Sanjiv Goel M.D., Inc. v. Cigna Healthcare of California, Inc.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

SANJIV GOEL M.D., INC., 19-CV-03356-DSF (PLAx)

Plaintiff,

Order GRANTING Plaintiffs

Vv. Motion to Remand (Dkt. 9)

CIGNA HEALTHCARE OF

CALIFORNIA, INC., et al.,

Defendants.

Defendants Cigna Healthcare of California, Inc. (Cigna

California) and Cigna Health and Life Insurance Company

(CHLIC) (collectively, Defendants) removed this case based on

diversity and federal question jurisdiction. Dkt. 1 (Notice).

Plaintiff Sanjiv Goel M.D., Inc. (Plaintiff) moves for remand. Dkt.

9 (Mot.). Plaintiff's Motion is GRANTED.

I. FACTUAL BACKGROUND

Plaintiff provides emergency medical services. Dkt. 1-1

(Compl.) § 1. After rendering such services to four patients

insured by Defendants, Plaintiff submitted claims for

reimbursement. Id. § 10. Defendants reimbursed Plaintiff

$32,089.69 for those services but failed to reimburse the

remaining $387,412.23 Plaintiff claims it is owed. Id. § 15.

II. DISCUSSION

A. Diversity Jurisdiction

Federal courts have diversity jurisdiction where the amount

in controversy exceeds $75,000 and the action is between citizens

of different states. 28 U.S.C. §§ 1332, 1441.1 Defendants do not

contest that Cigna California and Plaintiff are both citizens of

California, but claim Cigna California was fraudulently joined.2

For purposes of diversity jurisdiction, the Court “may

disregard the citizenship of a non-diverse defendant who has been

fraudulently joined.” Grancare, LLC v. Thrower, 889 F.3d 543,

548 (9th Cir. 2018). A non-diverse defendant is fraudulently

joined “[i]f the plaintiff fails to state a cause of action against [the]

resident defendant, and the failure is obvious according to the

settled rules of the state.” Morris v. Princess Cruises, Inc., 236

F.3d 1061, 1067 (9th Cir. 2001) (first alteration in original)

(quoting McCabe v. Gen. Foods Corp., 811 F.2d 1336, 1339 (9th

Cir. 1987)). “[T]he test for fraudulent joinder and for failure to

state a claim under Rule 12(b)(6) are not equivalent.” Grancare,

889 F.3d at 549. Instead, “the standard is similar to the ‘wholly

insubstantial and frivolous’ standard for dismissing claims under

Rule 12(b)(1) for lack of federal question jurisdiction.” Id. In

evaluating a claim of fraudulent joinder, “a federal court must find

that a defendant was properly joined and remand the case to state

court if there is a ‘possibility that a state court would find that the

complaint states a cause of action against any of the [non-diverse]

defendants.’” Id. (alteration and emphasis in original) (quoting

Hunter v. Philip Morris USA, 582 F.3d 1039, 1046 (9th Cir.

2009)). In this inquiry, “the district court must consider . . .

1 The parties do not dispute that the amount in controversy exceeds $75,000.

2 Defendants’ Request for Judicial Notice is denied as moot.

whether a deficiency in the complaint can possibly be cured by

granting the plaintiff leave to amend.” Id. at 550.

In its Complaint, Plaintiff does not differentiate between

CHLIC and Cigna California. See Compl. ¶¶ 2-3 (defining CHLIC

and Cigna California as “Cigna” and Cigna and the Doe

defendants as “Cigna” or “Defendants”). Plaintiff alleges that

CHLIC and Cigna California “coordinate their efforts, utilize the

same employees and assets, [and] have actual or ostensible

authority to, and do in fact, act through one another, and

otherwise function as a united whole.” Id. ¶ 3. Plaintiff further

alleges that CHLIC and Cigna California market and present

themselves to members and providers as “a single unified entity

under the ‘Cigna’ marketing brand name,” id., and “are the alter

egos of each other,” Mot. at 6; see also Compl. ¶ 8.

