Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_07-cv-00323/USCOURTS-caed-1_07-cv-00323-3/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1001 E.R.I.S.A.

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

MARIA QUARESMA, an individual )

and Successor in Interest of )

LEONEL DAROSA, a deceased )

individual, and MARSHAL S. )

FLAM, M.D., an individual, )

)

)

)

Plaintiffs, )

)

vs. )

)

)

BC LIFE & HEALTH INSURANCE )

COMPANY, a corporation, and )

DOES 1 through 10, inclusive, )

)

)

Defendants. )

)

)

No. CV-F-07-323 OWW/NEW

MEMORANDUM DECISION DENYING 

PLAINTIFFS' MOTION TO REMAND

(Doc. 15) AND GRANTING IN

PART AND DENYING IN PART

DEFENDANT'S MOTION TO

DISMISS FIRST AMENDED

COMPLAINT AND DIRECTING

PLAINTIFFS TO FILE SECOND

AMENDED COMPLAINT (Doc. 12)

Before the Court are Plaintiffs’ motion to remand and

Defendant’s motion to dismiss the First Amended Complaint.

A. BACKGROUND.

On January 30, 2007, Plaintiffs Maria Quaresma, an

individual and successor in interest of Leonel DaRosa, a deceased

individual, and Marshal S. Flam, M.D., filed a Complaint in the

Fresno County Superior Court. Defendants are BC Life & Health

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Plaintiffs’ Complaint and Amended Complaint are replete with 1

underlined, bolded and/or italicized passages. This format makes

the pleadings extremely difficult to read and serves no valid

purpose. Plaintiffs are ordered to refrain from this format in

future filings in this Court.

2

Insurance Company and Does 1-10. The Complaint alleged seventeen

causes of action. In pertinent part, the Complaint alleged: 1

IV. STATE COURT HAS ‘CONCURRENT’

JURISDICTION

28. Section 1132(a)(1)(B) of Title 29, U.S.

Code, Labor, read, ‘(a) A civil action may be

brought - (1) by a participant or beneficiary

- (B) to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of his plan, or to clarify

his rights to future benefits under the terms

of the plan ...’ In this regard, subsection

(e) of section 1132 of Title 29, U.S. Code,

Labor, adds, ‘State courts of competent

jurisdiction and district courts of the

United States shall have concurrent

jurisdiction of actions under paragraphs

(1)(B) and (7) of subsection (a) of this

section (1132).’ [emphasis added.]

29. As such, because participant DaRosa’s

successor-in-interest Maria Quaresma and

third-party beneficiary Dr. Flam bring the

present civil action in order to recover

benefits due them under the terms of DaRosa’s

plan with BC Life and/or to enforce their

rights under the terms of DaRosa’s insurance

policy with BC Life, the Superior Court of

California, County of Fresno, has concurrent

jurisdiction over this action. 

V. FEDERAL LAW CLAIMS UNDER THE EMPLOYEE

RETIREMENT INCOME SECURITY ACT (ERISA)

FIRST CAUSE OF ACTION 

...

...

31. As alleged above, DaRosa and BC Life

entered into a contract of insurance, whereby

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BC Life agreed to provide DaRosa with health

insurance in consideration for DaRosa paying

premiums.

32. Throughout the period of said insurance

policy, DaRosa regularly paid premiums when

due and performed each act, obligation and/or

condition on his part to be performed under

the parties’ agreements and policy of

insurance to keep the policy in full force

and effect. DaRosa intended and expected

thereby to receive the health insurance he

had contracted to receive. Notwithstanding

BC Life’s obligation to do so, BC Life has

failed and refused, and continues to fail and

refuse, to perform its obligations as agreed

and as set forth in the policy of insurance. 

Despite DaRosa’s demands, BC Life has failed

and refused to approve coverage for

treatment, which is part of the health

insurance policy. Such failure and refusal

constitutes a material breach of the contract

requested by the insurance policy as well as

the covenant of good faith and fair dealing

implied into the insurance contract by law.

33. Also, implied within the above-described

contract (insurance policy) entered into with

DaRosa, BC Life further agreed (as a matter

of implication by law) to act in good faith

and to deal fairly with DaRosa in carrying

out its responsibilities under the agreement

and policy of insurance. Upon entering into

the agreement and policy of insurance, and

accepting premiums from DaRosa, BC Life

agreed to provide DaRosa with health

insurance. Implicit in BC Life’s obligations

to act fairly and in good faith toward DaRosa

was its duty to timely and properly

reconsider its denial of DaRosa’s claim upon

receiving DaRosa’s valid appeal with

supporting documents and/or consulting with

DaRosa’s physicians.

34. BC Life breached its express obligations

under the policy and breached its implied

obligations and duties to act fairly and in

good faith toward DaRosa by failing to timely

and properly reconsider its denial of

DaRosa’s claim upon receiving DaRosa’s valid

appeal with supporting documents and/or

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failing to consult DaRosa’s physicians.

35. BC Life also breached its duties in

light of the fact that California law is

clear that an insurance company cannot deny

the use of a particular drug treatment when

the following criteria are satisfied: (a) the

drug is approved by the federal Food and Drug

Administration (‘FDA’); (b) the drug is

prescribed by a participating licensed health

care professional for the treatment of a

life-threatening condition; and (c) the drug

has been recognized for treatment of that

condition by two articles from major peer

reviewed medical journals that present data

supporting the proposed off-label use or uses

as generally safe and effective unless there

is clear and convincing contradictory

evidence presented in a major peer reviewed

medical journal. (See, Cal. Health & Safety

Code § 1367.21; and Cal. Ins. Code §

10123.195.) Here, Alimta has been approved

by the FDA, Alimta was prescribed by Dr. Flam

(a participating licensed health care

professional), Alimta was prescribed for

DaRosa’s life-threatening cancer condition,

Alimta has been recognized for treatment of

medical conditions such as DaRosa’s by at

least two articles from major peer reviewed

medical journals that present data supporting

the proposed off-label use of Alimta as

generally safe and effective, and there is no

clear and convincing contradictory evidence

presented in a major reviewed [sic] medical

journal regarding the fact that Alimta should

not be used to treat medical conditions such

as DaRosa’s. 

[Emphasis deleted].

36. Applicable federal law, namely the

Employee Retirement Income Security Act of

1974, as amended (hereinafter ‘ERISA’)

provides that this civil action may be

brought against these defendants. (See,

ERISA Section 502(a)(1)(B); Title 29 U.S.

Code § 1132(a)(1)(B).) Said provision

provides in pertinent part as follows; [sic]

‘... (a) A civil action may be brought - (1)

by a participant of [sic] beneficiary - (B)

to recover benefits due to him under the

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terms of his plan, to enforce his rights

under the terms of his plan, or to clarify

his rights to future benefits under the terms

of the plan ...’

37. As a direct and proximate result of BC

Life’s breach of its express and implied

contractual duties and obligations, DaRosa

was deprived of the benefits of the insurance

coverage for which he paid substantial

premiums, and suffered damages that exceed

the jurisdictional minimum of the Superior

Court, in an amount that will be determined

at trial. DaRosa’s damages include

attorneys’ fees and costs necessarily

incurred in bringing the instant lawsuit to

require BC Life to perform its obligations

under the contract of insurance at issue. 

Applicable federal law specifically allows

for the award of attorneys’ fees under

subsection (g) of section 1132 of Title 29,

U.S. Code (ERISA): [‘(1) In any action under

this subchapter ... by a participant,

beneficiary, or fiduciary, the court in its

discretion may allow a reasonable attorney’s

fee and costs of action to either party.’].

On February 27, 2007, Blue Cross of California, contending

that it was erroneously sued as BC Life & Health Insurance

Company, removed the Complaint to this Court. The Notice of

Removal asserts in pertinent part:

5. The District Court of the United States,

Eastern District of California has original

jurisdiction under 29 U.S.C. Section

1132(e)(1) and 28 U.S.C. § 1331 and the

Action is one that may be removed to this

Court by Defendant pursuant to 28 U.S.C.

Section 1441(a)(b) and (c), for the following

reasons:

(a) Plaintiffs allege that in or

about November 2005, Blue Cross

denied payment for the use of

Alimta to treat decedent Leonel

DaRosa’s (‘Decedent’) cancer, and,

in or about August 2006, denied

payment for the use of Avastin to

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treat Decedent’s cancer, contending

that both treatments were

investigational and, therefore,

excluded from coverage by the

health plan issued by Blue Cross.

(b) The health plan issued to

Decedent on which plaintiff’s [sic]

claim is based was a group health

policy issued to the Decedent’s

employer, Contente Dairy, and

constitutes an employee welfare

benefit plan within the meaning of

29 U.S.C. Section 1332(e)(1). The

enforcement of rights under the

plan is governed exclusively by

federal law under ERISA. Pilot

Life Ins. Co. v. Dedeaux, 481 U.S.

41 (1987). Removal of such cases

to federal court is proper. 

Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58 ...(1987).

6. This Court has original jurisdiction over

ERISA claims under the provisions of 28

U.S.C. Section 1331. Thus, this Action may

be removed to this Court by Defendant

pursuant to the provisions of 28 U.S.C.

Section 1441(a) as an action arising under

the Constitution, laws or treaties of the

United States.

On March 2, 2007, Defendant filed a motion to dismiss the

Complaint. Plaintiffs filed a First Amended Complaint (FAC) on

March 23, 2007. (Doc.10). Defendant’s motion to dismiss the

Complaint was denied as moot by Order filed on March 30, 2007. 

(Doc. 11).

The FAC still names the Defendant as BC Life & Health

Insurance Company. The FAC alleges twenty-three causes of

action, grouped as follows:

A. Decedent DaRosa’s Contract Claims Which

Have Been Assigned to Dr. Flam

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1. Breach of Written Contract by

Assignee Dr. Flam

2. Breach of Oral Contract and/or

Promissory Estoppel by Assignee Dr.

Flam

3. Declaratory Relief by Assignee

Dr. Flam

B. Dr. Flam’s State Law Contract or Quasi

Contract Claims

4. Breach of Oral Contract and/or

Breach of Promissory Estoppel

Contract By Dr. Flam

5. Declaratory Relief By Dr. Flam

6. Breach of Quasi-Contract

(Common Count of Quantum Meriut) By

Dr. Flam

C. Dr. Flam’s State Law Torts Based on

Defendant’s Pre-Approval

7. Breach of Implied Covenant of

Good Faith and Fair Dealing

8. Negligence

9. Fraud/Deceit

10. Negligent Misrepresentation

11. Fraud - False Promise

12. Violation of California Unfair

Business Practices Act

D. Decedent DaRosa’s Non-Assigned State Law

Tort Claims Based On Various State Code

Violations

13. Breach of Implied Covenant Of

Good Faith and Fair Dealing

14. Tortious Bad Faith Breach Of

The Duty Of Good Faith And Fair

Dealing

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15. Negligence

16. Fraud/Deceit

17. Negligent Misrepresentation

18. Fraud - False Promise

19. Negligent Infliction of

Emotional Distress Against All

Defendants

20. Violation of California Unfair

Business Practices Act

21. Equitable Relief Of

Reformation Based On Fraud

22. Ambiguity, Mutual Mistake, or

Unconscionability Equitable Relief

of Rescission and Restitution

23. Unjust Enrichment Against All

Defendants.

Except as alleged below, all references to ERISA have been

deleted in the FAC. Paragraph 1 of the FAC alleges:

Prior to the filing of this First Amended

Complaint, Maria Quaresma, as the sole heir

and Successor In Interest of Leonel DaRosa,

assigned to Dr. Flam Decedent DaRosa’s claim

for insurance benefits against Defendants as

herein set forth, and Dr. Flam is now the

legal owner and holder thereof. 

In addition, the FAC alleges in pertinent part:

IV. AS AN ASSIGNEE OF DECEDENT DAROSA’S

STATE CONTRACT CLAIM, DR. FLAM HAS STANDING

TO SUE FOR CONTRACT BENEFITS AND,

FURTHERMORE, THIS ACTION IS NOT SUBJECT TO

REMOVAL TO FEDERAL COURT.

