

1

ERISA is codified in the United States Code at 29 U.S.C. § 1001 et seq.

1

1

Defendants’ Motion to Dismiss Plaintiff’s state law claims for quantum meruit and for

2

violations of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq.

3

on grounds that those claims, as stated, conflicted with ERISA and were thereby

4

preempted. Leave to amend was granted and, on September 8, 2015, Plaintiff filed a

5

First Amended Complaint (“FAC”) purporting to state claims for: 1) breach of oral

6

contract; 2) breach of implied-in-fact contract; and 3) negligent misrepresentation. ECF

7

No. 15.

8
9

Presently before the Court is Defendants’ Motion to Dismiss (ECF No. 16) that
FAC, brought pursuant to Federal Rule of Civil Procedure 12(b)(6) on grounds that

10

Plaintiffs have still failed to state a claim upon which relief can be granted. Alternatively,

11

Defendants allege that they cannot be expected to respond to Plaintiff’s claims as

12

currently pleaded and move for a more definite statement of those claims under Rule

13

12(e). As set forth below, Defendant’s Motion under Rule 12(e) will be granted.

14

Inasmuch as Plaintiff will be afforded a further opportunity to state a viable claim,

15

Defendants’ Motion to Dismiss will be denied without prejudice to being renewed should

16

that be appropriate.2

17
18

BACKGROUND

19
20

During 2013 and 2014, Plaintiff provided medical assistance to a number of Tiger

21

Lines employees. FAC, ¶¶ 8, 10. Those employees were enrolled members and/or

22

beneficiaries of a health plan sponsored and/or administered by Defendants (“Plan”). Id.

23

¶ 8. Defendants’ Plan is self-funded. Plan Document, Ex. B to Defs.’ Notice of

24

Removal, ECF No. 1-2, p. 5.3 The Plan Document sets forth the terms and provisions

25

under which the Plan pays benefits. When a medical provider obtains an assignment of

26
27

2

Because oral argument would not have been of material assistance, this matter was submitted
on the briefing. E.D. Cal. Local R. 230(g).
3

28

Page references to the Plan Document are to its original pagination and not to the page numbers
assigned to the Plan Document as an Exhibit.

2

1

benefits and bills the Plan directly for goods and services provided to a patient covered

2

by the Plan, the Plan pays benefits directly to that medical provider. Id. at p. 65, 94.

3

According to Plaintiff, it provided goods and services to certain patients covered

4

by the Plan on 56 separate occasions and thereafter submitted claims to the Plan for

5

payment. FAC, ¶¶ 8, 10, 12 and Ex. A thereto. The total charges billed to the Plan for

6

that treatment were $502,687.89. Id. at ¶ 11. Plaintiff alleges that Defendants failed to

7

pay the claims properly and remitted only $31,568.04. Id. at ¶ 13. Plaintiff contends it is

8

still owed at least $450,965.07, exclusive of interest, and now seeks to recover those

9

funds. Id.

10

As indicated above, Plaintiff’s lawsuit, originally filed on December 22, 2014, in

11

San Joaquin County Superior Court, contained two state law claims for quantum meruit

12

and for UCL violations. On February 6, 2015, Defendants removed that action to this

13

Court on grounds that its state law claims were completely barred by ERISA. After the

14

Court granted Defendants’ Motion to Dismiss on grounds that Plaintiff had identified

15

nothing taking the claims pled outside the scope of ERISA preemption, the FAC

16

followed, purportedly stating three new state law claims. Defendants now challenge

17

those claims on grounds they are impermissibly vague and should be dismissed, or

18

alternatively should be subject to an order requiring Plaintiffs to make a more definite

19

statement of their claims.

20
21

STANDARD

22
23

A motion for more definite statement pursuant to Rule 12(e) attacks “the

24

unintelligibility of the complaint, not simply the mere lack of detail . . . .” Neveau v. City

25

of Fresno, 392 F. Supp. 2d 1159, 1169 (E.D. Cal. 2005). Courts will deny the motion if

26

the complaint is specific enough to give notice to the defendants of the substance of the

27

claim asserted. Id. A Rule 12(e) motion should be granted only if the complaint is “so

28

vague or ambiguous that the opposing party cannot respond, even with a simple denial,
3

1

in good faith or without prejudice to himself.” Cellars v. Pac. Coast Packaging, Inc., 189

2

F.R.D. 575, 578 (N.D. Cal. 1999); see also Bautista v. L.A. Cnty., 216 F.3d 837, 843 n.1

3

(9th Cir. 2000) (Reinhardt, J., concurring) (party can move for more definite statement on

4

those rare occasions where a complaint is so vague or ambiguous that party cannot

5

reasonably frame a responsive pleading).

