Community Hospital of the Monterey Peninsula v. Aetna Life Insurance Company et al

Filing 28

ORDER REMANDING TO STATE COURT by Magistrate Judge Paul Singh Grewal granting 13 . (psglc1S, COURT STAFF) (Filed on 1/9/2015)

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UNITED STATES DISTRICT COURT

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United States District Court
For the Northern District of California

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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COMMUNITY HOSPITAL OF THE
MONTEREY PENINSULA,

)
)
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Plaintiff,
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v.
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AETNA LIFE INSURANCE COMPANY, et al., )
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Defendants.
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)

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE
COURT
(Re: Docket No. 13)

Two years ago, Plaintiff Community Hospital of the Monterey Peninsula (“CHOMP”)
admitted a patient for various emergency medical services.1 The patient was a member of an

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employer self-funded health plan administered by Defendants Aetna Life Insurance Company,
Valueoptions of California, Inc. and Valueoptions Inc.2 Although CHOMP continued to provide

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care to the patient, it says Defendants declined to provide authorization for the continued hospital

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care.3 CHOMP then filed suit in state court, alleging various causes of action under California

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See Docket No. 1 at 8.

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See id. at 8, 10.

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See id. at 9.

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

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state law.4 After Aetna removed to this court based on ERISA preemption, CHOMP moved to

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remand.5 Because ERISA does not preempt any of CHOMP’s claims, the court remands the case

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to Monterey Superior Court.6

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I.

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The Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002(1), contains
“expansive pre-emption provisions . . . which are intended to ensure that employee benefit plan
regulation would be ‘exclusively a federal concern.’”7 One form of ERISA preemption is
“complete preemption” under § 502(a)(1)(B), 29 U.S.C. § 1132(a) (“ Section 502”).8 Under

United States District Court
For the Northern District of California

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Section 502, “[a]ny state-law cause of action that duplicates, supplements, or supplants ERISA’s

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civil enforcement remedy” is preempted because it “conflicts with clear congressional intent to

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make that remedy exclusive.”9 Indeed, “the ERISA civil enforcement mechanism is one of those

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provisions with such ‘extraordinary pre-emptive power’ that it ‘converts an ordinary state

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common law complaint into one stating a federal claim for purposes of the well-pleaded
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complaint rule.’”10

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Under Section 502, “a state-law cause of action is completely preempted if (1) ‘an

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individual, at some point in time, could have brought [the] claim under ERISA § 502(a)(1) (B),’

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

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See id. at 10-13.

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See Docket No. 13.

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See, e.g., John Muir Health v. Cement Masons Health and Welfare Trust Fund for Northern
California, Case No. 14-cv-03115-TEH, 2014 WL 4756236 at *8 (N.D. Cal, Sept. 24, 2014).

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Aetna Health Inc. v. Davila, 542 U.S. 200, 200 (2004) (citing Alessi v. Raybestos–Manhattan,
Inc., 451 U.S. 504, 523 (1981)).

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See Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 945 (9th Cir.2009).

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Davila, 542 U.S. at 209.

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Id. (citing Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65–66 (1987)).
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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

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actions’” (the “Davila test”).11 In Davila, the Supreme Court determined that the first prong was

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met because the plaintiffs’ only claims related to “denial of benefits promised under the terms of

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the ERISA regulated employee benefit plans,” and the plaintiffs could have brought an action

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under Section 502.12 The second prong was met because the plaintiffs’ civil action sought only

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to “rectify a wrongful denial of benefits promised under [an] ERISA-regulated plan[], and [did]
not attempt to remedy any violation of a legal duty independent of ERISA.”13

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According to the complaint, on September 10, 2012, CHOMP admitted to its emergency

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room a patient belonging to a health plan administered by Defendants.14 Over the next week,

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For the Northern District of California

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CHOMP provided the patient emergent and necessary medical services. At the time of Patient’s

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admission, Defendants had verified the patient’s eligibility for healthcare benefits. A few days

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later, CHOMP contacted Defendants and requested concurrent authorization for continued post-

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stabilization—medically necessary services. This time, Defendants refused to provide

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authorization and failed to take any action to procure an alternate level of care for patient or to
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assume responsibility for patient’s care. When CHOMP sent Defendants a bill for the services
rendered, Defendants refused to pay.15
CHOMP then filed this suit in the Superior Court for the County of Monterey.16 The

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complaint asserts four causes of action, each of which arises under California law.17 The first

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cause of action alleges violation of California’s Unfair Competition Law based on state statutes

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Marin, 581 F.3d at 946 (quoting Davila, 542 U.S. at 210).

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Davila, 542 U.S. at 211.

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Id. at 214.

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See Docket No. 1 at 8-10.

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See id.

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See id. at 7.

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See id. at 10-13.

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

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and the second, third and fourth causes of action allege that Defendants owe CHOMP monies for

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services rendered.18 The specific acts giving rise to these claims include Defendants’ alleged

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failure to pay for emergency services as mandated by California law, including California Health

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& Safety Code § 1371.4. These acts also include Aetna’s alleged failure to take legally required

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action to the extent they disputed the medical necessity of the treatment provided to the patient
by CHOMP at the time it was reported to Defendants.19

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Aetna removed the case to this court, prompting CHOMP to move for remand.

