Insco v. Aetna Health & Life Ins. Co.

• Decision Date: 05 November 2009
• Docket Number: No. 2:09-cv-01254-RCJ-RJJ.,2:09-cv-01254-RCJ-RJJ.
• Parties: Roy INSCO and Donna Insco, Plaintiffs, v. AETNA HEALTH & LIFE INSUANCE CO., Aetna Health Insurance Co., Aetna Life Insurance Co., Does I through X, and Roe Corporations, Defendants.
• Court: U.S. District Court — District of Nevada

Page 1180

673 F.Supp.2d 1180

Roy INSCO and Donna Insco, Plaintiffs, v. AETNA HEALTH & LIFE INSUANCE CO., Aetna Health Insurance Co., Aetna Life Insurance Co., Does I through X, and Roe Corporations, Defendants.

No. 2:09-cv-01254-RCJ-RJJ.

United States District Court, D. Nevada.

November 5, 2009.

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COPYRIGHT MATERIAL OMITTED

Antonia C. Killebrew, Gerald I. Gillock, Gillock Markley & Killebrew, PC, Las Vegas, NV, Britt L. Tinglum, Richard H. Friedman, Friedman Rubin, Bremerton, WA, Matthew L. Sharp, Matthew L. Sharp, Ltd., Reno, NV, William S. Cummings, Friedman Rubin, Anchorage, AK, for Plaintiffs.

Christopher G. Rigler, John H. Cotton, John H. Cotton & Associates, Ltd., Las Vegas, NV, Richard J. Doren, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, for Defendants.

ORDER

ROBERT C. JONES, District Judge.

This case arises out of Plaintiff Roy Insco's ("Insco") alleged contraction of hepatitis C during treatment at the Endoscopy Center of Southern Nevada and the Gastroenterology Center of Nevada ("the Clinics") on June 13, 2007. Plaintiffs Roy and Donna Insco filed the present lawsuit, and the First Amended Complaint ("FAC") in the Clark County District Court against Aetna Health and Life Insurance Co. ("AHLI"), Aetna Health Insurance Co. ("AHI"), Aetna Life Insurance Co. ("ALI"), Does I-X, and Roes 1-X (collectively, "Aetna" or "Defendants"). (# 1 at 17). Defendants removed to this Court based on both federal question and diversity jurisdiction. (# 1). Before the Court is Defendants' Motion to Dismiss (# 14). Plaintiffs have filed a Response. (#20). For the reasons given herein, the Court denies the Motion to Dismiss (# 14) as to the First and Second Causes of Action and grants the Motion to Dismiss (# 14) as to the Third Cause of Action.

I. FACTS AND PROCEDURAL HITORY

The present case is similar in fact and law to a case recently decided by Chief Judge Roger L. Hunt of this District. See Sadler v. Health Plan of Nev., Inc., No. 2:08-cv-00466-RLH-LRL (D. Nev. June 25, 2008) (remanding to state court). That case is not published. However, Plaintiff has attached the order from that case to his Response (# 20, Ex. 1), and much of the research and reasoning therein is helpful in the present case. Both cases ultimately arose out of the Southern Nevada Health District's discovery of unsafe injection practices at the Endoscopy Center of Southern Nevada, which exposed tens of thousands of Nevada residents to bloodborne diseases like hepatitis B, hepatitis C, and HIV.

Plaintiff Roy Insco was allegedly exposed to such risk when he was treated at the Clinics on June 13, 2007 and contracted hepatitis C as a result of Defendants' negligence. Insco was employed at Ross Stores, Inc. ("Ross"), which paid for Insco's insurance plan ("the Plan") with Aetna. Aetna was the claims administrator for the Plan. As administrator, Aetna processed claims and negotiated contracts with independent providers for use by Plan members. (# 14 at 10:11-22). The Clinics were a part of Aetna's Preferred Provider Network. (Id. at 2-4).

