Nutrishare, Inc. et al v. Connecticue General Life Insurance Company, et al.,

Filing 17

ORDER signed by Judge John A. Mendez on 07/10/15 ORDERING that the Court GRANTS Cigna's 8 motion to dismiss Plaintiffs' second cause of action WITHOUT PREJUDICE. The Court GRANTS the motion to dismiss Nutrishare's state law clai ms in the third, fourth, fifth, seventh and eighth causes of action WITH PREJUDICE. And finally, the Court GRANTS the motion to dismiss the Patients' sixth cause of action WITH PREJUDICE. The Patients will be allowed to proceed anonymously; h owever, the issue may be revisited as this litigation progresses. Plaintiffs shall file an Amended Complaint within 20 days; Cigna shall file its responsive pleading within 20 days thereafter. If Plaintiffs elect not to amend their complaint, the case shall proceed on the remaining first cause of action. (Benson, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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NUTRISHARE, INC., a
California corporation;
PATIENT ONE, an individual;
PATIENT TWO, an individual;
PATIENT THREE, an individual,

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No.

2:15-cv-00351-JAM-AC

ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

Plaintiffs,
v.
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, a
Connecticut corporation;
CIGNA HEALTH AND LIFE
INSURANCE COMPANY, a
Connecticut corporation; and
DOES 1 through 10, inclusive,
Defendants.

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Defendants Connecticut General Life Insurance Company and

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Cigna Health and Life Insurance Company (collectively “CIGNA”)

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move to dismiss (Doc. #8) Plaintiffs Patient One, Patient Two,

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Patient Three (three unnamed Plaintiffs collectively “the

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Patients”) and Nutrishare, Inc.’s (“Nutrishare”) (with the

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Patients, collectively “Plaintiffs”) Complaint (Doc. #1). 1

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I.

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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

Nutrishare is a healthcare provider specializing in Total

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Parenteral Nutrition (“TPN”) services.

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plans to consumers.

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Organization (“PPO”) plans with CIGNA and have received services

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from Nutrishare.

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CIGNA sells healthcare

The Patients each have Preferred Provider

Nutrishare has provided services to CIGNA members since

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1994, but does not have a contract with CIGNA and is considered

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an out-of-network provider.

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an assignment of the patients’ benefits under their health

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benefits plan with CIGNA.

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Nutrishare’s practice is to obtain

Plaintiffs allege that Nutrishare has submitted a bill to

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CIGNA for the services provided to CIGNA members, setting forth

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the charges incurred.

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provided by Nutrishare, regardless of whether the patients have

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met their coinsurance or copayment obligations.

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CIGNA has placed calls to the Patients and their physicians

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urging them to seek TPN services from an in-network provider

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rather than Nutrishare.

CIGNA has refused to pay for the services

In addition,

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Plaintiffs filed the Complaint, stating eight causes of

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action: (1) enforcement pursuant to 29 U.S.C. § 1132(a)(1)(B) for

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failure to pay ERISA plan benefits on behalf of all Plaintiffs;

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(2) enforcement pursuant to 29 U.S.C. § 1132(a)(2) for breach of

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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 scheduled
for June 17, 2015.
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fiduciary duty on behalf of all Plaintiffs; (3) violation of

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California Business & Professions Code §§ 17200 et seq.,

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California’s unfair competition law (“UCL”), on behalf of

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Nutrishare; (4) breach of implied contract on behalf of

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Nutrishare; (5) services rendered on behalf of Nutrishare;

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(6) breach of covenant of good faith and fair dealing on behalf

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of the Patients; (7) intentional interference with prospective

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economic advantage on behalf of Nutrishare; and (8) negligent

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interference with prospective economic advantage on behalf of

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Nutrishare.

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II.

OPINION

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A.

Preemption of Nutrishare’s State Law Claims

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CIGNA first contends that Nutrishare’s state law claims are

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preempted under ERISA.

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their Opposition (Doc. #10, at p. 3 n.1) it does appear CIGNA is

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arguing that these claims are subject to conflict preemption

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under ERISA § 514(a), as amended, 29 U.S.C. § 1144(a) (“§

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514(a)”), and are completely preempted under ERISA § 502(a)

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(“§ 502(a)”).

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Nutrishare’s claims are completely preempted pursuant to

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§ 502(a).

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Although it is disputed by Plaintiffs in

For the reasons discussed below, the Court finds

Complete Preemption

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As noted by the Supreme Court, a state law claim may be

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“completely preempted” under ERISA because § 502(a) reflects

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Congress’ intent to “so completely pre-empt a particular area

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that any civil complaint raising this select group of claims is

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necessarily federal in character.”
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Metro. Life Ins. Co. v.

