Citations
- 121 F. Supp. 3d 950
Full opinion text
Proceedings (In Chambers): ORDER GRANTING IN PART AND DENYING IN PART PROVIDER COUNTER-DEFENDANTS’ MOTION TO DISMISS THE FIRST AMENDED COUNTERCLAIM AND JOINDER IN COUNTER-DEFENDANTS MICHAEL OMIDI, M.D. AND JULIAN OMIDI’S MOTION TO DISMISS FIRST AMENDED. COUNTERCLAIM [48]
MICHAEL W. FITZGERALD, U.S. District Judge
, This matter is before the Court on Provider Counter-Defendants’ (“Providers”) Motion to Dismiss the First Amended Counterclaim and Joinder in Counter-Defendants Michael Omidi, M.D. and Julian Omidi’s Motion to Dismiss First Amended Counterclaim (the “Motion”). (Docket No. 48). The Court read and considered the papers on the Motion, and held a hearing on December 10, 2014. For the reasons stated below, the Court GRANTS IN PART and DENIES IN PART the Motion.
I. BACKGROUND
On March 21, 2014, Plaintiffs initiated this action by filiñg a Complaint in the Los Angeles Superior Court. (Docket No. 1, Notice of Removal, Ex. A). On April 21, 2014, Defendants '(collectively, “United”) removed this action to this Court. (Id.). The Complaint asserts claims for violation of the California Business and Professions Code section 17200 et seq. (the “UCL”), breach of implied-in-fact contracts, services rendered, estoppel, and declaratory relief. (Id.).
United asserted federal subject matter jurisdiction on the basis that the state law claims alleged in the Complaint are completely preempted by the. Employee Retirement Income Security Act (“ERISA”). (Docket No. 1, Notice of Removal ¶¶ 5-17). On May 15, 2014, the Court issued an Order to Show Cause Re: Jurisdiction (the “OSC”) (Docket No. 27), to which- the parties responded on June 5, 2014 (Docket Nos. 34, 35). The Court then issued an Order Discharging the OSC on June 16, 2014 (Docket No. 38), in which the Court exercised its own judgment and agreed with the parties’ reasoning that the Complaint’s claim for declaratory relief was completely preempted by ERISA, thereby conferring federal jurisdiction over the action. • ...
On May 15, 2014, United filed a Counterclaim (Docket No. 25), adding several Counterclaim Defendants to the litigation, including Dr. Michael Omidi and Kambiz Benjamin Omidi a.k.a. Julian Omidi. The Providers responded by filing a Motion- to Dismiss the Counterclaim on July 7, 2014; (Docket No. 39). However, the parties entered into a stipulation (Docket No. 43) to withdraw pending motions to dismiss the Counterclaim and a pending motion to strike portions of-the Counterclaim. The Court granted this stipulation and set deadlines for a First Amended Counterclaim (“FACC”), and answers or motions to dismiss in response thereto. -.(Docket No. 44). . .
On September 3, 2014, United filed a FACC. (Docket No. 45).- The FACC asserts claims for fraud, violation of the UCL, conspiracy to commit fraud, intentional interference with contractual relationships, restitution under ERISA § 502(a)(3), and declaratory and injunctive relief under ERISA § 502(a)(3). ’ (Docket No. 45). The FACC alleges that Counterclaim Defendants, are conspiring to de fraud the public and United out of millions of dollars. (FACC ¶ 62). This conspiracy is purportedly hidden through the use of sham/shifting business names. (Id. ¶ 126). The activities underlying the conspiracy are generally alleged to be “various fraudulent practices designed to manipulate United to pay for services that were hot medically necessary, never provided, or not covered by the terms of the . United Plans.”. (Id. ¶ 68).' The specific malfeasance alleged includes: inducing patients to receive Lap-Band-related treatment through, among other things, improperly waiving copay, coinsurance, deductibles amounts (collectively, “co-pay”) (id. ¶66); mischaracterizing Lap-Band procedures provided by billing under incorrect CPT codes, hiding services that would not have otherwise been covered, or misrepresenting patients’ BMI calculations (id. ¶ 68); and submitting inflated bills, to United in an attempt to induce United to allow payment in excess of UCR (id. ¶ 275).
On October 3, 2014, the Providers-filed this Motion. ' On October 31, 2014, United filed an Opposition to Providers’' Motion to Dismiss the' FACC (the “Opposition”). (Docket No. 65). On November 14, 2014, the Providers filed a Reply in Support of the Motion (the '“Reply”). (Docket No. 78).
II. MOTION TO DISMISS
Providers’ bring the Motion pursuant to Federal Rules of Civil Procedure 9(b), 12(b)(1) and 12(b)(6).
In ruling on a motion under Federal Rule of Civil Procedure 12(b)(6), the Court follows Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ’state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citations omitted). “’All allegations of material fact in the complaint are taken as true and construed in the light most favorable to the plaintiff.’ ” Williams v. Gerber Prods. Co., 552 F.3d 934, 937 (9th Cir.2008) (quoting Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116, 1120 (9th Cir.2007)) (holding that a plaintiff had plausibly stated that a label referring to a product containing no fruit juice as “fruit juice snacks” may be misleading to a reasonable consumer).
Federal Rule of Civil Procedure 9(b) requires .that “a party [alleging fraud] must state with particularity the circumstances constituting fraud.” To satisfy Rule 9(b), a plaintiff must include “the who, what, when, where, and how” of the fraud. Vess v. Ciba-Geigy Corp. USA 317 F.3d 1097, 1106 (9th Cir.2003) (internal quotation marks and citations omitted). “A motion to dismiss a complaint or claim ‘grounded in fraud’ under Rule 9(b) for failure to plead with particularity is the functional, equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state a claim.” Id. at 1107. As such, dismissals under Rule 9(b) and 12(b)(6) “are treated in the same mannfer.” Id. at 1107-08.
In -ruling on a motion under Federal Rule of Civil Procedure 12(b)(1), the Court must determine whether it lacks subject matter jurisdiction over the Complaint or any claims therein. “A jurisdictional challenge under Rule 12(b)(1) may be made either on the face of the pleadings or by presenting extrinsic evidence.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003) (citing White v. Lee, 227 F.3d 1214, 1242 (9th Cir.2000)) (evaluating whether a composer had standing to pursue copyright claims against a producer and distributors).
A. Disclosure of Parties in Interest
Although Providers point out that United did not initially supply a thorough Notice of Interested Parties, this oversight has been corrected, as mentioned in the Opposition (Opp. at 2) and reflected in Docket No. 64.
