Kaiser Foundation Health Plan, Inc. vs. Hawaii Life Flight Corporation
ORDER GRANTING IN PART AND DENYING IN PART COUNTERCLAIM DEFENDANT KAISER FOUNDATION HEALTH PLAN, INC.'S MOTION TO DISMISS COUNTERCLAIM PLAINTIFF HAWAII LIFE FLIGHT CORPORATIONS FIRST AMENDED COUNTERCLAIM re #99 Motion to Dismiss. Signed by JUDGE ALAN C. KAY on 04/27/2017.-- The Court GRANTS IN PART and DENIES IN PART Defendant KFHP's Motion to Dismiss. The Court GRANTS IN PART and DENIES IN PART KFHP's Motion as to Count III. The Court's partial grant as to Count III is WITH PREJUDICE and WITHOUT LEAVE TO AMEND. Counts I and II are dismissed WITHOUT PREJUDICE and WITH LEAVE TO AMEND. Count IV is dismissed WITH PREJUDICE. The Court DIRECTS that HLF shall file its next amended counterclaim within 30 days of the date of this Order. (eps, )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).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
KAISER FOUNDATION HEALTH PLAN,
INC., a foreign non-profit
) Civ. No. 16-00073 ACK-KSC
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 IN PART AND DENYING IN PART COUNTERCLAIM
DEFENDANT KAISER FOUNDATION HEALTH PLAN, INC.’S
MOTION TO DISMISS COUNTERCLAIM PLAINTIFF HAWAII LIFE FLIGHT
CORPORATION’S FIRST AMENDED COUNTERCLAIM
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TABLE OF CONTENTS
Count I: Unfair Competition Claim .......................16
A. Whether a Violation of EMTALA Constitutes Unfair
B. Whether HLF Has Failed to Allege Injury to
Count II: Intentional Interference with Contract Claim ..40
A. Whether KFHP Intentionally Induced Hospitals to Breach
B. Whether KFHP’s Actions Were Not Justified.............47
III. Count III: ERISA Claim ..................................50
Count IV: Breach of Contract Claim ......................56
A. Judicial Notice of Documents..........................56
B. Whether HLF Has Asserted a Ripe Claim Regarding KFHP’s
1. Interpretation of the Indemnity Offer ..............60
2. Ripeness ...........................................63
C. Whether HLF Validly Received an Assignment of the
Indemnity Rights and Has Standing.....................68
D. Whether ERISA Preempts Count IV.......................71
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For the reasons set forth below, the Court GRANTS IN
PART and DENIES IN PART Plaintiff-Counter Defendant Kaiser
Foundation Health Plan Inc.’s Motion to Dismiss Hawaii Life
Flight Corporation’s First Amended Counterclaim.
This matter involves Defendant-Counter Plaintiff
Hawaii Life Flight Corporation’s (“HLF”) efforts to recover its
billed charges for the provision of air ambulance services in
First Am. Counterclaim, ECF No. 92 (“FACC”), ¶ 1.
evidenced by the parties’ briefing, this case has an extensive
procedural background and presents intricate claims which
require resolution of complex factual and legal questions in
order to determine responsibility for the cost of providing air
ambulance transport services among the Hawaiian islands.
the parties and the Court are familiar with the history of this
case, and the Court will not repeat it here in full. 1
This case is related to a lawsuit in which Toby Sidlo
filed a class action complaint on July 15, 2015 against Kaiser
Permanent Insurance Company (“KPIC”) and Kaiser Foundation
Health Plan, Inc. (“KFHP”) alleging claims under the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §
The Court also incorporates by reference its prior orders from
October 31, 2016 (ECF No. 56) and November 17, 2016 (ECF Nos.
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1001 et seq. seeking to recover health care benefits and to
enforce plan benefits.
ECF No. 56 at 2-3; Sidlo v. Kaiser
Permanent Insurance Company, CV No. 15-00269 ACK-KSC (“Sidlo”).
Sidlo and HLF also entered into a Joint Litigation Agreement
(“JLA”) on July 15, 2015.
ECF No. 56 at 22-23.
Separately, on February 18, 2016, KFHP filed a
complaint in the instant case against HLF and its parent company
Air Medical Resource Group, Inc. (“AMRG”) alleging that HLF and
AMRG had violated the anti-assignment provision in KFHP’s ERISA
plans in Hawaii by attempting to procure assignment of members’
rights and benefits.
Id. at 4-5.
Specifically, KFHP alleged
that the Sidlo litigation was brought by HLF and/or AMRG in
Id. at 5.
On April 6, 2016, this Court
consolidated the Sidlo and KFHP actions as both cases
“involve[d] a determination as to whether [Sidlo’s] purported
assignment of rights to [HLF} was valid.”
ECF No. 85. 2
ECF No. 29; Sidlo,
HLF then filed a counterclaim against KFHP on April
14, 2016 alleging four claims: (1) unfair competition in
violation of Hawaii Revised Statutes (“HRS”) § 480-2; (2)
tortious interference with contract; (3) defamation; and (4)
Id. at 5-6.
In the Order Consolidating Cases, the Court noted that Sidlo
agreed to consolidation for purposes of discovery. ECF No. 29
at 2 n.1; Sidlo, ECF No. 85 at 2 n.1; see also ECF No. 56
(noting consolidation for purposes of discovery).
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In its October 31, 2016 Order, this Court addressed
cross-motions for summary judgment filed by Sidlo and by KFHP
and KPIC in the Sidlo action.
ECF No. 56 at 8-9.
also filed a joinder to Sidlo’s motion.
Id. at 9.
HLF and AMRG
denied Sidlo’s motion and granted KFHP and KPIC’s motion in part
and denied it in part.
Id. at 77-78.
In so holding, the Court
concluded that Sidlo had standing, that the Inter-Facility
Transport Policy applied to Sidlo’s claim, and thus that Sidlo
did not suffer an adverse benefit determination and could not
seek review of a claim denial.
See generally id.
the Court denied Sidlo’s claims regarding notice of material
modifications to the benefits plan arising from KFHP’s offer of
indemnification regarding HLF’s claims, KFHP’s alleged breach of
fiduciary duty, and equitable estoppel for misrepresentations of
rights under the contracts.
See generally id.
Court dismissed Sidlo’s claims regarding equitable
indemnification as not ripe because HLF had not yet sued Sidlo,
nor had Sidlo made any payment or discharged any legal
obligation to HLF, so KFHP’s alleged offer of indemnification
was not yet applicable.
See id. at 77.
Sidlo filed a notice of
appeal regarding this Order on November 29, 2016.
The Court issued two orders in the instant case on
November 17, 2016.
In the first, it determined that the anti- 5 -
assignment provision in KFHP’s plans did not apply to health
care providers, and thus the plan members could assign their
rights to HLF.
See ECF No. 76.
In the second, the Court
addressed KFHP’s motion to dismiss HLF’s counterclaim.
Court held that to the extent HLF’s counterclaim was based on
communications with plan members, the claims were preempted, ECF
No. 77 at 22; but to the extent they were based on
communications with hospitals, the Court could not definitively
determine whether they pertained to KFHP’s ERISA plans for
purposes of preemption.
Id. at 23-24.
The Court also dismissed
without prejudice HLF’s unfair competition counterclaim as it
was unclear what false or misleading statements were made or
what the nature of the competition injured was.
Id. at 29.
sum, the Court dismissed HLF’s counterclaim with prejudice to
the extent it was based on communications with members but
otherwise granted leave to amend the other claims.
Id. at 32. 3
The Court deconsolidated the cases on November 30,
ECF No. 89.
HLF filed its FACC in the instant case on
January 4, 2017, again alleging four claims.
ECF No. 92.
filed the instant Motion to Dismiss on February 10, 2017.
No. 99 (“Motion”).
HLF filed its Opposition on March 2, 2017.
Each of these orders was filed both in the instant case as ECF
Nos. 56, 76, and 77 and in the Sidlo litigation, as ECF Nos.
487, 507, and 508, respectively.
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ECF No. 103 (“Opp.”).
KFHP filed its Reply on March 9, 2017.
ECF No. 104 (“Reply”).
This Court held a hearing on KFHP’s Motion on March
HLF provides air ambulance services throughout the
State of Hawaii, transporting patients by helicopter or fixed
wing aircraft to hospitals and medical centers which are
equipped to handle a patient’s emergency medical condition,
which may include transport from neighboring islands.
HLF is not a self-dispatching service; its “emergency
flights are only dispatched by attending physicians and
hospitals” when there is a qualified emergency.
Id. ¶ 14.
hospitals have entered into contracts with HLF to provide air
Id. ¶ 25.
These contracts contain First
Call Agreements (“FCAs”) with HLF in exchange for HLF placing an
aircraft at or near the hospital.
The FCAs provide that
when air ambulance services are necessary, the hospital will
call HLF first, provided that using HLF meets the requirements
of the Emergency Medical Treatment & Active Labor Act
EMTALA, 42 U.S.C. § 1395dd, provides that a hospital may not
transfer an individual whose “emergency medical condition has
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KFHP is an insurer and administrator for various
insured employee welfare benefit plans providing health
Id. ¶ 28.
KFHP is also a fiduciary under
ERISA and is responsible for determining coverage and
eligibility of participants and beneficiaries for benefits under
Id. ¶ 29.
Until August or September 2013, KFHP and
HLF had a contract governing reimbursement rates, pursuant to
which “HLF accepted as payment in full an average rate from KFHP
that was less than the total billed rate HLF charged for a
ECF No. 56 at 12; see also Sidlo, ECF No. 324-1 at
6 (KFHP asserted that HLF accepted on average $10,638 from KFHP
in payment where full billed charges averaged $32,279 per
However, KFHP grew concerned with HLF’s increasing
rates and entered into a contract with American Medical Response
(“AMR”), HLF’s only competitor for air medical services in
Id. at 12.
contract with KFHP.
HLF then appears to have terminated its
Id. at 12-13.
not been stabilized” unless the transfer is appropriate and
defines what constitutes an appropriate transfer.
Although AMR was not named in the FACC; based on the filings in
the Sidlo litigation, the Court is aware that the competitor
referenced in the FACC is AMR (not to be confused with HLF’s
parent company AMRG). Based on information from the Sidlo
matter, AMR appears to have entered the market shortly before it
signed the contract with KFHP in September 2013. Sidlo, KFHP’s
Supplemental Motion for Summary Judgment, ECF No. 285-1 at 4
(“To avoid HLF’s rapidly increasing prices, KFHP entered into a
long-term contract with AMR, a new air transport company in
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HLF has alleged in its FACC that in connection with
its health insurance services, KFHP has improperly made written
and oral demands that hospitals arrange for “emergency
transportation of patients through or as designated by KFHP” and
has implemented procedures requiring hospitals to use air
ambulance services provided by AMR. 6
FACC ¶ 5.
In the Sidlo
litigation, HLF submitted to the Court with KFHP’s consent
correspondence that KFHP sent to Hawaii Health Systems
Corporation (“HHSC”) concerning the use of HLF’s air ambulance
services by Kona Community Hospital (“KCH”), an HHSC facility.
ECF No. 77 at 9.
HLF has an FCA with KCH which is set to expire
on October 31, 2017.
On March 19, 2015, KFHP sent HHSC a
Hawaii, in September 2013.”) (relying on Decl. of Thomas Risse ¶
3, Sidlo, ECF No. 287-1).
HLF has alleged that its own FCAs “recognize that the treating
physician under EMTALA is free to call upon an alternative
transportation service provider if a patient has an [emergency
medical condition]” and thus the FCAs do not violate EMTALA.
See FACC ¶ 25. HLF alleges that KFHP’s pre-authorization
mandate to hospitals, by contrast, applies “regardless of
whether the patient has an EMC” and thus violates EMTALA. See
id. ¶ 26. KFHP asserted at the hearing that its preauthorization requirement only covers non-emergency conditions
and still allows hospitals to select the air transport provider
in an emergency situation as required by EMTALA, citing a letter
from March 19, 2015 discussed infra at 10-11. However, this
Court may not decide which party’s interpretation is correct on
a motion to dismiss. The Court also notes that HLF has alleged
that KFHP’s pre-authorization demands were made regardless of
whether patients were in an unstabilized condition, and that
KFHP’s March 19, 2015 letter is not definitive on this issue.
The Court thus must accept as true at this stage that at least
some of the flights at issue involved patients in an unstable
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cease-and-desist letter asserting that KCH’s Dr. Richard
McDowell had been preventing hospital staff from using AMR and
had been directing the use of HLF instead.
No. 74-2 (letter).
Id.; see also ECF
At the hearing held on April 4, 2017, this
Court allowed HLF’s request to refer to the contents of this
letter in discussing the oral and written demands HLF has
alleged KFHP made to hospitals.
ECF No. 106 at 28-29 (Tr. of
H’ring); see also id. at 10 (KFHP also referencing the contents
of this letter). 7
In the letter, KFHP asserted that Dr. McDowell’s
actions constituted a breach of contract between KFHP and HHSC,
which contract required HHSC to, among other things: “(i) notify
Kaiser within 48 hours of a Kaiser member presenting to one of
the HHSC facilities”; “(ii) cooperate with Kaiser in
transferring Kaiser members to the Moanaluna Medical Center”;
and “(iii) provide services in the most cost effective manner.”
ECF No. 74-2; ECF No. 77 at 10.