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

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formulated a two-prong test to determine whether a claim is

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completely preempted by ERISA.

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U.S. 200, 210 (2004) (“Davila”); Marin Gen. Hosp. v. Modesto &

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Empire Traction Co., 581 F.3d 941, 946 (9th Cir. 2009).

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the test, a state law claim is completely preempted if (1) an

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individual could have brought the claim under § 502(a); 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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The Supreme Court has

Aetna Health Inc. v. Davila, 542

Under

Davila, at 210.

The Ninth Circuit has continuously reaffirmed the principle

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that “‘ERISA preempts the state law claims of a provider suing as

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an assignee of a beneficiary’s rights to benefits under an ERISA

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plan.’”

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Med. Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (quoting The

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Meadows v. Employers Health Ins., 47 F.3d 1006, 1008 (9th Cir.

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1995)).

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whether Nutrishare brings its state law claims as an assignee of

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its patients’ benefits or as an independent entity based on

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obligations independent of the ERISA plans.

Blue Cross of California v. Anesthesia Care Associates

The dispositive issue presented by this motion is

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When faced with claims from healthcare providers against

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insurers, it is imperative that “[c]ourts distinguish between

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claims brought in the provider's derivative capacity as an

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assignee of plan benefits, which are preempted by ERISA, and

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those brought in its independent status as a third-party health

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care provider, which are not preempted.”

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Healthcare Dist. v. Robert F. Kennedy Farm Workers Med. Plan, No.

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08CV747 WQH (CAB), 2008 WL 4350024, at *4 (S.D. Cal. 2008); see

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also Catholic Healthcare W.-Bay Area v. Seafarers Health &
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Pioneers Mem'l

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Benefits Plan, 321 F. App'x 563, 564 (9th Cir. 2008) (“ERISA does

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not preempt ‘claims by a third-party who sues an ERISA plan not

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as an assignee of a purported ERISA beneficiary, but as an

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independent entity claiming damages’”) (emphasis in original).

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“A party can avoid ERISA preemption if it identifies a

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separate contract between the parties or alleges a specific

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misrepresentation that does not require interpretation of the

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ERISA plan and would not affect the relationships of the ERISA

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participants.”

Pioneers Mem'l Healthcare Dist., 2008 WL 4350024,

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at *4; see also Seafarers Health & Benefits Plan, 321 F. App'x at

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564-65 (finding a provider’s claims not preempted where the

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complaint did “not mention an assignment,” but rather asserted

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claims “based on a direct contractual relationship”); Anesthesia

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Care Associates, 187 F.3d at 1050-52 (finding a provider’s claims

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not preempted where the insurer and provider executed provider

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agreements upon which the providers based their contractual

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claims independent of their patients’ rights).

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2.

Analysis

CIGNA contends Nutrishare is “proceeding based solely on

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assignments of benefits from patients under their respective

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ERISA health benefit plans” and that Nutrishare “does not allege

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any basis for seeking payment from CIGNA other than the patient

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assignments.”

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allegations in the Complaint itself that Nutrishare is asserting

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rights as an assignee of its patients.

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Plaintiffs argue that Nutrishare’s state law claims “assert

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directly enforceable rights to payment arising under independent

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state law duties between parties whose relationship is not

Reply at pp. 3-4.

It points to specific

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In the Opposition,

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governed by ERISA.”

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Opp. at p. 4.

The Court looks to the Complaint itself for guidance.

Each

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of Nutrishare’s state law claims is based on CIGNA’s alleged

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failure to pay benefits rightfully owed to Nutrishare based on

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its patients’ healthcare plans provided by CIGNA.

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64; 93-110; 121-143.

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Nutrishare’s right to payment outside of the assignment of its

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patients’ rights.

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that no contract exists between Nutrishare and CIGNA and that

Comp. ¶¶ 48-

The Complaint does not assert a basis for

In fact, the Complaint specifically points out

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Nutrishare “has not agreed to comply with, or be bound by, any

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[CIGNA] insurance contracts, policies or procedures.”

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¶ 26.

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assignee, the Court finds Nutrishare’s state law claims in the

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third, fourth, fifth, seventh and eighth causes of action are

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preempted and the Court grants CIGNA’s motion to dismiss these

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derivative claims with prejudice.

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Comp.

Because recovery is based on Nutrishare’s status as

The Court need not address any remaining preemption
arguments put forth by CIGNA regarding these claims.

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B.

Breach of the Covenant of Good Faith and Fair Dealing

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In response to CIGNA’s motion to dismiss the Patients’ sixth

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claim for breach of the covenant of good faith and fair dealing,

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plaintiffs first argue that the claim is a “tort cause of action”

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not “related to” the ERISA plan “but rather is simply a state law

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that regulates the relationship between insureds and insurance

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companies.

