Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01936/USCOURTS-caed-2_06-cv-01936-1/pdf.json

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

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

DOCTORS HOSPITAL OF MANTECA,

INC.,

Plaintiff, NO. CIV. S-06-1936 WBS DAD

v.

ORDER RE: MOTIONS TO DISMISS

AND REMAND

UNITED AGRICULTURAL BENEFIT 

TRUST, dba UNITED AGRICULTURE 

EMP; and DOES 1 through 100,

inclusive,

Defendants.

----oo0oo----

Currently before the court are defendant United

Agricultural Benefit Trust’s motion to dismiss the complaint for

failure to state a claim on which relief can be granted, and

plaintiff’s motion to remand this action to the state court for

lack of federal jurisdiction. 

I. Factual and Procedural Background

Plaintiff Doctors Hospital of Manteca (“the Hospital”)

is a licensed, acute care hospital and a California corporation

principally doing business in San Joaquin County. (Compl. ¶ 1.) 

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On January 1, 2001, the Hospital entered into an agreement with

CCN Managed Care, a company that contracts with providers like

the Hospital on behalf of health insurance plans and plan

administrators. (Id. ¶ 3.) Defendant United Agricultural

Benefit Trust (“UABT”) is identified within the agreement between

CCN and the Hospital as a “payor” for services contractually

provided by the Hospital. (Id. ¶ 4.) Pursuant to this

agreement, the Hospital commits to providing its services at

discounted rates to beneficiaries of health plans, including

UABT. (Id. ¶ 4.) In turn, the agreement sets out how health

plans such as UABT will pay the Hospital for treatment provided

to UABT’s beneficiaries. (Id.)

On February 10, 2003, a patient insured by defendant

was admitted to the Hospital for treatment. (Id. ¶ 5.) The

services provided by Hospital to the patient were medically

necessary and ordered by a physician. (Id.) Under the terms of

the agreement, once a claim has been submitted to defendant, it

must make a payment on that claim within thirty days. (Id. ¶

10.) The Hospital submitted a claim and the necessary

documentation to defendant. (Id. ¶¶ 11, 14.) Although defendant

paid the Hospital for part of the cost of the services, it did

not pay the full amount of the charges. (Id. ¶ 7.) 

On August 25, 2006, plaintiff filed suit against

defendant, alleging a single claim for breach of contract. 

(Compl.) Defendant removed the case on August 28, 2006,

contending that this court has federal question jurisdiction

because the claim arises under the Employment Retirement Income

Security Act (“ERISA”), 29 U.S.C. § 1001, et seq. Defendant now

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Defendant has filed a request for the court to take 1

judicial notice of three documents: (1) the declaration of Claire

M. Einsmann, (2) an agreement between the employer of the plan

beneficiary and defendant, and (3) the ERISA plan description,

and correspondence between the parties in this case. On a motion

to dismiss, the court may take judicial notice of matters of

public record or of documents whose contents are alleged in the

complaint and whose authenticity is not questioned. Lee v. City

of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). None of these

items are matters of public record. Additionally, because the

ERISA plan is not the basis for plaintiff’s claim for breach of

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argues that this claim should be dismissed because it is

preempted by ERISA, and the time to file an administrative appeal

under ERISA has passed. Alternatively, defendant contends that

because plaintiff is not a party to the contract, it lacks

standing to allege breach of contract. To address these

arguments, the court must consider whether ERISA applies here,

despite the fact that the Hospital alleges a single, state law

claim for breach of contract in its complaint.

Motion to Dismiss

At the pleading stage, the plaintiff need only set

forth “a short and plain statement of the claim showing that the

pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2);

Leatherman v. Tarrant County Narcotics Intelligence &

Coordination Unit, 507 U.S. 163, 168 (1993). A complaint should

“give the defendant fair notice of what the plaintiff’s claim is

and the grounds upon which it rests.” Conley v. Gibson, 355 U.S.

41, 47 (1957). Consequently, on a motion to dismiss, the court

accepts the allegations in the complaint as true and draws all

reasonable inferences in favor of the pleader. Scheuer v.

Rhodes, 416 U.S. 232, 236 (1974); Cruz v. Beto, 405 U.S. 319, 322

(1972). 

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contract, it need not be considered. Therefore, the court denies

the request for judicial notice.