29. A healthcare provider’s suit against an

ERISA plan for payment is generally not

subject to removal because the provider is

neither an ERISA ‘beneficiary’ nor a

‘participant.’ (Hermann Hospital v. MEBA

Medical & Benefits Plan (5 Cir.1988) 845 th

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F.2d 1286, 1288-1289; and Blue Cross of

California v. Anesthesia Assocs. Med. Group,

Inc. (9 Cir.1999) 187 F.3d 1045, 1053 th

[providers’ claims did not affect

relationship between Plaintiff and its

beneficiaries].) Moreover, the law is clear

that ERISA does not cover such non-enumerated

parties as assignees and thus there can be no

complete preemption and no removal

jurisdiction. (See, All State Insurance

Company v. 65 Security Plan (3 Cir.1989) rd

879 F.2d 90, 94 [‘Congress simply made no

provision in 1132(a)(1)(B) for persons other

than participants and beneficiaries to sue,

including persons purporting to sue on their

behalf ... We also observed that a prior

precedent of this court “implicitly adopted

the view that § 1132 must be read narrowly

and literally” ... Moreover, turning to the

second prerequisite for “complete

preemption,” our attention has not been

directed to any evidence of an intent of the

part of Congress to permit removal of the

type of state-law claims made by Allstate

[the assignee/subrogee] in cases where the

plaintiff exclusively relies on state law.’];

see also Harris v. Provident Life and

Accident Ins. Co. (9 Cir.1994) 26 F.3d 930, th

934 [‘ERISA pre-emption, without more, does

not convert a state claim into an action

arising under federal law ... ERISA carefully

enumerates the parties entitled to seek

relief under ERISA’s civil enforcement

provisions [29 U.S.C. § 1132(a)]; it does not

provide anyone other than participants,

beneficiaries, or fiduciaries with an express

cause of action for a declaratory judgment on

the issues in this case. A suit for similar

relief by some other party does not “arise

under” that provision.’]; citing,

Metropolitan Life Ins. Co. v. Taylor (1987)

481 U.S. 58, 64 ....

30. Here, because Dr. Flam is an assignee of

Decedent DaRosa’s claims under Decedent

DaRosa’s insurance contract with BC Life, and

because Dr. Flam’s own non-assigned causes of

action against BC Life include only

California state law causes of action which

are independent of the insurance contract

(i.e., causes of action based on violations

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of Cal. Ins. Code, Health & Safety Code, Cal.

Bus. & Prof. Code, and/or common law duties),

there is no Federal Court jurisdiction of

this matter.

On April 4, 2007, Defendant filed a motion to dismiss the

First Amended Complaint, (Doc. 12), which motion Plaintiffs

oppose. However, on April 20, 2007, Plaintiffs filed a motion to

remand the First Amended Complaint to the Fresno County Superior

Court. (Doc. 15).

B. MOTION TO REMAND.

Plaintiffs move to remand the action to the Fresno County

Superior Court on the ground that “no federal question exists

(since all of the causes of action in the [FAC] are state laws)

so that there is no federal subject matter jurisdiction.” 

Plaintiffs assert that BC Life improperly removed the Complaint

to this Court:

As further clarified by the Plaintiffs’ First

Amended Complaint filed herein, the

Plaintiffs’ lawsuit against Defendant Blue

Cross does not contain any causes of action

arising under any federal statute, and

certainly not arising under ERISA, as was

wrongly claimed by Defendant Blue Cross in

its Removal.

28 U.S.C. § 1441 provides in pertinent part:

(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

defendants, to the district and division

embracing the place where such action is

pending ....

(b) Any civil action of which the district

courts have original jurisdiction founded on

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a claim or right arising under the

Constitution, treaties or laws of the United

States shall be removable without regard to

the citizenship of the parties ....

(c) Whenever a separate and independent claim

or cause of action with the jurisdiction

conferred by section 1331 [federal question]

of this title is joined with one or more

otherwise non-removable claims or causes of

action, the entire case may be removed and

the district court may determine all issues

therein, or, in its discretion, may remand

all matters in which State law predominates.

The removal statute is strictly construed against removal and

federal jurisdiction must be rejected if there is any doubt as to

the right of removal in the first instance. Gaus v. Miles, Inc.,

980 F.2d 564, 566 (9 Cir.1992). The burden of establishing th

federal jurisdiction falls on the party invoking removal. Harris

v. Provident Life and Acc. Ins. Co., 26 F.3d 930, 932 (9th

Cir.1994). 

In determining the existence of removal jurisdiction, the

Court ordinarily looks to the complaint as originally filed, and

not as amended. Id. “[J]urisdiction must be analyzed on the

basis of the pleadings filed at the time of removal without

reference to subsequent amendments ... Because of this rule, a

plaintiff may not compel remand by amending a complaint to

eliminate the federal question upon which removal was based.” 

Sparta Surgical Corp. v. National Ass’n of Securities Dealers,

Inc., 159 F.3d 1209, 1213 (9 Cir.1998). th

Given that the Complaint alleged a cause of action under

ERISA and sought relief under ERISA, Plaintiffs’ contention that

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the Complaint was improperly removed on the basis of ERISA

preemption is totally unfounded. Plaintiffs filed the FAC to

compel remand by eliminating the ERISA cause of action. In

Barraclough v. ADP Automotive Claims Services, 818 F.Supp. 1310,

1311-1312 (N.D.Cal.1993), the plaintiff filed a complaint in

state court asserting a claim under the Americans with

Disabilities Act. After defendant removed the action, the

plaintiff moved to remand on the ground that the District Court

lacked subject matter jurisdiction. The District Court held:

Barraclough contends that this court does not

have subject matter jurisdiction over her

claim against ADP because her only federal

claim lacks merit. The date upon which

Barraclough bases her cause of action for

wrongful termination is September 30, 1991. 

The ADA did not become effective until July

26, 1992 ... Since the wrongful termination

occurred before the effective date of the

ADA, Barraclough’s claim under the ADA is

meritless. Therefore, with her only federal

claim devoid of any merit, Barraclough argues

that the court has no basis for federal

jurisdiction and should remand the matter to

state court.

The law is clear, however, that a plaintiff

should not be permitted to ‘effectuate remand

by pointing out the flaws in her own

complaint, in effect arguing for dismissal of

that claim ***.’ Dworkin v. Hustler

Magazine, Inc., 611 F.Supp. 781, 784

(D.C.Wyo.1985). Similarly, the court in

Sarmiento v. Texas Board of Veterinary

Medical Examiners, 939 F.2d 1242, 1245 (5th

Cir.1991), held that the fact that a federal

claim lacks merit does not deprive the

district court of subject matter

jurisdiction. In the present case,

Barraclough argues for remand on just that

ground.

Because plaintiff is asserting a federal

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Plaintiffs’ brief in opposition to the motion to dismiss is 2

confusingly worded because it keeps referring to removal as being

improper. As ruled above, the removal was proper. References to

Plaintiffs’ arguments using the terms “remove” or removal” in

discussing ERISA preemption are because of Plaintiffs’ briefs and

not because removal remains an issue in resolving the motion to

dismiss.

13

claim (whether or not meritorious), defendant

has a right to a federal forum. As stated in

Austwick v. Board of Education, 555 F.Supp.

840, 842 (N.D.Ill.1983), ‘A federal forum for

federal claims is certainly defendant’s

right.’ Even if plaintiff’s federal claim is

meritless, as plaintiff now claims, defendant

is entitled to have the court so determine. 

Only when the merits of the ADA have been

decided and the claim dismissed will remand

be proper.

To the extent that Plaintiffs seek remand on the ground that

the removal of the Complaint was improper, Plaintiffs’ motion to

remand is DENIED.

C. MOTION TO DISMISS.

Defendant moves to dismiss the state law contract and tort

claims alleged in the FAC pursuant to Rule 12(b)(6), Federal

Rules of Civil Procedure, on the ground that these claims are

preempted by ERISA. Defendant also contends that Dr. Flam has no

standing to pursue an ERISA claim as an assignee of health care

benefits because of the anti-assignment provision in the health

care plan, nor as a third party beneficiary of the health care

plan.2

1. GOVERNING STANDARDS.

A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

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732 (9 Cir.2001). Dismissal of a claim under Rule 12(b)(6) is th

appropriate only where “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-

46 (1957). Dismissal is warranted under Rule 12(b)(6) where the

complaint lacks a cognizable legal theory or where the complaint

presents a cognizable legal theory yet fails to plead essential

facts under that theory. Robertson v. Dean Witter Reynolds,

Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a motion to th

dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe all inferences from

them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). Immunities and other th

affirmative defenses may be upheld on a motion to dismiss only

when they are established on the face of the complaint. See

Morley v. Walker, 175 F.3d 756, 759 (9 Cir.1999); Jablon v. th

Dean Witter & Co., 614 F.2d 677, 682 (9 Cir. 1980) When ruling th

on a motion to dismiss, the court may consider the facts alleged

in the complaint, documents attached to the complaint, documents

relied upon but not attached to the complaint when authenticity

is not contested, and matters of which the court takes judicial

notice. Parrino v. FHP, Inc., 146 F.3d 699, 705-706 (9th

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In an extremely confusing argument, Plaintiffs contend that 3

Defendant’s “affirmative defense” of ERISA preemption cannot

establish federal subject matter jurisdiction. In so arguing,

Plaintiffs cite cases holding that an action may not be removed to

federal court on the basis of a federal defense. This argument is

without merit. The action was removed because Plaintiff’s

Complaint alleged an ERISA claim. Because an ERISA claim was

alleged in the Complaint, a federal court had and has subject

matter jurisdiction. In a footnote, Plaintiffs assert:

[T]he same jurisdictional arguments are

pertinent to defeat the instant Motion to

Dismiss Because Defendant Blue Cross Relies

Solely on its affirmative defense of ERISA

preemption [sic].

Plaintiffs cite no authority in support of this contention. In 

In Estes v. Federal Express Corp., 417 F.3d 870, 872-873 (8th

Cir.2005), the Eighth Circuit held:

Estes also argues that the district court

erred by prematurely deciding the defendants’

affirmative defense of preemption. However,

in their notice of removal, the defendants

raised the doctrine of complete preemption,

contending all of Estes’ state law claims

‘fall within ERISA’s civil enforcement

scheme’, 29 U.S.C. § 1132(a)(1)(B).’ Estes

was unmistakenably placed on notice of the

defendants’ ERISA preemption contention.

15

Cir.1988).3

2. ERISA PREEMPTION.

In contending that ERISA preempts the state law tort and

contract claims alleged in the FAC, Defendant submits the

Declaration of Susan L. Horthy, employed as a Legal Assistant in

Defendant’s Legal Department. Attached to Ms. Horthy’s

Declaration is a copy of Leonel DaRosa’s “2-50 Small Group

Employee Application’, showing that Mr. DaRosa was employed by

Contente Dairy. Mr. DaRosa selected medical coverage “Premier

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PPO $20 Copay” and “authorize[d] my employer to deduct from my

earnings the contribution (if any) required to apply toward the

cost of this plan.” Also attached is a copy of Contente Dairy’s

“2-50 Small Group Employer Application”. Under the provision for

“Employer Medical Contribution Option”, Contente Dairy selected

“Traditional Contribution” with the employee to contribute 90%

per month.

The parties do not dispute that the insurance policy at

issue is an ERISA plan within the meaning of 29 U.S.C. § 1002(1). 

29 U.S.C. § 1144(a) provides in pertinent part:

Except as otherwise provided in subsection

(b) of this section, the provisions of this

subchapter and subchapter III of this chapter

shall supersede any and all State laws

insofar as they may now or hereafter relate

to any employee benefit plan described in

section 1003(a) of this title and not exempt

under Section 1003(b) of this title ....

Section 1144(b)(2)(A) provides in pertinent part: “[N]othing in

this subchapter shall be construed to exempt or relieve any

person from any law of any State which regulates insurance ....”

The starting point for determining whether ERISA preempts a

state law is Section 1144(a). The Supreme Court has emphasized

the broad effect of Section 1144(a). See California Division of

Labor Standards v. Dillingham, 519 U.S. 316, 324 (1997)(quoting

prior cases using the phrases “clearly expansive”, “broad scope”,

“expansive sweep”, “broadly worded”, “deliberately expansive”,

and “conspicuous for its breadth”.). The Supreme Court has

stated that “[a] law ‘relates to’ an employee benefit plan, in

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the normal sense of the phrase, if it has a connection with or

reference to such a plan.” Ingersoll-Rand Co. v. McClendon, 498

U.S. 133, 139 (1990). “Where a State’s law acts immediately and

exclusively upon ERISA plans ... or where the existence of ERISA

plans is essential to the law’s operation ... that ‘reference’

will result in preemption.” Dillingham, 519 U.S. at 325. With

regard to the phrase “connection with”, the Supreme Court holds:

“[T]o determine whether a state law has the forbidden connection,

we look both to ‘the objectives of the ERISA statute as a guide

to the scope of the state law that Congress understood would

survive,’ as well as to the nature of the effect of the state law

on ERISA plans.” Dillingham, id. In analyzing these objectives

“[t]he basic thrust of the pre-emption clause [is] to avoid a

multiplicity of regulation in order to permit the nationally

uniform administration of employee benefit plans.” New York

State Conference of Blue Cross & Blue Shield Plans v. Travelers

Ins. Co., 514 U.S. 645, 657 (1995). The Supreme Court has also

emphasized that “[t]he principal object of the [ERISA] statute is

to protect plan participants and beneficiaries.” Boggs v. Boggs,

520 U.S. 833, 845 (1997). However, the Supreme Court “has

established a presumption that Congress did not intend ERISA to

preempt areas of ‘traditional state regulation’ that are “quite

remote from the areas with which ERISA is expressly concerned -

‘reporting, disclosure, fiduciary responsibility, and the like.’” 

Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d

1212, 1217, amended, 208 F.3d 1170 (9 Cir.), cert. denied 531 th

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U.S. 992 (2000), citing Dillingham, 519 U.S. at 330.

a. DR. FLAM’S FIRST, SECOND AND THIRD CAUSES OF

ACTION.

Paragraph 1 of the FAC alleges that “[p]rior to the filing

of this First Amended Complaint, Maria Quaresma, as the sole heir

and Successor In Interest of Leonel DaRosa, assigned to Dr. Flam

Decedent DaRosa’s claim for insurance benefits against Defendants

as herein set forth and Dr. Flam is now the legal owner and

holder thereof.” 

Plaintiffs’ contend that Dr. Flam’s First, Second and Third

Causes of Action are not preempted by ERISA because these causes

of action are based on a valid assignment of payment by Mr.

DaRosa to Dr. Flam. Plaintiffs assert that, therefore, Dr. Flan

is a “non-ERISA entity” whose claims against Defendant in these

causes of action cannot be preempted.

Plaintiffs cite General American Life Ins. Co. v.

Castonguay, 984 F.2d 1518 (9 Cir.1993). In Castonguay, an th

insurer, General, brought an action against an ERISA trust and

its trustee, alleging breach of contract, fraud, and negligent

misrepresentation. The ERISA trust provided health and other

benefits to participating car dealers and their employees. The

ERISA trust bought an insurance policy from General, under which

General was to pay part of the claims made the trust’s plan

members. The trust was to pay the remainder, but if it could

not, General would protect the plan members by paying on their

behalf and then seeking reimbursement from the trust. In order

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to protect itself in the event of the trust’s insolvency, General

drafted an agreement to permit either party to cancel the policy

on a month’s notice, to permit General to periodically demand

audited financial statements, and to permit General to cancel 

cancel the policy immediately if the trust did not provide

audited financial statements. By the end of 1987, the trust was

in the red, but General did not look at any financial statements

when it renewed the insurance policy in 1988. Instead, General

relied on representations of the trust’s agent in the renewal

negotiations that the trust was solvent but that no financial

statements were available, and in a document provided by the

trust’s agent listing the trust’s assets but not its liabilities. 

When General finally realized that the trust was insolvent,

General canceled the insurance policy and brought suit. At issue

on appeal was the personal liability of the trustees for the $3

million shortfall. Noting that questions concerning a trustee’s

liability for a trust’s debts are normally determined by state

law, the Ninth Circuit held:

But this is no ordinary trust. It’s an

employee benefit plan trust, and under ERISA

‘any and all State laws’ are preempted

‘insofar as they ... relate to any employee

benefit plan.’ ... ERISA’s preemption clause

is one of the broadest ever enacted by

Congress ... and it preempts even generally

applicable laws, not just laws aimed

exclusively at employee benefit plans ....

The difficulty is that ERISA doesn’t preempt

all generally applicable laws whenever they

happen to affect an employee benefit plan. 

The Supreme Court has explained that much of

state tort law and contract law isn’t

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preempted. See Mackey v. Lanier Collection

Agency & Serv., Inc., 486 U.S. 825, 832-33

... (1988). Likewise, state law isn’t

preempted when an employee benefit plan acts

as employer ..., or as stockholder ... It’s

far easier to make ‘I know it when I see it’

decisions in this field than to come up with

a general rule, but we must try.

The key to distinguishing between what ERISA

preempts and what it does not lies, we

believe, in recognizing that the statute

comprehensively regulates certain

relationships: for instance, the relationship

between plan and plan member, between plan

and employer, between employer and employee

(to the extent an employee benefit plan is

involved), and between plan and trustee ...

Because of ERISA’s explicit language ... and

because state laws regulating these

relationships (or the obligations flowing

from these relationships) are particularly

likely to interfere with ERISA’s scheme,

these laws are presumptively preempted. 

But ERISA doesn’t purport to regulate those

relationships where a plan operates just like

any other commercial entity - for instance,

the relationship between the plan and its own

employees, or the plan and the landlord from

whom it leases office space. State law is

allowed to govern these relationships,

because it’s much less likely to disrupt the

ERISA scheme than in other situations. 

Moreover, if these relationships were

governed by federal law, federal courts would

have to invent a federal common law of

contracts, torts, property, corporations -

something that would run against the grain of

our federal system ....

To determine a state law is preempted we must

look at whether is encroaches on the

relationships regulated by ERISA. State tort

and contract causes of action, for instance,

don’t apply to transactions between plans and

their participants ..., because the

relationship between a plan and participant

is, under ERISA, a matter of exclusively

federal concern ... Wrongful discharge laws

don’t apply to employee terminations carried

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out to avoid benefit payments, because the

employer-employee relationship is - insofar

as it deals with benefit plans - also an

exclusively federal matter ... State law

can, however, apply to transactions between

plans and their creditors or their landlords

or their own employees, because those

relationships are outside ERISA’s purview.

Under this approach, the first question we

ask is whether the state law reaches a

relationship that is already regulated by

ERISA. It doesn’t matter whether the state

law regulates the relationship directly (by

telling the parties what they can or cannot

do) or indirectly (by imposing on the parties

extra duties that flow from their conduct in

the relationship). Any regulation of the

relationship is basis enough for preemption.

Here, the state law subjects trustees to

personal liability on account of things they

do in discharging their responsibility to the

trust. ERISA already regulates the trusttrustee relationship: For instance, it gives

the trustees the authority to control and

manage the plan, 29 U.S.C. § 1102, imposes on

them a fiduciary duty to the plan’s

beneficiaries, 29 U.S.C. § 1104, demands that

they avoid certain conflicts of interest, 29

U.S.C. §§ 1106-1107, and makes them

personally liable to the plan for breach of

fiduciary duty, 29 U.S.C. § 1109. And

Cal.Prob.Code § 18000 certainly regulates

this relationship, because it imposes an

extra burden on trustees by virtue of their

part in the relationship. This burden

affects the trustees’ conduct just as surely

as direct regulation would; a trustee exposed

to additional personal liability for his acts

as trustee may act much more timidly than one

who’s immunized from such liability. 

Moreover, adding to the trustees’ personal

obligations can make it harder for plans to

find qualified trustees, who may be

frightened away by the specter of personal

liability ....

Because the state law here regulates one of

the relationships regulated by ERISA, we must

give effect to ERISA’s broad preemption

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Plaintiffs also cite Herman Hospital v. MEBA Medical & 4

Benefits Plan, 845 F.2d 1286, 1288-1289 (5 Cir.1988). However, th

Herman Hospital followed Second Circuit authority and declined to

follow Ninth Circuit authority. This Court is bound by Ninth

Circuit precedent. Therefore, Herman Hospital is not discussed

further. 

22

clause. The liability of the trustees in

this case must be governed by federal, not

California, law.

984 F.2d at 1521-1522.

Plaintiffs also contend that “state law claims by a

healthcare provider such as Plaintiff Dr. Flam against a medical

insurance company such as Blue Cross for benefit payment (such as

Plaintiff Dr. Flam’s individual claims in light of the preapproval, and assigned claims against Defendant Blue Cross) are

generally not subject to removal to federal courts because the

physician/provider is neither an ERISA plan ‘beneficiary’ nor a

‘participant.’”. 

Plaintiffs cite Blue Cross of California v. Anesthesia

Assocs. Med. Group, Inc., 187 F.3d 1045, 1053 (9 Cir.1999), as th

authority that a physician provider’s claims do not affect the

relationship between the insurance company and the

beneficiaries.4

In Anesthesia Assocs., Blue Cross brought actions to compel

arbitration of medical providers’ claims for breach of provider

agreements. The litigation arose from a fee dispute between four

medical providers who participated in the Prudent Buyer Plan, a

medical care plan offered by Blue Cross. As part of the Prudent

Buyer Plan, Blue Cross entered into a standardized contract, the

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Participating Physician Agreement (the provider agreement), with

physicians. Under the provider agreements, Blue Cross agreed to

identify the participating physicians in the information

materials distributed to members of the Prudent Buyer Plan and to

direct its subscribers to these physicians. In turn, the

physicians agreed to accept payment from Blue Cross for services

rendered to Prudent Buyer Plan subscribers according to specified

fee schedules. In the provider agreements, the physician agreed

to “seek, accept and maintain evidence of assignment for the

payment of Medical Services provided to Members by PHYSICIAN

under the applicable Prudent Buyer Benefit Agreement”, that

“PHYSICIAN shall seek payment only from BLUE CROSS for the

provision of Medical Services,” except pursuant to specified

exceptions”, that “PHYSICIAN agrees to accept the fee schedule as

provided in Exhibit B, attached and made part of this Agreement,

or PHYSICIAN’s covered billed charges, whichever is less, as

payment in full for all Medical Services provided to Members.” 

The provider agreements provided for review of new fee schedules

by the Blue Cross Physician Advisory/Relations Committee prior to

adoption. The provider agreements included arbitration

provisions in which the parties agreed to submit disputes

concerning the terms of the provider agreements to arbitration

pursuant to California law. Each of the medical providers had

some patients who were enrolled in the Prudent Buyer Plan as part

of a health benefit plan covered by ERISA. The dispute between

the medical providers and Blue Cross related to changes in the

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fee schedules that Blue Cross allegedly made in 1993-1995. 187

F.3d at 1048-1049. The District Court rejected Blue Cross’

argument that the medical providers’ claims related to an ERISAcovered plan under 29 U.S.C. § 1144(a). On appeal, the Ninth

Circuit ruled that the medical providers claims were not

preempted by ERISA’s civil enforcement provision, 29 U.S.C. §

1132(a), or ERISA’s express preemption provision, 29 U.S.C. §

1144(a). With regard to Section 1132(a), the Ninth Circuit held:

Under ERISA § 502(a), a civil action may be

brought by an ERISA plan participant or

beneficiary seeking 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.’ 29

U.S.C. § 1132(a)(1)(B). Blue Cross contends

that our decision in Misic v. Building Serv.

Employees Health & Welfare Trust, 789 F.2d

1374 (9 Cir.1986), is dispositive of our th

analysis under § 502(a). We disagree.

In Misic, a dentist rendered dental services

to beneficiaries of an ERISA plan that

provided dental benefits of 80 percent of the

cost of their dental care. See id. at 1376. 

The beneficiaries assigned their rights to

reimbursement to the dentist who in turn

billed the plan directly. When the plan did

not pay 80 percent of the dentist’s bill, the

dentist sued to recover the deficiencies in

payment. See id. The court held that unlike

pension benefits, which may not be assigned

to others, see ERISA § 206(d), 29 U.S.C. §

1056(d), ERISA does not prohibit the

assignment by a beneficiary of his or her

right to reimbursement under a health care

plan to the health care provider. See id. at

1377. The Misic court further held that

because a health care provider-assignee

stands in the shoes of the beneficiary, such

a provider has standing to sue under §

502(a)(1)(B) to recover benefits due under

the plan. Accordingly, as we later

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commented, Misic ‘affirmed the principle that

ERISA preempts the state law claims of a

provider suing as an assignee of a

beneficiary’s right to benefits under an

ERISA plan.’ The Meadows v. Employers Health

Ins., 47 F.3d 1006, 1008 (9 Cir.1995). th

Misic does not address, much less control,

the circumstances presented here. In Misic,

the provider had no contractual agreement

with his patient’s health benefit plan, such

as a provider agreement, specifying his fee

entitlements. It is clear in Misic that the

provider sought, as an assignee, to recover

reimbursement due to his assignors under the

terms of the benefit plan; indeed, the terms

of the benefit plan were the provider’s only

basis for his reimbursement claim. Here, in

contrast, the Providers and Blue Cross have

executed provider agreements, and it is the

terms of the provider agreements that

Providers contend Blue Cross has breached. 

Indeed, the Providers are asserting

contractual breaches, and related violations

of the implied duty of good faith and fair

dealing, that their patient-assignors could

not assert: the patients simply are not

parties to the provider agreements between

the Providers and Blue Cross. The dispute

here is not over the right to payment, which

might be said to depend on the patients’

assignments to the Providers, but the amount,

or level, of payment, which depends on the

terms of the provider agreements. 

Blue Cross also argues that the reference in

the provider agreements to ‘PHYSICIAN’s

covered billed charges’ shows that the

Providers’ claims depend on the

interpretation of the terms of the plan. As

noted above, this phrase appears in version B

of the provider agreements:

PHYSICIAN agrees to accept the fee

schedule as provided in Exhibit B,

attached to and made part of this

Agreement, or PHYSICIAN’s covered

billing charges, whichever is less,

as payment in full for all Medical

Services provided to members.

