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Court of Appeal, Fourth District, Division 2, California.

Gilbert LEVY, Plaintiff and Appellant, v. PACIFICARE OF CALIFORNIA et al., Defendants and Respondents.

No. E022431.

Decided: December 22, 1999

Shernoff, Bidart, Darras & Arkin;  Shernoff, Bidart, Darras & Dillon and Sharon J. Arkin, Claremont, for Plaintiff and Appellant. Konowiecki & Rank, Jon N. Manzanares, Los Angeles, and Keith A. Weaver, Santa Weaver, for Defendants and Respondents PacifiCare of California and PacifiCare Health Systems, Inc. Bonne, Bridges, Mueller, O'Keefe & Nichols, Los Angeles, Richard J. Ryan, Roseville, Nancy Flores, Monterey Park;  Greines, Martin, Stein & Richland, Robert A. Olson, Beverly Hills, and Laura Boudreau for Defendant and Respondent Empire Physicians Medical Group.


Plaintiff Gilbert Levy appeals from an adverse judgment entered after defendants' demurrers to the first amended complaint were sustained without leave to amend.   The complaint contains nine causes of action, all based upon plaintiff's claim that he was wrongfully denied access to a second medical opinion concerning a cancer diagnosis and was then denied coverage for corrective surgery.   The trial court found it lacked jurisdiction to hear plaintiff's claims since he failed to exhaust administrative remedies mandated by the Medicare Act. (42 U.S.C. § 1395 et seq.)   Plaintiff asserts none of his causes of action were subject to administrative review and therefore the trial court erred.   We disagree with the plaintiff and affirm.

facts and Procedural History

Plaintiff filed his original complaint on June 10, 1997.   In response, PacifiCare of California, doing business as Secure Horizons, and PacifiCare Health Systems, Inc. (collectively PacifiCare), filed a notice of removal to federal court.   The parties later stipulated to remand the case to superior court.1  Both PacifiCare and Empire Physicians Medical Group (Empire) (collectively Defendants) demurred.   The court overruled both demurrers as to certain causes of action and sustained the demurrers as to other causes of action, with leave to amend.

On November 26, 1997, plaintiff filed a first amended complaint including nine causes of action against PacifiCare and Empire.2  Plaintiff alleges:  The Department of Labor through the Health Care Financing Agency (HCFA) contracts with health maintenance organizations (HMO's) including PacifiCare, to provide medical care to Medicare-eligible senior and disabled citizens.   In Southern California, HCFA pays the HMO approximately $570 per month for each enrollee, whether any medical treatment is provided or not.   The HMO's must allow dissatisfied members to disenroll at any time, effective on the first of the month following the election.   Those members may choose another HMO or the standard Medicare entitlement.   Therefore, it is in the best interest of the HMO to enroll healthy persons, and then cause them to be dissatisfied and disenroll as soon as they require significant levels of treatment.

PacifiCare, a provider of medical benefits with duties equivalent to those of an insurance company, contracts with independent doctor groups, such as Empire, to supply medical services to its enrollees.   PacifiCare managed and controlled the activities of Empire, and vice versa, as a result of a contract between them by which Empire agreed to provide medical care, benefits determination and utilization review services to PacifiCare insureds.   The contractual arrangement between PacifiCare and Empire created a financial disincentive for Empire to refer patients to practitioners or facilities not under contract with PacifiCare.   PacifiCare paid Empire according to the number of plan enrollees, not the amount of medical services provided.   Further, Empire had to cover the cost of outside referrals for treatment it could not provide.   These types of covenants often result in the delay and/or denial of necessary medical care for plan enrollees.   PacifiCare required Empire to keep these arrangements a secret from the patients.

PacifiCare was the benefits administrator and underwriter of a health insurance policy issued to plaintiff as an alternative to the Medicare program.   Prior to his enrolling, PacifiCare represented to plaintiff that he would be entitled to everything Medicare offered and more, would be able to choose his own primary care physician and would be entitled to all treatment recommended by that doctor.   As part of its contractual agreement with HCFA, under 42 United States Code section 1395mm, PacifiCare was required to provide the same level of care and benefits provided under Medicare, without premiums or copayments.   In addition, PacifiCare promised to provide many additional services and benefits not covered by Medicare.