B. United’s Standing
1. United’s Standing Under ERISA
United asserts two claims pursuant to ERISA § 502(a)(3). (FACC ¶¶ 316-43). Only plan participants, beneficiaries, and fiduciaries are afforded standing to bring an ERISA § 502(a)(3) claim. 29 U.S.C. § 1132(a)(3).
Providers contend that United does not plead relevant terms from the vast majority of plans that provide it with fiduciary status, and that standing here requires a plan-by-plan analysis. (Mot. at 3-4). Moreover, Providers argue that the few allegations that are pleaded are inadequate because United relies on summary plan descriptions (“SPDs”) and administrative services agreements (“ASAs”) to support its standing as a plan fiduciary, which are insufficient as they are not the operative plan documents. (Id. at 2-6). United, however, argues that it provided examples from plan documents, not SPDs, and ASAs that demonstrate United’s fiduciary authority, and, therefore, standing. (Opp. at 2-3).
As mentioned above, ERISA § 502(a)(3) permits a plan fiduciary to bring suit to enjoin activities that violate ERISA or the terms of the plan, or receive appropriate equitable relief to redress violations of or enforce the' terms of ERISA or the plan. 29 U.S.C. § 1132(a)(3). “A ’fiduciary’ is an entity with ’any discretionary authority’ in the ’administration of an ERISA plan.” Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 866 (9th Cir.2008) (citing 29 U.S.C. § 1002(21)(A)); see also Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 438 (6th Cir.2006) (“Under ERISA a person is a fiduciary only with respect to those aspects of the plan over which he or she exercises authority or control,”). A “person who performs purely ministerial functions ... for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan....”, 29 C.F.R. § 2509.75-8(0-2). However, “an insurer will be found to be an ERISA fiduciary if it has the authority to grant, deny, or review denied claims.” Kyle Rys., Inc. v. Pac. Admin. Servs., Inc., 990 F.2d 513, 518 (9th Cir.1993).
Here, United has alleged that “[f]or all (or virtually all) of the ERISA Plans, one of the United Counterclaimants in this matter has been delegated by the respective plan’s Plan Administrator the fiduciary responsibility and discretion to decide claims under the terms of the Plan (’Claims Administrator.’).” (FACC ¶ 318). The FACC further alleges that, in these instances, “the Plan document in question will delegate to a United Counterclaimant discretionary authority to resolve participants’ claims for benefits under the Plan. United’s authority to decide claims is final and binding, subject only to judicial review (or independent external review mandated by state law or the Affordable Care Act).” (Id.). The FACC goes on to provide exemplar language from the Whole Foods Market Group ' Benefit Plan and ASA, Time Warner Plan document, and the ASA with, AOL Time Warner that demonstrate the discretion and duties afforded to a United entity under the plans. (Id. ¶¶ 319-24). The FACC, moreover, alleges that “[tjhese, or materially indistinguishable, terms are included in the Plan documents and ASAs for all (or virtually all) of the ERISA Plans included in Appendix I.” (Id. ¶325). These allegations are sufficient at the present stage of the litigation to establish standing as a fiduciary under ERISA § 502(a)(3).
Providers’ contentions that the example language from these plans is unavailing because it is taken from SPDs rather that actual plan documents is contradicted by the plain wording of the FACC. (See, e.g., id. ¶ 322) (“The [Time Warner] Plan document in question delegates to United-Healthcare Insurance Company the discretionary authority to resolve all claims for benefits under the terms of the plan.”).
Providers continually refer to plans, on whose behalf United does not seek to recoup payments, as containing language that does hot confer the same discretion. (See Mot. at 5-6).. However, the very fact that the FACC does not seek to recoup for plans which purportedly contain differing language undercuts Providers’ argument that such plans defeat United’s fiduciary standing here. To the extent that Providers are contending that United is not a fiduciary for plans that it names as relevant in the related Almont case, however, this allegation, if proven, could have repercussions for its breach of .fiduciary duty claims in that case. (See id. at 6 (“For example, Walmart’s SPD simply describes United as a Third Party Administrator that does not have fiduciary responsibility. (Declaration of Eric Chan Supp. Mot. Dismiss FACC (‘Chan Decl.’) Ex. A, p. 43 & 239.) It is likely for this reason that Appendix A to the FACC lists no Walmart claims for which United seeks to recoup payments, though Walmart is a party to the main Almont action.”)). Moreover, Providers’ argument that some plans, which are not at issue in the FACC, do not confer fiduciary responsibility is based on SPDs; however, Providers have already argued that SPDs are insufficient to reflect plan terms. (Mot. at 4-5 (“[C]ourts regularly decline to accept representations made in the language of an SPD as to the discretion that a plan document has delegated to a third party administrator.”)).
Finally, Providers’ argument that United’s ■ status as a claims administrator is insufficient to confer fiduciary status is unavailing. Providers cite to authority stating that if an entity merely prorides ministerial tasks, it is not a fiduciary for ERISA purposes. (Mot. at 6). However, United has not alleged that it merely carries out the directives of another entity. Rather, United alleges that it has “been delegated by the respective plan’s Plan Administrator the fiduciary responsibility and. discretion,to decide claims.” (FACC ¶ 318)., This discretion is the hallmark of an ERISA fiduciary, and United, consequently has, standing to bring suit under § 502(a)(3). ,
2. United’s Article III Standing
Providers contend that United has not alleged that it suffered any loss in connection with the claims that are related to self-funded ERISA plans, and therefore there have been insufficient allegations to support Article III standing for claims brought on behalf of these plans. (Mot. at 6-7). As discussed above, with respect to the ERISA claims asserted on behalf of self-funded plans, United has properly alleged that it is a fiduciary of the self-funded plans and is acting on behalf of the plans, pursuant to its fiduciary obligations, to recover overpayments and enforce the terms of the plans. (See, e.g., FACC ¶¶ 323-26).
A plaintiff must have Article III standing in order for the suit to constitute a “case or controversy” over which a federal court has subject matter jurisdiction. Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir.2004) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)). In order to demonstrate Article III standing, a plaintiff must show: “(1)’ injury in fact; (2) causation; and (3) likelihood that a favorable decision will redress the injury.” Schneider v. Chertoff, 450 F.3d 944, 959 (9th Cir.2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). An “injury in fact” consists of “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560, 112 S.Ct. 2130 (internal quotation marks and citations omitted). General allegations regarding injury are sufficient at the pleading stage. Braunstein v. Arizona Dept. of Transp, 683 F.3d 1177, 1184 (9th Cir.2012) (citing Lujan, 504 U.S. at 561, 112 S.Ct. 2130).
