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-01149-FLA (PDx)

12 Plaintiff, ORDER (1) DISCHARGING ORDER 13 v. TO SHOW CAUSE [DKT. 19], 14 (2) REMANDING ACTION, AND (3) DENYING PLAINTIFF’S 15 CAREMORE HEALTH PLAN, et al., MOTION TO REMAND [DKT. 24] 16 Defendants. AND DEFENDANT’S MOTION TO DISMISS [DKT. 27] AS MOOT 17

18 19 21 On July 15, 2021, the court Ordered the parties to Show Cause (“OSC”) in 22 writing why the court has subject matter jurisdiction over this action. Dkt. 19. 23 Plaintiff Silver Peaks, LLC (“Plaintiff” or “Silver Peaks”) and Defendant CareMore 24 Health Plan (“Defendant” or “CareMore”) filed their responses to the OSC on July 30, 25 2021. Dkts. 22, 23. 26 Having reviewed the parties’ responses to the OSC, and for the reasons stated 27 herein, the court DISCHARGES the OSC and REMANDS the action to the Orange 28 County Superior Court. The court further DENIES Plaintiff’s pending Motion to 1 Remand (Dkt. 24) and Defendant CareMore’s pending Motion to Dismiss (Dkt. 27) as 2 moot. 4 Plaintiff filed this action on May 21, 2021 in Orange County Superior Court 5 against CareMore and Mesa Verde Convalescent Hospital (“Mesa Verde”) 6 (collectively, “Defendants”). See Dkt. 1-4 (“Compl.”). Plaintiff is a home care 7 organization that provides non-medical services, including supervisory “sitter 8 services,” to patients that reside in their home or live in an elderly care facility. 9 Compl. ¶ 1. Defendant CareMore is a “medical group health plan, care delivery 10 system and insurer that works with a subscriber member’s insurance plan to deliver 11 needed care to subscribing members.” Id. ¶ 2. Mesa Verde is a care facility with its 12 principal place of business in California. Id. ¶ 3. Plaintiff seeks damages against 13 Defendants for (1) fraud, (2) breach of contract, (3) breach of contract as third-party 14 beneficiary, (4) breach of implied contract, (5) account stated, (6) quantum meruit, 15 and (7) unjust enrichment.1 Compl. ¶¶ 22-62. 16 Plaintiff alleges Mesa Verde and CareMore entered into a Letter of Agreement 17 (“LOA”) through which Plaintiff would provide sitter services for patient D.B. 18 (“Patient”),2 who was enrolled in a Medicare Advantage plan administered by 19 CareMore.3 Compl. ¶ 9; Dkt. 22 at 2. According to Plaintiff, it rendered these sitter 20

21 1 The Complaint asserts different causes of action in the body of the Complaint than in 22 the caption on its first page. The court refers to the causes of action asserted in the 23 body of the Complaint. 24 2 Patient is identified by his initials for privacy purposes. 25 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- 26 service program. See 42 U.S.C. § 1395w–21. “To participate, insurers referred to as 27 Medicare Advantage Organizations (MAOs) contract with the federal Centers for Medicare & Medicaid Services (CMS).” Ohio State Chiropractic Ass’n v. Humana 28 1 services for Patient from January 11, 2020 to January 18, 2020 in Mesa Verde’s 2 facility. Compl. ¶ 11. In January 2020, Plaintiff sent Mesa Verde an invoice for the 3 sitter services it performed for Patient in the amount of $3,222. Compl. ¶ 12, Ex. 1. 4 Plaintiff alleges it still has not received payment for the sitter services, despite making 5 several telephone calls to the Mesa Verde facility and sending multiple overdue 6 invoices. Compl. ¶¶ 14-21. 7 Defendant CareMore removed this action from state court on July 2, 2021, 8 arguing removal is proper under the “federal officer” removal statute, 28 U.S.C. 9 § 1442(a)(1), and that the court has federal question jurisdiction pursuant to 28 U.S.C. 10 § 1441(c). Dkt. 1. The court set the instant OSC regarding the court’s subject matter 11 jurisdiction on July 15, 2021. Dkt. 19. The parties responded on July 30, 2021. Dkts. 12 22, 23. 13 On August 2, 2021, Plaintiff filed a Motion to Remand. Dkt. 24. Defendant 14 CareMore filed a Motion to Dismiss on August 9, 2021, arguing, inter alia, that 15 Plaintiff’s state law claims are preempted under the Medicare Act and that the court 16 lacks subject matter jurisdiction because Plaintiff did not comply with the Medicare 17 Act’s exhaustion requirements. Dkt. 27. 19 Federal courts have subject matter jurisdiction only as authorized by the 20 Constitution and Congress. U.S. Const. art. III, § 2, cl. 1; see also Kokkonen v. 21 Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A suit filed in state court 22

