Situated v. Humana Inc., 06-35672.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation620 F.3d 1134
Docket NumberNo. 06-35672.,06-35672.
PartiesDO SUNG UHM; Eun Sook Uhm, a married couple, individually and for all others similarly situated, Plaintiffs-Appellants, v. HUMANA, INC., a Delaware corporation; Humana Health Plan, Inc., a Kentucky corporation doing business as Humana, Defendants-Appellees.
Decision Date30 August 2010

620 F.3d 1134

DO SUNG UHM; Eun Sook Uhm, a married couple, individually and for all others similarly situated, Plaintiffs-Appellants,
HUMANA, INC., a Delaware corporation; Humana Health Plan, Inc., a Kentucky corporation doing business as Humana, Defendants-Appellees.

No. 06-35672.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted March 14, 2008.
Opinion Filed Aug. 25, 2008.

Rehearing Granted and Opinion Withdrawn July 22, 2009.

Filed Aug. 30, 2010.

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Scott C. Breneman and Joseph A. Grube, Ricci Grube Aita & Breneman, PLLC, Seattle, WA, for the appellants.

Brian D. Boyle, Mark Davies, Samuel Brown, and Meaghan McLaine, O'Melveny & Myers, LLP, Washington, D.C., for the appellees.

William A. Helvestine and Carri L. Becker, Epstein Becker & Green, P.C., San Francisco, CA, for amicus curiae American Health Insurance Plans.

Andre Mura, Center for Constitutional Litigation, P.C., Washington, D.C., for amicus curiae American Association of Justice.

Sarang Vijay Damle, United States Department of Justice, Washington, D.C., for amicus curiae United States of America.

Rochelle Bobroff, National Senior Citizens Law Center, Washington, D.C., for amici curiae California Health Advocates, Medicare Rights Center, National Senior Citizens Law Center, and The Center for Medicare Advocacy.

Appeal from the United States District Court for the Western District of Washington, Ricardo S. Martinez, District Judge, Presiding. D.C. No. CV-06-00185-RSM.


Opinion by Judge PAEZ; Concurrence by Judge B. FLETCHER.

PAEZ, Circuit Judge:

Plaintiffs-Appellants Do Sung Uhm and Eun Sook Uhm (“the Uhms”) appeal the district court's order dismissing their complaint against Defendants-Appellees Humana Health Plan, Inc., and Humana, Inc., (collectively, “Humana”) on the ground that their claims are preempted by the express preemption provision of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (“MMA” or “the

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Act”). The Uhms also appeal the district court's order denying their partial motion for reconsideration in which they argued that, unlike Humana Health Plan, Inc., Humana, Inc., is not regulated under the Act, and therefore the claims against it cannot be preempted. Having concluded that all of the Uhms' claims were preempted by the Act, the district court declined to reach Humana's argument that the Uhms had failed to properly exhaust their claims pursuant to the Act's exhaustion requirements. See 42 U.S.C. § 405(g), (h). We affirm. 2 We hold that the district court lacked jurisdiction to consider the Uhms' breach of contract and unjust enrichment claims because they were not properly exhausted under the Act. We further hold that the Uhms' fraud and consumer protection act claims, while not subject to the Act's exhaustion provisions, are expressly preempted. Thus, the district court properly dismissed all of the Uhms' claims.


The Act established Medicare Part D (“Part D”), a voluntary prescription drug benefit program for seniors. See 42 U.S.C. § 1395w-101 et seq. Under the Act, health insurance providers contract with the Centers for Medicare and Medicaid Services (“CMS”), 3 part of the Department of Health and Human Services, to offer Part D prescription drug plans (“PDPs”) to Medicare beneficiaries. Humana Health Plan, Inc., is a CMS-approved PDP provider; Humana, Inc., its parent company, is not. 4

In late 2005, the Uhms-Medicare beneficiaries-chose Humana as their Part D provider based in part on the representations Humana made in its marketing materials. 5 In particular, the Uhms relied on Humana's representation that they would be enrolled in the benefits plan and accordingly receive coverage for their prescription drugs beginning January 1, 2006, the first day Part D sponsors could provide benefits under the Act.

Intending to enroll in Humana's program, the Uhms submitted the Humana Prescription Drug Plan Enrollment Form. The Uhms chose “Social Security Check Deduction” as their method of premium payment. Accordingly, the $6.90 plan premium was deducted from their January 2006 and February 2006 social security checks.

