1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 FAST ACCESS SPECIALTY Case No.: 20cv1953 JM (AGS) THERAPEUTICS, LLC, 12
Plaintiff, 13 v. 14
UNITEDHEALTH GROUP, INC., ORDER ON MOTION TO DISMISS 15 UNITED HEALTHCARE SERVICES, 16 and UNITED HEALTHCARE INSURANCE COMPANY, 17 Defendants. 18 19
20 Defendants UnitedHealth Group, Inc., United HealthCare Services, Inc., and United 21 Healthcare Insurance Company (“United”) move to dismiss the First Amended Complaint 22 (Doc. No. 13), pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. No. 17.) 23 Plaintiff Fast Access Specialty Therapeutics, LLC (“Specialty” or “Specialty Pharmacy”) 24 opposes. (Doc. No. 20.) The motion has been fully briefed, including supplemental 25 briefing, (Doc. Nos. 24, 25), and the court finds the motion suitable for submission without 26 oral argument in accordance with Civil Local Rule 7.1(d)(1). For the below reasons, the 27 motion is GRANTED. 28 1 I. BACKGROUND 2 As alleged in the First Amended Complaint (“FAC”), Specialty is an out-of-network 3 pharmacy that sought preapproval from United to dispense self-infused medication to 4 “Patient A,” one of United’s insureds. (FAC, ¶¶ 1-3.) United responded by issuing 5 “preapproval letters” to Specialty. (¶ 3.) Based on these “authorizations” and “countless 6 other oral and written communications and assurances” from United, Specialty dispensed 7 $720,384.81 in medication to Patient A over the course of a year, and made 14 timely 8 claims for reimbursement. (¶ 4.) United paid only one claim in the amount of $24,110.10. 9 (¶ 12.) United denied the remainder of Specialty’s claims because there were no medical 10 records showing the medication was actually self-infused by Patient A. (¶¶ 5-6.) Specialty 11 unsuccessfully appealed each denial to United. (¶¶ 98-101.) As a result, Specialty brings 12 claims for: (1) breach of express contract; (2) breach of implied contract; (3) promissory 13 estoppel; (4) unjust enrichment/quasi-contract; (5) quantum meruit; and (6) intentional 14 interference with prospective economic relations or advantage. (Doc. No. 13.) 15 II. LEGAL STANDARDS 16 In deciding a motion to dismiss a complaint under Rule 12(b)(6), the court must 17 “take all allegations of material fact as true and construe them in the light most favorable 18 to the non-moving party.” Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 19 1995). The court must also draw all reasonable inferences in favor of the claimant. Retail 20 Prop. Tr. v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014). 21 Dismissal may be based on a lack of a cognizable legal theory or on the absence of facts 22 that would support a valid theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 23 (9th Cir. 1990). To survive a motion to dismiss under Rule 12(b)(6), the complaint must 24 contain sufficient facts to state a claim for relief that is plausible on its face. Ashcroft v. 25 Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads 26 factual content that allows the court to draw the reasonable inference that the defendant is 27 liable for the misconduct alleged.” Id. at 678. In resolving the motion, the court does not 28 weigh evidence, evaluate witness credibility, or consider the likelihood that a plaintiff will 1 prevail at trial. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). A claim that is 2 preempted by federal law fails to state a claim upon which relief can be granted under Rule 3 12(b)(6). Stewart v. U.S. Bancorp, 297 F.3d 953, 957 (9th Cir. 2002) (motion to dismiss 4 based on ERISA preemption is a merits decision on the pleadings, not a motion to dismiss 5 for lack of jurisdiction). 6 III. DISCUSSION 7 United’s alleged determination for refusing to reimburse Specialty is indeed 8 troubling. Depriving Specialty of any opportunity to address the claimed inequity that 9 could result from United’s contention of categorical preemption of all claims seems 10 harsh. Nonetheless, based on the applicable law and the posture of the case as presented 11 to the court, including the particular allegations in Specialty’s FAC, as well as the 12 argument, or lack thereof, put forth by both parties, the court must find that Specialty’s 13 claims, as pled, are preempted. 14 A. Waiver 15 Before reaching the merits of United’s preemption argument, Specialty argues that 16 UnitedHealth Group, Inc. and United Healthcare Services, Inc. “waived their defense that 17 the causes of action are preempted by ERISA by not raising them in their motion to dismiss 18 the original Complaint.”1 (Doc. No. 20 at 19.) Specialty initially brought claims against 19 UnitedHealth Group, Inc. and United Healthcare Services for: (1) breach of contract; 20 (2) unjust enrichment/quasi-contract; (3) promissory estoppel; (4) quantum meruit; and 21 (5) tortious interference with contractual relations. (Doc. No. 1.) In response, United filed 22 its first motion to dismiss under Rule 12(b)(6), arguing that Specialty’s breach of contract 23 and collateral estoppel claims failed because the verification of benefits was neither a 24 25 26 1 Specialty also argues, in contradictory fashion, that United should have initially asserted 27 the preemption defense given the repeated references to Patient A’s health plan in the FAC, even though Specialty argues the plan was referenced merely for “background purposes.” 28 1 binding agreement nor a clear and unambiguous promise to pay. (Doc. No. 8.) United also 2 moved for a more definite statement regarding the tortious interference claim. (Id.) 3 In response, Specialty amended its complaint by replacing its tortious interference 4 with contractual relations claim with a claim for intentional interference with prospective 5 economic relations or advantage. (Doc. No. 13-1 at 21.) Specialty also added a claim for 6 breach of implied contract. (Id. at 20.) In support of this claim, Specialty added some 7 factual allegations regarding communications with United. (Id. at 14-16.) Specialty also 8 added UnitedHealthcare Insurance Company as a Defendant. (Id. at 2.) In response, the 9 three named Defendants filed a second motion to dismiss. (Doc. No. 17.) Again, United 10 moved to dismiss Specialty’s breach of contract and collateral estoppel claims. (Id.) This 11 time, however, United moves to dismiss all claims on preemption grounds. (Id.) 12 In support of Specialty’s argument that United waived its preemption defense by 13 failing to raise it in its motion to dismiss the initial complaint, Specialty cites Rule 14 12(h)(1)(A), which provides that “[a] party waives any defense listed in Rule 12(b)(2)-(5) 15 by omitting it from a motion in the circumstances described in Rule 12(g)(2)[.]” Rule 16 12(g)(2) provides that “[e]xcept as provided in Rule 12(h)(2) or (3), a party that makes a 17 motion under this rule must not make another motion under this rule raising a defense or 18 objection that was available to the party but omitted from its earlier motion.” Rule 12(h)(2) 19 provides that “[f]ailure to state a claim upon which relief can be granted, . . . or to state a 20 legal defense to a claim may be raised: (A) in any pleading allowed or ordered under Rule 21 7(a); (B) by a motion under Rule 12(c) [for judgment on the pleadings]; or (C) at trial.”2 22 A motion to dismiss based on federal preemption is properly characterized as one 23 under Rule 12(b)(6). See Stewart, 297 F.3d at 957. United correctly argues that Rule 24 12(b)(6) motions are not subject to the waiver provision of Rule 12(h)(1)(A). The only 25 defenses subject to waiver under Rule 12(h)(1)(A) are those listed in Rule 12(b)(2)-(5), i.e. 26 27 28 2 1 lack of personal jurisdiction, improper venue, insufficient process, and insufficient service 2 of process. United does not move to dismiss the case based on any of these defenses. 