California Brain Institute, Inc. v. United HealthCare Services, Inc.

Opinion

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8 United States District Court 9 Central District of California

11 CALIFORNIA BRAIN INSTITUTE, Case № 2:23-cv-06071-ODW (RAOx)

12 Plaintiff, ORDER GRANTING MOTION TO 13 v. DISMISS [27] 14 UNITED HEALTHCARE SERVICES, INC. et al., 15

Defendants. 16 17 I. INTRODUCTION 18 Plaintiff California Brain Institute (“CBI”) brings this action against Defendant 19 United Healthcare Services, Inc. (“United”) for improperly withholding payment for 20 medical services CBI provided. (Second Am. Compl. (“SAC”), ECF No. 24.) CBI 21 brings three state law claims in its individual capacity and one federal law claim as its 22 patient’s assignee pursuant to the Employee Retirement Income Securities Act of 1974 23 (“ERISA”). United moves to dismiss CBI’s state law claims. (Mot. Dismiss (“Mot.” 24 or “Motion”), ECF No. 27.) For the reasons discussed below, the Court finds ERISA’s 25 statutory scheme preempts CBI’s state law claims and therefore GRANTS the 26 Motion.1 27

28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 II. BACKGROUND 2 All factual references derive from CBI’s Second Amended Complaint, attached 3 exhibits, and documents referenced and relied upon therein, and well-pleaded factual 4 allegations are accepted as true for purposes of this Motion.2 See Ashcroft v. Iqbal, 5 556 U.S. 662, 678 (2009); United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 6 A. Factual Background 7 This case concerns compensation for medical services that CBI provided to two 8 separate patients: “RH” and “MV.” (See SAC ¶ 8.) United manages the health plans 9 of both patients.3 CBI provided medical services to RH on multiple occasions. (Id. 10 ¶¶ 18–27.) CBI submitted bills for these services to United and United processed the 11 claims and made associated payments to CBI. (Id.) United later claimed it overpaid 12 the last of these payments. (Id. ¶¶ 30–31.) 13 CBI also provided medical services to MV on three occasions. (Id. ¶¶ 32, 37, 14 43.) These medical services are “Eligible Expenses” under MV’s health plan, which 15 qualifies as an employee benefit plan under ERISA (“ERISA Plan”). (Id. ¶¶ 10, 60– 16 62.) CBI obtained an assignment from MV granting CBI the right to step into the 17 shoes of MV with respect to MV’s rights under the ERISA Plan, including the right to 18 seek compensation for medical services. (Id. ¶ 53.) CBI submitted three claims to 19 United for MV’s medical services, billing $392,775.90, $487,928,70, and $139,432.80 20 respectively. (Id. ¶¶ 34, 39, 47.) 21 United processed CBI’s first two claims for MV’s coverage, determined the 22 total coverage amounted to $29,818.13, and obtained funds from MV’s employer for 23 the claims. (Id. ¶¶ 34–41.) Instead of paying CBI, United then kept those funds and 24 offset them against its alleged overpayment for RH’s separate and unrelated medical 25

