Uhm v. Humana Inc.

• Decision Date: 25 August 2008
• Docket Number: No. 06-35672.,06-35672.
• Citation: 540 F.3d 980
• Parties: Do 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.
• Court: U.S. Court of Appeals — Ninth Circuit

540 F.3d 980

Do 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.

No. 06-35672.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 14, 2008.

Filed August 25, 2008.

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, DC, for the appellees.

William A. Helvestine and Carri L. Becker, Epstein Becker & Green, P.C., San Francisco, CA, for the amicus.

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.

Before: B. FLETCHER and RICHARD A. PAEZ, Circuit Judges, and WILLIAM W. SCHWARZER,^* District Judge.

PAEZ, Circuit Judge:

Plaintiff-Appellants Do Sung Uhm and Eun Sook Uhm ("the Uhms") appeal the district court's order dismissing their complaint against Defendant-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 ("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 Humana, Inc. cannot be preempted. We have jurisdiction under 28 U.S.C. § 1291. We affirm.

I. FACTS

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"), part of the Department of Health and Human Services ("HHS"), to offer Part D prescription drug plans ("PDPs" or "plans") to Medicare beneficiaries. Humana Health Plan, Inc. is a CMS-approved PDP provider; Humana, Inc., its parent company, is not.¹

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.² In particular, the Uhms relied on Humana's representation that they would be enrolled in the benefits plan, and therefore receive coverage for their prescription drugs beginning January 1, 2006, the first day Part D sponsors could provide benefits under the Act.

The Uhms enrolled in Humana's PDP by filling out 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.

To receive benefits under the Humana plan, beneficiaries were required to submit a mail-order form and allow for at least two weeks between submission of the form and receipt of their medications. 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, or instructions on how to complete the forms and request and receive their drug benefits. Concerned about their ability to obtain their medications through the plan, the Uhms and their son repeatedly requested pertinent information from Humana. They called, they sent emails—but Humana was unresponsive. In late December 2005, the Uhms called Humana's toll-free telephone number to determine their status under the plan; 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.³ 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, or agreed to pay, Medicare Part D prescription drug coverage premiums to Humana and who did not receive those prescription drug benefits in either a timely fashion or at all."⁴

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 Uhms' grievances as alleged in the complaint, that the administrative process established by the Act was the appropriate vehicle for addressing each of the Uhms' grievances, and that therefore the Uhms' state law claims were 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 similarly denied that motion. The Uhms timely appealed both orders.⁵

II. ANALYSIS

A. 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 state law claims are preempted by a federal statute, 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).

B. Preemption Provision

Humana contends, and the district court ruled, that each of the Uhms' state law claims are preempted by the Act's express preemption provision. We may find preemption only where it is the "clear and manifest purpose of Congress." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947). Because the Act contains an express preemption provision, the "task of statutory construction must in the first instance focus on the plain wording of the clause, which necessarily contains the best evidence of Congress' pre-emptive intent." CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993).

Medicare Part D incorporates the express preemption provision contained in Part C, the Medicare Advantage ("MA") program, which provides medical benefits to seniors through managed care.⁶ The Part D preemption provision states:

The provisions of sections 1395w-24(g) [prohibition of premium taxes] and 1395w-26(b)(3) [preemption] of this title shall apply with respect to PDP sponsors and prescription drug plans under this part in the same manner as such sections apply to MA organizations and MA plans under part C of this subchapter.

42 U.S.C. § 1395w-112(g).

The Part C preemption provision in turn provides:

The standards established under this part shall supercede any State law or regulation (other than State licencing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part.

42 U.S.C. § 1395w-26(b)(3). See also 42 C.F.R. § 423.440(a) (adopting same language in Part D implementing regulations: "The standards established under this part supercede any State law or regulations (other than State licencing laws or State laws relating to plan solvency) for Part D plans offered by Part D plan sponsors.").

The plain language of the statute provides therefore that CMS "standards" supercede State law or regulations insofar as the State law or regulation is "with respect to" a "prescription drug plan" offered by a "PDP sponsor."⁷

The inclusion of the phrase "law or regulation" demonstrates Congress' intent to expressly supplant only positive state enactments. See Sprietsma v. Mercury Marine, 537 U.S. 51, 63, 123 S.Ct. 518, 154 L.Ed.2d 466 (2002) (interpreting the phrase "law or regulation" as indicating Congressional intent to expressly preempt only positive state enactments and not common law). As the Court in Sprietsma reasoned, if the term "law" was meant to encompass common law claims, "it might also be interpreted to include regulations, which would render the express reference to `regulation' in the pre-emption clause superfluous." Id.

An express preemption provision, however, may "reach[ ] beyond positive enactments, such as statutes and regulations, to embrace common-law duties." Bates v. Dow Agrosciences L.L.C., 544 U.S. 431, 443, 125 S.Ct. 1788, 161 L.Ed.2d 687 (2005). Despite Congress' inclusion of an express preemption clause, we are not "categorically preclude[d] ... from applying principles of implied preemption" to determine what exactly Congress intended to preempt. Metrophones Telecomm., Inc. v. Global Crossing Telecomm., Inc., 423 F.3d 1056, 1072 (9th Cir.2005). The Supreme Court has recognized implied preemption in two realms:

field pre-emption, where the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, and conflict pre-emption where compliance with both federal and state regulations is a physical impossibility, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 98,...