Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-00747/USCOURTS-casd-3_08-cv-00747-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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- 1 - 08cv747 WQH (CAB)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

PIONEERS MEMORIAL

HEALTHCARE DISTRICT, a California

nonprofit corporation,

Plaintiff,

CASE NO. 08cv747 WQH (CAB)

ORDER

vs.

ROBERT F. KENNEDY FARM

WORKERS MEDICAL PLAN, a

California health plan; and DOES 1

through 25, inclusive,

Defendants.

HAYES, Judge:

The matters before the Court are the Motion to Dismiss Complaint (Doc. # 3) and the

Motion to Remand (Doc. # 5). 

Background

On or about February 5, 2008, Plaintiff Pioneers Memorial Healthcare District 

(“Pioneers Memorial”) initiated this action by filing a Complaint in the Superior Court of

California, County of Imperial (Doc. # 1). On April 24, 2008, Defendant Robert F. Kennedy

Farm Workers Medical Plan (“RFK”) removed the action to this Court. Not. of Removal, p.

1. 

The Complaint alleges that hospitals and/or physicians enter into a written contract

with Community Care Network (“CCN Contract”) whereby the hospitals and physicians

would provide necessary services, supplies and/or equipment to individual enrollees of health

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plans registered with CCN as “Payor” signatories to the CCN Contract. The Complaint

alleges that in exchange, the Payor signatories agreed to pay the hospitals and/or physicians

for the services, supplies and/or equipment, pursuant to payment terms specified in the CCN

Contract. Complaint, ¶ 7. The Complaint alleges that RFK registered with CCN as a Payor

signatory to the CCN Contract and “hence agreed to pay hospitals and/or physicians for the

medically necessary services, supplies and/or equipment rendered to the individual enrollees

of RFK’s health plan pursuant to the terms of the CCN Contract.” Id., ¶ 8. The Complaint

alleges:

[U]nder the CCN Contract, Pioneers agreed to provide medically necessary

services, supplies, and/or equipment to the individual enrollees of RFK’s

health plan; in exchange, RFK agreed to pay Pioneers the negotiated rates

pursuant to the terms of the CCN Contract for the medically necessary

services, supplies, and/or equipment rendered to the individual enrollees of

RFK’s health plan.

Id., ¶ 10. The Complaint alleges that the “negotiated rates under the CCN Contract provided

among other things for such impatient services to be paid at a 15% discount off the ordinary

total billed charges submitted by Pioneers.” Id., ¶ 10. 

The Complaint alleges that on June 28, 2005, Pioneers Memorial admitted an

individual enrollee (“Patient”) of RFK’s health plan, and provided the Patient with medically

necessary emergency services, supplies, and/or equipment until July 26, 2005, when the

Patient was discharged. The Complaint alleges that on June 29, 2005, a RFK employee

verified that the Patient was in fact enrolled under RFK’s health plan, and stated that RFK

would pay 100% of the first $1,500.00 in charges and 80% of charges thereafter. The

Complaint alleges that “[n]o mention was made by RFK of any annual payment maximums

associated with the [Patient’s] healthcare policy.” Id., ¶ 13. The Complaint alleges that on

June 29, 2005, Pioneers “telephoned CCN, RFK’s agent,” and that CCN employees

authorized the Patient’s treatment for June 28 through June 20, July 1 through July 1, and

through July 25. Id., ¶¶ 14-16. 

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The Complaint alleges that “Pioneers’ ordinary total billed charges for rendering the

medically necessary services, supplies, and/or equipment to [the Patient] from June 28, 2005

through July 26, 2005 totaled $122,616.91.” Id., ¶ 17. The Complaint alleges:

Thus, according to the CCN Contract, RFK owed Pioneers a balance of

$104,224,37 after application of the 15% discount of $18,392.54.

Alternatively, based on the oral representations made by RFK or its agents to

Pioneers, RFK owed Pioneers a balance of $98,393.53 - i.e. 100% of the first

$1500 in charges and 80% of the remaining balance.

