Judge: Daniel M. Crowley, Case: 22STCV18865, Date: 2024-11-08 Tentative Ruling

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Case Number: 22STCV18865    Hearing Date: November 8, 2024    Dept: 71

Superior Court of California

County of Los Angeles

DEPARTMENT 71

TENTATIVE RULING

Defendant Stroock & Stroock & Lavan, LLP’s demurrer to Plaintiff Healthcare Ally Management of California, LLC’s second amended complaint is overruled.

Defendant Stroock & Stroock & Lavan, LLP (“Stroock”) (“Defendant”) demurs to Plaintiff Healthcare Ally Management of California, LLC’s (“HAMOC”) (“Plaintiff”) second amended complaint (“SAC”) on the grounds that it fails to state facts sufficient to constitute a cause of action according to Bristol SL Holdings, Inc. v. Cigna Health & Life Insurance Co. (9th Cir. 2024) 103 F.4th 597.  (Notice of Demurrer, pg. 1; C.C.P. §430(e).)[1]

Request for Judicial Notice

          Defendant’s 9/4/24 request for judicial notice of the opinion issued in Healthcare Ally Management of California, LLC v. Arup USA, Inc. (C.D. Cal. Aug. 26, 2024) No. 2:23-cv-05876-JLS (D-RJN, Exh. A), is granted.

          Defendant’s 11/1/24 request for judicial notice of the (1) opinion issued in Keith Feder, M.D., Inc. v. National Railroad Passenger Corp. (C.D. Cal. Oct. 29, 2024) No. 2:24-cv-8084-RGK (D-RJN, Exh. A); and (2) Appellant’s Opening Brief in Bristol SL Holdings, Inc. v. Cigna Health & Life Insurance Co. (9th Cir. Apr. 17, 2023) No. 23-55019 (D-RJN, Exh. B), is granted, however the Court does not consider the truth of the matters asserted in D-RJN, Exh. B.

Meet and Confer

Before filing a demurrer, the demurring party must meet and confer in person, by telephone, or by video conference with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer.  (C.C.P. §430.41(a), emphasis added.)

The demurring party shall file and serve with the demurrer a declaration stating either of the following: (A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer. (B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.  (C.C.P. §430.41(a)(3), emphasis added.)

Defendant’s counsel failed to submit a meet and confer declaration in violation of C.C.P. §430.41(a).  However, failure to sufficiently meet and confer is not grounds to overrule or sustain a demurrer.  (C.C.P. §430.41(a)(4); Dumas v. Los Angeles County Board of Supervisors (2020) 45 Cal.App.5th 348, 355; Olson v. Hornbrook Community Services District (2019) 33 Cal.App.5th 502, 515.)  Therefore, the Court will consider Defendant’s demurrer.

Procedural Background

          Plaintiff filed its initial Complaint on June 9, 2022, against Defendant.

          On July 14, 2022, Defendant removed the instant case to the U.S. District Court for the Central District of California, Western Division (“C.D. Cal.”).  (7/15/22 Notice of Removal.)

          On February 13, 2023, Plaintiff filed the operative SAC alleging three causes of action against Defendant: (1) negligent misrepresentation; (2) promissory estoppel; and, in the alternative, (3) recovery of benefits under 29 U.S.C. §1132(a)(1)(B).

On July 12, 2023, C.D. Cal. remanded the instant matter to this Court.  (7/18/23 Notice of Remand.)  The Court ruled on Defendant’s motion to dismiss, granting the motion without leave to amend as to the ERISA claim and remanded the state law claims to this Court.  (7/18/23 Notice of Remand at pg. 2 of 22.)  Therefore, only the 1st and 2nd causes of action remain.

Defendant filed the instant demurrer on September 3, 2024.  Plaintiff filed its opposition on October 28, 2024.  Defendant filed its reply on November 1, 2024.

Summary of Allegations

Plaintiff alleges this action arises from Defendant’s failure to make proper payments and/or underpayments to La Peer Surgery Center (“Medical Provider”).  (SAC ¶12.) 

Plaintiff alleges that on June 17, 2015, Medical Provider entered into an agreement with it.  (SAC ¶1.)  Plaintiff alleges the agreement provided that Medical Provider could assign any past, present, or future unpaid or underpaid bills to Plaintiff by sending it a copy of the unpaid or underpaid bill.  (SAC ¶1.)  Plaintiff alleges the agreement also provided that once an underpaid or unpaid bill was assigned to Plaintiff, it had the right to take any legal action necessary including the filing of a lawsuit to attempt to recover an unpaid or underpaid bill.  (SAC ¶1.) 