6

“Rule 12(e) is designed to strike an unintelligibility rather than want of

7

detail . . . . A motion for a more definite statement should not be used to test an

8

opponent's case by requiring him to allege certain facts or retreat from his allegations.”

9

Neveu, 392 F. Supp. 2d at 1169 (quoting Palm Springs Med. Clinic, Inc. v. Desert Hosp.,

10

628 F. Supp. 454, 464-65 (C.D. Cal. 1986). If the facts sought by a motion for a more

11

definite statement are obtainable by discovery, the motion should be denied. See

12

McHenry v. Renne, 84 F.3d 1172, 1176 (9th Cir. 1996); Neveau, 392 F. Supp. 2d at

13

1169-70; Sagan v. Apple Computer, 874 F. Supp. 1072, 1077 (C.D. Cal. 1994). “This

14

liberal standard of pleading is consistent with [Rule] 8(a)(2) which allows pleadings that

15

contain a ‘short and plain statement of the claim.’ Both rules assume that the parties will

16

familiarize themselves with the claims and ultimate facts through the discovery process.”

17

Neveu, 392 F. Supp. 2d at 1169 (citing Sagan, 874 F. Supp. at 1077 (“Motions for a

18

more definite statement are viewed with disfavor and are rarely granted because of the

19

minimal pleading requirements of the Federal Rules.”)).

20
21

STATUTORY FRAMEWORK

22
23

Generally, a cause of action arises under federal law only “when the plaintiff’s well

24

pleaded complaint raises issues of federal law.” Marin Gen. Hosp. v. Modesto & Empire

25

Traction Co., 581 F.3d 941, 944 (9th Cir. 2009). Exclusive federal jurisdiction can

26

nonetheless be conferred “in certain instances where Congress intended the scope of a

27

federal law to be so broad as to entirely replace any state law claim.” Id. at 945.

28

///
4

1

ERISA represents one such instance. ERISA was enacted by Congress in 1974

2

to regulate employee benefits plans and in so doing to protect the interests of plan

3

participants and their beneficiaries. It provides a “federal cause of action for civil claims

4

aimed at enforcing the provisions of an ERISA plan.” Reynolds Metals Co. v. Ellis,

5

202 F.3d 1246, 1247 (9th Cir. 2000) (citing 29 U.S.C. §1132(e)(1)).

6

The scope of ERISA regulation is sweeping. Section 502(a)(1)(B) permits a civil

7

action by a participant or beneficiary of an ERISA plan ‘to recover benefits due to him

8

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

9

his rights to future benefits under the terms of the plan.” 29 U.S.C. §1132(a)(1)(B). If a

10

state law action seeks such relief, it must be pursued as a federal claim under ERISA.

11

This is because, as the Supreme Court has recognized, § 502(a) demonstrates a

12

Congressional intent to “so completely pre-empt a particular area that any civil complaint

13

raising this select group of claims is necessarily federal in character.” Metropolitan Life

14

Insurance Co. v. Taylor, 481 U.S. 58, 63-64 (1987).

15

ERISA therefore provides for complete preemption and confers exclusive federal

16

jurisdiction. “Complete preemption removal is an exception to the otherwise applicable

17

rule that a plaintiff is ordinarily entitled to remain in state court so long as its complaint

18

does not, on its face, affirmatively allege a federal claim.” Marin Gen., 581 F.3d at 945

19

(internal quotation marks and citation omitted). As the Ninth Circuit further notes,

20

however, “complete preemption under § 502(a) is really a jurisdictional rather than a

21

preemption doctrine,” since it in fact confers federal jurisdiction given Congress’ broad

22

intention to override any competing state law. Id.

