Blue Cross of CA. V. Anesthesia Care Assoc. Med. Group

Decision Date27 August 1999
Docket NumberNo. 98-55884,No. 98-15258,No. 98-15843,No. 98-15257,98-15258,98-15257,98-15843,98-55884
Citation187 F.3d 1045
CourtU.S. Court of Appeals — Ninth Circuit

James H. Fleming, Fleming & Phillips, Walnut Creek, California, for the petitioner-appellant.

Edward P. Sangster, McKenna & Cuneo, San Francisco, California, for the respondents-appellees.

Appeals from the United States District Court for the Northern District of California Maxine M. Chesney, District Judge, Presiding.D.C. No. CV 97-01654 MMC, CV 97-01655 MMC.

Appeal from the United States District Court for the Eastern District of California Garland E. Burrell, Jr., District Judge, Presiding. D.C. Nos. CV-97-00841 GEB

Appeal from the United States District Court for the Central District of California Consuelo B. Marshall, District Judge, Presiding. D.C. No. CV 97-03425 CBM.

Before: John T. Noonan and A. Wallace Tashima, Circuit Judges, and Jane A. Restani, Court of International Trade Judge.* Opinion by Judge Tashima


TASHIMA, Circuit Judge:

We are asked to determine whether the claims of medical providers against a health care plan for breach of their provider agreements are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. S 1001 et seq. We conclude that the fact that these medical providers obtained assignments of benefits from beneficiaries of ERISA-covered health care plans does not convert their claims into claims for benefits under ERISA-covered health care plans, and that the medical providers' claims do not otherwise fall within ERISA's express preemption clause, S 514(a), 29 U.S.C. S 1144(a). We, therefore, affirm the judgments of the district courts dismissing these actions for lack of subject matter jurisdiction.

A. Medical Provider Agreements

This litigation arises from a fee dispute between four medical providers -- Anesthesia Care Associates Medical Group, Inc. ("Anesthesia Care"), Anesthesiology Consultants of Contra Costa County Medical Group, Inc. ("Anesthesiology Consultants"), Kern Bone and Joint Specialists, Incorporated ("Kern Bone"), and Beaver Medical Clinic, Inc. ("Beaver Medical") (collectively "Providers") -- who participate in the Prudent Buyer Plan, a medical care plan offered by Blue Cross of California ("Blue Cross"). As of July, 1997, the Prudent Buyer Plan had more than two million members; approximately 39 percent of these members were provided the Prudent Buyer Plan by their private employers as part of the employees' health benefit coverage, and approximately 61 percent were either individual subscribers or were provided the Plan by government employers or special California state programs.

As part of the Prudent Buyer Plan, Blue Cross enters into a standardized contract, the Participating Physician Agreement (the "provider agreement"), with physicians. More than 30,000 physicians, including those affiliated with the Providers, have entered into one or the other of two versions of the provider agreement.1 Under these provider agreements, Blue Cross agrees to identify the participating physicians in the information materials it distributes to members of the Prudent Buyer Plan and to direct its subscribers to these physicians. In turn, the physicians agree to accept payment from Blue Cross for services rendered to Prudent Buyer Plan subscribers according to specified fee schedules.

Under the Prudent Buyer Plan, the patient is largely removed from the medical billing and payment process. In the provider agreements, the physician agrees to "seek, accept and maintain evidence of assignment for the payment of Medical Services provided to Members by PHYSICIAN under the applicable Prudent Buyer Benefit Agreement." (Provider Agreements S 4.2.) As to payment, the provider agreements state that "PHYSICIAN shall seek payment only from BLUE CROSS for the provision of Medical Services," except pursuant to specified exceptions. (Id. SS 6.1-6.10.) The provider agreements also state that "PHYSICIAN agrees to accept the fee schedule as provided in Exhibit B, attached and made part of this Agreement or PHYSICIAN's covered billed charges, whichever is less, as payment in full for all Medical Services provided to Members." (Id. S 6.6.) 2 The provider agreements further provide for review of new fee schedules by the Blue Cross Physician Advisory/Relations Committee prior to adoption.3

The provider agreements include arbitration provisions, in which the parties agree to submit disputes concerning the terms of the provider agreement to arbitration. The agreements specify that California law governs their construction and enforcement. (Id. S 13.10.)

Each of the Providers has some patients who are enrolled in the Prudent Buyer Plan as part of a health benefit plan covered by ERISA.

B. Proceedings

The dispute between the Providers and Blue Cross relates to changes in the fee schedules that Blue Cross allegedly made in 1993, 1994, and 1995. Viewing their claims as rais- ing common questions of law and fact, in March, 1997, the Providers submitted a joint written demand for arbitration of this dispute in a consolidated arbitration proceeding for themselves and other similarly situated physicians. Blue Cross was amenable to arbitration, but only to individual arbitrations with each provider, not to a consolidated class arbitration.

In May, 1997, Blue Cross filed petitions to compel arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. S 4, against each of the Providers in the United States District Courts in California. In these petitions, Blue Cross asserted federal subject matter jurisdiction under ERISA and the FAA. Shortly thereafter, the Providers filed a joint class action complaint against Blue Cross in the California Superior Court for the City and County of San Francisco, alleging that Blue Cross had breached its provider agreements with the Providers by improperly amending the fee schedules, and had violated its implied duty of good faith and fair dealing under California law.

On June 6, 1997, Blue Cross removed the Providers' state court action to the United States District Court for the Northern District of California. On November 21, 1997, the Northern District Court granted the Providers' motion to remand the removed action back to San Francisco Superior Court and to dismiss Blue Cross' petitions to compel individual arbitration with Anesthesia Care and Anesthesiology Consultants for lack of subject matter jurisdiction. On April 1 and 6, 1998, the Central District and Eastern District Courts, respectively, granted Beaver Medical's and Kern Bone's motions to dismiss Blue Cross' petitions to compel arbitration for lack of subject matter jurisdiction.4

The federal district courts' decisions dismissing Blue Cross' petitions rejected Blue Cross' argument that, by virtue of the assignments of benefits under the Prudent Buyer Plan to the Providers from their patients, some of whom had their subscriptions in the Prudent Buyer Plan through ERISAcovered health benefit plans, the Providers' claims fell within ERISA's civil enforcement provision, S 502(a), 29 U.S.C. S 1132(a).

The district court for the Northern District also rejected Blue Cross' argument that the Providers' claims "relate[d] to" an ERISA-covered plan under S 514(a) of ERISA, 29 U.S.C. S 1144(a), ERISA's express preemption clause. The only other federal statute invoked in Blue Cross' petitions was the FAA. Because the FAA does not provide an independent basis for jurisdiction, see Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32 (1983), the district courts dismissed the petitions for lack of subject matter jurisdiction. Blue Cross appeals each of the federal district court's decisions dismissing its petitions to compel arbitration. We have jurisdiction over these appeals pursuant to 28 U.S.C. S 1291, and we affirm the judgments of the district courts.


We review the district courts' decisions regarding ERISA preemption of state law de novo, see Operating Eng'rs Health & Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 675 (9th Cir. 1998); WSB Elec., Inc. v. Curry , 88 F.3d 788, 791 (9th Cir. 1996), as we review questions of subject matter jurisdiction de novo. See Geweke Ford v. St. Joseph's Omni Preferred Care Inc., 130 F.3d 1355, 1357 (9th Cir. 1997).


It is well established that the FAA does not, on its own, provide a basis for federal question jurisdiction. See Southland Corp. v. Keating, 465 U.S. 1, 15 n.9 (1984); Moses H. Cone, 460 U.S. at 25 n.32; Kehr v. Smith Barney, Harris Upham & Co., 736 F.2d 1283, 1287 (9th Cir. 1984) (S 4); Garrett v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 882 (9th Cir. 1993) (S 10). Rather, S 4 of the FAA "provides for an order compelling arbitration only when the federal district court would have jurisdiction over a suit on the underlying dispute; hence, there must be diversity of citizenship or some other independent basis for federal jurisdiction before the order can issue." Moses H. Cone, 460 U.S. at 25 n.32.

Blue Cross argues that the Providers' claims are preempted by ERISA, which thereby provides a basis for subject matter jurisdiction, because they fall within ERISA's civil enforce- ment provision, S 502(a), 29 U.S.C. S 1132(a), and express preemption clause, S 514(a), 29 U.S.C. S 1144(a). We hold that the Providers' claims...

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