Sidlo v. Kaiser Permanente Insurance Company
ORDER GRANTING KAISER FOUNDATION HEALTH PLAN, INC.'S MOTION TO DISMISS HAWAII LIFE FLIGHT CORPORATION'S COUNTERCLAIM re ( #195 ) Motion to Dismiss in case 1:15-cv-00269-ACK-KSC - Signed by JUDGE ALAN C. KAY on 11/17/2016. "For the foregoing reasons, the Court GRANTS KFHP's Motion to Dismiss HLF's Counterclaim. Counts I, II, III, and IV are dismissed with prejudice, but only to the extent they are based upon KFHP's communications with members and otherwise with leave to amend. " Associated Cases: 1:15-cv-00269-ACK-KSC, 1:16-cv-00073-ACK-KSC (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
TOBY SIDLO, on behalf of himself, )
and all others similarly situated, )
) Civ. No. 16-00073 ACK-KSC
KAISER PERMANENTE INSURANCE
COMPANY, a California non-profit
corporation, KAISER FOUNDATION
HEALTH PLAN, INC., a foreign non- )
profit corporation, and DOE
KAISER FOUNDATION HEALTH PLAN,
INC., a foreign non-profit
HAWAII LIFE FLIGHT CORPORATION, a )
Hawaii corporation, and AIR
MEDICAL RESOURCE GROUP, INC., a
HAWAII LIFE FLIGHT CORPORATION, a )
Counterclaim Plaintiff, )
KAISER FOUNDATION HEALTH PLAN,
INC., a foreign non-profit
Counterclaim Defendant. )
ORDER GRANTING KAISER FOUNDATION HEALTH PLAN, INC.’S MOTION TO
DISMISS HAWAII LIFE FLIGHT CORPORATION’S COUNTERCLAIM
For the reasons set forth below, the Court GRANTS
Kaiser Foundation Health Plan, Inc.’s Motion to Dismiss Hawaii
Life Flight Corporation’s Counterclaim Against Kaiser Foundation
Health Plan, Inc.
ECF No. 195.1
The Court and the parties are familiar with the
extensive factual and procedural history of this case, and the
Court will not repeat it here except as necessary.
On February 18, 2016, Kaiser Foundation Health Plan,
Inc. (“KFHP”) filed a Complaint against Hawaii Life Flight
Corporation (“HLF”) and Air Medical Resource Group, Inc.
KFHP’s Compl. Against HLF and AMRG for Violation of
29 U.S.C. § 1132(a)(3) (“Complaint”), D. Haw., Civ. No. 16-00073
ACK-KSC, ECF No. 1.
KFHP’s claim arises out of the events
underlying and comprising consolidated lawsuit Sidlo v. Kaiser
Permanente Insurance Company, et al., Civ. No. 15-00269 ACK-KSC.
In its Complaint, KFHP alleges HLF and AMRG have violated and
Unless otherwise noted, all Electronic Case File (“ECF”)
citations refer to the civil docket for Sidlo v. Kaiser
Permanente Insurance Company, et al., Civ. No. 15-00269 ACK-KSC,
which has been consolidated with the instant action for purposes
of discovery. See Order Consolidating Cases, ECF No. 85.
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attempted to violate an anti-assignment provision contained in
KFHP’s health plans within Hawaii, which are governed by the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1001 et seq.
Complaint ¶¶ 49-56.
KFHP alleges that
HLF and/or AMRG “have repeatedly attempted to procure broad
assignments of members of the Plans’ rights, interest, claims
for money due, benefits and/or obligations under the Plans, in
violation of the anti-assignment provision.”
Id. ¶ 33.
specifically, KFHP asserts that the Sidlo litigation has been
brought by HLF and/or AMRG in Sidlo’s name, which constitutes a
violation of the anti-assignment provision.
Id. ¶ 35.
HLF and AMRG filed an Answer to the Complaint on April
ECF No. 102.
ECF No. 103.
That same day, HLF filed a Counterclaim
HLF’s Countercl. Against KFHP (“Counterclaim”),
HLF’s Counterclaim asserts four counts:
competition in violation of Hawaii Revised Statutes (“HRS”)
§ 480-2; 2) tortious interference with contract; 3) defamation;
and 4) trade libel/disparagement.
Id. ¶¶ 23-49.
that KFHP, “in connection with its health insurance services,
has made written and oral demands that hospitals arrange for
emergency transportation of patients exclusively through or as
designated by KFHP, even where those hospitals have contracts
with HLF and contrary to the federal law that exclusively
provides that emergency patient transport is arranged by the
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Id. ¶ 24.
Further, HLF contends that KFHP
has sent letters to patients that received air ambulance
services from HLF, which letters contain “numerous falsehoods,
misrepresentations, and otherwise disparaging and defamatory
statements” regarding HLF.
Id. ¶ 25.
On June 8, 2016, KFHP filed a Motion to Dismiss HLF’s
ECF No. 195.
KFHP argues that HLF’s
claims are preempted by ERISA; are barred by the litigation
privilege; and fail to state a claim upon which relief can be
Id. at 1-2.
HLF filed a Memorandum in Opposition to
KFHP’s Motion on October 14, 2016 (“Opposition”), ECF No. 473;
and KFHP filed a Reply in Support of KFHP’s Motion (“Reply”) on
October 24, 2016, ECF No. 481.
