Cal. Spine & Neurosurgery Inst. v. Bos. Sci. Corp.

CALIFORNIA SPINE AND NEUROSURGERY INSTITUTE, Plaintiff, v. BOSTON SCIENTIFIC CORPORATION, Defendant.

Case No. 18-CV-07610-LHK

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

May 3, 2019

ORDER GRANTING MOTION TO REMAND AND DENYING REQUEST FOR EXPENSES AND FEES

Re: Dkt. No. 18

Plaintiff California Spine and Neurosurgery Institute ("Plaintiff") brings suit against Defendant Boston Scientific Corp. ("Defendant") alleging breach of oral contract and promissory estoppel. Plaintiff originally brought suit in the Superior Court of Santa Clara County but Defendant removed the suit to the United States District Court for the Northern District of California. Before the Court is Plaintiff's motion to remand and for attorneys' fees and costs. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS Defendant's motion to remand and DENIES Defendant's request for attorneys' fees and costs.

I. BACKGROUND

A. Factual Background

Plaintiff is a provider of medical services. ECF No. 1-1 ("Compl.") at ¶ 19. Defendant is a health insurance company providing health coverage to subscribers or dependents of subscribers under insurance policies underwritten by Defendant. Id. at ¶ 7. In the healthcare industry, medical services providers sometimes enter into a contract with a health insurance company such that the health services providers are "in network" with the health insurer, which allows subscribers to the health insurer to "pay lower co-payments and deductibles to obtain care and treatment from a contracted [healthcare] provider." Id. at ¶¶ 10-11. Being "in network" with a health insurer also allows the health insurer to set rates of pay for services rendered by the healthcare provider. Id. at ¶ 9.

Plaintiff is an "out-of-network provider" or "non-participating provider," meaning that Plaintiff has not entered into contracts with health insurance companies. Id. In particular, Plaintiff does not have a written contract with the Defendant setting rates of pay for services rendered by the Plaintiff. Id. Being an out-of-network provider means that to "properly determine whether or not to provide medical services to a patient, the common practice . . . is to obtain a separate oral promise and assurance of payment from the [health insurer]." Id. at ¶ 15. It is common practice for a health insurer to pay "a percentage of the market rate for the procedure, also described as [] an average payment for the procedure performed or provided by similarly situated medical providers within similarly situated areas or places of practice." Id. at ¶ 16. Health insurers typically use the phrase "usual, customary, [and] reasonable" ("UCR") to describe how much a heath insurer is willing to pay for medical services provided by an out-of-network provider. Id.

On March 5, 2018, Plaintiff's employee phoned Defendant to ascertain what kind of health coverage Defendant would offer one of Plaintiff's Patients. Id. at ¶ 19. The Patient in question was one of Defendant's insureds, id. at ¶ 6, meaning that the Patient was a participant in an employee health benefit plan governed by the Employee Retirement Income and Security Act of 1974 ("ERISA"), ECF No. 2-1. Plaintiff alleges that Defendant offered "promises and information . . . that DEFENDANT would pay for the services to be provided to Patient and under what terms that payment would be made." Compl. at ¶ 19. In particular, Defendant allegedly informed Plaintiffthat the Patient had a deductible and a maximum out of pocket limit for healthcare of $6,000, of which $0 had been paid. Id. at ¶ 21. Plaintiff was allegedly promised that Defendant would pay 80% of the UCR rate once the Patient met his or her deductible. Moreover, after the Patient met the maximum out of pocket limit, Plaintiff was allegedly promised that Defendant would pay 100% of the UCR rate. Id. at ¶ 22.

After allegedly receiving these promises from Defendant, on August 2, 2018, the Patient underwent a surgical procedure performed by Plaintiff. Id. at ¶ 18. Following the procedure, Plaintiff submitted its claims to Defendant accompanied by the Patient's various medical records. Id. at ¶ 29. Defendant processed Plaintiff's bill but determined to pay Plaintiff $0 out of a total billed amount of $77,000. Id. at ¶ 30.

B. Procedural History

On October 19, 2018, Plaintiff filed a complaint in the California Superior Court of Santa Clara County. ECF No. 1-1 at summons. Plaintiff asserted two causes of action: (1) breach of oral contract, and (2) promissory estoppel. Id. at 6-7. On December 19, 2018, Defendant removed the case to the United States District Court of the Northern District of California. ECF No. 1 at 2. Defendant removed the case even though the complaint contained state law causes of action because Defendant believed that Plaintiff raised a cause of action under federal law. Id. at 3. Specifically, Defendant believed that ERISA, 29 U.S.C. § 1001, et seq. completely preempted Plaintiff's state law claims such that the Northern District of California would have original jurisdiction over Plaintiff's claims. Id.

