Silver Peaks, LLC v. CareMore Health Plan

• Court: District Court, C.D. California
• Decided: August 31, 2021
• Docket: 2:21-cv-05355
• Status: Unknown

Opinion

1 2 JS -6 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 SILVER PEAKS, LLC, Case No. 2:21-cv-05355-FLA (PDx)

12 Plaintiff, RULING GRANTING PLAINTIFF’S 13 v. MOTION TO REMAND [DKT. 20], 14 DENYING DEFENDANT CAREMORE’S MOTION TO 15 CAREMORE HEALTH PLAN, et al., DISMISS [DKT. 16], AND 16 Defendants. DISCHARGING ORDER TO SHOW CAUSE [DKT. 21] 17

18 19 20 RULING 21 Before the court are two motions: (1) Plaintiff Silver Peaks, LLC’s (“Plaintiff” 22 or “Silver Peaks”) Motion to Remand (Dkt. 20) (“MTR”); and (2) Defendant 23 CareMore Health Plan’s (“Defendant” or “CareMore”) Motion to Dismiss Plaintiff’s 24 Complaint (Dkt. 16) (“MTD”). CareMore opposes Plaintiff’s Motion to Remand. 25 Dkt. 25 (“Opp. to MTR”). Plaintiff opposes CareMore’s Motion to Dismiss. Dkt. 24 26 (“Opp. to MTD”). On August 5, 2021, the court found these matters appropriate for 27 resolution without oral argument and vacated the hearing set for August 13, 2021. 28 Dkt. 29; see Fed. R. Civ. P. 78(b); Local Rule 7-15. 1 On July 15, 2021, the court additionally ordered the parties to show cause 2 (“OSC”) in writing why the court has subject matter jurisdiction over this action. Dkt. 3 19. The parties filed timely responses on July 30, 2021. Dkts. 27, 28. 4 For the reasons stated herein, the court GRANTS Plaintiff’s Motion to Remand 5 and DENIES Defendant CareMore’s Motion to Dismiss as moot. The OSC is 6 DISCHARGED. 7 BACKGROUND 8 Plaintiff filed this action on May 25, 2021 in Los Angeles Superior Court 9 against Defendants CareMore, Country Villa Belmont Heights Healthcare Center 10 (“Belmont”), and Rockport Healthcare Support Services, LLC (“Rockport”) 11 (collectively, “Defendants”). See Dkt. 1-4 (“Compl.”). Plaintiff is a home care 12 organization that provides non-medical services, including supervisory “sitter 13 services,” to patients that reside in their home or live in an elderly care facility. 14 Compl. ¶ 1. Defendant CareMore is a “medical group health plan, care delivery 15 system and insurer that works with a subscriber member’s insurance plan to deliver 16 needed care to subscribing members.” Id. ¶ 2. Defendant Belmont allegedly is a 17 health care facility operating in California, and Defendant Rockport allegedly is 18 Belmont’s parent company. Id. ¶¶ 3-4, 27. Plaintiff seeks damages against 19 Defendants for (1) fraud, (2) breach of contract, (3) breach of contract as third-party 20 beneficiary, (4) breach of implied contract, (5) account stated, (6) quantum meruit, 21 and (7) unjust enrichment.1 Compl. ¶¶ 23-63. 22 Plaintiff alleges Belmont and CareMore entered into a Letter of Agreement 23 (“LOA”) through which Plaintiff would provide sitter services for patient F.D. 24 25 26 27 1 The Complaint asserts different causes of action in the body of the Complaint than in the caption on its first page. The court refers to the causes of action asserted in the 28 body of the Complaint. 1 (“Patient”),2 who was enrolled in a Medicare Advantage plan administered by 2 CareMore.3 Compl. ¶ 9; Opp. to MTR 2. According to Plaintiff, it rendered these 3 sitter services for Patient in Belmont’s facility for approximately two weeks from 4 March 2, 2020 to March 18, 2020. Compl. ¶ 11. Plaintiff states the LOA outlines the 5 following business practice for payment between Belmont and CareMore. MTR 4. 6 First, Belmont must bill CareMore for the services Patient received within sixty 7 calendar days from the dates of service. Id. Next, CareMore issues a check for those 8 services to either Belmont or Rockport. Id. Finally, Belmont or Rockport reimburses 9 Plaintiff for its services. Id. 10 In February 2020, Plaintiff sent Belmont an invoice for the sitter services it 11 performed for Patient in the amount of $6,894. Compl. ¶ 13, Ex. 1. According to 12 Plaintiff, it still has not received payment for the sitter services, despite sending an 13 additional letter to Belmont demanding payment. Id. ¶ 15. Plaintiff further alleges 14 that its counsel spoke with a manager from Belmont in July 2020, who stated 15 CareMore had only authorized sitter services for one week. Id. ¶ 20. Accordingly, 16 Belmont represented it would only pay Plaintiff a total of $3,447. Id. On information 17 18