The Court held a hearing regarding the Motion on
November 7, 2016.
KFHP serves as a claim fiduciary of certain group
health plans within the State of Hawaii that are governed by
Counterclaim ¶ 31; Complaint ¶¶ 3, 6.
Included in the
health plan documents is a Hawaii Region Group Medical and
Hospital Service Agreement (“Service Agreement”), which lists
KFHP as “a fiduciary to review claims under [the] Service
Agreement,” and indicates that KFHP “has the authority to review
claims and determine whether a Member is entitled to the
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benefits of [the] Service Agreement.”2
Service Agreement, Ex. A
to KFHP’s Req. for Judicial Notice in Supp. of Mot. at KFHP
000004, ECF No. 196-2.
At all relevant times, Consolidated
Plaintiff Toby Sidlo and a group of proposed class members were
participants in or beneficiaries of these plans.3
FAC ¶¶ 3, 11.
The Court takes judicial notice of KFHP’s health plan
documents, including the Group Face Sheet, Service Agreement,
Kaiser Permanente Group Plan Benefit Schedule (“Benefit
Schedule), and various riders attached to KFHP’s Request for
Judicial Notice in Support of Motion. See ECF No 196. The
Court also takes judicial notice of KFHP’s Complaint. See id.
Both the plan documents and KFHP’s Complaint are alleged in the
Counterclaim and neither party disputes their authenticity; nor
has HLF objected to KFHP’s request. See Counterclaim ¶ 11
(“[T]he claims [asserted in the Counterclaim] arise out of the
same transaction or occurrence that is the subject matter of
KFHP’s complaint . . . .”); id. ¶ 31 (“KFHP, as the health
insurance plan fiduciary for the Patients, was at all times
aware of the contracts between the Patients and HLF.”) (emphasis
Additionally, the Court takes judicial notice of
Consolidated Plaintiff Toby Sidlo’s First Amended Class Action
Complaint (“FAC”), ECF No. 227, as well as the Court’s summary
judgment order in the Sidlo litigation dated October 31, 2016,
ECF No. 487. See United States v. Howard, 381 F.3d 873, 876 n.1
(9th Cir. 2004) (noting that a court may take judicial notice of
court records in another case). Finally, the Court takes
judicial notice of the Joint Litigation Agreement (“JLA”) signed
by HLF and Sidlo. See ECF No. 325-31; see also Fed. R. Evid.
201(b)(2) (a court may take judicial notice of a fact that “can
be accurately and readily determined from sources whose accuracy
cannot reasonably be questioned”).
In consolidated case Sidlo v. Kaiser Permanente Insurance
Company, et al., Civ. No. 15-00269 ACK-KSC, KFHP member Sidlo
alleged that KFHP and Kaiser Permanente Insurance Company
(“KPIC”) violated ERISA by underpaying or under-reimbursing
claims for medical air transportation services provided to plan
participants or beneficiaries by HLF since 2013. FAC ¶¶ 55-56.
On October 31, 2016, the Court issued an Order granting summary
(continued . . .)
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HLF provides air ambulance services throughout the
State of Hawaii, transporting patients via helicopter or fixed
wing aircraft to hospitals and medical centers throughout the
Counterclaim ¶¶ 1, 12.
HLF asserts that it is not a
self-dispatching service; rather, pursuant to the Emergency
Medical Treatment and Active Labor Act (“EMTALA”), 42 U.S.C. §
1395dd, attending physicians and hospitals dispatch HLF when an
Counterclaim ¶ 15.
The Centers for Medicare
& Medicaid Services (“CMS”) have issued interpretive guidelines
for EMTALA, which state, “It is the treating physician at the
transferring hospital who decides how the individual is
transported to the recipient hospital and what transport service
will be used, since this physician has assessed the individual
See CMS, State Operations Manual, Appendix V, at
66, available at https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/som107ap_v_emerg.pdf.
judgment in favor of KFHP and KPIC on Counts I through V of
Sidlo’s First Amended Complaint, which alleged various claims
arising under ERISA. See ECF No. 487 at 77-78. In its Order
the Court also sua sponte dismissed without prejudice Sidlo’s
Count VI, which sought a determination that KFHP and KPIC were
“liable for the full unpaid balances owed by each class member
under the doctrine of equitable indemnification as well as all
other indemnity requirements imposed by law.” Id.
Pursuant to Federal Rule of Evidence 201(b)(2), the Court takes
judicial notice of CMS’s interpretive guidelines for EMTALA.
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HLF contends that “[m]any Hawaii hospitals contract
with HLF to provide air ambulance services because they and
their physicians believe that the nature of HLF’s services . . .
best serve the medical needs of, and minimize risk to, their
Counterclaim ¶ 20.
As a result, HLF asserts, these
hospitals have entered into first call agreements with HLF,
which require the hospitals to first call upon HLF to provide
necessary air ambulance services in an emergency situation.
Subsequent to the hearing on KFHP’s Motion, HLF, with
the consent of KFHP, submitted to the Court three of the first
call agreements it has with hospitals.
The first agreement is a
“Right of First Refusal” contract that HLF entered into with
Kona Community Hospital (“KCH”) on the Big Island.
HLF’s Submission of Exs., ECF No. 505-4.