On January 24, 2019, Plaintiff filed a motion to remand the case back to state court and to seek expenses and fees. ECF No. 18 ("Mot."). On February 7, 2019, Defendant filed an opposition. ECF No. 22 ("Opp."). On February 14, 2019, Plaintiff filed a reply. ECF No. 23 ("Reply").

II. LEGAL STANDARD

A. Motion to Remand

A suit may be removed from state court to federal court only if the federal court wouldhave had subject matter jurisdiction over the case. 28 U.S.C. § 1441(a); see Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) ("Only state-court actions that originally could have been filed in federal court may be removed to federal court by the defendant."). If it appears at any time before final judgment that the federal court lacks subject matter jurisdiction, the federal court must remand the action to state court. 28 U.S.C. § 1447(c).

The party seeking removal bears the burden of establishing federal jurisdiction. Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). "The removal statute is strictly construed, and any doubt about the right of removal requires resolution in favor of remand." Moore-Thomas v. Alaska Airlines, Inc., 553 F.3d 1241, 1244 (9th Cir. 2009) (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)).

B. Request for Attorneys' Fees

Following remand of a case upon unsuccessful removal, the district court may award "just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). The award of fees and costs is within the discretion of the district court. Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). Nonetheless, "[a]bsent unusual circumstances, courts may award attorney's fees under § 1447(c) only where the removing party lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively reasonable basis exists, fees should be denied." Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005).

The objective reasonableness of removal depends on the clarity of the applicable law and whether such law "clearly foreclosed the defendant's basis of removal." Lussier, 518 F.3d at 1066-67. "If the law in the Ninth Circuit is not so clear as to make the removing party's endeavor entirely frivolous, a court will deny the request for attorney's fees." FSM Dev. Bank v. Arthur, 2012 WL 1438834, at *7 (N.D. Cal. Apr. 25, 2012) (brackets omitted).

III. DISCUSSION

Plaintiff's motion deals with two separate but interrelated issues. First, Plaintiff argues that the case ought to be remanded to state court because Plaintiff's causes of action are not completelypreempted by ERISA. Second, Plaintiff seeks fees and costs for improper removal. The Court discusses each issue in turn.

A. ERISA Preemption

Plaintiff argues that this action was incorrectly removed because Plaintiff does not have standing to bring a claim under the ERISA statute. Mot. at 5. Defendant responds by contending that Plaintiff's two state law claims "are merely a disguised claim for benefits under ERISA." Opp. at 7. The Court finds Plaintiff's argument more compelling.

"[R]emoval on ERISA grounds is only appropriate if ERISA completely preempts a state law claim." Holloway v. Gilead Scis., Inc., 2016 WL 3526060, at *1 (N.D. Cal. June 23, 2016) (citing Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 944-45 (9th Cir. 2009)). If removal was improper, "the district court lack[s] subject matter jurisdiction, and the action should [be] remanded to the state court." Doctors Med. Center of Modesto, Inc. v. Principal Mut. Life Ins. Co., 2008 WL 4790534, at *2 (E.D. Cal. Aug. 28, 2008) (quoting Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003)).

The United States Supreme Court's decision in Aetna Health Inc. v. Davila "sets forth a two-prong test for determining whether a state law claim is completely preempted by ERISA's civil enforcement provision. Under that test, a state law cause of action is completely preempted if (1) the plaintiff, 'at some point in time, could have brought [the] claim under ERISA § 502(a)(1)(B),' and (2) 'there is no other independent legal duty that is implicated by [the] defendant's actions.'" Hansen v. Grp. Health Coop., 902 F.3d 1051, 1059 (9th Cir. 2018) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004)). "[T]his test from Davila is conjunctive, and both elements need to be met to show complete preemption." Id.

In the instant case, the Court finds that Plaintiff could not have brought its claims under ERISA § 502(a)(1)(B), so the first prong of the Davila test is not met. ERISA § 502(a)(1)(B) provides:

A civil action may be brought—(1) by a participant or beneficiary—. . . (B) to recover benefits due to him under the terms of his plan, to

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