Church v. Rouillard

• Decision Date: 06 March 2019
• Docket Number: No. 2:15-cv-02165-KJM-EFB,2:15-cv-02165-KJM-EFB
• Court: U.S. District Court — Eastern District of California
• Parties: Foothill CHURCH, Calvary Chapel Chino Hills, and Shepherd of the Hills Church, Plaintiffs, v. Michelle ROUILLARD, in her official capacity as Director of the California Department of Managed Health Care, Defendant.

371 F.Supp.3d 742

Foothill CHURCH, Calvary Chapel Chino Hills, and Shepherd of the Hills Church, Plaintiffs,

v.Michelle ROUILLARD, in her official capacity as Director of the California Department of Managed Health Care, Defendant.

No. 2:15-cv-02165-KJM-EFB

United States District Court, E.D. California.

Signed March 6, 2019

Filed March 7, 2019

Alexander Miles Medina, Medina McKelvey LLP, Roseville, CA, Erik Stanley, Pro Hac Vice, Jeremiah Galus, Pro Hac Vice, Kevin Hayden Theriot, Pro Hac Vice, Alliance Defending Freedom, Scottsdale, AZ, for Plaintiffs.

Hadara Rachel Stanton, Joshua Sondheimer, Attorney General's Office for the State of California Department of Justice, San Francisco, CA, for Defendant.

ORDER

Kimberly J. Mueller, UNITED STATES DISTRICT JUDGE

This action arises from letters the California Department of Managed Health Care ("DMHC") issued to seven private health insurers, which required them to remove any limitations on or exclusions of abortion services from the health care coverage they offer. Second Am. Compl. ("SAC"), Ex. 1, ECF No. 72-1. Plaintiffs Foothill Church, Calvary Chapel Chino Hills and Shepherd of the Hills Church ("plaintiffs"), three churches who offer their employees DMHC-regulated health coverage through these insurers, filed this action against defendant Michelle Rouillard ("defendant"), Director of the DMHC, alleging the letters violate the plaintiffs' constitutional rights under the First and Fourteenth Amendments. This matter is before the court on defendant's motion to dismiss the Second Amended Complaint. Mot., ECF No. 75. Plaintiffs oppose the motion. Opp'n, ECF No. 77. Defendant has replied. Reply, ECF No. 78. The motion was submitted without oral argument and, as explained below, the court GRANTS the motion.

I. STATUTORY FRAMEWORK

In California, the DMHC and the California Department of Insurance ("CDI") oversee regulation of the health care industry. The DMHC regulates "health care service plans" under the Knox Keene Health Care Service Plan Act of 1975 ("Knox Keene Act"), Cal. Health & Safety Code §§ 1340 et seq. The Knox Keene Act defines "health care service plans" as "[a]ny person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees." Cal. Health & Safety Code § 1345(f)(1). Health maintenance organizations ("HMOs") and other structured managed care organizations ("MCOs") are "health care service plans" under this definition. Rea v. Blue Shield of Cal. , 226 Cal. App. 4th 1209, 1215, 172 Cal.Rptr.3d 823 (2014).

The Knox Keene Act requires a person to secure a license from the Director of the DMHC before offering a health care service plan. Cal. Health & Safety Code § 1349. One requirement for licensure is that "a health care service plan contract [must] provide to subscribers and enrollees all the basic health care services" specified in the statute. Id. § 1367(i). Relevant to this action, the defendant has promulgated regulations defining the scope of this requirement to include "a variety of voluntary family planning services." Cal. Code Regs. tit. 28, § 1300.67(f)(2). The letters assert that, in conjunction with "the California Reproductive Privacy Act and multiple California judicial decisions that have unambiguously established under the California Constitution that every pregnant woman has the fundamental right to choose to either bear a child or to have a legal abortion," the Knox Keene Act requires health care service plans to cover elective abortions. SAC, Ex. 1.

The Knox Keene Act provides for a number of categorical and individualized exemptions. For example, the Act offers religious employers exemptions from providing coverage for "FDA-approved contraceptive methods that are contrary to [their] religious tenets," Cal. Health & Safety Code § 1367.25(c), or coverage for "forms of treatment of infertility

in a manner inconsistent with [their] religious and ethical principles," id. § 1374.55(e).

II. FACTUAL AND PROCEDURAL BACKGROUND

On October 23, 2017, plaintiffs filed the operative Second Amended Complaint, ECF No. 72, which contains the following allegations largely paralleling the allegations of their original complaint and their First Amended Complaint ("FAC"). On August 22, 2014, the defendant Director of the DMHC sent letters to seven private health insurers stating the DMHC had reviewed their contracts and the relevant legal authorities and "concluded that it erroneously approved or did not object to" language in some previous evidence of coverage (EOC) filings that may discriminate against women by limiting or excluding coverage for terminations of pregnancies. SAC ¶¶ 4, 32 & Ex. 1.

Plaintiffs are three non-profit Christian churches located in Southern California. Id. ¶¶ 13–15. Each plaintiff has more than fifty full-time employees and must, therefore, provide health coverage for its employees under the federal Patient Protection and Affordable Care Act of 2010. Id. ¶¶ 54–55. The Churches offer health insurance plans to their employees through various insurers, each of which received a letter from the DMHC as described above. Id. ¶ 32 & Ex. 1. Plaintiffs all hold what they describe as "historic and orthodox" Christian teachings on the sanctity of human life. Id. ¶ 18. They "believe and teach that abortion destroys an innocent human life" and that "participation in, facilitation of, or payment for an abortion that violates their religious beliefs is itself sin." Id. ¶¶ 20–21. In furtherance of these beliefs and principles, plaintiffs consulted with their insurance brokers and/or insurers in an effort to provide employee group health plans that do not pay for abortions. Id. ¶¶ 28–30. However, plaintiffs' insurance brokers and/or insurers have informed them that the DMHC's letters prevent their group health insurance plans from excluding or limiting coverage for abortions. Id. ¶ 31.

This action followed. The original complaint alleged that the DMHC's letters violated plaintiffs' rights under the Free Exercise, Establishment, Free Speech and Equal Protection clauses of the U.S. Constitution. See Compl. ¶¶ 104, 114, 119, 126, ECF No. 1. The court previously dismissed the Establishment and Free Speech claims with prejudice, but allowed the plaintiffs to file an amended complaint to cure defects in their Free Exercise and Equal Protection claims. First Order at 22, ECF No. 39. The plaintiffs then filed their First Amended Complaint, which the court again dismissed in resolving defendant's motion to dismiss, once again granting plaintiffs leave to amend their Free Exercise and Equal Protection claims. See FAC; Second Order, ECF No. 68. In support of their Free Exercise claim, plaintiffs now allege "[t]he Knox–Keene Act, as interpreted and applied by Defendant, is neither neutral nor generally applicable." SAC ¶ 167. Specifically, plaintiffs allege the Director has used her "broad, unfettered discretion" to provide exemptions "in a way that prefers some religious beliefs to others." Id. ¶¶ 170–72. Thus, they allege, "Defendant Rouillard has interpreted and selectively applied the Knox–Keene Act and its ‘basic health care services’ requirement against the Churches to suppress specific religious beliefs about when it is morally permissible to provide health insurance coverage for elective abortions." Id. ¶ 175. Plaintiff's Equal Protection claim is similarly based on alleged disparate treatment of different religious employers. See id. ¶¶ 191–93.

III. LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) tests the court's subject matter jurisdiction. See, e.g. , Savage v. Glendale Union High Sch. , 343 F.3d 1036, 1039–40 (9th Cir. 2003). When a party moves to dismiss for lack of subject matter jurisdiction, "the plaintiff bears the burden of demonstrating that the court has jurisdiction." Boardman v. Shulman , No. 2:12-cv-00639-MCE-GGH, 2012 WL 6088309, at *2 (E.D. Cal. Dec. 6, 2012), aff'd sub nom. Boardman v. Comm'r , 597 F. App'x 413 (9th Cir. 2015). If a plaintiff lacks standing, the court lacks subject matter jurisdiction under Article III of the U.S. Constitution.

Cetacean Cmty. v. Bush , 386 F.3d 1169, 1174 (9th Cir. 2004).

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The motion may be granted only if the complaint "lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Hartmann v. Cal. Dep't of Corr. & Rehab. , 707 F.3d 1114, 1122 (9th Cir. 2013) (citation omitted).

Although a complaint need contain only "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), in order to survive a motion to dismiss, this short and plain statement "must contain sufficient factual matter ... to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A complaint must include something more than "an unadorned, the-defendant-unlawfully-harmed-me accusation" or " ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’ " Id. (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). Determining whether a complaint will survive a motion to dismiss for failure to state a claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937.

In making this context-specific evaluation, this court must construe the complaint in the light most favorable to the plaintiff and accept its factual allegations as true....