“Because ’ERISA abounds with the language and terminology of trust law,’ the Court relies heavily on trust law doctrine in interpreting ERISA.” Gabriel v. Alaska Elec. Pension Fund, 773 F.3d 945, 954 (9th Cir.2014) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). For example, in evaluating the appropriate standard of review for benefit decisions, the Supreme Court has previously analogized a plan administrator to a trustee of a common law trust. See Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008). Moreover, the Supreme Court has noted that ERISA typically treats a plan fiduciary as a trustee. CIGNA Corp. v. Amara, 563 U.S. 421, 131 S.Ct. 1866, 1879, 179 L.Ed.2d 843 (2011) (stating that ERISA typically treats the terms of a plan as a trust and a plan fiduciary as a trustee). In Sprint Communications Co., L.P. v. APCC Services, Inc., the Supreme Court discussed Article" III standing in the context of assignments, and pointed out that “federal courts routinely entertain suits which will result in relief for parties that are hot themselves directly bringing suit,” using, trustees initiating suit on behalf of a trust as just such an example. 554 U.S. 269, 287, 128 S.Ct. 2531, 171 L.Ed.2d 424 (2008). The Ninth Circuit, likewise, has noted that trustees and executors have Article III standing because they “have a stake in the litigation because they are acting on behalf of the estate, which owns the claims being litigated.” Glanton ex rel. ALCOA Prescription Drug Plan v. AdvancePCS Inc., 465 F.3d 1123, 1126 (9th Cir.2006).
In light of Supreme Court precedent, as well as the Ninth Circuit’s guidance regarding trust law, United has made an. adequate showing of constitutional standing as to self-funded plans., Moreover, Providers do not contest United’s standing to assert claims on behalf of fully-insured plans, and, in any event, Article. Ill standing is manifest as to these plans, for which United purportedly served' as both claims administrator and insurer. (FACC ¶ 51).
3. United’s Standing to Bring a UCL Claim
Providers do not contest-United’s standing to bring a UCL claim on behalf of any fully-insured plans at issue, and, in much in the same way that Article III standing is evident for these plans, so too is standing for purposes of a UCL claim. However, Providers argue that United lacks standing to bring a UCL claim on behalf of self-funded plans because the plans themselves are financially responsible for benefit claims, and United has failed to allege that it has suffered any economic injury. (Mot. at 8).
Previously, the UCL afforded standing for “any person acting for the interests of itself, its members or the general public.” Kwikset Corp. v. Superior, Court (“Kwikset”), 51 Cal.4th 310, 320, 120 Cal.Rptr.3d 741, 246 P.3d 877 (2011) (internal quotation marks and citations omitted). However, in 2004, with the enactment of Proposition 64, UCL standing requirements became more stringent. Id. at 320-21, 120 Cal.Rptr.3d 741, 246 P.3d 877. The California Supreme Court has noted that the purpose of this change was. “to eliminate standing for those who have not engaged in any business dealings with would-be defendants and thereby strip such unaffected parties of the ability to file ‘shakedown lawsuits,’ while preserving for actual victims of deception and other acts of unfair competition the ability to sue and enjoin such practices.” Id. at 317, 120 Cal.Rptr.3d 741, 246 P.3d 877 (citations omitted)." “To have standing under California’s UCL, as amended by California’s Proposition 64, plaintiffs' must establish that they (1) suffered an injury in fact and (2) lost money or property as a result of the unfair competition.” Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir.2009) (citing Cal. Bus. & Prof. Code § 17204; Walker v. Geico Gen. Ins. Co., 558 F.3d 1025, 1027 (9th Cir.2009)) (discussing, in case involving consumer suit alleging that Apple’s iPod was defective because it posed an unreasonable risk of noise-induced hearing loss, .that consumers lacked standing under the UCL because they failed to show the requisite injury to themselves).
The “injury in fact” element of UCL standing is meant to incorporate the “established federal meaning,” which was already discussed above in the context of Article III standing. Kwikset, 51 Cal.4th at 322, 120 Cal.Rptr.3d 741, 246 P.3d 877. In many cases, satisfaction of the “lost money or property” element will satisfy this “injury in fact” requirement. Id. at 323, 120 Cal.Rptr.3d 741, 246 P.3d 877. In its own right, the “lost money or property” element can be satisfied in “innumerable” ways, such as when a plaintiff is made to: “(1) surrender in a transaction- more, or acquire in a transaction less, than he ^or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter-into a transaction, costing money or property, that would otherwise have been unnecessary.” Id. The California Supreme Court has recognized that the economic component of. UCL standing ■ renders it more restrictive than federal injury in fact (because it includes fewer types of injury), but also, notes that the actual quantum of economic injury needed is only as much as would satisfy injury in fact — all that need be alleged is an “identifiable trifle” of injury. Id. at 324-25, 120 Cal.Rptr.3d 741, 246 P.3d 877 (internal quotation marks and citations omitted).
Here, it does stand to reason that United, as the entity purportedly subject to fraudulent misrepresentations made by Providers, should be permitted to redress the'harms stemming from these alleged practices. Moreover, United does not run afoul of Kwikset’s pronouncement that Proposition 64 was meant to “ehminate standing for those who have not engaged in any business dealings with would-be defendants.”
However, it is unclear what economic injury United has suffered in connection with self-funded plans as a result of Providers’ purported conduct. Absent a showing of such injury, the UCL standing requirements do not permit United to bring suit. The Court, therefore, concludes that United does not have standing to bring a UCL claim on behalf of the self-insured plans.
C. United’s State Law Claims
1. ERISA Preemption
Providers argue that United’s state law claims seeking' recoupment on behalf of ERISA plans are preempted. (Mot. at 9-12). United asserts claims on behalf of non-ERISA plans as well as ERISA plans. (FACC ¶ 51). State law claims brought on behalf of non-ERISA plans would not be preempted irrespective of this analysis, so the following discussion is only relevant to the claims as applied to ERISA plans.
