Community Hospital of the Monterey Peninsula v. Blue Cross of California et al

Filing 29

ORDER by Judge Lucy H. Koh denying as moot 9 Motion to Dismiss; granting 13 Motion to Remand (lhklc3S, COURT STAFF) (Filed on 1/26/2015)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

10
SAN JOSE DIVISION

United States District Court
Northern District of California

11
12

COMMUNITY HOSPITAL OF THE
MONTEREY PENINSULA,

13
14

Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S
MOTION TO REMAND, AND
DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

Plaintiff,
v.

15
16
17

BLUE CROSS OF CALIFORNIA, a
California corporation; LABORERS
HEALTH AND WELFARE TRUST FUND
FOR NORTHERN CALIFORNIA; and
DOES 1 through 10, inclusive,

18
19
20

Defendants.
Before the Court are the Motion to Remand filed by plaintiff Community Hospital of the

21

Monterey Peninsula (“Plaintiff” or the “Hospital”), ECF No. 13 (“Mot.”), and the Motion to

22

Dismiss filed by defendants Laborers Health and Welfare Trust Fund of Northern California (the

23

“Trust Fund”) and Anthem Blue Cross (“Anthem,” sued here as Blue Cross of California)

24

(collectively, “Defendants”), ECF No. 9. The Court finds these motions suitable for decision

25

without oral argument pursuant to Civil Local Rule 7-1(b) and hereby VACATES the motion

26

hearing and the initial case management conference set for January 29, 2015, at 1:30 p.m. Having

27

1

28

Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

1

considered the submissions of the parties, the relevant law, and the record in this case, the Court

2

GRANTS Plaintiff’s Motion to Remand, and DENIES as moot Defendants’ Motion to Dismiss.

3

I.

BACKGROUND

4

A.

Factual Background

5

According to the Complaint, on December 16, 2012, a patient (“Patient”) sought and

6

received emergency medical treatment at the Hospital. Ex. A to ECF No. 1-1 (“Compl.”) ¶ 7.

7

Patient provided proof to the Hospital that he was a member of the Trust Fund’s health plan,

8

which is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”). Id. ¶ 8.

9

Anthem, pursuant to a contract with the Trust Fund, authorized the Hospital to provide treatment

10

United States District Court
Northern District of California

11

to Patient from December 16, 2012, to December 26, 2012. Id. ¶ 12.
On December 26, 2012, Patient’s physician determined that Patient could be discharged to

12

a skilled nursing facility (“SNF”). Compl. ¶ 14. Because no SNF could accommodate Patient

13

until December 31, 2012, Patient stayed at the Hospital until he was discharged on that date. Id.

14

¶ 15. Despite the Hospital’s attempts to obtain authorization from Defendants to continue treating

15

Patient, the Hospital alleges that Defendants failed to take any action to procure an alternate level

16

of care for Patient or to assume responsibility for Patient’s care while he was hospitalized from

17

December 26, 2012, to December 31, 2012. Id. ¶¶ 16, 18. It was not until December 28, 2012, the

18

Hospital alleges, that Defendants notified the Hospital that Defendants disputed the level of care

19

being provided. Id. ¶ 17.

20

On or about January 9, 2013, the Hospital sought $110,125.00 in reimbursement from

21

Defendants for Patient’s care from December 16, 2012, through December 31, 2012. Compl. ¶ 19.

22

Defendants partially paid, denying the Hospital reimbursement in the amount of $19,282.00 for

23

the treatment provided to Patient from December 26, 2012, until December 31, 2012. Id. ¶ 20. It

24

is that amount that the Hospital now seeks to recover. Id. ¶ 22.

25

B.

26

After exhausting Defendants’ internal appeal processes, Compl. ¶ 21, Plaintiff filed its

27
28

Procedural History

2
Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

1

Complaint in Monterey County Superior Court on July 22, 2014. The Complaint asserts four

2

causes of action against Defendants, all of which arise under California law1: one cause of action

3

for violation of the Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq., and

4

three causes of action alleging that Defendants owe Plaintiff monies for services rendered. Compl.

