Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union—Pac. Mar. Ass'n Welfare Plan

• Decision Date: 22 August 2016
• Docket Number: B267941
• Citation: 2 Cal.App.5th 793,206 Cal.Rptr.3d 461
• Court: California Court of Appeals Court of Appeals
• Parties: MORRIS B. SILVER M.D., INC., Plaintiff and Appellant, v. INTERNATIONAL LONGSHORE AND WAREHOUSE UNION—PACIFIC MARITIME ASSOCIATION WELFARE PLAN, Defendant and Respondent.

2 Cal.App.5th 793

206 Cal.Rptr.3d 461

MORRIS B. SILVER M.D., INC., Plaintiff and Appellant

v.INTERNATIONAL LONGSHORE AND WAREHOUSE UNION—PACIFIC MARITIME ASSOCIATION WELFARE PLAN, Defendant and Respondent.

B267941

Court of Appeal, Second District, Division 7, California.

Filed August 22, 2016

Law Offices of Jonathan A. Stieglitz and Jonathan A. Stieglitz, Poway, for Plaintiff and Appellant.

Seyfarth Shaw, D. Ward Kallstrom, Kevin J. Lesinski, Jonathan A. Braunstein and Eden Anderson, San Francisco; Leonard Carder, Christine S. Hwang and Andrew J. Ziaja, San Francisco, for Defendant and Respondent.

PERLUSS

, P.J.

Morris B. Silver M.D., Inc. (Silver) sued the International Longshore and Warehouse Union—Pacific Maritime Association Welfare Plan (Plan) to recover payment for health care services provided to Plan policyholders. Silver's action was dismissed on the ground all of his state law causes of action were preempted by the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.

) (ERISA). We reverse the order dismissing the lawsuit and remand for further proceedings as set forth in this opinion.

FACTUAL AND PROCEDURAL BACKGROUND

On October 8, 2014 Silver filed a complaint and on April 24, 2015 a first amended complaint against the Plan for breach of oral contract, quantum meruit, promissory estoppel and interference with contractual relations. The amended complaint alleged Silver had provided health care services to Plan policyholders for several years.¹ Before rendering services, Silver, an out-of-network provider, called the Plan to determine the amount it would pay.² The information supplied was memorialized in writing by Silver personnel on “an insurance verification sheet.”³ Silver also obtained written agreements from the policyholders ensuring they would pay their portion of the health care services.⁴

Until September 2012 the Plan regularly paid Silver's invoices. Beginning that month, however, the Plan stopped paying Silver, sending it and its policyholders explanation-of-benefits (EOB) forms indicating that the billed procedures were not covered and that neither the Plan nor the patient had any obligation to make payment to Silver.⁵

In June 2015 the Plan demurred to the amended complaint on the grounds Silver's claims were preempted by ERISA and the amended complaint failed to state a cause of action. The trial court, on its own motion, dismissed the amended complaint without prejudice on preemption grounds and ruled the demurrer was moot. In finding the claims preempted, the court explained, “ ‘courts look to whether the state law cause of action would remain “but for” the denial of the claim for benefits....' ” Because Silver's claims would not remain if the outstanding balance due Silver had been paid, the court found the claims were essentially denial-of-coverage claims and thus preempted.

DISCUSSION

1. Notwithstanding the Procedural Irregularities, Silver's Due Process Rights Were Not Violated

Rather than rule on the Plan's demurrer, which raised preemption, the trial court, without explanation or citation to authority, dismissed the action without prejudice on its own motion, finding Silver's state law causes of action preempted by ERISA. The court then found the Plan's demurrer was moot. Silver contends this procedural anomaly violated its due process rights because it had no notice of the court's sua sponte motion and no opportunity to address the arguments upon which the court relied. Silver also argues Code of Civil Procedure section 581

, governing dismissals, does not provide any authority for the court's action. (See In re Marriage of Straczynski (2010) 189 Cal.App.4th 531, 538–539, 116 Cal.Rptr.3d 938 [trial court erred in dismissing action without providing proper notice to parties and without proper legal basis].)