19 2 Patient is identified by her initials for privacy purposes. 20 3 Medicare Advantage allows individuals to receive Medicare benefits through private 21 health-insurance plans instead of Medicare Parts A and B, the government’s fee-for- service program. See 42 U.S.C. § 1395w–21. “To participate, insurers referred to as 22 Medicare Advantage Organizations (MAOs) contract with the federal Centers for 23 Medicare & Medicaid Services (CMS).” Ohio State Chiropractic Ass’n v. Humana Health Plan Inc., 647 Fed. App’x 619, 620 (6th Cir. 2016) (citing 42 U.S.C. § 1395w– 24 27; 42 C.F.R. § 422.503). As the Sixth Circuit has explained, “CMS makes monthly 25 per-beneficiary payments to MAOs, which take on the prospective financial risk of serving Medicare beneficiaries. Generally speaking, MAOs have latitude to ‘select 26 the [health-care] providers from whom the benefits under the plan are provided.’ To 27 that end, MAOs often contract with physicians and hospitals. But to cover the full panoply of Medicare benefits, [Medicare Advantage] plans include services that are 28 sometimes furnished by non-contract providers.’” Id. (citations omitted). 1 and belief, Plaintiff alleges the LOA signed by CareMore and Belmont creates an 2 obligation for Defendants to pay the invoice. Id. ¶ 22. 3 Defendant CareMore removed this action from state court on July 1, 2021, 4 arguing removal is proper under the “federal officer” removal statute, 28 U.S.C. 5 § 1442(a)(1), and that the court has federal question jurisdiction pursuant to 28 U.S.C. 6 § 1441(c). Dkt. 1. On July 9, 2021, Defendant CareMore filed its Motion to Dismiss, 7 arguing, inter alia, that Plaintiff’s state law claims are preempted under the Medicare 8 Act and that the court lacks subject matter jurisdiction because Plaintiff did not 9 comply with the Medicare Act’s exhaustion requirements. Dkt. 16. The court 10 Ordered the parties to Show Cause why the court has subject matter jurisdiction in this 11 matter on July 15, 2021. Dkt. 19. The next day, Plaintiff filed the instant Motion to 12 Remand. Dkt. 20. The parties filed their responses to the court’s OSC on July 30, 13 2021. Dkts. 27, 28. 14 DISCUSSION 15 Federal courts have subject matter jurisdiction only as authorized by the 16 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 17 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 18 may be removed to federal court only if the federal court would have had original 19 jurisdiction over the suit. 28 U.S.C. § 1441(a). The party seeking removal bears the 20 burden of establishing federal jurisdiction by a preponderance of the evidence. Gaus 21 v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir. 1992) (citing McNutt v. Gen. Motors 22 Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). 23 In ruling on a motion to remand, jurisdiction is generally determined from the 24 face of the complaint. Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985). The 25 court may remand the action sua sponte “[i]f at any time before final judgment it 26 appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c); 27 United Invs. Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004). 28 1 Here, Defendant CareMore argues the court has subject matter jurisdiction 2 pursuant to 28 U.S.C. § 1442(a)(1) (the federal officer removal statute) and 28 U.S.C. 3 § 1331 (federal question jurisdiction). See Opp. to MTR. 4 I. The Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1) 5 A. Legal Standard 6 Under the federal officer removal statute, a civil action may be removed to 7 federal court by “any officer (or any person acting under that officer) of the United 8 States or of any agency thereof, in an official or individual capacity, for or relating to 9 any act under color of such office….” 