Opinion
CV 24-5550 FMO (SSCx)
07-30-2024
University of Southern California v. Heimark Distributing, LLC
Present: The Honorable Fernando M. Olguin, United States District Judge
CIVIL MINUTES - GENERAL
Proceedings: (In Chambers) Order Remanding Action
Pursuant to the court's duty to sua sponte establish subject matter jurisdiction over this action, see United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir. 2004), the court concludes as follows.
BACKGROUND
The University of Southern California (“plaintiff” or “USC”), on behalf of the Keck Medical Center of USC dba Keck Hospital of USC (“Keck”) and dba USC Norris Comprehensive Cancer Center (“Norris”) (“plaintiff”), “owns and operates” Keck and Norris (collectively, “Hospitals”), which are California licensed acute-care hospitals. (See Dkt. 1-1, Complaint at ¶ 2). Defendant is Heimark Distributing, LLC (“defendant” or “Heimark”). (See id. at ¶ 3). Between August 2022 and September 2022, the Hospitals provided medically necessary healthcare services to a patient (“Patient”) on six separate occasions. (See id. at ¶¶ 25, 31-117). Plaintiff “dealt directly” with defendant's agent, EBA&M Corporation (“TPA”), “in obtaining agreement to pay for services” and received some payments from defendant. (See id. at ¶¶ 6, 12-13). However, defendant refused to pay all sums due, and instead paid discounted rates. (See id. at ¶¶ 10-11, 17, 19, 26). Plaintiff alleges that it and defendant had “no written agreement which could dictate the rates of reimbursement, nor allowable discounts on the medical services provided by plaintiff. (See id. at ¶ 17).
On June 3, 2024, plaintiff filed suit against Heimark in Los Angeles County Superior Court, asserting state law claims for (1) breach of implied contract; (2) unfair business practices, Cal. Bus. & Prof. Code §§ 17200, et seq.; (3) unjust enrichment; (4) quantum meruit; and (5) accounts stated. (See Dkt. 1-1, Complaint at ¶¶ 118-175); (Dkt. 1, Notice of Removal (“NOR”) at ¶ 5). Specifically, plaintiff alleges that defendant owes money for services rendered to Patient, “who is a member paying premiums for coverage under Defendant's welfare benefit plan.” (See Dkt. 1-1, Complaint at ¶¶ 128, 135). On July 1,2024, Heimark removed the case to federal court, asserting that this court has subject matter jurisdiction under 28 U.S.C. § 1331 “because the complaint . . . alleges claims arising under . . . the Employee Retirement Income Security Act of 1974 (‘ERISA'),” 29 U.S.C. § 1001, et seq. (Dkt. 1, NOR at ¶ 2).
LEGAL STANDARD
Removal of a civil action from the state court where it was filed is proper if the action might have originally been brought in federal court. See 28 U.S.C. § 1441(a) (“Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court[.]”). “The burden of establishing federal jurisdiction is upon the party seeking removal[.]” Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988); see Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676, 684 (9th Cir. 2006) (per curiam) (noting the “longstanding, near-canonical rule that the burden on removal rests with the removing defendant”). As such, any doubts are resolved in favor of remand. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (“We strictly construe the removal statute against removal jurisdiction.”). Indeed, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).
DISCUSSION
In general, under the “well-pleaded complaint” rule, courts look to the complaint to determine whether an action falls within the bounds of federal question jurisdiction. See Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941,944 (9th Cir. 2009). If a complaint contains only state law causes of action, which is the case here, (see Dkt. 1-1, Complaint at ¶¶ 118-75), there is generally no federal question jurisdiction even where there is a federal defense to the state law cause of action. See Aetna Health Inc. v. Davila (“Davila”), 542 U.S. 200, 207, 124 S.Ct. 2488, 2494 (2004).