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II.

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The court has removal jurisdiction under 28 U.S.C. § 1441 and 1446(a). Defendants

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For the Northern District of California

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claim removal jurisdiction under 28 U.S.C. § 1331.20 The parties further consented to the

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jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed. R. Civ. P.

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72(a).21

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Because the court remands the case, it does not consider substantive defenses brought by
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Defendants, such as those regarding Aetna’s role as administrator.22
III.

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Davila’s two-prong test for removal of state law claims is straightforward: (1) could the

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plaintiff have brought its claims under Section 502 of ERISA and (2) do the defendant’s actions

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implicate any independent legal duty? Neither prong is satisfied here.

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First, CHOMP could not bring its claims as an ERISA beneficiary. Aetna highlights the

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patient’s assignment to CHOMP of all benefits under the plan. “ERISA preempts the state
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See id.

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See id.

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See Docket No. 1 at 1.

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See Docket Nos. 7, 8, 11.

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See Docket No. 20 at 2.

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

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claims of a provider suing as an assignee of a beneficiary’s rights to benefits under an ERISA

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plan.”23 But CHOMP explicitly disavows any claim based on the patient’s right to benefits under

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its employer’s ERISA plan. CHOMP instead bases its claim on state law payment standards for

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emergency and medically necessary services it provided after Defendants allegedly failed to take

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over the patient’s care.24

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In Marin General Hospital v. Modesto & Empire Traction Co., the Ninth Circuit held

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that, despite an assignment of benefits, the first prong of the Davila test was not satisfied because
the claims arose out of an oral agreement between the hospital and an insurance plan

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For the Northern District of California

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administrator to pay certain of the patient’s hospital charges above and beyond those covered by

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the ERISA plan.25 Aetna attempts to distinguish Marin General Hospital by arguing that

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CHOMP does not allege that Defendants have entered into any contracts with it.26 But as

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CHOMP correctly notes, what was dispositive in Marin General Hospital was the fact that the

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hospital’s claim stemmed from a non-ERISA obligation, not the particular source of that
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obligation:
[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
MBAMD. As in Blue Cross, the Hospital is not suing defendants based on any

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The Meadows v. Employers Health Ins., 47 F.3d 1006, 1008 (9th Cir.1995) (citing Misic v.
Building Service Employees Health & Welfare Trust, 789 F.2d 1374, 1378 (9th Cir.1986))
(emphasis in original).
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See Docket No. 1 at 10-13.

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See Marin Gen. Hosp., 518 F.3d at 947.

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See Docket No. 20 at 8.

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

assignment from the patient of his rights under his ERISA plan pursuant to §
502(a)(1)(B); rather, it is suing in its own right pursuant to an independent obligation.27

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Here, as in Marin General Hospital, the plaintiff is not suing as the assignee of an ERISA plan

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participant or beneficiary under Section 502(a)(1)(B), and is not seeking benefits under an
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ERISA plan. As in that case, the plaintiff therefore could not have brought the instant claims
under Section 502(a)(1)(B).28

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Second, Aetna’s actions implicate legal duties that are independent of those under

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ERISA. Claims are based on other independent legal duties if they would exist whether or not an

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ERISA plan existed.29 State law legal duties are not independent of ERISA where “interpretation

United States District Court
For the Northern District of California

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of the terms of [the] benefit plan forms an essential part” of the claim, and legal liability can exist

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“only because of [the] administration of ERISA-regulated benefit plans.”30 Like the plaintiff in
People of the State of California v. Blue Cross of California, CHOMP’s claims depend on an

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interpretation of state law, and do not in any way involve the interpretation of any ERISA plans

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administered by defendants.31

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Marin General Hospital, 581 F.3d at 948; see also Blue Cross of California v. Anesthesia Care
Assocs. Med. Group Inc., 187 F.3d 1045, 1050 (9th Cir.1999) (holding claims of medical
providers against health care plan for breach of provider agreements were not completely
preempted by ERISA because “the Providers’ claims, which arise from the terms of their
provider agreements and could not be asserted by their patient-assignors, are not claims for
benefits under the terms of ERISA plans, and hence do not fall within § 502(a)(1)(B).”).

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Cf. People of the State of California v. Blue Cross of California, Case No. 3:11-cv-3107-SI,
2011 WL 4723758, at * (N.D. Cal. Oct. 7, 2011) (holding that ERISA did not preempt claims
based on Cal. Health & Safety Code § 1371.4).

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See Marin General Hospital, 581 F.3d at 950.

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Davila, 542 U.S. at 211.

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See People of the State of California, 2011 WL 4723758, at *16; John Muir Health, 2014 WL
4756236, at * 6 (holding that claim arising under Section 1371.4 not preempted where plaintiff
medical provider sought payment for emergency services regardless of the patient’s actual
entitlement to ERISA benefits).
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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT

IV.

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CHOMP’s motion to remand is GRANTED. The case is remanded to Monterey Superior

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Court. The Clerk shall close the file.

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SO ORDERED.

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Dated: January 9, 2015

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_________________________________
PAUL S. GREWAL
United States Magistrate Judge

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United States District Court
For the Northern District of California

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Case No.: 5:14-cv-03903-PSG
ORDER REMANDING TO STATE COURT