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As their enrollment date approached, the Uhms had not yet received any information from Humana about their prescription drug plan, including their identification cards, mail-order forms required to order prescription drugs, or instructions on how to complete the forms and request their drug benefits. The Humana plan required beneficiaries to allow for at least two weeks between submission of the request for prescription drugs and receipt of their medications. Accordingly, the Uhms became concerned about their ability to obtain their medications through the plan. They and their son repeatedly requested pertinent information from Humana. They called, they sent e-mails-but Humana was unresponsive. In late December 2005, the Uhms called Humana's toll-free telephone number to determine their status under the plan and they were told by a Humana representative that they were “not recognized as members of the Humana Part D PDP.”

January 1, 2006, came and passed, and the Uhms did not receive the materials necessary for obtaining their drug benefits. The Uhms were forced to buy their prescription medications out-of-pocket at costs higher than those provided by Humana's plan, despite the fact that the PDP premium was deducted from their social security checks in both January and February of that year.

On February 6, 2006, the Uhms filed a complaint against Humana Health Plan, Inc., and Humana, Inc., 6 in the U.S. District Court for the Western District of Washington, claiming breach of contract, violation of several state consumer protection statutes, unjust enrichment, fraud, and fraud in the inducement. The Uhms filed the complaint on behalf of themselves and a putative class consisting of “all persons who paid and/or were billed by Humana, for enrollment in the Humana Part D PDP and (a) did not receive benefits under the Humana Part D PDP, and/or (b) whom Humana failed to actually enroll in the Humana Part D PDP, and/or (c) whom Humana enrolled in the Humana Part D PDP on a date or dates later than the date or dates promised by Humana.” They invoked federal subject matter jurisdiction over the suit under the Class Action Fairness Act of 2005 and 28 U.S.C. § 1332(d).

Humana responded with a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim, which the district court granted. The district court concluded that the standards promulgated by CMS under the Act governed the grievances that the Uhms alleged in their complaint, that the administrative process established by the Act was the appropriate vehicle for addressing each of the Uhms' grievances, and that the Uhms' state law claims were therefore preempted by the Act's express preemption provision.

The Uhms filed a motion for partial reconsideration, arguing that their claims were not preempted with respect to Humana, Inc., because Humana, Inc., is not a CMS-approved PDP provider. The district court denied that motion. The Uhms timely appealed both orders.

II. ANALYSISA. Standard of Review

We review de novo the district court's dismissal of a case under Rule 12(b)(6) for failure to state a claim, Marder v. Lopez, 450 F.3d 445, 448 (9th Cir.2006), as well as the district court's determination that a federal statute preempts state

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law claims, Niehaus v. Greyhound Lines, Inc., 173 F.3d 1207, 1211 (9th Cir.1999). We review for abuse of discretion the district court's denial of a motion for reconsideration. Bliesner v. Commc'n Workers of Am., 464 F.3d 910, 915 (9th Cir.2006). We consider de novo the question of subject matter jurisdiction. See Sommatino v. United States, 255 F.3d 704, 707 (9th Cir.2001).

B. Exhaustion of Administrative Remedies

Humana argues that the Uhms' claims must be exhausted through the Act's administrative remedial scheme before a federal court may exercise jurisdiction under the Medicare Act. The issue of exhaustion bears on the district court's jurisdiction, see Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1115 (9th Cir.2003), so we address this argument first.

The Act's exhaustion requirement, 42 U.S.C. § 405(h), 7 makes judicial review under a related provision, 42 U.S.C. § 405(g), 8 “the sole avenue for judicial review” for claims “ ‘arising under’ the Medicare Act.” Heckler v. Ringer, 466 U.S. 602, 614-15, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). 9 The Supreme Court has held that “the exhaustion requirement of § 405(g) consists of a non-waivable requirement that a claim for benefits shall have been presented to the Secretary, and a waivable requirement that the administrative remedies prescribed by the Secretary be pursued fully by the claimant.” Id. at 617, 104 S.Ct. 2013 (internal quotations and citation omitted). 10 Only once the Secretary has issued a “final decision” may the individual seek judicial review of that determination. Id. at 605, 104 S.Ct. 2013. A “final decision” is rendered only after the individual has “pressed his claim” through all levels of administrative review. Id.; Ardary v. Aetna Health Plans of Cal., Inc., 98 F.3d 496, 498 (9th Cir.1996). In sum, “[j]urisdiction over cases ‘arising under’ Medicare exists only under

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42 U.S.C. § 405(g), which requires an agency decision in advance of judicial review.” Kaiser, 347 F.3d at 1111. 11

Humana contends that the Uhms' claims are subject to these provisions and that the Uhms have failed to exhaust those claims. The Uhms admit they have not pursued any of their claims through the Act's administrative processes, but argue that they need not exhaust their administrative remedies because their claims do not “arise under” the Medicare Act. They further contend that because their claims...

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