23

The Supreme Court has developed a two-prong test for determining whether a

24

state-court cause of action is completely preempted under § 502(a): (1) “an individual, at

25

some point in time, could have brought the claim under ERISA § 502(a)(1)(B)”; and

26

(2) “where there is no other independent legal duty that is implicated by a defendant’s

27

actions.” Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004). Davila’s two prong test

28

///
5

1

is in the conjunctive. Complete preemption occurs only if both prongs of the test are

2

satisfied. Marin Gen., 581 F.3d at 947.

3

If complete preemption is present under a Davila analysis, and the case is

4

properly in federal court, the next step is to determine whether the state law claims upon

5

which federal jurisdiction has been conferred survive so-called “conflict preemption”

6

under ERISA § 514(a). See 29 U.S.C. § 1144(a). Under § 514(a), state law claims that

7

“relate to” an ERISA cause of action “conflict” with ERISA and are therefore precluded,

8

even if their effect on ERISA “is only indirect.” Ingersoll-Rand Co. v. McClendon, 498

9

U.S. 133, 139 (1990). State tort law and implied contract remedies are conflict

10

preempted even when ERISA does not authorize a similar cause of action. Olson v.

11

Gen. Dynamics Corp., 960 F.2d 1418, 1424 (9th Cir. 1991).

12
13

ANALYSIS

14
15

Defendants argue that despite Plaintiff’s attempt by way of its FAC to state three

16

new state-law causes of action, the nature of Plaintiff’s allegations still makes it clear that

17

they depend on the provisions of Defendants’ employee benefit plan and consequently

18

are preempted by ERISA. Plaintiff, on the other hand, argues it has identified

19

agreements outside Defendants’ Plan which take the dispute outside the purview of

20

ERISA.

21

Conflict preemption under ERISA § 514(a) is an affirmative defense arising when

22

a provision of state law “relates to” an ERISA benefit plan. Marin Gen., 581 F.3d at 945.

23

State law “relates to” an ERISA benefit plan if there is a connection with or reference to

24

such a plan. Abraham v. Norcal Waste Sys., 265 F.3d 811, 820 (9th Cir. 2001). State

25

common law tort and contract actions asserting improper processing of a claim for

26

benefits under an employee benefit plan are generally preempted by ERISA. 29 U.S.C.

27

§ 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987); Metro Life Ins. Co. v.

28

Taylor, 481 U.S. 58, 62 (1987). As indicated above, state laws relate to an ERISA plan
6

1

for purposes of preemption “even if the law is not specifically designed to affect such

2

plans, or the effect is only indirect.” Ingersoll-Rand, 498 U.S. at 139.

3

Like its predecessor, the gravamen of the claims asserted by way of the FAC is

4

that Plaintiff’s claims for benefits were improperly paid, with some $450,965.07 owed on

5

claims totaling $502,687.89. ERISA, generally preempts state law causes of action

6

based on improper payment of claims for medical benefits. Kanne v. Conn. Gen. Life

7

Ins. Co., 867 F.2d 489, 493 (9th Cir. 1988); Fresno Comm. Hosp. & Med. Ctr. v. Souza,

8

No. CV F 07-0325, 2007 WL 2120272 at 4-6 (E.D. Cal. July 23, 2007). Consequently,

9

Plaintiff can escape the sweeping force of ERISA preemption only by identifying grounds

10

independent from the provisions of the Plan itself in claiming it is owed more for services

11

provided than already received. While the Court’s August 20, 2015, Memorandum and

12

Order found that Plaintiff had not sufficiently identified any basis outside the Plan for

13

arguing its entitlement to additional payments, it permitted Plaintiff to amend its

14

complaint to either show such entitlement or to demonstrate that that the Plan itself

15

authorized further reimbursement (which would permit an ERISA claim under the Plan).4

16

Plaintiff’s FAC makes no effort to allege that the payments under the terms of the

17

Plan were not proper.5 Instead, the FAC asserts that when Plaintiff contacted

18

Defendants and spoke to its representatives to verify patient eligibility under Defendants’

19

health plan, those representatives “orally represented” that “Lodi Memorial would be

20

reimbursed for the medically necessary services provided. . . at 100% of Lodi Memorial’s

21

usual and customary total billed charges.” FAC, ¶16. According to Plaintiff, the resulting