Defendants argue that Cigna California was fraudulently

joined because CHLIC, and not Cigna California, “administered or

insured medical benefits for the four individuals who received the

treatment for which plaintiff alleges it was undercompensated”

and “Cigna California was [not] responsible for payment of the

contested claims.” Dkt. 12 (Opp’n) at 7-8. Defendants also

dispute that Cigna California is the alter ego of CHLIC. Id. at 8-9.

As to the first point, Defendants submitted a declaration

from Emily Russell, an operations advisor at CHLIC, asserting

that Cigna California “is not the insurer, plan sponsor, plan

administrator, or claims administrator” for any of the four

patients’ health plans. Dkt. 12-3 (Russell Decl.) at ¶¶ 1, 6, 11, 16,

20. Defendants also submitted a declaration from William S.

Jameson, Managing Counsel for CHLIC and Cigna California,

stating that Cigna California “had no responsibility for processing,

adjudicating, or denying the claims for the services as issue in this

action.” Dkt. 12-2 (Jameson Decl.) ¶¶ 1, 10. Although this

evidence may cast doubt on the viability of Plaintiff’s claims

against Cigna California, “a denial, even a sworn denial, of

allegations does not prove their falsity.” Grancare, 889 F.3d at

551.

As to the second point, Jameson declares that neither

CHLIC nor Cigna California is “a parent company or subsidiary of

the other,” “each independently decide[s] what products they will

offer” and “utilize[s] a different claims platform and a different

claims process,” they “do not employ the same personnel,”3 have

“independent boards of directors,” and “generate separate

financial statements.” Jameson Decl. ¶¶ 6-8. These assertions

cast doubt on the viability of Plaintiff’s alter ego theory, but do not

demonstrate that Cigna California could not possibly be liable.

“[I]t is conceivable that a corporate family could have formal

delineations of responsibilities that are not followed in practice.”

Jadali v. Cigna Health & Life Ins. Co., 3:19-cv-00996-WHO, 2019

WL 1897481, at *3 (N.D. Cal. Apr. 29, 2019). The Court

recognizes that the Complaint as it stands provides minimal

factual allegations to support a claim of alter ego liability, but the

Court finds such deficiency could be cured through amendment.

Because Cigna California was not fraudulently joined,

diversity jurisdiction did not exist at the time of removal.

B. Federal Question Jurisdiction

For the Court to have federal question jurisdiction, the claim

must arise under federal law. 28 U.S.C. § 1331. “Ordinarily,

determining whether a particular case arises under federal law

turns on the ‘well-pleaded complaint’ rule.” Aetna Health Inc. v.

Davila, 542 U.S. 200, 207 (2004) (quoting Franchise Tax Bd. of

State of Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463 U.S.

3 That is, apparently, apart from Mr. Jameson, who is Managing Counsel for

both companies. Jameson Decl. ¶ 1.

1, 9-10 (1983)). However, there is an exception to the well-pleaded

complaint rule for federal statutes that completely preempt a

plaintiff’s state law claim. Id. (citing Beneficial Nat. Bank v.

Anderson, 539 U.S. 1, 8 (2003)). Here, Defendants assert that

Plaintiff’s state law claims are completely preempted under

ERISA.

The Supreme Court has established a two-prong test to

determine whether a state law cause of action is completely

preempted by ERISA: (1) “if an individual, at some point in time,

could have brought his claim under” 29 U.S.C. § 1132(a)(1)(B)4

and “there is no other independent legal duty that is implicated by

defendant’s actions.” Id. at 210. Both prongs must be satisfied for

preemption to apply. Marin Gen. Hosp. v. Modesto & Empire

Traction Co., 581 F.3d 941, 947 (9th Cir. 2009).

1. Davila’s First Prong

Because Davila’s second prong is clearly not met, the Court

need not analyze the first prong. See Hansen v. Grp. Health

Coop., 902 F.3d 1051, 1059 (9th Cir. 2018).