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In determining whether a complaint states a claim under

federal law, courts apply the “well-pleaded complaint rule.” 

Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citing

Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)). When

the claims in “the plaintiffs’ well-pleaded complaint raise[]

issues of federal law,” the claims arise under federal law. 

Metro. Life Ins. Co., 481 U.S. at 63. For federal jurisdiction

to be appropriate, the federal claim must appear on the face of

the complaint. Franchise Tax Bd. v. Constr. Laborers Vacation

Trust, 463 U.S. 1, 9-10 (1983). Moreover, the federal cause of

action plead must be “unaided by the answer or by the petition

for removal.” Gully v. First Nat. Bank in Meridian, 299 U.S.

109, 113 (1936). Because federal preemption is typically a

defense to a cause of action that is not raised in the complaint,

“it is well-established that the defense of preemption ordinarily

is insufficient justification to permit removal to federal

court,” or the exercise of federal jurisdiction. Dukes v. U.S.

Healthcare, Inc., 57 F.3d 350, 353-54 (3rd Cir. 1995) (citing

Caterpillar, Inc. v. Williams, 482 U.S. 386, 398 (1987)). 

However, “Congress may so completely pre-empt a particular area

that any civil complaint raising this select group of claims is

necessarily federal in character.” Metro. Life, 481 U.S. at 63-

64. 

Defendant argues that the complaint should be dismissed

for failure to exhaust administrative remedies under ERISA,

assuming that ERISA completely preempts plaintiff’s state claim

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for breach of contract. However, two conditions must be met for

complete preemption under ERISA. If a “state law claim ‘relates

to’ an ERISA plan within the meaning of § 1144(a) and falls

within the scope of ERISA's civil enforcement provision found in

§ 1132(a)--the state claims are completely preempted by ERISA and

converted to federal questions, at least for the purposes of

removal jurisdiction.” Toumajian v. Frailey, 135 F.3d 648, 654

(9th Cir. 1998) (citing Metro. Life, 481 U.S. at 66; Buster v.

Greisen, 104 F.3d 1186, 1188 (9th Cir. 1997); Rice v. Panchal, 65

F.3d 637, 639 (7th Cir. 1995); Dukes, 57 F.3d at 354)) (emphasis

added). Importantly, “[i]f both conditions are not met, however,

the federal court does not have subject matter jurisdiction . . .

. Only if the complaint asserts a state law claim that can be

reasonably characterized as a claim under any of ERISA’s civil

enforcement provisions can the action be properly removed.” Id.

(citing Metro. Life, 481 U.S. at 66).

Thus, if the Hospital’s claim should have been brought

under the civil enforcement provision of ERISA, § 502(a), the

claim would be completely preempted such that this court would

have jurisdiction over the case, and the exhaustion requirements

of ERISA would apply. See 29 U.S.C. § 1132; see also Pascack

Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan,

388 F.3d 393, 398 n.4 (3d Cir. 2004). Claims that fall within

the scope of ERISA’s civil enforcement provision, § 502(a)(1)(B),

are claims brought by plan participants seeking to “recover

benefits due . . . under the terms of [the] plan, to enforce . .

. rights under the terms of the plan, or to clarify . . . rights

to future benefits under the terms of the plan.” 29 U.S.C. §

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1132(a)(1)(B). The United States Supreme Court has clarified the

application of this provision of ERISA as follows: 

It follows that if an individual brings suit

complaining of a denial of coverage for medical 

care, where the individual is entitled to such 

coverage only because of the terms of an

ERISA-regulated employee benefit plan, and 

where no legal duty (state or federal) 

independent of ERISA or the plan terms is 

violated, then the suit falls within the scope 

of ERISA § 502(a)(1)(B). In other words, if an 

individual, at some point in time, could have 

brought his claim under ERISA § 502(a)(1)(B), and 

where there is no other independent legal duty 

that is implicated by a defendant’s actions, then 

the individual’s cause of action is completely 

pre-empted by ERISA § 502(a)(1)(B).

Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004); see also

Burbank Podiatry Assocs. Group, APC v. U.S. Dist. Court for the

N. Dist. of Cal., No. 98-2326, 1999 U.S. Dist. LEXIS 1397, at *22

(N.D. Cal. Feb. 2, 1999) (“Complete preemption, and thus federal

jurisdiction, requires that the plaintiff bringing the claim must

participate in [an ERISA-regulated] relationship[] by being a

plan participant, beneficiary, or fiduciary entitled to seek

recovery under 29 U.S.C. § 1132(a).” (emphasis added)) (citing

Geweke Ford v. St. Joseph’s Omni Pref. Care, Inc., 130 F.3d 1355,

1358 (9th Cir. 1997); Harris v. Provident Life & Accident Ins.,

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

The Hospital’s claim does not seek to enforce benefits

or to enforce or clarify rights under the ERISA plan, and is

therefore not subject to complete preemption. The Hospital

alleges that its contract with CCN Managed Care names UABT as a

payor and includes terms that govern how UABT should reimburse

the Hospital for the treatment provided. This agreement between

a health care provider and an insurance company is separate and

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Defendant argues that the fact that the contract at 2

issue incorporates the ERISA plan by reference necessarily means

that this claim is “derived directly from UABT’s ERISA plan” and

is therefore preempted. However, “the bare fact that [an ERISA]

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.” Blue Cross of Cal. v. Anesthesia Care

Assocs. Med. Group, Inc., 187 F.3d 1045, 1051 (9th Cir. 1999).

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distinct from the ERISA plan. It is not a claim by an individual

plan beneficiary seeking to recover benefits under the terms of

the ERISA plan. Although defendant contends that there has been 2

an assignment of rights from the plan beneficiary to the Hospital

such that this claim is based on the plan beneficiary’s interest

in recovering benefits under the ERISA plan, there are no

allegations in the complaint that would support such a claim. 

Additionally, on a motion to dismiss, the court must

take the allegations in the complaint as true, Scheuer, 416 U.S.

at 236, and therefore can give no credence to defendant’s

assertion that an assignment of rights may have occurred. The

allegations in the complaint clearly indicate that plaintiff is

bringing suit for breach of a contract that was distinct from the

ERISA plan. 

Defendant further contends that the Hospital does not

have standing to bring this suit because the contract it relies

upon is between the Hospital and CCN Managed Care, and not

between the parties to this suit. The fact that the agreement is

directly between the Hospital and CCN Managed Care does not

necessarily preclude enforcement of the agreement against

defendant. Defendant is expressly mentioned in the agreement as

a payor. More significantly, however, whether or not the

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Hospital has standing to bring suit regarding a purely state law

claim is not something this court would have jurisdiction to

consider. Defendant’s reasoning ignores the fundamental and

threshold fact that jurisdiction flows from the claims in the

complaint. See generally Merrill Dow, 478 U.S. 804; Franchise

Tax Bd., 463 U.S. 1. The fact that plaintiff may not be a party

to the contract affects only whether suit in state court is

appropriate--it does not generate jurisdiction in federal court.

Motion to Remand

Remand of a case to state court after removal is

appropriate when there are no grounds for federal jurisdiction or

removal was procedurally improper. 28 U.S.C. § 1447(c). Any

questions regarding the propriety of removal are resolved in

favor of the party moving for remand. Matheson v. Progressive

Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003) (“Where

doubt regarding the right to removal exists, a case should be

remanded to state court.”). Additionally, “[t]he burden of

establishing federal jurisdiction is placed on the party seeking

removal . . . .” Salveson v. W. States Bankcard Ass’n, 731 F.2d

1423, 1426 (9th Cir. 1984) (citations omitted). 

It follows from the discussion above that this court

lacks jurisdiction over the claims in plaintiff’s complaint. 

Plaintiff’s state law claim is not subject to complete preemption

because the complaint does not seek to enforce benefits or to

enforce or clarify rights under the ERISA plan. Further, the

fact that the contract incorporates the ERISA plan by reference

does not require that the plaintiff’s state law claim be

extinguished and replaced by ERISA. Blue Cross of Cal., supra. 

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IT IS THEREFORE ORDERED that defendant United

Agricultural Benefit Trust’s motion to dismiss be, and the same

hereby is, DENIED;

AND IT IS FURTHER ORDERED that this action be, and the

same hereby is, REMANDED to the Superior Court of the State of

California, in and for the County of San Joaquin, Manteca Branch.

DATED: October 30, 2006

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