In October 1996, plaintiff was diagnosed with lung cancer.   Dr. Frankel, his primary care physician, referred him to PacifiCare's treating oncologist, Dr. George.   On November 15, 1996, Dr. George told plaintiff that the location of the tumor (near his heart) made it inoperable, leaving chemotherapy and radiation as the only treatment available.   Since Dr. George was not a surgeon, plaintiff wanted a second opinion from Dr. Morton, a thoracic surgeon at the John Wayne Cancer Institute.   Dr. Frankel processed the required paperwork requesting the second opinion.   On November 20, 1996, Empire denied the request on the ground that plaintiff had to see the local, in-network oncologist.   On November 21, 1996, plaintiff consulted Dr. Morton at his own expense.   Dr. Morton concluded plaintiff's only chance to survive was immediate surgery, as the tumor would double in size within 30 days.   Dr. Frankel submitted a request for a referral authorization to allow Dr. Morton to perform the needed surgery.   On November 27, 1996, Empire denied the referral stating plaintiff must be seen by an in-network surgeon, even though Dr. George had already determined no plan surgeon would perform the surgery.   Plaintiff determined the surgery would be covered under Medicare.   He therefore immediately disenrolled from the PacifiCare plan.   His Medicare coverage was effective December 1, 1996, and Dr. Morton performed successful surgery to remove the cancer on December 2, 1996.

Plaintiff alleges PacifiCare unreasonably withheld medical benefits under its contract with him.   By unreasonably withholding referrals, denying authorization for testing, failing to provide diagnosis, testing and treatment, and failing to make and withholding benefit payments, among other things, PacifiCare and Empire breached the duty of good faith and fair dealing they owed to plaintiff, breached their contracts with him, and negligently and intentionally inflicted emotional distress upon him.   By engaging in conduct that it knew would result in a denial of benefits to plaintiff, Empire negligently and intentionally interfered with plaintiff's contractual relationship with PacifiCare.   By having and failing to disclose financial incentives to deny benefits and by failing to provide authorization for medical treatment, among other things, Defendants breached their fiduciary duty to plaintiff.   By telling plaintiff he would receive all medically necessary treatment with the intention of denying that treatment when financially expedient, PacifiCare intentionally misrepresented facts to plaintiff.   Defendants should be enjoined from, among other things, willfully denying medically necessary treatment to senior citizens and from failing to disclose their financial incentives to deny such treatment.   Plaintiff prayed for damages for failure to provide benefits, emotional distress, pain and suffering, economic and punitive damages, as well as equitable relief.

On January 22, 1998, the trial court sustained PacifiCare's demurrer to the first amended complaint without leave to amend.   On January 26, 1998, plaintiff stipulated that Empire's demurrer be “sustained without leave to amend based on the same issues that the Court addressed and ruled on as to [PacifiCare's] demurrer.”   Based upon the stipulation, on February 5, 1998, the trial court issued an order sustaining Empire's demurrer without leave to amend and dismissed plaintiff's first amended complaint in its entirety.


 Preliminarily, we dispense with Empire's argument that plaintiff waived his right to appeal as against Empire by stipulating to the entry of judgment.   While generally a party may not appeal from a judgment to which he or she has agreed, an appeal may be taken when assent to judgment is given to facilitate appeal after an adverse determination on a critical issue.   (County of San Bernardino v. Pacific Indemnity Co. (1997) 56 Cal.App.4th 666, 678, fn. 7, 65 Cal.Rptr.2d 657.) Despite Empire's contrary argument, we conclude the trial court's finding that it lacked subject matter jurisdiction because plaintiff failed to exhaust his administrative remedies was indeed an adverse determination on a critical issue.   Given that decision, plaintiff could not hope to survive demurrer on any of his causes of action against Empire.   Thus, we decline to dismiss plaintiff's appeal as to Empire.