26 2 The facts upon which CBI bases its allegations remain largely unchanged from the First Amended Complaint. Accordingly, the Court incorporates much of the factual background provided in its 27 previous order dismissing that complaint. (See Order Granting First MTD 2–3, ECF No. 23.) 28 3 RH and MV are not insured by the same health plan. (See SAC ¶¶ 9, 26, 32; see also Order Granting First MTD 2 n.3.) 1 services. (Id.) United refused to process CBI’s third claim for MV’s medical 2 services. (Id. ¶¶ 47–50.) CBI asserts that United acted improperly when it withheld 3 monies paid by MV’s employer for CBI’s services under the ERISA Plan, and kept 4 the funds to offset United’s alleged overpayment for patient RH. (Id. ¶ 42.) 5 B. Procedural Background 6 Based on the above facts, CBI initiated this legal action to obtain payment it 7 believes United improperly retained. (See generally SAC.) United previously moved 8 to dismiss CBI’s three common law causes of action pursuant to Federal Rule of Civil 9 Procedure (“Rule”) 12(b)(6), as conflict-preempted under ERISA § 514(a), 29 U.S.C. 10 § 1144(a), and as insufficiently pleaded. (First MTD 1–2, ECF No. 18.) The Court 11 granted the motion and dismissed the state law claims as preempted. (See Order 12 Granting First MTD 4–7.) 13 In analyzing CBI’s opposition to United’s first motion, the Court noted CBI’s 14 reliance on DB Healthcare, LLC v. Blue Cross Blue Shield of Arizona, Inc., 852 F.3d 15 868 (9th Cir. 2017). In that case, the Ninth Circuit held that a plaintiff’s “state law 16 claims for breach of . . . agreements” would not be preempted if they “have an 17 independent legal basis from ERISA.” (See Order Granting First MTD 7–8 (quoting 18 DB Healthcare, 852 F.3d at 878).) However, in this case, the Court found that “CBI 19 fail[ed] to allege any facts to support . . . any independent legal basis” from ERISA for 20 CBI’s claims. (Id. at 8.) Accordingly, the Court granted United’s motion with leave 21 to amend. (Id.) 22 On amendment, CBI now asserts the same four causes of action against United 23 as in the previous pleading: (1) money had and received, (2) conversion, 24 (3) constructive trust, and (4) recovery of benefits pursuant to ERISA § 502(a)(1)(B), 25 29 U.S.C. § 1132(a)(1)(B). (SAC ¶¶ 69–91.) As before, CBI brings the first three 26 causes of action “in its own individual capacity” to recover the $29,818.13 United 27 obtained from MV’s employer and did not pay to CBI. (Id. ¶¶ 5, 6, 67.) CBI brings 28 the fourth cause of action in its capacity as MV’s assignee to recover “appropriate 1 payment for the medical services provided to Patient MV.” (Id. ¶¶ 7, 68.) CBI 2 acknowledges that these recoveries overlap, and that if CBI recovers the $29,818.13, 3 then that reduces the amount CBI could receive in payment under the terms of MV’s 4 ERISA Plan. (See id. ¶ 68 n.4.) 5 United now again moves to dismiss CBI’s first three causes of action as 6 preempted and insufficiently pleaded pursuant to Rule 12(b)(6). (Mot. 7–8.) The 7 Motion is fully briefed. (Opp’n, ECF No. 29; Reply, ECF No. 30.) 8 III. LEGAL STANDARD 9 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 10 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 11 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 12 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 13 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 14 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 15 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 16 550 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual 17 matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 18 556 U.S. at 678 (internal quotation marks omitted). 19 The determination of whether a complaint satisfies the plausibility standard is a 20 “context-specific task that requires the reviewing court to draw on its judicial 21 experience and common sense.” Id. at 679. A court is generally limited to the 22 pleadings and must construe all “factual allegations set forth in the complaint . . . as 23 true and . . . in the light most favorable” to the plaintiff. Lee v. City of Los Angeles, 24 250 F.3d 668, 679 (9th Cir. 2001). However, a court need not blindly accept 25 conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. 