Kalifano, Inc. v. Sierra Health & Life Ins. Co.

• Decision Date: 24 March 2020
• Docket Number: Case No.: 2:19-cv-00916-GMN-DJA
• Parties: KALIFANO, INC., Plaintiff, v. SIERRA HEALTH AND LIFE INSURANCE COMPANY, INC., Defendant.
• Court: U.S. District Court — District of Nevada

KALIFANO, INC., Plaintiff, v. SIERRA HEALTH AND LIFE INSURANCE COMPANY, INC., Defendant.

Case No.: 2:19-cv-00916-GMN-DJA

UNITED STATES DISTRICT COURT DISTRICT OF NEVADA

March 24, 2020

ORDER

Pending before the Court is Defendant Sierra Health and Life Insurance Company, Inc.'s ("Defendant's") Motion to Dismiss, (ECF No. 4). Plaintiff Kalifano, Inc. ("Plaintiff") filed a Response, (ECF No. 6), and Defendant filed a Reply, (ECF No. 11). Also pending before the Court are Plaintiff's Motion to Remand, (ECF No. 7), and Motion to Amend/Correct the Complaint, (ECF No. 9). Defendant filed Responses, (ECF Nos. 13, 14), and Plaintiff filed Replies, (ECF Nos. 15, 16). For the reasons discussed below, the Court GRANTS Plaintiff's Motion to Remand and DISMISSES as moot Defendant's Motion to Dismiss and Plaintiff's Motion to Amend/Correct the Complaint.

I. BACKGROUND

This action arises from Defendant's health care coverage of Plaintiff's employees, which began on August 22, 2001 ("Sierra Health Plan"). (Compl. ¶¶ 6-7, Ex. A to Pet. Removal, ECF No. 1). At the inception of coverage, Ismat Khalaf ("Khalaf") was one of Plaintiff's employees who became enrolled in the Sierra Health Plan. (Id. ¶ 10). Khalaf moved out of the United States in 2005 to the country of Jordan and then to China as part of Plaintiff's international operation—all while continuing to serve as a full-time employee for Plaintiff. (Id. ¶ 11).

On July 17, 2017, Defendant informed Plaintiff that Khalaf was ineligible for health care coverage under the Sierra Health Plan as of the time Khalaf moved outside the United States. (Id. ¶ 15). Defendant then terminated Khalaf's health care coverage retroactively, effective May 31, 2017. (Id. ¶ 16). However, between 2005 and July 17, 2017, Defendant had "continued to charge [Plaintiff] for Mr. Khalaf's health benefits under the Sierra Health Plan." (Id. ¶ 14). Also, according to Plaintiff, "[a]t no time prior to July 17, 2017 did [Defendant] or any of its agents advise [Plaintiff] that the Sierra Health Plan does not provide health benefits to employees who reside out of the United States, that an employee's move outside of the United States makes them ineligible under the Sierra Health Plan, or that an employee's move outside of the United States needs to be reported to Sierra Health." (Id. ¶ 13).

In light of Defendant's July 17, 2017 notice of Khalaf's non-coverage, Plaintiff requested a refund from Defendant for "health insurance premiums paid on behalf of Mr. Khalaf from the time he moved out of the USA through May 31, 2017." (Id. ¶ 17). Defendant refunded $3,972.35 (roughly sixty-days' worth of premiums), but refused to refund more. (Id. ¶ 18).

To recover the premiums that Plaintiff paid for Khalaf's coverage under the Sierra Health Plan between 2005 and 2017, Plaintiff commenced this action in the Eighth Judicial District Court for Clark County, Nevada ("Nevada state court") by filing its Complaint on April 25, 2019. (Compl., ECF No. 1). Plaintiff asserts eight claims for relief in the Complaint: (1) fraud; (2) breach of contract; (3) breach of covenant of good faith and fair dealing/common law bad faith; (4) mutual mistake; (5) unilateral mistake; (6) negligent misrepresentation; (7) unjust enrichment; and (8) declaratory judgment. (Id. ¶¶ 20-74).