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Gregoire, 147 F.3d 1039, 1045 (9th Cir. 1998).”

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denial of rehearing and rehearing en banc (1998)).

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4-5.

See Washington Physicians Service Association v.

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(As amended on
Opp. at pp.

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Plaintiffs next argue that even if the Patients’ claim

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relates to an ERISA plan, it is saved from preemption by ERISA’s

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savings clause.

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statute shall not be “construed to exempt or relieve any person

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from any law of any State which regulates insurance.”

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§ 1144(b)(2)(A).

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of America v. Ward, 526 U.S. 358, 363-64 (1999).

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Opp. at pp. 5-6.

The clause provides that the

29 U.S.C.

Plaintiffs rely on UNUM Life Insurance Company

Plaintiffs’ reliance on Gregoire and Ward is misplaced as
both of these cases are distinguishable.

Gregoire did not

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address whether ERISA preempted a common law claim of breach of

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the covenant of good faith and fair dealing.

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with a Washington state law, the “Alternative Provider Statute,”

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that directly regulated health plans, providers, and the

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provision of health services.

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a California state law, the “notice-prejudice” rule, that

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provided an insurer a defense based on an insured’s failure to

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give timely notice of a claim.

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implied covenant of good faith and fair dealing, relied on by

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Plaintiffs in the instant case, makes no mention of healthcare

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plans, providers or services even if it can be applied in that

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context under certain circumstances.

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Reply, Jabour v. CIGNA Healthcare of California, Inc., 162 F.

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Supp. 2d 1119 (C.D. Cal. 2001), directly rejected the argument

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Plaintiffs now assert.

Rather, it dealt

147 F.3d at 1042.

Ward dealt with

526 U.S. at 363-64, 366-67.

The

As CIGNA points out in its

Reply at pp. 4-5.

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The court in Jabour specifically addressed the issue of

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whether a claim for breach of the implied covenant of good faith

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and fair dealing is preempted by ERISA, discussing ERISA’s

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savings clause and the impact of Ward.
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162 F. Supp. 2d at 1123-

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Ward did not undermine the “clearly established line of

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precedent” holding that claims for breach of the implied covenant

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of good faith and fair dealing were preempted by ERISA and not

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“saved” by § 1144(b)(2)(A).

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common sense” these types of common law, “bad faith” claims are

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not state laws which “regulate insurance.”

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The court concluded that the Supreme Court’s decision in

Id.

It found that “as a matter of

Id.

Applying Jabour to Plaintiffs’ sixth cause of action, the
Court grants CIGNA’s motion to dismiss the Patients’ claim.

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C.

Breach of Fiduciary Duty

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CIGNA moves the Court to dismiss Plaintiffs’ second cause of

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action for breach of fiduciary duty pursuant to 29 U.S.C.

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§ 1132(a)(2).

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only be asserted for the benefit of the ERISA plan and because

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Plaintiff’s claim is based on denials of benefits to these

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specific parties, not the plan as a whole, it should be

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dismissed.

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CIGNA contends that claims under § 1132(a)(2) can

MTD at pp. 11-12.

Section 1132(a)(2) provides a right of action to a

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“participant, beneficiary or fiduciary for appropriate relief

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under § 1109,” which deals with liability for breach of fiduciary

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duties with respect to ERISA plans.

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may bring fiduciary actions against the plan fiduciaries, but

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they must do so for the benefit of the plan and not their

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individual benefit.”

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1445 (9th Cir. 1995).

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“Individual beneficiaries

Cinelli v. Sec. Pac. Corp., 61 F.3d 1437,

Plaintiffs argue that they have alleged a “systematic and

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willful failure to pay benefits” and thus their claim meets the

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standards set for a claim under § 1132(a)(2).
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Opp. at pp. 6-9.

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Furthermore, they contend relief granted “under this claim would

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benefit not only the Patients, but all participants in their

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ERISA plans by seeking an injunction to remove [CIGNA] as the

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. . . administrator for each of the ERISA plans at issue.”

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at p. 6.

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1288465, at *2 (N.D. Cal. 2007), cited by CIGNA, is directly on

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point and addresses and rejects arguments similar to those put

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forth by Plaintiffs in support of their claim.

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Opp.

Ehrman v. Standard Ins. Co., No. C06-05454MJJ, 2007 WL

In Ehrman, the court dismissed a claim under § 1132(a)(2)

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because the plaintiff failed to “establish that the claim is for

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the benefit of the [ERISA] Plan.”

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court found the complaint clearly indicated the claim was

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ultimately for the underpaying of benefits to individual

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participants in the plan.

