Borreani v. Kaiser Found. Hosps.

NATALIE BORREANI, et al., Plaintiffs,

v.KAISER FOUNDATION HOSPITALS, et al., Defendants.

No. C 12-00925 RS

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

Date: June 22, 2012

ORDER DENYING DEFENDANTS'

MOTION TO DISMISS AND

REMANDING THE CASE FOR LACK

OF SUBJECT MATTER JURISDICION

I. INTRODUCTION

Following Charles Borreani's death, his surviving relatives filed suit against Kaiser Foundation Health Plan, Kaiser Foundation Hospitals, and Kaiser Permanente Medical Group (collectively "Kaiser") alleging they withheld critical information from decedent's doctors about the safety of prescription drugs Neurontin and gabapentin. Defendants move to dismiss this action in its entirety arguing that all asserted claims are preempted under the Employee Retirement Income Security Act ("ERISA"). For the following reasons, defendants' motion to dismiss is denied and this matter is remanded for lack of subject matter jurisdiction.

II. RELEVANT FACTS

Kaiser is an integrated managed care consortium that operates medical facilities, employs health care providers, and distributes a variety of medical services. In this capacity, Kaiser sells medical insurance plans to both individuals and employers and regulates which prescription drugs and services should be included in said coverage. Decedent Charles Borreani purchased one of these plans through his employer. As part of this coverage, Kaiser utilizes a centralized Drug Information Service ("DIS") to research drugs and present information about these drugs to physicians and to the company's eight regional divisions. Each region's Pharmacy and Therapeutics ("P&T") Committee then uses this data to choose the safest and most effective drugs to include in its drug formulary, a catalog of pre-approved medications. Drugs are listed without restrictions, with restrictions, or with a variety of guidelines. If a drug appears without restrictions, it may be prescribed for whatever condition the physician deems appropriate. Alternatively, if a drug is listed with certain guidelines or restrictions, the physician may consider those limitations when prescribing to patients. Although Kaiser will pay for off-formulary prescriptions, an internal study concluded that over 95% of prescriptions from Kaiser doctors conformed to the formulary guidelines.

Pursuant to this evaluation system, Kaiser added the Pfizer drug Neurontin to all regional formularies in 1994. From 1997 to 1999, the drug was listed as unrestricted. Neurontin was tremendously popular and remained on all eight formularies for over ten years. After this period, Kaiser discovered Pfizer was utilizing illegal strategies to market Neurontin for off-label use. Specifically, Pfizer was encouraging physicians to prescribe large doses of the drug to treat neuropathic pain all the while suppressing data linking the medication to the development of suicidal thoughts.

Upon learning of this alleged illegal behavior, Kaiser filed suit against Pfizer, joining the multidistrict In re Neurontin Marketing and Sales Practices litigation. At trial, Kaiser agents testified that had the company known of Neurontin's dangerous side effects, it would not have listed it as unrestricted in the formularies. They also represented that they intended to educate Kaiser physicians about the increased risk of depression associated with high doses of the drug. In March2010, the jury returned a verdict against Pfizer, finding the company fraudulently marketed Neurontin for off-label use at unsafe doses of greater than 1800 milligrams per day. According to plaintiffs, Kaiser has yet to notify its physicians of the Court's findings or to modify the formularies to include depression as a side effect of Neurontin or of its generic version, gabapentin.

In May 2009, while the Pfizer litigation was pending, decedent Charles Borreani began experiencing extremity numbness. He made an appointment with his Kaiser primary care physician who diagnosed him with peripheral neuropathy and prescribed gabapentin. Over the next year and a half, Borreani continued to take gabapentin at varying doses, while simultaneously developing an array of psychiatric symptoms such as, vertigo, drowsiness, blurred vision, and depressive thoughts. In July 2010, he complained again to his primary care physician who increased his gabapentin dosage to 2,400-3,200 milligrams per day. Two months later, Borreanni committed suicide.