On May 30, 2019, Defendant removed this case from Nevada state court to this Court by filing its Petition for Removal, (ECF No. 1). Defendant asserts that the Court has subject-matter jurisdiction over this case pursuant to 28 U.S.C. § 1331 because Plaintiff's Complaint arises under the Employee Retirement Income Security Act ("ERISA") of 1974, 29 U.S.C.§ 1001 et. seq. since it seeks "to recover payment for employee health care coverage from an employer based plan governed by ERISA." (Pet. Removal ¶ 4).

Four days after removing this action, Defendant filed its Motion to Dismiss, (ECF No. 4). Then, just over two weeks later, Plaintiff filed its Motion to Remand, (ECF No. 7), and a Motion to Amend/Correct the Complaint, (ECF No. 9).

II. LEGAL STANDARD

A. Motion to Dismiss

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. See N. Star Int'l v. Ariz. 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 (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, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

A court may also dismiss a complaint pursuant to Federal Rule of Civil Procedure 41(b) for failure to comply with Federal Rule of Civil Procedure 8(a). Hearns v. San Bernardino Police Dept., 530 F.3d 1124, 1129 (9th Cir. 2008). Rule 8(a)(2) requires that a plaintiff'scomplaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

"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). 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 becomes a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

If the court grants a motion to dismiss, it must then decide whether to grant leave to amend. The court should "freely give" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant . . . undue prejudice to the opposing party by virtue of . . . the amendment, [or] futility of the amendment . . . ." Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962).

B. Motion to Remand

"If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c). Generally, district courts have subject matter jurisdiction over civil actions in two instances: (1) if the claims arise under federal law; and (2) where no plaintiff is a citizen of the same state as a defendant and the amount in controversy exceeds $75,000. 28 U.S.C. § 1331; 28 U.S.C. § 1332(a).

If a plaintiff files a civil action in state court, the defendant may remove that action to a federal district court if the district court has original jurisdiction over the matter. 28 U.S.C. § 1441(a). Removal statutes are strictly construed against removal jurisdiction. Ritchey v. UpJohn Drug Co., 139 F.3d 1313, 1317 (9th Cir. 1998). "Federal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, 980 F.2d 564, 566 (9th Cir. 1992) (quoting Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1064 (9th Cir. 1979)). The defendant always has the burden of establishing that removal is proper. Gaus, 980 F.2d at 566.

III. DISCUSSION

Plaintiff's Complaint brings only state-law causes of action that do not, on their face, raise issues of federal law. (See Compl. ¶¶ 20-74). Defendant nevertheless removed the case to federal court on the ground that each of Plaintiff's claims are completely preempted by § 502(a) of ERISA, 29 U.S.C. § 1132(a).¹ (Pet. Removal 3:8-6:11, ECF No. 1). Indeed, "complete preemption" under § 502(a) of ERISA is an exception to the general rule of removal being improper when the complaint does not explicitly allege a federal claim. Rudel v. Hawai'i Mgmt. All. Ass'n, 937 F.3d 1262, 1269 (9th Cir. 2019), cert. denied sub nom. HI Mgmt. All. Assoc. v. Rudel, No. 19-752, 2020 WL 871750 (U.S. Feb. 24, 2020). By contrast, "express preemption" under § 514 of ERISA, 29 U.S.C. 1144(a), is not such an exception to the general rule of removal. Id. ("Section 514, however, does not confer federal jurisdiction"); Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 945 (9th Cir. 2009) (explaining that "complete preemption" by § 502(a) permits removal, but preemption under § 514 of ERISA "is an insufficient basis for original federal question jurisdiction under [28 U.S.C.] § 1331(a) and removal jurisdiction under [28 U.S.C.] § 1441(a)."). Defendant also uses that same basis of"complete preemption" to argue for dismissal of Plaintiff's state-law claims under Federal Rule of Civil Procedure 12(b)(6). (Mot. Dismiss 1:20-28, ECF No. 4).

The below discussion addresses whether "complete preemption" applies here, since complete preemption dictates the Court's...