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plaintiff’s “conclusory” claim that removal of the defendant

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fiduciary would benefit the plan as a whole.

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found unpersuasive allegations that the actions of the defendant

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were “systematic,” “repeated,” and “willful.”

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Id.

2007 WL 1288465, at *2.

The

The court disregarded the

Id.

It similarly

Id.

The Court finds the analysis in Ehrman persuasive.

Simply

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using the words “systematic” or “willful” in the Complaint does

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not change the fact that Plaintiffs’ § 1132(a)(2) claim is

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ultimately based on CIGNA’s denial of benefits for individual

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participants.

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not for the benefit of the ERISA plan as a whole despite

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Plaintiff’s conclusory claim that removing CIGNA as administrator

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would benefit all participants in the plan.

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CIGNA’s motion to dismiss the second cause of action.

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because it is not clear to the Court that further amendment would

Similar to the claim in Ehrman, the claim here is

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The Court grants
However,

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be futile, the motion to dismiss this claim is granted without

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prejudice.

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D.

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CIGNA contends the Patients have failed to establish

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exceptional circumstances necessary to proceed anonymously in

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this litigation.

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is necessary to protect the sensitive medical information of the

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Patients.

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The Patients’ Anonymity

MTD at pp. 14-17.

Plaintiffs contend anonymity

Opp. at pp. 12-13.

As they relate to identification of parties in a complaint,

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the Federal Rules of Civil Procedure require the caption to

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include the names of all the parties.

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There is a presumption that litigants will use their real names.

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Doe v. Kamehameha Schools/Bernice Pauahi Bishop Estate, 596 F.3d

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1036, 1042 (9th Cir. 2010).

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“[M]any federal courts, including the Ninth Circuit, have

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permitted parties to proceed anonymously when special

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circumstances justify secrecy.”

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Textile Corp., 214 F.3d 1058, 1069 (9th Cir. 2000).

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be allowed to use a pseudonym when nondisclosure of the party's

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identity is necessary to protect the party from harassment,

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injury, ridicule or embarrassment.

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Doe v. Sierra Cnty., No. 2:14-CV-01552-MCE, 2014 WL 5035301, at

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*1 (E.D. Cal. 2014).

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retain his or her anonymity when “the party's need for anonymity

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outweighs prejudice to the opposing party and the public's

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interest in knowing the party's identity.”

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Corp., at 1069; see also Doe v. John F Kennedy Univ., No. C-13-

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01137 DMR, 2013 WL 4565061, at *3 (N.D. Cal. 2013).

Fed. R. Civ. Proc. 10(a).

There are limited exceptions.

Does I Thru XXIII v. Advanced
A party may

Id. at 1067–68; Doe ex rel.

However, a party will only be permitted to

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Advanced Textile

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The Complaint states:

“The names and identities of Patient

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One, Patient Two, and Patient Three have been withheld to protect

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the Patients’ confidential health information.”

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n.1.

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necessary . . . to preserve privacy in a matter of a sensitive

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and highly personal nature.

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information will be separately provided to [CIGNA] and be

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disclosed to this Court as necessary and subject to appropriate

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protective measures.”

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It goes on to explain:

Comp. at p. 1

“Anonymity in this case is

The Patients’ identifying

Id.

Plaintiffs have privately identified to CIGNA the identities

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of the Patients.

The Court finds the prejudice to the public and

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to CIGNA at this stage in the litigation is minimal.

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the Ninth Circuit has stated, “the balance between a party's need

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for anonymity and the interests weighing in favor of open

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judicial proceedings may change as the litigation progresses.”

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Advanced Textile Corp., 214 F.3d at 1069.

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will permit the Patients to proceed anonymously for the time

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being.

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extent possible regarding this issue and craft and propose to the

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Court protective orders as necessary.

However, as

The Court therefore

However, the parties shall cooperate to the greatest

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III.

ORDER

The Court GRANTS CIGNA’s motion to dismiss Plaintiffs’

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second cause of action WITHOUT PREJUDICE.

The Court GRANTS the

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motion to dismiss Nutrishare’s state law claims in the third,

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fourth, fifth, seventh and eighth causes of action WITH

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PREJUDICE.

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the Patients’ sixth cause of action WITH PREJUDICE.

And finally, the Court GRANTS the motion to dismiss

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The Patients

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will be allowed to proceed anonymously; however, the issue may be

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revisited as this litigation progresses.

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an Amended Complaint within twenty days of this Order and CIGNA

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shall file its responsive pleading within twenty days thereafter.

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If Plaintiffs elect not to amend their complaint, the case shall

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proceed on the remaining first cause of action.

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IT IS SO ORDERED.
Dated: July 10, 2015

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Plaintiffs shall file