3 Additionally, given that Specialty’s preemption defense can still be raised in an answer, a 4 motion for judgment on the pleadings, and at trial, it makes little sense to delay ruling on 5 the issue because it was not raised in United’s first motion to dismiss.3 See Allstate Ins. 6 Co. v. Countrywide Fin. Corp., 824 F. Supp. 2d 1164, 1175 (C.D. Cal. 2011) (invoking the 7 “substantial amount” of caselaw allowing successive Rule 12(b)(6) motions where the 8 motions have not been filed for the purpose of delay, where entertaining the motion would 9 expedite the case, and where the motion would narrow the issues involved); Yumul v. Smart 10 Balance, Inc., No. CV 10-00927 MMM (AJWx), 2011 WL 1045555, at *5 (C.D. Cal. Mar. 11 14, 2011) (finding that a preemption defense can be raised anytime); see also 12 CollegeSource, Inc. v. AcademyOne, Inc., No. 08CV1987-GPC (MDD), 2015 WL 13 5638104, at *20 (S.D. Cal. Sept. 24, 2015) (“[T]he legal standard to allow an affirmative 14 defense of preemption is liberal.”), aff’d, 709 F. App’x 440 (9th Cir. 2017). Regardless, in 15 its FAC, Specialty added UnitedHealthcare Insurance Company as a defendant. (Doc. No. 16 13.) Therefore, the instant motion is the first opportunity UnitedHealthcare Insurance 17 Company had to assert the preemption defense against Specialty. Accordingly, United’s 18 preemption argument was not waived by failing to raise it in its initial motion to dismiss. 19 B. Preemption 20 United moves to dismiss all of Specialty’s claims on the grounds they are preempted 21 under 29 U.S.C. § 1144(a), which is the “express” preemption provision of the Employee 22 Retirement Income Security Act of 1974 (“ERISA”). (Doc. No. 17 at 7.) ERISA’s express 23 preemption provision “supersede[s] any and all State laws insofar as they . . . . relate to any 24 25
26 27 3 Specialty does not dispute that United can raise the preemption issue later in the litigation. Specialty also provides no support for its implied argument that a preemption defense can 28 1 employee benefit plan.” 29 U.S.C. § 1144(a). This includes state common law claims. 2 Scott v. Gulf Oil Corp., 754 F.2d 1499, 1504 (9th Cir. 1985). 3 The “relates to” standard is one of the “broadest preemption clauses ever enacted by 4 Congress.” Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir. 1990); see also 5 Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004) (noting that ERISA has 6 “extraordinary pre-emptive power”). “Congress used the words ‘relate to’ in . . . . their 7 broad sense.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983). “A law ‘relates to’ 8 an employee benefit plan, in the normal sense of the phrase, if it has a connection with or 9 reference to such a plan.” Id. at 96-97. Where “the existence of [an ERISA] plan is a 10 critical factor in establishing liability” under a state cause of action, the state law claim is 11 preempted. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 136, 139-40 (1990). A claim 12 “falls under ERISA’s far-reaching preemption clause” when the “underlying theory of the 13 case revolves around the denial of benefits.” Tingey v. Pixley-Richards West, Inc., 14 953 F.2d 1124, 1131 n.2 (9th Cir. 1992). “While . . . . the phrase ‘relate to’ should be read 15 broadly, the Supreme Court . . . . admonished that the term is to be read practically, with 16 an eye toward the action’s actual relationship to the subject plan.” Providence Health Plan 17 v. McDowell, 385 F.3d 1168, 1172 (9th Cir. 2004) (citing N.Y. State Conf. of Blue Cross 18 & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655-56 (1995)). “In evaluating 19 whether a common law claim has ‘reference to’ a plan governed by ERISA, the focus is 20 whether the claim is premised on the existence of an ERISA plan, and whether the existence 21 of the plan is essential to the claim’s survival.” Id. (citations omitted); see also Golden 22 Gate Rest. Ass’n v. City & County of San Francisco, 546 F.3d 639, 657 (9th Cir. 2008) (a 23
24 25 4 There are two kinds of ERISA preemption: express preemption, under 29 U.S.C. § 1144(a), and “complete” or “conflict” preemption, under 29 U.S.C. § 1132(a). Cleghorn 26 v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005)). Conflict preemption applies 27 when a state law’s enforcement mechanism conflicts with ERISA’s “comprehensive scheme of civil remedies.” Id. at 1225. United does not argue that Specialty’s claims are 28 1 state law claim makes “reference to” an ERISA plan if (1) the claim acts immediately and 2 exclusively on an ERISA plan or (2) adjudication of the claim requires the existence of an 3 ERISA plan). 4 1. Individual Claims 5 United argues that all of Specialty’s claims are preempted under the “reference to” 6 prong of the preemption test because the claims “hinge on the interpretation” of Patient 7 A’s plan, and the claims are “based on the allegation that United ‘had an obligation under 8 the plan to provide health insurance coverage’ to the insured.” (Doc. No. 17 at 9-10.) 9 United argues the claims are “masked” as claims under state law, but the action is “really 10 to recover plan benefits.” (Id. at 9.) In support of this argument, United points out that: 11 (1) the FAC directly references the plan nine times, and indirectly references the plan twice; 12 (2) the verifications attached to the FAC, i.e. the preapprovals, reference the plan 12 times; 13 and (3) in at least two paragraphs of the FAC, Specialty admits the plan’s limitations 14 apply.5 (Id. at 10.) 15 a. Breach of Express Contract 16 A breach of contract claim under California law requires: (1) a legally enforceable 17 contract between the parties; (2) the plaintiff’s performance or excuse for non- 18 performance; (3) the defendant’s breach of that contract (e.g., by failing to perform or 19 performing inadequately); and (4) damage to the plaintiff caused by the defendant’s breach. 20 Hickcox-Huffman v. US Airways, Inc., 855 F.3d 1057, 1062 (9th Cir. 2017). To be 21 enforceable, “a contract must be sufficiently definite for the court to ascertain the parties’ 22 obligations and to determine whether those obligations have been performed or breached.” 23 Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 789 (9th Cir. 2012) (citation and 24
25 5 Unfortunately, United does not address Specialty’s claims on a claim-by-claim basis. See 26 Summit Est., Inc. v. Cigna Healthcare of Cal., Inc., Case No. 17-CV-03871-LHK, 2017 27 WL 4517111, at *5 (N.D. Cal. Oct. 10, 2017) (noting that the defendant made claim- specific arguments for dismissal). United also declined the court’s invitation to do so in 28 1 internal quotations omitted). A plaintiff must “allege the specific provisions in the contract 2 creating the obligation the defendant is said to have breached.” In re Anthem, Inc. Data 3 Breach Litig., 162 F. Supp. 3d 953, 978 (N.D. Cal. 2016) (internal quotation omitted). 4 “[C]ourts in the Ninth Circuit have consistently held that ERISA preempts common-law 5 contract claims arising from employee benefit plans.” Fonseca v. Hewlett-Packard Co., 6 Case No.: 19cv1748-GPC-MSB, 2020 WL 4596758, at *17 (S.D. Cal. Aug. 11, 2020); see 7 also Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1444 (9th Cir. 1995) (“We recognize that 8 ERISA generally preempts common law theories of contract law.”). 9 Specialty alleges that “by issuing” the preapprovals to Specialty, and “through its 10 other numerous written and oral communications . . . . and assurances,” United “agreed to 11 pay” Specialty for the medication. (FAC ¶ 137.) Specialty also alleges the preapprovals 12 “represented an offer to enter into a contract with Specialty . . . . whereby United would 13 pay Specialty” for the medication. (¶ 142.) Specialty alleges it accepted the offer by 14 dispensing the medication set forth in the preapproval, and United then “breached its 15 obligation to pay” for the medication. (¶¶ 143, 145.) 