In addition, the letter noted
Pursuant to Federal Rule of Evidence 201(c)(1), a court “may
take judicial notice on its own.” The Court will take judicial
notice of this letter, as it is central to the theories of HLF’s
direct claims, both parties referred to it at the April 4, 2017
hearing, and the authenticity does not appear to be in dispute
as both parties consented to the Court’s prior consideration of
this letter in the instant matter and the Sidlo action. See ECF
No. 74; Sidlo, ECF No. 505 (indicating that both parties
consented to review of this letter, among other documents); see
also infra at 15-16, 57-58 (discussing standards for judicial
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that Dr. McDowell’s conduct constituted intentional interference
with KFHP’s agreements with AMR and HHSC.
ECF No. 74-2.
also responded to Dr. McDowell’s professed EMTALA concerns on
the basis that the patients transported were in stable condition
so EMTALA did not apply; as such, KFHP disagreed 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.”
ECF No. 74-2.
In its FACC, HLF additionally alleged that
approximately 129 of KFHP’s members were transported by HLF for
“medically necessary air medical transport services.”
Id. ¶ 30.
These individuals have assigned to HLF all rights, title, and
interest in the plan related to the services HLF provided.
id. ¶¶ 6, 31-159 (hereinafter, “Assignors” or “members”).
has asserted that for many of the transports it provided to
KFHP’s members, KFHP has refused to pay HLF’s charges.
Id. ¶ 6.
Instead, KFHP apparently unilaterally decided to pay 200% of the
allowable Medicare payment per transport, which is less than
HLF’s claimed charge.
Id. ¶ 172.
Section G of KFHP’s plans governs reimbursement of
Id. ¶ 161.
It provides that KFHP will
pay 80% of “Applicable Charges” for ambulance services deemed
necessary by a physician.
What constitutes the applicable
charge depends on who provides the service.
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See id. ¶ 162.
Member rates are used when a “Medical Group” or “Health Plan
Hospital” provides the service.
For contracted Medical
Groups or Health Plan facilities, the applicable charge is the
For non-contracted facilities and
providers, the applicable charge is the actual billed charge.
As HLF and KFHP do not currently have a negotiated rate,
HLF asserts that KFHP is obligated to pay no less than 80% of
HLF’s actual billed charges.
Id. ¶ 163.
KFHP has asserted that Section G does not apply to
transports between facilities; rather, it covers 100% of the
costs of such transports pursuant to its Inter-Facility
Transport Policy regardless of whether the provider has
contracted with KFHP.
Id. ¶¶ 165-166.
This Court previously
held in the Sidlo litigation that the Inter-Facility Transport
Policy, not Section G, applied to Sidlo’s claims.
ECF No. 56 at
HLF has alleged that it believes KFHP has informed the
Assignors that they “have no obligation to pay any amount to
HLF” and should not do so, that KFHP would protect Assignors
from any claim for payment by HLF, and that KFHP would reimburse
Assignors for any amounts paid to HLF.
Id. ¶ 168.
KFHP has agreed to indemnify the Assignors for “any amount that
might be deemed due and owing to HLF.”
Id. ¶ 169.
contacted each of the Assignors, except Toby Sidlo, advising
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them of the amount KFHP failed to pay and requesting that
payment be made to HLF for the unpaid amounts.
Id. ¶ 175.
Based on the foregoing, HLF brought four counterclaims
in its FACC, two direct claims and two derivative claims based
on the assignment of rights to HLF.
Count I is a direct claim
for unfair competition pursuant to HRS § 480-2, based on KFHP’s
requirement that hospitals obtain authorization from KFHP before
arranging emergency transport, in violation of EMTALA and the
Affordable Care Act (“ACA”).
Id. ¶¶ 177-198.
used its economic power to cause hospitals to breach the FCAs
with HLF and utilize the inferior air transport services offered
by HLF’s competitor.
Id. ¶¶ 186-89, 191.
Count II asserts a
direct claim for tortious interference with contract, grounded
in the fact that KFHP allegedly knew about the FCAs between HLF
and the hospitals and caused the hospitals to breach the FCA
agreements and utilize AMR instead.
Id. ¶¶ 199-205.
Count III asserts a derivative claim to recover health
care benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B), because
KFHP has allegedly underpaid the Assignors’ claims for the air
medical transportation services HLF provided.
Id. ¶¶ 206-217.
In addition, HLF seeks to “clarify and enforce Assignor’s rights
to payment of those amounts still due and owing” through an
Id. ¶ 219.
Finally, Count IV asserts a derivative
claim for breach of KFHP’s indemnification promises to the
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Assignors, under which HLF asserts KFHP is obligated to pay 100%
of the amounts HLF claims it is still owed.
Id. ¶¶ 222-228.
Rule 12(b)(6) authorizes the Court to dismiss a
complaint that fails “to state a claim upon which relief can be
Fed. R. Civ. P. 12(b)(6).
Rule 12(b)(6) is read in
conjunction with Rule 8(a), which requires only “a short and
plain statement of the claim showing that the pleader is
entitled to relief.”
Fed. R. Civ. P. 8(a)(2).
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.
Balistreri v. Pacifica
Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988).
In resolving a Rule 12(b)(6) motion, the Court must
construe the complaint in the light most favorable to the
plaintiff and accept all well-pleaded factual allegations as
Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 783
(9th Cir. 2012).
“[O]nly pleaded facts, as opposed to legal
conclusions, are entitled to assumption of truth.”
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.
Twombly, 550 U.S. 544, 555 (2007).
Bell Atl. Corp. v.
The complaint “must contain
sufficient factual matter, accepted as true, to ‘state a claim
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to relief that is plausible on its face.’”
Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
“The plausibility standard . . . asks for more than a
sheer possibility that a defendant has acted unlawfully.”
“Where a 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.’”
Id. (quoting Twombly, 550 U.S. at 557).
“In considering a
motion to dismiss, the court is not deciding whether a claimant
will ultimately prevail but rather whether the claimant is
entitled to offer evidence to support the claims asserted.”
Tedder v. Deutsche Bank Nat. Trust Co., 863 F. Supp. 2d 1020,
1030 (D. Haw. 2012) (citing Twombly, 550 U.S. at 563 n.8).
Under Rule 12(b)(6), review is generally limited to
the contents of the complaint.
Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Campanelli v.
Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996).
may “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).
The Court may also
consider documents whose contents are alleged in a complaint and
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whose authenticity is not questioned by any party.
HSBC Bank Nev., N.A., 691 F.3d 1152, 1160 (9th Cir. 2012).
If the Court dismisses the complaint, it should grant
leave to amend regardless of whether a request has been made,
unless it determines that the pleading cannot be cured by new
1079 (9th Cir. 2012).
OSU Student All. v. Ray, 699 F.3d 1053,
Leave to amend “is properly denied,
however, if amendment would be futile.”
Carrico v. City & Cty.
of S.F., 656 F.3d 1002, 1008 (9th Cir. 2011).
Count I: Unfair Competition Claim
Hawaii Revised Statutes § 480-2(a) prohibits “[u]nfair
methods of competition and unfair or deceptive acts or practices
in the conduct of any trade of commerce.”
The statute provides
that it should be construed with “due consideration to the
rules, regulations, and decisions of the Federal Trade
Commission and the federal courts interpreting section 5(a)(1)
of the Federal Trade Commission Act.”
HRS § 480-2(b); Davis v.
Four Seasons Hotel Ltd., 122 Haw. 423, 446, 228 P.3d 303, 326
(2010) (“This court has similarly recognized that Hawaii’s
consumer protection laws are also intended to preserve
In order to bring a claim for unfair methods of
competition pursuant to HRS § 480-2, the Hawaii Supreme Court
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has clarified that plaintiffs must “qualify as persons who may
bring a claim under HRS § 480-2(e)” and that they “have standing
to bring a private claim for unfair competition under HRS §§
481B-14 and 480-2 only if they satisfy the requirements of §
Soule v. Hilton Worldwide, Inc., 1 F. Supp. 3d 1084,
1094-95 (D. Haw. 2014) (Kay, J.) (citing Davis, 122 Haw. at 446
“The essential elements of a claim for unfair
competition [under § 480-13] are: (1) a violation of Chapter
480; (2) that causes an injury to plaintiffs’ business or
property; and (3) damages.”
Id. at 1095.
“To satisfy the
second element, plaintiffs must allege an injury in fact and the
nature of the competition” and “must ultimately show that their
injury necessarily stems from the negative effect on competition
caused by the violation as opposed to some pro-competitive or
neutral effect of the defendant’s antitrust violation.”
A. Whether a Violation of EMTALA Constitutes Unfair
KFHP first asserts that HLF may not bring an unfair
competition claim predicated on a violation of EMTALA, as HLF
has no actionable claim against KFHP under that statute.
HLF responds that its claim is that “Kaiser’s use of
its economic power to force hospitals to seek insurance
preauthorization for emergency services, in a manner that is
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contrary to the ACA and EMTALA, is unfair and contrary to public
Opp. at 9 (footnote omitted). 8
The Court first turns to the issue of whether HRS §
480-2 requires an independently actionable predicate claim.
Hawaii Supreme Court does not appear to have spoken directly on
this issue, but it has recognized that “unfair” means “conduct
that (1) threatens an incipient violation of an antitrust law,
or (2) violates the policy or spirit of one of those laws
because its effects are comparable to or the same as a violation
of the law, 9 or (3) otherwise significantly threatens or harms
Like EMTALA’s delegation of authority to the treating hospital
or physician to choose the emergency air transport provider, 42
U.S.C. § 1395dd, the regulations governing the ACA state that
an insurance plan or issuer must cover emergency services
“[w]ithout the need for any prior authorization determination,
even if the emergency services are provided on an out-of-network
basis.” 29 C.F.R. § 2590.715-2719A(b)(2)(i). KFHP’s alleged
mandate to hospitals to obtain pre-authorization for emergency
transports, if true, would implicate EMTALA and the ACA in the
same way. As the FACC and the parties’ briefing focuses on
EMTALA, the Court will do likewise here.
The Court notes that this second definition of “unfair conduct”
may appear to allow claims based on the violation of any law’s
policy or spirit. However, read according to its plain language
this formulation permits only violations of an antitrust law’s
policy or spirit, as it refers to “those laws” stated in the
first definition, which relate to antitrust. Cf. Hungate v. Law
Office of David B. Rosen, 139 Haw. 394, 391 P.3d 1 (2017) (where
statutory language is unambiguous, courts “give effect to plain
and obvious meaning”). In addition, interpreting “those laws”
to refer to competition-related laws accords with the scope of
the other two definitions. See State v. Crouser, 81 Haw. 5, 13
n.6, 911 P.2d 725, 733 (1996) (in interpreting legal texts, the
meaning of words or phrases may be determined by reference to
those associated with it under the principle of noscitur a
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Robert’s Haw. Sch. Bus, Inc. v. Laupahoehoe
Transp. Co., 91 Haw. 224, 255 n.34, 982 P.2d 853, 884 n.34
(1999) (citing Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular
Tel. Co., 20 Cal. 4th 163, 186, 973 P.2d 527, 544 (1999)).
addition, “competitive conduct is unfair when it offends
established public policy and when the practice is immoral
unethical, oppressive, unscrupulous or substantially injurious
Id. (internal citation and quotation omitted);
see also FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244 n.5
(1972) (describing the factors the FTC uses in determining
whether a practice is unfair as “offend[ing] public policy,”
“immoral, unethical, oppressive, or unscrupulous,” or “caus[ing]
substantial injury to consumers (or competitors or other
The Hawaii Supreme Court has also noted that HRS §
480-2 “was constructed in broad language in order to constitute
a flexible tool to stop and prevent unfair competition and
fraudulent, unfair or deceptive business practices for the
sociis). Cf. Island Tobacco Co. v. R.J. Reynolds Indus., Inc.,
513 F. Supp. 726, 737 (D. Haw. 1981) (“Unfair trade practices
which violate the spirit of the antitrust laws fall within the
purview of the [FTCA].”); Bartleys Town & Country Shops, Inc. v.
Dillingham Corp., 530 F. Supp. 499, 514 (D. Haw. 1982)
(discussing with approval a Seventh Circuit case noting that the
FTCA was “designed to restrain practices as unfair” which had
not yet but were likely to grow into “Sherman Act dimensions” if
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protection of both consumers and honest businessmen and
982 P.2d at 884.
Robert’s Haw. Sch. Bus, 91 Haw. at 255 n.34,
“Whether competition is unfair or not
generally depends on the surrounding circumstances of the
What is harmful under certain circumstances
may be beneficial under different circumstances.”
Ass’n v. Haw. Med. Serv. Ass’n, Inc., 113 Haw. 77, 108, 148 P.3d
1179, 1210 (2006) (“HMA”) (internal quotation marks and citation
Hawaii’s unfair competition law appears to be narrower
than, for example, California’s similar law, in terms of what
conduct is rendered actionable as unfair competition.
law appears to target conduct that is either anticompetitive or
that offends public policy.
By contrast, California defines
unfair competition to “include any unlawful, unfair, or
fraudulent business act or practice and unfair, deceptive,
untrue or misleading advertising”.
Cal. Bus. & Prof. Code §
“By proscribing ‘any unlawful’ business practice,
section 17200 borrows violations of other laws and treats them
as unlawful practices that the unfair competition law makes
Cel-Tech Commc’ns, 20 Cal. 4th at
180, 973 P.2d at 539-40 (1999) (internal citation and quotation
California thus explicitly appears to make actionable
via its unfair competition law a broad swath of illegal acts
- 20 -
that a plaintiff would otherwise be unable to bring. 10
law, in comparison, does not, on its face, render otherwise
illegal acts independently actionable in an unfair competition
suit except to the extent those illegal acts harm competition or
offend the public policy of competition-related laws.
The Hawaii Supreme Court’s discussion in Whitey’s Boat
Cruises, Inc. v. Napali-Kaui Boat Charters, Inc. is instructive
on this point.
