Cleanquest, LLC v. UnitedHealthcare Insurance Company

• Court: District Court, C.D. California
• Decided: December 2, 2024
• Docket: 8:23-cv-00148
• Status: Unknown

Opinion

1 O 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE CENTRAL DISTRICT OF CALIFORNIA 10 11 CLEANQUEST, LLC., a California Case No. 8:23-cv-00148-JWH-ADS limited liability company, 12 Plaintiff, ORDER REGARDING 13 DEFENDANTS’ MOTION TO v. DISMISS PLAINTIFF’S THIRD 14 AMENDED COMPLAINT [ECF UNITED HEALTHCARE No. 50] 15 INSURANCE COMPANY, a corporation; 16 UNITED HEALTHCARE SERVICES, INC., a corporation; 17 UNITED BEHAVIORAL HEALTH operating under the brand name 18 OPTUM; and DOES 1-10, inclusive, 19 Defendants. 20 21 22 23 24 25 26 27 1 Before the Court is the motion of Defendants UnitedHealthcare 2 Insurance Company; United HealthCare Services, Inc.; and United Behavioral 3 Health (collectively, “Defendants”) to dismiss the Third Amended Complaint 4 of Plaintiff Cleanquest, LLC.1 The Court concludes that this matter is 5 appropriate for resolution without a hearing. See Fed. R. Civ. P. 78; L.R. 7-15. 6 After considering the papers field in support and in opposition,2 the Court 7 orders that the Motion is GRANTED in part and DENIED in part, for the 8 reasons set forth herein. 9 I. BACKGROUND 10 A. Procedural History 11 Cleanquest filed its initial Complaint in state court in December 2022, 12 and Defendants removed the case to this Court in January 2023.3 13 In March 2023, Defendants filed a motion to dismiss the Complaint.4 14 Two weeks later, Cleanquest filed a First Amended Complaint.5 Accordingly, 15 16

17 1 Defs.’ Mot. to Dismiss Pl.’s Third Am. Compl. (the “Motion”) [ECF 18 No. 50]. 2 The Court considered the documents of record in this action, including 19 the following papers: (1) Third Am. Compl. (the “Amended Complaint”) 20 (including its attachments) [ECF No. 39]; (2) Motion (including its 21 attachments); (3) Amended Complaint, Sealed Exs. G, H, I, J K, L, M, N, O, P, Q, R, & X [ECF No. 44 through 44-12]; (4) Pl.’s Opp’n to Motion (the 22 “Opposition”) [ECF No. 56]; and (5) Defs.’ Reply in Supp. of Motion (the 23 “Reply”) [ECF No. 57]. Defendants request judicial notice of certain documents related to this matter. See Request for Judicial Notice [ECF No. 51]. 24 The Court did not rely on the documents that are the subject of those requests. 25 Accordingly, Defendants’ Request for Judicial Notice is DENIED as moot. 26 3 See Notice of Removal [ECF No. 1]. 27 4 Defs.’ Mot. to Dismiss the Compl. [ECF No. 14]. 1|| the Court denied Defendants’ motion to dismiss as moot.® In July 2023, the Court dismissed Cleanquest’s First Amended Complaint, with leave to amend, □□ because Cleanquest’s claims were insufficiently pleaded.’ In April 2024, the 4|| Court dismissed Cleanquest’s Second Amended Complaint, again with leave to 5|| amend, because Cleanquest’s claims remained insufficiently pleaded.® 6 In May 2024, Cleanquest filed a Third Amended Complaint, asserting the 7|| following claims for relief: 8 e breach of implied contract; 9 e quantum meruit; 10 e violation of Cal. Bus. & Prof. Code § 17200 (“UCL”); and 11 e violation of ERISA, 29 U.S.C. § 1132. 12|| In June 2024, Defendants filed the instant Motion to dismiss Cleanquest’s || operative Amended Complaint, in its entirety, and the matter is fully briefed. 14|| B. Facts 15 Cleanquest’s allegations are briefly summarized as follows:? 16 Cleanquest is a toxicology laboratory that provides testing services for 17|| substance abuse treatment facilities." This case concerns the alleged 18 || underpayment by Defendants for insured laboratory toxicology testing." 19 20 41|| ° Order [ECF No. 17]. 22\| 7 Order Regarding Defs.’ Mot. to Dismiss [ECF No. 24]. * Order Regarding Defs.’ Mot. to Dismiss (the “‘Order Dismissing Second 24 Amended Complaint”) [ECF No. 38]. 25 ? In connection with the instant Motion, the Court expresses no view □ regarding the veracity of Cleanquest’s allegations. See Am. Family Assn v. City & County of San Francisco, 277 F.3d 1114, 1120 (9th Cir. 2002). *° Amended Complaint 1. See generally id.