Id., ¶ 18. The Complaint alleges that on or about September 6, 2005, Pioneers Memorial

received a total payment of $26,755.90 from RFK. The Complaint alleges that “RFK failed

to pay Pioneers for the remaining balance of either $77,468.47 based on the CCN Contract

rates . . . , or $71,637.63 based on the oral contract created when RFK verified [the Patient’s]

benefits.” Id., ¶ 21. 

The Complaint alleges that RFK “breached the CCN Contract by filing to pay

Pioneers the CCN Contract Amount Due.” Id., ¶ 28. The Complaint alleges that RFK

breached the oral contract, pursuant to which RFK represented that RFK would pay 100%

of the first $1500 of Pioneers Memorial’s billed charges and 80% of charges thereafter, by

“failing to pay Pioneers the Oral Contract Amount Due.” Id., ¶ 34. The Complaint alleges

that RFK’s representations were false and made with the intent to induce Pioneers Memorial

to continue rendering medical services, supplies and/or equipment, and that Pioneers

Memorial reasonably relied on RFK’s misrepresentations. The Complaint alleges the

following causes of action: (1) breach of written contract, (2) breach of oral contract, (3)

negligent misrepresentation, and (4) common count: goods and services rendered. 

On April 30, 2008, RFK filed the Motion to Dismiss, pursuant to Rules 12(b)(1) and

12(b)(6) of the Federal Rules of Civil Procedure. RFK moves to dismiss on grounds that the

claims alleged in the Complaint are preempted by the Employee Retirement Income Security

Act of 1974 (“ERISA”), 29 U.S.C. sections 1001, et seq., and because the Complaint fails

to state any cognizable cause of action under ERISA. On May 16, 2008, Pioneers Memorial

filed an opposition to the Motion to Dismiss (Doc. # 4). On May 16, 2008, Pioneers

Memorial filed the Motion to Remand, pursuant to 28 U.S.C. section 1447(c). Pioneers

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Memorial moves to remand on grounds that the Court lacks original jurisdiction over the

action because none of the claims alleged in the Complaint “relate to” ERISA. Mot. to

Remand, p. 4. On May 23, 2008, RFK filed a reply to the opposition to the Motion to

Dismiss (Doc. # 7). On June 23, 2008, RFK filed an opposition to the Motion to Remand

(Doc. # 9). On June 27, 2008, Pioneers Memorial filed a reply to the opposition to the

Motion to Remand (Doc. # 11). 

On September 15, 2008, the Court heard oral argument (Doc. # 13). 

Standard of Review

Pursuant to 28 U.S.C. section 1441(a), a defendant may remove “any civil action 

brought in a State court of which the district courts of the United States have original

jurisdiction.” 28 U.S.C. § 1441(a). The burden of establishing removal jurisdiction under

28 U.S.C. § 1332(d) is on “the proponent of federal jurisdiction.” Abrego v. The Dow

Chemical Co., 443 F.3d 676, 680 (9th Cir. 2006). 

Analysis

 Pioneers Memorial contends that the claims in the Complaint are not preempted by

ERISA because Pioneers Memorial is a third-party hospital, seeking recovery of damages

based on independent state-law-based contractual obligations owed by RFK. Pioneers

Memorial contends that it is not a plan participant or beneficiary seeking to recover for

improper processing of a claim for plan benefits or for breach of the plan contract. Pioneers

Memorial contends that it is not an assignee of a plan participant or beneficiary. Pioneers

Memorial contends that its claims do not relate to benefits under the terms of an ERISA plan,

but instead relate to damages suffered by Pioneers Memorial as a result of RFK’s breach of

its contract with Pioneers Memorial. Pioneers Memorial contends that its claims do not

directly affect the relationship among traditional ERISA entities because “[w]hile Pioneers

Memorial alleges that it has a contract with RFK, it has not alleged that this contract in any

way is based on the patient’s health plan.” Mot. to Remand, p. 13. Pioneers Memorial

moves to remand on grounds that the Complaint does not plead any causes of action over

which the Court has original jurisdiction. 