110 Haw. 302, 132 P.3d 1213 (2006).
case, the court addressed whether the plaintiff could bring a
common law unfair competition claim based on its competitors’
failure to obtain the proper permits for operating boat
Id. at 312, 132 P.3d at 1223.
The court affirmed
summary judgment for the defendants, finding that there was no
private right of action for damages for the failure to obtain
It is for this reason that HLF’s citation to Coast Plaza
Doctors Hospital v. UHP Healthcare, 105 Cal. App. 4th 693, 705
(2002) for the proposition that courts have allowed unfair
competition claims for alleged violations of EMTALA, Opp. at 9,
is not persuasive. Because California defines unfair
competition to include otherwise unlawful practices, a plaintiff
alleging unfair competition in California could base its claim
on a violation of EMTALA regardless of whether it had an
independent right to sue under EMTALA itself or whether a
violation of EMTALA affects competition. In any event, the
Court is not bound to follow the holding of this particular case
and declines to do so here.
Although HLF asserts that Whitey’s Boat Cruises is
distinguishable because it dealt with a common law unfair
competition claim, as opposed to a statutory claim, HLF has not
provided, nor has the Court been able to locate, any authority
addressing how that difference might be relevant in interpreting
the type of conduct Hawaii courts consider unfair.
- 21 -
the permits, as the “regulations were not promulgated with the
objective of protecting business interests or competition but
rather with the objective of protecting and preserving the
environment for the general public.”
Id. at 313, 318, 132 P.3d
at 1224, 1229.
The reasoning in Whitey’s Boat Cruises accords with
the Hawaii Supreme Court’s discussion in Robert’s Hawaii School
Bus noted above that the meaning of the word “unfair” relates to
harm to competition.
See 91 Haw. at 255 n.34, 982 P.2d at 884.
Although neither Whitey’s Boat Cruises nor Robert’s Hawaii
School Bus go so far as to say that wrongful conduct sufficient
to constitute unfair competition must be independently
actionable by the plaintiff, both suggest that where an unfair
competition claim is based on illegality, the reason why the
conduct is illegal must relate to competition.
To the extent that HLF’s unfair competition claim is
based on illegality, the Court concludes that EMTALA was not
promulgated “with the objective of protecting business interests
or competition,” Whitey’s Boat Cruises, 110 Haw. at 312, 132
P.3d at 1223, but rather because “Congress was concerned that
hospitals were ‘dumping’ patients who were unable to pay, by
either refusing to provide emergency medical treatment or
transferring patients before their conditions were stabilized.”
Eberhardt v. City of Los Angeles, 62 F.3d 1253, 1255 (9th Cir.
- 22 -
1995) (citing H.R. Rep. No. 241, 99th Cong., 1st Sess. (1985)).
“Congress enacted EMTALA to create a new cause of action,
generally unavailable under state tort law, for what amounts to
‘failure to treat’....”
Bryant v. Adventist Health Sys./W., 289
F.3d 1162, 1168 (9th Cir. 2002).
HLF has not asserted, nor has
the Court found any authority to suggest, that in enacting
EMTALA Congress was at all concerned with business interests or
To allow HLF to bring an unfair competition claim
based on the purported illegality of KFHP’s conduct would expand
Hawaii’s unfair competition law beyond what the Hawaii Supreme
Court has indicated it would allow. 13
The parties have not discussed whether Congress was concerned
with business interests or competition in enacting the ACA.
However, the Court notes that, like EMTALA, the seemingly
applicable regulations for the ACA appear to limit causes of
action for a violation the preauthorization requirement to those
brought by the Secretary of Labor or plan participants or
beneficiaries and do not allow business competitors more broadly
to bring claims. See 29 U.S.C. §§ 1132, 1134. The Court’s
holdings regarding EMTALA would thus appear to apply to the ACA
as well. However, as the parties have not briefed this issue or
any implications for standing, and given the Court’s other
holdings on this claim, the Court declines to address this
If Hawaii were, like California, to borrow violations of other
laws, then it would allow HLF to assert a cause of action based
on EMTALA despite not being a patient. However, as KFHP
asserts, the cause of action would be against hospitals, not
against health plans like KFHP. See 42 U.S.C. § 1395dd(d)(2)(A)
(providing for a “civil action against the participating
hospital”); see also Jackson v. E. Bay Hosp. 246 F.3d 1248, 1260
n.6 (9th Cir. 2001) (“EMTALA only applies to hospitals which
choose to participate in Medicare.”); Eberhardt, 62 F.3d at 1257
(“EMTALA does not allow private suits against physicians.”).
- 23 -
HLF also appears to argue instead, or in addition,
that KFHP’s conduct is unfair because it is contrary to the
public policy established in EMTALA “of putting the patients’
medical needs before the insurance companies’ financial goals.”
Opp. at 11.
However, it is not apparent from the FACC that
there is a plausible basis to believe that the medical needs of
any patients have been affected by KFHP’s conduct.
alleges that it has lost revenue and profit from the transport
of patients who would have been placed on HLF aircraft but for
KFHP’s conduct, FACC ¶¶ 192-96, nowhere in the FACC does HLF
allege that the use of a different transportation service harmed
the medical needs of those patients, or even that in making this
choice, the physicians disregarded the medical needs of patients
or differential transport risk from choosing HLF’s competitor. 14
Indeed, HLF has specifically alleged that “KFHP does
not know whether, for example, any patient has suffered adverse
medical consequences as a result of delay engendered by [KFHP’s
Allowing a claim against KFHP would go well beyond even
California’s borrowing statute, as it would expand not only the
category of persons who could bring claims for violations of
other laws, but also the category of persons who may be held to
have violated those laws. The Court is unwilling to read HRS §
480-2 so broadly in the absence of more explicit authority.
Although HLF has alleged that prior to KFHP’s preauthorization requirement, physicians generally chose HLF over
its competitor, FACC ¶ 187, HLF has not plausibly alleged that
choosing its competitor resulted in increased risks of or actual
harm to patients.
- 24 -
Hospital Operation’s Center]’s preauthorization process.”
KFHP’s alleged ignorance, however, does not excuse HLF
from its pleading burden.
At most, HLF has alleged as a general
matter that patient health can quickly deteriorate in emergency
situations and that by maintaining more aircraft closer to
hospitals, HLF “best serve[s] patients’ medical interests by
minimizing the risk to the patient being transferred.”
183, 186, 187.
These allegations do not provide the Court with
a plausible basis to conclude that any violation of EMTALA that
actually occurred here posed a risk to patient health. 15
while reading the FACC to allege a technical violation of EMTALA
where AMR was chosen over HLF, the Court nevertheless still has
difficulty finding that such a violation is contrary to public
policy in the absence of allegations regarding harm to patient
Cf. Riopta v. Amresco Residential Mortg. Corp., 101 F.
Supp. 2d 1326, 1334 (D. Haw. 1999) (Kay, J.) (finding that
technical TILA violation did not offend established public
policy as HRS § 480-2 is not a strict liability statute and
focuses on the “reprehensibility of defendant’s conduct”).
HLF asserted at the hearing that it would need to reach
discovery in order to know whether there was injury to patients.
However, whether or not discovery will support allegations does
not absolve HLF of the burden to plead the existence of such
injuries; otherwise, HLF’s claim risks an unwarranted fishing
- 25 -
Rather, the only harm that HLF has plausibly alleged
is breach of contract.
See FACC ¶ 186 (alleging that KFHP’s
preauthorization requirement caused hospitals to breach their
FCAs with HLF).
However, simple breach of contract alone is not
enough to support a claim for unfair competition.
Partners v. Equilon Enterprises LLC, 679 F. Supp. 2d 1203, 1211
(D. Haw. 2009) (Kay, J.) (distinguishing between a potentially
unconscionable penalty clause, enforcement of which could give
rise to a viable unfair competition claim as it may be immoral
or injurious to consumers or other competitors, and “normal
breach of contract,” which the Court indicated was insufficient
to sustain an unfair competition claim.
Accordingly, HLF has
failed to allege that KFHP’s conduct was unfair.
B. Whether HLF Has Failed to Allege Injury to Competition
KFHP also asserts that HLF has failed to plead injury
Motion at 11-13.
To show injury to
competition, HLF must allege “how the [defendant’s] conduct will
negatively affect competition.”
Gurrobat v. HTH Corp., 133 Haw.
1, 22, 323 P.3d 792, 813 (2014) (emphasis added) (finding that
the defendant’s unlawful withholding of a service charge
negatively affected competition by allowing it to charge lower
base prices than its law-abiding competitors); see also Villon
v. Marriott Hotel Servs., Inc., 130 Haw. 130, 150, 306 P.3d 175,
195 (2013) (“[A] plaintiff must demonstrate that its injury
- 26 -
stems from the negative effect on competition caused by [a
defendant’s] violation to ensure that it does not stem from some
pro-competitive or neutral effect of the defendant’s antitrust
violation.”) (internal quotation and citation omitted).
requirement “is designed to serve the same purpose as the
federal requirement that a plaintiff assert an antitrust
Wadsworth v. KSL Grand Wailea Resort, Inc., 818 F.
Supp. 2d 1240, 1265 (D. Haw. 2010) (Kay, J.) (interpreting Davis
v. Four Seasons Hotel Ltd., 122 Haw. 423, 446, 228 P.3d 303, 326
Under this standard, “[i]t is not enough to allege harm
to a competitor...[p]laintiff must allege a harm to
HLF has argued that it has sufficiently alleged injury
to competition by asserting that:
KFHP’s use of its economic power in order to
force hospitals to utilize the inferior
services offered by HLF’s competitor, even
in emergency situations, and despite the
fact that HLF can provide a faster service,
suppresses HLF’s ability to compete, and
harms competition, by allowing HLF’s
competitor to achieve a volume of transports
that it would not be able to achieve without
KFHP’s market interference.
FACC ¶ 188; see also id. ¶ 189 (KFHP’s conduct “renders it
unnecessary for HLF’s competitor to undertake the investment
that it would otherwise need to make to be able to compete with
HLF – it has no incentive to place competing aircraft on
- 27 -
neighbor islands, or to otherwise try to provide a faster,
better service than HLF....”).
Under the analogous Sherman Act, the Ninth Circuit has
clearly stated that “[o]rdinarily, the factual support needed to
show injury to competition must include proof of the relevant
geographic markets and demonstration of the restraint’s
anticompetitive effects within those markets.”
Racing, Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d 504, 508 (9th Cir.
1989) (affirming dismissal for failure to allege actual
detrimental competitive effects).
“Avoiding such market
analysis requires proof of actual detrimental competitive
effects such as output decreases or price increases.”
“[R]emoval of one or a few competitors need not equate with
injury to competition,” as “‘[e]very agreement concerning trade,
every regulation of trade, restrains.’”
Id. at 508 (quoting Bd.
of Trade v. United States, 246 U.S. 231, 238 (1918)).
competition is only threatened when the “arrangement affecting
trade becomes unreasonably disruptive of market functions such
as price setting, resource allocation, market entry, or output
At the same time, “convergence of injury to a market
competitor and injury to competition is possible when the
relevant market is both narrow and discrete and the market
participants are few.”
Id. at 508-09.
- 28 -
However, a plaintiff may
not “merely alleg[e] a bare legal conclusion; if the facts do
not at least outline or adumbrate a violation of the Sherman
Act, the plaintiffs will get nowhere merely by dressing them up
in the language of antitrust.”
Rutman v. Wine Co. v. E.&J.
Gallo Winery, 829 F.2d 729, 736 (9th Cir. 1987) (internal
quotation marks and citation omitted).
Though not entirely clearly alleged in the FACC, the
relevant market here appears to be “air medical transport
service” in Hawaii, which KFHP does not appear to contest.
FACC ¶¶ 186-87; Motion at 12-13 (disputing its economic power
in, but not the definition of, the market for “medical air
FACC ¶ 187.
HLF has alleged that it has only one competitor.
As such, the market appears to be narrow and raises
the possibility that injury to HLF could converge with injury to
See Les Shockley Racing, 884 F.2d at 508.
Where HLF’s FACC falls short are allegations
supporting “the restraint’s anticompetitive effects,” such as
“output decreases or price increases.”
While HLF has
alleged in a conclusory manner that KFHP’s conduct has resulted
in anticompetitive effects, see FACC ¶¶ 188, 191, it has not
provided sufficient factual allegations supporting how the
injuries it has suffered are anticompetitive or how consumers
have been harmed, much less how KFHP’s conduct led to those
The FACC contains no allegations that the volume of
- 29 -
flights overall has decreased or that the price charged to
patients (or their insurer) has increased in the market as a
whole; indeed, AMR appears to charge less for its services than
See FACC ¶ 185.
And HLF’s allegations about the market
are too threadbare to understand the effect of KFHP’s alleged
conduct on the market as a whole.
See Tampa Elec. Co. v.
Nashville Coal Co., 365 U.S. 320, 329 (1961) (explaining that,
to assess injury to competition, courts should take into account
“the relative strength of the parties, the proportionate volume
of commerce involved in relation to the total volume of commerce
in the relevant market, and the probable immediate and future
effects which pre-emption of that share of the market might have
on effective competition”).
Such allegations about the market are critical for
concluding that injury to HLF converges with injury to the
In concluding that injury to competitors 17 and to the
“[L]ower prices, so long as they are not predatory, actually
benefit competition, as opposed to harming it.” Wadsworth, 818
F. Supp. 2d at 1267. HLF has not suggested a predatory pricing
scheme exists, nor does one seem plausible here, especially
given the absence of allegations that KFHP has substantial
market power, which are critical for a predatory competitor to
recoup its losses. See Rebel Oil Co., Inc. v. Atl. Richfield
Co., 51 F.3d 1421, 1434 (9th Cir. 1995); FACC ¶ 188; see also
infra at 33-35 (discussing allegations regarding economic
The Court notes that, contrary to KFHP’s implication, Motion
at 13, it appears that under Hawaii law HLF does not have to
allege that KFHP competes with HLF. See HMA, 113 Haw. at 110,
- 30 -
market could converge, the Ninth Circuit in Les Shockley relied
on Oltz v. St. Peter’s Community Hospital, 861, F.2d 1440 (9th
Cir. 1988) in which the court found injury to competition where
the exclusion of a single anesthetist reduced the number of
competing anesthesia providers from five to four.
509 (describing Oltz).
884 F.2d at
And in Blue Sky Color of Imagination,
LLC v. Mead Westvaco Corp., the court found antitrust injury
where the defendant entered into a series of exclusive
No. CV 10-02175 DDP, 2010 WL 4366849, at *3 (C.D.
Cal. Sept. 23, 2010).
There the market allegedly only had four
participants and the relevant market consisted of only three
stores, so the “exclusionary domination of even a single
superstore could have an injurious effect on the market.”
The Hawaii Supreme Court also recognized in HMA the
importance of factual allegations describing the market in
sufficiently alleging injury to competition and emphasized the
plaintiffs’ allegations that the defendant dominated the
healthcare enrollment market, was the largest provider of fee148 P.3d at 1212 (holding that “plaintiffs need not be
competitors of [the defendant]” nor need they be “in
competition” with the defendant). This appears to differ with
federal antitrust law, which requires that the parties compete
in the same market. See Amarel v. Connell, 102 F.3d 1494, 1508
(9th Cir. 1996) as amended (Jan. 15, 1997). However, even under
Hawaii law, the plaintiff must still sufficiently allege the
nature of competition. HMA, 113 Haw. at 111-12, 148 P.3d at
- 31 -
for-service insurance in the state, and over 90% of physicians
participated with defendant’s plan. 18
P.3d at 1214.
HMA, 113 Haw. at 112, 139
The plaintiffs also alleged that it was through
such market dominance that the defendant was able to set the
terms and reimbursement amounts that the plaintiffs would
Id.; see also Wadsworth, 818 F. Supp. 2d at 1268
(reading HMA as stating that “the plaintiffs had clearly
specified the market, as well as a harm to the market and
competition in the form of increased prices because of the
defendant’s behavior.”). 19
The specific allegations regarding
the defendant’s dominant position in the market in HMA rendered
it plausible – not merely possible – that the defendant could
Indeed, in supporting its conclusions, the Hawaii Supreme
Court quoted and emphasized the following factual allegations,
among others: “[The defendant] dominates the enrollee market in
Hawaii with over 65% of Hawaii’s population enrolled in one of
HMSA’s plans. In this regard, HMSA is the largest provider of
fee-for-service insurance in the State with more than 90% of the
market and is the second largest HMO provider in the State.
Similarly, [the defendant] dominates the physician market, with
approximately 90% of Hawaii’s physicians participating in HMSA’s
networks.” HMA, 113 Haw. at 112, 148 P.3d at 1214 (emphasis
As Wadsworth post-dates both Twombly and Iqbal, the discussion
of HMA in Wadsworth reaffirms the reasoning of the Hawaii
Supreme Court in finding the HMA pleading sufficient even in
light of the stricter pleading standards of Twombly and Iqbal,
contrary to what KFHP suggests. See Reply at 5.
- 32 -
act anticompetitively in setting terms and reimbursement
Here, HLF’s assertions that KFHP managed to force
hospitals to use AMR instead of HLF, FACC ¶ 188, are still
insufficient to plausibly support that injury to HLF converged
with an anticompetitive effect on the market.
While the number
of competitors in the market is small, it is unknown from the
face of the FACC how many hospitals are at issue or
approximately what proportion of air ambulance flights have
allegedly been affected.
And though KFHP’s arrangement might
have injured HLF by redirecting flights it otherwise would have
been assigned, the FACC does not plausibly suggest that KFHP and
AMR have “exclusionary domin[ance]” in the market or that the
loss in profit threatens to drive HLF from the market sufficient
to cause injury to competition itself. 21
Cf. Lai v. USB-
Implementers Forum, Inc., 2015 WL 12746705, at *7 (C.D. Cal.
Mar. 11, 2015) (“Given the enormity of the market in which
Plaintiff competes, the allegations once more fail to show that
HLF’s allegations that KFHP plausibly could achieve this
result are also suspect, as discussed infra at 34-35.
Indeed, KFHP asserted at the hearing that HLF has
FCAs with other healthcare providers like HMSA. ECF No. 101 at
11 (Tr. of H’ring). Although such information is not currently
before the Court, and is thus not properly considered, that type
of information would be relevant for understanding how the
flights at issue relate to the market for air ambulance services
in Hawaii and the corresponding impact on HLF and on the market
as a whole.
- 33 -
overall competitive conditions have been affected by the failure
to certify one product manufactured by a single competitor.”);
Robert’s Waikiki U-Drive, Inc. v. Budget Rent-A-Car Sys., Inc.,
491 F. Supp. 1199, 1219 (D. Haw. 1980) (“[I]n a rule of reason
case, injury to competition is determined by reference to a
particular market, and by reference to that market shares held
by the alleged conspirators.”).
Contrasting the allegations supporting the HMA court’s
findings with the allegations in HLF’s FACC only further
supports this Court’s conclusion.
The FACC here alleges that
KFHP used its economic power, FACC ¶¶ 188, 191, but it is
missing factual allegations describing the market and how much
market power KFHP has like those specifically relied on in HMA.
Thus HLF’s conclusory allegations about AMR being able to
achieve a volume of transports it would not otherwise have
without undertaking additional investment, FACC ¶¶ 188-89, which
if plausible might constitute antitrust injury, do not rise
above a mere possibility here because of the lack of allegations
supporting how KFHP’s conduct resulted in these alleged
But even setting aside the absent allegations
regarding the effect on the market, the FACC does not plausibly
allege how KFHP caused the hospitals to agree to its preauthorization requirement; it only supports that hospitals now
- 34 -
call AMR instead of HLF.
See FACC ¶¶ 21, 187.
Although HLF has
alleged that KFHP “use[d] its economic power” to get hospitals
to accede, FACC ¶ 188, HLF has not plausibly alleged that KFHP
has any market power in the first place, much less a
sufficiently dominant market position to force the hospitals to
Under such circumstances, hospitals may have had other
independent or non-anticompetitive reasons to switch to AMR.
Indeed, hospitals may have chosen AMR because of the obligations
formed under contracts agreeing to “notify Kaiser” when a member
presented at an HHSC facility, “cooperate with Kaiser” in
transporting patients, and “provide services in the most
effective manner.” 22
ECF No. 74-2 (March 19, 2015 letter).
FACC thus “stops short of the line between possibility and
plausibility of entitlement to relief.”
Iqbal, 556 U.S. at 678.
Finally, HLF has suggested that KFHP’s conduct has led
to a diminished quality of air transport services because AMR’s
service requires patients to wait longer before being
Although HLF indicated at the hearing that the hospitals
acceded because KFHP threatened them with breach of contract
lawsuits, HLF has not suggested that such lawsuits were
meritless. To the contrary, the March 19 letter suggests that
KFHP was attempting to enforce existing contracts in nonemergency transports, which undermines the plausibility of HLF’s
allegations that KFHP’s pre-authorization requirement was
anticompetitive. Moreover, as KFHP notes, hospitals can face
severe penalties for violating EMTALA. See Reply at 4, and the
March 19 letter supports that doctors, like Dr. McDowell, strive
to abide by EMTALA in circumstances where they believe it
- 35 -
See FACC ¶ 187.
Hawaii courts have indicated that
one way to show harm to the market is by showing how consumers
have been affected by the complained-of conduct.
133 Haw. at 30, 323 P.3d at 821 (interpreting the critical fact
in in HMA to be allegations “that the defendants’ actions would
harm patients, i.e. the “consumers” of healthcare.”) (emphasis
in original); see also Rebel Oil Co., Inc. v. Atl. Richfield
Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (an act can be
anticompetitive where it results in diminished quality where
economic resources are not allocated to their best use because
consumer welfare will not be maximized).
The factual allegations on which HLF appears to rely
for a theory of consumer harm are that HLF’s air ambulance
services “best serve patients’ medical interests by minimizing
the risk of harm,” in emergency situations, FACC ¶ 186; that
prior to KFHP’s pre-authorization requirement “HLF was generally
the first choice of physicians and hospitals for emergency
transports,” id. ¶ 187, and that AMR’s services are “inferior,”
id. ¶ 188.
However, these allegations do not plausibly support
that patients have been harmed.
As the Court has already noted,
there are no allegations of actual injury to patients.
HLF allege that the quality of AMR’s service is substandard or
unreasonable; it simply alleges that it is not exactly the same
as HLF’s service.
- 36 -
HLF’s theory is premised on the assumption that injury
to consumers will result unless hospitals choose the highest
quality of medical care available.
This appears to be why HLF
cites to the agency interpretive guidelines for EMTALA: HLF
seeks to imply that consumers are entitled to the highest
quality of service available in order to “minimize the risk to
the individual who is being transferred” see FACC ¶ 181.
However, EMTALA only provides that patients are entitled to
“appropriate transfer” that “is effected through qualified
personnel and transportation equipment.”
42 U.S.C. §
This contrasts with the duties of the
transferring hospital to provide medical care before transport
in order to minimize risks.
Courts interpreting the “appropriate transfer”
provision have held that it only requires “personnel and
transportation equipment that a reasonable physician would
consider appropriate to safely transport the patient in
Burditt v. U.S. Dep’t of Health and Human Servs.,
934 F.2d 1362, 1372-73 (5th Cir. 1991) (reading EMTALA’s
legislative history as indicating transfer was to be made by
“proper personnel using equipment that meets health and safety
standards”); see also Lopes v. Kapiolani Med. Ctr. For Women &
Children, 410 F. Supp. 2d 939, 950 (D. Haw. 2005) (Kay, J.)
(quoting this proposition from Burditt ).
- 37 -
Since HLF has not
alleged that AMR was not a reasonable choice of air transport
provider, nor has it alleged actual harm to patients, the FACC
does not plausibly allege harm to consumers. 23
Nor does the FACC plausibly suggest that consumer
choice has been diminished as a result of KFHP’s conduct.
relies on its allegations that hospitals generally chose HLF
before prior to KFHP’s conduct to imply that hospitals were
choosing HLF over AMR.
However, the FACC does not contain
allegations supporting that AMR was competing with HLF in the
air ambulance market in Hawaii during this time frame.
such allegations, the inference that patients, i.e. the
consumers of healthcare, are not receiving the service the
hospitals would have otherwise selected, is not plausible.
FACC leaves open that HLF is merely losing market share to a new
entrant in the market, which does not, by itself, indicate that
the entry was anticompetitive and may actually suggest increased
Moreover, to the extent that an increased level of patient
risk is relevant, HLF has only alleged the possibility that
choosing the competitor service might increase the risk because
the transport might take longer. See FACC ¶¶ 2 (“In situations
where minutes can mean the difference between life and death, a
patient’s life may literally depend on the ability of an air
ambulance to respond to a situation immediately.”); 187 (HLF has
three times as many aircraft as its competitor); 188-89 (HLF
provides faster, better service than its competitor). However,
HLF has not alleged facts plausibly indicating that lower
quality of service matters in the flights at issue.
- 38 -
choice in the market. 24
Pool Water Prods. V. Olin Corp., 258
F.3d 1024, 1036 (9th Cir. 2001) (finding no antitrust injury
where because “[a] decrease in one competitor’s market share
affects competitors, not competition.”); Streamcast Networks,
Inc. v. Skype Techs., S.A., 547 F. Supp. 2d 1086 (C.D. Cal.
2007) (finding antitrust injury was insufficiently alleged where
pleading suggested conduct served to improve consumer choice).
In light of all of the issues discussed above, the
court finds that HLF’s allegations regarding injury to
competition are insufficient.
See Prime Healthcare Servs., Inc.
v. Serv. Employees Int'l Union, 642 F. App'x 665, 666–67 (9th
Cir.), cert. denied, 136 S. Ct. 2532 (2016) (finding allegations
of harm to competition conclusory where the plaintiff did not
allege that the defendant actually caused higher prices or
reduction in overall choice or quality of care). 25
Indeed, the market may now offer a choice between two
medically appropriate service providers competing on both
quality and price: HLF, which offers an allegedly higher-quality
(that is, potentially quicker) but higher-priced ambulance
service, and AMR, which offers an allegedly lower-quality (i.e.,
potentially slower) but also lower-priced service. The shift in
the market alleged in HLF’s FACC may simply reflect a preference
for the latter option, finding it represents a better overall
value. Agreements made by insurers, hospitals, and service
providers, such as those referred to in the March 19, 2015
letter may represent such a balance between patients’ interests
in the promptness of service and price.
The Court notes that EMTALA may complicate the interplay of
competitive forces in the air ambulance market in Hawaii. While
HLF has correctly alleged that EMTALA delegates the authority to
- 39 -
the Court concludes that HLF has failed to plausibly state a
claim for unfair competition under HRS § 480-2.
GRANTS KFHP’s Motion as to Count I and DISMISSES HLF’s unfair
Count II: Intentional Interference with Contract Claim
Under Hawaii law, the elements of tortious
interference with contractual relations are: “(1) a contract
between the plaintiff and a third party; (2) the defendant’s
knowledge of the contract; (3) the defendant’s intentional
inducement of the third party to breach the contract; (4) the
absence of justification on the defendant’s part; (5) the
subsequent breach of the contract by the third party; and (6)
damages to the plaintiff.”
