Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02737/USCOURTS-caed-2_06-cv-02737-0/pdf.json

Parties Involved:
ACS Benefit Services, Inc.
Defendant
ACS Consulting
Defendant
Redding Medical Center, Inc.
Plaintiff

Document Text:

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L. R. 78-230(h).

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

REDDING MEDICAL CENTER, INC.

Plaintiff,

v. NO. CIV. S-06-02737 FCD GGH

MEMORANDUM AND ORDER

ACS BENEFIT SERVICES, INC.,

dba ACS CONSULTING; and DOES 1

through 25, Inclusive,

Defendants.

----oo0oo----

This matter is before the court on defendant’s motion to

dismiss plaintiff’s complaint pursuant to Federal Rule of Civil

Procedure 12(b)(6). For the reasons set forth below,1

defendant’s motion is DENIED.

/////

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

BACKGROUND

Plaintiff, Redding Medical Center (“the Hospital”),

initially brought this action for breach of contract on October

30, 2006, in the Superior Court of the State of California for

the County of Shasta. Defendant removed the case to this court

on the bases of diversity jurisdiction and original jurisdiction

on December 4, 2006. 

Plaintiff alleges that it entered into an agreement (“the

Agreement”) with Beech Street Corporation (“Beech Street”) on

October 1, 1990. (Pl.’s Compl. (“Compl.”), filed December 4,

2006, ¶ 3). Beech Street routinely enters into contracts with

providers on behalf of third party administrators who act as

“Payors.” (Id.) Plaintiff alleges that defendant ACS is a Payor

within the definition provided in the Agreement. (Id. ¶ 4). The

Agreement states that providers, such as the Hospital, will

supply services at discounted rates to the beneficiaries of plans

administered by the third party administrators such as ACS. (Id.

¶ 5). The Agreement also provides that the third party

administrators, or Payors, must reimburse the Hospital at the

specified rates. (Id.) If the Payor does not reimburse the

Hospital within 30 days of receipt of a claim, the Agreement

provides that the Hospital may revoke the discount and the Payor

will be charged the Hospital’s usual and customary rates. (Id. ¶

6). 

Plaintiff alleges that a beneficiary of a plan administered

by ACS (“the Patient”) was treated at the Hospital from July 31,

2001 through August 31, 2001. (Id. ¶ 7). Further, plaintiff

alleges that ACS agreed to pay the Hospital for the services

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

rendered at discounted rates pursuant to the Agreement. (Id. ¶

8). The Hospital provided services to the Patient and issued a

bill totaling $423,199.30 after application of the discount. 

(Id.) Plaintiff alleges that ACS paid a portion of the amount

owed, but breached the Agreement by failing to pay the bill in

full. (Id. ¶ 9). 

On December 11, 2006, defendant filed a motion to dismiss

plaintiff’s sole claim for breach of contract pursuant to Federal

Rule of Procedure 12(b)(6). Defendant asserts that plaintiff has

failed to properly allege that ACS is a party to any contract

with plaintiff. Defendant also asserts that the claim must be

dismissed because it is preempted by the Employee Retirement

Income Security Act (“ERISA”). 

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int'l Ass'n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Given that the complaint is construed favorably to the

pleader, the court may not dismiss the complaint for failure to

state a claim unless it appears beyond a doubt that the plaintiff

can prove no set of facts in support of the claim which would

entitle him or her to relief. Conley v. Gibson, 355 U.S. 41, 45

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

(1957); NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th

Cir. 1986).

Nevertheless, it is inappropriate to assume that plaintiff

“can prove facts which it has not alleged or that the defendants

have violated the . . . laws in ways that have not been alleged.” 

Associated Gen. Contractors of Calif., Inc. v. Calif. State

Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the

court “need not assume the truth of legal conclusions cast in the

form of factual allegations.” United States ex rel. Chunie v.

Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986).

ANALYSIS

I. Failure to State a Claim

Defendant contends that plaintiff has failed to state a

claim for breach of contract against ACS because it failed to

allege a contract between the Hospital and ACS. Defendant argues

that the agreement plaintiff attached to the complaint is an

agreement between Beech Street and the Hospital. (Def.’s Mem. of

P. & A. in Supp. of Mot. to Dismiss (“Mot. to Dismiss”), filed

December 11, 2006, at 4). Further, defendant argues that the

Agreement does not specifically mention ACS as a party to the

Agreement. (Id.) 