26 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 27 Where a district court grants a motion to dismiss, it should generally provide 28 leave to amend unless it is clear the complaint could not be saved by any amendment. 1 See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 2 1025, 1031 (9th Cir. 2008). Leave to amend may be denied when “the court 3 determines that the allegation of other facts consistent with the challenged pleading 4 could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture 5 Co., 806 F.2d 1393, 1401 (9th Cir. 1986). Thus, leave to amend “is properly 6 denied . . . if amendment would be futile.” Carrico v. City & County of San 7 Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011). 8 IV. DISCUSSION 9 United argues that ERISA preempts CBI’s common law claims for conversion, 10 constructive trust, and money had and received, as well as CBI’s prayer for 11 compensatory and punitive damages, and restitution (collectively here, “CBI’s 12 claims”). (Mot. 7–8.) As the Court again finds CBI’s claims are ERISA-preempted, it 13 declines to reach United’s additional argument that CBI fails to sufficiently plead 14 these claims and remedies. (See id. at 8.) 15 A. ERISA Preemption 16 ERISA’s provisions “supersede any and all State laws insofar as they . . . relate 17 to any employee benefit plan.” ERISA § 514(a), 29 U.S.C. § 1144(a); (see generally 18 Order Granting First MTD). Pursuant to § 514(a)’s “relate to” clause, ERISA 19 preempts state laws and common law causes of action in “two categories”: those that 20 have a “connection with” an ERISA-governed benefit plan, and those that have a 21 “reference to” an ERISA-governed benefit plan. Gobeille v. Liberty Mut. Ins. Co., 22 577 U.S. 312, 319–20 (2016) (state law); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 23 47 (1987) (common law causes of action). A state law claim has a “reference to” an 24 ERISA plan where the claim is premised on the ERISA plan and cannot survive 25 without the plan’s existence. See Oregon Teamster Emps. Tr. v. Hillsboro Garbage 26 Disposal, Inc., 800 F.3d 1151, 1156 (9th Cir. 2015) (citing Providence Health Plan v. 27 McDowell, 385 F.3d 1168, 1172 (9th Cir. 2004)). A state law claim has a “connection 28 with” an ERISA plan where the claim involves “a central matter of plan 1 administration” or “interferes with nationally uniform plan administration.”4 2 Gobeille, 577 U.S. at 320. 3 In evaluating CBI’s First Amended Complaint, the Court previously found that 4 ERISA preempts CBI’s claims under either test. As CBI has not materially altered its 5 claims or allegations in the Second Amended Complaint, the logic employed in the 6 Court’s previous order stands. Specifically, regarding the “reference to” test, CBI’s 7 claims are premised on the existence of MV’s ERISA Plan because CBI seeks to 8 recover for medical services it contends are “Eligible Expenses” under MV’s ERISA 9 Plan. (See SAC ¶¶ 61–62; Order Granting First MTD 6.) Regarding the “connection 10 with” test, CBI’s claims involve a central matter of plan administration because 11 payment (or nonpayment) of benefits is a core aspect of administering MV’s ERISA 12 Plan. (See Order Granting First MTD 7.) The Court also reiterates that Congress 13 intentionally drafted ERISA to include an expansive preemption clause to preclude 14 would-be litigants from using common law as CBI attempts to here: as “an alternative 15 enforcement mechanism for securing benefits.” (Id. (quoting Blue Cross of Cal. v. 16 Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1054 (9th Cir 1999)).) 17 To summarize, CBI’s core grievance is that United is refusing to pay CBI the 18 monies it owes for MV’s procedures, and that this is unfair because the terms of MV’s 19 ERISA Plan entitles CBI to those payments. (See generally SAC.) CBI’s attempts to 20 characterize the payments United received from MV’s employer as somehow 21 unrelated to MV’s ERISA Plan are unavailing. The ERISA claim remains the crux of 22 the complaint; the state law claims do not survive without the existence of the ERISA 23 Plan. Therefore, the Court again dismisses the state law claims. 24 25