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... But the Providers’ claims arise from Blue

Cross’ alleged breach of the provider

agreements’ provisions regarding fee

schedules, and the procedure for setting

them, not what charges are ‘covered’ under

the Prudent Buyer Plan. The Providers’

claims, therefore, do not rest upon this term

of the Prudent Buyer Plan. Where the meaning

of a term in the Plan is not subject to

dispute, the bare fact that the Plan may be

consulted in the course of litigating a

state-law claim does not require that the

claim be extinguished by ERISA’s enforcement

provision. See Livadas v. Bradshaw, 512 U.S.

107, 123-25 ... (1994)(stating rule that need

to refer to collective bargaining agreement

did not bring claims within § 301, the

enforcement provision of the Labor-Management

Relations Act ....

In view of the fact that, although

beneficiaries of ERISA-covered plans have

assigned their rights to reimbursement to the

Providers, the Providers are asserting state

law claims arising out of separate agreements

for the provision of goods and services, we

find no basis to conclude that the mere fact

of assignment converts the Providers’ claims

into claims to recover benefits under the

terms of an ERISA plan ....

Id., at 1050-1052. With regard to Blue Cross’ argument that

ERISA’s express preemption provision applied to the medical

providers’ claims on the grounds that the claims will impose

economic burdens on ERISA plans and their beneficiaries and will

implicate relationships regulated by ERISA, the Ninth Circuit,

relying on New York State Conference of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995), and De

Buono v. NYSA ILA Med. and Clinical Servs. Fund, 520 U.S. 806

(1997), ruled that the economic effects that the medical

providers’ claims might have on ERISA plans are not sufficient

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for preemption to occur. Id. at 1052-1054.

Plaintiffs further assert that “the law is clear that claims

under ERISA do not cover such non-enumerated parties as

assignees”, citing Allstate Insurance Company v. 65 Security

Plan, 879 F.2d 90, 94 (3 Cir.1989) and Harris v. Provident Life rd

and Accident Ins. Co., 26 F.3d 930, 934 (9 Cir.1994). th

In 65 Security Plan, Allstate brought suit in state court

against a beneficiary and an ERISA employee benefit plan

providing medical insurance, to determine whether the insurer’s

medical coverage or that of the ERISA plan’s was primary. At the

time Michael Lindemuth was involved in an automobile accident, he

was covered as a dependent under Allstate’s no-fault automobile

insurance policy issued to his father, and also covered as a

dependent under a medical insurance program provided by the ERISA

plan. Following the accident, claims for no-fault insurance

benefits were presented to Allstate, which paid the claims. 

Allstate thereafter contended that its insurance policy only

provided “excess” coverage and that the ERISA plan must both

reimburse Allstate for its payments to Lindemuth and assume

responsibility for all such future payments. The ERISA plan,

citing its own “escape” and “excess” clauses, contended that it

was not the primary insurer and refused to reimburse Allstate. 

879 F.2d at 92. Allstate’s complaint sought an order that (1)

Lindemuth’s medical expenses are included within the coverage of

the Plan and that Allstate is only secondarily liable for them;

and (2) Allstate is entitled to indemnity or contribution from

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the Plan for Lindemuth’s medical expenses paid to date. The

Third Circuit held that ERISA’s civil enforcement provision,

Section 1132 pre-empted Allstate’s claims:

... ERISA nowhere provides an express cause

of action in favor of a non-ERISA insurance

company for contribution or indemnity from an

ERISA plan. In this respect, the case before

us is much like the situation before the

court in Franchise Tax Board v. Construction

Laborers Vacation Trust, 463 U.S. 1 ...

(1983). There, a state tax authority filed

suit in state court in an attempt to levy on

funds held in trust by an ERISA plan and the

plan removed the case to a federal district

court. The Supreme Court held that there was

no removal jurisdiction because Section

502(a) [Section 1132(a)] did not create a

‘cause of action in favor of state

governments, to enforce tax levies or for any

other purpose.’ Id. at 25 ....

Appellees argue, however, that Allstate’s

complaint does state a cause of action

explicitly recognized under ERISA in that

Allstate is in some manner subrogated to

beneficiary Lindemuth’s claim against the

Plan under section 502(a)(1)(B), 29 U.S.C. §

1132(a)(1)(B), the statutory provision that

authorizes a beneficiary’s suit to recover

benefits from an ERISA plan. We have

recently considered and rejected a similar

argument, however. In Northeast Department,

ILGWU v. Teamsters Local Un. No. 229, 764

F.2d 147 (3 Cir.1985), one ERISA plan sued rd

another claiming contribution and indemnity

in connection with benefits it had paid to a

participant of both plans. This court held

‘that the express jurisdictional provisions

of ERISA, found in 29 U.S.C. § 1132, do not

authorize federal jurisdiction over a suit

... brought by a pension fund and its trustee

against another pension fund.’ 764 F.2d at

154. In rejecting the genre of subrogation

analysis urged by appellees as a basis for

jurisdiction under section 502(a)(1)(B), this

court reasoned that ‘Congress simply made no

provision in 1132(a)(1)(B) for persons other

than participants or beneficiaries to sue,

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including persons purporting to sue on their

behalf.’ Northeast Dept., 764 F.2d at 154

n.6. We also observed that a prior precedent

of this court ‘implicitly adopted the view

that § 1132 must be read narrowly and

literally’ and that such ‘a reading precludes

the interpretation that a pension fund or a

trustee (fiduciary) of a fund can sue under §

1132(a)(1)(B) on behalf of participants or

beneficiaries.’ Id. at 153. 

Moreover, turning to the second prong for

‘complete preemption,’ our attention has not

been directed to any evidence of an intent on

the part of Congress to permit removal of the

type of state-law claims made by Allstate in

cases where the plaintiff relies exclusively

on state law.

Id. at 94.

In Harris v. Provident Life, a former employee brought an

action alleging state law causes of action for misrepresentation

and breach of contract with respect to coverage under the

employer’s health care plan, and alleging a claim under ERISA for

breach of fiduciary duty. The Ninth Circuit ruled in pertinent

part:

... Whether a person is a plan participant

must be decided as of the time of the filing

of the lawsuit ... At the time of filing

suit, Lawrence Harris was a former employee

of Lincoln. A former employee is a plan

participant only if he has ‘a reasonable

expectation of returning to covered

employment or [has] a colorable claim to

vested benefits.’ Firestone Tire & Rubber

Co. v. Bruch, 489 U.S. 101, 117 ... (1989)

... The Harrises have not established that

Lawrence Harris has either. As such,

Lawrence Harris is not a plan participant and

therefore we have no jurisdiction to hear the

Harrises’ ERISA claim for breach of fiduciary

duty ....

Id. at 933. The Ninth Circuit further held that, because Harris

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was not a plan participant, their state law claims were not

within the scope of Section 1132(a) and therefore not completely

preempted. Id. at 934.

Plaintiffs’ contention that the First, Second, and Third

Causes of Action brought by Dr. Flam as the assignee of Mr. Da

Rosa’s claims against BC Life are not subject to ERISA preemption

is not supported by the cases upon which Plaintiffs rely and is

not supported by Ninth Circuit precedent, precedent not cited or

distinguished by Plaintiffs. As Defendant contends, the

controlling Ninth Circuit case is Misic v. Building Serv.

Employees Health & Welfare Trust, supra, 789 F.2d 1374 (9th

Cir.1986), the case distinguished by the Ninth Circuit in Blue

Cross of California v. Anesthesia Assocs. Med. Group, Inc.,

supra, 187 F.3d 1045. 

In Misic, a dentist rendered dental services to

beneficiaries of an ERISA plan that provided dental benefits of

80 percent of the cost of their dental care. 789 F.2d at 1376. 

The beneficiaries assigned their rights to reimbursement to the

dentist who in turn billed the plan directly. When the plan did

not pay 80 percent of the dentist’s bill, the dentist sued to

recover the deficiencies in payment. See id. The Ninth Circuit

rejected the argument that, because only the parties named in

Section 1132 have standing to sue under ERISA, and assignees are

not named, Dr. Misic did not have standing to sue under ERISA:

These arguments mistakenly treat Dr. Misic as

a suitor in his own right. Dr. Misic sues

derivatively, as assignee of beneficiaries. 

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As paragraph 12 of the complaint alleges, Dr.

Misic ‘stands in the shoes of the

[b]eneficiaries;’ and Dr. Misic’s assignors,

beneficiaries under the Act, are expressly

authorized by section 1132(a)(1)(B) to sue to

recover benefits due under a plan. 

... 

We conclude Dr. Misic, as assignee of

beneficiaries pursuant to assignments valid

under ERISA, has standing to assert the

claims of his assignors.

Id. at 1378-1379. 

Plaintiffs’ failure to discuss Misic and their reliance on

cases distinguishable from the allegations in the FAC, compel the

conclusion that the First, Second and Third Causes of Action,

brought by Dr. Flam as the assignee of Mr. DaRosa’s claims

against Defendant under the ERISA plan are governed and preempted by ERISA because, as discussed infra, the claims assigned

to Dr. Flam by Mr. DaRosa are pre-empted by ERISA. 

Defendant contends that Dr. Flam’s causes of action based on

the assignment to him by Mr. DaRosa must be dismissed because

Part XI, General Provisions, of the Blue Cross Policy, attached

to the FAC as Exhibit 2a-c, provides:

Benefits Not Transferable: You and your

eligible Family Members are the only persons

entitled to receive benefits under this

Combined Evidence of Coverage and Disclosure

Form. The right to benefits cannot be

transferred. FRAUDULENT USE OF SUCH BENEFITS

WILL RESULT IN CANCELLATION OF THIS COMBINED

EVIDENCE OF COVERAGE AND DISCLOSURE FORM AND

APPROPRIATE LEGAL ACTION WILL BE TAKEN. 

Relying on this policy provision, Defendant suggests that

Dr. Flam does not have standing to sue for the recovery of Mr.

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DaRosa’s ERISA benefits. Defendant cites Davidowitz v. Delta

Dental Plan of California, Inc., 946 F.2d 1476 (9 Cir.1991). th

In Davidowitz, Delta Dental Plan provided dental benefits to

employees under a welfare benefit plans governed by ERISA. Under

the plans, Delta agreed to pay 70% of the beneficiary’s dental

bill and the beneficiary paid the co-payment balance. Some of

the dental service providers participated, while others did not. 

A beneficiary was free to go to either a participating or a nonparticipating dentist; in either case, Delta paid the same

percentage of the bill. However, Delta paid participating

dentists directly, while non-participating dentists must collect

from the beneficiary. In consideration for direct Delta payment,

participating dentists agreed to bill and attempt to collect the

co-payment from beneficiaries, and to meet Delta quality

standards. Neither obligation applied to non-participating

dentists. To circumvent non-direct payment, some nonparticipating dentists asked beneficiaries to assign their rights

to receive Delta’s checks to the dentists in exchange for a

waiver of the co-payment. Delta’s plans provided: “Payment for

services provided by a dentist who is not a Participating Dentist

shall be made to an Eligible Person, and shall not be

assignable.” Appellees, a group of non-participating dentists,

sought a preliminary injunction ordering Delta to honor

beneficiary assignments. The District Court granted the

preliminary injunction and the Ninth Circuit reversed, concluding

that “ERISA welfare plan payments are not assignable in the face

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of an express non-assignment clause in the plan.” 946 F.2d at

1481.

Plaintiffs respond that Blue Cross’ contention “is based

solely on the misinterpretation of a vague and ambiguous clause

in the insurance contract which prohibits the transfer of the

health care policy itself.” Plaintiffs assert that the abovequoted language in the policy “is a prohibition only to the

transfer of the health care policy itself, and not the accounts

receivable from Plaintiff Decedent DaRosa and Plaintiff Dr.

Flam.” Comparing the “Benefits Not Transferable” provision in

the Blue Cross policy to the anti-assignment provision in the

Delta Dental plans at issue in Davidowitz, Plaintiffs argue that

the Blue Cross provision “is far less expressive about the

prohibition of assignment of payment for services” and that “[o]n

its face, the language is clearly the prohibition of the transfer

of the health care policy [sic].” Plaintiffs cite Royal Indem.

Co. v. Kaiser Aluminum & Chemical Corp., 516 F.2d 1067, 1072 (9th

Cir.1975): 

It is well settled that when a contract of

insurance is drafted by the insurer, any

ambiguity, uncertainty, or doubt is to be

resolved by a construction favoring the

insured.

Plaintiffs also refer to Feit v. St. Paul Fire & Marine Ins. Co.,

209 Cal.App.2d Supp. 825, 828 (1962):

It is a generally accepted rule of

construction that ambiguities in a contract

of insurance are to be resolved against the

insurer who drafted the same and in favor of

the insured ... Furthermore, policies of

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insurance are to be given a reasonable

construction, and not one that leads to an

absurd result.

Relying on these cases, Plaintiffs argue that Defendant’s attempt

to construe the “Benefits Not Transferable” provision to prohibit

the assignment of accounts receivable to Dr. Flam leads to an

absurd result:

[I]t would indeed be absurd to construe the

language of a clause which limits the

transfer of a health insurance policy to

include the assignment of payments. If such

an agreement were contemplated, surely it

would have been made in express, specific,

and unambiguous terms. 