16 i. Preapprovals 17 Some courts have found that breach of contract claims, as well as other types of 18 claims, are not preempted by ERISA if the plaintiff provider alleges that the defendant 19 insurer or plan expressly promised to pay, or made representations to pay, as part of the 20 verification of benefits process. See Summit Est., Inc. v. United Healthcare Ins. Co., Case 21 No. 4:19-cv-06724 YGR, 2020 WL 5436655, at *2 (N.D. Cal. Sept. 10, 2020) (breach of 22 contract, promissory estoppel, and quantum meruit claims not preempted where the 23 provider allegedly “contacted United to verify insurance benefits and was advised in all 24 cases that the policies provided for and [United] would pay for treatment at the usual, 25 reasonable and customary rate”); In re Out of Network Substance Use Disorder Claims 26 against UnitedHealthcare, Case No. SACV 19-2075 JVS (DFMx), 2020 WL 5913855, at 27 *5 (C.D. Cal. July 29, 2020) (breach of oral contract and promissory estoppel claims not 28 preempted where the provider alleged “[a]s part of verifying benefits and authorizing 1 treatment . . . , and in multiple communications . . . , [United] orally promised to pay [the 2 providers] for the treatment provided . . . . on the same terms as provided for in the policies 3 between [United] and their insureds; specifically, payments . . . . equal to a percentage of 4 their covered charges”); Aton Ctr., Inc. v. Blue Cross of Cal., Case No.: 3:17-cv-00852- 5 BEN-MDD, 2017 WL 6027077, at *1 (S.D. Cal. Dec. 5, 2017) (breach of oral contract 6 claim not preempted where the provider alleged it was advised that “the policies provided 7 for and [the insurer] would pay for inpatient treatment, based on the usual, reasonable and 8 customary rate”); Cigna, 2017 WL 4517111, at *15 (claims for breach of contract and 9 negligent failure to disclose were not preempted where the plaintiff “was advised in all 10 cases that the policies provided for and [the insurer] would pay for treatment at the usual, 11 reasonable and customary rate”).6 12 Here, however, Specialty does not actually allege that United expressly agreed in the 13 preapprovals to pay Specialty for the medication.7 Rather, Specialty artfully alleges: (1) 14 the “issuance” of the preapprovals constituted an “agree[ment] to pay, (FAC ¶ 137);” (2) 15 the preapprovals “represented an offer to enter into a contract . . . . whereby United would 16 17 18 6 In Cigna, however, the district court found the claims were not preempted under the 19 “reference to” prong because California contract and tort law are laws of “general application” and do not focus exclusively or primarily upon ERISA plan administration, 20 and because the existence of ERISA plans is not essential to their operation. 2017 WL 21 4517111, at *15 (citing In re Anthem, Inc. Data Breach Litig., Case No. 15-MD-02617- LHK, 2016 WL 3029783 (N.D. Cal. May 27, 2016)). 22
23 7 The documents Specialty calls “preapprovals” are not actually labeled as “preapprovals.” United describes the documents as “verifications of coverage.” The preapprovals, which 24 are addressed to Patient A but copied to Specialty, nonetheless describe themselves as 25 “approvals” and “benefit determinations.” (Doc. No. 1-2 at 7.) Accordingly, when read in the light most favorable to Specialty, the preapprovals may have, as Specialty alleges, 26 “specifically approved dispensing” Patient A’s medication. (FAC ¶ 39.) As discussed 27 herein, however, and based on the arguments put forth by the parties, the court cannot reasonably infer that an approval to dispense medication is necessarily a promise or offer 28 1 pay” for the medication, (¶ 142); and (3) “[n]othing in the preapprovals . . . . gave United 2 the basis to withhold payment to [Specialty] for the claims,” (¶ 139). (See also ¶ 1 (“United 3 refused and continues to refuse to honor its series of preapprovals to pay[.]”). Specialty 4 does not explain, however, and it is not apparent from the FAC, how the “issuance” of the 5 preapprovals constituted an agreement, or how the preapprovals “represented” an offer. 6 Further, it is not reasonable to infer the preapprovals are agreements or offers given that 7 multiple courts have found that a verification of benefits does not, per se, constitute a 8 contract without at least specifying the amount to be paid. See Pac. Bay Recovery, Inc. v. 9 Cal. Physicians’ Servs., Inc., 12 Cal. App. 5th 200, 216 (2017) (no implied contract based 10 on preauthorization and statements that provider “would be paid” the customary rate 11 without specifying the amount); Aton Ctr., Inc. v. Premera Blue Cross, Case No.: 3:20-cv- 12 00501-WQH-BGS, 2021 WL 615048, at *4 (S.D. Cal. Feb. 16, 2021) (dismissing breach 13 of oral and implied contract claims because “[verification of benefit] and authorization 14 calls alone are generally insufficient to form the basis for an oral or implied contract 15 because they lack a manifestation of intent to enter into a contract”); see also Regents of 16 the Univ. of Cal. v. Aetna US Health of Cal., Inc., Case No. SACV 10-1043 DOC (RNBx), 17 2011 WL 13227844, at *4 (C.D. Cal. Mar. 15, 2011) (granting summary judgment for 18 insurer because “[r]elevant case law establishes in cases with . . . . ambiguity regarding the 19 facts that insurance authorizations or precertifications – when coupled with disclaimers – 20 are not binding contracts”); Cedars Sinai Med. Ctr. v. Mid-W. Nat. Life Ins. Co., 118 F. 21 Supp. 2d 1002, 1008 (C.D. Cal. 2000) (granting summary judgment in favor of insurer 22 based on expert testimony that, within the medical insurance industry, an insurer’s 23 verification is not the same as a promise to pay).8 24 /// 25 /// 26 27 28 8 1 Furthermore, in the preapprovals, which are incorporated into the FAC, United does 2 not actually agree to pay Specialty for the medication. Rather, the preapprovals state “[w]e 3 received a request to cover outpatient services” and “after review of the information 4 submitted and your plan documents, it was determined the following service is eligible for 5 outpatient coverage.”10 (Doc. No. 1-2 at 2.) Although the preapprovals confirm that 6 Patient A was “eligible” for coverage, they explicitly state that payment was not 7 guaranteed, and moreover, that payment was dependent on the terms of Patient A’s plan 8 with United. For example, the preapprovals state “[p]ayment is based on . . . . [t]he services 9 the health plan covers” and “[t]his approval does not guarantee that the plan will pay for 10 the service when, for example, . . . [p]ayment of covered services depends on other plan 11 rules, including coordination of benefits.” (Doc. No. 1-2 at 8.) 12 Finally, in addition to the multiple references to Patient A’s plan contained in the 13 preapprovals, Specialty itself repeatedly refers to Patient A’s plan, both indirectly and 14 directly, in support of its breach of express contract claim. Most notably, although 15 Specialty apparently alleges the preapprovals constitute both an agreement and offer to 16 pay, Specialty concedes the agreement to pay was “subject only to the limitations set forth 17 in the [p]reapprovals,” (¶ 137), and the offer to pay represented by the preapprovals was 18 “subject to the conditions set forth therein,” (¶ 142). The “conditions” and “limitations” 19 20 21 22 9 Specialty states it inadvertently neglected to attach the exhibits attached to the initial 23 complaint to the FAC. (See Doc. No. 19-1.) The same exhibits are referenced in the FAC, however. (See, e.g., FAC ¶¶ 35-36.) Accordingly, the parties’ Joint Stipulation to Allow 24 Plaintiff to File Exhibits to First Amended Complaint (Doc. No. 19) is GRANTED. The 25 exhibits at Doc. No. 19-1 are incorporated into the FAC.
