Opinion
CIV. NO. 2:16-1493 WBS CKD
10-07-2016
SPINE & NEUROSURGERY ASSOCIATES, a medical corporation, Plaintiff, v. BLUE SHIELD OF CALIFORNIA LIFE & HEALTH INSURANCE COMPANY, a California corporation; and DOES 1 through 10, Defendant.
MEMORANDUM AND ORDER RE: MOTION TO DISMISS
Plaintiff Spine & Neurosurgery Associates filed this case against defendant Blue Shield of California Life & Health Insurance Company, seeking reimbursement for medical treatment provided to a Blue Shield insured. (Compl. ¶ 1 (Docket No. 1).) Defendant now moves to dismiss plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Def.'s Mot. to Dismiss ("Def.'s Mot.") (Docket No. 7).)
I. Factual and Procedural History
Plaintiff is a California medical corporation. (Compl. ¶ 5.) From May 14 through 15, plaintiff provided emergency medical treatment and services to Viktor Tkachuk, who was insured by defendant. (Id. ¶ 10; Def.'s Mot., Mem. ("Def.'s Mem.") at 1.) Plaintiff did not have a contract with defendant to provide medical services. (Compl. ¶ 12; Def.'s Mem. at 1-2.) The cost of Tkachuk's treatment amounted to $33,048.00. (Compl. ¶ 11.)
On or about June 10, 2015, plaintiff submitted a claim to defendant for full reimbursement of Tkachuk's treatment expenses. (Id. ¶ 13.) To date, defendant has paid $2,400.74 on the claim. (Id. ¶ 16.) The parties disagree about whether defendant is obligated to pay the remaining amount. (Id. ¶¶ 13-15.) Their dispute centers on whether defendant is obligated to pay more than contracted-provider rates on plaintiff's claim. (See id. ¶¶ 12, 14; Def.'s Mem. at 2.)
On December 17, 2015, plaintiff filed a complaint in the California Superior Court seeking payment on the remaining amount from defendant. (See Def's Mot., Decl. of Christopher Rheinheimer ("Rheinheimer Decl.") Ex. A, State Ct. Compl. (Docket No. 7-3).) Plaintiff's state court complaint alleged violation of California Health and Safety Code and California Insurance Code. (Id. at 4-5.) It did not raise other claims. Defendant demurred to the state court complaint in its entirety, and the state court sustained that demurrer without leave to amend. (Id. Ex. B, State Ct. Order at 3 (Docket No. 7-4).) Plaintiff also voluntarily dismissed the state court action with prejudice. (Id. Ex. C, State Ct. Request for Dismissal (Docket No. 7-5); Def.'s Mem. at 2.)
The court takes judicial notice of the three exhibits attached to the Rheinheimer declaration, as each exhibit is a document on file with the California Superior Court. See U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (federal courts "may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue."); see also Bryant v. Carleson, 444 F.2d 353, 357 (9th Cir. 1971) (taking judicial notice of proceedings and filings in state courts). --------
On June 30, 2016, plaintiff initiated an action in this court seeking reimbursement for the same expenses it sought reimbursement for in state court. (Compl. ¶ 11.) This time, plaintiff cites the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), as the sole basis for its claim. (Id. ¶ 18-21.) Defendant now moves to dismiss plaintiff's complaint on grounds of res judicata, arguing that the state court judgment bars this action. (Def.'s Mem. at 3.)
II. Legal Standard
On a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court must accept the allegations in the pleadings as true and draw all reasonable inferences in favor of the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions . . . ." Twombly, 550 U.S. at 555 (citation omitted). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice," and "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
III. Analysis
"Res judicata, also known as claim preclusion, bars litigation in a subsequent action of any claims that were raised or could have been raised in the prior action." W. Radio Servs. Co. v. Glickman, 123 F.3d 1189, 1192 (9th Cir. 1997). "In order for res judicata to apply there must be: 1) an identity of claims, 2) a final judgment on the merits, and 3) identity or privity between parties." Id. "Congress has specifically required all federal courts to give preclusive effect to state-court judgments whenever the courts of the State from which the judgments emerged would do so." Allen v. McCurry, 449 U.S. 90, 96 (1980) (citing 28 U.S.C. § 1738).
The parties in this action are identical to those in the earlier state court action. (Compare State Ct. Compl., with Compl.)