Plaintiff alleges on July 17, 2019, Patient received a surgical procedure from Medical Provider.  (SAC ¶33.)  Plaintiff alleges that on July 12, 2019, Medical Provider’s employee, Yuriko H., obtained representations from Aetna and Defendant’s representative, Sara, regarding the way Medical Provider would be paid for services to determine whether or not to provide services.  (SAC ¶34.)  Plaintiff alleges Medical Provider asked: what is the Patient’s responsibility versus Defendant’s responsibility for paying for medical services?  (SAC ¶34.) 

Plaintiff alleges that Aetna on behalf of Defendant represented to Medical Provider that Patient’s deductible is and was $1,000.00 and Patient’s maximum out of pocket (“MOOP”) expense is and was $4,000.00 and that to date for that calendar year Patient had paid $4,000.00.  (SAC ¶35.) 

Plaintiff alleges Medical Provider asked: does Defendant pay based on usual, reasonable, customary and allowed (“UCR”) for procedure codes 45378, 43239, J21.0, R19.4, R12 and other similar codes within the same family?  (SAC ¶36.) 

Plaintiff alleges Aetna on behalf of Defendant represented to Medical Provider that for services in connection with procedure codes 45378, 43239, J21.0, R19.4, R12, Defendant pays the UCR rate.  (SAC ¶37.)

Plaintiff alleges Medical Provider asked: does Defendant use a Medicare Fee Schedule to pay for procedure codes 45378, 43239, J21.0, R19.4, R12?  (SAC ¶38.)

Plaintiff alleges Aetna Life Insurance Co. (“Aetna”) on behalf of Defendant represented to Medical Provider that for services in connection with procedure codes 45378, 43239, J21.0, R19.4, R12, Defendant’s payment would not be based on the Medicare Fee Schedule.  (SAC ¶39.)

Plaintiff alleges on information and belief that Aetna is and was Defendant’s agent and representative in connection with stating the manner of payment for medical services and providing other administrative services relating to the Patient’s and Defendant’s health plan.  (SAC ¶3.)

Plaintiff alleges Defendant further represented that no authorization required was for the procedure codes.  (SAC ¶40.)

Plaintiff alleges all the information obtained was documented by Medical Provider as part of Medical Provider’s office policy and practice.  (SAC ¶41.)  Plaintiff alleges at no time prior to the provision of services to Patient by Medical Provider was Medical Provider advised that Patient’s policy or certificate of insurance was subject to certain exclusions, limitations or qualifications, which might result in denial of coverage, limitation of payment or any other method of payment unrelated to the UCR rate.  (SAC ¶42.) 

Plaintiff alleges Aetna on behalf of Defendant did not refer to any other portion of Patient’s plan that would put Medical Provider on notice of any reduction in the originally stated payment percentage.  (SAC ¶43.)

Plaintiff alleges that despite having Aetna make these representations on its behalf, Defendant and Aetna knew that they would not be paying Medical Provider at the UCR rate.  (SAC ¶44.)  Plaintiff alleges despite having Aetna make these representations on its behalf, Defendant and Aetna knew that they would be paying Medical Provider at a Medicare rate.  (SAC ¶44.)

Plaintiff alleges Medical Provider was never provided with a copy of Patient’s plan or even a portion of Patient’s plan by Defendant or Patient, and as a result, Medical Provider could not even make itself aware of any reduction of the payment amount.  (SAC ¶45.)

Plaintiff alleges Medical Provider relied and provided services solely based on Aetna’s representations, promises, and statements on behalf of Defendant.  (SAC ¶46.)  Plaintiff alleges the statements had no relation to Defendant and Patient’s plan document, as the statements may or may not have been based in the Defendant or Patient’s plan documents but bore no consideration when Medical Provider agreed to provide medical services.  (SAC ¶46.)  Plaintiff alleges Medical Provider took Aetna’s representations on behalf of Defendant at face value and provided services based solely on those promises and representations.  (SAC ¶46.)

Plaintiff alleges on September 30, 2021, Medical Provider assigned Patient T.M.’s (“Patient”) underpaid/unpaid bill including the right to file a lawsuit to Plaintiff by sending via email a copy of Patient’s underpaid/unpaid bill to Plaintiff.  (SAC ¶1.)  Plaintiff alleges Patient is a member and enrollee of Defendant’s health insurance policy.  (SAC ¶1.) 

Summary of Demurrer

Defendant demurs to the SAC on the basis it is preempted by ERISA.  (Demurrer, pg. 5.)[2]

Failure to State a Cause of Action

          Entire SAC

          Defendant’s argument that its demurrer to Plaintiff’s SAC on the basis that all state claims are preempted by ERISA is unavailing and unsupported by California case law.  In Morris B. Silver M.D., Inc. v. International Longshore & Warehouse Union – Pacific Maritime Association Welfare Plan (2016) 2 Cal.App.5th 793, the Court of Appeal distinguished cases, like the instant one, from others subject to ERISA preemption.  The Morris B. Silver Court stated:

Because third-party providers are not parties to the bargain “struck in ERISA” between plaintiffs and employers, the court in [Memorial Hospital System v. Northbrook Life Insurance Co. (5th Cir. 1990) 904 F.2d 236, the leading case holding a hospital’s claim for deceptive and unfair practices arising from representations regarding coverage was not preempted and articulating a two-factor test] could not “believe that Congress intended the preemptive scope of ERISA to shield welfare plan fiduciaries from the consequences of their acts toward non-ERISA health care providers when a cause of action based on such conduct would not relate to the terms or conditions of a welfare plan, nor affect—or affect only tangentially—the ongoing administration of the plan.”

(Morris B. Silver M.D., Inc. v. International Longshore & Warehouse etc. (2016) 2 Cal.App.5th 793, 805, quoting Memorial Hospital System v. Northbrook Life Insurance Co. (5th Cir. 1990) 904 F.2d 236, 249-250.)  The Morris B. Silver Court adopted the test enumerated in Memorial Hospital System and concluded the Plaintiff’s contract and quasi-contract claims were not preempted because the claims were “predicated on a garden-variety failure to make payment as promised for services rendered.”  (Morris B. Silver M.D., Inc., 2 Cal.App.5th at pg. 807.)  The Morris B. Silver Court acknowledged that “the claims would not exist but for an ERISA plan and are predicated on somebody’s interpretation of the plan. But the fact an ERISA plan is an initial step in the causation chain, without more, is too remote of a relationship with the covered plan to support a finding of preemption.”  (Id., citing Dishman v. UNUM Life Ins. Co. of America (9th Cir. 2001) 269 F.3d 974, 984 [“Obviously, at some level Dishman’s tort claim relates to the plan. That cannot be denied. But that cannot be the end of the analysis, either, for as we know, ‘[p]re-emption does not occur . . .  if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability.’”].)

          Here, as in Morris B. Silver, Plaintiff alleges that Aetna on behalf of Defendant represented and promised that payment is based on UCR and not Medicare as the basis for its claims for promissory estoppel and negligent misrepresentation.  (SAC ¶¶36-39.)  The representations alone can and do serve as the basis for Plaintiff’s claims.  (SAC ¶46.)

          Defendant’s reliance on Bristol SL Holdings, Inc. v. Cigna Health & Life Insurance Co. (9th Cir. 2024) 103 F.4th 597 is unavailing for several reasons.  First, Morris B. Silver is binding on this Court, whereas Bristol is not.  Second, the claims at issue in Bristol are distinguishable from those asserted in the SAC.  Bristol discusses state law contract claims; the instant case discusses misrepresentation and tort claims.  (Bristol SL Holdings, Inc. v. Cigna Health & Life Insurance Co. (9th Cir. 2024) 103 F.4th 597, 602.)  Finally, the plaintiff in Bristol admitted that it needed the ERISA plan to have a claim.  (Id. at pg. 603.)  Here, the Plaintiff specifically alleges that its state law claims are not in any way based on the ERISA plan.  (SAC ¶46 [“Medical Provider relied and provided services solely based on Aetna’s representations, promises and statements”].)

          Accordingly, Defendant’s demurrer to Plaintiff’s SAC is overruled.

Conclusion

Defendant’s demurrer to Plaintiff’s SAC is overruled.

Moving Party to give notice.

Dated:  November _____, 2024