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RFK contends that Pioneers Memorial’s claim “is effectively a dispute over how

much the Plan should pay Pioneer under the RFK Health Plan.” Opposition, p. 4. RFK

contends that this action is based on Pioneers Memorial’s allegation that RFK did not pay

enough of the medical claims incurred by the hospital. RFK contends that Pioneers

Memorial’s status therefore “derives from an ERISA regulated relationship between the RFK

Plan and its participant/ patient.” Id. RFK contends that Pioneers Memorial’s claims are

preempted by ERISA because they are “intertwined with the terms of the RFK Plan.” Id. at.

9. 

ERISA’s preemption clause provides that the provisions of ERISA “supersede any

and all State laws insofar as they may now or hereafter relate to any employee benefit plan.”

29 U.S.C. § 1144(a). Although the Supreme Court has given the phrase “relate to” expansive

meaning, the Supreme Court has held that not all state law claims are preempted. Mackey

v. Lanier Collection Agency & Service, Inc., 486 U.S. 825 (1988); Hoag Memorial Hospital

v. Managed Care Administrators, 820 F. Supp. 1232, 1234 (C.D. Cal. 1993). The Ninth

Circuit has articulated the following “unifying characteristics of cases where ERISA

preemption was found: (1) the state law claims address areas of exclusive federal concern,

such as the right to receive benefits under the terms of an ERISA plan; and (2) the claims

directly affect the relationship among traditional ERISA entities - the employer, the plan and

its fiduciaries, and the participants and beneficiaries.” Cedars-Sinai Medical Center v.

National League of Postmasters of the United States, 497 F.3d 972, 978 (9th Cir. 2007). 

(quoting Memorial Hospital System v. Northbrook Life Insurance Co., 904 F.2d 236, 245

(5th Cir. 1990). 

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. Geweke Ford

v. St. Joseph’s Omni Pref. Care, Inc., 130 F. 3d 1355, 1358 (9th Cir. 1997); see also Peralta

v. Hispanic Business, Inc., 419 F.3d 1064, 1069 (9th Cir. 2005) (common law claims do not

“relate to” an ERISA plan when the “adjudication of the claim required no interpretation of

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the [ERISA] plan, no distribution of benefits, and no dispute regarding any benefits

previously paid”). 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’ because such claims do not ‘relate’ to ERISA preemption.” Cedars-Sinai

Medical Center, 497 F.3d at 978. Courts 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. Memorial Hospital, 904 F.2d at 250; see also Hoag Memorial

Hospital, 820 F. Supp. at 1236 (“Hoag Memorial’s claims to recover promised payment from

the employer and the administrator of the Plan must be distinguished from an action by an

ERISA participant or beneficiary to recover benefits under the terms of the plan. It is this

Court’s opinion that ERISA’s preemption provision was intended to preclude the latter, not

the former.”). The Ninth Circuit has reasoned that “depriving an independent third-party

provider of a state-law cause of action does not further, but rather defeats, Congress’s

purpose behind enacting ERISA.” Cedars-Sinai, 497 F.3d at 979 (citing Memorial Hospital,

904 F.2d at 250). 

The claims alleged in the Complaint arise out alleged breach of contractual obligations

owed by RFK to Pioneers Memorial. The Complaint alleges that RFK breached written

contractual obligations owed to Pioneers Memorial under the CCN Contract, and oral

contractual obligations owed to Pioneers Memorial pursuant oral representations made by

RFK employees to Pioneers Memorial. The Complaint does not allege contractual

obligations owed to Pioneers Memorial by RFK based on the RFK health plan.

Interpretation of the CCN Contract and the representations allegedly made by RFK

employees to Pioneers Memorial does not require interpretation of the RFK health plan. As

alleged in the Complaint, Pioneers Memorial is suing RFK as an independent third-party

provider, claiming damages, not in a derivative capacity as an assignee of plan benefits. The

Court concludes that the claims alleged in the Complaint are not preempted by ERISA

because they do not relate to an ERISA plan. The Court grants the Motion to Remand. 

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Conclusion

IT IS HEREBY ORDERED that the Motion to Remand (Doc. # 5) is GRANTED.

The Court REMANDS this action to the state court. 

DATED: September 19, 2008

WILLIAM Q. HAYES

United States District Judge

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