2. Davila’s Second Prong

As Defendants concede, state law claims can survive

preemption if they are based on “an extraneous promise that

imposed an obligation on the defendant independent of the terms

of the ERISA plan.” Opp’n at 14. Under Davila’s second prong,

“[t]he relevant inquiry . . . focuses on the origin of the duty, not its

relationship with health plans.” Hansen, 902 F.3d at 1060.

4 That provision states: “A civil action may be brought . . . by a participant or

beneficiary . . . 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.”

Therefore, a duty can be “independent” under Davila even if “it

relies on the existence of a health benefit plan.” See id.5

a. Statutory Claims (First and Fifth Causes of

Action)

In Davila, plaintiffs asserted claims under a state health

care statute that imposed liability on managed care entities for

damages proximately caused by a failure to exercise ordinary care.

542 U.S. at 212. However, because the statute included a safe

harbor for damages caused by failure to provide uncovered

treatment, “interpretation of the terms of respondents’ benefit

plans forms an essential part of their [state statutory] claim, and

[statutory] liability would exist here only because of petitioners’

administration of ERISA-regulated benefit plans.” Id. at 213. In

other words, liability under the statute depended on whether

coverage was rightfully denied under the plan.

By contrast, the California statute at issue here, as applied

to health care providers, “does impose an independent coverage

requirement, mandating that health plans” reimburse providers

for emergency services provided to stabilize a patient. See

5 For this reason, Defendants’ reliance on pre-Hansen district court cases that

hold otherwise are misplaced. Opp’n at 16-17 (first citing In re WellPoint,

Inc. Out-of-Network UCR Rates Litig., 903 F. Supp. 2d 880, 930 (C.D. Cal.

2012) (“[A]ny obligation that WellPoint had to pay for emergency services is

entirely dependent on Dr. Schwendig’s patients . . . being enrolled in a

qualifying benefits plan”); then citing Melamed v. Blue Cross of California,

No. CV 11-4540 PSG FFMX, 2011 WL 3585980, at *8 (C.D. Cal. Aug. 16,

2011), aff’d, 557 F. App’x 659 (9th Cir. 2014) (“[A]ny obligation that

Defendants had to pay for emergency services is entirely dependent on

Plaintiffs’ patients . . . being enrolled in a qualifying benefits plan.”)).

Hansen, 902 F.3d at 1060. Unlike Davila where “the state law

applied only when a benefit plan covered treatment,” the state law

here “applies to how all benefit plans cover” stabilizing emergency

services. See id. “[B]ecause [the statutory duty] does not

piggyback on, and is thus independent of, the specific rights

‘established by the benefit plans[,]’” the second Davila prong is not

met. Id. (quoting Davila, 542 U.S. at 213); see also John Muir

Health v. Cement Masons Health & Welfare Tr. Fund for N.

California, 69 F. Supp. 3d 1010, 1020 (N.D. Cal. 2014) (California

Health and Safety Code § 1371.4(b) “requires payment

irrespective of the enrollee’s plan determination.”).6

Defendants also assert that this claim is preempted because

§ 1371.4 does not apply to self-funded health care plans, and at

least one of the patients had a self-funded plan, Opp’n at 15; Defs.’

Supp. Br. at 9, and that there is no private right of action to

enforce § 1371.4(b), Opp’n at 16. However, these arguments

present defenses to Plaintiff’s claim that can be raised on

demurrer; they are not relevant to the Court’s preemption

analysis. See Catholic Healthcare W.-Bay Area v. Seafarers

Health & Benefits Plan, 321 F. App’x 563, 565 (9th Cir. 2008)

(“That [defendant] may succeed on the merits does not alter the

fact that [plaintiff’s] Complaint asserts only non-preempted state

law claims.”).

Therefore, the First and Fifth Causes of Action are not

completely preempted by ERISA.