22
23
24
25
26
27

4

Plaintiff purports to object to any previous finding by the Court that because Plaintiff submitted
bills to Defendants by way of patient assignment of benefits, Plaintiff’s claims must necessarily be
governed by the provisions of Defendants’ Plan. That contention, however, mischaracterizes the Court’s
prior ruling. To the extent Plaintiff can identify separate and independent agreements for reimbursement,
the Court’s August 20, 2015, Memorandum and Order made it clear that Plaintiff can potentially state a
claim surviving ERISA preemption. Instead, the Court simply found that in alleging that Defendants
improperly paid less than the full amount of Plaintiff’s billings, Plaintiff’s initial complaint identified “no
independent contract, agreement or obligation apart from obligations under the plan agreement itself.”
See Mem. and Order, ECF No. 14, 10:28-11:1. The FAC now attempts to rectify that deficiency.
5

28

Indeed, Plaintiff’s opposition appears to concede that its action is not intended to recover
benefits due under the ERISA plan itself. Pl.’s Opp’n, 3:3-5

7

1

oral contract was breached when Defendants failed to pay Plaintiff’s bills in their entirety

2

as promised.

3

In addition to alleging breach of the above-claimed oral argument, Plaintiff further

4

argues that there was an implicit, implied-in-fact contract that Defendants would pay

5

100% of Plaintiff’s usual and customary total billed charge in treating beneficiaries under

6

Defendants’ health plans. Id. at ¶¶ 21-22. Finally, Plaintiff also contends that by falsely

7

representing that Plaintiff would be fully paid for all treatment provided to Defendants’

8

beneficiaries when it had no intention of doing so, Defendants’ agents engaged in

9

negligent misrepresentation since Plaintiff relied on those false statements. Id. at

10

¶¶ 29-31.

11

Aside from attaching a spreadsheet which purports to identify 56 different

12

incidents of treatment provided to Defendants’ beneficiaries, along with the total amount

13

billed and the amounts received as compensation for Plaintiff’s services, the FAC

14

provides no further specifics as to just what representations were made or when

15

Defendant’s agents made the alleged promises to pay all of Plaintiff’s charges. Nor

16

does Plaintiff allege the identity of the agents who made the claimed representations to

17

pay Plaintiff’s bills in their entirety.

18

The Court agrees that Defendants are entitled to know such basic facts

19

concerning the claimed representations and how they support the assertion of either

20

breach of an oral or implied-in-fact contract. Moreover, with regard to negligent

21

misrepresentation, those claims must be pled with particularity in accordance with Rule

22

9(b), and they are not. See, e.g., Meridian Project Sys. v. Hardin Constr. Co.,

23

404 F. Supp. 2d 1214, 1219 (E.D. Cal. 2005).

24

In opposing Defendants’ motion, Plaintiff states only that “[i]ncluding more specific

25

allegations for each claim, such as the dates of the communications and the specific

26

persons involved, would result in a very lengthy pleading.” Pl.’s Opp’n, 2:16-18.

27

Plaintiff’s claim that its pleading could thereby become unwieldy does not excuse the

28

total dearth of any specifics from its currently operative FAC. While Plaintiff need not
8

1

necessarily include specifics as to each and every one of the 56 alleged admissions for

2

which representations were made, it must provide enough illustrative examples to give

3

Defendants adequate notice of just what kind of representations are allegedly involved.

4

With no specifics at all, Defendants cannot be expected to properly respond to Plaintiff’s

5

lawsuit.

6
7

CONCLUSION

8
9

For the reasons set forth above, Plaintiff will be permitted to further amend its

10

pleadings to provide further factual detail concerning the promises it claims Defendants’

11

agents made to the effect that patient billings would be remitted in full. Defendants’

12

Motion (ECF No. 16) is therefore GRANTED to the extent it asks that Plaintiff be

13

required to provide a more definite statement of its claims in accordance with Rule 12(e).

14

Pending that opportunity to offer enough factual specificity to state a potentially viable

15

claim, however, Plaintiff’s request for dismissal under Rule 12(b)(6) is DENIED without

16

prejudice to being renewed should Plaintiff’s further effort to amend prove unavailing.

17
18
19
20

Plaintiff is directed to file its Second Amended Complaint not later than thirty (30)
days following the date this Memorandum and Order is electronically filed.
IT IS SO ORDERED.
Dated: May 12, 2016

21
22
23
24
25
26
27
28
9