5

¶¶ 36-58. The alleged acts giving rise to Plaintiff’s UCL cause of action are: (1) Defendants’

6

rescission of the verification of benefits for Patient’s treatment subsequent to the Hospital’s good

7

faith provision of health care service, in violation of section 796.04 of the California Insurance

8

Code and section 1371.8 of the California Health and Safety Code; and (2) Defendants’ failure to

9

take legally required action to the extent Defendants disputed the medical necessity of the
treatment provided to Patient, in violation of section 1371.4 of the California Health and Safety

11
United States District Court
Northern District of California

10

Code. Id. ¶¶ 37-38.
On October 10, 2014, Defendants removed the case to federal court on the basis that

12
13

Plaintiff’s state law claims are completely preempted by ERISA, 29 U.S.C. § 1001 et seq., which

14

governs Patient’s benefit plan. ECF No. 1 ¶ 4. Defendants moved to dismiss this case on October

15

17, 2014. ECF No. 9. Plaintiff opposed the motion on October 31, 2014, ECF No. 12, and

16

Defendants replied on November 7, 2014, ECF No. 15.
On October 31, 2014, Plaintiff also filed the instant Motion to Remand. Mot. at 10.

17
18

Defendants opposed this motion on November 14, 2014, ECF No. 18 (“Opp.”), and Plaintiff

19

replied on November 21, 2014, ECF No. 21.

20

II.

LEGAL STANDARD

21

A suit may be removed from state court to federal court only if the federal court would

22

have had subject matter jurisdiction over the case. 28 U.S.C. § 1441(a); see Caterpillar Inc. v.

23

Williams, 482 U.S. 386, 392 (1987) (“Only state-court actions that originally could have been filed

24

in federal court may be removed to federal court by the defendant.”). If it appears at any time

25
26
27
28

1

The Complaint also asserts two state law causes of action against Anthem only: breach of
written contract and breach of implied covenant of good faith and fair dealing. Compl. ¶¶ 23-35.
3
Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

1

before final judgment that the federal court lacks subject matter jurisdiction, the federal court must

2

remand the action to state court. 28 U.S.C. § 1447(c).
The party seeking removal bears the burden of establishing federal jurisdiction. Provincial

3
4

Gov’t of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). “The removal

5

statute is strictly construed, and any doubt about the right of removal requires resolution in favor

6

of remand.” Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing

7

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)).

8

III.

9

DISCUSSION
In its Motion to Remand, Plaintiff argues that the Court should remand the instant case to

Monterey County Superior Court because Plaintiff’s Complaint asserts no federal claims and

11
United States District Court
Northern District of California

10

because ERISA does not preempt any of Plaintiff’s state law claims. Mot. at 2. The Court agrees.

12

True, ERISA contains “expansive pre-emption provisions . . . which are intended to ensure

13

that employee benefit plan regulation would be ‘exclusively a federal concern.’” Aetna Health

14

Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S.

15

504, 523 (1981)). One form of ERISA preemption is “complete pre-emption” under ERISA

16

section 502(a), id. at 207, which provides that a civil enforcement action may be brought:

17
18

(1) by a participant or beneficiary—. . . (B) to recover benefits due to him under the
terms of his plan, to enforce his rights under the terms of the plan, or to clarify his
rights to future benefits under the terms of the plan.

19

29 U.S.C. § 1132(a). Pursuant to this provision, “any state-law cause of action that duplicates,

20

supplements, or supplants the ERISA civil enforcement remedy” is preempted because it

21

“conflicts with the clear congressional intent to make the ERISA remedy exclusive.” Davila, 542

22

U.S. at 209.

23

Under Davila, however, a state law cause of action is completely preempted only “if (1)

24

‘an individual, at some point in time, could have brought [the] claim under ERISA

25

§ 502(a)(1)(B),’ and (2) ‘where there is no other independent legal duty that is implicated by a

26

defendant’s actions.’” Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 946

27
28

4
Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

1

(9th Cir. 2009) (alteration in original) (quoting Davila, 542 U.S. at 210). Because Davila’s two-

2

pronged test is stated “in the conjunctive,” a state law cause of action is preempted “only if both

3

prongs of the test are satisfied.” Id. at 947.