Plaintiffs’ argument that the “Benefits Not Transferable”

provision only prohibits transfer of the policy is belied by the

terms of the provision itself. There is no language in that

provision from which such a construction can be inferred. The

provision very clearly states that the right to benefits cannot

be transferred. 

Defendant’s motion to dismiss the First, Second and Third

Causes of Action of the Amended Complaint asserted by Dr. Flam as

assignee of Decadent DaRosa’s claims is GRANTED WITH LEAVE TO

AMEND on the basis of ERISA preemption, see discussion infra, 

and because of Dr. Flam’s lack of standing to assert these

claims. 

b. Dr. Flam’s Fourth through Twelfth Causes of

Action.

Defendant further argues that Dr. Flam’s state law contract

or quasi-contract causes of action (B 4-6) and his state law tort

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claims based on Defendant’s preapproval (C 7-12) are preempted by

ERISA.

The Fourth Cause of Action is for breach of contract and/or

promissory estoppel and alleges that Dr. Flam and Defendant

entered into an oral agreement whereby Defendant agreed to

provide health insurance to Decedent DaRosa “so as to pay the

bills of Decedent DaRosa’s treating physician (Dr. Flam) as to

the aforementioned Alimta treatments; that Defendant breached its

oral agreement by failing to provide health insurance for the

Alimta treatments for which Dr. Flam obtained pre-approval from

Defendant and by failing to timely reconsider its denial of

Decedent DaRosa’s claim upon receiving Decedent DaRosa’s/Dr.

Flam’s valid appeal with supporting documents and/or by failing

to consult with Dr. Flam. 

The Fifth Cause of Action is for declaratory relief and

alleges:

53. A controversy has arisen and exists

between Dr. Flam and the Defendants

concerning their respective rights and duties

as to the parties’ agreements and the

provisions of the policies (and the abovedescribed promissory estoppel pre-approval)

at issue regarding BC Life’s obligations to

properly reconsider Decedent DaRosa’s/Dr.

Flam’s request with respect to the denial of

health insurance coverage by BC Life to

Decedent DaRosa for payment to Dr. Flam. Dr.

Flam seeks a declaration of his rights and

the Defendants’ duties under the parties’

agreements and policies (and under promissory

estoppel pre-approval, including a

determination that Decedent DaRosa is

entitled to the health insurance benefits,

and that Dr. Flam is thus entitled to payment

by BC Life for the medical treatment he

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provided to Decedent DaRosa (after preapproval from BC Life.

The Sixth Cause of Action is captioned “Breach of QuasiContract (Common Count of Quantum Meriut)” and alleges that

“[b]etween May 2005 and October 2006, on BC Life’s promise to pay

the reasonable value of the Alimta treatments provided by Dr.

Flam to Decedent DaRosa, Dr. Flam provided Decedent DaRosa with

Alimta for the purpose of treating Decedent DaRosa’s cancer” and

that BC Life has wrongfully refused to pay for the Alimta

treatments despite its pre-approval, and that “[a]s a result of

BC Life’s breach of the oral pre-approval agreement and

unjustifiable refusal to pay Dr. Flam for the Alimta treatments,

Dr. Flam has sustained substantial damages.” 

The Seventh Cause of Action is for breach of the implied

covenant of good faith and fair dealing. The Seventh Cause of

Action alleges that Dr. Flam obtained pre-approval from BC Life

and rendered treatment to Decedent DaRosa in reliance of BC

Life’s pre-approval promise of payment; that implied within the

pre-approval was BC Life’s agreement to act in good faith and

deal fairly with Dr. Flam in carrying out its responsibilities

under the pre-approval promise; and that BC Life failed in these

obligations. The Seventh Cause of Action further alleges:

62. Implicit in BC Life’s obligations to act

fairly and in good faith toward Dr. Flam (in

light of its pre-approval for Alimta

treatment) was its duty to timely reconsider

its denial of the claim for payment upon

receiving a valid appeal with supporting

documents and/or to consult with Decedent

DaRosa’s physicians.

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63. BC Life breached its obligations and

duties to act fairly and in good faith toward

Dr. Flam by failing to uphold its obligations

as to its pre-approval of the Alimta

treatment as well as to timely reconsider its

denial of the claim upon receiving a valid

appeal with supporting documents and/or

failing to consult with Decedent DaRosa’s

physicians. BC Life further breached its

obligations and duties to act fairly and in

good faith towards Dr. Flam by:

(a) Failing to acknowledge and 

promptly respond to Decedent DaRosa/Dr.

Flam’s tender for insurance benefits as

required under California Insurance Code §§

790.03(h)(2)(3) [sic];

(b) Failing to acknowledge receipt 

of the claim and/or to begin any necessary

investigation of the claim within fifteen

(15) days of receipt of the claim as mandated

by 10 California Code of Regulations §

2695.2(e); and,

(c) Failing to accept or deny a 

claim for insurance benefits within forty

(40) days of notification of the insured’s

claim as required under 10 California Code of

Regulations § 2695.7(b)(d) [sic].

64. BC Life also breached its duties in

light of the fact that California law is

clear that an insurance company cannot deny

the use of a particular drug treatment when

the following criteria are satisfied: (a) the

drug is approved by the federal Food and Drug

Administration ...; (b) the drug is

prescribed by a participating licensed health

care professional for the treatment of a

life-threatening condition; and (c) the drug

has been recognized for treatment of that

condition by two articles from major peer

reviewed medical journals that present data

supporting the proposed off-label use or uses

as generally safe and effective unless this

is [sic] clear and convincing contradictory

evidence presented in a major peer reviewed

medical journal. (See Cal.Health & Safety

Code § 1367.21; and Cal.Ins. Code §

10123.195.) Here, Alimta has been approved

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by the FDA, Alimta was prescribed by Dr. Flam

(a participating licensed health care

professional), Alimta was prescribed for

Decedent DaRosa’s life-threatening cancer

condition, Alimta has been recognized for

treatment of medical conditions such as

Decedent DaRosa’s by at least two articles

from major peer reviewed medical journals

that present data supporting the proposed

off-label use of Alimta as generally safe and

effective, and this is [sic] no clear and

convincing contradictory evidence presented

in a major reviewed [sic] medical journal

regarding the fact that Alimta should not be

used to treat medical conditions such as

Decedent DaRosa’s. [underlining omitted].

The Eighth Cause of Action is for negligence. The Eighth

Cause of Action alleges that prior to entering into the abovementioned agreement to pay Dr. Flam, BC Life, through its

authorized representatives, represented that Decedent DaRosa

would be entitled to health insurance benefits for payment to Dr.

Flam; that the policy of insurance clearly provides for the

treatment sought by DaRosa and recommended by his doctors; and

that, prior to rendering the treatment, Dr. Flam obtained preapproval for BC Life and rendered the treatment in reliance on BC

Life’s pre-approval promise of payment. The Eighth Cause of

Action further alleges:

68. At all times herein relevant, the

conduct of BC Life was negligent and

constituted a breach of its duties,

including, but not limited to, statutory

duties, common law duties, and other duties

mandated by law. BC Life and its agents

represented that they were experts and held

themselves out as having superior training,

education, and knowledge in the insurance

industry. By reason of such expertise and/or

of its representations of possessing such

expertise, BC Life is held to a higher

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standard of care. In view of the

relationship between the parties and the

representations of BC Life and its agents,

Dr. Flam relied completely on BC Life to

timely, fairly, and adequately provide

treatment payments to Dr. Flam without appeal

and/or to promptly reconsider its denial of

Dr. Flam’s claim upon receiving a valid

appeal with supporting documents, as well as

to consult with ... Dr. Flam ... Further, as

a BC Life approved treating physician, Dr.

Flam reasonably expected BC Life to pay for

services rendered to Decedent DaRosa,

especially since BC Life pre-approved the

treatment before it was rendered. Further,

BC Life breached its duty of care to Dr. Flam

by failing to timely and reasonably

reconsider its post-treatment refusal to pay

after BC Life had provided pre-approval for

the treatment. 

69. BC Life failed to conduct and complete

its reconsideration in a proper and timely

manner, it failed to consult with Decedent

DaRosa’s physicians, and BC Life wrongfully

asserts that Decedent DaRosa is not entitled

to the insurance benefits for payment to Dr.

Flam for which Decedent DaRosa has paid

substantial premiums, and for which Dr. Flam

relied on to his extreme financial detriment.

70. BC Life has, and had, a duty to Dr.

Flam, to act at all times with due and

reasonable care for the interests of the

insured’s pre-approved physician; yet BC Life

failed to do so.

The Eighth Cause of Action also claims that BC Life breached its

duty “by acting or failing to act in a manner consistent with the

reasonable standard of care required by applicable case law,

California statutory law, California regulations, and other

similar standards, in its conduct of failing and refusing to

timely reconsider a valid appeal with supporting documents

relating to the health insurance provided by BC Life to Decedent

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DaRosa and/or failing to consult with ... Dr. Flam ...” and that

“BC Life breached its obligations and duties to act fairly and in

good faith towards Dr. Flam” by failing to act with regard to the

California Insurance Code provisions and regulations quoted above

in Paragraphs 63-64 of the FAC. 

The Ninth Cause of Action is for fraud and deceit. The

Ninth Cause of Action alleges that, prior to entering into the

above-mentioned agreement to pay Dr. Flam, BC Life, through its

authorized representatives, represented that Decedent DaRosa

would be entitled to health insurance benefits for payment to Dr.

Flam; that the policy of insurance clearly provides for the

treatment sought by DaRosa and recommended by his doctors; and

that, prior to rendering the treatment, Dr. Flam obtained preapproval for BC Life and rendered the treatment in reliance on BC

Life’s pre-approval promise of payment. The Ninth Cause of

Action further alleges:

77. Dr. Flam is informed, believe [sic], and

allege [sic] that the above-mentioned

representations and pre-approval by BC Life,

through its agents, were in fact false and

fraudulent when made. The true facts were

that BC Life did not intend to provide

Decedent DaRosa with health insurance

benefits so as not to pay Dr. Flam after he

provided treatment. Instead, BC Life

intended to deal with Dr. Flam in bad faith

and with the intention of using any method at

its disposal to avoid legitimate payment

under the insurance policy.

78. When BC Life, through its agents, made

its representations, BC Life knew them to be

false. BC Life made the statements with the

intent to defraud and deceive Dr. Flam in

inducing Dr. Flam to provide unreimbursed

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treatment to Decedent DaRosa. 

79. Dr. Flam ... was ignorant of the falsity

of these representations and believed them to

be true. In reliance on the ...

representations, Dr. Flam was induced to buy

the medications and administer treatment to

Decedent DaRosa all to Dr. Flam’s extreme

financial detriment. Had Dr. Flam/DaRosa

known the true facts, Dr. Flam would not have

provided the treatment to Decedent DaRosa.

80. Dr. Flam reasonably and justifiably

relied on said representations in view of the

superior knowledge of BC Life’s agents and

the quasi-fiduciary relationship between an

insurer and its insured.

...

82. BC Life pursued said course of conduct

intentionally, maliciously, oppressively,

fraudulently, deceitfully, with a conscious

disregard, and/or with reckless disregard of

the likelihood of causing financial injury to

Dr. Flam. BC Life made these false and

deceitful representations with the sole

purpose of furthering its own economic

interest at the expense of Dr. Flam’s

economic interest. BC Life further breached

its obligations and duties to act fairly and

in good faith towards Dr. Flam by [by failing

to act with regard to the California

Insurance Code provisions and regulations

quoted above in Paragraphs 63-64 of the FAC.]

...

84. Dr. Flam is informed, believe, and

allege [sic] that all the alleged acts

described herein were performed or ratified

by BC Life’s managerial employees with

malicious and fraudulent intent who acted

with actual knowledge that BC Life’s conduct

would cause Dr. Flam harm, and Dr. Flam is

therefore entitled to recover punitive and/or

exemplary damages ....

The Tenth Cause of Action is for negligent

misrepresentation. The Tenth Cause of Action is based on the

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same misrepresentations described in the Ninth Cause of Action

and alleges that “BC Life made the representations without

reasonable grounds for believing them to be true.”

The Eleventh Cause of Action is for fraud - false promise. 

The Eleventh Cause of Action is based on the same

misrepresentations described in the Ninth Cause of Action. The

Eleventh Cause of Action further alleges that Dr. Flam “was

ignorant of BC Life’s secret intention not to perform and Dr.