Plaintiff alleges in the complaint that the Hospital entered

into the Agreement with Beech Street, which is in the business of

entering into contracts with providers on behalf of Payors, who

are obligated by the Agreement. (Compl. ¶ 3). Plaintiff also

alleges that “ACS is a Payor within the meaning set forth in the

Agreement.” (Id. ¶ 4). Further, plaintiff alleges that “the

Agreement provides that ACS is obligated to comply with the terms

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2 Plaintiff has also set forth several theories as to why

contractual terms may be extended to non-signatories such as ACS. 

Because plaintiff has sufficiently alleged for the purposes of a

motion to dismiss that, as a Payor, defendant was bound by the

Agreement, the court does not reach the merits of those

arguments. However, to the extent such arguments are applicable

and properly made, this does not preclude plaintiff from

asserting these theories in the future. 

5

of the Agreement, including reimbursing the Hospital for such

hospital services at the discounted rates set forth in the

Agreement.” (Id. ¶ 5). By alleging that ACS is a Payor and that

Payors are bound by the Agreement, plaintiff has sufficiently

alleged that ACS is bound by the Agreement.2

The crux of defendant’s argument is that the allegations in

the complaint are not specific enough and that the alleged Payor

Agreement between Beech Street and ACS is not supported by

evidence. (See Def.’s Reply, filed January 19, 2007, at 5-6). 

Rule 8(a) sets forth a liberal notice pleading standard which

does not require plaintiff to provide evidence in support of his

allegations made in the complaint. “[A]ll the Rules require is

‘a short and plain statement of the claim’ that will give the

defendant fair notice of what the plaintiff's claim is and the

grounds upon which it rests.” Fed. R. Civ. P. 8(a); see Conley

v. Gibson, 355 U.S. 41, 47 (1957). At the pleading stage, the

court must accept well-pleaded allegations as true and draw all

reasonable inferences therefrom. Plaintiff has alleged that, as

a Payor, ACS is bound by the Agreement between the Hospital and

Beech. Nothing in the attached Agreement contradicts this

allegation. Therefore, defendant’s motion to dismiss plaintiff’s

claim for failure to allege that there was a contract between ACS

and the Hospital is DENIED. 

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 The court does not address whether it could consider

the plan if it were attached to defendant’s motion.

6

II. ERISA Preemption

Defendant contends that plaintiff’s complaint is preempted

by federal law because the plan at issue is an employee welfare

and benefit plan governed by ERISA. Under section 1144(a) of

ERISA, the statute’s provisions “shall supersede any and all

state laws insofar as they may now or hereafter relate to any

employee benefit plan” as defined by ERISA. 29 U.S.C. § 1144(a). 

This preemption provision may be invoked only if 1) the relevant

plan is governed by ERISA and 2) the state law claims “relate to

the ERISA plan. 29 U.S.C. § 1144(a); Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 96-98 (1983).

An “employee welfare benefit plan” regulated by ERISA is

“any plan, fund or program . . . established or maintained by an

employer” to provide its participants “benefits in the event of

sickness, accident, disability, death or unemployment . . . .” 29

U.S.C. § 1002(1). The United States Supreme Court has held that

a state law claim is “related to” an ERISA plan if the claim “has

a connection with or reference to such a plan.” Shaw, 463 U.S.

at 96-97. 

At this stage in the litigation, the court cannot determine

whether the preemption clause of ERISA applies to plaintiff’s

claim. The court cannot assess whether the relevant plan is

governed by ERISA because neither plaintiff nor defendant has

submitted the plan to the court.3 As plaintiff notes in its

Opposition to the Motion to Dismiss, “[n]othing in the Complaint,

in the attached exhibits, or in any other matter of which the

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

court may take judicial notice demonstrates that this dispute is

governed by ERISA.” (Pl.’s Opp’n to Mot. to Dismiss, filed

January 3, 2007, at 7). Therefore, defendant’s motion to dismiss

plaintiff’s breach of contract claim based upon the assertion

that it is preempted by ERISA is DENIED. 

CONCLUSION

 For the reasons stated herein, defendant’s motion to dismiss

plaintiff’s complaint pursuant to Rule 12(b)(6) is DENIED.

IT IS SO ORDERED.

DATED: February 2, 2007

Case 2:06-cv-02737-FCD-GGH Document 15 Filed 02/02/07 Page 7 of 7