28 U.S.C. § 1442(a)(1) (“§ 1442”). In the 10 Ninth Circuit, federal officer removal is available to a defendant under § 1442(a) if: 11 (1) the removing defendant is a “person” within the meaning of the statute; (2) there is 12 a causal nexus between the removing party’s actions, taken pursuant to a federal 13 officer’s directions, and plaintiff’s claims; and (3) the removing party can assert a 14 colorable federal defense. Stirling v. Minasian, 955 F.3d 795, 800 (9th Cir. 2020). 15 The federal officer removal statute is an exception to the “well-pleaded 16 complaint” rule, which requires a federal question to appear on the face of the 17 complaint for jurisdiction to be proper, rather than raised as an anticipated or actual 18 defense. Jefferson Cnty. v. Acker, 527 U.S. 423, 431 (1999), superseded by statute on 19 other grounds as discussed in Sawyer v. Foster Wheeler LLC, 860 F.3d 249, 258 (4th 20 Cir. 2017). In other words, the statute allows removal of suits against federal officers 21 and people acting under them so long as: (1) a “connection or association” exists 22 between the act in question and the federal office; and (2) their defense depends on 23 federal law. Id. 24 B. Analysis 25 CareMore argues this case was properly removed to federal court because 26 Patient was enrolled in a Medicare Advantage plan that CareMore administered, and 27 “Medicare coverage determinations and reimbursements are predicated on a purely 28 federal scheme involving federal Medicare Act statutes, its implementing regulations, 1 and policy determinations from the Centers for Medicare and Medicaid Services 2 (“CMS”)….” Opp. to MTR 2 & n.1. Thus, according to CareMore, removal under 3 the federal officer statute is appropriate for private entities like itself because it 4 administers Medicare benefits under the direction of the federal government. Id. 5-13. 5 The court disagrees for two reasons. 6 First, from the face of the Complaint and the LOA between Belmont and 7 CareMore, the Medicare Act and its implementing regulations appear to be irrelevant 8 here. The LOA explicitly states that “Patient Sitter Services are considered as 9 excluded from Medicare allowable payment and paid in addition to the Medicare 10 allowable payment at $16.00/hr….” Dkt. 4-1, at 2 ¶ 5 (emphasis added). In other 11 words, the LOA states that sitter services are not covered by Medicare, but that 12 CareMore will nonetheless cover those services at a rate of $16 an hour. 13 According to CareMore, “despite Plaintiff’s argument that the LOA states that 14 sitter services are not covered under Medicare, Attachment A to the LOA provides 15 that ‘[i]n the event of any inconsistency between the terms and conditions of this 16 Attachment and the terms and conditions in the remainder of the [LOA], the terms and 17 conditions of this Attachment A shall govern.’” Opp. to MTR 10 (citing Compl. Ex. 18 1, Attach. A, § 12.1). CareMore, however, does not explain how any provision of 19 Attachment A contradicts the explicit terms of the LOA or how sitter services are in 20 fact covered by Medicare. Nor does CareMore point to any “inconsistency” between 21 the LOA and Attachment A regarding Medicare coverage of sitter services. 22 CareMore also contends that “[w]hether or not Plaintiff is seeking payment for 23 services that may not be covered [by Medicare] … is not relevant to the issue for 24 purposes of jurisdiction under the federal officer removal statute.” Opp. to MTR 10. 25 To the contrary, if sitter services are not covered by Medicare pursuant to the LOA, 26 CareMore cannot assert either: (1) a “causal nexus” between its actions, taken 27 pursuant to a federal officer’s directions, and plaintiff’s claims; or (2) a “colorable 28 1 federal defense.” See Stirling, 955 F.3d at 800. CareMore, thus, fails to establish 2 removal is appropriate. 3 Second, even if Medicare covered sitter services here, the court is not persuaded 4 CareMore was “acting under” any federal officer or agency under Supreme Court 5 precedent interpreting § 1442(a)(1).4 CareMore quotes Watson v. Philip Morris Cos., 6 551 U.S. 142, 147, 152 (2007), to argue that a private entity is “acting under” a federal 7 officer when it is involved in “an effort to assist, or to help carry out, the duties or 8 tasks of the federal superior,” and that the term “acting under” is broad and must be 9 liberally construed. Opp. to MTR 7 (italics in Watson). The Supreme Court, 10 however, also emphasized that “broad language is not limitless. And a liberal 11 construction nonetheless can find limits in a text’s language, context, history, and 12 purposes.” Watson, 551 U.S. at 147. 