Opinion
No. 2:15-cv-00351-JAM-AC
07-10-2015
NUTRISHARE, INC., a California corporation; PATIENT ONE, an individual; PATIENT TWO, an individual; PATIENT THREE, an individual, Plaintiffs, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation; CIGNA HEALTH AND LIFE INSURANCE COMPANY, a Connecticut corporation; and DOES 1 through 10, inclusive, Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
Defendants Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company (collectively "CIGNA") move to dismiss (Doc. #8) Plaintiffs Patient One, Patient Two, Patient Three (three unnamed Plaintiffs collectively "the Patients") and Nutrishare, Inc.'s ("Nutrishare") (with the Patients, collectively "Plaintiffs") Complaint (Doc. #l).
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for June 17, 2015. --------
I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
Nutrishare is a healthcare provider specializing in Total Parenteral Nutrition ("TPN") services. CIGNA sells healthcare plans to consumers. The Patients each have Preferred Provider Organization ("PPO") plans with CIGNA and have received services from Nutrishare.
Nutrishare has provided services to CIGNA members since 1994, but does not have a contract with CIGNA and is considered an out-of-network provider. Nutrishare's practice is to obtain an assignment of the patients' benefits under their health benefits plan with CIGNA.
Plaintiffs allege that Nutrishare has submitted a bill to CIGNA for the services provided to CIGNA members, setting forth the charges incurred. CIGNA has refused to pay for the services provided by Nutrishare, regardless of whether the patients have met their coinsurance or copayment obligations. In addition, CIGNA has placed calls to the Patients and their physicians urging them to seek TPN services from an in-network provider rather than Nutrishare.
Plaintiffs filed the Complaint, stating eight causes of action: (1) enforcement pursuant to 29 U.S.C. § 1132(a)(1)(B) for failure to pay ERISA plan benefits on behalf of all Plaintiffs; (2) enforcement pursuant to 29 U.S.C. § 1132(a)(2) for breach of fiduciary duty on behalf of all Plaintiffs; (3) violation of California Business & Professions Code §§ 17200 et seq., California's unfair competition law ("UCL"), on behalf of Nutrishare; (4) breach of implied contract on behalf of Nutrishare; (5) services rendered on behalf of Nutrishare; (6) breach of covenant of good faith and fair dealing on behalf of the Patients; (7) intentional interference with prospective economic advantage on behalf of Nutrishare; and (8) negligent interference with prospective economic advantage on behalf of Nutrishare.
II. OPINION
A. Preemption of Nutrishare's State Law Claims
CIGNA first contends that Nutrishare's state law claims are preempted under ERISA. Although it is disputed by Plaintiffs in their Opposition (Doc. #10, at p. 3 n.1) it does appear CIGNA is arguing that these claims are subject to conflict preemption under ERISA § 514(a), as amended, 29 U.S.C. § 1144(a) ("§ 514(a)"), and are completely preempted under ERISA § 502(a) ("§ 502(a)"). For the reasons discussed below, the Court finds Nutrishare's claims are completely preempted pursuant to § 502(a).
1. Complete Preemption
As noted by the Supreme Court, a state law claim may be "completely preempted" under ERISA because § 502(a) reflects Congress' intent to "so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). The Supreme Court has formulated a two-prong test to determine whether a claim is completely preempted by ERISA. Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004) ("Davila"); Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 946 (9th Cir. 2009). Under the test, a state law claim is completely preempted if (1) an individual could have brought the claim under § 502(a); and (2) "where there is no other independent legal duty that is implicated by a defendant's actions." Davila, at 210.
The Ninth Circuit has continuously reaffirmed the principle that "'ERISA preempts the state law claims of a provider suing as an assignee of a beneficiary's rights to benefits under an ERISA plan.'" Blue Cross of California v. Anesthesia Care Associates Med. Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (quoting The Meadows v. Employers Health Ins., 47 F.3d 1006, 1008 (9th Cir. 1995)). The dispositive issue presented by this motion is whether Nutrishare brings its state law claims as an assignee of its patients' benefits or as an independent entity based on obligations independent of the ERISA plans.
When faced with claims from healthcare providers against insurers, it is imperative that "[c]ourts distinguish between claims brought in the provider's derivative capacity as an assignee of plan benefits, which are preempted by ERISA, and those brought in its independent status as a third-party health care provider, which are not preempted." Pioneers Mem'l Healthcare Dist. v. Robert F. Kennedy Farm Workers Med. Plan, No. 08CV747 WQH (CAB), 2008 WL 4350024, at *4 (S.D. Cal. 2008); see also Catholic Healthcare W.-Bay Area v. Seafarers Health & Benefits Plan, 321 F. App'x 563, 564 (9th Cir. 2008) ("ERISA does not preempt 'claims by a third-party who sues an ERISA plan not as an assignee of a purported ERISA beneficiary, but as an independent entity claiming damages'") (emphasis in original).
"A party can avoid ERISA preemption if it identifies a separate contract between the parties or alleges a specific misrepresentation that does not require interpretation of the ERISA plan and would not affect the relationships of the ERISA participants." Pioneers Mem'l Healthcare Dist., 2008 WL 4350024, at *4; see also Seafarers Health & Benefits Plan, 321 F. App'x at 564-65 (finding a provider's claims not preempted where the complaint did "not mention an assignment," but rather asserted claims "based on a direct contractual relationship"); Anesthesia Care Associates, 187 F.3d at 1050-52 (finding a provider's claims not preempted where the insurer and provider executed provider agreements upon which the providers based their contractual claims independent of their patients' rights).
2. Analysis
CIGNA contends Nutrishare is "proceeding based solely on assignments of benefits from patients under their respective ERISA health benefit plans" and that Nutrishare "does not allege any basis for seeking payment from CIGNA other than the patient assignments." Reply at pp. 3-4. It points to specific allegations in the Complaint itself that Nutrishare is asserting rights as an assignee of its patients. In the Opposition, Plaintiffs argue that Nutrishare's state law claims "assert directly enforceable rights to payment arising under independent state law duties between parties whose relationship is not governed by ERISA." Opp. at p. 4.
The Court looks to the Complaint itself for guidance. Each of Nutrishare's state law claims is based on CIGNA's alleged failure to pay benefits rightfully owed to Nutrishare based on its patients' healthcare plans provided by CIGNA. Comp. ¶¶ 48-64; 93-110; 121-143. The Complaint does not assert a basis for Nutrishare's right to payment outside of the assignment of its patients' rights. In fact, the Complaint specifically points out that no contract exists between Nutrishare and CIGNA and that Nutrishare "has not agreed to comply with, or be bound by, any [CIGNA] insurance contracts, policies or procedures." Comp. ¶ 26. Because recovery is based on Nutrishare's status as assignee, the Court finds Nutrishare's state law claims in the third, fourth, fifth, seventh and eighth causes of action are preempted and the Court grants CIGNA's motion to dismiss these derivative claims with prejudice.
The Court need not address any remaining preemption arguments put forth by CIGNA regarding these claims.
B. Breach of the Covenant of Good Faith and Fair Dealing
In response to CIGNA's motion to dismiss the Patients' sixth claim for breach of the covenant of good faith and fair dealing, plaintiffs first argue that the claim is a "tort cause of action" not "related to" the ERISA plan "but rather is simply a state law that regulates the relationship between insureds and insurance companies. See Washington Physicians Service Association v. Gregoire, 147 F.3d 1039, 1045 (9th Cir. 1998)." (As amended on denial of rehearing and rehearing en banc (1998)). Opp. at pp. 4-5.
Plaintiffs next argue that even if the Patients' claim relates to an ERISA plan, it is saved from preemption by ERISA's savings clause. Opp. at pp. 5-6. The clause provides that the statute shall not be "construed to exempt or relieve any person from any law of any State which regulates insurance." 29 U.S.C. § 1144(b)(2)(A). Plaintiffs rely on UNUM Life Insurance Company of America v. Ward, 526 U.S. 358, 363-64 (1999).