26 10 The preapprovals also list the procedure code, which is described as “Factor VIII 27 (antihemophilic factor, recombinant) per IU, not otherwise specified.” (Doc. No. 1-2 at 2.) The December 11, 2019 preapproval also lists “99999” as the total “requested units,” and 28 1 set forth in the preapprovals are, of course, the conditions and limitations contained in 2 Patient A’s plan. 3 Specialty also directly references Patient A’s plan by alleging: (1) United agreed to 4 pay for Patient A’s medication “subject only to the limitations of the Patient’s plan;” 5 (2) “[n]othing in the preapprovals or the Patient’s plan gave United the basis to withhold 6 payment to the Specialty Pharmacy for the claims;” (3) “Specialty Pharmacy provided the 7 medication to the Patient consistent with and compliant with the preapprovals and the 8 Patient’s plan;” and (4) United issued the preapprovals “[k]nowing it had an obligation 9 under the plan to provide health insurance coverage to Patient A for the medication.” (¶¶ 10 138-141.) These references are not, as Specialty argues, merely for “background 11 purposes.” (See Doc. No. 20 at 10.) Rather, the repeated references to Patient A’s plan in 12 the preapprovals and in Specialty’s allegations demonstrate that Specialty’s breach of 13 express contract claim is premised not only on the existence of Patient A’s plan, but the 14 specific terms in Patient A’s plan, or lack thereof, concerning reimbursement to out-of- 15 network pharmacies for self-infused medication. Accordingly, Specialty’s breach of 16 express contract claim is preempted to the extent it relies on the preapprovals. See ABC 17 Servs. Grp., Inc. v. Health Net of Cal., Inc., Case No. SA CV 19-00243-DOC-DFM, 2020 18 WL 4760182, at *2 (C.D. Cal. July 29, 2020) (breach of contract claims preempted where 19 provider plaintiffs treated the patients “only after receiving authorization and verification 20 of benefits” because the claims were premised on the insurer’s allegedly wrongful denial 21 of benefits).11 22 ii. Other Written and Oral Communications 23 Specialty also alleges an express contract exists based on “other numerous written 24 and oral communications . . . . and assurances.” (FAC ¶ 137.) Although Specialty does 25
26 27 11 The court in ABC Services also dismissed the breach of contract claims because the plaintiff providers “neglected to identify any contract provisions” to support its claims. 28 1 not specify the written and oral communications and assurances upon which its express 2 contract claim relies, in its introductory allegations,12 Specialty lists some “additional 3 communications” from United. (¶¶ 114-23.) Specifically, Specialty alleges that employees 4 or agents of United said: (1) United still had not received Patient A’s medical records, (¶ 5 114); (2) United received the medical records, but needed 30 calendar days for processing, 6 (¶ 115); (3) the medical records were being reviewed, (¶ 116); (4) United needed more 7 medical records, (¶ 117); (5) the claims were under review, (¶¶ 118-19); (6) the claims 8 would be sent to be “expedited,” (¶ 120); (7) “all unpaid claims should be finalized within 9 a week,” (¶ 121); and (8) Specialty should change the “POS” to Patient A’s home and 10 should follow-up with United in two weeks, (¶ 123). 11 Specialty also alleges in its introductory allegations that “United made a promise to 12 out-of-network providers that it would pay them for approved out-of-network services 13 based upon its published out-of-network payment policies.” (¶ 110.) Although Specialty 14 again does not specify the alleged promises to which it refers, Specialty also alleges that 15 “United’s website provides that when a patient has coverage for out-of-network benefits, 16 it will pay for the lower of ‘the out-of-network provider’s actual charge billed to the 17 member’ or ‘the reasonable and customary amount,’ ‘the usual customary, and reasonable 18 amount,’ ‘the prevailing rate,’ or other similar terms that base payment on what other 19 healthcare professionals in a geographic area charge for their services.” (¶ 105.) Specialty 20 also alleges that “United’s website further provides that it uses the FAIR Health databases 21 to determine the reimbursement of out-of-network benefits and that it frequently uses the 22 80th percentile of the FAIR Health Benchmark Databases to calculate how much to pay 23 for out-of-network services.” (¶ 106.) Specialty alleges that “[r]ather than pay the 24 Specialty Pharmacy based upon what other healthcare professionals in the geographic area 25
26 27 12 Rather than specifying the written and oral communications upon which its express contract claim relies, Specialty merely incorporates all of its introductory allegations into 28 1 charge for the medication, . . . United breached its own payment guidelines and its 2 obligations under law by not paying[.]” (¶¶ 107-08.) 3 Here, however, Specialty does not allege or argue that either the “additional 4 representations” made by United employees or agents, or the “published out-of-network 5 payment policies” on United’s website, constitute an express contract that is independent 6 of the preapprovals. Rather, Specialty clearly alleges that it is the combination of these 7 alleged communications with the preapprovals that serves as the basis for its breach of 8 contract claims. (See Doc. No. 20 at 18 (“[T]he notices of preapproval that United issued 9 to Specialty Pharmacy pursuant to United’s provider policies and procedures, together with 10 those policies and procedures and numerous additional written and oral assurances of 11 payment from United, formed a binding agreement.”).) In other words, Specialty does not 12 allege or argue that its express contract claim could survive if the court finds, as it does, 13 that the claim is preempted to the extent it relies on the preapprovals. For example, 14 Specialty does not allege that United agreed to pay based exclusively on the representations 15 made on United’s website regardless of the preapprovals and regardless of the terms of 16 Patient A’s plan.13 Because it is not reasonable to infer, based on Specialty’s allegations, 17 18 19 20 13 In its opposition, Specialty does not mention United’s website, and references United’s 21 “published out-of-network policies” without specifying whether it is referring to the representations on the website. (See Doc. No. 20 at 9.) If Specialty amends the FAC to 22 include an express contract claim that is not based on the preapprovals or Patient A’s plan, 23 the court makes no assurances that such a claim would survive. See Pac. Recovery Sols. v. United Behav. Health, 481 F. Supp. 3d 1011, 1029 (N.D. Cal. 2020) (claims for breach of 24 contract and promissory estoppel preempted because, inter alia, the plaintiff alleged the 25 insurer represented on its website that it would pay customary rates for “out-of-network benefits, which suggests the customary rate definition has a connection to the terms of 26 benefit plans”) (emphasis in original). Here, Specialty alleges that United agreed on its 27 website that it would pay customary rates “when a patient has coverage for out-of-network benefits,” and that United uses a database “to determine the reimbursement of out-of- 28 1 that Specialty’s breach of express contract claim is independent of the preapprovals and 2 Patient A’s plan, the entirety of Specialty’s breach of express contract claim is preempted. 