Flam, could not, in the exercise of reasonable diligence, have

discovered BC Life’s secret intention not to perform”; that BC

Life failed to abide by its promises; that the conduct of BC Life

“was an intentional misrepresentation, deceit, or concealment of

a material fact known to BC Life with the intention on the part

of BC Life of thereby fraudulently depriving Dr. Flam of legal

rights or otherwise causing injury and was despicable conduct

that subjected Dr. Flam to cruel and unjust hardships in

conscious disregard of Dr. Flam’s rights, so as to justify an

award of exemplary and punitive damages.” The Eleventh Cause of

Action further alleges that “BC Life breached its obligations and

duties to act fairly and in good faith towards Dr. Flam” by

failing to act with regard to the California Insurance Code

provisions and regulations quoted above in Paragraphs 63-64 of

the FAC. The Eleventh Cause of Action alleges:

99. The acts of Defendants and each of them

(including but not limited to the Doe

Defendants), as alleged herein, constitutes

wrongful conduct performed with oppression,

fraud or malice, so that Dr. Flam (in

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addition to actual damages) is entitled to an

award of exemplary and punitive damages under

California Civil Code § 3294. BC Life’s

conduct constitutes malice under CCC § 3294

because its conduct was either intended to

cause injury to Dr. Flam or was despicable

conduct which was carried on by BC Life in

willful and conscious disregard (i.e.,

wanton) of the rights and safety to others. 

Alternatively, BC Life’s conduct constitutes

fraud under CCC § 3294 because its conduct

was either an intentional misrepresentation,

or deceit, or a concealment of a material

fact known to BC Life, thereby depriving Dr.

Flam of a property or legal right or

otherwise causing injury. Further, BC Life’s

conduct constituted oppression under CCC §

3294 because its conduct was despicable

conduct that subjected Dr. Flam to cruel and

unjust hardship in conscious disregard to Dr.

Flam’s rights.

The Twelfth Cause of Action is for violation of the

California Unfair Business Practices Act, Business & Professions

Code §§ 17200 et seq. The Twelfth Cause of Action alleges that

Defendant engaged in unfair competition and unlawful, unfair or

fraudulent business practices “as alleged in this Complaint

[sic], including failing to properly reconsider its denial of Dr.

Flam’s claim upon receiving Dr. Flam’s appeal with supporting

documents and/or failing to consult with Decedent DaRosa’s

physicians.” The Twelfth Cause of Action alleges that Defendant

“further breached its obligations and duties to act fairly and in

good faith” towards Dr. Flam by [by failing to act with regard to

the California Insurance Code provisions and regulations quoted

above in Paragraphs 63-64 of the FAC.] The Twelfth Cause of

Action alleges that Defendant has been “unjustly enriched and

should be required to disgorge the funds paid to it and be

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restrained and enjoined from engaging in such acts in the future”

and that:

105. Dr. Flam’s success in this action will

enforce important rights affecting the public

interest; namely, the rights of every insured

in California (and that insured’s BC Life

approved physician) who contracts with BC

Life for health insurance and who properly

and fully pays the premiums on their BC Life

health insurance policy in order to be

covered when the need for medical treatment

arises; as well as the myriad physicians who

obtained pre-approval from BC Life for a

specific treatment and then administered the

treatment at their own cost to their extreme

financial detriment. Dr. Flam herein takes

upon himself to enforce these insurance

contracts and lawful claims. This is a

financial burden incurred in pursuing this

action and it would be against the interests

of justice to penalize Dr. Flam by forcing

him to pay attorneys’ fees from the recovery

in this action. Therefore, an award of

reasonable attorneys’ fees is appropriate

pursuant to California Code of Civil

Procedure § 1021.5.

Plaintiffs argue that these twelve causes of action are not

preempted by ERISA because Dr. Flam is a “non-ERISA entity” and

cannot have his individual claims preempted, citing Allstate Ins.

Co. v. 65 Security Plan, supra, 879 F.2d 90 and Harris v.

Provident Life and Accident Insurance Co., supra, 26 F.3d 930.

In The Meadows v. Employers Health Ins., 47 F.3d 1006 (9th

Cir.1995), a third-party health care provider brought an action

against a health insurer for state law claims arising out of the

insurer’s alleged misrepresentation concerning whether patients

were covered by the policy. In pertinent part the Ninth Circuit

ruled:

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We hold that the district court correctly

concluded that the independent state law

claims of the The Meadows, a third-party

provider, lie outside the bounds of the ERISA

‘relates to’ standard because neither The

Meadows nor the Friedels had any existing

ties to the ERISA plan in 1990. 

A recent decision of our Court supports this

conclusion. In Harris v. Provident Life and

Acc. Ins. Co., 26 F.3d 930 (9 Cir.1994), an th

employee decided not to purchase ERISA

benefits because he relied on certain

misrepresentations of the ERISA agent. He

then sued the ERISA plan for fraud under

ERISA and applicable state statutes. We held

that because the employee never became a plan

beneficiary, he lacked standing to claim an

injury under ERISA. Id. at 933. However, we

went on to hold that the employee’s

‘remaining state claims are not within the

scope of § 1132(a) and therefore not

completely preempted.’ Id. at 934 ....

Other courts have adopted similar rationales

for allowing independent state claims to

proceed despite ERISA. In Memorial Hospital

System v. Northbrook Life Ins. Co., 904 F.2d

236, 245 (5 Cir.1990), the Fifth Circuit th

noted that courts have found preemption if

(1) the state law claims address areas of

exclusive federal concern, such as the right

to receive benefits under an ERISA plan; and

(2) the claims directly affect the

relationship among the traditional ERISA

entities (the employer, the plan and its

fiduciaries, and the participants and

beneficiaries). See also Hook v. Morrison

Mining Co., 38 F.3d 776, 781 (5 Cir.1994). th

The Fifth Circuit held that a third-party’s

independent claims for damages for

misrepresentation of coverage against an

ERISA plan do not fall within the scope of

these two factors. Memorial Hospital, 904

F.2d at 245. First, the court pointed out

that Congress enacted ERISA to protect the

interests of employees and their

beneficiaries under employee benefit plans. 

A third-party provider’s claims for unfair

and deceptive trade practices against a plan

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does not infringe upon an area which Congress

sought to regulate exclusively under ERISA. 

Id. at 247. See also Weaver v. Employers

Underwriters, Inc., 13 F.3d 172, 176-77 (5th

Cir.1994)(state law claims by independent

contractor, who was not a participant or

beneficiary, did not affect the relationship

between the traditional ERISA entities;

therefore claims were not preempted);

Fugarino v. Hartford Life and Acc. Ins. Co.,

969 F.2d 178, 186 (6 Cir.1992)(‘if the th

plaintiff is not a “participant” or

“beneficiary,” he may sue under and seek the

broader relief provided by state tort law’),

cert. denied, ___ U.S. ___, 113 S.Ct. 1401

... (1993); Hospice of Metro Denver, Inc. v.

Group Health Ins., 944 F.2d 752, 756 (10th

Cir.1991)(declining to find preemption

because hospice’s estoppel claim against

insurance provider did not involve the

administration of the ERISA plan, the

processing of a covered claim, nor the rights

of an ERISA participant or beneficiary); Hoag

Memorial Hospital v. Managed Care

Administrators, 820 F.Supp. 1232, 1235

(C.D.Cal.1993)(ERISA does not preempt

hospital’s state law claims for

misrepresentation of coverage because suit

did not involve the administration of the

ERISA plan); Martin v. Pate, 749 F.Supp. 242,

246 (S.D.Ala.1990)(employee may maintain

state action for fraud because

misrepresentations occurred before employee

became a beneficiary under ERISA plan.),

aff’d, 934 F.2d 1265 (11 Cir.1991). th

Second, the Fifth Circuit explained that if a

patient was not covered under the ERISA plan,

despite the Plan’s assurances to the

contrary, a provider’s subsequent civil

recovery against the insurer in no way

expands the rights of the patient to receive

benefits under the terms of the plan. 904

F.2d at 246.

In short, as the above discussion

demonstrates, courts have held that ERISA

does not preempt a third-party provider’s

independent state law claims against a plan

precisely because those claims do not ‘relate

to’ the administration of an ERISA plan. In

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the instant case, that the Friedels were not

beneficiaries of any plan at the time

Employers Health misrepresented the existing

coverage is further reason to conclude that

The Meadows’ claim does not ‘relate to’ the

provisions of the ERISA plan.

47 F.3d at 1009-1010. 

In Cedars-Sinai Medical Center v. National League of

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

Cedars-Sinai, a health services provider brought a state court

action against the administrator of an ERISA plan, PBP Health,

alleging, inter alia, breach of contract and negligent

misrepresentation in connection with partial reimbursement of

claims for treatment of an employee/plan enrollee. The Ninth

Circuit agreed with Cedars-Sinai that its independent, nonderivative claims for breach of contract and negligent

misrepresentation were not preempted by ERISA, relying on The

Meadows, supra, and Memorial Hospital System, supra.

These Ninth Circuit decisions support denial of the motion

to dismiss to the extent Dr. Flam’s causes of action are based on

allegations of breach of contract and misrepresentation based on

allegations that Defendants promised or pre-approved

reimbursement for the cancer treatment at issue.

However, the Fourth through Twelfth Causes of Action include

allegations that Defendant failed to process Decedent DaRosa’s

claim within time limits set forth in California Insurance Code §

790.03(h) and 10 California Code of Regulations §§ 2695.2 and

2695.7, and denied Dr. Flam’s claim for reimbursement in

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violation of California Health & Safety Code § 1367.21 and

California Insurance Code § 10123.195. These allegations “relate

to” the ERISA plan because these state laws encroach on a

relationship regulated by ERISA, i.e., between the ERISA plan and

the beneficiary, Decedent DaRosa.

Defendant’s motion to dismiss the Fourth through Twelfth

Causes of Action is GRANTED IN PART AND DENIED IN PART WITH LEAVE

TO AMEND. 

c. Decedent DaRosa’s State Law Causes of Action.

The Thirteenth through Twenty-Third Causes of Action are

brought by Decedent DaRosa. As noted above, these causes of

action are as follows:

13. Breach of Implied Covenant Of Good Faith

and Fair Dealing

14. Tortious Bad Faith Breach Of The Duty Of

Good Faith And Fair Dealing

15. Negligence

16. Fraud/Deceit

17. Negligent Misrepresentation

18. Fraud - False Promise

19. Negligent Infliction of Emotional

Distress Against All Defendants

20. Violation of California Unfair Business

Practices Act

21. Equitable Relief Of Reformation Based On

Fraud

22. Ambiguity, Mutual Mistake, or

Unconscionability Equitable Relief of

Rescission and Restitution

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23. Unjust Enrichment Against All

Defendants.

All of these causes of action as well as the First, Second and

Third Causes of Action, contain essentially the same allegations

as set forth above in connection with Dr. Flam’s state law causes

of action.

Defendant moves to dismiss these causes of action on the

ground of ERISA preemption. 

In Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41

(1987), the Supreme Court addressed whether ERISA preempts state

common law tort and contract actions asserting improper

processing of a claim for benefits under an ERISA plan. The

Supreme Court held:

There is no dispute that the common law

causes of action asserted in Dedeaux’s

complaint ‘relate to’ an employee benefit

plan and therefore fall under ERISA’s express

pre-emption clause, § 514(a). In both

Metropolitan Life, supra, and Shaw v. Delta

Air Lines, Inc., supra, 463 U.S., at 96-100

..., we noted the expansive sweep of the preemption clause. In both cases, ‘[t]he phrase

“relate to” was given its broad common-sense

meaning, such that a state law “relate[s] to”

a benefit plan “in the normal sense of the

phrase, if it has a connection with or

reference to such a plan.”’ Metropolitan

Life, supra, 471 U.S., at 739 ..., quoting

Shaw v. Delta Air Lines, supra, 463 U.S., at

97. In particular we have emphasized that

the pre-emption clause is not limited to

‘state laws specifically designed to affect

employee benefit plans.’ Shaw v. Delta Air

Lines, supra, at 98 ... The common law causes

of action raised in Dedeaux’s complaint, each

based on alleged improper processing of a

claim for benefits under an employee benefit

plan, undoubtedly meet the criteria for preemption under § 514(a). 

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481 U.S. at 47-48.

In Cleghorn v. Blue Shield of California, 408 F.3d 1222 (9th

Cir.2005), Cleghorn, a health plan participant sued the insurer

in state court, alleging on behalf of himself, all others

similarly situated, and the general public, claims under the 

California Unfair Competition Law and California Consumer Legal

Remedies Act. Cleghorn’s complaint requested general damages,

injunctive relief, disgorgement of illegally-gained profits, and

punitive damages. The action was removed on the ground of ERISA

preemption. Cleghorn then amended his complaint to delete his

individual claims. The District Court denied Cleghorn’s motion

to remand and, after Cleghorn declined to amend the complaint to

include claims under ERISA’s civil enforcement scheme, dismissed

the action. The Ninth Circuit, relying primarily on Aetna Health

Inc. v. Davila, 542 U.S. 200 (2004), held in pertinent part:

... ERISA section 502(a) contains a

comprehensive scheme of remedies to enforce

ERISA’s provisions. See 29 U.S.C. § 1132(a). 

