Stanford Health Care v. Trustmark Services Company

Background

Stanford Health Care alleged that, from January 2020 through June 2021, it provided medically necessary treatment at Stanford Hospital to patients covered by a health plan sponsored by The Chefs’ Warehouse, Inc. and administered by Trustmark. Stanford said it contacted defendants to verify each patient’s coverage, submitted bills after treatment, and received only partial reimbursement. It alleged that defendants underpaid it by $513,760.25.

Stanford filed two claims against each defendant: breach of an implied-in-fact contract and quantum meruit. An implied-in-fact contract is one inferred from the parties’ conduct. Quantum meruit is a claim seeking reasonable payment for services provided with an expectation of compensation, even when no enforceable contract exists. Stanford sought the unpaid amount, interest, attorney fees, and costs.

Arguments and legal standards

Both defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. Trustmark also moved under Rule 12(b)(1), which challenges the court’s subject-matter jurisdiction—the court’s authority to hear the case.

The defendants argued that Stanford had not alleged facts showing that an implied contract was formed or breached and that its quantum meruit theory was not viable. They relied heavily on the court’s earlier decision in a related case involving similar allegations, which found that verifying benefits and authorizing services alone did not establish an implied contract and that the allegations did not show a specific request for, or direct benefit from, the services.

Trustmark separately argued that it was only the plan’s third-party administrator and had assumed no financial obligation for claims under the plan. It supported that argument with a declaration and plan documents. The court treated this as a factual jurisdictional challenge. Stanford did not provide supporting evidence and did not respond to Trustmark’s Rule 12(b)(1) argument.

The Chefs’ Warehouse separately argued that the claims were preempted—displaced or barred—by the Employee Retirement Income Security Act. Stanford argued that its claims were based on independent promises to pay for medical services rather than rights under the health plan.

Court’s reasoning

The court concluded that Stanford relied on the same theory rejected in the earlier related decision: that verifying patients’ enrollment in the health plan created an implied contract. Stanford did not adequately distinguish that decision or address the substantial case law supporting defendants’ position. The court therefore granted both defendants’ Rule 12(b)(6) motions.

The court also granted Trustmark’s Rule 12(b)(1) motion. It found that Trustmark had provided adequate evidence supporting its jurisdictional challenge, while Stanford had neither supplied evidence establishing jurisdiction nor responded to that part of the motion.

Because Stanford’s allegations did not survive dismissal under Rule 12(b)(6), the court stated that it was unnecessary to reach The Chefs’ Warehouse’s separate argument that ERISA preempted the claims. The court said Stanford should clarify in any amended complaint whether its theory of recovery falls outside ERISA’s preemption provision.

Disposition

The court granted Trustmark’s Rule 12(b)(6) and Rule 12(b)(1) motions and granted The Chefs’ Warehouse’s Rule 12(b)(6) motion. Stanford Health Care was granted leave to amend, and any amended complaint had to be filed within 21 days of the order.