3 b. Breach of Implied Contract 4 As an alternative to its breach of express contract claim, Specialty brings a claim for 5 breach of an implied contract. (FAC ¶¶ 168-74.) “A cause of action for breach of implied 6 contract has the same elements as does a cause of action for breach of contract, except that 7 the promise is not expressed in words but is implied from the promisor’s conduct.” Yari v. 8 Producers Guild of Am., Inc., 161 Cal. App. 4th 172, 182 (2008). “The Ninth Circuit has 9 held that ERISA preempts common law theories of breach of contract implied in fact[.]” 10 Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1095 (9th Cir. 1985). 11 Specialty alleges that United’s conduct manifested an intent to be bound because 12 United: (1) “authorized” Specialty to dispense medication in the first preapproval; 13 (2) “issu[ed]” two additional preapprovals; (3) paid one of Specialty’s 14 claims (the eighth 14 one); and (4) had “numerous communications with” and made “assurances to” Specialty. 15 (FAC ¶ 169.) Specialty further alleges that “[b]ased upon the custom in the industry, the 16 Specialty Pharmacy had the reasonable expectation that it would be paid the claims subject 17 to the limitations of the plan.” (¶ 170.) 18 Here, the payment of one claim, and perhaps the “issuance” of the first preapproval, 19 might constitute conduct, as opposed to expressed terms, supportive of an implied contract 20 claim. United’s customary conduct in the industry might also support the claim. Again, 21 however, Specialty’s claim depends, at least in part, on the alleged “authorization” 22 contained in the preapprovals, which, as discussed above, repeatedly refer to Patient A’s 23 plan. Indeed, Specialty does not allege or argue that its implied contract claim survives 24 without regard to the preapprovals or Patient A’s plan. 25 Moreover, Specialty specifically pleads that the reasonableness of its expectations is 26 “subject to the limitations of the plan.” (Id.) Again, this reference to Patient A’s plan is 27 not merely for “background purposes.” In Cmty. Hosp. of Monterey Peninsula v. Aetna 28 Life Ins. Co., Case No. 19-cv-00328-BLF, 2020 WL 7389010, at *7 (N.D. Cal. June 26, 1 2020) (“Aetna”), for example, the provider alleged, as Specialty does here, that: (1) the 2 third party patient was covered by an ERISA plan at the time of treatment; (2) the provider 3 billed the insurer pursuant to the patient’s plan; (3) the insurer partially paid those bills 4 pursuant to the plan; and (4) the provider availed itself of the administrative remedies in 5 the plan. The court found the provider’s implied contract claim was preempted because 6 the court would be necessarily required to examine the provisions of the third party 7 patient’s plan, and because the plan was essential for the claim’s survival. Based on 8 Specialty’s allegations supporting its implied contract claim, it is not clear how this court 9 could avoid examining the terms of Patient A’s plan, or how the claim could survive 10 without the plan. See also Sharp Mem’l Hosp. v. Regence BlueCross BlueShield of Utah, 11 Case No.: 16cv2493 JM (RNB), 2018 WL 3993359, at *8 (S.D. Cal. Aug. 21, 2018) 12 (finding that determining whether insurer breached an implied-in-fact contract with a 13 provider would require the jury to evaluate exclusions in the patient’s ERISA plan, which 14 would likely mean the claim is preempted). Accordingly, Specialty’s breach of implied 15 contract claim is preempted. 16 c. Promissory Estoppel 17 “The elements of promissory estoppel are (1) a clear and unambiguous promise by 18 the promisor, and (2) reasonable, foreseeable and detrimental reliance by the promisee.” 19 Bushell v. JPMorgan Chase Bank, N.A., 220 Cal. App. 4th 915, 929 (2013). “Promissory 20 estoppel applies whenever a promise which the promissor should reasonably expect to 21 induce action or forbearance on the part of the promisee or a third person and which does 22 induce such action or forbearance would result in an injustice if the promise were not 23 enforced.” Advanced Choices, Inc. v. State Dep’t of Health Servs., 182 Cal. App. 4th 1661, 24 1671-72 (2010). “A cause of action for promissory estoppel is ‘basically the same as 25 contract actions, but only missing the consideration element.’” Yari, 161 Cal. App. 4th at 26 182 (internal citations omitted). 27 In support of its promissory estoppel claim, Specialty again alleges United made 28 clear and unambiguous promises to Specialty “through the issuance” of the preapprovals. 1 (FAC ¶ 152.) Specialty also alleges United “made numerous express and implied promises 2 and assurances . . . . relating to payment of the [c]laims.” (¶ 154.) Again, however, 3 Specialty does not identify anything in the preapprovals, or anything about the “issuance” 4 of the preapprovals, that constitutes a clear and unambiguous promise to pay. See Cal. 5 Surgery Ctr., Inc. v. UnitedHealthcare, Inc., Case No. CV 19-02309 DDP (AFMx), 2020 6 WL 3869715, at *5 (C.D. Cal. July 9, 2020) (equitable estoppel claim not preempted where 7 the providers alleged that United “specifically stated that it would pay up to 80% of its in- 8 network allowed amount and that it would honor an assignment of benefits and pay 9 plaintiffs directly” and where United was alleged to have previously paid). 10 Specialty also does not specify any promises or assurances that were allegedly made 11 that could function independently of the preapprovals or Patient A’s plan. Rather, 12 Specialty merely alleges that United made promises “relating” to payment. Absent Patient 13 A’s plan, however, the alleged “promises” made by United “neither could nor would have 14 been made,” and United would have had no reason to issue preapprovals or allegedly make 15 numerous promises relating to payment of the “claims.” See Cal. Spine & Neurosurgery 16 Inst. v. JP Morgan Chase & Co., Case No. 19-cv-03552-PJH, 2019 WL 7050113, at *4 17 (N.D. Cal. Dec. 23, 2019) (applying same reasoning to find that claims for promissory 18 estoppel and quantum meruit were preempted). Accordingly, because Specialty’s 19 promissory estoppel claim, as pled, is dependent on the preapprovals, the claim is 20 preempted for the same reasons discussed above. 21 d. Unjust Enrichment/Quasi-Contract 22 “When a plaintiff alleges unjust enrichment, a court may construe the cause of action 23 as a quasi-contract claim seeking restitution.” Astiana v. Hain Celestial Grp., Inc., 24 783 F.3d 753, 762 (9th Cir. 2015). The elements of an unjust enrichment claim are “receipt 25 of a benefit and unjust retention of the benefit at the expense of another.” Lectrodryer v. 26 SeoulBank, 91 Cal. Rptr. 2d 881, 883 (Cal. Ct. App. 2000). “The theory of unjust 27 enrichment requires one who acquires a benefit which may not justly be retained, to return 28 either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” 1 Otworth v. S. Pac. Trans. Co., 212 Cal. Rptr. 743, 748 (Cal. Ct. App. 1985); see also Klein 2 v. Chevron U.S.A., Inc., 202 Cal. App. 4th 1342, 1388 (2012) (“A plaintiff may not . . . . 3 pursue or recover on a quasi-contract claim if the parties have an enforceable agreement 4 regarding a particular subject matter.”). 5 Here, Specialty alleges that United received a benefit when Specialty dispensed 6 medication to Patient A. (FAC ¶¶ 148-49.) Specialty alleges that “United had a contractual 7 obligation to the Patient to reimburse it or any healthcare provider for providing the 8 medication.” (¶ 150.) Specialty also alleges “it would be fundamentally unfair for [United] 9 to avoid paying the claims, especially given that it issued the preapprovals to the Specialty 10 Pharmacy and made additional representations and assurances to the Specialty Pharmacy.” 11 (Id.) Therefore, in determining whether United received a benefit, the terms of Patient A’s 12 plan would need to be consulted.14 The terms of the plan, as referenced in the preapprovals, 13 would also likely need to be consulted in evaluating unjustness given that Specialty relies 14 on the preapprovals to demonstrate unjustness. Accordingly, Specialty’s claim for unjust 15 enrichment/quasi-contract, as currently pled, is preempted. 16 e. Quantum Meruit 17 “Quantum meruit (or quasi-contract) is an equitable remedy implied by the law 18 under which a plaintiff who has rendered services benefiting the defendant may recover 19 the reasonable value of those services when necessary to prevent unjust enrichment of the 20 defendant.” In re De Laurentiis Entm’t Grp. Inc., 963 F.2d 1269, 1272 (9th Cir. 1992). 21 “To recover in quantum meruit, a party need not prove the existence of a contract, but it 22 must show the circumstances were such that ‘the services were rendered under some 23 understanding or expectation of both parties that compensation therefor was to be made.’” 24 Port Med. Wellness, Inc. v. Conn. Gen. Life Ins. Co., 24 Cal. App. 5th 153, 180 (2018) 25 (citation omitted). “[I]n order to recover under a quantum meruit theory, a plaintiff must 26
27 14 As part of its claim based on quantum meruit, Specialty alleges the services it provided 28 1 establish both that he or she was acting pursuant to either an express or implied request for 2 such services from the defendant and that the services rendered were intended to and did 3 benefit the defendant.” Day v. Alta Bates Med. Ctr., 98 Cal. App. 4th 243, 248 (2002). 4 “[F]ederal and state courts have found that authorization of treatment and verification of 5 benefits . . . . are insufficient to state a claim for quantum meruit.” ABC Servs. Grp., Inc. 6 v. Health Net of Cal., Inc., Case No. SA CV 19-00243-DOC-DFM, 2020 WL 2121372, at 7 *7 (C.D. Cal. May 4, 2020) (citations omitted). 8 Specialty alleges it provided the medication “based upon the request of United.” 9 (FAC ¶ 166.) Specialty does not specify, however, when, where, or how the request was 10 allegedly made. See ABC Services, 2020 WL 2121372, at *7 (dismissing quantum meruit 11 claim because the plaintiff did not allege that the insurer requested that the provider treat 12 any of the patients, as opposed to merely authorizing treatment and verifying benefits); 13 Sharp, 2018 WL 3993359, at *9 (faulting the provider for failing to expand on how an 14 insurer requested that provider perform service for the insurer’s benefit, and noting that in 15 the health insurance context, the patient first requests medical service, then the provider 16 seeks authorization from the insurer to provide treatment); see also Namdy Consulting, Inc. 17 v. UnitedHealthcare Ins. Co., No. 18-cv-01283-RSWL-KS, 2018 WL 6430119, at *3 (C.D. 18 Cal. July 11, 2018) (“Where . . . . the patient initiates the request for treatment and the 19 hospital contacts the insurer for authorization, the insurer makes no express or implied 20 request.”). 21 Moreover, Specialty alleges its dispensation of the medication was “approved in the 22 preapprovals,” (FAC ¶ 163), and the services it provided benefited United “by dispensing 23 of its contractual obligation to the Patient,” (¶ 166). Again, this reference is not mere 24 “background” because Specialty will have to show that United had a contractual obligation 25 to Patient A, and that the obligation was satisfied. Accordingly, Specialty’s quantum merit 26 claim is preempted because it depends on the preapprovals and Patient A’s plan. See also 27 Summit, 2020 WL 5436655, at *7 (granting motion to dismiss quantum meruit claim 28 because the complaint did not raise the inference that “United itself” requested that the 1 provider treat the patients); Aetna, 2020 WL 7389010, at *7 (quantum merit claim 2 preempted where the insurer’s alleged conduct toward the provider, i.e. an authorization, 3 partial denial of benefits, and partial payment, were “intertwined” and “arose” from the 4 plan); Vrijesh S. Tantuwaya MD, Inc. v. Anthem Blue Cross Life & Health Ins. Co., 169 F. 5 Supp. 3d 1058, 1072 (S.D. Cal. 2016) (quantum meruit claims preempted where the 6 provider’s claims were based on the allegation that insurer wrongfully denied it adequate 7 reimbursement). 8 f. Intentional Interference 9 A plaintiff alleging a claim for relief for the tort of intentional interference with 10 prospective economic relations or advantage must prove “(1) an economic relationship 11 between the plaintiff and some third party, with the probability of future economic benefit 12 to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional wrongful 13 acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption 14 of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts 15 of the defendant.” Sybersound Recs., Inc. v. UAV Corp., 517 F.3d 1137, 1151 (9th Cir. 16 2008) (alterations omitted) (citing Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 17 1134, 1153 (2003)). 18 Specialty alleges: (1) it had an economic relationship with Patient A that carried the 19 probability of future economic benefit for Specialty; (2) United was aware of Specialty’s 20 relationship with Patient A; (3) United intended to disrupt the relationship in order to steer 21 Patient A to another pharmacy that would provide the medication at a lower price; 22 (4) Specialty’s relationship with Patient A was terminated; and (5) Specialty lost past and 23 future profits from dispensing medication to Patient A. (FAC ¶¶ 176-81.) Specialty also 24 alleges, however, that United’s conduct in refusing to reimburse it for the medication was 25 an independently wrongful act because “United had a contractual duty to the Patient to 26 provide the patient with medical benefits, including paying for the patient to obtain the 27 medication.” (¶ 182.) Specialty does not allege or argue that its intentional interference 28 claim survives without pleading an independently wrongful act. Moreover, Specialty does 1 not allege another wrongful act besides the alleged breach of the terms in Patient A’s plan. 2 Perhaps the existence of Patient A’s plan, or breach of its terms, is a more attenuated issue 3 in the resolution of Specialty’s tort claim, as compared to contract-based claims. 4 Nonetheless, as Specialty’s intentional interference claim is currently pled, it is not 5 reasonable to infer that Specialty could prove its alleged wrongful act without consulting 6 the terms of Patient A’s plan. Further, it is not reasonable to infer that United would 7 concede it violated the terms of Patient A’s plan in defending against the claim. 8 Accordingly, Specialty’s intentional interference with prospective economic relations or 9 advantage claim is preempted because it is premised, in a substantive way, on the 10 preapprovals and Patient A’s plan. 11 2. Specialty’s Arguments 12 Specialty argues that “the Ninth Circuit has held that state law claims are not 13 preempted when, like here, an ERISA plan is only referenced in the [FAC] for background 14 purposes and in no way are the providers’ claims dependent upon the plan.” (Doc. No. 20 15 at 10.) As discussed above, the repeated direct and indirect references to Patient A’s plan 16 in the FAC cannot reasonably be read to serve mere “background purposes.” Furthermore, 17 the cases cited by Specialty in support of its argument are not availing. 18 i. The Meadows 19 In The Meadows v. Employers Health Ins., 47 F.3d 1006, 1107 (9th Cir. 2009), the 20 court held that where a provider was suing not as an assignee, but as a “third party 21 provider,” its claims for negligent misrepresentation, estoppel, and breach of contract were 22 not preempted because they were “independent state law claims.” In The Meadows, 23 however, the provider was told that a husband and wife were covered, when in fact they 24 were not because the husband had terminated his employment prior to treatment. Id. at 25 1109. In concluding the claims were independent of the husband’s plan, the court reasoned 26 “neither [the provider] nor the [husband and wife] had any existing ties to the ERISA plan” 27 when they sought treatment. Id. The court also distinguished another case, in which the 28 1 Supreme Court found that a claim for wrongful termination was not preempted, because 2 “the claims [in The Meadows] arose because there was no plan coverage for the [husband 3 and wife] which was the very fact misrepresented by [the plan], to the detriment of [the 4 provider].” Id. at 1010. Therefore, The Meadows clearly relied, at least in part, on the 5 absence of an ERISA plan in place at the time the provider sought to verify coverage.16 6 Here, Specialty does not allege that Patient A’s plan was not in place at the time it sought 7 to verify coverage. To the contrary, and as discussed above, Specialty’s claims rely 8 heavily, if not entirely, on the allegation that a plan was in place when it received the 9 preapprovals and other communications from United. 10 ii. Cedars-Sinai 11 In Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 978 12 (9th Cir. 2007), the court held, in summary fashion, that claims for breach of contract and 13 negligent misrepresentation were not precluded by federal law because, under The 14
15 15 The case was Ingersoll-Rand, in which the Supreme Court held it had “no difficulty in 16 concluding” that a claim for wrongful termination related to an ERISA plan where the 17 plaintiff alleged his employer wrongfully terminated him to avoid paying his pension benefits. 498 U.S. at 140. The existence of a pension plan was specifically included as an 18 element of the state cause of action. Id. In Wise v. Verizon Commc’ns, Inc., 600 F.3d 1180, 19 1191 (9th Cir. 2010), however, the Ninth Circuit clarified that it is not necessary that the existence of an employee benefit plan be specifically included as an express element of a 20 state common law claim in order for the claim to be preempted. In Wise, an employee was 21 denied long-term disability benefits by her employer and her employee welfare plan. Id. at 1184. She sought damages from her employer based on promises the employer allegedly 22 made concerning her benefits while recruiting and hiring her. Id. Relying on the “critical 23 factor” language in Ingersoll-Rand, the court found the claims against her employer were preempted because: (1) the complaint “necessarily reference[d] an ERISA plan;” (2) “[t]he 24 state law theories of fraud, misrepresentation, and negligence all depend on the existence 25 of an ERISA-covered plan to demonstrate that [the plaintiff] suffered damages: the loss of insurance benefits;” and (3) the plaintiff “must allege the existence of an ERISA plan to 26 state her claims under [state] law.” Id. at 1191. 27 16 Specialty also does not address The Meadows’ rationale for distinguishing Ingersoll- 28 1 Meadows, the provider was “suing as a third-party claiming damages, and not as an 2 assignee of rights to benefits.” In Cedars-Sinai, however, the plan argued (1) it was not 3 required to pay the contracted rate for federal employees because of the patient’s death, 4 and (2) it need not pay the Medicare rate because the deceased patient was no longer an 5 employee. Id. Therefore, the plan in Cedars-Sinai essentially argued the same thing as the 6 plan in The Meadows did, i.e. that it was not required to pay because the beneficiary was 7 no longer an employee and was not covered by the employer-based health plan. Here, 8 again, Specialty does not contend that United’s refusal to pay is based on the absence of a 9 plan due to Patient A’s unemployment or death. Rather, Specialty contends that United’s 10 refusal is based on the terms of the plan in place at the time Specialty dispensed medication 11 to him.17 12 iii. Blue Cross 13 In Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 14 1051 (9th Cir. 1999), the court found, inter alia, that “[w]here the meaning of a term in the 15 plan is not subject to dispute, the bare fact that the plan may be consulted in the course of 16 litigating a state-law claim does not require that the claim be extinguished by ERISA’s 17 enforcement provision.” Accordingly, Specialty also argues that “just because the [FAC] 18 references the plan for background does not mean the claims are preempted, as the meaning 19 of the terms of the plan are not in dispute and the Specialty Pharmacy is not seeking to 20 enforce terms of the plan.” (Doc. No. 20 at 8; see also id. at 16 (arguing that “the mere 21 fact that a plan may need to be consulted in the course of state-law litigation or that it is 22 referenced in the complaint does not require preemption”).) 23 Here, however, the terms in Patient A’s plan are “subject to dispute.” Although 24 Specialty argues it is “not claiming there was any breach of any ERISA plan document,” 25
26 27 17 Neither The Meadows nor Cedars-Sinai held, as Specialty suggests, that where an individual beneficiary does not assign his or her claims to their provider, the provider’s 28 1 (Doc. No. 25 at 6), it is not reasonable to infer that Specialty and United entirely agree, or 2 will entirely agree, as to the meaning of the terms in Patient A’s plan, or lack thereof, 3 regarding reimbursement for self-infused medication. It is also not reasonable to infer that 4 United’s alleged reason for the refusal, i.e. there are no medical records that Patient A 5 actually self-infused the medication, has no connection to the terms of Patient A’s plan. 6 Accordingly, and as discussed above, the instant case is not one in which there is a “bare 7 fact” that Patient’s A’s plan “may be consulted.” Rather, the plan’s terms are, a key part, 8 if not the core part, of Specialty’s claims. 9 Additionally, the dispute in Blue Cross was over the plan’s ability to adjust a fee 10 schedule in express written “provider agreements” between the plan and the providers. The 11 court specifically relied on this fact to distinguish the case from another case in which the 12 assignee-provider had no such agreement. See 187 F.3d at 1051 (citing Misic v. Building 13 Serv. Emp. Health & Welfare Trust, 789 F.2d 1374 (9th Cir. 1986)). In other words, the 14 Blue Cross court differentiated claims brought by an assignee-provider for reimbursement 15 under a patient’s agreement with an insurer from those brought by a provider under the 16 provider’s agreement with the insurer. The court reasoned that claims related to benefits 17 under a patient’s agreement with a plan can only be brought by a patient or an assignee- 18 provider, whereas claims related to changes in fee schedules under a provider’s agreement 19 with an insurer can only be brought by the provider. Id. Here, however, Specialty concedes 20 it does not have a provider agreement with United, (see FAC ¶ 5), and its claims are not 21 based on a breach of a provision regarding changes to a fee schedule in a provider 22 agreement. 