Plaintiffs' reliance on Gregoire and Ward is misplaced as both of these cases are distinguishable. Gregoire did not address whether ERISA preempted a common law claim of breach of the covenant of good faith and fair dealing. Rather, it dealt with a Washington state law, the "Alternative Provider Statute," that directly regulated health plans, providers, and the provision of health services. 147 F.3d at 1042. Ward dealt with a California state law, the "notice-prejudice" rule, that provided an insurer a defense based on an insured's failure to give timely notice of a claim. 526 U.S. at 363-64, 366-67. The implied covenant of good faith and fair dealing, relied on by Plaintiffs in the instant case, makes no mention of healthcare plans, providers or services even if it can be applied in that context under certain circumstances. As CIGNA points out in its Reply, Jabour v. CIGNA Healthcare of California, Inc., 162 F. Supp. 2d 1119 (C.D. Cal. 2001), directly rejected the argument Plaintiffs now assert. Reply at pp. 4-5.
The court in Jabour specifically addressed the issue of whether a claim for breach of the implied covenant of good faith and fair dealing is preempted by ERISA, discussing ERISA's savings clause and the impact of Ward. 162 F. Supp. 2d at 1123- 29. The court concluded that the Supreme Court's decision in Ward did not undermine the "clearly established line of precedent" holding that claims for breach of the implied covenant of good faith and fair dealing were preempted by ERISA and not "saved" by § 1144(b)(2)(A). Id. It found that "as a matter of common sense" these types of common law, "bad faith" claims are not state laws which "regulate insurance." Id.
Applying Jabour to Plaintiffs' sixth cause of action, the Court grants CIGNA's motion to dismiss the Patients' claim.
C. Breach of Fiduciary Duty
CIGNA moves the Court to dismiss Plaintiffs' second cause of action for breach of fiduciary duty pursuant to 29 U.S.C. § 1132(a)(2). CIGNA contends that claims under § 1132(a)(2) can only be asserted for the benefit of the ERISA plan and because Plaintiff's claim is based on denials of benefits to these specific parties, not the plan as a whole, it should be dismissed. MTD at pp. 11-12.
Section 1132(a)(2) provides a right of action to a "participant, beneficiary or fiduciary for appropriate relief under § 1109," which deals with liability for breach of fiduciary duties with respect to ERISA plans. "Individual beneficiaries may bring fiduciary actions against the plan fiduciaries, but they must do so for the benefit of the plan and not their individual benefit." Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1445 (9th Cir. 1995).
Plaintiffs argue that they have alleged a "systematic and willful failure to pay benefits" and thus their claim meets the standards set for a claim under § 1132(a)(2). Opp. at pp. 6-9. Furthermore, they contend relief granted "under this claim would benefit not only the Patients, but all participants in their ERISA plans by seeking an injunction to remove [CIGNA] as the . . . administrator for each of the ERISA plans at issue." Opp. at p. 6. Ehrman v. Standard Ins. Co., No. C06-05454MJJ, 2007 WL 1288465, at *2 (N.D. Cal. 2007), cited by CIGNA, is directly on point and addresses and rejects arguments similar to those put forth by Plaintiffs in support of their claim.
In Ehrman, the court dismissed a claim under § 1132(a)(2) because the plaintiff failed to "establish that the claim is for the benefit of the [ERISA] Plan." 2007 WL 1288465, at *2. The court found the complaint clearly indicated the claim was ultimately for the underpaying of benefits to individual participants in the plan. Id. The court disregarded the plaintiff's "conclusory" claim that removal of the defendant fiduciary would benefit the plan as a whole. Id. It similarly found unpersuasive allegations that the actions of the defendant were "systematic," "repeated," and "willful." Id.