Meridian Mortg., Inc. v. First Haw.
Bank, 109 Haw. 35, 44, 122 P.3d 1133, 1142 (2005) (emphasis
omitted) (citing Weinberg v. Mauch, 78 Haw. 40, 890 P.2d 277
(1995)); also Queen’s Med. Ctr. v. Kaiser Found. Health Plan,
Inc., 948 F. Supp. 2d 1131 (D. Haw. 2013) (Kay, J.) (quoting
choose the transport service used to the treating physician,
FACC ¶ 22; EMTALA does not appear to address the issue that it
is the insurer of unstabilized patients, not the treating
physicians, who bears the cost of emergency flights. The Court
notes that HLF has asserted that it should be allowed to charge,
in the case of an unstabilized patient, a rate set only “by
market and competitive forces.” Sidlo, HLF’s Limited Response
to Factual Assertions Made By KFHP, ECF No. 355-2 at 5 n.3. In
any event, it remains HLF’s duty to sufficiently allege injury
to competition if it wishes to bring a claim for unfair
- 40 -
KFHP has moved to dismiss HLF’s intentional
interference with contract claim on the basis that HLF has
failed to sufficiently allege intentional inducement and that
HLF admits that KFHP’s actions were justified.
Motion at 14-15.
A. Whether KFHP Intentionally Induced Hospitals to
Breach Their FCAs
In Hawaii, “[t]he third element – intent – ‘denotes
purposefully improper interference,’ and ‘requires a state of
mind or motive more culpable than mere intent.’”
HMA, 113 Haw.
at 116, 148 P.3d at 1218 (quoting Omega Envtl., Inc. v.
Gilbarco, 127 F.3d 1157, 1166 (9th Cir. 1997) and Locricchio v.
Legal Servs. Corp., 833 F.2d 1352, 1358 (9th Cir. 1987),
In other words,
‘[t]he plaintiff must prove that the
defendant either pursued an improper
objective of harming the plaintiff or used
wrongful means that caused injury in fact.
Asserting one’s rights to maximize economic
interests does not create an interference of
ill will or improper purpose.’
Id. (quoting Omega Envtl., 127 F.3d at 1166).
wrongful actions must go beyond mere breach of contract in order
to state a tortious interference claim.
See Meridian Mortg.,
109 Haw. at 47, 122 P.3d at 1145 (“Evidence merely of a breached
contract was insufficient to sustain a tortious interference
with contractual relations claim.”); Kapunakea Partners, 679 F.
Supp. 2d at 1220 (finding plaintiff sufficiently stated a
- 41 -
tortious interference claim because enforcement of alleged
penalty provisions constituted unfair competition and thus
“transcend[ed] the breach of the Agreements”).
HLF has asserted
that the FACC sufficiently alleged that KFHP both used “wrongful
means” and had an improper intent.
Opp. at 16-17.
First, HLF has asserted that “KFHP’s conduct was
designed to disrupt HLF’s business operations and relationships
with Patients and hospitals.”
FACC ¶ 192.
This allegation is
insufficient as it amounts to a “‘formulaic recitation’” of the
element that KFHP intended to interfere.
See Wadsworth, 818 F.
Supp. 2d at 1246 (quoting Bell Atl. Corp., 550 U.S. at 555).
Next, HLF has argued that in causing hospitals to
violate EMTALA, KFHP violated public policy.
Opp. at 17-18.
discussed above, HLF has not plausibly asserted that KFHP
violated the public policy established in EMTALA, and
accordingly cannot claim that KFHP’s conduct was improper on
HLF has additionally alleged that KFHP requires preauthorization, regardless of whether there is an emergency,
which violates EMTALA.
FACC ¶ 26.
The Restatement (Second) of
Torts suggests that “[c]onduct specifically in violation of
statutory provisions” may make an interference improper.
Restatement (Second) of Torts § 767; see also Wadsworth, 2014 WL
6065875, at *12 (“An improper means may be demonstrated where
- 42 -
the interference involved ‘violations of statutes, regulations,
or recognized common-law rules.’”) (quoting Kutcher, 957 P.2d at
However, accepting as true HLF's allegations that KFHP
demanded that hospitals obtain pre-authorization for patients in
an unstable condition, which might constitute an EMTALA
violation, it would still be the hospitals, not KFHP, who
committed such violation.
HLF cannot ground KFHP’s alleged
interference with contract on the hospitals’ supposed violations
of EMTALA without additional allegations that KFHP acted
wrongfully in causing the hospitals to violate EMTALA.
discussed above, it is only possible, not plausible, that KFHP
improperly used its market power to enforce its preauthorization requirement for hospitals.
However, the fact that the FACC does not plausibly
allege anticompetitive effect does not necessarily preclude
allegations that KFHP’s conduct demonstrates improper or
See FACC ¶¶ 192, 204; Opp. at 17
(alleging that KFHP was “motivated by...anticompetitive
considerations” and that its conduct was designed “to impede or
destroy HLF’s ability to compete”).
In HMA, the Hawaii Supreme Court found sufficient
allegations of intent where the defendant’s automatic and
improper downcoding of claims and improper editing claims which
resulted in denials of reimbursement “caused injury and
- 43 -
disrupted relationships with patients”.
148 P.3d at 1220.
HMA, 113 Haw. at 118,
Similarly, in Hawaii Motorsports Investment,
Inc,. v. Clayton Group Services, the court found intent
sufficiently alleged where the defendant had “intentionally
and/or negligently represented the status of the property” at
Civ. No. 09-304 SOM-BMK, 2009 WL 3109941, at *7 (D. Haw.
Sept. 25, 2009).
By contrast, in Gold Refinery, LLC v. Aloha Island
Gold, LLC found allegations that the counter-defendant “through
its unlawful threats and prosecution of legal action, did
purposefully interfere with business relations between [Aloha
Island] and [its customers] and their expectancy of future
economic benefit to be derived from such relationship”
insufficient to establish intent.
No. CIV. 11-00522 SOM, 2012 WL
518396, at *11 (D. Haw. Feb. 15, 2012).
The court specifically
noted that the complaint was conclusory, despite claiming that
the threats and lawsuit were “unlawful” because it “provide[d]
no explanation of what made the threats or lawsuit improper.”
The distinction between Gold Refinery on one hand and
HMA and Hawaii Motorsports on the other is critical.
cases demonstrate that the plaintiff must provide a plausible
theory or explanation as to how the conduct at issue shows
unlawful or improper intent, rather than merely asserting that
- 44 -
an act is unlawful or illegal without supporting factual
However, the only conduct alleged underlying the
FACC is that KFHP required that hospitals obtain preauthorization from Kaiser.
See FACC ¶ 183.
This conduct could
be consistent with anticompetitive intent, if, as HLF suggested
at the hearing, KFHP improperly threatened HHSC with breach of
ECF No. 106 at 28-29 (Tr. of H’ring); see Kutcher, 87
Haw. at 405, 957 P.2d at 1087 (improper means may include
However, HLF has not alleged that the
threats were unfounded, and the letter to which HLF was
referring suggests the opposite.
ECF No. 74-2.
view of this letter, HLF must do more to explain that KFHP
lacked a basis for enforcing the pre-authorization requirement
or how the requirement demonstrates intent to harm HLF rather
than rational pursuit of KFHP’s hospital operations and economic
The FACC’s suggestion that KFHP acted in pursuit of
lower costs, FACC ¶ 185, which is reinforced by the March 19,
2015 letter requiring that HHSC notify and cooperate with Kaiser
and provide services in the most cost effective manner, also
distinguishes this case from Peace Software, Inc. v. Hawaii.
Electric Co., No. CIV 09-00408 SOM/LEK, 2010 WL 290649, at *7
(D. Haw. Jan. 22, 2010).
There, the court found improper intent
despite allegations “suggest[ing] that [the defendant] was
- 45 -
attempting to maximize its own economic interest.
so, the court was able to rely on allegations that the defendant
had “apparent control” over the party breaching the contract and
interfered after it no longer had an economic interest in the
contract, and thus its motivation was at least “unclear.”
As the court in Gold Refinery later noted, the court was able to
infer an improper objective from the lack of economic benefit
from interfering with the contract.
2012 WL 518396, at *10.
Because the FACC suggests that KFHP was motivated at least in
part in order to obtain lower costs, see FACC ¶ 93, the FACC
does not plausibly suggest that KFHP was not simply motivated by
The Court is mindful that it is considering a motion
to dismiss, and not summary judgment, and thus it “is not
deciding whether a claimant will ultimately prevail but rather
whether the claimant is entitled to offer evidence to support
the claims asserted.”
Tedder, 863 F. Supp. 2d at 1030 (D. Haw.
However, this does not relieve HLF of the burden of
providing a plausible theory or explanation of how KFHP’s
conduct is wrongful or demonstrates improper intent.
allegations are critical to define the scope of what evidence
HLF will pursue and offer in support of the FACC, rather than
allowing HLF to conduct a fishing expedition.
conclusory allegations of improper intent here simply fall short
- 46 -
of nudging the asserted impropriety of KFHP’s conduct across the
line of plausibility.
Accordingly, the FACC fails to state the
intent element of HLF’s tortious interference with contract
B. Whether KFHP’s Actions Were Not Justified
KFHP also asserts that HLF’s allegations regarding its
alleged lack of justification are conclusory and that HLF has
admitted KFHP’s conduct was justified.
Motion at 16-17.
fourth element, that the defendant acted without proper
justification, must be a part of the plaintiff's prima facie
Kutcher v. Zimmerman, 87 Haw. 394, 406, 957 P.2d 1076,
1088 (Haw. Ct. App. 1998).
“[A] plaintiff may show that
interference was without proper justification where the
interference was ‘tortious, illegal, or unconstitutional’ and/or
involved ‘violations of statutes, regulations or recognized
Id. at 407 (quoting Prosser & Keeton on the
Law of Torts § 129, at 982).
Beyond that, Hawaii courts have indicated they are
“reluctant to specify and thus limit what may constitute
unjustified interference under all circumstances” and instead
appear to defer to caselaw.
Compliance with statutes does
not preclude a finding of lack of justification.
See Rossi v.
Motion Pictures Ass’n of Am. Inc., 391 F.3d 1000, 1006 n.10 (9th
Cir. 2004) (interpreting Hawaii law).
- 47 -
Motivation solely for
personal gain has been held to constitute a lack of
See Lee v. Aiu, 85 Haw. 19, 32, 939 P.3d 655,
668 (1997) (relying on the fact that defendants entered into the
same agreement that they encouraged the plaintiffs to breach).
Hawaii has indicated that the issue of justification
turns on whether the contractual interests at stake outweigh the
value of the allegedly interfering conduct or not; if so, the
conduct may be found unjustified and liability may be imposed,
if the other elements are met.
Kahala Royal Corp. v. Goodsill
Anderson Quinn & Stifel, 113 Haw. 251, 269–70, 151 P.3d 732,
750–51 (2007) (“The question of justification therefore rests on
whether protection of the contractual interests merits
prohibition of the particular conduct which interferes with that
The defendant may be privileged to induce a breach
where it “acts to protect a conflicting interest which is
considered to be of equal or greater value than that accorded
the contractual rights involved.”
However, Hawaii does not
require a plaintiff to negate privilege and other defenses in
pleading that the defendant acted without justification.
Kutcher, 87 Haw. at 408, 957 P.2d at 1090.
Here, HLF has alleged that “KFHP was not justified in
its conduct of requiring preauthorization and inducing the
hospitals to breach their FCA contracts with HLF because, among
other things, KFHP’s conduct violates federal law.”
- 48 -
FACC ¶ 203.
KFHP construes these allegations as referring to a violation of
Motion at 16.
In order for HLF to rely on an EMTALA
violation to show lack of justification, it must show that the
violation has a connection to commercial or business interests.
In Whitey’s Boat Cruises, the Hawaii Supreme Court determined
that for an interference with prospective business advantage
claim, the statutes violated “must have some nexus to commercial
business interests” or provide “private rights and remedies.”
110 Haw. at 317 n.25, 132 P.3d at 1228 (as described in Kutcher,
87 Haw. at 405-06, 957 P.2d at 1087-88, both interference with
existing and prospective contractual relations require a lack of
The court then concluded that the plaintiff’s
reliance on violations of environmental regulations was
For the reasons discussed above, the Court
finds that allegations regarding EMTALA are not sufficient to
allege lack of justification as they do not have a nexus to
commercial interests or provide a private right to HLF against
To the extent HLF also alleges that KFHP’s conduct was
not justified because it had an anticompetitive motive such
allegations are not plausible as the FACC does not indicate or
explain how KFHP’s conduct shows anticompetitive motivation, as
See Gold Refinery, 2012 WL 518396, at *9
(allegations that defendant lacked lawful justification to
- 49 -
threaten legal action and that defendant’s sole purpose was to
induce breach held conclusory as the complaint did not indicate
how the plaintiff could show these conclusions).
Finally, the Court notes that in the March 19, 2015
letter to HHSC, KFHP asserted that under the contract, HHSC
agreed to “provide services in the most cost effective manner,”
and thus KFHP required HHSC facilities to “notify Kaiser within
48 hours” and “cooperate with Kaiser on the transfer of its
ECF No. 74-2.
Contrary to HLF’s allegations that
KFHP lacked justification, this letter suggests that KFHP had a
justification for attempting to enforce its contract with HHSC. 26
Accordingly, the Court finds that HLF has not sufficiently
stated a claim for tortious interference with contract thus
GRANTS KFHP’s Motion to Dismiss Count II.