1 Cleanquest provided laboratory toxicology testing for 166 patients.12 2 Cleanquest is an out-of-network provider.13 Cleanquest submitted claims for 3 repayment to Defendants, in accordance with ERISA health insurance plans.14 4 Although Defendants previously paid Cleanquest “consistently for its laboratory 5 services[,]” Defendants “either suddenly stopped paying claims or made low 6 and erratic claim payments.”15 Defendants failed to make payments in 7 accordance with the ERISA plans/policies, the rates paid on other consistently 8 paid claims, and the reasonable value of Cleanquest’s services.16 9 II. LEGAL STANDARD 10 A. Rule 12(b)(6)—Failure to State a Claim 11 A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil 12 Procedure tests the legal sufficiency of the claims asserted in a complaint. See 13 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In ruling on a Rule 12(b)(6) 14 motion, “[a]ll allegations of material fact are taken as true and construed in the 15 light most favorable to the nonmoving party.” Am. Family Ass’n, 277 F.3d at 16 1120. Although a complaint attacked by a Rule 12(b)(6) motion “does not need 17 detailed factual allegations,” a plaintiff must provide “more than labels and 18 conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 19 To state a plausible claim for relief, the complaint “must contain 20 sufficient allegations of underlying facts” to support its legal conclusions. Starr 21 v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). “Factual allegations must be 22 enough to raise a right to relief above the speculative level on the assumption 23

24 12 Id. at ¶ 5. 25 13 Id. at ¶ 6. 26 14 Id. at ¶ 1. 27 15 Id. at ¶ 7. 1 that all the allegations in the complaint are true (even if doubtful in fact) . . . .” 2 Twombly, 550 U.S. at 555 (citations and footnote omitted). Accordingly, to 3 survive a motion to dismiss, a complaint “must contain sufficient factual matter, 4 accepted as true, to state a claim to relief that is plausible on its face,” which 5 means that a plaintiff must plead sufficient factual content to “allow[] the Court 6 to draw the reasonable inference that the defendant is liable for the misconduct 7 alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks 8 omitted). A complaint must contain “well-pleaded facts” from which the Court 9 can “infer more than the mere possibility of misconduct.” Id. at 679. 10 B. Rule 15(a)—Leave to Amend 11 A district court “should freely give leave when justice so requires.” 12 Fed. R. Civ. P. 15(a). The purpose underlying the liberal amendment policy is to 13 “facilitate decision on the merits, rather than on the pleadings or 14 technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). Therefore, 15 leave to amend should be granted unless the Court determines “that the 16 pleading could not possibly be cured by the allegation of other facts.” Id. 17 (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). 18 III. ANALYSIS 19 A. Sufficient Detail in Pleading, in General 20 Defendants contend that the Amended Complaint fails to comply with the 21 pleading standards and requirements set forth in Rule 8.17 In its Order 22 Dismissing the Second Amended Complaint, the Court instructed Cleanquest to 23 “identify, specifically in the Amended Complaint, the terms in the [Summary 24 Plan Descriptions] that United allegedly violated and to allege how United 25 violated those terms.”18 The Amended Complaint meets those requirements. 26