“There are two strands of ERISA preemption: (1) ‘express’ preemption under ERISA § 514(a), 29 U.S.C. § 1144(a); and (2) preemption due to a ‘conflict’ with ERISA’s exclusive remedial scheme set forth in 29 U.S.C. § 1132(a), notwithstanding the lack of ¿xpress preemption.” Paulsen v. CNF Inc., 559 F.3d 1061, 1081 (9th Cir.2009) (citing Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir.2005)). The Court will discuss each in turn.
a. “Express” Preemption Under § 514(a)
“Express” preemption, unlike “complete preemption,” does not confer federal question removal jurisdiction. See Marin Gen. Hosp. v. Modesto & Empire Traction Co. (“Marin General”), 581 F.3d 941, 945-46 (9th Cir.2009). Express preemption is governed by ERISA § 514(a), which “provides that, subject to various exceptions ..., ERISA ‘supersede^ any and all State laws insofar as they may ... relate to any' employee benefit plan.’” Sarkisyan v. CIGNA Healthcare of California, Inc., 613 F.Supp.2d 1199, 1203 (C.D.Cal.2009) (quoting 29 U.S.G. § 1144(a)). “A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). The Supreme Court has noted that this “preemption clause is conspicuous for its breadth,” as “[i]t establishes as an area of exclusive federal concern the subject of every state law that ‘related to’ an employee benefit plan governed by ERISA.” FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990). Even state laws that are consistent with ERISA are preempted. See Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).
A state law demonstrates the-forbidden “reference to” an ERISA plan when it “acts immediately and exclusively upon ERISA plans ... or where the existence of ERISA plans is essential to the law’s operation.” California Div. of Labor Standards Enforcement v. Dillingham Const., N.A., Inc., 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (finding that a California law requiring a contractor on a public works project to pay its workers the prevailing wage in the project’s locale had no “reference to” ERISA plans).
A state law that does not “refer to” an ERISA plan could, nevertheless, be preempted if has a “connection with” such a plan. Id. at 325, 117 S.Ct. 832. • Previously, the Supreme Court interpreted “relates to,” and consequently “connection with,” broadly. See, e.g., Shaw, 463 U.S. at 97, 103 S.Ct. 2890. However, more recently, the Supreme Court has limited the scope of this analysis. See Operating Eng’rs Health & Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 677 (9th Cir.1998) (“Of late, the [Supreme] Court has come to recognize -that ERISA pre-emption must have limits .when it enters areas traditionally left to state regulation- — ”). In New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance. Co. (“Travelers”), 514 U.S. 645, 656, 115 S.Ct. 1671 (1995), the Supreme Court recognized that “[f]or the same reasons that infinite relations cannot be the measure of pre-emption, neither can infinite connections.” As such, under the more modern approach,. a § 514(a) “connection with” analysis requires “looking] both to ‘the- objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive,’ as well as to the nature of the effect of the state law on ERISA plans.” California Div. of Labor Standards Enforcement, 519 U.S. at 325, 117 S.Ct. 832 (quoting Travelers, 514 U.S. at 656, 658-59, 115 S.Ct. 1671).
. Regarding the objectives of ERISA, the Supreme Court has stated that Congress’s intent in passing § 514(a) was:
[T]o ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government. Otherwise, the inefficiencies created could work to the detriment of plan beneficiaries.
Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (citing FMC Corp. v. Holliday, 498 U.S. 52, 60, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990)).
In contrast, the Supreme Court “has established a presumption that Congress did not intend ERISA to preempt areas of ’traditional state regulation’ that are ’quite remote from the areas with which ERISA is expressly concerned — reporting, disclosure, fiduciary responsibility, and the like.’ ” Paulsen v. CNF Inc., 559 F.3d 1061, 1082 (9th Cir.2009) (quoting Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212, 1216 (9th Cir.2000), opinion amended on denial of reh’g, 208 F.3d 1170 (9th Cir.2000)) (internal quotation marks omitted). Should a state law have “only, a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability,” preemption does not occur. Travelers, 514 U.S. at 661, 115 S.Ct. 1671 (quoting District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 130 n. 1, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992)) (internal quotation marks omitted).
The Ninth Circuit has utilized a “relationship test” in evaluating “connection with” preemption, which entails a finding that “a state law claim is preempted when the claim bears on an ERISA-regulated relationship, e.g., the relationship between plan and plan member, between plan and employer, between employer and employee.” Paulsen, 559 F.3d at 1082 (citing Providence Health Plan v. McDowell, 385 F.3d 1168; 1172 (9th Cir.2004)).
b. “Complete” Preemption under § 502(a)
Complete preemption demonstrates that the remedial scheme of 502(a) is to be “ ‘the exclusive vehicle for actions by ERISA-plan participants and beneficiaries asserting improper processing of a claim for benefits.’ ” Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 494 (9th Cir.1988) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987)).
“Complete preemption under § 502(a) is ‘really a jurisdictional rather than a preemption doctrine, [as it] confers exclusive federal jurisdiction in certain instances where Congress intended the scope of a federal law to be so broad as to entirely replace any state-law claim.’” Marin General, 581 F.3d at 945 (quoting Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health & Welfare Trust Fund, 538 F.3d 594, 596 (7th Cir.2008)). “If a complaint alleges only state-law claims, and if these claims are entirely encompassed by § 502(a), that complaint is converted from ‘an ordinary state common law complaint into one stating; a federal claim for purposes , of .the well-pleaded complaint rule.’ ” Marin General, 581 F.3d at 945 (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)).
State law claims are completely preempted by § 502(a) if: (1) an individual, at some point in time, could have brought the claim under § 502(a); and (2) there is no other legal duty independent of ERISA or plan terms implicated by the defendant’s ¡actions. Davila, 542 U.S. at 210, 124 S.Ct. 2488. “A state-law cause of action is preempted ... only if both prongs of the test are satisfied.” Marin General, 581 F.3d at 947.
In a footnote, United cites to an Eleventh Circuit case, Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 (11th Cir.1999), for the proposition that a claim is not completely preempted if it is not brought against an ERISA entity. Butero sets out a four element test for evaluating complete preemption (referred to in the decision as “superpreemption”), one element of which is that- “the defendant must be an ERISA entity.” Id. However, this Court follows and applies the Supreme Court’s Davila test for complete preemption and, to the extent that the Butero analysis is inconsistent with Davi-la, it is not controlling. Moreover, the Eleventh Circuit has, itself, adopted the Davila test. See Connecticut State Dental Ass’n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1345 (11th Cir.2009) (discussing that Davila refines Buterú, and, “[i]n accordance with the Supreme Court’s directive,” applying Davila).
c. United’s Fraud Claims
Providers argue that United’s fraud claims are preempted because they relate to ERISA plans, could have been brought under ERISA § 502(a), and hinge on no legal duties outside of the ERISA plans. (Mot. at 9-11). United asserts, in turn, that it could not bring suit for damage to its own business interests under ERISA § 502(a), so the claims are not completely preempted; similarly, United argues that claims by an insurer for fraudulent billing asserting its own losses are not “defensively preempted” under ERISA § 514(a). (Opp. at 7-9). Moreover, United argues that it seeks damages on the basis of conduct that was fraudulent independent of ERISA § 502(a) or plan terms, and therefore its claims seeking recovery on behalf of self-funded plans are not preempted under either ERISA § 502(a) or § 514(a). (Id. at 11-12).
The Court evaluates these contentions as to the fraud claims, which includes the allegations of conspiracy to commit fraud,
i. Express Preemption
Providers argue that United’s fraud claims “relate to” the plans because, for instance, the terms of these plans dictate what is covered and what is not. (Mot. at 9-11).
It is plain that California fraud law does not make reference to ERISA plans, as it is a law of general applicability that neither “acts immediately and exclusively upon ERISA plans,” nor relies upon the existence of ERISA plans to operate. See, e.g., Paulsen, 559 F¡3d- -M 1082 (finding that state law negligence claims did were not preempted, under the “reference to” analysis because they were based on common law negligence principles .and select California statutes,, laws which did act “immediately and exclusively” on ERISA plans and the operation of which did not rely on the existence of ERISA plans). However, whether the fraud claim has a “connection with” ERISA plan's' requires additional analysis.
Common law fraud claims are an area of traditional state.regulation, which peaces a.“c.onsidprable burden” on the par-: ty-asserting express preemption to overcome the- presumption that Congress did not intend to displace state, law. See Trustees of AFTRA Health Fund v. Biondi, 303 F.3d 765, 775 (7th Cir.2002) (quoting De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520 U.S. 806, 814, 117 S.Ct. 1747, 138 L.Ed.2d 21 (1997)) (internal quotation marks omitted). . However, even acknowledging this presumption, “the mere fact that States, have traditionally regulated common law fraud does not, in and of itself, preclude [this] claim from being expressly preempted under § 1144(a), if allowing the. claim to. go forward would thwart the statutory objectives of ERISA.” Id. (citing Dillingham, 519 U.S. at 330, 117 S.Ct. 832).
The fraud allegations-here do not appear to directly implicate an ERISA-regulated relationship, such as that between plan and plan member, plan and employer, or employer and employee. Rather, this activity transpired between an out-of-network provider and a claims administrator — a relationship that,- by itself,- is not regulated by ERISA. See Catholic Healthcare W.-Baig Area v. Seafarers Health & Benefits Plan, 321 Fed.Appx. 563, 564 (9th Cir.2008) (discussing that when a third party provider sued an ERISA plan “based on contractual obligations arising directly between the provider and the ERISA plan (or for misrepresentations of coverage made by the ERISA plan to the provider),” rather than suing derivatively as an assignee, “the dispute involves a contract and representations made between a third party provider and a plan-a relationship that is not governed by ERISA”).
In Blue Cross of California v. Anesthesia Care Associates Medical Group, Inc. (“Anesthesia Care”), 187 F.3d 1045, 1053-54 (9th Cir.1999), the Ninth Circuit found that providers’ claims against a health care plan for breach of their provider agreements did not encroach on ERISA relationships when: (1) the “claims [did] not involve construction of the terms of ERISA-covered benefit plans”; (2) the claims were not intertwined with beneficiaries’ ERISA benefits “because there [was] no claim that beneficiaries [had] not received their full benefits under the plans, or any argument that interpretation of the provider agreements [would] somehow work a change in the benefits to which beneficiaries will be entitled under ERISA-covered plans”; and (3) the ’’claims concern[ed] only promises that Blue Cross made as a health care plan provider to its participating physicians, rather than ”touch[ing] on Blue Cross’ fiduciary status, or any claims that a beneficiary may make against Blue Cross in that capacity.” See also Providence Health Plan v. McDowell, 385 F.3d 1168, 1172 (9th Cir.2004) (discussing that an insurer’s breach of contract action against insured to recover payments pursuant to a reimbursement clause — which did not require interpreting the plan, or dictating or disputing the correctness of a benefits distribution — did not have the necessary “connection with” or “reference to” an ERISA plan). Although it is true that Anesthesia Care arguably points to some of the issues at play in this action, and while the claim is not entirely unrelated to the relationship between United and the plans/plan members, the fact remains that the primary relationship involved is that between a third party provider and a claims administrator. The alleged misconduct does not implicate a state law claim that would subject plans and plan sponsors to “conflicting directives,” such that it would demonstrably be subsumed within the class of state law Congress would have expected ERISA to preempt.
Moreover, the Seventh Circuit’s reasoning in Biondi and the Second Circuit’s decision in Geller v. County Line Auto Sales, Inc., 86 F.3d 18 (2d Cir.1996) are persuasive and suggest the same result. In these cases, the courts evaluated whether fraud claims brought by trustees against a participant (Biondi) and employer (Getter) were expressly preempted. In each case, there had been misrepresentations made as to whether a particular person, on whose behalf the plan had expended money, was, in fact, covered under the plan. Geller, 86 F.3d at 19-20; Biondi, 303 F.3d at 770-71. Both courts held that these fraud claims were not expressly preempted. Geller, 86 F.3d at 23; Biondi, 303 F.3d at 782. In reaching this result, Getter noted that “although the defendants improperly administered the plan, the essence of the plaintiffs’ fraud claim does not rely on the pension plan’s operation or management,” but rather, the . “bare bones” of the claim were that these defendants fraudulently misrepresented that someone was a full-time employee, and that the plaintiffs paid out funds on behalf of this person. 86 F.3d at 23. Moreover, Getter observed that “allowing ... [the] common law fraud claim would in no way compromise the purpose of Congress and does not impede federal control over the regulation of employee benefit plans. To the contrary, ’insuring the honest administration of financially sound plans’ is critical to the accomplishment of ERISA’s mission.” Id. (quoting Pompano v. Michael Schiavone & Sons, Inc., 680 F.2d 911, 914 (2d Cir.1982)). The court went on to state that “common law fraud claim, which seeks to advance the rights and expectations created by ERISA, is not preempted simply because it may have a tangential impact on employee benefit plans.” Id. Finally, Geller observes that “[t]he plan was only the context in which this garden variety fraud occurred.” Id. Biondi follows much the same analysis. See Biondi, 303 F.3d at 773-82.
Following the logic expressed in Getter and Biondi, and in light of the primary relationships implicated here, the Court concludes that United’s fraud claims are not expressly preempted.
ii. Complete Preemption
a. Davila’s First Prong
Under the first prong of Davila, the Court must inquire whether Unitéd could have brought this claim under ERISA. United, as neither a beneficiary nor a participant, would be unable to’ bring any claims under ERISA § 502(a)(1) to enforce or clarify rights under the relevant plans. However, as a fiduciary, United could bring claims under ERISA § 502(a)(3) to recover appropriate equitable relief as redress for violations of or to enforce plan terms. Indeed, United does bring § 502(a)(3) claims in the present litigation (discussed below).
“There is a divergence of views between the district courts as to what constitutes actions taken ’to enforce the terms of the plan’ ” under § 502(a)(3), with some holding that an entity acting on its own behalf was not proceeding as a fiduciary for purposes of a claim that would fall within the ambit of § 502(a)(3), while others define fiduciaries for purposes of a § 502(a)(3) claim more broadly. See United Healthcare Servs., Inc. v. Sanctuary Surgical Ctr., Inc. (“Sanctuary Surgical”), 5 F.Supp.3d 1350, 1358-59 (S.D.Fla.2014). If United seeks to recover, in its fiduciary capacity, what was purportedly over-spent as a result of Providers’ alleged misrepresentations, this could fall within the ambit of a claim under ERISA § 502(a)(3). In contrast, to the extent United brings suit in its own right for its business losses, as it claims to do in its Opposition (Opp. at 7-10), then it may arguably not be operating as a fiduciary for the plans, such that a claim under ERISA would be unavailable. However, some jurisdictions consider a plan fiduciary to be bringing a claim that could have been brought under § 502(a)(3) even if the fiduciary’s motivation in the suit is not to enforce the terms of the plan, but only to redress its own alleged injury. See Sanctuary Surgical, 5 F.Supp.3d at 1358-59 (noting the divergence in approaches taken by district courts on the issue of whether a claim could have been brought by a fiduciary under § 502(a)(3)).
In a way that is distinct from this case, United’s cited cases generally do not include § 502(a)(3) claims. Moreover, those courts found that § 502(a)(3) did not completely preempt the relevant state Taw claims for one of several reasons, including that the claims were. not asserted by a party acting as a fiduciary (such that they could be asserted under § 502(a)(3)), or the damages recoverable under the asserted claim were unavailable under a § 502(a)(3) claim. See, e.g., Sanctuary Surgical, 5 F.Supp.3d at 1359-60 (holding that “United’s conduct ... fail[ed] to satisfy the first prong of the Davila test because it is not made to appear that United seeks ‘equitable relief to enforce the terms of the plans within the meaning of § 502(a)(3)”). - ■
Ultimately, despite the issues raised above, the Court need not reach a decision on this prong. The Court must deem both Davila prongs satisfied in order to find complete preemption, and the Court does not find the second prong satisfied, as next discussed.
b. Davila’s Second Prong
Here, Providers contend that “the only arguable basis for a duty to collect co-payments or coinsurance can be the ERISA plan provisions,” and point to the fact that, per the FACC, the plans set the availability of coverage and amount of copay required for a given service. ■ (Mot. at 10-11).
Pursuant to the second Davila prong, the Court must evaluate whether the claim implicates duties independent of ERISA. The Ninth Circuit has-noted that “[t]his question requires a practical, rather than a formalistic, analysis because ‘[claimants simply cannot obtain relief by dressing up ah ERISA benefits claim in the garb of a state law tort.’ ” Fossen v. Blue Cross & Blue Shield of Montana, Inc., 660 F.3d 1102, 1110-11 (9th Cir.2011) (quoting Cleghorn, 408 F.3d at 1225).
United’s claim rests on allegations that Providers made affirmative misrepresentations to United in submitting claims for ■ reimbursement. (See FACC ¶ 287 (“Counterclaim Defendants made false representations of material fact to United in submitting claim forms to United.”)). United does not contend that the duty to provide truthful claims submissions hinges on the terms of the individuals 'plans. Rather, “[t]hese claims do not rely on, and are independent of, any duty under an ERISA plan.” Marin General, 581 F.3d at 949. (See also Opp. at 11 (“Here, United’s fraud claims seek damages, from Providers’ general assets, due to conduct that was fraudulent, independent of the precise terms of the plans at issue.” (emphasis in original)). While the question of what payments would have been justified may require consultation of the plans themselves, it cannot be said that the fraud claim is based on- no duties independent of ERISA or plan terms. .See, e.g., Ass’n of New Jersey Chiropractors v. Aetna, Inc., No. CIV.A. 09-3761 JAP, 2012 WL 1638166, at *5-7 (D.N.J. May 8, 2012) (holding, in suit involving counterclaims brought by health insurer against providers alleging that providers misrepresented and over-billed for services, that counterclaims were not preempted because the claims were “based upon an independent duty ... under New Jersey’s insurance fraud statute and common law” that “prohibits] providers from committing fraud, including submitting fraudulent bills to an insurer for payment”).
It is true that the plans dictate what services are covered and what reimbursement is proper for such services. The plans exclude services for certain procedures, meaning that alleged omission of excluded services in bills for otherwise permissible procedures could have caused improper benefit disbursements’. It is not unprecedented to find that claims arising out of activities such as miscoding are preempted. See, e.g., Blue Cross & Blue Shield of Rhode Island v. Korsen, 746 F.Supp.2d 375, 381-84 (D.R.I.2010) (holding, in suit brought by health insurer against providers alleging that providers intentionally miscoded services, that the insurer’s claims to recover overpayments were preempted and converted into § 502(a)(3) claims because “the crux of the dispute” involved a benefits determination, and even though the providers’ agreements imposed duties on the defendants, they did not impose duties independent of ERISA).
Still, the .Ninth Circuit has said, in the context of § 502 complete preemption, that “[w]here the meaning of a term in the Plan is not subject to dispute, the bare fact that the Plan may be consulted in the course of litigating a state-law claim does not require that the claim be extinguished by ERISA’s enforcement provision.”' Anesthesia Care Associates Med. Grp., Inc., 187 F.3d at 1051. In Davila, the Court analyzed whether ERISA preempted claims brought pursuant to a Texas state law requiring that managed care entities exercise ordinary care when making benefit decisions. 542 . U.S. at 204, 212-13, 124 S.Ct. 2488. This state law contained a provision stating that it did not require that managed care entities provide treatment for services not otherwise covered by the relevant health care plan. Id. at 213, 124 S.Ct. 2488. As such, the Court found, that “interpretation of the terms of [the relevant] benefit plans form[ed] an. essential part of’ the asserted state law claim, and liability under the state law “would exist ... only because of petitioners’ administration of ERISA-regulated benefit plans.” id.
. Here, the alleged misrepresentations, while linked to the plans in terms of damage calculation,. are wrongful irrespective of the plan terms. This case does .not present the same scenario analyzed in Davila, in which adherence to plan terms obviated any potential violation of the implicated state law.
As such, the second Davila prong weighs against preemption. Because both Davila prongs must be satisfied before a claim is completely preempted, Providers’ motion to dismiss United’s fraud, claim on the basis of preemption fails.
d. United’s Remaining State Law Claims
Providers advance a similar argument as to the remaining state law claims; namely, that these claims are preempted because, they relate to ERISA plans and could have been brought under ERISA section 502(a). (Mot. at 9, 11-12). United responds to Providers’ preemption argument with the. same contentions discussed in the fraud analysis above.
i. UCL
In its UCL claim, United alleges that the .Counter-Defendants have engaged in a number of unfair, unlawful, and fraudulent activities, including submission of false claims, participation in a scheme to own and operate a network of climes and surgery centers in violation of California’s prohibition on the corporate practice of medicine, and improper payment of incentives to physicians for patient referrals. (FACC ¶¶ 295-302).
Express Preemption: Applying the “relationship test,” the UCL claim does not directly implicate an ERISA-reg-ulated relationship. Rather, the UCL claim pertains to the actions taken by out-of-network providers in relation to an ERISA claims administrator (and- the group health plans it administers) and California consumers. Moreover, much the same- rationale that informs the Court’s preemption holding-for the fraud claim is applicable to the UCL claim, as they are premised upon many of the same allegations. Permitting this claim to proceed does not “compromise the purpose of Congress and does not impede federal control over the regulation of employee benefit plans,” and is harmonious with the objective ofprotecting the integrity of employee benefit plans. Geller, 86 F.3d at 22-23.
The Court concludes, therefore, that the UCL claim is not expressly preempted.
Complete Preemption: Turning to the second Davila prong first, the conduct referenced in the UCL allegations depends upon legal duties that are independent of ERISA and plan terms. For instance, the duty to adhere to California’s prohibitions on the corporate practice of medicine and incentivization of patient referrals are quite outside the duties imposed by ERISA. Moreover, the alleged fraudulent practices, as discussed above, implicate duties derived from state law, which imposed upon Providers an independent “duty to refrain from making misrepresentations 'in the presentation of insurance claims for benefits.” Sanctuary Surgical, 5 F.Supp.3d at 1361.
In light of this conclusion, the Court need not analyze the first Davila prong. The UCL claim is not completely preempted.
ii. Intentional Interference with Contractual Relationships
United alleges that Providers used promises of co-pay waivers to induce members to accept services, which constituted illegal interference “with the contract between United Members, the group health plans in which they participate, and (in certain instances) United as' insurer.” (FACC ¶ 310). United further alleges.that “by accepting assignments from, and acting as authorized representatives of the United members, and then submitting false or inflated bills for. services, the Counterclaim Defendants illegally interfered with the contractual relationship between United and , its members.” (7&¶314).
Express Preemption: The intentional interference claim contains many óf the same allegations that underlie the fraud claim, and 'allowing parties to’an insurance contract to redress interlopers’ interference is certainly consistent with the objective of protecting the integrity of employee benefit plans. Moreover, while ERISA plans are certainly implicated in the alleged activity, the conduct at issue is that of a third party provider acting upon the contractual relationship between United and members.
Scenarios in which the Ninth Circuit has previously found interference claims to be preempted — including cases decided prior to the Ninth Circuit’s opinion in General American Life Insurance Co. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir.1993), which first introduced the relationship test, and the Supreme Court’s decision in Travelers — are distinguishable.- For instance, the Ninth Circuit found that a claim brought by a former employee against his prior employer for interference with a protected property interest (retirement benefits) arising out of an ERISA plan was preempted as referring to the plan. Sorosky v. Burroughs Corp., 826 F.2d 794, 800 (9th Cir.1987); see also Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 819 (9th Cir.1992) (holding that a tortious interference with contract claim was preempted when asserted by a former employee against his prior employer and.the related Trust arising out of communications to the group plan insurer that the employee was no longer covered under the plan). Even though Sorosky and Greany do not apply the relationship test; the relationships implicated — between employer (and Trust in Greany) and employee — are patently at the center' of ERISA, while conduct undertaken by an outsider to ERISA-governed relationships is not of the same primacy.
Complete Preemption: Much like the legal duties implicated by the fraud claims, the duty to refrain from interference with the contractual' relationships of others arises independently from ERISA or the duties under an ERISA plan. In light of this conclusion, the Court need not analyze the first Davila prong. The intentional interference claim is not completely preempted.
Again, Ninth Circuit cases that have held differently are distinguishable. Sorosky (though decided prior to Davila) held that the interference claim at issue was completely preempted as falling within the scope of ERISA § 502(a)(3). Sorosky, 826 F.2d at 800. In that case, however, ERISA § 502(a)(3) provided an avenue for the employee to enforce his ERISA § 510 rights to non-interference. Id. See also Tingey v. Pixley-Richards W., Inc., 953 F.2d 1124, 1131 (9th Cir.1992) (holding that a claim for intentional interference, arising out of an employer’s alleged termination of an employee so as to deny him benefits, was subject to preemption). Here, the alleged interference is not of the same kind, as it is not interference that was purportedly undertaken by an employer (potentially to avoid paying benefits under the plan in a manner ERISA itself declares impermissible), but rather interference effected by an alleged outsider.
2. United’s Fraud and Conspiracy Claims
In addition to their preemption arguments, Providers contend that United has failed to adequately allege its claims for fraud, and, consequently, the claim for conspiracy predicated upon such fraud. (Mot. at 12-17).
Under California law, “[t]he elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” 5 B.E. Witkin, Summary of California Law, Torts § 772, at 1121 (10th ed.2005).
a. Fraud Allegations Re: Non-Contracted Providers and Duty to Collect Co-Pays
i. Duty
Providers argue that waiver or discount of patient co-pay by out-of-network providers is not fraudulent, under California law since there is no California authority that imposes a duty for such providers to collect or disclose collection of co-pay. (Mot. at 12). However, Providers misconstrue the FACC’s allegations — this is not a case of non-disclosure absent an affirmative duty, but rather an instance in which affirmative misrepresentations were alleged to have been made during the course of claims submissions.
In support of their position, Providers cite to a 1981 California Attorney General Opinion. (See Mot. at 12-13 (citing 64 Ops. Cal. Att’y. Gen. 782, 1981 WL 126814 (1981)). In: that Opinion, the Attorney General interpreted whether a dentist’s failure to report deductions of co-pay in reporting, his “usual fee” pursuant to a provision in a. dental insurance plan violated California laws against rnisrepresentation and fraud. 64 Cal. Op. Att’y Gen, 782, 1981 WL 126814, at *1-2 (1981). Because the term “usual fee” in the plan was ambiguous, and the term was to be construed against the insurer who drafted the plan, the Attorney General found that the plan could be interpreted to allow co-pay to be included in “usual fee” even when the patient did not have to pay it. Id. at *3.
Providers also cite to Buller v. Sutter Health, 160 Cal.App.4th 981, 74 Cal.Rptr.3d 47 (2008). (Mot. at 13-14). In Butter, the Court of Appeal considered whether, a provider’s bills violated the UCL because they did not disclose that discounts would be provided for patients who paid promptly. 160 Cal.App.4th at 984-85, 74 Cal.Rptr.3d 47. The Butter complaint did not allege that there was an affirmative duty to disclose prompt-pay discounts, and thus the failure to reveal such a policy was found not to be fraudulent under the UCL. Id. at 988, 74 Cal.Rptr.3d 47. While the plaintiff argued that the court had mischaracterized his coinplaint as one alleging a failure to disclose when he actually was arguing that the amount owed was misrepresented, the complaint itself repeatedly alleged a failure to disclose. Id. Moreover, the plaintiff claimed that he was challenging a practice of inflation and misrepresentation of'balances due on invoices, but the court disagreed; rather, the court found that “[t]he balance is exactly what a patient with private insurance owes after the insurance company pays its portion of the charges.” Id. at 989, 74 Cal.Rptr.3d 47. The court recognized a difference “betweén the practice of artificially inflating the price of a service beyond its actual cost and the practice of voluntarily offering customers discounts on a properly priced service,” and noted that there were no allegations in the complaint that “the initial amount charged ... [was] improper on its face.” Id.
Both the Attorney General Opinion and Butter are inapposite. The term “usual fee” as discussed in the Attorney General Opinion necessarily is not tied to a specific patient" and service. In contrast, as alleged in the FACC, “Charges” or “Total Charges” were meant to reflect the feés actually charged to the patient for the claims reflected on the forms. (FACC ¶¶ 56, 288). Moreover, the Attorney General was interpreting an ambiguity in an insurance plan against the drafter, in accordance with well-established rules of insurance contract interpretation. Here, however, the “Total Charges” prompt— which United alleges created a duty to disclose what the actual charge for the services rendered were (id. ¶¶ 55-57) — did not come from a document that United drafted. Rather, United alleges that “[t]hese are forms approved and generated in connection with the federal Medicare program, and it is common in the health care industry for these same forms to be used in connection with other governmental and non-governmental insurance.” (Id.¶ 55). Therefore, the interpretation afforded by the Attorney General is inapplicable here.
Moreover, unlike in Butter, the issue here is not whether an alleged failure to disclose to patients that they may be eligible for discounts if they pay promptly is objectionable; or, indeed, whether the provision of a discount in isolation is objectionable. Rather, the case before the Court asks whether reporting charges to an insurer that allegedly fail to account for co-pay waivers but are meant to reflect the fees actually charged to the patient constitutes a misrepresentation — precisely the issue of impropriety of initial charges that Bueller distinguished. The allegations in the FACC support a finding that Providers’ purported practice constitutes misrepresentation. Providers cite to no binding authority that counsels a different result,
ii. Misrepresentations
Providers contend that they made no misrepresentations by failing to disclose waiver of co-pay because the industry-standard billing forms contain no spaces for disclosure of discounts. (Mot. at 15). Rather, Providers state that they “did here what every other healthcare provider does,” and simply noted their “Total Charges” on these forms, making no representations as to whether they would collect co-pay obligations. (Id. at 16). Providers also note that they did not know the amounts of the relevant co-pays until after they had submitted these forms, since providers do not learn these amounts until the insurer or plan sends an Explanation of Benefits (“EOB”) in response to claim submissions. (Id). Providers cite to the Declaration of Araminta Salazar (“Salazar Declaration”) as evidence of the EOB format., (Id).
As a preliminary matter, Providers’ assertion that the FACC alleges no misrepresentations ignores the FACC’s allegations outside of the deduction context. Providers focus on United’s fraud allegations regarding waiver of co-pay, and ne? gleet to address United’s other fraud allegations; namely that Providers submitted “[fraudulent claims that misrepresented the nature of the procedure performed, or in some cases, completely failed to disclose that the member received a gastric Lap Band,” “[fraudulent claims that sought payment for services which were .charged using inflated. CPT codes,” “[fraudulent claims that sought payment for services which were never performed,” “[fraudulent claims that inflated the member’s BMI in order to receive secure coverage for the Lap Band surgery,” and “[fraudulent claims that demanded, exorbitant fees far in excess of the usual and. customary rate.” (FACC ¶ 285).
Moreover, even as to the deductions, as discussed above, United has alleged conduct that could amount to affirmative misrepresentations. Providers argue that they were not aware of co-pay amounts when they submitted the claims for reimbursement (Mot. at 16), but the allegations of misrepresentations in the FACC are not negated by invocation of these factual issues at this stage in the proceedings,
iii. Reasonable Reliance
Finally; Providers claim that, as there were no misrepresentations made, United fails to demonstrate reasonable reliance on any misstatements. (Mot. at 17). Moreover, Providers point to the methods United uses to calculate “eligible expenses,” and argue that since only one of the four methodologies- has anything to do with billed charges,- and - the FACC does not specify which plans calculated payments based on total charges, United. fails, to plead reli