Silver Peaks, LLC v. CareMore Health Plan

Opinion

1 2 JS -6 3 4 5 6 7 10 11 SILVER PEAKS, LLC, Case No. 8:21-cv-01188-FLA (PDx)

12 Plaintiff, RULING (1) GRANTING 13 v. PLAINTIFF’S MOTION TO 14 REMAND [DKT. 14]; AND (2) DENYING DEFENDANT 15 CAREMORE HEALTH PLAN, et al., CAREMORE’S MOTION TO 16 Defendants. DISMISS [DKT. 11] AND DEFENDANT PARK REGENCY’S 17 MOTION FOR JOINDER [DKT. 13] 18

19 20 22 Before the court are two motions: (1) Plaintiff Silver Peaks, LLC’s (“Plaintiff” 23 or “Silver Peaks”) Motion to Remand (Dkt. 14) (“MTR”); and (2) Defendant 24 CareMore Health Plan’s (“CareMore”) Motion to Dismiss Plaintiff’s Complaint (Dkt. 25 13) (“MTD”). CareMore opposes Plaintiff’s Motion to Remand. Dkt. 20 (“Opp. to 26 MTR”). Plaintiff opposes CareMore’s Motion to Dismiss. Dkt. 21 (“Opp. to MTD”). 27 Defendant Park Regency Care Center (“Park Regency”) joined in Defendant 28 CareMore’s Motion to Dismiss on July 16, 2021. Dkt. 13. 1 On August 16, 2021, the court found these matters appropriate for resolution 2 without oral argument and vacated the hearings set for August 20, 2021. Dkt. 23; see 3 Fed. R. Civ. P. 78(b); Local Rule 7-15. For the reasons stated herein, the court 4 (1) GRANTS Plaintiff’s Motion to Remand, and (2) DENIES as moot Defendants 5 CareMore and Park Regency’s joint Motion to Dismiss. 7 Plaintiff filed this action on June 4, 2021 in Orange County Superior Court 8 against Defendants CareMore and Park Regency. See Dkt. 1-4 (“Compl.”). Plaintiff 9 is a home care organization that provides non-medical services, including supervisory 10 “sitter services,” to patients that reside in their home or live in an elderly care facility. 11 Compl. ¶ 1. Defendant CareMore allegedly is a “medical group, health plan and[/]or 12 care delivery system and insurer that works with a subscriber member’s insurance 13 plan to deliver needed care to subscriber members.” Id. ¶ 33. Defendant Park 14 Regency is a healthcare facility with its principal place of business in California. Id. 15 ¶ 3. Plaintiff seeks damages against Defendants for (1) fraud, (2) breach of contract, 16 (3) breach of contract as third-party beneficiary, (4) breach of implied contract, (5) 17 account stated, (6) quantum meruit, and (7) unjust enrichment.1 Compl. ¶¶ 22-61. 18 Plaintiff alleges Park Regency and CareMore entered into a Letter of 19 Agreement (“LOA”) through which Plaintiff would provide sitter services for patient 20 A.P. (“Patient”),2 who was enrolled in a Medicare Advantage plan administered by 21 CareMore.3 Compl. ¶ 8; Id. Ex. 1. According to Plaintiff, it rendered these sitter 22

23 1 The Complaint asserts different causes of action in the body of the Complaint than in 24 the caption on its first page. The court refers to the causes of action asserted in the 25 body of the Complaint. 26 2 Patient is identified by his initials for privacy purposes. 27 3 Medicare Advantage allows individuals to receive Medicare benefits through private health-insurance plans instead of Medicare Parts A and B, the government’s fee-for- 28 1 services for Patient in Park Regency’s facility from December 17, 2019 to January 31, 2 2020. Compl. ¶ 11. Plaintiff states the LOA outlines the following business practice 3 for payment between Park Regency and CareMore. MTR 4. First, Park Regency 4 must bill CareMore for the services Patient received within sixty calendar days from 5 the dates of service. Id. Next, CareMore issues a check to either Park Regency or its 6 parent company. Id. Finally, Park Regency or its parent company reimburses 7 Plaintiff for its services. Id. 8 In February 2020, Plaintiff sent Park Regency two invoices for the sitter 9 services it performed for Patient in the total amount of $18,288. Compl. ¶ 12; Id. Exs. 10 2, 3. According to Plaintiff, Park Regency issued it a check for $5,031, but a balance 11 of $13,257 remains outstanding despite Plaintiff sending Park Regency multiple 12 overdue invoices. Id. ¶¶ 20-21. 13 Defendant CareMore removed this action from state court on July 9, 2021, 14 arguing removal is proper under the “federal officer” removal statute, 28 U.S.C. 15 § 1442(a)(1), and that the court has federal question jurisdiction pursuant to 28 U.S.C. 16 § 1441(c). Dkt. 1. On July 16, 2021, Defendant CareMore filed its Motion to 17 Dismiss, arguing, inter alia, that Plaintiff’s state law claims are preempted under the 18 Medicare Act and that the court lacks subject matter jurisdiction because Plaintiff did 19 not comply with the Medicare Act’s exhaustion requirements. Dkt. 11. Defendant 20

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