III. Count III: ERISA Claim
The Court next turns to KFHP’s argument that HLF’s
claims for ERISA benefits pursuant to 29 U.S.C. § 1132(a)(1)(B) 27
Although the Court recognizes that KFHP’s assertions in the
letter might be contradicted or proven untrue, the fact that HLF
is aware of KFHP’s stated position in this letter and has failed
to allege any facts which would undermine it is troubling.
29 U.S.C. § 1132(a)(1)(B) provides that a plan participant or
beneficiary may bring a civil action “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.” HLF has brought claims as the
assignee of benefits, which assignment this Court previously
- 50 -
are collaterally estopped by this Court’s decision in the Sidlo
action, ECF No. 56. 28
Motion at 17.
Collateral estoppel, or issue preclusion, “generally
refers to the effect of a prior judgment in foreclosing
successive litigation of an issue of fact or law actually
litigated and resolved in a valid court determination essential
to the prior judgment, whether or not the issue arises on the
same or different claim.”
New Hampshire v. Maine, 532 U.S. 742,
“Issue preclusion bars relitigation of issues
adjudicated in an earlier proceeding if three requirements are
met: (1) the issue necessarily decided at the previous
proceeding is identical to the one which is sought to be
relitigated; (2) the first proceeding ended with a final
judgment on the merits; and (3) the party against whom [issue
preclusion] is asserted was a party or in privity with a party
at the first proceeding.”
In re Reynoso, 477 F.3d 1117, 1122
(9th Cir. 2007) (citing Reyn’s Pasta Bella, LLC v. Visa USA,
Inc., 442 F.3d 741, 746 (9th Cir. 2006).
HLF does not appear to contest that it was in privity
with the plaintiff in Sidlo.
See Opp. at 21-24.
agrees that this element is satisfied because HLF was able to
held does not violate the anti-assignment provision of the plan.
ECF No. 76 at 31.
ECF No. 56 in this action was also filed as ECF No. 487 in the
- 51 -
participate in and had a practical opportunity to control the
Sidlo litigation by virtue of its JLA with Sidlo and the
multiple joinders it filed to Sidlo’s summary judgment briefing.
See In re Schimmels, 127 F.3d 875, 881 (9th Cir. 1997)
(describing relationships deemed sufficiently close to justify
finding privity, including where a nonparty had a significant
interest and participated in the prior action); United States v.
Bhatia, 545 F.3d 757, 759-60 (9th Cir. 2008) (privity may be
found where nonparty had the same practical opportunity as a
party to control the proceedings); ECF No. 45 at 3, 6, 9, 22-23.
As to the second element of collateral estoppel, there
was a final judgment entered in favor of KFHP in Sidlo v. Kaiser
Found. Health Plan, Inc., No. 1:15-cv-00269, ECF No. 526. 29
The real dispute is regarding the last element:
whether Count III raises the same issues as in Sidlo and if
those issues were necessarily decided in this Court’s previous
“Collateral estoppel treats as final only those
questions actually and necessarily decided in a prior suit.”
Brown v. Felsen, 442 U.S. 127, 139 n.10 (1979); see also
Syverson v. Int’l Bus. Machines Corp., 472 F.3d 1072, 1078
As KFHP notes, the pendency of the Sidlo appeal does not
preclude the application of collateral estoppel. See Robi v.
Five Platters, Inc., 838 F.2d 318, 327 (9th Cir. 1988) (“The
present appeals in no way affect the ‘firmness’ of the Robi
decisions in the district court for purposes of issue
- 52 -
(defining the elements of offensive nonmutual issue preclusion
to include that “the issue was decided in a final judgment”).
As both this action and Sidlo involve claims for ERISA benefits,
it is unsurprising that some of the allegations underlying this
claim are very similar to those in Sidlo, as shown by KFHP’s
Motion at 19-20.
However, this Court disagrees
that all of the issues essential to dispose of HLF’s claim were
necessarily decided by this Court’s opinion in Sidlo.
In granting summary judgment to KFHP on Sidlo’s ERISA
claim, the Court determined that the Inter-Facility Transport
Policy, rather than Section G (or the “Ambulance Services
provision”) governed Sidlo’s claim for benefits. 30
ECF No. 56 at
KFHP represented that that policy “reimburses providers
for members’ transport at no cost to members, including
Id. at 46.
As such, the Inter-Facility Transport
Policy “ask[e]d nothing of [Sidlo] from a cost standpoint.”
at 52; see also id. at 20 (reimbursement “with no copayment
obligation on Members”), 46-47 (reimbursement provided “at no
The Court recognizes that HLF has presented claims under
Section G for preservation and to the extent that any patient
was transported from the scene of an incident to a facility,
rather than between facilities. Opp. at 23 n.11. Based on the
FACC, the Court cannot determine whether there are any scene-tofacility transports that may be governed by Section G. However,
to the extent that HLF is asserting that facility-to-facility
transports are governed by Section G, the Court finds such
claims to be collaterally estopped by virtue of the Sidlo
- 53 -
cost to members, including copays” and “no copayment is required
by the Inter-Facility Transport Policy”).
Thus, the Court’s
holding that the Inter-Facility Transport Policy applied
resulted in Sidlo not owing anything to KFHP.
The parties still dispute, however, whether the Court
necessarily decided whether HLF may seek 100% of its billed
charges from KFHP under the Inter-Facility Transport Policy.
Opp. at 23-24; Reply at 14-15.
HLF has alleged that under the
Inter-Facility Transport Policy, “KFHP is obligated to pay 100%
of all amounts owed to HLF by Assignors,” FACC ¶ 216, and
asserts that this Court did not determine the actual amount due
to HLF in the Sidlo litigation.
Opp. at 23.
KFHP argues that
the Court accepted that the Inter-Facility Transport policy only
requires Kaiser to pay “fair market value,” that KFHP had
complied with the plan, and in deciding no further benefits were
payable to Sidlo necessarily determined that the amount KFHP
paid was at or above fair market value.
Reply at 14-15.
KFHP asserted in the Sidlo litigation that under the
Inter-Facility Transport Policy, “‘KFHP determines the fair
market value of the services’” and reimburses at that rate.
No. 56 at 46 (quoting KFHP’s Reply at 9); see also ECF No. 56 at
20 (KFHP reimburses “at fair market value with no copayment
obligation on Members.”).
Although the Court noted that
“Sidlo’s claim was reimbursed to the fullest extent anticipated
- 54 -
by the plan,” ECF No. 56 at 62, the Court did not, as KFHP
argues, necessarily determine that the 200% of Medicare rate
KFHP used for reimbursement was at or above fair market value
and that no further benefits were payable.
Nor did the Court
find that the proper rate for air ambulances services owed under
the Inter-Facility Transport Policy was reimbursement at fair
Rather, the Court simply recognized that KFHP had
complied with its practice of reimbursing at 200% of the
Medicare rate under the Inter-Facility Transport Policy, ECF No.
56 at 21. Indeed, the Court immediately clarified this point in
a footnote and explicitly stated that “an issue remains as to
whether KFHP reimbursed HLF at the proper rate,” as it was “an
issue not currently before the Court.”
Id. at 62 n.14; see also
id. at 65 (“it is undetermined at this point whether KFHP
reimbursed HLF at the proper rate”). 31
In addition, this Court issued a minute order on September 6,
2016 noting that the parties appeared at the time to agree that
the fair market rate is the appropriate rate and directed the
parties to explore with the magistrate judge whether they could
use alternative dispute resolution to determine what fair market
value rate was. ECF No. 38. Moreover, during the summary
judgment hearing the Court indicated multiple times that it
encouraged the parties to address the rate of reimbursement
issue before the magistrate judge. See Sidlo, Tr. of Hearing,
Sept. 15, 2016, ECF No. 421 at 16, 97. These directives belie
KFHP’s assertion that the Court has already determined what the
proper rate of reimbursement was, and the Court additionally
notes that the parties do not currently appear to agree that
fair market value is the appropriate rate.
- 55 -
In sum, application of the Inter-Facility Transport
Policy resolved Sidlo’s claim because it meant that Sidlo did
not owe anything further to KFHP.
However, such determination
did not resolve what the proper rate of reimbursement was.
did it resolve whether the 200% of Medicare rate was less than
the proper reimbursement rate such that KFHP was required to
provide additional reimbursement to HLF pursuant to Sidlo’s
benefits plan (or conversely if 200% of Medicare was greater
than the proper rate of reimbursement, if HLF would have to
repay a portion of KFHP’s payment).
Because it has already
concluded that the Inter-Facility Transport Policy applies to
facility-to-facility transports, the Court GRANTS KFHP’s Motion
as to this issue.
However, the Court DENIES KFHP’s Motion as to
the rate of reimbursement (that is, the proper rate for air
ambulances services) and accordingly finds that HLF is not
collaterally estopped from pursuing this part of Count III.
Count IV: Breach of Contract Claim
A. Judicial Notice of Documents
Concurrently with its Motion to Dismiss and as
relevant to its arguments for dismissing the breach of contract
claim, KFHP filed a request for judicial notice, which HLF has
Request for Judicial Notice, ECF No. 100
The Request seeks notice of four documents, all of
- 56 -
which this Court previously considered in connection with the
Request at 2.
“When ruling on a Rule 12(b)(6) motion to dismiss, if
a district court considers evidence outside the pleadings, it
must normally convert the 12(b)(6) motion into a Rule 56 motion
for summary judgment, and it must give the nonmoving party an
opportunity to respond.”
Ritchie, 342 F.3d at 907.
may, however, 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.”
Under Federal Rule of Evidence 201, the Court may also
take judicial notice of “a fact that is not subject to
reasonable dispute because it (1) is generally known within the
trial court’s territorial jurisdiction; or (2) can be accurately
and readily determined from sources whose accuracy cannot
reasonably be questioned.”
Fed. R. Evid. 201(b).
In addition, the Court may consider a document
referenced in the complaint if it is central to the plaintiff’s
claim and no party questions the authenticity of the copy
attached to the motion.
Marder v. Lopez, 450 F.3d 445, 448 (9th
A document “may be incorporated by reference into a
complaint if the plaintiff refers extensively to the document or
the document forms the basis of plaintiff’s claim.”
- 57 -
342 F.3d at 908 (noting that “incorporation by reference may
apply, for example, when a plaintiff’s claim about insurance
coverage is based on the contents of a coverage plan.”).
addition, the document’s authenticity must not be in dispute.
Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1160 (9th Cir.
2012) (“[C]ourts may take into account documents whose contents
are alleged in a complaint and whose authenticity no party
questions, but which are not physically attached to the
plaintiff’s pleading.”) (internal quotation and alteration
The first three documents are letters from KFHP
relating to its indemnification and defense promises to its
Request, Exhibits 1-3, ECF Nos. 100-2 to 100-4.
documents appear central to HLF’s breach of contract claim.
FACC ¶¶ 9 (KFHP “has offered unlimited indemnification benefits
to certain KFHP members related to services received from
HLF.”); 169 (“KFHP has agreed to indemnify Assignors, and each
of them for any amount that might be deemed due and owing to
HLF.”); 218 (“Under KFHP’s promises to indemnify all Assignors
for any amounts deemed owing to HLF, KFHP is obligated to pay
100% of all amounts owed to HLF by Assignors, and to ensure that
HLF is fully compensated at no cost to Assignors, or any of
them.”); 225 (“KFHP has made promises, and has undertaken a
contractual obligation outside of the Plans and independent of
- 58 -
ERISA, to pay any and all remaining amounts owed to HLF by
Assignors, and each of them.”).
The last document is a copy of Sidlo’s signed Standard
Ambulance Signature Form, which contains an assignment
provision, giving HLF “all right, title, and interest in all
benefit plans from which my dependents or I are entitled to
recover and agree to immediately remit and assign any payment
for the services provided to [HLF].”
Exhibit 4, ECF No. 100-5.
The contents of this document are also incorporated into HLF’s
claim: “The KFHP members at issue have each assigned their
rights and benefits under their KFHP plans to HLF.”
FACC ¶ 6;
see also id. ¶¶ 31-159 (alleging assignment to HLF for each
Both Counts III and IV rely on this assignment to
allow HLF to bring claims in place of the Assignors.
¶¶ 220, 226.
As HLF has not disputed the authenticity of any of the
documents, the Court GRANTS KFHP’s Request for Judicial Notice
and has considered the documents in determining the breach of
B. Whether HLF Has Asserted a Ripe Claim Regarding KFHP’s
In its Motion to Dismiss, KFHP first asserts that the
breach of contract claim is barred for ripeness, just as Sidlo’s
claim for equitable indemnification was, and thus is also barred
- 59 -
by collateral estoppel.
Motion at 22-23; ECF No. 56 at 72-77.
HLF argues in opposition that by demanding payment against the
Assignors, it has ripened claims based on KFHP’s indemnification
promises to the Assignors.
Opp. at 25.
As determining ripeness
of the breach of contract claim depends in part on the substance
of the indemnity KFHP gave to the Assignors and when its duty to
indemnify arose, the Court will address ripeness together with
KFHP’s arguments about the plausibility of HLF’s interpretation
of the indemnity promises.
See Motion at 23-24.
1. Interpretation of the Indemnity Offer
KFHP appears to assert that HLF’s characterization of
the indemnity promises is unambiguously wrong, and that HLF has
not alleged a breach under the offers as properly construed.
See Motion at 23-24.
HLF has not addressed the contract
interpretation issue in its Opposition, but rather appears to
assert that the indemnification contract is enforceable and that
HLF will seek to enforce it.
Opp. at 26-30.
On a motion to
dismiss, this Court may consider whether a contract is
ambiguous, and even if it is ambiguous, whether the complaint
still states a claim under the possible interpretations.
