Saloojas, Inc. v. Aetna Health of California, Inc.

Background

Saloojas, Inc., a healthcare provider and medical facility that provides COVID testing, sued Aetna Health of California, Inc. Saloojas alleged that it was outside Aetna’s provider network and that Aetna incorrectly denied or underpaid most of its reimbursement claims for COVID-testing services provided to Aetna-insured patients and members of employer plans administered by Aetna.

Saloojas alleged that California Senate Bill 510 required Aetna to pay out-of-network providers a reasonable amount for COVID testing without cost-sharing or other medical-management requirements. The complaint also alleged that Aetna denied claims for arbitrary reasons, used unfair appeals procedures, requested medical records to facilitate denials, and charged insureds copayments and deductibles in violation of that law. The amended complaint asserted claims under the Employee Retirement Income Security Act, California insurance bad-faith and fraud theories, California’s Unfair Competition Law, and the Racketeer Influenced and Corrupt Organizations Act. Although the complaint cited Senate Bill 510, it did not assert a claim under that law.

Employee-benefits claim

The court had previously dismissed Saloojas’s claim under Section 502(a)(1)(B) of the Employee Retirement Income Security Act, or ERISA, with permission to amend because Saloojas had not shown statutory standing. A healthcare provider generally cannot sue under that provision as a plan participant or beneficiary unless the patient assigned the relevant rights to the provider.

The amended complaint alleged that each Aetna insured had signed a COVID medical form that assigned rights to Saloojas. The court found that the form’s language only indicated that Saloojas would bill patients’ insurance companies. It did not show that patients intended to transfer ownership of their claims or authorize Saloojas to sue Aetna over unpaid benefits. The court therefore granted the motion to dismiss this claim. The dismissal was without prejudice but without leave to amend because Saloojas had already amended once and had not identified additional facts that could cure the standing defect at that time.

Insurance bad faith and fraud

The court held that Saloojas did not plausibly allege standing to bring an insurance bad-faith claim. Saloojas did not allege that it was a party to an insurance contract with Aetna or an intended beneficiary of contracts between Aetna and its insureds. The medical form also did not establish that patients made Saloojas their agent or transferred rights to it.

The court separately found that the fraud allegations were insufficient. Saloojas alleged that Aetna had a legal obligation to pay a reasonable amount for COVID testing and that Saloojas expected payment at its posted cash price, but it did not plausibly allege that Aetna made a misrepresentation to Saloojas, knew it was false, or induced Saloojas to rely on it. The court granted dismissal of the insurance bad-faith and fraud claims without leave to amend.

RICO claim

The court had previously found that Saloojas had not pleaded RICO predicate acts—specific underlying crimes required for a civil racketeering claim—with sufficient factual detail. The amended complaint did not add facts supporting mail fraud, wire fraud, or embezzlement, and instead relied on alleged violations of Senate Bill 510, the Unfair Competition Law, the federal CARES Act, and insurance bad-faith activities. The court explained that those alleged violations were not recognized RICO predicate acts. It granted dismissal of the RICO claim without leave to amend.

California Unfair Competition Law claim

California’s Unfair Competition Law prohibits unlawful, unfair, or fraudulent business practices. Saloojas invoked all three theories.

For the unlawful-practices theory, Saloojas alleged that Aetna violated the federal CARES Act and California Senate Bill 510 by failing to pay the posted cash price or a reasonable price for COVID testing. The court found these allegations too conclusory because the amended complaint did not provide sufficient facts about market rates or the amounts Aetna paid for the billed services. The court dismissed this theory with leave to amend because it was not clear that additional facts could not cure the pleading problem.

For the unfair-practices theory, Saloojas alleged that Aetna intentionally avoided its COVID-testing obligations and improperly billed insureds. The court held that Saloojas could not state a claim under this theory because, under the court’s stated rule, only a consumer or competitor may bring such a claim, and Saloojas was neither. This theory was dismissed without leave to amend.

For the fraudulent-practices theory, Saloojas alleged that Aetna’s practices were likely to mislead its insureds and the public. The court found that these allegations did not identify the specific people, conduct, timing, location, and manner of the alleged deception, as required for fraud-based claims. This theory was dismissed without leave to amend.

Disposition

The court granted Aetna’s motion to dismiss. It dismissed the first amended complaint without leave to amend except for the Unfair Competition Law claim based on the unlawful-practices theory, which was dismissed with leave to amend. The court did not grant permission to add new or additional claims generally.

The court noted that Saloojas had cited but had not asserted a claim under California Senate Bill 510. Aetna argued that the statute does not create a private right of action, and the court described that argument as persuasive. The court allowed Saloojas to file a brief of no more than seven pages explaining why adding such a claim would not be futile. The court stated that it would then set a deadline for a second amended complaint containing the unlawful-practices theory and, if amendment would not be futile, a Senate Bill 510 claim.