Decedent's surviving relatives filed suit in the County of Alameda Superior Court against Kaiser Foundation Health Plan, Kaiser Foundation Hospitals, and Kaiser Permanente Medical Groups. According to the FAC, together, these Kaiser entities provided medical coverage to Borreani, managed the hospital at which he sought treatment, and employed the physicians who prescribed gabapentin. Plaintiffs allege that following the Pfizer litigation, Kaiser wrongfully withheld vital information from its physicians about the efficacy and safety of Neurontin for off-label use in the treatment of peripheral neuropathy. According to plaintiffs, because of this failure to inform, decedent's doctors were unaware of the side effects associated with the drug and continued to prescribe it for his neurological disorder despite his developing psychiatric illness. The First Amended Complaint ("FAC") asserts claims for: (1) Intentional Misrepresentation; (2) Negligent Misrepresentation; (3) Concealment; (4) Fraud; (5) Negligent Failure to Warn; (6) Negligence; and (7) Medical Negligence.¹ Defendants removed the case to this Court asserting federal question jurisdiction under ERISA, and now move to dismiss the action on the basis of ERISA preemption.

III. LEGAL STANDARD

A. Motion to Dismiss

Under Federal Rule of Civil Procedure ("FRCP") 8(a)(2), a complaint must present "a short and plain statement of the claim" demonstrating that plaintiff is entitled to relief. Fed. R. Civ. P. 8(a)(2). If the complaint does not meet this standard, the defendant may move to dismiss for failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). Dismissal is appropriate if the claimant either does not raise a cognizable legal theory or fails to allege sufficient facts to support a cognizable claim. See Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1988). Thus, while a legally sufficient complaint does not require "detailed factual allegations," it must contain more than "unadorned" assertions of harm or bare legal conclusions without factual support. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In evaluating a Rule 12(b)(6) motion to dismiss, all material allegations in the complaint are accepted as true and construed in the light most favorable to the non-moving party. See Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).

B. Remand for Lack of Subject Matter Jurisdiction

Removal of a state court action to federal court is appropriate only if the federal court would have had original subject matter jurisdiction over the suit. See 28 U.S.C. § 1441(a). If, following removal, a federal court determines there was a defect in the removal procedure or an absence of subject matter jurisdiction, it may remand the action to state court sua sponte or on motion of a party. Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988). In deciding whether removal was proper, courts strictly construe the statute against finding jurisdiction, and the party invoking federal jurisdiction bears the burden of establishing that removal was appropriate. Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009) (citations omitted). Where doubt exists regarding the right to remove an action, it should be resolved in favor of remand to state court. See Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003).

IV. DISCUSSION

A. ERISA Preemption

Defendants argue that plaintiffs' FAC must be dismissed because all claims are preempted under ERISA. According to defendants, at base, plaintiffs' entire suit relates to decedent's employer sponsored health plan and is, therefore, fully within the scope of ERISA's civil enforcement scheme. Plaintiffs concede that Borreani's health plan was an employee welfare benefit plan covered by ERISA, see 29 U.S.C. § 1002, and acknowledge that the two breach of contract claims asserted in their original complaint may have been preempted. They insist, however, that the pleadings, as amended, make no reference to the plan's language and do not seek to vindicate or to clarify any benefits under the plan. Consequently, ERISA is inapplicable and the action should be remanded for lack of subject matter jurisdiction.

Congress enacted ERISA in order to "provide a uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (explaining that ERISA provides a variety of remedies and sanctions intended to protect the interests of plan participants and beneficiaries). In structuring this regime, Congress included "expansive pre-emption provisions . . . to ensure that employee benefit plan regulation remained exclusively a federal concern." Id.; see 29 U.S.C. § 1144. Although these provisions are broadly worded, application of the legislative language has developed from a "plain language interpretation, in which ERISA would have preempted nearly everything, to a more pragmatic interpretation, in which courts seek to preserve the goals of Congress . . . while maintaining state control in traditional fields of state regulation." Bui v. Am. Telephone & Telegraph Co., 310 F.3d 1143, 1147 (9th Cir. 2002) (refusing to preempt state medical malpractice claims). Under this legislative scheme, there are two types of ERISA preemption: (1) complete preemption under ERISA § 502, see 29 U.S.C. § 1132(a); and (2) express preemption under ERISA § 514(a), see 29 U.S.C. § 1144(a). Paulsen...