 “On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, we give the complaint a reasonable interpretation, and treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law.   A trial court errs in sustaining a demurrer when the plaintiff has stated a cause of action under any possible legal theory, and abuses its discretion in sustaining a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.  (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967 [9 Cal.Rptr.2d 92, 831 P.2d 317].)”  (Palm Springs Tennis Club v. Rangel (1999) 73 Cal.App.4th 1, 4-5, 86 Cal.Rptr.2d 73.)   On appeal, “ ‘․ Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading․’  [Citation.]”  (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349, 134 Cal.Rptr. 375, 556 P.2d 737.)   Plaintiff having made no attempt to indicate how his complaint may have been amended to state a cause of action under any theory, if we decide the demurrer was properly sustained, we must conclude that plaintiff has failed to establish that the trial court abused its discretion in denying leave to amend.

This case is determined by a single issue:  whether plaintiff's state law causes of action are based upon claims governed by the Medicare Act's (the Act) exclusive administrative review provisions.   There is only one California case on this topic, Redmond v. Secure Horizons, PacifiCare, Inc. (1997) 60 Cal.App.4th 96, 70 Cal.Rptr.2d 174.3

Redmond holds, citing Heckler v. Ringer (1984) 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622, that claims “arising under” the Act are subject to the exclusive administrative review procedures of 42 United States Code section 405(g) and (h), made applicable to the Act by 42 United States Code sections 1395ii and 1395mm(c)(5)(B).   In Redmond, the defendant HMO denied the plaintiff benefits for life-saving surgery, but later reimbursed her for her expenses.   The plaintiff sued for breach of contract, breach of the implied covenant of good faith and fair dealing, and infliction of emotional distress, based upon the initial denial of her claim and subsequent delay in reimbursement.  (Redmond v. Secure Horizons, PacifiCare, Inc., supra, 60 Cal.App.4th at pp. 98-99, 70 Cal.Rptr.2d 174.)   The Court of Appeal for the Sixth District concluded the plaintiff's state law claims did arise under the Act and affirmed the dismissal of her complaint for lack of subject matter jurisdiction.  (Id. at pp. 100-104, 70 Cal.Rptr.2d 174.)

The courts of our sister states have not examined this issue in a published decision and the federal circuit courts are in disagreement.  (Compare Ardary v. Aetna Health Plans of California, Inc. (9th Cir.1996) 98 F.3d 496 [state law tort claims for wrongful death, negligence, infliction of emotional distress and misrepresentation do not arise under the Act] with Midland Psychiatric Associates, Inc. v. United States (8th Cir.1998) 145 F.3d 1000 [state law claim for tortious interference with contract would entangle court in redeciding the Medicare claims decision and therefore arose under the Act] and Bodimetric Health Services, Inc. v. Aetna Life & Casualty (7th Cir.1990) 903 F.2d 480 [claims for fraud, negligence, breach of contract, breach of implied covenant of good faith and fair dealing and breach of fiduciary duty arose under the Act].) 4

 Claims arise under the Act when their basis is a request for the payment of benefits under the Act, when they are inextricably intertwined with the payment of benefits, or if the standing and substantive basis for the presentation of the claim are the Act.   We are to define the term “arising under” broadly.  (Heckler v. Ringer, supra, 466 U.S. at pp. 614-615, 620, 104 S.Ct. 2013.)   A claim may arise under the Act, even if it also arises under some other law as pleaded.  (Cf. Weinberger v. Salfi (1975) 422 U.S. 749, 760-761, 95 S.Ct. 2457, 45 L.Ed.2d 522.)   On the other hand, a claim does not arise under the Act if it is “wholly ‘collateral’ to [the] claim for benefits” and the injury cannot be remedied through the administrative appeals procedure.  (Heckler v. Ringer, supra, 466 U.S. at p. 618, 104 S.Ct. 2013.)

 For plaintiff to prove breach of the duty of good faith and fair dealing, breach of contract, negligent and intentional interference with a contractual relationship, breach of fiduciary duty and negligent and intentional infliction of emotional distress, plaintiff would have to show that a second opinion and surgery were unreasonably and/or wrongfully denied.   This would necessarily require the court to review the merits of Defendants' Medicare claims decisions.   The Act provides that such review is within the sole province of the Secretary of Health and Human Services, thus ensuring a uniformity of determinations nationwide, rather than the disparate findings that would inevitably result if each state court could determine entitlement to benefits under the Act. (42 U.S.C. §§ 1395ff, 1395mm.)   The above listed causes of action claim, at bottom, that Defendants should have allowed benefits that they denied.   Thus, while the standing for these claims may be in state law, as the Ardary court observed, we nevertheless conclude the claims are inextricably intertwined with the payment of benefits and arise under the Act.

 Plaintiff's causes of action for misrepresentation and injunctive and restitutionary relief give rise to a slightly different analysis, since at first blush, claims of this nature would not appear to have much to do with requests for benefits.  (See, e.g., Solorzano v. Superior Court (1992) 10 Cal.App.4th 1135, 13 Cal.Rptr.2d 161 [plaintiffs' request for injunctive relief for HMO's alleged deceptive advertising methods not preempted by federal law].) 5  Still, as pleaded, the alleged misrepresentation is based upon Defendants' assertions that benefits available through Medicare would not be denied and that treatment options would not be limited.   As compensation for the alleged misrepresentation, plaintiff seeks to recover for unreimbursed medical expenses for the second opinion and for emotional distress.   Similarly, plaintiff's cause of action for injunctive relief, at bottom, seeks to prevent Defendants from denying claims for benefits, and to prevent Defendants from engaging in conduct that results in the denial of benefits.  “A party cannot avoid the Medicare Act's jurisdictional bar simply by styling its attack as a claim for collateral damages instead of a challenge to the underlying denial of benefits.   If litigants who have been denied benefits could routinely obtain judicial review of these decisions by recharacterizing their claims under state and federal causes of action, the Medicare Act's goal of limited judicial review for a substantial number of claims would be severely undermined.  [Citations.]”  (Bodimetric Health Services, Inc. v. Aetna Life & Casualty, supra, 903 F.2d at p. 487.)   Thus, we conclude the trial court correctly found that plaintiff's complaint is inextricably intertwined with his claim for benefits under the Act. If the denial of his claim for benefits under the Act was not allegedly wrongful, plaintiff would have no causes of action.   The Act's exclusive provision regarding claims for benefits deprives the state courts of subject matter jurisdiction over plaintiff's claims.

On appeal plaintiff seeks primarily to convince this court to find the Ninth Circuit opinion in Ardary v. Aetna Health Plans of California, Inc., supra, 98 F.3d 496 controlling, and distinguish Redmond v. Secure Horizons, PacifiCare, Inc., supra, 60 Cal.App.4th 96, 70 Cal.Rptr.2d 174.   Plaintiff would also have us distinguish Bodimetric Health Services, Inc. v. Aetna Life & Casualty, supra, 903 F.2d 480.   Initially, we note that we are not bound to follow any of these opinions, which are merely of persuasive effect.   (See La Com v. Pacific Gas & Electric Co. (1955) 132 Cal.App.2d 114, 118, 281 P.2d 894;  Rohr Aircraft Corp. v. County of San Diego (1959) 51 Cal.2d 759, 764, 336 P.2d 521, revd. on other grounds (1960) 362 U.S. 628, 636, 80 S.Ct. 1050, 4 L.Ed.2d 1002.)   Further, we find Ardary, Redmond and Bodimetric distinguishable from the instant suit in both their facts and their analysis.   Empire correctly observes that Heckler v. Ringer, supra, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622, controls, and it is the authority upon which we base our decision.

Our application of Ringer and our analysis of Redmond and Ardary cause us to conclude that plaintiff's claims are more akin to those in Redmond than those in Ardary.   Viewed superficially, Redmond could be interpreted to merely conclude that the essence of Redmond's claim was a denial of benefits, albeit for delayed reimbursement rather than the cost of medical care.   However, it should not be overlooked that the plaintiff in Redmond had already received her benefits at the time she filed her suit.   Her claims, as are plaintiff's herein, were for consequential damages flowing from the denial of benefits, not for reimbursement of the benefits themselves.   But because those consequential damages could not be awarded without the trial court second-guessing the benefits determination, they were found to be inextricably intertwined with a claim for benefits, and therefore subject to exclusive administrative review.   (Redmond v. Secure Horizons, PacifiCare, Inc., supra, 60 Cal.App.4th at pp. 102-103, 70 Cal.Rptr.2d 174.)

Ardary is factually distinguishable from the instant case as it involved an action by surviving family members for a wrongful death allegedly occasioned by a failure to provide medical services, and not, as here, a claim by the enrollee.  (Ardary v. Aetna Health Plans of California, Inc., supra, 98 F.3d at pp. 497-498.) 6  Further, in deciding Ardary, the Ninth Circuit applied the exception to exclusive administrative review that was mentioned by the United States Supreme Court in Ringer, for “special cases” where the claim is “ ‘wholly “collateral” to [the] claim for benefits, and where ․ [the] injury could not be remedied by the retroactive payment of benefits․' ”  (98 F.3d at p. 500, citing Heckler v. Ringer, supra, 466 U.S. at p. 618, 104 S.Ct. 2013.)

Assuming the Ninth Circuit's analysis was correct (Empire argues it was not), the special circumstances it found brought Ardary into the Ringer exception are not present here.   As shown above, throughout his complaint plaintiff bases his claims of wrongdoing on the decision to deny benefits, and requests compensation for the denial of benefits.   Ergo, plaintiff's claims are not wholly collateral to a claim for benefits.   In addition, though plaintiff argues his case is “special” because he has already been compensated and therefore his claims cannot be remediated through the administrative review process, we conclude he has “no colorable claim that an erroneous denial of ․ benefits in the early stages of the administrative process [injured him] in a way that [could not] be remedied by the later payment of benefits.”   (Heckler v. Ringer, supra, 466 U.S. at p. 618, 104 S.Ct. 2013.)   In this regard his claims are no different than those of the plaintiffs in Ringer and Redmond.

In Ardary, the court held that the complaint did not arise under the Act because it contained no “ ‘․ claims in which “both the standing and the substantive basis for the presentation” of the claims' is the Act. [Citations.]”  (Ardary v. Aetna Health Plans of California, Inc., supra, 98 F.3d at p. 499, italics in original.)   However, the “standing and substantive basis” test, originally formed in Weinberger v. Salfi, supra, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522, was only one part of the Supreme Court's analysis in Ringer.   The court also found dispositive the fact that the plaintiffs' claims were “inextricably intertwined with what [it held was] in essence a claim for benefits․”  (Heckler v. Ringer, supra, 466 U.S. at p. 624, 104 S.Ct. 2013.)   The Ardary court's consideration of whether the claims were essentially for benefits or were inextricably intertwined with a claim for benefits was irreversibly caught up in its determination that it was dealing with a special case that was an exception to the rule.   Since this is not a special case Ardary contains a significant analytical gap that affects how Ringer applies here.   When that gap is filled, we conclude a different result ensues.

In addition to his heavy reliance on Ardary, plaintiff argues that 42 United States Code section 1395ff, which is one of two sections of the Act from which the exclusive administrative review of benefits claims is derived, does not apply in this case.   Plaintiff argues that section only applies to claims for benefits under parts A and B of the Act. He continues that since this case involves 42 United States Code section 1395mm, which is under part D of the Act, section 1395ff is of no effect.   Plaintiff's argument fails.  42 United States Code section 1395mm(c)(2) requires that HMO's must provide the same benefits to which members would otherwise be entitled under parts A and B. Thus, 42 United States Code section 1395ff is incorporated into 42 United States Code section 1395mm, and its administrative review requirements do apply.

Plaintiff points out that 42 United States Code section 1395mm(c)(5) provides its own review procedure for HMO members who are dissatisfied with their HMO because it denied benefits.   He claims that since he ultimately received his benefits, this review provision does not apply, and he need not exhaust administrative remedies prior to filing his action.   However, plaintiff did not get the benefits to which he believed himself entitled from the HMO Defendants, and that is exactly why he is dissatisfied with them.   The provision, which vests exclusive review in the Secretary of Health and Human Services, is applicable.