27 17 Motion 2:19-4:10. 1 Cleanquest has made significant revisions to its operative pleading.19 In its 2 Amended Complaint, Cleanquest identifies relevant plan language,20 and 3 Cleanquest alleges that Defendants violated those terms. Accordingly, the 4 Court concludes that Cleanquest’s Amended Complaint is, in general, 5 sufficiently pleaded. 6 B. Sufficiency of ERISA Claim (Claim Four) 7 1. ERISA § 502(a)(1)(B) 8 To state a claim for benefits under ERISA § 502(a)(1)(B), a plaintiff must 9 allege the existence of an ERISA plan, along with the provisions of the plan that 10 entitle it to benefits. See Almont Ambulatory Surgery Ctr., LLC v. UnitedHealth 11 Grp., Inc., 99 F. Supp. 3d 1110, 1155 (C.D. Cal. 2015). Cleanquest attaches to 12 the Amended Complaint two Summary Plan Descriptions,21 and it recites the 13 relevant provisions of those plans in that pleading.22 Cleanquest’s allegations 14 and supporting exhibits, showing that some claims were paid while others were 15 not, plausibly aver that Defendants misapplied the plan terms. Additionally, the 16 Court concludes that Cleanquest alleged the exhaustion of its administrative 17 remedies.23 18 Defendants asserts that Cleanquest’s “allegations are contradicted by the 19 documents attached to the [Amended Complaint].”24 That argument, which 20 involves the interpretation of documents attached to the Amended Complaint, is 21 not well-suited for a Rule 12(b)(6) motion. The Court concludes that 22

23 19 See Notice of Revisions to Second Amended Complaint [ECF No. 40]. 24 20 See Amended Complaint ¶¶ 22 & 34-36. 25 21 Amended Complaint, Exs. B, C, & D [ECF No. 39-2 through 39-4]. 26 22 Id. at ¶¶ 22 & 34-36. 27 23 See id. at ¶¶ 7 & 38-50. 1 Cleanquest’s ERISA claim is sufficiently pleaded. Thus, Defendants’ Motion is 2 DENIED, with respect to this claim. 3 2. ERISA § 502(a)(2) 4 ERISA § 502(a)(2) “authorizes suits by four classes of party-plaintiffs: 5 the Secretary of Labor, participants, beneficiaries, and fiduciaries.” 6 Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 142 n.9 (1985). 7 “Congress’ intent [was for those] actions for breach of fiduciary duty [to] be 8 brought in a representative capacity on behalf of the plan as a whole.” Id.; Wise 9 v. Verizon Commc’ns, Inc., 600 F.3d 1180, 1189 (9th Cir. 2010) (“The claim for 10 fiduciary breach gives a remedy for injuries to the ERISA plan as a whole, but 11 not for injuries suffered by individual participants as a result of a fiduciary 12 breach.”). 13 Cleanquest’s theory underlying its instant claims is that it allegedly “has 14 suffered and will continue to suffer economic injury[.]”25 The Court agrees 15 with Defendants’ assertion that Cleanquest “plainly brings [this] claim on behalf 16 of itself.”26 Because Cleanquest does not assert this claim in a representative 17 capacity, the Court DISMISSES this claim without leave to amend. 18 3. ERISA § 502(a)(3) 19 “Courts in [the Northern District of California] have found § 502(a)(3) 20 claims cognizable in conjunction with § 502(a)(1)(B) claims particularly where 21 the relief sought in connection with each claim is distinct.” Englert v. Prudential 22 Ins. Co. of Am., 186 F. Supp. 3d 1044, 1047 (N.D. Cal. 2016) (internal quotation 23 marks and citation omitted). In its Amended Complaint, Cleanquest alleges that 24 “equitable and injunctive relief” may be appropriate.27 Cleanquest asserts that 25