26 4 Additionally, the Ninth Circuit uses a “relationship test” to identify an impermissible “connection with” an ERISA plan; this test focuses on whether the “claim bears on an ERISA-regulated 27 relationship, e.g., the relationship between plan and plan member, between plan and employer, 28 between employer and employee.” Oregon Teamster, 800 F.3d at 1156 (quoting Paulsen v. CNF Inc., 559 F.3d 1061, 1082 (9th Cir. 2009)). 1 B. Bristol 2 The Court previously granted CBI leave to amend its First Amended Complaint 3 because, until recently, it had been an open legal question whether pre-service 4 confirmation of coverage could give rise to an independent claim. (See Order 5 Granting First MTD 8–9.) Two days after CBI filed its Second Amended Complaint, 6 the Ninth Circuit issued its holding in Bristol SL Holdings, Inc. v. Cigna Health and 7 Life Insurance Company, in which the court clarified what a plaintiff needs to show to 8 allege an “independent” state law claim that is not preempted by ERISA. 103 F.4th 9 597 (9th Cir. 2024). 10 In Bristol, a medical services provider brought state law claims against an 11 insurance company to recover compensation for services rendered. Id. at 599. The 12 provider argued that phone calls to the insurance company verifying patients’ 13 coverage created independent contractual obligations between the insurance company 14 and the provider. Id. The provider further argued that because these contracts arose 15 from common law, they stood separate and apart from ERISA’s statutory scheme and 16 could not be preempted. Id. at 601–07. 17 The Ninth Circuit rejected this argument. Id. at 607. Ruling in favor of the 18 insurance company, the Ninth Circuit explained that “‘independent state law claims’ 19 means claims ‘independent’ of an ERISA plan, not claims arising from an 20 ‘independent’ source of law.” Id. at 606 (emphasis added). Regardless of the claims’ 21 basis in contract law, the provider’s claims were still tied to the patients’ ERISA plans 22 because the provider sought to recover plan benefits. Id. at 603 (“By attempting to 23 secure plan-covered payments discussed via phone through the alternative means of 24 state contract law, Bristol is seeking to obtain through a state contract remedy that 25 which it could not obtain through ERISA. This effort triggers preemption . . . . 26 Bristol’s state law claims also rely on the substance of the ERISA plans to calculate 27 damages.” (cleaned up)). 28 1 Here, in the Second Amended Complaint, CBI attempts to establish the 2 independence of its state law claims, arguing: (1) United received money from MV’s 3 employer intended for CBI, leading to a claim for money had and received, (SAC 4 ¶¶ 69–74); (2) United earmarked funds from MV’s employer to pay for medical 5 services provided to MV and converted those funds for its own use, leading to a claim 6 for conversion, (id. ¶¶ 75–81); and (3) United wrongfully obtained money from MV’s 7 employer, because United was in reality holding the money in trust on behalf of CBI, 8 leading to a claim for constructive trust, (id. ¶¶ 82–86). 9 CBI’s state law claims suffer from the same defects the Ninth Circuit identified 10 in Bristol. Although CBI attempts to disconnect the payment MV’s employer made to 11 United from the administration of MV’s ERISA Plan, the payment and the Plan are 12 inextricably connected. (See also Order Granting First MTD 7 (“CBI attempts to 13 separate the payment of funds to CBI from United’s processing of the claim, but the 14 Court is not persuaded these are so easily divided.”).) The fact remains that if MV’s 15 employer was not obligated to pay for the medical services under MV’s ERISA Plan, 16 United would have never received the money that CBI claims it improperly retained. 17 Further, like the plaintiff in Bristol, CBI attempts to utilize ERISA to calculate 18 damages while in the same breath claiming the statute does not apply to the state law 19 claims at all. (See SAC ¶ 81.) CBI also tacitly concedes the state law claims overlap 20 with the ERISA claim by acknowledging that it is pleading an overlapping theory of 21 recovery (meaning that recovery under one or more of the state law claims reduces the 22 amount recovered under the ERISA claim and vice versa). (See id. ¶ 68 n.4.) 23 Therefore, CBI cannot present a basis for its state law claims that is 24 independent from MV’s ERISA Plan—the claims are inseparable from the ERISA 25 Plan. Given the inescapable connection to MV’s ERISA Plan, any further amendment 26 to CBI’s state law claims would be futile. 27 28 1 Vv. CONCLUSION 2 For the reasons discussed above, the Court GRANTS United’s Motion to 3 || Dismiss CBI’s common law claims, without leave to amend. (ECF No. 27.) The case 4|| may proceed as to the ERISA claim. United has fourteen days from the date of this 5 || Order to answer CBI’s complaint with respect to the remaining ERISA claim. The 6 || Court will set the case schedule in accordance with this disposition and the parties’ 7 || Rule 26(f) Report. 8 9 IT IS SO ORDERED. 10 11 September 30, 2024 12 ee wo 2

14 OTIS D. GHT, II Is UNITED STATES DISTRICT JUDGE

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