We agree the trial court's approach was irregular. Nevertheless, Silver's right to due process was not violated, and any error by the trial court was harmless. The legal basis for the trial court's dismissal—ERISA preemption—was addressed by the parties in their briefing in support of and opposition to the Plan's demurrer. Indeed, the court's decision set forth the law governing demurrers, and its preemption analysis cited several of the cases discussed by the parties. Even though the court considered additional authority not raised by the parties, is not unusual or improper for a court to engage in its own research and decide an issue in reliance on authority the parties have not cited. For practical purposes, the court's order was equivalent to a ruling sustaining the Plan's demurrer.⁶

2. Silver's Claims for Breach of Contract, Quantum Meruit and Promissory Estoppel Are Not Preempted by ERISA; Its Claim for Interference with Contractual Relations Is Preempted

a. Standard of review

“The interpretation of ERISA, including whether ERISA preempts state law, is a question of law which we review de novo.” (In re Marriage of Padgett (2009) 172 Cal.App.4th 830, 839, 91 Cal.Rptr.3d 475

.)

b. ERISA preemption generally

“ERISA is a comprehensive federal law designed to promote the interests of employees and their beneficiaries in employee pension and benefit plans. [Citation.] As a part of this integrated regulatory system, Congress enacted various safeguards to preclude abuse and to secure the rights and expectations that ERISA brought into being. [Citations.] Prominent among these safeguards is an expansive preemption provision, found at section 514 of ERISA [29 U.S.C. § 1144

].” (

Marshall v. Bankers Life & Casualty Co. 1992) 2 Cal.4th 1045, 1050–1051, 10 Cal.Rptr.2d 72, 832 P.2d 573

(Marshall ); see Aetna Health Inc. v. Davila (2004) 542 U.S. 200, 208 [124 S.Ct. 2488, 159 L.Ed.2d 312] [“The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans. To this end, ERISA includes expansive pre-emption provisions, [citation] which are intended to ensure that employee benefit plan regulation would be ‘exclusively a federal concern.’ ”].)

ERISA has two distinct preemption provisions: Preemption under section 514 (29 U.S.C. § 1144

), known as conflict or ordinary preemption; and so-called complete preemption under section 502(a) ( 29 U.S.C. § 1132(a) ). Conflict preemption is an affirmative defense to a plaintiff's state law cause of action that entirely bars the claim; that is, the particular claim involved cannot be pursued in either state or federal court. Complete preemption, in contrast, is a doctrine that recognizes federal jurisdiction over what would otherwise be a state law claim, an issue that typically arises when the defendant has removed the plaintiff's state court lawsuit to federal court. “Despite the similarity in nomenclature, complete preemption is quite distinct from ordinary preemption.... ‘ “Ordinary preemption” is an affirmative defense to the allegations in a plaintiff's complaint asserting a state law claim claiming that a state law conflicts with, and is overridden by, a federal law. On the other hand, complete preemption does not constitute a defense at all. Rather, it is a narrowly drawn jurisdictional rule for assessing federal removal jurisdiction when a complaint purports to raise only state law claims. It looks beyond the complaint to determine if the suit is actually and entirely a matter of federal law, even if the state law would provide a cause of action in the absence of the federal law.’ ” (Totten v. Hill (2007) 154 Cal.App.4th 40, 50, 64 Cal.Rptr.3d 357

; see Marin Gen. Hosp. v. Modesto & Empire Traction Co . (9th Cir. 2009) 581 F.3d 941, 945 [complete preemption “is ‘really a jurisdictional rather than a preemption doctrine, [as it] confers exclusive federal jurisdiction in certain instances where Congress intended the scope of a federal law to be so broad as to entirely replace any state-law claim’ ”].) Despite this difference, case authority discussing ERISA preemption often conflates the two doctrines. (See Marin Gen. Hosp ., at p. 945 [acknowledging the Ninth Circuit may have contributed to the confusion between the two doctrines by using terminology only relevant to conflict preemption to describe complete preemption].) Both parties agree the issue in the instant case concerns conflict preemption, not complete preemption.

c. Conflict preemption

i. State laws

Section 514(a) provides, “Except as provided in subsection (b) of this section, the provisions of [Titles I and IV of ERISA] shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....” (29 U.S.C. § 1144(a)

, italics added.) Initially, the Supreme Court interpreted the “relate to” language very broadly, holding, “A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan.” (Shaw v. Delta Air Lines (1983) 463 U.S. 85, 96–97 [103 S.Ct. 2890, 77 L.Ed.2d 490] ; see Ingersoll–Rand Co. v. McClendon (1990) 498 U.S. 133, 139, 111 S.Ct. 478, 112 L.Ed.2d 474 (Ingersoll–Rand ) [“[u]nder this broad common-sense meaning, a state law may ‘relate to’ a benefit plan, and thereby be pre-empted, even if the law is not specifically designed to affect such plans, or the effect is only indirect”].)

Subsequently recognizing the difficulty of reconciling such a broad and potentially limitless definition with the competing presumption that Congress generally does not intend to supplant state law, the Supreme Court concluded it “simply must go beyond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the law Congress understood would survive.” (New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. (1995) 514 U.S. 645, 656 [115 S.Ct. 1671, 131 L.Ed.2d 695]

(Travelers ) [holding New York statute requiring hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by...