Plaintiff claims that Defendant insurers had a duty to "evaluate, audit, monitor, and supervise" the Clinics at which he received treatment (# 1 ¶¶ 55-56), and that the floor of this duty was established by the Nevada Revised Statutes ("NRS") and the Nevada Administrative Code ("NAC") under the doctrine of negligence per se, because Plaintiff was within the class, of persons intended to be protected and his injuries were of the type intended to be prevented. (Id. ¶¶ 62-63 (citing Nev. Rev.Stat. §§ 695G.130, 695G.160, 695G.180, 695G.190 and Nev. Admin. Code §§ 695.[C]200, 695C.210, and 695C.400)).¹ Pursuant to this obligation, Plaintiff alleges that had Defendants properly established, implemented, and supervised the mandated quality assurance procedures, the unsafe injection practices would have been corrected and Plaintiff would not have been harmed. (Id. 1157). Accordingly, Plaintiffs First and Second Causes of Action, which are really a single cause of action, are for Negligence and Negligence Per Se.

Plaintiffs Third Cause of Action is for a Breach of the Implied Covenant of Good Faith and Fair Dealing. (Id. at 25). Plaintiff claims that Defendants breached this covenant as to their insurance contract with Plaintiff by "engaging in unreasonable conduct with knowledge of there being no reasonable basis for its conduct." (Id. ¶ 70). This claim seems to conflate a cause of action for breach of the implied covenant of good faith and fair dealing with negligence. First, Plaintiff uses the term "unreasonable" as opposed to "intentional." (Id.). Second, the next paragraph of the FAC makes it clear that this is a "negligence" theory. (Id. ¶ 71). But Plaintiff then goes on to claim "fraud, malice, and oppression" to support punitive damages. (Id. ¶ 72).

Defendants removed the action to federal court based both on diversity jurisdiction, 28 U.S.C. § 1332, and federal question jurisdiction, § 1331, arguing that Plaintiffs claims are preempted by § 514(a) and § 502(a) of the Employee Retirement Income Security Act of 1974 ("ERISA"). Defendants have filed the present Motion to Dismiss (# 14), arguing that Plaintiffs have failed to state a claim under Rule 12(b)(6) because: (1) Plaintiffs claims are preempted by ERISA §§ 514(a) and 502(a), and (2) Plaintiffs have not made out prima facie cases of the underlying torts.

II. RULE 12(b)(6) STANDARD

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief' in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See North Star Int'l. v. Arizona Corp. Comm'n., 720 F.2d 578, 581 (9th Cir.1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). The court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts showing that a violation is plausible, not just possible. Ashcroft v. Iqbal, ___ U.S. ____, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citations omitted).

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion . . . However, material which is properly submitted as part of the complaint may be considered" on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1990) (citations omitted). Similarly, "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss" without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). Moreover, under Federal Rule of Evidence 201, a court may take judicial notice of "matters of public record." Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir.1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.2001).

III. ANALYSIS

A. Preemption Under ERISA

Congress enacted ERISA to "protect . . . the interests of participants in employee benefit plans and their beneficiaries," by setting out substantive regulatory requirements for employee benefit plans, and to "provide for appropriate remedies, sanctions, and ready access to the federal courts." Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citing 29 U.S.C. § 1001(b)); see also Brandner v. Unum Life Ins. Co. of Am., 152 F.Supp.2d 1219, 1223 (D.Nev. 2001). To this end, ERISA contains expansive preemption provisions that are intended to ensure that employee benefit plan regulation is "exclusively a federal concern." Id. (citing Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)). In determining whether federal law preempts state law, the "Supreme Court has repeatedly held that the question of whether federal law preempts state law is one of congressional intent, and that Congress' purpose is the ultimate touchstone." Brandner, 152 F.Supp.2d at 1223 (citations and internal quotations omitted).

"There are two strands to ERISA's powerful preemptive force." Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir.2005). "First, ERISA section 514(a) expressly preempts all state laws `insofar as they may now or hereafter relate to any employee benefit plan.'" Id. (citing 29 U.S.C. § 1144(a)). Second, "ERISA section 502(a) contains a comprehensive scheme of civil remedies to enforce ERISA's provisions." Id. (citing 29 U.S.C. § 1132(a)). Under this section, "[a]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil...