Pacific Recovery Solutions v. United Behavioral Health

Background

Pacific Recovery Solutions, doing business as Westwind Recovery, and Miriam Hamideh brought a putative class action against United Behavioral Health and MultiPlan, Inc. The plaintiffs alleged that they provided intensive outpatient program services to patients whose health-insurance policies were administered by United. According to the allegations, United represented during verification-of-benefits calls that it would pay a percentage of the services’ usual, customary, and reasonable rates, but the plaintiffs alleged that United instead paid lower amounts.

The Second Amended Complaint asserted six state-law claims: violation of California’s Unfair Competition Law, intentional misrepresentation and fraudulent inducement, negligent misrepresentation, civil conspiracy, breach of oral or implied contract, and promissory estoppel. The plaintiffs brought those claims for themselves and for a proposed class of similarly situated out-of-network intensive outpatient providers.

The court had dismissed two earlier versions of the complaint. In the prior related proceeding, it dismissed state-law claims based on services covered by Employee Retirement Income Security Act (ERISA) plans and allowed the plaintiffs to amend claims involving plans allegedly outside ERISA’s coverage. The court instructed the plaintiffs to identify claims covered by non-ERISA plans and explain why those plans were exempt from ERISA.

Motions and legal standard

United and MultiPlan moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not plead enough facts to state a plausible legal claim. They argued that ERISA preempted the state-law claims and that the claims were inadequately pleaded even if they were not preempted.

ERISA Section 514(a) preempts state laws that relate to employee benefit plans. The court explained that a state-law claim is preempted when it depends on the existence or terms of an ERISA-covered plan or has a genuine effect on a relationship governed by ERISA.

Court’s reasoning

The court found that the plaintiffs’ state-law claims were based on United’s alleged promise to pay for services at a percentage of the usual, customary, and reasonable rates under the patients’ healthcare plans. The plaintiffs had removed detailed allegations from the earlier complaint, including information about the claims, alleged underpayments, and United’s alleged representations. In the Second Amended Complaint, they replaced those allegations with conclusory statements that the plans were not governed by ERISA.

The plaintiffs did not identify any particular non-ERISA claims, plans, or class members. They also did not provide nonconclusory facts allowing the court to reasonably infer that any of the relevant services were covered by plans outside ERISA. Because the claims depended on the healthcare plans and the complaint did not plausibly allege that the plans were non-ERISA plans, the court held that the claims were subject to dismissal as preempted by ERISA.

The court had already given the plaintiffs an opportunity to add the necessary facts. Because they failed to do so, the court concluded that another opportunity to amend would be futile.

Disposition

The court GRANTED United’s and MultiPlan’s motions to dismiss the plaintiffs’ state-law claims WITH PREJUDICE. The order terminated Docket Numbers 85 and 86. The clerk was directed to terminate the action and enter judgment.