See Ex. 4 to
The agreement provides
that HLF, “without charge to KCH, will transport, without regard
for ability to pay, medically necessary patients from KCH to
medical facilities in Hawaii, in accordance with physician’s
In certain situations, such as when a
patient requires specialty care not provided by HLF or HLF has a
delayed estimated time of arrival, KCH may request transport
from another provider.
The term of the agreement is five
years, beginning November 1, 2012.
Thus, the agreement is
still valid, expiring on October 31, 2017.
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The second agreement is also a “Right of First
Refusal” contract between HLF and Wilcox Memorial Hospital
(“WMH”), a facility located on Kauai.
Submission of Exs., ECF No. 505-5.
See Ex. 5 to HLF’s
The agreement contains
substantially similar provisions as the first agreement, and has
a three year term beginning February 1, 2013.
three year term has expired, but the agreement provides that it
“shall automatically renew each year for one year periods.”
The last agreement is entitled an “Agreement for
Purchase of Goods and Services,” entered into by HLF and Hilo
Medical Center (“HMC”) on the Big Island.
Submission of Exs., ECF No. 505-6.
See Ex. 6 to HLF’s
Under the contract, HLF
agrees to keep a “base of operation” at the hospital in order to
quickly transport “urgent and emergent patients.”
contract states that HLF “will serve as the preferred air
transport service provider, so long as performance and quality
indicators are met as determined by HMC Administration and
Emergency Medical Staff.”
It also requires HLF to provide
a plan detailing the service it will provide, including
“alternate patient transport options for [sic] (a) while the
helicopter is in use and a second need arises, (b) when
helicopter use is not practical due to the weight of the patient
or the need for additional life support equipment during
transport; or (c) when weather conditions preclude the use of
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The agreement has a three year term
beginning April 10, 2013, and provides that the agreement “may
be renewed for subsequent renewal terms as agreed to by both
parties through a written amendment.”
The initial three-
year term has expired, and it is unclear at this point whether
the parties agreed to renew the agreement.
HLF alleges that KFHP, “in connection with its health
insurance services, has made written and oral demands that
hospitals arrange for emergency transportation of patients
exclusively through or as designated by KFHP, even where those
hospitals have contracts with HLF and contrary to the federal
law that exclusively provides that emergency patient transport
is arranged by the treating physician.”
Id. ¶ 5.
that KFHP requires hospitals to utilize the air ambulance
services of HLF’s competitors, “who are aligned with, or
otherwise have relationships with, KFHP.”
HLF, with the consent of KFHP, has also submitted to
the Court two letters counsel for KFHP sent to Hawaii Health
Systems Corporation (“HHSC”) concerning KCH’s use of HLF’s air
part of HHSC.
According to the communications, KCH is a
See Ex. 2 to HLF’s Submission of Exs., ECF No.
KCH is also the hospital with which HLF has a first call
agreement set to expire on October 31, 2017.
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The first communication is a cease and desist letter
sent on March 19, 2015.
KFHP asserts that KCH’s Dr.
Richard McDowell “has not been permitting Kaiser hospital staff
to coordinate the air ambulance transportation through Kaiser’s
first call air ambulance contractor, AMR; and has been directing
ER staff at [KCH] to use [HLF] exclusively for air transport,
over the requests and objections of Kaiser’s hospital staff.”
The letter states that KCH, through Dr. McDowell’s actions,
is in breach of a contract between HHSC and Kaiser Foundation
Hospitals, whereby HHSC is required to notify Kaiser when one of
its members presents at a HHSC facility; cooperate with Kaiser
on the transfers of its members; and provide services in a cost
The letter also notes that Dr.
McDowell’s conduct is interfering with KFHP’s first call
agreement with American Medical Response (“AMR”).
The letter also states that any EMTALA concerns do not
apply, since the air ambulance transports with which KFHP is
concerned involve patients who are in stable condition.
The letter reads, “In such instances, we disagree that [KCH] or
HHSC should dictate the mode of transportation, especially when
Kaiser has medical and financial responsibility for the
patient’s post stabilization care.”
In a follow-up communication sent to HHSC on July 15,
2015, counsel for KFHP writes:
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We recognize that there may be circumstances
unstabilized patient is necessary and that a
transfer by rotor vehicle may be medically
necessary in the opinion of the treating
Your citation to EMTALA and the
challenging that decision for unstabilized
patients being transported by air ambulance
from the KCH emergency department. However,
the vast majority of Kaiser members at issue
. . . do not involve unstabilized patients
in an emergent condition . . . .
the cases in the last year have concerned
stabilized Kaiser members who are being
transferred for continuity of care of the
patient at their Kaiser hospital.
cases EMTALA does not apply.
Ex. 3 to HLF’s Submission of Exs., ECF No. 505-3.
The letter reiterates that AMR is KFHP’s first call
provider and that KFHP is responsible for controlling the
medical expenses of its members.
The letter closes
Regrettably, while Kaiser has tried to
negotiate reasonable rates with HLF, HLF
refuses to contract with Kaiser so long as
Kaiser has a first call contract with AMR.
HLF has pursued a business plan that seeks
contracts with unconscionable, undisclosed
rates in circumstances where the members and
their families are under duress.
assistance in helping us to avoid such cases
in the future would most certainly be
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HLF did not submit to the Court any communications
from KFHP to either WMH or HMC, the two other hospitals with
whom HLF has first call agreements that the Court has reviewed.
