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U.S. Court In California Holds Claims For Reimbursement Were Pre-Empted By ERISA


HLD, v. 32, n. 12 (December 2004)

U.S. Court In California Holds Claims For Reimbursement Were Pre-Empted By ERISA

In November 1997, California Pacific Medical Center (California Pacific) entered into an agreement with Interplan Corporation (Interplan) and Redwood Empire Electrical Workers Health and Welfare Trust Fund (Redwood Empire) to provide medical services to beneficiaries of Redwood Empire's healthcare plan. In April 2001, a beneficiary was admitted to California Pacific and gave birth to a child, and both mother and child suffered from severe complications. The total treatment for both was over $1.1 million, and under the agreement California Pacific was entitled to $828,900 for the medical services it provided. California Pacific contacted Interplan and Zenith Administrators, Inc. (Zenith), Redwood Empire's third-party administrator of the plan about payment. Concentra Preferred Systems, Inc. (Concentra) was hired by a reinsurer of Redwood Empire to seek reductions in reimbursement claims. Concentra later claimed it received a special discount from an employee of California Pacific, and California Pacific claimed the employee did not have the authority to negotiate or agree to any discount for the services. California Pacific claimed it was underpaid for the services by $485,900.

In June 2004, California Pacific filed its initial complaint, and in July 2004 it filed its first amended complaint (FAC) against Concentra, Interplan, Redwood Empire, and Zenith (defendants) for breach of contract, unfair business practices, services rendered, unjust enrichment, and declaratory relief. Redwood Empire removed the case to the federal court on the grounds the federal court had exclusive jurisdiction because the claims arose under the Employee Retirement Income Security Act (ERISA). Defendants moved to dismiss California Pacific's FAC on the grounds the claims were pre-empted by ERISA.

The U.S. District Court for the Northern District of California granted defendants' motion to dismiss and granted California Pacific's motion to file a second amended complaint. California Pacific argued its claims were not pre-empted by ERISA because the claims were not related to the administration of the plan. The court noted that the Supreme Court recently decided in Aetna Health, Inc. v. Davila, 124 S.Ct. 2488 (2004), that "Congress' intent to make the ERISA civil enforcement mechanism exclusive would be undermined if state causes of action that supplement ERISA � 502(a) remedies were permitted." California Pacific's claims arose in connection with the administration of the plan, said the court, because the claims were based on the obligation of defendants to provide services to an eligible beneficiary and the services would have to be covered by the plan. Because California Pacific obtained an assignment of benefits from the patient, the dispute was between California Pacific and defendants and went to the fundamental purpose of the plan. Thus, the claims in the FAC would not exist "but for" defendants' failure to reimburse California Pacific for the services that were provided. The court reviewed each of California Pacific's claims and determined they were all pre-empted by ERISA because the state law claims were "an alternative enforcement mechanism of an ERISA provision." Therefore, the court granted defendants' motion to dismiss the FAC, and granted plaintiff leave to file a second amended complaint that would assert claims for relief under ERISA.

California Pacific Med. Ctr. v. Concentra Preferred Sys., Inc., No. C 04-3083 SBA, 2004 WL 2331876 (N.D. Cal. Oct. 15, 2004). 

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