A state cause of action that would fall

within the scope of this scheme of remedies

is preempted as conflicting with the intended

exclusivity of the ERISA remedial scheme,

even if those causes of action would not

necessarily be preempted by section 514(a)

[29 U.S.C. § 1144(a)]. See Davila, 124 S.Ct.

at 2498 n.4. It is this second strand of

ERISA’s preemptive force that precludes

Cleghorn’s action.

Section 502(a) of ERISA provides, among other

things, that ‘[a] civil action may be brought

... by a participant or beneficiary ... to

recover benefits due to him under the terms

of his plan ....’ 29 U.S.C. § 1132(a). When

Cleghorn sought benefits under the plan and

did not receive them, he did not pursue his

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ERISA remedy but instead brought the present

state-law claims. These are precisely the

kind of claims that the Supreme Court in

Davila held to be pre-empted. In Davila, the

plaintiffs were denied coverage or

reimbursement for certain medical services by

their ERISA plan administrators. They

similarly declined to pursue their ERISA

remedies and instead brought state tort

claims to enforce duties of care imposed by

state statutes. See Davila, 124 S.Ct. at

2499. The Supreme Court held that the state

causes of action were preempted even though:

(1) they were tort claims (unlike ERISA

claims), (2) they were based on an external

state statutory duty, and (3) they did not

duplicate ERISA remedies. See id. at 2498-

2499. As the Court summarized: ‘Congress’

intent to make the ERISA civil enforcement

mechanism exclusive would be undermined if

state causes of action that supplement the

ERISA § 502(a) remedies were permitted, even

if the elements of the state cause of action

did not precisely duplicate the elements of

an ERISA claim.’ Id. at 2499-2500; see also

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,

54 ... (1987)(noting that the ‘policy choices

reflected in the inclusion of certain

remedies and the exclusion of others under

the federal scheme would be completely

undermined if ERISA-plan participants and

beneficiaries were free to obtain remedies

under state law that Congress rejected in

ERISA.’); Elliott v. Fortis Benefits Ins.

Co., 337 F.3d 1138, 1147 (9 Cir.2003) th

(holding that an action ‘which seeks nonERISA damages for what are essentially claim

processing causes of action[] clearly falls

under the § 1132 preemption exemplified by

Pilot Life.’); Dishman v. UNUM Life Ins. Co.,

269 F.3d 974, 983 (9 Cir.2001)(ruling that th

‘[c]laimants simply cannot obtain relief by

dressing up an ERISA benefits claim in the

garb of a state law tort.’).

Cleghorn argues that his claims no longer

implicate ERISA because he amended his

complaint to delete his individual claim. 

Artful pleading does not alter the potential

for this suit to frustrate the objectives of

ERISA. The only factual basis for relief

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pleaded in Cleghorn’s complaint is the

refusal of Blue Shield to reimburse him for

the emergency medical care he received. Any

duty or liability that Blue Shield had to

reimburse him ‘would only here only because

of [Blue Shield’s] administration of ERISAregulated benefit plans.’ Davila, 124 S.Ct.

at 2498. Even the class claim does not aid

Cleghorn, for he is a participant in an ERISA

plan and brings his action on behalf of

others similarly situated. Cleghorn’s claim

therefore cannot be regarded as independent

of ERISA.

408 F.3d at 1225-1226. 

In Massachusetts Mut. Life Ins. Co. v. Russell, 437 U.S.

134, 148 (1985), the Supreme Court held:

[T]he relevant text of ERISA, the structure

of the entire statute, and its legislative

history all support the conclusion that in §

409(a) Congress did not provide, and did not

intend the judiciary to imply, a cause of

action for extra-contractual damages caused

by improper or untimely processing of benefit

claims.

Governing case law cited above establishes that the First,

Second and Third Causes of Action assigned to Dr. Flam by

Decedent DaRosa and Decedent DaRosa’s causes of action alleged in

the Thirteenth through Twenty-Third Causes of Action are

preempted by ERISA. The motion to dismiss the First, Second,

Third and Thirteenth through Twenty-Third Causes of Action is

GRANTED WITH LEAVE TO AMEND to seek civil enforcement of ERISA

benefits pursuant to 29 U.S.C. § 1132(a).

d. ERISA “SAVINGS CLAUSE”.

Plaintiffs argue that all of the causes of action alleged in

the Amended Complaint are not preempted because of 29 U.S.C. §

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1144(b)(2)(A): “[N]othing in this subchapter shall be construed

to exempt or relieve any person from any law of any State which

regulates insurance ....”

Plaintiffs assert that the “gravamen of every one of the

Plaintiffs’ causes of action is based on the alleged violation of

the California Insurance Code, California Health & Safety Code,

California Business & Professions Code, and/or other California

common law duties; all of which reflect a clear State policy of

regulating insurance by prohibiting the bad faith failure by

insurers such as Defendant Blue Cross to promptly pay the

rightful claims of an insured such as Plaintiff Decedent DaRosa

and/or his assignee Plaintiff Dr. Flam.” 

Plaintiffs cite Lewis v. Aetna U.S. Healthcare, Inc., 78

F.Supp.2d 1202 (N.D.Okla.1999).

In Lewis, following payment of the insurance proceeds, the

beneficiary of a decedent’s life insurance policy issued as part

of an employee benefit plan sued the insurance company in state

court, alleging breach of contract and bad faith based on undue

delay in payment, and seeking compensatory and punitive damages. 

The District Court, discussing the cause of action for tortious

breach of the implied covenant of good faith and fair dealing

recognized in Oklahoma by Christian v. American Home Assurance

Co., 577 P.2d 899 (Okla.1977), ruled that the cause of action

constitutes a state law that regulates insurance under 29 U.S.C.

§ 1144(b)(2)(A). 78 F.Supp.2d at 1212-1214. 

Plaintiffs do not point out that this holding in Lewis is

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not followed by the Tenth Circuit or by the Supreme Court of

Oklahoma. See Conover v. Aetna US Healthcare, Inc., 167

F.Supp.2d 1317, 1319-1322 (N.D.Okla.2001), aff’d, 320 F.3d 1076

(10 Cir.2003), cert. denied, 542 U.S. 936 (2004); Holloway v. th

UNUM Life Ins. Co. of America, 89 P.3d 1022 (Okla.2003). 

Plaintiffs also cite Hood v. Prudential Insurance Company of

America, 460 So.2d 1227 (Ala.1984).

In Hood, a discharged employee, Hood, brought suit against

the insurer, Prudential, and an ERISA plan for bad-faith refusal

to pay a claim under a group disability policy. The Supreme

Court of Alabama agreed with Hood that, pursuant to 29 U.S.C. §

1144(b)(2)(A), Alabama law governs and regulates insurance

companies:

It is evident that through federal

legislation Congress sought to protect ERISA

styled pension plans from the intrusion of

state regulation. See Alessi v. RaybestosManhattan, 451 U.S. 504 ... (1981). 

Nevertheless, as evidenced by the saving

clause, Congress intended for the regulation

of the insurance industry to remain within

the province of state law. (There is no

federal regulation of that industry.)

Prudential relies heavily upon Alessi v.

Raybestos-Manhattan ... to support its

argument that a state claim for bad faith

refusal to pay is preempted by federal law. 

In Alessi, the Supreme Court held that a New

Jersey statute concerning workmen’s

compensation disability benefits ‘related to’

ERISA pension plans and was therefore

preempted by federal law insofar as the

statute eliminated one method for calculating

pension benefits under ERISA pension plans. 

Id., 451 U.S. at 524 ... The New Jersey

statute purported to prohibit offsetting

workmen’s compensation disability benefits

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against employees’ retirement pension

benefits or payments. In application, this

statute effectually eliminated one method of

calculating pension benefits specifically

provide for under ERISA.

In contrast to the situation in Alessi, a bad

faith refusal to pay action brought against

Prudential, an insurance company, neither

directly nor indirectly affects the terms or

conditions of employee benefit plans governed

by ERISA. See 29 U.S.C. § 1144(c)(2).

Title 29 U.S.C., § 1144(b)(2)(B), restricts

the application of the saving clause in §

1144(b)(2)(A) for the purpose of directly or

indirectly regulating ERISA pension plans. 

It reads in part:

‘(B) Neither an employee benefit

plan described in section 1003(a)

of this title, ... nor any trust

established under such a plan,

shall be deemed to be an insurance

company or other insurer, bank,

trust company, or investment

company or to be engaged in the

business of insurance or banking

for purposes of any law of any

State purporting to regulate

insurance companies, insurance

contracts, banks, trust companies,

or investment companies.’

This provision further prohibits the state

regulation of ERISA plans, under the

authority of the saving clause, simply

because the plan may act as self-insurer on

all of its benefits. Wadsworth v. Whaland,

562 F.2d 70 (1 Cir.1977); see also Hewlett- st

Packard Co. v. Barnes, 425 F.Supp. 1294

(N.D.Cal.1977). However, in the instant

case, the plan is not acting as a selfinsurer, but rather has obtained a group

benefit policy from Prudential. Clearly,

Prudential is the insurer and the plan is the

insured. Accordingly, 29 U.S.C. §

1144(b)(2)(B) in nowise prohibits the

regulation of Prudential merely because the

plan is one of the policyholders. Wayne

Chemical, Inc. v. Columbus Agency Service

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Corporation, 567 F.2d 692 (7 Cir.1977); th

Cate v. Blue Cross-Blue Shield of Alabama,

434 F.Supp. 1187 (E.D.Tenn.1977).

Based on the foregoing, we must conclude that

Hood’s bad faith refusal to pay claim against

Prudential does not affect the terms and

conditions of ERISA pension plans and is

authorized by 29 U.S.C. § 1144(b)(2)(A). We

hold that Hood’s claim against Prudential

does not ‘relate to’ ERISA pension plans as

contemplated by 29 U.S.C. § 1144(a) and

therefor is not preempted by federal law.

460 So.2d at 1230-1231. But see Simmons v. Prudential Ins. Co.

of America, 641 F.Supp. 675, 678 (D.Colo.1986)(“In face of overwhelming opinion to the contrary ... [t]he case of Hood v.

Prudential Ins. Co., seems to be the aberration, not the rule.”)

Plaintiffs do not cite any Ninth Circuit or Supreme Court

authority in support of their position. 

Defendant cites Kanne v. Connecticut General Life Ins. Co.,

867 F.2d 489, 493-494 (9 Cir.), cert. denied, 492 U.S. 906 th

(1988). In Kanne the Ninth Circuit held that California

Insurance Code § 790.03(h) is preempted by ERISA. The Ninth

Circuit assumed, without deciding, that Section 790.03(h) is a

law regulating insurance under the savings clause, but concluded:

The Kannes’ argument asks us to limit Pilot

Life’s preemption holding to only those state

law which do not fall within the savings

clause. To accept this argument, however, we

would have to ignore the second half of Pilot

Life, 107 S.Ct. at 1555-58, in which the

Court made abundantly clear that its

preemption holding was equally based on its

acceptance of the Solicitor General’s view

that ‘Congress clearly expressed an intent

that the civil enforcement provisions of

ERISA § 502(a) be the exclusive vehicle for

actions by ERISA-plan participants and

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beneficiaries asserting improper processing

of a claim for benefits.’ Id. at 1555. The

Court stated:

In sum, the detailed provisions of

§ 502(a) set forth a comprehensive

civil enforcement scheme that

represents a careful balancing of

the need for prompt and fair claims

settlement procedures against the

public interest in encouraging the

formation of employee benefit

plans. The policy choices

reflected in the inclusion of

certain remedies and the exclusion

of others under the federal scheme

would be completely undermined if

ERISA-plan participants and

beneficiaries were free to obtain

remedies under state law that

Congress had rejected in ERISA.

Id. at 1556. We do not find it possible to

read this language in a way that permits a

state statute like § 790.03(h) to supplement

the ERISA civil enforcement provisions

available to remedy improper claims

processing. Accordingly, the Kannes’ state

statutory cause of action for mishandling of

their insurance claim is also preempted. 

In McBride v. PLM International, Inc., 179 F.3d 737, 744-745 (9th

Cir.1998), the Ninth Circuit held that a claim for breach of the

implied covenant of good faith and fair dealing was preempted by

ERISA. See also Parrino v. FHP, Inc., 146 F.3d 699, 703-704 (9th

Cir.), cert. denied, 525 U.S. 1001 (1998):

Parrino’s causes of action for breach of the

implied covenant of good faith and fair

dealing and for civil conspiracy are both

predicated upon alleged defects in FHP’s

procedures for processing health insurance

claims. These causes of action therefore

fall within the scope of Section

502(a)(1)(B), which embraces claims by ERISA

plan participants ‘asserting improper

processing of [insurance claims],’ Pilot Life

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Ins. Co. v. Dedeaux, 481 U.S. 41, 56 ...

(1987), and are completely preempted by

ERISA. 

In Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S.

329 (2003), the Supreme Court ruled:

Today we make a clean break from the

McCarran-Ferguson factors and hold that for a

state law to be deemed a ‘law ... which

regulates insurance’ under § 1144(b)(2)(A),

it must satisfy two requirements. First, the

state law must be specifically directed

toward entities engaged in insurance. See

Pilot Life, supra, at 50; UNUM, supra, at

368; Rush Prudential, supra, at 366. Second,

... the state law must substantially affect

the risk pooling arrangement between the

insurer and the insured.

Id. at 341-342. Prior to this holding, the Supreme Court

utilized the test first articulated in Metropolitan Life Ins. Co.

v. Massachusetts, 471 U.S. 724, 740 (1985), and described in UNUM

Life Insurance Co. of America v. Ward, 526 U.S. 358 (1999) as

follows:

Our precedent provides a framework for

resolving whether a state law ‘regulates

insurance’ within the meaning of the saving

clause. First, we ask whether, from a

‘common-sense view of the matter,’ the

contested prescription regulates insurance. 

Metropolitan Life Ins. Co. v. Massachusetts,

471 U.S. 724, 740 (1985); see Pilot Life, 481

U.S. at 48. Second, we consider three

factors employed to determine whether the

regulation fits within the ‘business of

insurance’ as that phrase is used in the

McCarran-Ferguson Act ..., 15 U.S.C. § 1011

et seq.: ‘first, whether the practice has the

effect of transferring or spreading a

policyholder’s risk; second, whether the

practice is an integral part of the policy

relationship between the insurer and the

insured; and third, whether the practice is

limited to entities within the insurance

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industry.’ Metropolitan Life, 471 U.S., at

473 ...; see also Pilot Life, 481 U.S., at

48-49.

A recent Ninth Circuit decision of assistance in resolving

this issue is Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138

(9 Cir.), cert. denied, 540 U.S. 1090 (2003). th

In Elliot, an insured sued a long-term disability benefits

insurer, asserting claims under ERISA for the policy benefits,

and under Montana’s Unfair Trade Practices Act for non-ERISA

compensatory and punitive damages. The district court granted

the insurer’s motion for judgment on the pleadings, basing its

finding of preemption of two separate ERISA provisions:

First, the district court held that the

express preemption of ERISA § 514, 29 U.S.C.

§ 1144, which contains both a preemption and

a saving clause, defeated Elliott’s state law

claims. Second, the district court noted

that even if it were to find the substantive

provisions of the UTPA not preempted, ERISA §

502(a), 29 U.S.C. § 1132(a), would preempt

the enforcement of the UTPA which allows her

to enforce the state law rights.

337 F.3d at 1141-1142. The Ninth Circuit discussed the various

Supreme Court decisions addressing the application of Section

1144(b)(2)(A), including UNUM Life Insurance Co. of America v.

Ward, id. at 1142-1146. The Ninth Circuit stated:

... Following [UNUM] ..., we might well find

that the UTPA to be specifically directed

toward entities engaged in insurance, and it

is certainly possible that we would find the

UTPA to substantially affect the risk pooling

arrangement between the insurer and the

insured ... As things stand, however, we do

not have to reach these issues because Pilot

Life’s theory of § 1132 preemption has been

narrowly but sufficiently re-affirmed by the

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Supreme Court subsequent to UNUM’s footnote

seven and the question it might raise. 

The level of preemptive force of § 1132 was

clarified in Rush Prudential HMO, Inc. v.

Moran, 536 U.S. 355 ... (2002). In

considering an Illinois law that provided a

right to independent medical review of

certain denials of benefits, the Supreme

Court concluded that, while the independent

review may resemble a separate arbitration

proceeding going beyond ERISA’s enforcement

provisions, the independent review was not

precluded by the preemptive principle of

Pilot Life. Rush Prudential, 536 U.S. AT

380-81. In reaching this conclusion, Rush

Prudential removed much of the precedential

force of this aspect of Pilot Life, calling

Pilot Life’s discussion of preemption by §

1132 ‘dictum.’ Id. at 377 ... The Rush

Prudential court explained the genesis of

Pilot Life’s invocation of § 1132, and

recharacterized Pilot Life’s holding to mean

only that ‘ERISA would not tolerate a

diversity action seeking monetary damages for

breach generally and for consequential

emotional distress, neither of which Congress

had authorized in § 1132(a).’ Id. at 378 ...

The Rush Prudential court noted that only

once since Pilot Life, in Ingersoll-Rand Co.

v. McClendon, 498 U.S. 133 ... (1990), had it

re-affirmed the Pilot Life conclusion that §

1132 might preempt a state remedy. Rush

Prudential, 536 U.S. at 379 ... According to

the Court in Rush Prudential, the problem in

Ingersoll-Rand was that a ‘state law

duplicated the elements of a claim available

under ERISA’ while converting the remedy

‘from an equitable one under § 1132(a)(3) ...

into a legal one for money damages.’ Id. 

The Court explained, thus narrowly

reaffirming Pilot Life, that preemption by §

1132 constitutes ‘a limited exception from

the saving clause’ for causes of action and

remedies alternative to ERISA. Id. at 381

... While the Court described this exception

to the saving clause as quite limited, the

exception does include state causes of action

that would ‘significantly expand[] the

potential scope of ultimate liability imposed

upon employers’ by ERISA, and such claims are

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preempted. Id. at 379 ... In other words, §

1132's preemptive effect depends on the

nature of the state remedy, including the

availability of non-ERISA compensatory and

punitive damages. Thus, the availability of

such non-ERISA damages is a strong indicator

that a state cause of action may be

preempted.

Applying Rush Prudential as controlling here

would dictate preemption. But there are two

possible distinctions between Rush Prudential

and the instant case. First, Montana’s UTPA

arguably does not fall squarely under Rush

Prudential’s characterization of IngersollRand. According to Rush Prudential, the

problem with the state law cause of action in

Ingersoll-Rand was that it ‘duplicated the

elements of a claim available under ERISA,

[but] converted the remedy. Rush Prudential,

536 U.S. at 379 ... In contrast, here the

UTPA may instead provide rights in addition

to those provided by ERISA by, for example

‘obligating insurers to make advance payments

before the duty to indemnify under the policy

is triggered.’ Ridley, 951 P.2d at 992. We

do not, however, read Rush Prudential’s reaffirmation of Pilot Life as limited narrowly

to the precise circumstances of IngersollRand. See Rush Prudential, 536 U.S. at 380

... (citing Pilot Life, Ingersoll-Rand and

Mass. Mut. Life Ins. Co. v. Russell, 473 U.S.

134 ... (1985), as examples of the types of

cases invoking § 1132 preemption). The

instant action, which seeks non-ERISA damages

for what are essentially claim processing

causes of action, clearly falls under the §

1132 preemption exemplified by Pilot Life. 

Also, Elliot asks us to distinguish Rush

Prudential on the ground that its main

concern was the potential liability imposed

upon employers, whereas the present action is

against an insurance company rather than an

employer. While this may be true, the nature

of the defendant alone does not suffice to

save a claim which conflicts with ERISA’S

enforcement scheme. Cf. Bast, 150 F.3d at

1008 (noting that for questions of ERISA

preemption, ‘[t]he key issue is whether the

parties’ relationships are ERISA-governed

relationships’ and not the precise roles

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played by the parties).

Section 1132, as construed by Rush

Prudential, thus preempts Elliot’s claims. 

Unlike the notice-prejudice rule involved in

UNUM, which only provided a ‘relevant rule of

decision’ for a suit brought under § 1132,

UNUM, 526 U.S. at 366 ..., Elliot’s claim

relies in the first instance on Montana’s

UTPA’s civil enforcement provision, Mont.Code

Ann. § 33-18-242. Unlike the not preempted

independent review mechanism of Rush

Prudential, Mont.Code Ann. § 33-18-242

provides damages above and beyond those

provided in ERISA, including punitive

damages. Because the present case

‘involve[s] the sort of additional claim or

remedy exemplified in Pilot Life,’ Rush

Prudential, 536 U.S at 380, it falls within §

1132 preemption. Accord Fink v. Dakotacare,

324 F.3d 685, 689 (8 Cir.2003)(applying th

Rush Prudential and declaring a state claims

processing law preempted); Conover v. Aetna

U.S. Health Care, Inc., 320 F.3d 1076, 1079-

80 (10 Cir.2003)(same); Caffey v. UNUM Life th

Ins. Co., 302 F.3d 576, 582 (6th

Cir.2002)(same); Emil v. UNUM Life Ins. Co.

of Am., ... 2003 WL 256781

(M.D.Pa.Feb.5,2003)(same).

337 F.3d at 1146-1148.

Subsequent to Elliot, the Supreme Court in Aetna Health Inc.

v. Davila, 542 U.S. 200, 216-217 (2004) held in pertinent part:

Respondents ... argue ... that the THCLA is a

law that regulates insurance and hence that

ERISA § 514(b)(2)(A) [29 U.S.C. §

1144(b)(2)(A)] saves their causes of action

from pre-emption (and thereby complete preemption). This argument is unavailing. The

existence of a comprehensive remedial scheme

can demonstrate an ‘over-powering federal

policy’ that determines the interpretation of

a statutory provision designed to save state

law from being pre-empted. Rush Prudential,

536 U.S. at 375. ERISA’s civil enforcement

provision is one such example. See ibid.

As this Court stated in Pilot Life, ‘our

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understanding of [§514(b)(2)(A)] must be

informed by the legislative intent concerning

the civil enforcement provisions provided by

ERISA §502(a), 29 U.S.C. § 1132(a).’ 481

U.S., at 52. The Court concluded that ‘[t]he

policy choices reflected in the inclusion of

certain remedies and the exclusion of others

under the federal scheme would be completely

undermined if ERISA-plan participants and

beneficiaries were free to obtain remedies

under state law that Congress rejected in

ERISA.’ Id., at 54. The Court then held,

based on

‘the common-sense understanding of

the saving clause, the McCarranFerguson Act factors defining the

business of insurance, and most

importantly, the clear expression

of congressional intent that

ERISA’s civil enforcement scheme be

exclusive, ... that [the

plaintiff’s] state law suit

asserting improper processing of a

claim for benefits under an ERISAregulated plan is not saved by

§514(b)(2)(A).’ Id., at 57

(emphasis added).

Pilot Life’s reasoning applies here with full

force. Allowing respondents to proceed with

their state-law suits would ‘pose an obstacle

to the purposes and objectives of Congress.’ 

Id., at 52. As this Court has recognized in

both Rush Prudential and Pilot Life, ERISA

§514(b)(2)(A) must be interpreted in light of

the congressional intent to create an

exclusive federal remedy in ERISA §502(a). 

Under ordinary principles of conflict preemption, then, even a state law that can

arguably be characterized as ‘regulating

insurance’ will be pre-empted if it provides

a separate vehicle to assert a claim for

benefits outside of, or in addition to,

ERISA’s remedial scheme.

542 U.S. at 216-218. As noted supra, the Ninth Circuit applied

Davila in Cleghorn v. Blue Shield of California, supra, 408 F.3d

at 1225-1226. 

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Plaintiffs total failure to cite Supreme Court or Ninth

Circuit authority and the force of the decisions quoted are

persuasive that Plaintiffs’ assertion that the causes of action

alleged in the Amended Complaint are not preempted because of the

saving clause of Section 1144(b)(2)(A) are unfounded. 

 CONCLUSION

For the reasons stated above consistent with this Memorandum

Decision and the rulings in open court:

1. Plaintiffs’ motion to remand is DENIED;

2. Defendant’s motion to dismiss is GRANTED IN PART AND

DENIED IN PART WITH LEAVE TO AMEND:

a. The First, Second, Third and Thirteenth through 

Twenty-Third Causes of Action are dismissed with leave to amend

to allow Decedent DaRosa to seek civil enforcement of ERISA

benefits pursuant to 29 U.S.C. § 1132(a).

b. The Fourth through Twelfth Causes of Action are 

dismissed with leave to amend to allege claims by Dr. Flam for

breach of contract and misrepresentation based on allegations

that Defendants promised or pre-approved reimbursement for the

cancer treatment at issue. The Fourth through Twelfth Causes of

Action are dismissed without leave to amend based on ERISA preemption to the extent these causes of action include allegations

that Defendant failed to process Decedent DaRosa’s claim within

the time limits set forth in California Insurance Code §

790.03(h) and 10 California Code of Regulations §§ 2695.2 and

2695.7, and denied the claim for reimbursement in violation of

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California Health & Safety Code § 1367.21 and California

Insurance Code § 10123.195. 

3. Counsel for Defendant shall prepare and lodge a form of

Order within 5 days of the filing date of this Memorandum

Decision;

3. Plaintiffs shall file a Second Amended Complaint in

compliance with the rulings herein within 30 days of the filing

date of the Order.

IT IS SO ORDERED.

Dated: October 26, 2007 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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