13 As Watson explained, the “basic purpose” of federal officer removal is to 14 prevent interference with the federal government’s operations caused, for example, by 15 a state’s prosecution of federal officers and agents acting within the scope of their 16 authority. Id. at 150. It also serves to protect federal officers and agents from “local 17 prejudice” against federal laws or officials, and to ensure “federal officials [access to] 18 a federal forum in which to assert federal immunity defenses.” Id. 19 Here, CareMore’s interpretation of the federal officer removal statute stretches 20 it too far from its original purpose. CareMore is not at a significant risk of state-court 21 “prejudice” because it administers Medicare benefits. See id. at 152. A state-court 22 lawsuit brought against CareMore is not likely to disable federal officials from taking 23 necessary action to enforce federal law. Id. Nor is a state-court lawsuit in this action 24 likely to deny a federal forum to an individual entitled to assert a federal claim of 25 26 27 4 As the court concludes Defendant does not meet its burden to show it was “acting under” a federal official or agency for purposes of the removal statute, it need not 28 address the parties’ arguments regarding the additional requirements of § 1442. 1 immunity. Id. Accordingly, neither the language, nor history, nor purpose of the 2 removal statute leads the court to believe Congress intended to expand the scope of 3 federal officer removal to entities such as CareMore. See id. at 147-53 (reviewing the 4 history and purpose of the federal officer removal statute). 5 To be sure, a private contractor may “act under” a federal officer or agency 6 when it “helps [federal] officers fulfill … basic governmental tasks” and “perform[s] a 7 job that, in the absence of a contract with a private firm, the Government itself would 8 have … to perform.” Id. at 153. This requires a showing that the government 9 formally delegated its legal authority to the private entity to act on its behalf. Id. at 10 156. 11 Although CareMore argues it performs government tasks by administering 12 Medicare benefits under Medicare Advantage plans, it fails to submit any evidence 13 showing Congress, CMS, or any other federal agency formally delegated legal 14 authority to CareMore. See id. at 157 (noting that without evidence of formal 15 delegation, the defendant was merely subject to government regulation, which is not 16 sufficient for removal purposes). For example, CareMore does not submit evidence of 17 a contract between itself and the government or point to a statute or regulation that 18 explicitly delegates legal authority from the government to CareMore. See id. 19 (holding plaintiff failed to establish it was “acting under” a federal officer where there 20 was “no evidence of any delegation of legal authority” from a government agency nor 21 “evidence of any contract, any payment, any employer/employee relationship, or any 22 principal/agent arrangement”). 23 CareMore, thus, has failed to demonstrate by a preponderance of the evidence 24 that it has anything more than an arms-length relationship with CMS, or that the 25 control to which CareMore is subject is the type of close relationship necessary for a 26 private contractor to “act under” a federal agency. See Vaccarino v. Aetna, Inc., No. 27 5:18-cv-02349-JGB (SHKx), 2018 WL 6249707, at *6 (C.D. Cal. Nov. 29, 2018) 28 (holding that “[b]ecause Removing Defendants have not explained the nature of 1 CMS’s control over coverage decisions or elaborated on the government’s interest in 2 such decisions, they fail to meet their burden of showing that their actions were ‘taken 3 pursuant to a federal officer’s directions.’”). 4 Accordingly, CareMore is not entitled to remove this action as a “person acting 5 under” an officer of the United States. 6 II. Federal Question Jurisdiction, 28 U.S.C. § 1331 7 A. Legal Standard 8 Federal district courts have original jurisdiction over all civil actions “arising 9 under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. 10 “The presence or absence of federal-question jurisdiction is governed by the ‘well- 11 pleaded complaint rule,’ which provides that federal jurisdiction exists only when a 12 federal question is presented on the face of the plaintiff’s properly pleaded 13 complaint.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). “This rule 14 makes a plaintiff the ‘master of his complaint’: He may generally avoid federal 15 jurisdiction by pleading solely state-law claims.” Valles v. Ivy Hill Corp., 410 F.3d 16 1071, 1075 (9th Cir. 2005). 17 As an exception to the well-pleaded complaint rule, the court has subject matter 18 jurisdiction when a federal question is necessarily embedded in the state claims 19 asserted in a complaint. For a state law claim to provide federal question jurisdiction, 20 the “state law claim [must] necessarily raise a stated federal issue, actually disputed 21 and substantial, which a federal forum may entertain without disturbing any 22 congressionally approved balance of federal and state judicial responsibilities.” 23 Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). 24 “That is, federal jurisdiction over a state law claim will lie if a federal issue is: 25 (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of 26 resolution in federal court without disrupting the federal-state balance approved by 27 Congress.” Gunn v. Minton, 568 U.S. 251, 258 (2013). 28 / / / 1 B. Analysis 2 CareMore argues the court has federal question jurisdiction because Plaintiff’s 3 state law claims depend upon an interpretation of a Medicare reimbursement 4 mechanism. Opp. to MTR 14-15. Thus, according to CareMore, “Plaintiff’s claims 5 necessarily raise the issue of whether Defendant administered Plaintiff’s claim in 6 accordance with the Medicare Act.” Id. at 14. 7 The court, however, finds Plaintiff’s state-law claims do not raise a substantial 8 and disputed federal issue. Plaintiff does not seek reimbursement for services it 9 claims were denied under the Medicare Act. See Ardary v. Aetna Health Plans of 10 Cal., Inc., 98 F.3d 496, 500 (9th Cir. 1996) (holding an action does not raise a federal 11 issue under the Medicare Act when “at bottom [it is] not seeking to recover 12 [Medicare] benefits”). Nor do Plaintiff’s claims require interpretation of Medicare 13 laws, as it is undisputed sitter services are not covered by Medicare. See City of 14 Oakland, 969 F.3d at 906-07 (finding no federal jurisdiction under the “slim category” 15 articulated in Grable where the claim “neither require[d] an interpretation of a federal 16 statute nor challenge[d] a federal statute’s constitutionality” (citation omitted)). 17 Rather, Defendant raises the Medicare Act as a shield to liability. See Opp. to MTR 18 11-13 (arguing the Medicare Act provides CareMore with a “colorable defense” in 19 this action). It is well-established that federal issues raised as a defense are not 20 sufficient to support subject matter jurisdiction. See Caterpillar, 482 U.S. at 393 21 (“[A] case may not be removed to federal court on the basis of a federal defense, … 22 even if the defense is anticipated in the plaintiff’s complaint, and even if both parties 23 concede that the federal defense is the only question truly at issue.”) (italics in 24 original). 25 Because Plaintiff’s state-law claims do not raise a substantial federal issue, the 26 court lacks subject matter jurisdiction. See Grable, 545 U.S. at 314. Thus, Plaintiff’s 27 Motion to Remand is GRANTED, and the OSC is DISCHARGED. 28 / / / 1 CONCLUSION 2 For the foregoing reasons, the court GRANTS Plaintiff's Motion to Remand 3 | (Dkt. 20) and DISCHARGES the OSC (Dkt. 19). Defendant CareMore’s Motion to 4 || Dismiss (Dkt. 16) is DENIED as moot. 5 IT IS SO ORDERED. 6 7 | Dated: August 31, 2021

9 FERNANDO L. AENLLE-ROCHA 10 United States District Judge

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