Hungate v. Law Office of David B. Rosen, No. SCAP-13-0005234,
2017 WL 747870, at *7 (Haw. Feb. 27, 2017) (reversing dismissal
where the court concluded that despite contract ambiguity, the
- 60 -
complaint stated a claim under the interpretation more favorable
to the plaintiff).
In Hawaii, “an agreement should be construed as a
whole and its meaning determined from the entire context and not
from any particular word, phrase, or clause.”
Tanaka, 137 Haw. 137, 155, 366 P.3d 612, 630 (2016), cert.
denied, 137 S. Ct. 198 (2016) (internal quotation omitted).
“[C]ontractual terms should be interpreted according to their
plain, ordinary meaning and accepted use in common speech.”
State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Haw. 315,
324, 978 P.2d 753, 762 (1999).
“[C]ourts should not draw
inferences from a contract regarding the parties’ intent when
the contract is definite and unambiguous.”
whether an ambiguity exists, “[t]he court should look no further
than the four corners of the document.”
“Where a term or
clause remains open to more than one reading, we construe any
ambiguity against the party who drafted the contract.”
Santiago, 137 Haw. at 155, 366 P.3d at 630 (internal quotation
KFHP has made the following indemnification promises 32
to its members who received air ambulance services from HLF: (1)
KFHP also made an offer of legal defense to its members.
Request, Ex. 2. However, as the offer of defense does not
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“If you have made a payment to Hawaii Life Flight...we will
reimburse you for verified payment amounts.”
Request, Ex. 1;
(2) “Kaiser has written all affected Members that it will defend
them personally against HLF’s baseless claims [and] Kaiser
wishes to clarify that it will also indemnify all impacted
Members from HLF’s baseless claims (beyond the costs of their
Request, Ex. 3 (emphasis in original).
HLF’s characterization of the reimbursement promise as
an agreement to pay to HLF on demand the full amounts HLF claims
are owed is implausible, as the core of KFHP’s promises are to
“reimburse” members for payments made to HLF and to “indemnify”
its members “from HLF’s baseless claims.”
Request, Exs. 1, 3.
Although KFHP would be required to reimburse these amounts if
any of the Assignors had paid HLF in full, HLF has not alleged
that any reimbursement is due to Assignors.
Nor is it apparent
that reimbursement necessarily will ever become due, and thus
ripeness concerns are implicated.
The promise to “indemnify” its members “from HLF’s
baseless claims” in the third letter raises similar concerns.
The duty to indemnify does not arise until liability is
See Pancakes of Haw., Inc. v. Pomare Properties
Corp., 85 Haw. 286, 292, 944 P.2d 83, 89 (Haw. Ct. App. 1997)
appear to be at issue here, the Court will not discuss it
- 62 -
(“Once the trier of fact makes a determination on the claims in
the lawsuit, the duty to indemnify will either arise or lie
Claims falling within the indemnity provision will
trigger the duty to indemnify, while claims falling outside the
provision will relieve the indemnitor of his or her duty to
indemnify.”) (quoted with approval in Haole v. Hawaii, 111 Haw.
144, 151, 140 P.3d 377, 384 (2006)).
Although HLF has alleged
that KFHP may be held liable for indemnification, it has not
sufficiently alleged that KFHP’s duty to indemnify has in fact
As such, HLF’s allegations fail to state a claim and
raise ripeness concerns.
“The ripeness doctrine prevents courts, through
avoidance of premature adjudication, from entanglement in
theoretical or abstract disagreements that do not yet have a
concrete impact on the parties.”
18 Unnamed John Smith
Prisoners v. Meese, 871 F.2d 881, 883 (9th Cir. 1989).
ripeness is “determinative of jurisdiction,” “[i]f a claim is
unripe, federal courts lack subject matter jurisdiction and the
complaint must be dismissed.”
S. Pac. Transp. Co. v. City of
Los Angeles, 922 F.2d 498, 502 (9th Cir. 1990); see also Higa v.
Earp, Civ. No. 08-00411 JMS-LEK, 2009 WL 1402686, at *2 (D. Haw.
May 15, 2009) (“The question of ripeness, like other challenges
- 63 -
to a court's subject matter jurisdiction, is treated as a motion
to dismiss under Rule 12(b)(1).”) (citation omitted).
“One does not have to await the consummation of
threatened injury to obtain preventive relief.
certainly impending, that is enough.”
If the injury is
Thomas v. Union Carbide
Agric. Prods. Co., 473 U.S. 568, 581 (1985) (emphasis added)
But where a plaintiff’s claim involves
“contingent future events that may not occur as anticipated, or
indeed not occur at all,” the claim is not ripe for judicial
review because “the issues raised require further factual
18 Unnamed John Smith Prisoners, 871 F.2d at 883
(quoting Thomas, 473 U.S. at 581).
As noted above, “a cause of action for indemnity does
not accrue until the indemnitee has suffered a loss.”
United States, 654 F.2d 644, 650 (9th Cir. 1981).
different than the duty to defend, which is broader and arises
earlier than the duty to indemnify.
See W. World Ins. Co. v.
Cty. of Hawaii, No. CV0500742DAE/LEK, 2008 WL 2073494, at *2 n.1
(D. Haw. May 15, 2008), aff'd, 357 F. App'x 795 (9th Cir. 2009)
(“the ‘duty to indemnify remains speculative until the
underlying proceeding against the insured has progressed
sufficiently to settle the relevant liability issues.’”)(quoting
Am. States Ins. Co. v. Dastar Corp., 318 F.3d 881, 894 (9th Cir.
2003) (Ferguson, J., dissenting) (interpreting Oregon law));
- 64 -
Haole, 111 Haw. at 151, 140 P.3d at 384 (finding the duty to
defend arises when the complaint raises the potential for
indemnification); Delmonte v. State Farm Fire & Cas. Co., 90
Haw. 39, 52, 975 P.2d 1159, 1172 (1999), as amended (Mar. 15,
1999) (“The duty to defend is broader than the duty to
“[C]ourts often find claims for indemnification or
contribution are not ripe because the claims are contingent on a
finding of liability on the underlying claim.”
Summerlin Life & Health Ins. Co., 536 F. Supp. 2d 1236, 1241 (D.
Nev. 2008) (collecting cases).
In Western World, the court had
previously found that there was a duty to defend but concluded
that the indemnification issue was not ripe where there were
“substantial factual disputes” remaining in the underlying state
court action which would “have a direct and substantial impact
on the question” of indemnification.
2073494, at *2.
W. World Ins. Co., 2008 WL
Similarly, in Seattle Times Co. v. National
Surety Corp., the court concluded that the breach of contract
claim based on an indemnification agreement was not yet ripe
because the plaintiff did not “point to a distinct and
unequivocal statement that [the defendant] intend[ed] not to
perform under the contract when and if its performance be[came]
No. C13-1463RSL, 2016 WL 3033498, at *3 (W.D. Wash. May
Rather, the defendant asserted that it did not have
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sufficient information to evaluate liability and raised defenses
to the plaintiff’s claims, which was insufficient to constitute
an anticipatory breach.
The Court agrees that HLF’s breach of contract claim
is not yet ripe.
HLF has alleged that it has requested payment
from each Assignor of the unpaid amount due, but that is still
insufficient to give rise to KFHP’s indemnification duties.
Pancakes, 85 Haw. at 292, 944 P.2d at 89 (the duty to arise will
either arise or lie dormant once the underlying claims have been
A breach of contract claim based on the
indemnification remains contingent on various events, such as
resolution of the amount Kaiser must pay under the ERISA claim,
see ECF No. 56 at 62 n.14, so it remains uncertain whether a
balance will remain on any of HLF’s bills.
Although HLF also appears to assert that if a balance
remains, it would sue to collect the balance, see Opp. at 26,
this assertion does not solve the ripeness issues.
There is no
evidence that if the Assignors are deemed liable for the
balance, KFHP will refuse to indemnify them.
In addition, the
parties have foreshadowed various arguments about the
enforceability of the indemnification agreement based on balance
billing, unconscionability, and preemption under the Airline
Deregulation Act, see Motion at 24; Opp. at 26-30; Reply at 20.
Resolution of those issues may affect whether the Assignors can
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be held liable for the balance and thus will bear on whether
KFHP’s indemnification duty arises at all, much less in what
The Court declines to address any of these issues at
this stage, but they further illustrate why the indemnification
claim is not yet ripe. 33
See 18 Unnamed John Smith Prisoners,
871 F.2d at 883 (dismissing claims that involved “‘contingent
future events that may not occur as anticipated, indeed may not
occur at all.’”) (quoting Thomas, 473 U.S. at 581).
In sum, the Court finds that HLF has not stated a
claim for breach of the indemnification agreement because HLF
cannot yet allege that it is legally entitled to full
reimbursement and the claim is not ripe.
Sacramento, LLC v. Am. Home Assur., Co., No. C 07-06493 JSW,
2008 WL 2025015, at *3 (N.D. Cal. May 8, 2008) (“Because
Entercom has not yet become legally obligated to pay any such
sums, any claim for breach of contract based on a refusal to
acknowledge and provide coverage, i.e. to indemnify the Entercom
Parties, is not yet ripe.”); Aliya Medcare Fin., LLC v. Nickell,
156 F. Supp. 3d 1105, 1137 (C.D. Cal. 2015) (“It is axiomatic
HLF argued at the hearing that it seeks to have the Court
through the assignment determine the amounts to which HLF has
alleged it is entitled, and the indemnity would be the means of
collecting those amounts after entitlement has been proven.
However, this discussion at the hearing only further reinforces
the Court’s conclusion that this claim is not yet ripe.
- 67 -
that Exec Billing has no obligation to indemnify Aliya for
damages that have not yet been awarded to it.”).
C. Whether HLF Validly Received an Assignment of the
Indemnity Rights and Has Standing
KFHP next asserts that HLF was never properly assigned
indemnification rights and therefore lacks standing to assert a
claim for breach of contract.
Motion at 24-25.
HLF argues in
response that the assignment provisions are so broadly worded
that they encompass the indemnity promises KFHP later gave to
Opp. at 30.
In Hawaii, “[a]ssignments are subject to the standards
applicable to the interpretation of contracts.”
Martin v. GMAC
Mortg. Corp., No. CIV. 11-00118 LEK, 2012 WL 2526911, at *2 (D.
Haw. June 29, 2012).
The Court has already set forth the
standards for contract interpretation above.
“where an assignment is challenged, the presumption is in favor
AIG Hawaii Ins. Co. v. State Farm Ins.
Companies, 119 Haw. 244, 195 P.3d 711 (Haw. Ct. App. 2008)
(unpublished) (internal citation and quotation omitted).
In Hawaii, an assignment generally “operates to place
the assignee in the shoes of the assignor, and provides the
assignee with the same legal rights as the assignor had before
Fireman's Fund Ins. Co. v. AIG Hawai'i Ins. Co.,
109 Haw. 343, 349, 126 P.3d 386, 392 (2006) (emphasis in
- 68 -
original) (internal quotation marks omitted).
obtained assignments through its Standard Ambulance Signature
Form, which assigns “any payment for the services provided to
Hawaii Life Flight.”
Request, Ex. 4.
The issue for this Court
is thus whether the indemnity promise KFHP later gave to its
members could have been assigned to HLF through the Standard
Ambulance Signature Form signed at the time of transport.
The court in Brewer Environmental Industries, LLC v.
Matson Terminals, Inc. faced the same basic issue.
As the court
there framed it, the “key issue” was whether “an assignment of
rights [could] be applied prospectively so as to include similar
rights acquired by the assignor at a later time[.]”
10-00221 LEK-KSC, 2011 WL 1637323, at *11 (D. Haw. Apr. 28,
In that case, a company (“Brewer”) obtained a worker’s
compensation policy from an insurer (“Seabright”).
Id. at *9.
Through that policy, “Brewer contractually assigned its rights
to Seabright to recover from third-parties [sic] any payments
made under the policy.”
Id. (internal citation omitted).
Brewer then later entered into an agreement with the defendants,
which contained a provision by which the defendants would
indemnify Brewer for certain liabilities.
Id. at *1.
The court rejected the plaintiffs’ argument that the
assignment included the later-acquired indemnification rights,
reasoning that under Fireman’s Fund Insurance, Brewer only
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transferred to Seabright “its rights as they existed prior to
Id. at *11 (holding that “Brewer’s
subsequently-acquired indemnity rights were not part of that
transfer and therefore cannot be enforced by Seabright”). 34
such, the court concluded that Seabright lacked standing to
pursue a breach of contract claim, as it had no enforceable
contract rights against the defendant.
Here, the Court is faced with essentially the same
HLF obtained assignments from the Assignors at the
See Compl. ¶ 1; Opp. at 30; Request, Ex. 4. 35
time of transport.
After transport and when HLF and KFHP began to dispute the
billing issues, KFHP offered to its members defense and
See Request, Exs. 1-3.
Just as in Brewer, the
indemnification rights were obtained sometime after the
assignment was made, and those subsequently obtained rights were
not part of the transfer of rights.
As such, the Court
The court in Brewer noted that it “was unaware of any Hawai‘i
cases that have expanded this principle to include legal rights
that the assignor acquired after the assignment.” 2011 WL
1637323, at *11. This Court has also been unable to locate any
such authority in Hawaii.
In its Opposition, HLF does not assert that there has been any
other assignment of rights apart from that given in the Standard
Ambulance Consent Form. See Opp. at 30.