4

At a minimum, here, the second prong is not satisfied. As in Marin General, Plaintiff’s
“claims do not rely on, and are independent of, any duty under an ERISA plan.” 581 F.3d at 949.

6

Indeed, Plaintiff’s claims depend on interpretations of state law, and do not in any way require the

7

interpretation of an ERISA plan administered by Defendants. See Davila, 542 U.S. at 212-13

8

(explaining that state law legal duties do not arise independently of ERISA where “interpretation

9

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

10

“only because of [the] administration of ERISA-regulated benefit plans”). Whether, for example,

11
United States District Court
Northern District of California

5

Defendants engaged in unfair business practices by violating section 1371.4 of the California

12

Health and Safety Code does not turn on any interpretation of an ERISA plan.2 See Cal. ex rel.

13

Herrera v. Blue Cross of Cal., Inc., No. C 11-3107 SI, 2011 WL 4723758, at *5 (N.D. Cal. Oct. 7,

14

2011) (holding that “the second prong of Davila is not met here because plaintiff’s claims arise

15

from independent state law duties and do not depend on any duties imposed by an ERISA plan”

16

where the plaintiff had brought suit under section 1371.4 of the California Health and Safety

17

Code). In a nearly identical case involving several of the same state law claims brought by the

18

same Plaintiff, Judge Grewal agreed. See Cmty. Hosp. of the Monterey Peninsula v. Aetna Life

19

Ins. Co., No. 5:14-CV-03903-PSG, 2015 WL 138197, at *3 (N.D. Cal. Jan. 9, 2015) (remanding

20

to state court where Plaintiff asserted a UCL claim against Aetna based on, inter alia, section

21
22
23
24
25
26
27
28

2

According to Plaintiff, section 1371.4(a) mandates that a health plan have a physician
available for resolving disputed requests for treatment authorization. Compl. ¶ 38. If, after
consultation with the plan physician, there is still a disagreement between the plan and the
physician regarding the need for necessary medical care, the plan, Plaintiff alleges, must assume
responsibility for the care of the patient either by having its medical personnel take over the case
within a reasonable time after the disagreement or having a hospital under contract with the plan
agree to accept the transfer of the patient. Id. If the plan fails to satisfy either of those options,
Plaintiff claims that further necessary care is deemed authorized by the plan, and payment may not
be denied. Id. (citing Cal. Health & Safety Code § 1371.4(d)).
5
Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS

1

1371.4 of the California Health and Safety Code because “Aetna’s actions implicate legal duties

2

that are independent of those under ERISA”).3
Because the Court concludes that the second prong of the Davila test has not been

3
4

satisfied, the Court must find that ERISA does not completely preempt Plaintiff’s state law claims.

5

See Marin Gen., 581 F.3d at 947. As a result, the Court has no basis to exercise subject matter

6

jurisdiction over this action and must therefore remand the case to state court. See Cmty. Hosp.,

7

2015 WL 138197, at *3 (doing the same).

8

IV.

9

CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff’s Motion to Remand the case to

Monterey County Superior Court. Consequently, the Court DENIES as moot Defendants’ Motion

11
United States District Court
Northern District of California

10

to Dismiss.

12

IT IS SO ORDERED.

13
14

Dated: January 26, 2015
______________________________________
LUCY H. KOH
United States District Judge

15
16
17
18
19
20
21
22
23
24
25
26
27
28

3

Defendants’ citation to Cleghorn v. Blue Shield of California, 408 F.3d 1222 (9th Cir.
2005), is not to the contrary. See Opp. at 7. Unlike in Cleghorn, Plaintiff here is not a health plan
participant, and, more importantly, Plaintiff’s claim does not challenge the denial of benefits under
an ERISA plan. Rather, Plaintiff brings suit on the basis of state law duties independent of ERISA
that apply to insurance companies operating in California. See Herrera, 2011 WL 4723758, at *4
(distinguishing Cleghorn and remanding to state court where the plaintiff had brought suit under
section 1371.4 of the California Health and Safety Code).
6
Case No.: 14-CV-04552-LHK
ORDER GRANTING PLAINTIFF’S MOTION TO REMAND, AND DENYING AS MOOT DEFENDANTS’
MOTION TO DISMISS