24 Cal. App. 5th 153
Cal. Ct. App. 5th2018Background
- Port Medical (chiropractic provider) treated nearly exclusively members of an ERISA-governed welfare plan (International Longshore & Warehouse Union–Pacific Maritime Association Welfare Plan) and submitted claims through the Plan’s third‑party administrator, Connecticut General.
- Port Medical’s chiropractors were in-network with a chiropractic provider network and agreed to accept assignment of member benefits and specified fee schedules; Plan covered medically necessary chiropractic care (generally 40 visits/year).
- Beginning in mid‑2010 Connecticut General flagged Port Medical based on an alleged fraud tip, denied most claims, and requested medical records; Port Medical’s payments largely stopped and it ceased operations in Sept. 2010.
- Port Medical sued the Plan, the Board, and Connecticut General asserting five state‑law claims: breach of implied‑in‑fact contract, intentional misrepresentation, quantum meruit (services rendered), unfair competition (Bus. & Prof. Code § 17200), and intentional interference with prospective economic relations, alleging ~ $1.6M unpaid.
- Defendants moved for summary judgment arguing ERISA §514 preemption (conflict preemption), statute of limitations, and lack of evidence; trial court granted summary judgment for defendants; Port Medical appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Port Medical's breach of implied‑in‑fact contract claim is preempted by ERISA §514 | Implied contract arises from network practice: Port Medical provided covered services and Plan paid under fee schedules, creating an implied obligation separate from ERISA | The claim is fundamentally a demand for unpaid ERISA plan benefits (payments made because Plan was obligated to reimburse members), so conflict preempted | Preempted; summary judgment proper on this claim |
| Whether Port Medical's intentional misrepresentation claim is preempted | Connecticut General misrepresented audits and EOBs to induce continued treatment despite no intent to pay; claim arises from tortious misrepresentations independent of ERISA | EOBs and audit communications are core claim‑processing activities governed by ERISA notice/appeal rules; the alleged misrepresentations are inseparable from ERISA claims handling and thus preempted | Preempted; summary judgment proper on this claim |
| Whether quantum meruit (services rendered) claim is preempted | Port Medical rendered medically necessary, authorized services and the Plan became indebted to it; equitable recovery independent of ERISA | Recovery would be an alternative enforcement mechanism for benefits under an ERISA plan (i.e., unpaid plan benefits), so preempted | Preempted; summary judgment proper on this claim |
| Whether unfair competition and intentional interference claims are preempted and if triable issues exist on the merits | These claims allege defendants intentionally withheld payment (not merely denied claims) to put Port Medical out of business and benefit a competitor—tortious conduct outside ERISA’s core | Defendants: claims still depend on assertion that ERISA benefits were owed; evidence does not show assurances of payment or intent to deny valid claims or collusion with competitor; Plan cannot interfere with its own economic relations | Not preempted (alleged conduct reaches beyond routine claims handling), but Port Medical failed to produce evidence creating triable issues; summary judgment proper on these claims |
Key Cases Cited
- Misic v. Bldg. Serv. Employees Health, 789 F.2d 1374 (9th Cir. 1986) (providers with valid assignments can sue under ERISA as assignees)
- Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (U.S. 1987) (state causes of action based on improper processing of ERISA claims are preempted)
- Aetna Health Inc. v. Davila, 542 U.S. 200 (U.S. 2004) (ERISA preemption promotes uniform regulation of benefit plans)
- New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (U.S. 1995) (limits to broad "relate to" preemption; consider ERISA objectives)
- Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990) (hospital misrepresentation claim not preempted where provider relied on insurer’s assurance of coverage not grounded in plan terms)
- Blue Cross of Cal. v. Anesthesia Care Assoc., 187 F.3d 1045 (9th Cir. 1999) (provider claims arising from independent contract with insurer re: fee terms may avoid ERISA preemption)
- Morris B. Silver M.D., Inc. v. Int’l Longshore & Warehouse, 2 Cal.App.5th 793 (Cal. Ct. App. 2016) (adopted in part by this panel; discussed provider claims premised on plan misrepresentations)