 Plaintiff also suggests on appeal that 42 Code of Federal Regulations section 417.606(b)(1) 7 precludes administrative review because his benefit was furnished.   We find this assertion lacking in merit as that regulation merely defines what does and does not constitute an “organization determination” by an HMO under section 1395mm of the Act. Subdivision (b)(1) of 42 Code of Federal Regulations section 417.606 refers to determinations concerning services provided by the HMO for which the enrollee has no further liability.   That is clearly not the case here where it is agreed that Defendants did not provide the disputed services to plaintiff.

To the extent that plaintiff claims his administrative remedies have been exhausted because his claim was paid, we agree with the Redmond court that if that were indeed the case, his only avenue of redress would be with the federal court since the administrative review procedures do not allow for state court jurisdiction.  (Redmond v. Secure Horizons, PacifiCare, Inc., supra, 60 Cal.App.4th at p. 104; , 70 Cal.Rptr.2d 174 42 U.S.C. § 405(g), (h).)

We disagree with plaintiff that a preemption analysis is necessary and to the extent such analysis was dispositive in Ardary, it is again distinguishable from this case.8  This case involves a determination whether plaintiff was required to exhaust administrative remedies in order to vest jurisdiction in the superior court, and requires analysis no different than that undertaken in cases governed entirely by state administrative procedures and law.  (See, e.g., Hensler v. City of Glendale (1994) 8 Cal.4th 1, 32 Cal.Rptr.2d 244, 876 P.2d 1043;  Hood v. Hacienda La Puente Unified School Dist. (1998) 65 Cal.App.4th 435, 76 Cal.Rptr.2d 448.)

 Even if we were to apply a preemption analysis, it would not assist plaintiff in this case.   In nearly all of his causes of action, plaintiff seeks recovery for Defendants' involvement in capitation and/or risk sharing contracts, the methods by which plaintiff claims the Medicare/HMO system allows and/or fosters the wrongful denial of benefits.   However, those types of agreements are specifically authorized by the Act. (42 U.S.C. § 1395mm.)   Hence, plaintiff asks that we apply state law to directly conflict with the Act. His position may not be adopted without an indictment of the Act. We may not proceed along such lines.   That state law may not directly conflict with federal law is a central tenet of preemption analysis.  (Smiley v. Citibank (1995) 11 Cal.4th 138, 147-148, 44 Cal.Rptr.2d 441, 900 P.2d 690.)

Finally, plaintiff complains that the administrative review process cannot remediate the consequential harms he suffered as a result of the denial of benefits.   Plaintiff provides no authority for that position, which is his burden as the party seeking to establish jurisdiction.  (School Dist. of Okaloosa County v. Superior Court (1997) 58 Cal.App.4th 1126, 1131, 68 Cal.Rptr.2d 612.)   Yet assuming plaintiff's contentions were true, we recognize that here there may indeed be no remedy for the wrongs alleged.   Congress has promulgated a system that, through a limited review process, provides the remedies it deems sufficient to accomplish the purposes of the Act. (Cf. Schweiker v. Chilicky (1988) 487 U.S. 412, 108 S.Ct. 2460, 101 L.Ed.2d 370.)   That this system may not afford plaintiff all the relief to which his state law claims might have entitled him is a situation over which this court has no control.   This result was implied by the decision in Heckler v. Ringer, supra, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622, where the plaintiffs' consequential damages were apparently of no moment.   Further, if consequential harms were not intended to be included within the administrative review process, the process itself would cease to perform its primary function as a limit on judicial review.   Any patient whose benefits were denied or delayed could merely file a common law action claiming consequential damages thus severely undermining the exclusive remedy provisions of the Act.

The conduct about which plaintiff complains is a serious matter.   However, redress for the disquieting issues raised by the complaint does not lie with this court.   Congress has created a scheme by which the senior and disabled citizens of this country, who are of more modest means, receive their medical care.   That scheme leaves state courts no avenue to rectify the concerns raised by plaintiff.

Since we decide the demurrer was properly sustained, as stated above, we must conclude that plaintiff has failed to establish the trial court abused its discretion in denying leave to amend.   Because it is unnecessary to our decision, we decline to examine whether Defendants, as they have suggested, may be entitled to official immunity for the acts which plaintiff alleges to have been wrongful.


The judgment is affirmed.   Defendants to recover their costs on appeal.


1.   Plaintiff argues the stipulation to remand is an admission that there is no federal jurisdiction over these claims.   But removal of a case involving a federal question is at the election of the defendant.  (28 U.S.C. § 1441.)   We decline to draw any conclusions about PacifiCare's reasons for stipulating to have the case heard in a state forum.   Further, subject matter jurisdiction cannot be waived, nor can it be “created” by the parties where it does not exist.  (Cowan v. Superior Court (1996) 14 Cal.4th 367, 372, 58 Cal.Rptr.2d 458, 926 P.2d 438.)

2.   Alleged against PacifiCare and Empire were breach of the duty of good faith and fair dealing, breach of contract, breach of fiduciary duty, intentional and negligent infliction of emotional distress, as well as requests for injunctive and restitutionary relief.   Plaintiff also alleged against Empire intentional and negligent interference with a contractual relationship.   Against PacifiCare alone plaintiff alleged a cause of action for intentional misrepresentation.

3.   Just prior to oral argument on this case, the Court of Appeal for the Fourth District, Division Three, decided McCall v. Pacificare of Cal., Inc. (1999) 74 Cal.App.4th 257, 87 Cal.Rptr.2d 784, review granted December 1, 1999 (S082236).   Plaintiff relied heavily on McCall at oral argument.   However, during the pendency of this appeal, on December 1, 1999, the California Supreme Court granted review of the McCall decision.   The case may not, therefore, be cited as precedent.

4.   At oral argument, plaintiff pointed out that Midland and Bodimetric involved fiscal intermediaries rather than HMO's, as in the instant case.   However, plaintiff provided no explanation why this is a distinction of import.   Both cases analyze whether the state law claims advanced therein arose under the Act as that term was defined in Ringer.  (Midland Psychiatric Associates, Inc. v. United States, supra, 145 F.3d at p. 1004;  Bodimetric Health Services, Inc. v. Aetna Life & Casualty, supra, 903 F.2d at pp. 483-487.)   We see no reason why Ringer should be applied differently depending on the nature of the parties involved.In response to plaintiff's observation, Empire cited Grijalva v. Shalala (9th Cir.1998) 152 F.3d 1115, as a case that did involve an HMO. However, Grijalva did not address the issue of exclusive administrative review of state law claims “arising under” the Act. In addition, the United States Supreme Court granted a writ of certiorari in Grijalva, vacated the judgment, and remanded the case.  (Shalala v. Grijalva (1999) 526U.S. 1096, 119 S.Ct. 1573, 143 L.Ed.2d 669.)

5.   The Solorzano court's analysis focused solely on federal preemption and did not consider the potential effect of the exclusive administrative remedies for claims for benefits under the Act. We do not believe a preemption analysis is appropriate in this case.  (See discussion, infra.)

6.   Wartenberg v. Aetna U.S. Healthcare, Inc. (E.D.N.Y.1998) 2 F.Supp.2d 273, cited by plaintiff, relied heavily on Ardary and also involved a claim for wrongful death by the survivors of an enrollee.   It is therefore distinguishable on the same grounds.

7.   “(b) Actions that are not organization determinations.   The following are not organization determinations for purposes of this subpart:“(1) A determination regarding services that were furnished by the HMO or CMP [competitive medical plan], either directly or under arrangement, for which the enrollee has no further obligation for payment.”  (42 C.F.R. § 417.606(b)(1).)

8.   Bowen v. Michigan Academy of Family Physicians (1986) 476 U.S. 667, 106 S.Ct. 2133, 90 L.Ed.2d 623, upon which the Ardary court relied in its preemption analysis, was decided under a superseded version of the Act. In the same year Bowen was decided, 42 United States Code section 1395ff (the section discussed in Bowen ) was amended to do away with the distinction between parts A and B of the Act that had previously existed, and which was the subject of the Bowen decision.  (See Historical and Statutory Notes, United States Code Annotated (1992 ed.) § 1395ff, p. 59;  Abbey v. Sullivan (2d Cir.1992) 978 F.2d 37, 41-43.)   Consequently, the Ardary court's reliance on Bowen is questionable.


HOLLENHORST, J., and McKINSTER, J., concur.

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