Marin General Hospital vs. Modesto and Empire Tractions & Medical Benefits Administrators of MD, Inc.
Filed 9/10/09
Court of Appeals Ninth District
Cite as CV-07-01027-SI

CA Holds that State Law Action not Preempted by ERISA

Marin General Hospital performed a lumbar fusion procedure on a patient after it was allegedly told by Medical Benefits Administrators of M.D., Inc., (“MBAMD”) on April 8, 2004, that the patient had insurance coverage through an ERISA plan under his employer Modesto & Empire Traction Co. Allegedly, MBAMD orally verified the patient’s coverage, authorized treatment, and agreed to cover 90% of the patient’s medical expenses at the Hospital.

The Hospital submitted a bill to MBAMD for $178,926.54 but was only paid $46,655.54 and was told that it was not entitled to further payment. MBAMD further denied that it had such a contract to pay 90% of total charges with the Hospital and refused to make additional payment.

On December 8, 2006, the Hospital filed suit in California state court against Modesto, MBAMD, and MBAMD’s CEO and Chairman Ronald Wilson (collectively “defendants”) for breach of an implied contract, breach of an oral contract, negligent misrepresentation, quantum meruit, and estoppel.

The defendants claimed that ERISA completely preempted the Hospital’s claims but the Marin moved to remand to state court, arguing that it alleged only state-law claims in its complaint, and that these claims were not completely preempted under ERISA.

The trial court denied the hospital’s motion and dismissed their claim. Hence this appeal. The Court of Appeals reversed the trial court’s decision and held that:

• ERISA does not completely preempt a state-law action for breach of contract, negligent misrepresentation, quantum meruit, and estoppel because these state-law claims cannot be pursued under ERISA and rely on legal duties independent from duties under any benefit plan under ERISA.


• A party seeking removal based on federal question jurisdiction must show either that the state-law causes of action are completely preempted by § 502(a) of ERISA, or that some other basis exists for federal question jurisdiction.


• The Supreme Court’s recent opinion in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), is instructive. In Davila, a participant in and a beneficiary of ERISA-regulated employee benefit plans (collectively, “plaintiffs”) brought separate state-law suits in state court arising out of injuries sustained as a consequence of their plans’ denials of coverage.


• If state-law causes of action come within the scope of § 502(a)(1)(B), those causes of action are completely preempted, and the only possible cause of action is under § 502(a)(1)(B). In that event, a federal district court has federal question jurisdiction, either original jurisdiction under § 1331(a) or removal jurisdiction under § 1441(a), to decide whether the plaintiff has stated a cause of action under § 502(a)(1)(B).


• Following a ruling laid down by the Supreme Court, the duties imposed by the state statute “do not arise independently of ERISA or the plan terms.” This was so because the standards set forth in the state statute at issue “ ‘create no obligation on the part of the health insurance carrier . . . to provide to an insured or enrollee treatment which is not covered by the health care plan of the entity.’ ”

Thus the CA held that the hospital’s state-law claims are not completely preempted by § 502(a)(1)(B). The hospital’s suit may be remanded to the state court to proceed.