Finally, HLF contends that KFHP sent a form letter to
certain of its members who received air ambulance services from
HLF, which letters contain “numerous falsehoods and defamatory
Id. ¶¶ 6, 22.
One such letter, dated May 4, 2015,
was sent to Consolidated Plaintiff Sidlo in connection with a
medical air transport he received from HLF.
Counterclaim, ECF No. 103-2.
Id. ¶ 22; Ex. 1 to
The letter states that it was sent
in response to HLF’s attempts to request payment from Sidlo, and
that it relates to a dispute between KFHP and HLF “over
exorbitant and excessive billings for [HLF’s] air ambulance
Ex. 1 to Counterclaim.
It asserts that
KFHP informed HLF it is “illegal to pressure individual patients
and their families,” and that KFHP is “considering further legal
steps to prevent HLF from contacting [members],” including
offering to provide Sidlo with legal representation.
argues that the letter implies to Sidlo that he should refuse to
pay HLF for its services, and should instead direct HLF to the
attorney retained by KFHP to represent members.
KFHP’s communications to hospitals and members form
the basis of HLF’s claims of unfair competition, tortious
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interference with contract, defamation, and trade
Federal Rule of Civil Procedure 12(b)(6) authorizes
the Court to dismiss a complaint that fails “to state a claim
upon which relief can be granted.”
The Court may dismiss a
complaint either because it lacks a cognizable legal theory or
because it lacks sufficient factual allegations to support a
cognizable legal theory.
Conservation Force v. Salazar, 646
F.3d 1240, 1242 (9th Cir. 2011).
On a Rule 12(b)(6) motion to dismiss, the Court
accepts all well-pleaded factual allegations as true and
construes them in the light most favorable to the nonmoving
Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777,
783 (9th Cir. 2012).
The Court may not dismiss a “complaint
containing allegations that, if proven, present a winning
case . . . no matter how unlikely such winning outcome may
appear to the district court.”
Balderas v. Countrywide Bank,
N.A., 664 F.3d 787, 791 (9th Cir. 2011).
Nonetheless, “conclusory allegations of law and
unwarranted inferences are insufficient to defeat a motion to
Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011)
“[O]nly pleaded facts, as opposed to legal
conclusions, are entitled to assumption of the truth.”
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States v. Corinthian Colls., 655 F.3d 984, 991 (9th Cir. 2011).
A “formulaic recitation of the elements of a cause of action”
will not defeat a motion to dismiss.
Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (internal citations and
The complaint must contain sufficient
factual matter, accepted as true, to “state a claim to relief
that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
plausibility standard . . . asks for more than a sheer
possibility that a defendant has acted unlawfully.
complaint pleads facts that are ‘merely consistent with’ a
defendant’s liability, it ‘stops short of the line between
possibility and plausibility of entitlement to relief.’”
556 U.S. at 678 (quoting Twombly, 550 U.S. at 556-57) (some
quotation marks omitted).
The Court may, but is not required to, “consider
certain materials — documents attached to the complaint,
documents incorporated by reference in the complaint, or matters
of judicial notice — without converting the motion to dismiss
into a motion for summary judgment.”
United States v. Ritchie,
342 F.3d 903, 908 (9th Cir. 2003); see Davis v. HSBC Bank
Nevada, N.A., 691 F.3d 1152, 1159-60 (9th Cir. 2012) (court not
required to incorporate documents by reference).
The Court may
also consider documents whose contents are alleged in a
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complaint and whose authenticity is not questioned by any party.
Davis, 691 F.3d at 1160.
The Court need not accept as true
allegations that contradict the complaint’s exhibits, documents
incorporated by reference, or matters properly subject to
Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580,
588 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d
979, 988 (9th Cir. 2001).
A court should grant leave to amend “even if no
request to amend the pleading was made, unless it determines
that the pleading could not possibly be cured by the allegation
of other facts.”
Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.
2000) (en banc) (citations omitted).
Leave to amend “is
properly denied . . . if amendment would be futile.”
City & Cty. of S.F., 656 F.3d 1002, 1008 (9th Cir. 2011).
ERISA’s preemption clause provides that ERISA “shall
supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan.”
29 U.S.C. §
“There are two strands of ERISA Preemption:
‘express’ preemption under ERISA § 514(a), 29 U.S.C. § 1144(a);
and (2) preemption due to a ‘conflict’ with ERISA’s exclusive
remedial scheme set forth in [ERISA § 502(a),] 29 U.S.C. §
Fossen v. Blue Cross & Blue Shield of Mont., Inc.,
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660 F.3d 1102, 1107 (9th Cir. 2011) (quoting Paulsen v. CNF
Inc., 559 F.3d 1061, 1081 (9th Cir. 2009)) (alteration in
Both of these preemption provisions “defeat state-
law causes of action on the merits.”
KFHP argues that
HLF’s counterclaims are expressly preempted by 29 U.S.C. §
The Supreme Court has observed on numerous occasions
that “the express pre-emption provisions of ERISA are
Pilot Life Ins. Co. v. Dedeaux, 481
U.S. 41, 45-46 (1987); see also Ingersoll-Rand Co. v. McClendon,
498 U.S. 133, 138 (1990) (“[ERISA’s] pre-emption clause is
conspicuous for its breadth.”) (quoting FMC Corp. v. Holliday,
498 U.S. 52, 58 (1990)); Gobeille v. Liberty Mut. Ins. Co., 136
S. Ct. 936, 947 (2016) (“Section 1144 contains what may be the
most expansive express pre-emption provision in any federal
statute.”) (Thomas, J., concurring).
“The key to § 514(a) is found in the words ‘relate
Congress used those words in their broad sense, rejecting
more limited pre-emption language that would have made the
clause ‘applicable only to state laws relating to the specific
subjects covered by ERISA.’”
Ingersoll, 498 U.S. at 138
(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983)).
The Supreme Court has said that “a law ‘relates to’ an employee
benefit plan, in the normal sense of the phrase, if it has a
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connection with or reference to such a plan.”
Shaw, 463 U.S. at
96-97; see also Ingersoll, 498 U.S. at 139 (“Under this ‘broad
common-sense meaning,’ a state law may ‘relate to’ a benefit
plan, and thereby be pre-empted, even if the law is not
specifically designed to affect such plans, or the effect is
only indirect.”); Wise v. Verizon Commc’ns, Inc., 600 F.3d 1180,
1190, (9th Cir. 2010) (“[W]here ‘the existence of [an ERISA]
plan is a critical factor in establishing liability’ under a
state cause of action, the state law claim is preempted.”)
(quoting Ingersoll, 498 U.S. at 136).
In order to determine whether a common law claim has
“reference to” an ERISA plan, “the focus is whether the claim is
premised on the existence of an ERISA plan, and whether the
existence of the plan is essential to the claim’s survival.”
Oregon Teamster Emp’rs Trust v. Hillsboro Garbage Disposal,
Inc., 800 F.3d 1151, 1155 (9th Cir. 2015) (quoting Providence
Health Plan v. McDowell, 385 F.3d 1168, 1172 (9th Cir. 2004).
In determining whether a claim has a “connection with” an ERISA
plan, the Ninth Circuit uses a “relationship test . . . under
which a state law claim is preempted when the claim bears on an
ERISA-regulated relationship, e.g., the relationship between
plan and plan member, between plan and employer, [or] between
employer and employee.”
Paulsen, 559 F.3d at 1082; Oregon
Teamster, 800 F.3d at 1156.
More broadly, both the Supreme
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Court and the Ninth Circuit have recognized that “[t]he basic
thrust of the pre-emption clause . . . was to avoid a
multiplicity of regulation in order to permit the nationally
uniform administration of employee benefit plans.”
Conference of Blue Cross & Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 657 (1995); Paulsen, 559 F.3d at 1082.
Importantly, “pre-emption does not occur . . . if the
state law has only a ‘tenuous, remote, or peripheral’ connection
with covered plans, as is the case with many laws of general
Operating Eng’rs Health & Welfare Trust Fund v.
JWJ Contracting Co., 135 F.3d 671, 677 (9th Cir. 1998).
objective of Congress in crafting Section 1144(a) was not to
provide ERISA administrators with blanket immunity from garden
variety torts which only peripherally impact daily plan
Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d
974, 984 (9th Cir. 2001).
The Ninth Circuit has recognized that the “relate to”
language of ERISA’s preemption provision “has been the source of
great confusion and multiple and slightly differing analyses.”
Paulsen, 559 F.3d at 1081; see also Rutledge v. Seyfarth, Shaw,
Fairweather & Geraldson, 201 F.3d 1212, 1216 (9th Cir. 2000), as
amended by 208 F.3d 1170 (9th Cir. 2000) (“Developing a rule to
identify whether ERISA preempts a given state law . . . has
bedeviled the Supreme Court.”) (emphasis omitted).
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the court noted, “[W]e have formulated several different, though
compatible, tests in an effort to follow the Supreme Court in
fulfilling the statutory mandate of broad preemption without
intruding upon state laws beyond the intention of Congress and
the objectives of ERISA . . . . Our efforts, like the Supreme
Court’s, have not succeeded in making this inquiry a precise
Dishman, 269 F.3d at 981 n.15.
a. KFHP’s Letters to Members
KFHP’s purported communications to both patients and
hospitals form the basis of HLF’s Counterclaim.
that the claims to which these communications give rise are
preempted because the communications were made in the course of
administering its ERISA plans.
Motion at 10.
With respect to
KFHP’s alleged communications to patients, HLF argues that its
Counterclaim does not depend on the existence of an ERISA plan,
and that “the tortious interference and defamatory conduct
alleged in the Counterclaim is actionable irrespective of
whether KFHP were an ERISA plan administrator.”
HLF maintains that, consistent with circuit precedent, the
existence of an ERISA plan is not enough to establish that
preemption is warranted.
See id. at 7-12 (citing Dishman, 269
F.3d at 984 (“The fact that the conduct at issue allegedly
occurred ‘in the course of UNUM's administration of the plan’
does not create a relationship sufficient to warrant
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preemption.”); and Rose v. HealthComp, Inc., No. 1:15–cv–00619–
SAB, 2015 WL 4730173 (E.D. Cal. Aug. 10, 2015) (stating that
while “Defendant would not have obtained Plaintiff's
confidential medical information without the existence of the
medical plan . . . the Ninth Circuit held this does not create a
sufficient relationship to warrant preemption”)).
On the other hand, KFHP argues that the communications
involve an issue related to the payment of benefits, which is a
matter central to its administration of the health plans and
therefore subject to ERISA preemption.
Reply at 3.
Supreme Court has indicated that the payment of benefits is “a
central matter of plan administration.”
Egelhoff v. Egelhoff ex
rel. Breiner, 532 U.S. 141, 148 (2001); see also Gobeille, 136
S.Ct. at 955 (stating that laws which prescribe “how claims
should be processed or paid” touch on “central matter[s] of plan
administration”) (Ginsburg, J., dissenting); Rose, 2015 WL
4730173, at *8 (finding no preemption where “Plaintiff’s
allegations do not relate to processing any claim for
Here, HLF’s claims do not relate directly to the
denial of benefits due under the plans.
Instead, there is an
intermediate step because HLF’s claims arise out of
communications from KFHP to its members, which were sent in the
context of a dispute about the denial of benefits.
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KFHP asserts, “HLF’s claims are [nevertheless] contingent upon
the existence of the Plans and relate to KFHP’s administration
of the Plans and processing of claims.”
See Motion at 13.
can be discerned from the pleadings in both this action and the
Sidlo litigation, the letter to Sidlo was sent in connection
with a disagreement as to how KFHP was processing and paying
Sidlo’s claim for medical air transportation services, which
implicates KFHP’s interpretation of its ERISA plans.
is therefore directly tied to KFHP’s plan administration and
processing of claims.
Furthermore, the letter appears to arise from KFHP’s
conduct as an ERISA fiduciary.
KFHP asserts, “In response to
HLF’s intrusion into the realm of Plan administration, KFHP (as
a fiduciary and Plan administrator) needed to set the record
straight and inform Members that HLF was providing them with
inaccurate information based on HLF’s incorrect interpretation
of Plan documents.”
Reply at 4.
Because KFHP sent this letter
in its role as fiduciary, to the extent HLF’s Counterclaim is
based on this communication it appears to bear on the
relationship between the plan and the member, which the Ninth
Circuit has determined is a proper basis for preemption.
Paulsen, 559 F.3d at 1082.
The correlation between HLF’s Counterclaim and the
Sidlo litigation is also telling.
In this action, HLF’s claims
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rest on the premise that HLF has a contract with KFHP members,
under which members will pay the balance of the bill for their
air ambulance services.
However, Sidlo and HLF, as a party to
the JLA, sought this same balance from KFHP in the Sidlo
litigation via an improper denial of benefits claim pursuant to
29 U.S.C. § 1132(a)(1)(b).
Furthermore, as KFHP points out,
HLF’s Counterclaim purports to “arise out of the same
transaction or occurrence that is the subject matter of KFHP’s
complaint,” which itself is brought pursuant to 29 U.S.C. §
Reply at 3; see also Counterclaim ¶ 11.
Because KFHP’s interpretation of its plans and
administration and payment of members’ claims bears directly on
the letters KFHP sent its members, the Court holds that to the
extent HLF’s Counterclaim is based on those communications, it
b. KFHP’s Communications with Hospitals
KFHP’s communications with hospitals relate only to
Count I, which alleges that “KFHP sent the Letters to disparage
HLF unfairly with falsehoods and misrepresentations, to cause
Patients to breach their agreements to pay HLF for air ambulance
services, and to disrupt HLF’s business operations and
relationships with patients and hospitals.”
Counterclaim ¶ 26.
KFHP contends that “[h]ad there been no ERISA-governed benefits
plans in place that were administered by KFHP, KFHP would not
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have any reason to communicate with hospitals about services
provided to Members under those Plans or with any individuals
who were or are ‘Members.’”
Motion at 13.
The Court agrees
with HLF, however, that “KFHP’s conduct in causing hospitals to
breach their contracts with KFHP would be wrongful irrespective
of whether any ERISA governed plan is involved.”
In fact, neither of the communications the Court has
reviewed specifies whether the patients to whom KFHP refers are
members of an ERISA plan; indeed, there is no mention of an
ERISA-governed plan at all.
Furthermore, the first letter,
dated March 19, 2015, was sent several months before the Sidlo
litigation began, and the second letter is dated July 15, 2015,
which is the day Sidlo filed his lawsuit.
Thus, it is unclear
whether these communications were sent in the context of an
ongoing ERISA dispute related to a denial of benefits or as a
result of KFHP’s general dissatisfaction with HLF’s increasing
rates and “excessive billing practices.”
See Complaint ¶¶ 23-
The second letter does state, “The air ambulance
transportation of [KFHP] . . . members who have presented to and
have been stabilized in the KCH emergency department is at the
heart of the dispute with [HLF].”
Ex. 3 to HLF’s Submission of
This is likely a reference to the dispute that formed the
basis of the Sidlo litigation, which commenced the same day the
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letter was sent.
However, on a motion to dismiss the Court must
construe all inferences in favor of HLF, and thus concludes that
these letters do not definitively pertain to KFHP’s ERISA plans
Separately, KFHP argues that, pursuant to the plan
documents, it has the authority to “arrange and provide
medical services directly rather than paying for medical
services provided by others,”
Reply at 6 (quoting Service
Agreement at KFHP 000004); as well as to determine “the most
appropriate delivery or level of service” for medical care, id.
(quoting Benefit Schedule, Ex. A to KFHP’s Req. for Judicial
Notice in Supp. of Mot. at KFHP 000025, ECF No. 196-2).
extent the plans do afford KFHP a say in the method or provider
of medical services, EMTALA appears to limit this discretion.
In fact, KFHP appears to recognize that EMTALA allows the
hospital to direct the method of transportation in an emergency
See Ex. 3 to HLF’s Submission of Exs.
argues that EMTALA does not apply where a stabilized patient is
While KFHP stated in its first letter to
HHSC that its directive to hospitals to seek preauthorization
for medical air transportation did not implicate EMTALA, it did
concede in its second letter to HHSC that EMTALA might bear upon
some of the transports at issue.
See id. (“Most of the cases in
the last year have concerned stabilized Kaiser members who are
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being transferred for continuity of care of the patient at their
Kaiser hospital.”) (emphasis added).
Furthermore, as evidenced
by its Counterclaim, HLF appears to have outstanding concerns
As HLF notes, the CMS interpretive guidelines for
EMTALA provide, “It is the treating physician at the
transferring hospital who decides how the individual is
transported to the recipient hospital and what transport service
will be used, since this physician has assessed the individual
See CMS, State Operations Manual, Appendix V, at
Without knowing the circumstances surrounding the various
patient transports at issue, it is impossible for the Court to
determine at this juncture whether KFHP’s conduct and
communications violate EMTALA.
Further, the Court notes that a
question may remain as to whether HLF’s first call agreements
with hospitals likewise violate EMTALA.
However, on a motion to
dismiss HLF’s unfair competition claim pursuant to a theory of
ERISA preemption, the Court need not resolve these issues now.
For the foregoing reasons, the Court holds that to the
extent HLF’s claims arise out of KFHP’s communications with
members, those claims are preempted by ERISA.
Court dismisses with prejudice Counts I, II, III, and IV, but
only to the extent they are based upon KFHP’s communications
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with members and otherwise with leave to amend.5
See Somers v.
Apple, Inc., 729 F.3d 953, 960 (9th Cir. 2013) (“Dismissal
without leave to amend is proper if it is clear that the
complaint could not be saved by amendment.”) (alteration and
Unfair Competition Claim
The Court next determines whether HLF has properly
stated a claim of unfair competition pursuant to HRS Chapter
In its Counterclaim, HLF asserts that “KFHP, in connection
with its health insurance services, has made written and oral
demands that hospitals arrange for emergency transportation of
patients exclusively through or as designated by KFHP, even
where those hospitals have contracts with HLF and contrary to
the federal law that exclusively provides that emergency patient
transport is arranged by the treating physician.”
HLF alleges that these communications have disrupted
The Court notes that currently pending before Magistrate Judge
Chang is HLF’s Motion for Leave to File First Amended
Counterclaim, for which a hearing has been scheduled on December
15, 2016. See ECF No. 428. HLF’s proposed Amended Counterclaim
attached to its motion adds additional allegations to Count II
based on KFHP’s communications with hospitals.
KFHP’s Motion asserts that the absolute and qualified
privileges bar HLF’s Counterclaim in its entirety. Motion at
16-19. However, as HLF notes, KFHP does not specifically argue
that either of these privileges applies to KFHP’s communications
with hospitals, a point which KFHP does not dispute in its
Reply. See Opposition at 15; Reply at 10-12.
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HLF’s business operations and relationships with hospitals with
which it has first call agreements, and constitute an unfair
method of competition in violation of HRS Chapter 480.
HLF also contends that KFHP’s conduct “destroy[s] HLF’s
ability to compete against air ambulance service providers that
are aligned with KFHP,” and “has the effect of suppressing
competition in the Hawaii air ambulance service marketplace.”
Id. ¶ 27.
In order to state a claim of unfair competition, a
plaintiff must allege facts showing:
“(1) a violation of HRS
chapter 480; (2) which causes an injury to the plaintiff's
business or property; and (3) proof of the amount of damages.”
BlueEarth Biofuels, LLC v. Hawaiian Electric Co., 780 F. Supp.
2d 1061, 1074 (D. Haw. 2011) (quoting Davis v. Four Seasons
Hotel Ltd., 122 Haw. 423, 435 (2010)).
KFHP first attacks HLF’s claim on the basis that it
has not identified the specific provision of Chapter 480 that
KFHP’s conduct allegedly violates.
Motion at 19-20.
Counterclaim alleges that KFHP’s conduct has violated HRS § 4802, which provides that “[u]nfair methods of competition and
unfair or deceptive acts or practices in the conduct of any
trade or commerce are unlawful.”
HRS § 480-2(a).
§ 480-2 states that “[n]o person other than a consumer, the
attorney general or the director of the office of consumer
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protection may bring an action based upon unfair or deceptive
acts or practices declared unlawful by this section,” HLF must
allege that KFHP engaged in an unfair method of competition.
HRS §§ 480-2(d)-(e); BlueEarth, 780 F. Supp. 2d at 1074.
The Hawaii Intermediate Court of Appeals has stated
that “[a] practice is unfair when it offends established public
policy and when the practice is immoral, unethical, oppressive,
unscrupulous or substantially injurious to consumers.”
v. Cutter Mgmt. Co., 122 Haw. 181 (Ct. App. 2009) (citation
The Supreme Court of Hawaii has stated:
It is impossible to frame definitions which
embrace all unfair practices. There is no
limit to human inventiveness in this field.
specifically defined and prohibited, it
would be at once necessary to begin over
again. If Congress were to adopt the method
of definition, it would undertake an endless
It is also practically impossible to
definition will fit business of every sort
in every part of this country.
competition is unfair or not generally
depends upon the surrounding circumstances
of the particular case.
What is harmful
beneficial under different circumstances.
Haw. Med. Ass’n v. Haw. Med. Serv. Ass’n, Inc., 113 Haw. 77, 109
(2006) (citation omitted).
Perhaps for this reason, “Hawai‘i
courts have indicated that the terms unfair and deceptive should
be interpreted broadly.”
Crilley v. Bank of Am., N.A., Civ. No.
12-00081 LEK-BMK, 2012 WL 1492413, at *13 (D. Haw. Apr. 26,
- 28 -
2012); see also Han v. Yang, 84 Haw. 162, 177 (Ct. App. 1997)
(stating that HRS § 480-2 “outlaws unfair methods of competition
. . . in sweeping terms”) (citation omitted).
Despite the broad view Hawaii courts take with respect
to unfair competition claims, the Court finds that HLF has not
sufficiently pled a violation of HRS § 480-2.
only vaguely alleges that “KFHP sent the Letters to disparage
HLF unfairly with falsehoods and misrepresentations,” and
conclusorily states, “KFHP’s actions in creating, drafting, and
delivering the Letters offend established public policy, are
immoral, unethical, oppressive, unscrupulous or substantially
injurious to consumers, and therefore constitute an unfair
method of competition.”
See Counterclaim ¶ 26.
It is unclear
from the Counterclaim what false or misleading statements KFHP
made in its communications with the hospitals, or indeed, if any
were made at all; in fact, HLF only specifically alleges that
false and misleading statements were made in the letters to
members, but makes no reference to the same with regards to the
Similarly, it is unclear how exactly such a violation
caused injury to HLF’s business.
In order to establish the
second element of an unfair competition claim, a party must
sufficiently allege the “nature of the competition.”
780 F. Supp. 2d at 1074.
Specifically, the party must “allege
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how a defendant’s conduct will negatively affect competition.”
Id. (citation and internal quotation marks omitted).
Importantly, a party “need not be a competitor of or in
competition with” the party against whom it alleges a § 480-2
Four Seasons, 122 Haw. at 435.
Yet here, even when
viewing the Counterclaim in the light most favorable to HLF, the
Court finds that the Counterclaim fails to sufficiently allege
how KFHP’s communications with hospitals have negatively
HLF conclusively asserts that KFHP’s
communications were “designed to disrupt HLF’s business
operations . . . and to impede or destroy HLF’s ability to
compete against air ambulance service providers that are aligned
Counterclaim ¶ 27.
It then concludes that “KFHP’s
conduct . . . has the effect of suppressing competition in the
Hawaii air ambulance services marketplace.”
However, aside from its conclusory statement that
KFHP’s conduct has disrupted HLF’s business operations and
suppressed competition, the Counterclaim fails to allege with
any specificity the type of injury the subject communications
brought about, or in what way competition has been suppressed.
See Soule v. Hilton Worldwide, Inc., 1 F. Supp. 3d 1084, 1095
(D. Haw. 2014) (“Although Plaintiff alludes to the nature of the
competition, she fails to describe the nature of competition
with particularity and, additionally, to demonstrate that her
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injuries ‘stem from the negative effect on competition caused by
the violation . . . .’”) (citation omitted).
For example, the
Counterclaim fails to allege what, if any, business HLF has lost
from hospitals with which it has first call agreements as a
result of KFHP’s communications with the hospitals.
Finally, KFHP argues that HLF has failed to satisfy
the third element of its § 480-2 claim - proof of the amount of
damages – because it simply relies on “a bare legal conclusion
that it has been damaged in an amount to be proven at trial.”
Motion at 22 (internal quotation marks omitted).
that it has “numerously alleged throughout the Counterclaim that
KFHP’s conduct caused patients to breach their contracts with
HLF, thus depriving HLF of the sums and amounts it is owed.”
Opposition at 21.
However, since the Court has dismissed the
Counterclaim to the extent it relies on KFHP’s communications
with members, HLF is obligated to allege the damages it
sustained as a result of KFHP’s communications with hospitals,
which the Counterclaim fails to do.
For all of the foregoing reasons, the Court concludes
that HLF has failed to sufficiently plead the elements of an
unfair competition claim arising from KFHP’s communications with
- 31 -
For the foregoing reasons, the Court GRANTS KFHP’s
Motion to Dismiss HLF’s Counterclaim.
Counts I, II, III, and IV
are dismissed with prejudice, but only to the extent they are
based upon KFHP’s communications with members and otherwise with
leave to amend.
IT IS SO ORDERED.
Honolulu, Hawai’i, November 17, 2016.
Alan C. Kay
Sr. United States District Judge
Kaiser Foundation Health Plan, Inc. v. Hawaii Life Flight Corporation, et
al., Civ. No. 16-00073 ACK-KSC, Order Granting Kaiser Foundation Health Plan,
Inc.’s Motion to Dismiss Hawaii Life Flight Corporation’s Counterclaim.
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