6 The Court also is not persuaded by Defendants’ argument that Cleghorn v.

Blue Shield of California, 408 F.3d 1222 (9th Cir. 2005) mandates preemption

here.

b. Contract-based Claims (Second, Third, Fourth

and Sixth Causes of Action)

As described above, in support of its contract-based claims,

the Complaint alleges independent “oral representations,” an

“implied contract based upon prior dealing,” and implied

“authorization and approval for the medical care and treatment of

their member patients.” Compl. ¶¶ 46, 54, 77. The claims in

Sobertec LLC v. UnitedHealth Grp., Inc., No.

SACV191206JVSMRWX, 2019 WL 4201081, at *1 (C.D. Cal. Sept.

5, 2019) were similar: “Plaintiffs relied on . . . benefits

verifications, authorizations and related representations from

Defendants, and this course of dealing generally, consistent with

industry custom and practice, in agreeing to provide care to

Defendants’ insureds.” The court held that the plaintiffs’ claims

were not preempted because they were “not based on an obligation

under an ERISA plan, but rather on oral representations and

implied contracts, and the state-law relied upon does not apply

only to ERISA plans.”7 Id. at *4. The same is true here.

Defendants’ conclusory assertions that “Cigna’s obligations

were governed only by the relevant ERISA plans and the

applicable law,” Opp. at 14, and “the only reason plaintiff can

7 In the cases on which Defendants rely, there were no factual allegations

distinct from an ERISA claim. See, e.g., Sarkisyan v. CIGNA Healthcare of

California, Inc., 613 F. Supp. 2d 1199, 1208 (C.D. Cal. 2009) (“Plaintiffs’ only

relevant connection to CIGNA with respect to these three claims is CIGNA’s

partial administration of the Sonic Benefit Plan” and claims turn on whether

“CIGNA’s administration of the Sonic Benefit Plan was unlawful”);

WellPoint, 903 F. Supp. 2d at 930 (“Dr. Schwendig’s UCL claim is based on

the same allegations as his ERISA claim for benefits”); Melamed, 2011 WL

3585980, at *7 (Plaintiff’s claims were based on the “‘usual and customary’

rate of services performed to Defendants’ members as promised in the ERISA

plan.”) (emphasis added)).

pursue payment from CHLIC is because of the patients’ ERISA

plans,” Defs.’ Supp. Br. at 8, “utterly disregard[] the allegations

and case theory of Plaintiff,” see John Muir, 69 F. Supp. 3d at

1018.8 It is true that the factual allegations that form the basis

for these independent duties are somewhat lacking in detail, but

because there is a “strong presumption against removal

jurisdiction . . . the court resolves all ambiguity in favor of remand

to state court.” Hunter, 582 F.3d at 1042.

Plaintiff has alleged that his claims stem from independent

oral promises, course of dealing, and California statutes. Those

allegations are sufficient to establish a duty independent of

ERISA, and therefore Plaintiff’s state law claims are not

completely preempted. The Court lacks federal question

jurisdiction over Plaintiff’s claims.

C. Attorney’s Fees

“An order remanding a case may require payment of just costs

and actual expenses, including attorney fees, incurred as a result

of removal.” 28 U.S.C. § 1447(c). “Absent unusual circumstances,

courts may award attorney’s fees under § 1447(c) only where the

removing party lacked an objectively reasonable basis for seeking

removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141

(2005). Although unsuccessful, the removal was objectively

reasonable. Plaintiff’s request for fees and costs is DENIED.

8 Defendant also misstates the Complaint by omitting one of the bases on

which Plaintiff purportedly “concede[d]” its expectation for payment was

based. Opp’n at 15 (omitting “Cigna’s promise to make payments on behalf of

its insured patients”).

III. CONCLUSION

The motion to remand is GRANTED. The case is REMANDED

to the Superior Court of California, County of Ventura.

IT IS SO ORDERED.

Date: October 9, 2019 □□□ A. Jere

Dale S. Fischer

United States District Judge

WN