The Court finds the analysis in Ehrman persuasive. Simply using the words "systematic" or "willful" in the Complaint does not change the fact that Plaintiffs' § 1132(a)(2) claim is ultimately based on CIGNA's denial of benefits for individual participants. Similar to the claim in Ehrman, the claim here is not for the benefit of the ERISA plan as a whole despite Plaintiff's conclusory claim that removing CIGNA as administrator would benefit all participants in the plan. The Court grants CIGNA's motion to dismiss the second cause of action. However, because it is not clear to the Court that further amendment would be futile, the motion to dismiss this claim is granted without prejudice.
D. The Patients' Anonymity
CIGNA contends the Patients have failed to establish exceptional circumstances necessary to proceed anonymously in this litigation. MTD at pp. 14-17. Plaintiffs contend anonymity is necessary to protect the sensitive medical information of the Patients. Opp. at pp. 12-13.
As they relate to identification of parties in a complaint, the Federal Rules of Civil Procedure require the caption to include the names of all the parties. Fed. R. Civ. Proc. 10(a). There is a presumption that litigants will use their real names. Doe v. Kamehameha Schools/Bernice Pauahi Bishop Estate, 596 F.3d 1036, 1042 (9th Cir. 2010). There are limited exceptions. "[M]any federal courts, including the Ninth Circuit, have permitted parties to proceed anonymously when special circumstances justify secrecy." Does I Thru XXIII v. Advanced Textile Corp., 214 F.3d 1058, 1069 (9th Cir. 2000). A party may be allowed to use a pseudonym when nondisclosure of the party's identity is necessary to protect the party from harassment, injury, ridicule or embarrassment. Id. at 1067-68; Doe ex rel. Doe v. Sierra Cnty., No. 2:14-CV-01552-MCE, 2014 WL 5035301, at *1 (E.D. Cal. 2014). However, a party will only be permitted to retain his or her anonymity when "the party's need for anonymity outweighs prejudice to the opposing party and the public's interest in knowing the party's identity." Advanced Textile Corp., at 1069; see also Doe v. John F Kennedy Univ., No. C-13-01137 DMR, 2013 WL 4565061, at *3 (N.D. Cal. 2013).
The Complaint states: "The names and identities of Patient One, Patient Two, and Patient Three have been withheld to protect the Patients' confidential health information." Comp. at p. 1 n.1. It goes on to explain: "Anonymity in this case is necessary . . . to preserve privacy in a matter of a sensitive and highly personal nature. The Patients' identifying information will be separately provided to [CIGNA] and be disclosed to this Court as necessary and subject to appropriate protective measures." Id.
Plaintiffs have privately identified to CIGNA the identities of the Patients. The Court finds the prejudice to the public and to CIGNA at this stage in the litigation is minimal. However, as the Ninth Circuit has stated, "the balance between a party's need for anonymity and the interests weighing in favor of open judicial proceedings may change as the litigation progresses." Advanced Textile Corp., 214 F.3d at 1069. The Court therefore will permit the Patients to proceed anonymously for the time being. However, the parties shall cooperate to the greatest extent possible regarding this issue and craft and propose to the Court protective orders as necessary.
III. ORDER
The Court GRANTS CIGNA's motion to dismiss Plaintiffs' second cause of action WITHOUT PREJUDICE. The Court GRANTS the motion to dismiss Nutrishare's state law claims in the third, fourth, fifth, seventh and eighth causes of action WITH PREJUDICE. And finally, the Court GRANTS the motion to dismiss the Patients' sixth cause of action WITH PREJUDICE. The Patients will be allowed to proceed anonymously; however, the issue may be revisited as this litigation progresses. Plaintiffs shall file an Amended Complaint within twenty days of this Order and CIGNA shall file its responsive pleading within twenty days thereafter. If Plaintiffs elect not to amend their complaint, the case shall proceed on the remaining first cause of action.
IT IS SO ORDERED. Dated: July 10, 2015
/s/ _________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE