953 F. Supp. 2d 1078
N.D. Cal.2011Background
- Kaiser MAP enrollee was injured in a car accident and Kaiser paid for her medical care under the MAP.
- She settled the third-party claim for $100,000 and Kaiser sought reimbursement as a Medicare secondary payer.
- Plaintiff filed a putative class action in state court alleging UCL and CLRA violations based on Kaiser’s reimbursement practices and marketing.
- Kaiser removed to federal court arguing CAFA jurisdiction and complete preemption; plaintiff moved to remand and argued not preempted and no exhaustion.
- The court denied the motion to remand, concluding CAFA jurisdiction existed, and granted Kaiser’s motion to dismiss with prejudice for preemption.
- The court did not address the merits of exhaustion because it found preemption and/or exhaustion required dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CAFA diversity exists | CAFA thresholds not met; mandatory exception applies. | More likely than not >$5M at issue; CAFA jurisdiction proper. | CAFA jurisdiction established; mandatory exception not applicable. |
| Whether the local controversy exception applies under 1332(d)(4) | Case is local to California; should be remanded. | Not local because injuries and defendants span beyond California and primary defendants are not all California residents. | Local controversy exception does not apply. |
| Whether the court should decline jurisdiction under 1332(d)(3) | Discretionary decline appropriate due to state focus. | More than two-thirds of class members are California residents; not appropriate to decline. | Not applicable; jurisdiction preserved. |
| Whether the state-law claims are preempted by the Medicare Act | Claims are not preempted and/or are grounded in California law independent of the Act. | Claims are preempted because they impermissibly challenge Kaiser’s Medicare-related rights and are mischaracterizations of benefits; some claims require exhaustion. | Preempted; UCL/CLRA claims dismissed. |
| Whether exhaustion applies to the claims | Exhaustion unnecessary for certain state-law claims. | Plaintiff’s claims are disguised benefits claims and require administrative exhaustion. | Exhaustion required for claims arising as benefits; remaining claims preempted. |
Key Cases Cited
- Abrego Abrego v. Dow Chemical Co., 443 F.3d 676 (9th Cir. 2006) (precontention on amount in controversy and CAFA relevance remains)
- Uhm v. Humana, Inc., 620 F.3d 1134 (9th Cir. 2010) (preemption of benefits-related claims; exhaustion analysis; marketing regulations)
- Clay v. Permanente Med. Group, 540 F.Supp.2d 1101 (N.D. Cal. 2007) (marketing materials as potential preemption context under CMS regulations)