26 25 Amended Complaint ¶ 59. 27 26 Motion 10:23-24. 1 awarding damages may not be adequate because “some plans at issue may be 2 self-funded” while other plans may be “fully insured[.]”28 Those allegations are 3 sufficient at the pleading stage to state a claim under ERISA § 502(a)(3). 4 Accordingly, Defendants’ Motion is DENIED, with respect to this claim. 5 4. Failure to Provide Requested Plan Documents 6 Cleanquest “asked [Defendants] for copies of plan documents,” but 7 Defendants “either ignored the requests, refused to provide documents, or in 8 some cases sent letters claiming that they were not required to provide such 9 documents (even though they are plan claims administrators and the drafters of 10 the plans).”29 11 “Under 29 U.S.C. § 1132(c), only the plan ‘administrator’ can be held 12 liable for failing to comply with the reporting and disclosure requirements.” 13 Cline v. Indus. Maint. Eng’g & Contracting Co., 200 F.3d 1223, 1234 (9th Cir. 14 2000). Defendants assert that Cleanquest’s representative plans “show that 15 United is not the plan administrator; United is the claims administrator.”30 16 Nevertheless, the Court concludes that this claim should proceed, in view of 17 Cleanquest’s allegations that Defendants, as the “plan claims 18 administrator[,]”31 had a duty to send these documents. Accordingly, 19 Defendants’ Motion is DENIED, with respect to this claim. 20 C. Preemption of State Law Claims (Claims One, Two, and Three) 21 Defendants argue that ERISA § 514 expressly preempts Cleanquest’s 22 state law claims.32 The Court agrees. 23

24 28 Opposition 15:27-28. 25 29 Amended Complaint ¶ 8. 26 30 Reply 7:13-14 (emphasis in original). 27 31 Amended Complaint ¶ 8. 1 ERISA shall preempt “any and all State laws insofar as they may now or 2 hereafter relate to any employee benefit plan” covered under ERISA. 29 U.S.C. 3 § 1144(a). “This clearly expansive preemption provision . . . extends to state 4 common law causes of action[.]” Bristol SL Holdings, Inc. v. Cigna Health & Life 5 Ins. Co., 103 F.4th 597, 602 (9th Cir. 2024) (internal quotation marks and 6 citation omitted); see also Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) 7 (internal citations omitted) (“The purpose of ERISA is to provide a uniform 8 regulatory regime over employee benefit plans. To this end, ERISA includes 9 expansive pre-emption provisions, [citation] which are intended to ensure that 10 employee benefit plan regulation would be ‘exclusively a federal concern.’”). 11 A state law claim “‘relates to’ an ERISA plan ‘if it has a connection with 12 or reference to such a plan.’” Oregon Teamster Emps. Tr. v. Hillsboro Garbage 13 Disposal, Inc., 800 F.3d 1151, 1155 (9th Cir. 2015) (citation omitted). “These 14 two categories operate separately.” Depot, Inc. v. Caring for Montanans, Inc., 915 15 F.3d 643, 665 (9th Cir. 2019). “In determining whether a common law claim 16 has ‘reference to’ an ERISA plan, ‘the focus is whether the claim is premised on 17 the existence of an ERISA plan, and whether the existence of the plan is 18 essential to the claim’s survival.’” Oregon Teamster Emps. Tr., 800 F.3d at 1155 19 (citation omitted). State law claims refer to ERISA plans if they are “premised 20 on the existence of an ERISA plan” or if “the existence of the plan is essential to 21 the claim’s survival.” Depot, 915 F.3d at 665 (citation omitted). 22 The Court concludes that Cleanquest’s breach of implied contract, 23 quantum meruit, and UCL claims cannot be resolved without reference to 24 ERISA plans. As Defendants assert, and the Court agrees, each of Cleanquest’s 25 state law claims is “premised on coverage and reimbursement under the terms 26 of the plans[.]”33 27 1 In its breach of implied contract claim, Cleanquest alleges that 2 Defendants breached implied contracts created from “a historical course of 3 dealing” by “not paying claims or grossly under paying claims” rather than “the 4 plan document rate” or “the reasonable value of the services.”34 Based upon 5 the allegations in the Amended Complaint, the “existence of the” ERISA Plan 6 “is essential to the” survival of the breach of implied contract claim. Cmty. 7 Hosp. of Monterey Peninsula v. Aetna Life Ins. Co., 2020 WL 7389010, at *7 (N.D. 8 Cal. June 26, 2020) (concluding that a breach of implied-in-fact contract claim 9 was preempted under ERISA); In re Out of Network Substance Use Disorder 10 Claims against UnitedHealthcare, 2020 WL 5913855, at *5 (C.D. Cal. July 29, 11 2020) (concluding that an implied contract claim was preempted by ERISA 12 because the claim depended upon the interpretation of the ERISA plan to deny 13 coverage and benefits). Thus, the Court concludes that this claim makes an 14 impermissible reference to an ERISA plan. 15 In the quantum meruit claim, Cleanquest alleges that Defendants 16 “refused to pay based on the reasonable value of the services and/or plan 17 document rate as they represented and agreed, and instead have paid only a 18 small fraction of the plan document rate and/or reasonable value of the services 19 and often paid nothing at all for proper claims for covered medically necessary 20 services.”35 Because this claim depends upon the interpretation of “covered” 21 services as set forth in the ERISA plans, this claim also makes an impermissible 22 reference to an ERISA plan. See Port Med. Wellness, Inc. v. Connecticut Gen. Life 23 Ins. Co., 24 Cal. App. 5th 153, 181 (2018) (concluding that a quantum meruit 24 claim is preempted under ERISA when the plaintiff “contends it provided 25 covered services to Plan members and now seeks payment for those services”). 26

27 34 Amended Complaint ¶¶ 10 & 11. 1 The Court also concludes that Cleanquest’s UCL claim is preempted 2 under ERISA. Some UCL claims survive ERISA preemption when they are 3 “based on independent obligations owed to” the plaintiff. See, e.g., Forest 4 Ambulatory Surgical Assocs., LP v. United Healthcare Ins. Co., 2013 WL 11323600, 5 at *9 (C.D. Cal. Mar. 12, 2013). However, Cleanquest’s UCL claim is plainly 6 based upon Defendants’ refusal “to pay for services in accordance with the 7 terms and conditions of the applicable plans/policies.”36 See Sarkisyan v. 8 CIGNA Healthcare of California, Inc., 613 F. Supp. 2d 1199, 1206 (C.D. Cal. 9 2009) (concluding that ERISA § 514(a) preempted the plaintiffs’ UCL claim 10 when it was based upon alleged “improper claims handling practice”). 11 Thus, the Court concludes that ERISA § 514 preempts each of 12 Cleanquest’s state law claims. Accordingly, Defendants’ Motion is 13 GRANTED with respect to those claims. Because further amendment cannot 14 rescue those claims, the Court DISMISSES Cleanquest’s implied contract, 15 quantum meruit, and UCL claims without leave to amend. In view of the 16 Court’s conclusion that ERISA expressly preempts Cleanquest’s state law 17 claims, the Court need not address Defendants’ additional arguments regarding 18 those claims. 19 IV. DISPOSITION 20 For the foregoing reasons, the Court hereby ORDERS as follows: 21 1. Defendants’ instant Motion to dismiss [ECF No. 50] is 22 GRANTED in part and DENIED in part; specifically: 23 a. the Motion is GRANTED with respect to Cleanquest’s 24 ERISA § 502(a)(2) claim, implied contract claim, quantum meruit claim, 25 and UCL claim; each of those claims is DISMISSED without leave to 26 amend; and 27 1 b. the Motion is DENIED with respect to all other claims and 2 arguments. 3 2. Defendants are DIRECTED to file their respective Answers to 4|| Cleanquest’s Third Amended Complaint no later than December 13, 2024. 5 3. The stay of discovery is VACATED. 6 IT IS SO ORDERED. g|| Dated: December 2, 2024 LX, Lb — 9 SNITED STATES DISTRICT JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28