However, there is an exception to the well-pleaded complaint rule for state law causes of action that are “completely pre-empt[ed]” by ERISA. See Davila, 542 U.S. at 207-08, 124 S.Ct. at 2494-95; see also Marin Gen. Hosp., 581 F.3d at 944. “Congress may 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, 107 S.Ct. 1542, 1546 (1987). The Supreme Court has created a two-part test to determine whether state law claims are completely preempted by ERISA. See Davila, 542 U.S. at 210, 124 S.Ct. at 2496. “[A] state-law cause of action is completely preempted if (1) ‘an individual, at some point in time, could have brought [the] claim under ERISA § 502(a)(1)(B),' and (2) ‘where there is no other independent legal duty that is implicated by a defendant's actions.'” Marin Gen. Hosp., 581 F.3d at 946 (quoting Davila, 542 U.S. at 210, 124 S.Ct. at 2496) (“Davila test”). The defendant must show both prongs to invoke federal jurisdiction. See id. at 947.
“As to the first prong of Davila, generally only a beneficiary or participant in an ERISA plan can bring a civil action to enforce certain rights under the plan.” Orthopedic Specialists of S. Cal. v ILWU-PMA Welfare Plan, 2013 WL 4441948, *4 (C.D. Cal. 2013) (citing 29 U.S.C. § 1132(a)). But a health care provider, such as plaintiff, can assert a claim under ERISA § 502(a), 29 U.S.C. § 1132(a), when a beneficiary has assigned to a provider the beneficiary's right to benefits under an ERISA plan. See, e.g., Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999) (“[B]ecause a health care provider-assignee stands in the shoes of the beneficiary, such a provider has standing to sue under § 502(a)(1)(B)[.]”). Without such an assignment, a healthcare provider is not the “type of party” that may bring suit under ERISA § 502(a)(1)(B). See Cedars-Sinai Med. Ctr. v. Nat'l League of Postmasters of U.S., 497 F.3d 972, 978 (9th Cir. 2007) (noting that “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”) (internal quotation marks omitted).
Here, plaintiff is neither a participant, beneficiary, nor other principle entity of an ERISA plan. Therefore, under the plain language of ERISA, plaintiff does not have independent standing to seek recovery under ERISA § 502(a)(1)(B). See 29 U.S.C. § 1132(a)(1)(B) (“A civil action may be brought . . . by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]”). And although defendant contends that plaintiff is “the assignee of the Plan participant who received medical services from Plaintiff[,]” (Dkt. 1, NOR at ¶ 16), nowhere does the Complaint allege that the Patient to whom the Hospitals rendered medical services assigned his or her benefits to plaintiff. (See, generally, Dkt. 1-1, Complaint).
“‘[P]articipant' means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.” 29 U.S.C. § 1002(7). A beneficiary is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” Id. § 1002(8).
Bristol SL Holdings, Inc. v. Cigna Health and Life Ins. Company, 103 F.4th 597 (9th Cir. 2024), which defendant cites in the NOR, is distinguishable because in that case, “the plan participants and beneficiaries . . . had assigned payment of their insurance benefits to” the plaintiff. Id. at 601.
As the party seeking to invoke federal jurisdiction, defendant bears the burden of showing that plaintiff's claims are completely preempted. See Port Med. Wellness Inc. v. Conn. Gen. Life Ins. Co., 2013 WL 5315701, *4 (C.D. Cal. 2013). “Accordingly, [defendant also] bear[s] the burden of establishing a valid assignment.” Id. Here, there are no allegations in the complaint nor has defendant provided any evidence that the Patient assigned his or her benefits to plaintiff (see, generally, Dkt. 1-1, Complaint); moreover, the mere fact that no written contract exists between plaintiff and defendant does not require the conclusion that the Patient assigned his or her ERISA benefits to plaintiff. (See id. at ¶ 17).
In short, given that plaintiff could not have brought its claims under ERISA because it is neither a participant, beneficiary, nor other principle entity of an ERISA plan, the court finds that defendant has not met its burden of establishing preemption under the first prong of Davila. See Marin Gen. Hosp., 581 F.3d at 944 (“The burden of establishing federal subject matter jurisdiction falls on the party invoking removal.”).
Because defendant must establish both prongs to invoke federal jurisdiction, see Marin Gen. Hosp., 581 F.3d at 947, and defendant has failed to establish prong one, the court will not address the second prong.
This Order is not intended . Nor is it intended to be included in or submitted to any online service such as Westlaw or Lexis.
CONCLUSION
Based on the foregoing, IT IS ORDERED THAT:
1. The above-captioned action shall be remanded to the Superior Court of the State of California for the County of Los Angeles for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c).
2. The Clerk shall send a certified copy of this Order to the state court.