23 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 may be removed to federal court only if the federal court would have had original 2 jurisdiction over the suit. 28 U.S.C. § 1441(a). The party seeking removal bears the 3 burden of establishing federal jurisdiction by a preponderance of the evidence. Gaus 4 v. Miles, Inc., 980 F.2d 564, 566-67 (9th Cir. 1992) (citing McNutt v. Gen. Motors 5 Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). 6 In ruling on a motion to remand, jurisdiction is generally determined from the 7 face of the complaint. Miller v. Grgurich, 763 F.2d 372, 373 (9th Cir. 1985). The 8 court may remand the action sua sponte “[i]f at any time before final judgment it 9 appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c); 10 United Invs. Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004). 11 I. The Federal Officer Removal Statute, 28 U.S.C. § 1442(a)(1) 12 A. Legal Standard 13 Under the federal officer removal statute, a civil action may be removed to 14 federal court by “any officer (or any person acting under that officer) of the United 15 States or of any agency thereof, in an official or individual capacity, for or relating to 16 any act under color of such office….” 28 U.S.C. § 1442(a)(1) (“§ 1442”). In the 17 Ninth Circuit, federal officer removal is available to a defendant under § 1442(a) if: 18 (1) the removing defendant is a “person” within the meaning of the statute; (2) there is 19 a causal nexus between the removing party’s actions, taken pursuant to a federal 20 officer’s directions, and plaintiff’s claims; and (3) the removing party can assert a 21 colorable federal defense. Stirling v. Minasian, 955 F.3d 795, 800 (9th Cir. 2020). 22 The federal officer removal statute is an exception to the “well-pleaded 23 complaint” rule, which requires a federal question to appear on the face of the 24 complaint for jurisdiction to be proper, rather than raised as an anticipated or actual 25 defense. Jefferson Cnty. v. Acker, 527 U.S. 423, 431 (1999) (superseded by statute on 26 other grounds as discussed in Sawyer v. Foster Wheeler LLC, 860 F.3d 249, 258 (4th 27 Cir. 2017)). In other words, the statute allows removal of suits against federal officers 28 and people acting under them so long as: (1) a “connection or association” exists 1 between the act in question and the federal office; and (2) their defense depends on 2 federal law. Id. 3 B. Analysis 4 CareMore argues this case was properly removed to federal court because 5 Patient was enrolled in a Medicare Advantage plan that CareMore administered, and 6 “Medicare coverage determinations and reimbursements are predicated on a purely 7 federal scheme involving federal Medicare Act statutes, its implementing regulations, 8 and policy determinations from the Centers for Medicare and Medicaid Services 9 (“CMS”)….” Dkt. 22 at 2 & n.1. Thus, according to CareMore, removal under the 10 federal officer statute is appropriate for private entities like itself because it 11 administers Medicare benefits under the direction of the federal government. Id. at 3- 12 13. The court disagrees for two reasons. 13 First, the parties do not dispute that sitter services are not covered by Medicare.4 14 See Dkts. 22, 23. Thus, the Medicare Act and its implementing regulations appear to 15 be irrelevant here. CareMore argues that whether the services are covered under 16 Medicare is “wholly irrelevant” to the question of whether the court has subject matter 17 jurisdiction. Dkt. 22 at 12. To the contrary, if sitter services are not covered by 18 Medicare, CareMore cannot assert either: (1) a “causal nexus” between its actions, 19 taken pursuant to a federal officer’s directions, and plaintiff’s claims; or (2) a 20 21 22 4 In a related case before this court, the parties submitted a LOA between CareMore 23 and a healthcare facility which explicitly states that “Patient Sitter Services are considered as excluded from Medicare allowable payment and paid in addition to the 24 Medicare allowable payment at $16.00/hr….” Silver Peaks, LLC v. CareMore Health 25 Plan, et al., Case No. 2:21-cv-05335-FLA (PDx), Dkt. 4-1, ¶ 5. Plaintiff additionally submitted a copy of a CMS document that acknowledges sitter services are not 26 covered by Medicare. Id. Dkt. 22-5. In other words, the LOA states that sitter 27 services are not covered by Medicare, but that CareMore will nonetheless cover those services at a rate of $16 an hour. The parties do not dispute that a similar LOA 28 governs in the instant case. See Dkts. 22, 23. 1 “colorable federal defense.” See Stirling, 955 F.3d at 800. CareMore, thus, fails to 2 establish 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).5 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. Dkt. 22 at 6 (italics in Watson). The Supreme Court, however, 10 has also emphasized that “broad language is not limitless. And a liberal construction 11 nonetheless can find limits in a text’s language, context, history, and purposes.” 12 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 5 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 law 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. Dkt. 22 at 13-14. 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 Dkt. 22 at 9-13 18 (arguing the Medicare Act provides CareMore with a “colorable defense” in this 19 action). It is well-established that federal issues raised as a defense are not sufficient 20 to support subject matter jurisdiction. See Caterpillar, 482 U.S. at 393 (“[A] case 21 may not be removed to federal court on the basis of a federal defense, … even if the 22 defense is anticipated in the plaintiff’s complaint, and even if both parties concede that 23 the federal defense is the only question truly at issue.”) (italics in original). 24 Because Plaintiff’s state-law claims do not raise a substantial federal issue, the 25 court lacks subject matter jurisdiction. See Grable, 545 U.S. at 314. The court 26 REMANDS this action to the Orange County Superior Court and DISCHARGES the 27 OSC (Dkt. 19). 28 / / / 2 For the foregoing reasons, the court REMANDS this action to the Orange 3 County Superior Court. The OSC regarding the court’s subject matter jurisdiction 4 (Dkt. 19) is hereby DISCHARGED. Plaintiff’s Motion to Remand (Dkt. 24) and 5 Defendant CareMore’s Motion to Dismiss (Dkt. 27) are DENIED as moot. 7 8 Dated: September 7, 2021 9 ______________________________ FERNANDO L. AENLLE-ROCHA 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28