23 Also, the finding in Blue Cross that the “bare fact” that a plan “may be consulted” 24 does not warrant preemption was made when analyzing a preemption argument under 25 ERISA’s civil enforcement provision under 29 U.S.C. § 1132(a), not its express 26 preemption clause under 29 U.S.C. § 1144(a), which is the provision at issue here. See 27 Blue Cross, 187 F.3d at 1051. Additionally, the court made this finding in response to the 28 insurer’s “overriding” argument that the providers’ claims were preempted simply by 1 virtue of the fact that their right to receive reimbursement depended on assignments of the 2 rights from their patients, only some of which were beneficiaries of ERISA-covered plans. 3 Id. at 1050. The court stated, “we find no basis to conclude that the mere fact of assignment 4 converts the [p]roviders’ claims into claims to recover benefits under the terms of an 5 ERISA plan.” Id. at 1052. The court found the claims arose from the terms of the provider 6 agreements “and could not be asserted by their patient-assignors.” Id. at 1050. Here, 7 United does not argue that Specialty’s claims are preempted based on an assignment of 8 rights, and Specialty specifically disclaims proceeding as an assignee. Also, it does not 9 appear as if Patient A would be unable to bring the same or similar claims himself. 10 Finally, although the court in Blue Cross found the providers’ claims were not 11 preempted under ERISA’s express preemption clause, it did so in response to the plan’s 12 argument the claims were preempted because allowing the claims to proceed would 13 (1) impose increased costs on the plan, and (2) encroach on relationships regulated by 14 ERISA, such as between plan and plan member, plan and employer, and plan and trustee. 15 Id. at 1052. Indeed, the “economic effect” and “relationship” tests have been recognized 16 as grounds or potential grounds for finding that a law has a “connection with” ERISA and 17 is therefore preempted. See, e.g., N.Y. Conf. of Blue Cross & Blue Shield Plans v. Travelers 18 Ins. Co., 514 U.S. 645, 655 (1995) (recognizing potential economic effect test); Gen. Am. 19 Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1521-22 (9th Cir. 1993) (recognizing 20 relationship test). Here, United’s preemption argument is not based on the “connection 21 with” standard. (See Doc. No. 24 at 2 n.1.) Additionally, United’s preemption argument 22 is not based on the economic effects of the claims or interference of Specialty’s claims with 23 ERISA-regulated relationships. The only party to raise those issues is Specialty. There is 24 no indication, however, and Specialty cites no authority suggesting, that these “connected 25 /// 26 /// 27 /// 28 /// 1 with” tests are designed to be used defensively to show that a state law is not preempted, 2 as opposed to alternative methods for finding that a state claim is preempted.18 3 iv. Other Cases 4 Specialty also cites Hospice of Metro Denver, Inc. v. Grp. Health Ins. of Okla., Inc., 5 944 F.2d 752, 753 (10th Cir. 1991) in which a plan was alleged to have initially 6 communicated to a provider that a patient was covered, but then denied payment based on 7 the patient’s preexisting condition. The provider sued the plan for promissory estoppel, 8 quantum meruit, and claims as a third-party beneficiary. Id. The court found the claims 9 did not relate to the patient’s plan because denial of payment to the provider was a “mere 10 consequence” of its denial of coverage to the patient. Id. at 754. The court relied on the 11 fact the provider’s claims did not claim any rights under the plan, and did not claim any 12 breach of the plan contract. Id. The court found the references to the preexisting condition 13 in the plan was “background factual explanation” of the plan’s decision to deny payment. 14 Id. Here, however, Specialty brings claims for breach of contract. (FAC ¶¶ 136-46.) 15 Although Specialty attempts to couch these claims, as well as its other claims, as arising 16 not from the terms of Patient’s A plan, but rather from United’s preapprovals and “other 17 communications,” as discussed above, Specialty’s claims repeatedly refer to Patient A’s 18 plans for purposes beyond mere “background factual explanation.”19 19
20 21 18 The Blue Cross court also rejected the plan’s argument the claims were “intertwined” with patients’ benefits, reasoning that “because there is no claim that beneficiaries have 22 not received their full benefits under the plans, or any argument that interpretation of the 23 provider agreements will somehow work a change in the benefits to which beneficiaries will be entitled under ERISA-covered plans, the [p]roviders’ claims do not encroach on the 24 relationship between beneficiary and plan.” Blue Cross, 187 F.3d at 1053-54. Here, 25 whether Patient A received his full benefits under his health plan is not as far removed an issue as it was in Blue Cross. In fact, it appears to be a central issue. 26
27 19 Specialty also makes no attempt to reconcile this non-binding case with the Supreme Court’s holding in Ingersoll-Rand, 498 U.S. 133, and the Ninth Circuit’s holding in Wise, 28 1 Finally, Specialty cites Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474 (2020), 2 but does not explain why it affects the outcome of this case. In Rutledge, the Supreme 3 Court held that “ERISA does not pre-empt state rate regulations that merely increase costs 4 or alter incentives for ERISA plans without forcing plans to adopt any particular scheme 5 of substantive coverage.” Id. at 480. The Court found an Arkansas statute requiring 6 pharmacy benefit managers to reimburse pharmacies at a price equal to or higher than that 7 which the pharmacy paid to buy the drug from a wholesaler was not preempted. Id. at 474. 8 Given that the instant case does not involve a state regulation, it is not clear how Rutledge 9 applies. Moreover, as noted by United, the Court in Rutledge cited its previous decision in 10 Ingersoll-Rand, id. at 480, but the Court did not disturb its prior holding relating to the 11 preemption of state law claims. 12 IV. CONCLUSION 13 For the foregoing reasons, Specialty’s claims are preempted by ERISA’s express 14 preemption clause, 29 U.S.C. § 1144(a), because they make reference to, and are related 15 to, Patient A’s plan. United’s Motion to Dismiss on preemption grounds is GRANTED. 16 The court declines to decide whether Specialty’s breach of implied and express contract 17 claims, as well as its claim based on promissory estoppel, must also be dismissed for failure 18 to state a claim under Rule 12(b)(6) irrespective of United’s preemption argument. 19 Specialty’s request for leave to amend, (Doc. No. 20 at 21), is GRANTED. See 20 Fed. R. Civ. P. 15(a) (leave to amend “should be freely granted when justice so requires”); 21 Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (“[T]he underlying purpose 22 of Rule 15 . . . . [is] to facilitate decision on the merits, rather than on the pleadings or 23 technicalities.”) (internal quotation marks omitted); Moss v. U.S. Secret Serv., 572 F.3d 24 962, 972 (9th Cir. 2009) (requests for leave should be granted with “extreme liberality”). 25 Specialty shall file its second amended complaint, should it choose to file one, within 14 26 days of the filing of this order. United’s response to the operative complaint is due within 27 14 days after the expiration of Specialty’s deadline to file a second amended complaint. 28 See Fed. R. Civ. P. 15(a)(3). Should Specialty file a second amended complaint, and should 1 || United choose to file another motion to dismiss, the parties shall address any ERISA 2 preemption issue on a claim-by-claim basis with supporting citations and analysis of all 3 || applicable cases. 4 IT IS SO ORDERED. 5 || Dated: _ 4/2/21 6 Hi af Yield, _ 7 n. Jeffrey/f. Miller 3 nited States District Judge
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