As for whether the state court judgment was final and on the merits, California courts have held that "a dismissal with prejudice is the equivalent of a final judgment on the merits, barring the entire cause of action." Boeken v. Philip Morris USA, Inc., 48 Cal. 4th 788, 793 (2010). Similarly, "a judgment entered after the sustaining of a general demurrer is a judgment on the merits, and, to the extent that it adjudicates that the facts alleged do not establish a cause of action, it will bar a second action on the same facts." Palomar Mobilehome Park Ass'n v. City of San Marcos, 989 F.2d 362, 364 (9th Cir. 1993) (citing Crowley v. Modern Faucet Mfg. Co., 44 Cal. 2d 321, 322 (1955)).
Here, the factual basis for plaintiff's claim--its treatment of Tkachuk and subsequent inability to obtain full reimbursement from defendant--is identical to the factual basis that supported its state court claims. (Compare State Ct. Compl. ¶¶ 9-16, with Compl. ¶¶ 10-17.) Plaintiff does not dispute this. The state court sustained defendant's general demurrer on plaintiff's state court claims without leave to amend. (State Ct. Order at 3.) Moreover, plaintiff voluntarily dismissed the state court action with prejudice. (State Ct. Request for Dismissal.) Accordingly, the state court judgment was final and on the merits.
Plaintiff disputes whether the state court judgment, which only resolved its state law claims, (see State Ct. Order at 2-3), bars its present action, which is based on federal law. According to plaintiff, "after being informed that Mr. Tkachuk's health plan was an ERISA plan, Plaintiff's counsel realized that the State Court could not decide the issue of whether the Plaintiff's [state law] claim was viable" because "ERISA preempted state law with regard to Plaintiff's claims for reimbursement." (Pl.'s Opp'n at 5, 8 (Docket No. 10).) At that time, "Plaintiff's counsel, in his professional judgment, made the decision not to oppose Defendant's demurrer" on the belief that "the proper forum for Plaintiff's claims against Defendant was [in federal court]." (Id. at 8.) Plaintiff maintains that because "the State Court could not have addressed the issues presented in Plaintiff's current Complaint . . . res judicata does not bar Plaintiff from litigating such issues in this Court." (Id. at 7.)
In contrast to plaintiff's understanding, federal preemption of state law does not necessitate federal preemption of state court jurisdiction. It is well-established that "that nothing in the concept of our federal system prevents state courts from enforcing rights created by federal law. Concurrent jurisdiction has been a common phenomenon . . . and exclusive federal court jurisdiction over cases arising under federal law has been the exception rather than the rule." Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 507 (1962). Congress "may confine jurisdiction to the federal courts either explicitly or implicitly. . . . [T]he presumption of concurrent jurisdiction can be rebutted by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests." Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 478 (1981).
None of the considerations relevant to rebutting the presumption of concurrent state-federal jurisdiction are present with respect to the statute at issue in plaintiff's ERISA claim--29 U.S.C. § 1132(a)(1)(B). Contrarily, the statute expressly provides for concurrent state-federal jurisdiction: "State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this section." 29 U.S.C. § 1132(e). Accordingly, plaintiff could have raised its ERISA claim in state court.
"California, as most states, recognizes that the doctrine of res judicata will bar not only claims actually litigated in a prior proceeding, but also claims that could have been litigated." Palomar Mobilehome Park Ass'n, 989 F.2d at 364 (citing Busick v. Workmen's Comp. Appeals Bd., 7 Cal. 3d 967, 975 (1972) and Jama Const. v. City of Los Angeles, 938 F.2d 1045, 1047 n.1 (9th Cir. 1991)).
The court has considered the harshness of barring plaintiff from litigating its ERISA claim here in light of the state court's dismissal of its related state claims without leave to amend. Nevertheless, because plaintiff could have and did not raise its ERISA claim in state court prior to dismissal, and because the state court dismissed plaintiff's action with prejudice and without leave to amend, the court is compelled under California law to dismiss plaintiff's ERISA claim with prejudice. See Boeken, 48 Cal. 4th at 793 ("[A] dismissal with prejudice is the equivalent of a final judgment on the merits, barring the entire cause of action."); Palomar Mobilehome Park Ass'n, 989 F.2d at 364 ("[A] judgment entered after the sustaining of a general demurrer is a judgment on the merits . . . [and] it will bar a second action on the same facts."); see also Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995) ("Futility of amendment can, by itself, justify the denial of a motion for leave to amend.").
The court might be faced with the possibility of a different conclusion had plaintiff not voluntarily dismissed its state court action with prejudice and the state court not sustained defendant's demurrer without leave to amend. But because those events occurred, the court's ruling here is compelled under California law.
IT IS THEREFORE ORDERED that defendant's motion to dismiss plaintiff's complaint be, and the same hereby is, GRANTED. Plaintiff's complaint is DISMISSED WITH PREJUDICE and WITHOUT LEAVE TO AMEND. Dated: October 7, 2016
/s/_________
WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE