Morris B. Silver M.D., Inc. v. International Longshore & Warehouse Union-Pacific Maritime Ass'n Welfare Plan
2 Cal. App. 5th 793
| Cal. Ct. App. | 2016Background
- Morris B. Silver M.D., Inc. (Silver), an out-of-network medical provider, treated Plan beneficiaries after Plan personnel/administrators orally represented the Plan would pay specified amounts and memorialized verification on provider forms; Silver also obtained patient promises to pay remaining portions.
- The International Longshore & Warehouse Union–Pacific Maritime Association Welfare Plan (the Plan) is an ERISA-governed employee welfare benefit plan established by collective bargaining.
- From 2009 through September 2012 the Plan paid Silver; beginning September 2012 the Plan stopped paying and issued explanation-of-benefits (EOB) forms stating procedures were not covered and indicating "Total Patient Responsibility" of zero.
- Silver sued in state court for breach of oral contract, quantum meruit, promissory estoppel, and interference with contractual relations.
- The trial court dismissed Silver’s amended complaint sua sponte as preempted by ERISA; Silver appealed arguing (among other things) lack of notice and that several of its causes of action are not preempted.
- The Court of Appeal reversed the dismissal in part, holding Silver’s contract/quasi-contract claims are not preempted under the Memorial Hospital line of third‑party-provider cases, but the interference claim (based on EOB communications) is preempted.
Issues
| Issue | Plaintiff's Argument (Silver) | Defendant's Argument (Plan) | Held |
|---|---|---|---|
| Did the trial court’s sua sponte dismissal without prior notice violate due process? | Dismissal without notice/argument deprived Silver of procedural due process. | Court acted on preemption grounds addressed in demurrer papers; no prejudice. | Rejection of due process challenge; irregularity harmless because parties had briefed preemption and court relied on same legal issues. |
| Are Silver’s breach of oral contract, quantum meruit, and promissory estoppel claims preempted by ERISA §514(a)? | Claims arise from Plan/administrator misrepresentations to a third‑party provider and seek payment promised to provider, not enforcement of plan benefits; thus not preempted. | Claims relate to ERISA plan administration/coverage and therefore are preempted. | Not preempted: court applies the Memorial Hospital two‑factor approach for third‑party providers and concludes these claims do not implicate ERISA’s exclusive federal concerns. |
| Is a third‑party provider’s quantum meruit claim here preempted because it depends on plan coverage? | Quantum meruit is an alternate theory grounded on Plan’s direct promise to pay for services; it is independent of a participant’s entitlement to plan benefits. | Quantum meruit effectively seeks plan benefits and is therefore preempted. | Not preempted in this case because the claim is premised on the Plan’s promises to the provider and does not seek to alter plan terms or beneficiaries’ rights. |
| Is Silver’s interference with contractual relations claim (based on EOBs stating zero patient responsibility) preempted? | EOBs tortiously induced patients not to pay Silver; tort is independent and outside ERISA. | EOBs are communications required by ERISA/its regulations and concern plan adverse determinations, thus preempted. | Preempted: the claim targets how adverse benefit determinations are communicated (an ERISA‑governed area) and would interfere with uniform plan administration, so conflict preemption applies. |
Key Cases Cited
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (state-law claims for improper processing of ERISA claims are preempted)
- Ingersoll‑Rand Co. v. McClendon, 498 U.S. 133 (state action ‘‘relates to’’ ERISA plans when it references/depends on plan existence)
- New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (ERISA preemption must be read in light of Congress’s objectives; not all laws with tenuous connection are preempted)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (ERISA’s objectives favor uniform federal regulation of benefits and broad preemption)
- Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (supreme-court summary of ERISA preemption categories)
- Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir.) (third‑party provider claims based on insurer misrepresentations are not per se preempted; two‑factor test)
- The Meadows v. Employers Health Ins., 47 F.3d 1006 (9th Cir.) (applies Memorial Hospital reasoning to third‑party provider claims)
- Access Mediquip LLC v. United Healthcare Ins. Co., 662 F.3d 376 (5th Cir.) (applies Memorial Hospital; negligent misrepresentation and promissory estoppel by provider not preempted)
- Cedars‑Sinai Med. Ctr. v. Nat. League of Postmasters, 497 F.3d 972 (9th Cir.) (analogous hospital claim not preempted under federal benefits statute analysis)