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concludes that HLF lacks standing to bring a breach of contract
action based on KHFP’s promises of indemnification. 36
D. Whether ERISA Preempts Count IV
Finally, KFHP argues that the breach of contract claim
is preempted by ERISA because it is based on the same
communications KFHP sent to members as an ERISA fiduciary that
this Court previously found warranted preemption.
Motion at 25-
While the Court need not reach the preemption issue, given
its determination above that HLF’s claim is not ripe and HLF
does not have standing to bring this claim, it nevertheless has
determined that a discussion of preemption is warranted here.
As this Court discussed in its prior Order, ECF No. 77
at 15-19, 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. §
Both express preemption under § 514(a), 29 U.S.C. §
1144(a) and preemption due to a “conflict” with ERISA’s remedial
KFHP has argued that the assignment by its plain terms does
not include indemnification. See Reply at 18. However, even if
the term “payment” could be construed to include indemnification
rights, the Assignors could still only assign those rights that
existed at the time of assignment. As such, the Court does not
need to reach the interpretation of the term because the
Assignors did not have this right at the time of assignment to
the extent it was not included in the benefits plans. See
Request, Ex. 4. The Court discusses infra HLF’s position that
the benefits plans should be construed to include the indemnity
promises if they are held preempted.
- 71 -
scheme are sufficient to “defeat state-law causes of action on
Fossen v. Blue Cross & Blue Shield of Mont., Inc.,
660 F.3d 1102, 1107 (9th Cir. 2011).
ERISA preempts state laws insofar as they “relate to
any employee benefit plan” covered by ERISA.
29 U.S.C. §
The Supreme Court has repeatedly observed that “the
express pre-emption provisions of ERISA are deliberately
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46
“The key to § 514(a) is found in the words ‘relate to.’
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-Rand Co. v. McClendon, 498 U.S.
133, 138 (1990) (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 connection with or reference to such a plan.”
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
- 72 -
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 v. CNF Inc., 559 F.3d 1061,
1082 (9th Cir. 2009); Oregon Teamster, 800 F.3d at 1156.
broadly, both the Supreme 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
N.Y. State Conference of Blue Cross & Blue Shield Plans
v. Travelers Ins. Co., 514 U.S. 645, 657 (1995); Paulsen, 559
F.3d at 1082.
- 73 -
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) (citation
“[T]he 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 administration.”
Dishman v. UNUM Life Ins.
Co. of Am., 269 F.3d 974, 984 (9th Cir. 2001).
“ERISA doesn’t purport to regulate those relationships where a
plan operates just like any other commercial entity – for
instance, the relationship between the plan and its own
employees, or the plan and its insurers and creditors, or the
plan and the landlords from whom it leases office space.”
Am. Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1522 (9th Cir.
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
- 74 -
bedeviled the Supreme Court.”) (emphasis omitted).
in Johnson v. Lucent Technologies, Inc., the Ninth Circuit
recently held that an intentional infliction of emotional
distress claim based on the termination of benefits was
preempted by ERISA because, “but for Lucent’s termination of
benefits, there would have been no grounds for Johnson’s state
No. 14-56542, 2016 WL 5390352, at *2 (9th Cir.
Sept. 27, 2016) (unpublished).
In Busse v. Shaklee Corp., the
court found a misappropriation of funds claim preempted because
“without the [ERISA] plans, there would be no tort of removing
plaintiff’s pension rights from the pension records.”
No. C 10-
359 SI, 2010 WL 1346406, at *7 (N.D. Cal. Apr. 6, 2010).
By contrast, in Providence Health Plan, the Ninth
Circuit found a breach of contract claim was not preempted where
the plan sued the plan participant pursuant to the reimbursement
provision of the insurance plan.
385 F.3d at 1171.
paid medical benefits to the participant after a car accident,
and the participants then sued the driver of the vehicle and
obtained a settlement.
The plan then sought reimbursement
of the benefits it had provided.
The Ninth Circuit
reversed the district court’s holding that the breach of
contract provision was not preempted, reasoning that the plan
was simply trying to enforce its contract and “[a]djudication of
its claim does not require interpreting the plan or dictate any
- 75 -
sort of distribution of benefits” and as such did not “relate
to” the plan.
Id. at 1172.
Here, KFHP has offered to its members who received air
ambulance services from HLF defense and indemnification.
Request, Exs. 1-3.
HLF has alleged that these promises were
made “outside of the plans and independent of ERISA, FACC ¶ 225,
and as such, asserted that they are not preempted.
Opp. at 31.
HLF has additionally reiterated that on a motion to dismiss, the
Court must construe the FACC’s allegations in the light most
favorable to HLF.
However, “only pleaded facts, as opposed to
legal conclusions, are entitled to assumption of truth.”
Corinthian Colls., 655 F.3d at 991.
Whether KFHP’s indemnity
offer gives rise to an independent legal duty is a question of
See Shaw v. Santa Monica Bank, 920 F. Spp. 1080, 1086 (D.
Haw. 1996) (whether a legal duty exists for purposes of a
negligence action is a question of law for the court); see also
Sikiyan v. Morris, No. CV16-1699 PSG (JCX), 2016 WL 3131022, at
*4 (C.D. Cal. May 31, 2016), appeal dismissed sub nom. JANET
SIKIYAN v. GABRIELLE MORRIS, ET AL (June 28, 2016), and appeal
dismissed sub nom. JANET SIKIYAN v. GABRIELLE MORRIS (July 8,
2016) (“The determination of duty is primarily a question of
As such, the Court may determine whether KFHP’s
indemnity promise is independent of the ERISA plan and need not
assume the truth of HLF’s allegation.
- 76 -
Applying the Ninth Circuit’s relationship test, the
Court concludes that the breach of contract claim at issue here
bears on an ERISA-regulated relationship.
Although HLF is now
asserting the claim as an assignee of the claim, the
indemnification promises originally arose between KFHP and its
members who received HLF’s air ambulance services.
letters KFHP sent indicate that it was acting on behalf of the
See Ex. 1 (“As a nonprofit health plan, we
believe it is our responsibility to challenge excessive billing
like this to keep our health care coverage affordable for
members like you.”); Ex. 3 (“Kaiser is taking every step to
address the situation in a manner that will service the
interests of both its Members and the larger public.”).
indemnity thus bears on the relationship between KFHP and its
“Any regulation of the relationship is basis enough
Gen. Am. Life Ins. Co., 984 F.3d at 1522.
The Court comes to the same conclusion relying on
cases like Lucent and Busee, which find that a claim “relates
to” ERISA where there would be no grounds for the claim without
the ERISA plan.
Here, since the indemnification offer is
premised on the existence of the ERISA plan that limits or
eliminates member liability for the cost of air ambulance
services and a risk that a dispute regarding how KFHP processes
and pays claims may result in additional liability for members,
- 77 -
the alleged breach of contract claim would not have arisen
without the ERISA plan.
As KFHP asserts, the “indemnity
promises to its members were connected to and dependent upon its
relationship as the administrator of the members’ health
Reply at 19.
Absent the ERISA plan, KFHP would not be
involved in issues relating to how HLF was paid.
The Court’s analysis is further bolstered by the fact
that the indemnity promises are contained in letters from KFHP
to plan members which this Court previously determined were sent
in KFHP’s role as an ERISA fiduciary in connection with a
disagreement about claims processing.
ECF No. 77 at 21.
Court accordingly concluded that HLF’s counterclaim was
preempted to the extent it was based on those communications.
HLF has attempted to escape this holding by
distinguishing between the tort claims then at issue and the
contract claim here.
Opp. at 31.
However, the Court’s previous
opinion cannot be dispensed with so easily.
The Court did not
hold that the particular statements relevant to the tort claims
were made in connection with the claims processing dispute.
Although KFHP does not explicitly claim to be acting in its
fiduciary capacity in its communications to members regarding
the indemnification, the effect of its indemnification offer is
to uphold the interests of its members and ensure that their
ultimate liability is limited to the extent set forth in their
- 78 -
Rather, the Court held more broadly that the preempted claims
“ar[o]se out of communications from KFHP to its members, which
were sent in the context of a dispute about the denial of
benefits” and that to the extent the claims were “based on this
communication” they were preempted.
ECF No. 77 at 20-21.
Indeed, the letters themselves make clear that the
indemnity promises are being given precisely because of the
claims processing dispute.
See Request, Ex. 1 (“We are
currently in negotiations with Hawaii Life Flight and recently
learned it was asking members like you to pay amounts above what
we believe are reasonably owed to them....If you have made
payment to Hawaii Life Flight in response to its additional
letters or phone calls...we will reimburse you for verified
payment amounts.”); Ex. 3 (“Kaiser is aware of [HLF’s] claim
that is allegedly due unpaid fees,” “is taking every step to
address the situation in a manner that will serve the interests
of both its Members and the larger public,” and “wishes to
clarify that it will also indemnify all impacted Members form
HLF’s baseless claims”) (emphasis in original).
are, moreover, completely consistent with KFHP’s fiduciary
duties to its members.
At the end of the day, this claim does not involve a
breach of a provider agreement made directly with the insurer
concerning the rate of reimbursement, which has been held to not
- 79 -
sufficiently relate to ERISA.
See Blue Cross of Cal. v.
Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1041-52
(9th Cir. 1999) (finding breach of contract claim not
Rather, HLF’s breach of contract claim involves
HLF, purportedly standing in the shoes of plan members, suing
the retirement plan.
This is “a relationship comprehensively
regulated by ERISA.”
Borton v. New United Motor Mfg., Inc., No.
3:10-CV-00253-RCJ, 2010 WL 3259907, at *6 (D. Nev. Aug. 17,
2010) (finding fraud and negligent misrepresentation claims by
plan member against retirement plan preempted); 38 see also Barr
v. Am. Cynamid Co., 808 F. Supp. 752, 759 (W.D. Wash. 1992)
(finding alleged misrepresentations concerning supplemental
benefits available under voluntary severance program to ERISAcovered employees was preempted as “related to” an ERISA plan).
As such, HLF’s breach of contract claim is preempted.
Finally, the Court turns to HLF’s request that if the
indemnity agreements are preempted by ERISA, the Court “make
clear” that they “are preempted because they are part of
In its conclusion, the court in Borton relied on Davidian v.
Southern California Meat Cutters Union & Food Employees Benefit
Fund, 859 F.2d 134 (9th Cir. 1988), which affirmed a finding of
preemption as to claims for bad faith, fraud, deceit, and breach
of fiduciary duty by a plan member against a plan. There, a
representative of the plan allegedly misled him as to the
limitations of various health insurance plans from which he
could choose on retirement, and the Ninth Circuit concluded that
these claims were preempted because they related to the
administration of an employee benefit plan. 859 F.3d at 135.
- 80 -
Kaiser’s ERISA benefits plans” which have been assigned to HLF.
Opp. at 32.
However, HLF has not alleged in the FACC that
KFHP’s indemnity promises were intended to or did modify or
alter the Assignors’ benefits plans.
See generally FACC.
has HLF addressed the fact that this Court rejected in the Sidlo
litigation the claim that “KFHP modified the plan by
substituting indemnity benefits in place of healthcare benefits
without properly notifying members.”
ECF No. 56 at 50.
the Court determined that “there is no indication that KFHP
modified the plan.”
Id. at 62.
Rather “[by] offering to
indemnify members against any attempts by HLF to recover the
remainder of its medical transport bills, KFHP sought to protect
its members in the midst of a rate dispute with one of its
In addition, “[t]he letter KFHP sent to Sidlo
offering to provide him with free legal services did not purport
to replace any benefits Sidlo was due under the plan.”
Finally, HLF’s request may imply a concern there could
be limited recourse regarding Kaiser’s indemnity promises.
However, the Court notes that HLF has not actually cited to a
gap in recovery rights and that there may be possible equitable
remedies available under ERISA.
See, e.g., ECF No. 56
(discussing equitable estoppel under ERISA).
Ninth Circuit has held that even if such a gap exists, it “does
not undermine the reasoning on which a finding of preemption is
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Olson v. Gen. Dynamics Corp., 970 F.2d 1418, 1423 (9th
This is because “[t]here is simply no reason to
assume that Congress intended ERISA’s preemptive reach to be
coextensive with the Act’s civil remedial scheme” and any
resulting gap “is exactly the result that obtains when Congress
determines that federal law should govern a broad area to the
exclusion of state regulation and chooses not to prohibit the
actions formerly prohibited by state law.”
Id.; see also Bast
v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1009-10 (9th Cir.
1998), as amended (Aug. 3, 1998) (“Although forcing the Basts to
assert their claims only under ERISA may leave them without a
viable remedy, this is an unfortunate consequence of the
compromise Congress made in drafting ERISA.”).
As such, the
Court declines to find that KFHP’s indemnity promises are part
of the ERISA benefits plans.
Based on all of the foregoing, the Court accordingly
GRANTS KFHP’s Motion as to Count IV WITH PREJUDICE and WITHOUT
LEAVE TO AMEND.
For the foregoing reasons, the Court GRANTS IN PART
and DENIES IN PART Defendant KFHP’s Motion to Dismiss.
Court GRANTS IN PART and DENIES IN PART KFHP’s Motion as to
The Court’s partial grant as to Count III is WITH
PREJUDICE and WITHOUT LEAVE TO AMEND.
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Counts I and II are
dismissed WITHOUT PREJUDICE and WITH LEAVE TO AMEND.
is dismissed WITH PREJUDICE.
The Court DIRECTS that HLF shall
file its next amended counterclaim within 30 days of the date of
IT IS SO ORDERED.
Honolulu, Hawai’i, April 27, 2017.
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 In Part and Denying in Part
Counterclaim Defendant Kaiser Foundation Health Plan, Inc.’s Motion to
Dismiss Counterclaim Plaintiff Hawaii Life Flight Corporation’s First Amended
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