STANFORD HEALTH CARE v. CAREFIRST OF MARYLAND INC (2024)

ORDER GRANTING MOTION TO DISMISS

Re: Dkt. No. 24

Plaintiff Stanford Health Care filed this lawsuit against various health insurance organizations, alleging that they failed to pay medical bills for treatment that Stanford rendered to 7 of their enrollees. For the reasons that follow, the Court grants defendants’ Rule 12(b)(2) motion to dismiss claims involving 5 patients and grants defendants’ Rule 12(b)(6) motion to dismiss claims involving the remaining 2 patients.

BACKGROUND

Stanford filed this lawsuit in May 2023 alleging that the defendants CareFirst of Maryland, Inc. d/b/a CareFirst BlueCross BlueShield (BCBS); CareFirst BlueChoice, Inc.; and Group Hospitalization & Medical Services, Inc. (GHMS) failed to pay medical bills for 7 patients (purportedly defendants’ enrollees) to whom Stanford had administrated treatment. Stanford is a participating provider in BlueCard, “a national program that enables members of one BCBS Plan to obtain healthcare services while traveling or living in another BCBS Plan's service area.” Dkt. No. 29, at 8. Defendants are purportedly also members of the BlueCard program. Dkt. No. 28, at 10. Stanford alleges that in a written contract with Anthem Blue Cross of California, Stanford agreed to render medically necessary care to enrollees of Blue Cross of California health plans, and, as part of the BlueCard program, to enrollees of out-of-state Blue Cross affiliates. Dkt. No. 20, at 5. Accordingly, prior to administering necessary medical care for the patients here, Stanford purportedly contacted defendants to verify the patients’ health plan eligibility and obtain defendants’ authorization. Stanford further alleges that defendants represented that the patients were beneficiaries of their plans and offered to reimburse Stanford should medically necessary care be provided.

Stanford now asserts that defendants: (1) breached the written contract between Stanford and Anthem Blue Cross of California; and (2) breached an implied-in fact contract with Stanford. Stanford seeks damages of approximately $150,000. Defendants move to dismiss, arguing under Federal Rule of Civil Procedure 12(b)(2) that the Court lacks personal jurisdiction over the claims involving patients 1, 2, 4, 6, and 7; arguing under Federal Rule of Civil Procedure 12(b)(1) that the Court lacks subject matter jurisdiction over the claim involving patient 6; and arguing under Federal Rule of Civil Procedure 12(b)(6) that Stanford fails to state a claim as to patients 3 and 5.¹

LEGAL STANDARDS

In opposing a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff has the burden to prove that the Court's exercise of personal jurisdiction over the moving defendant is appropriate. Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). On such a motion, the Court can consider evidence contained in affidavits and is not limited to the allegations of the plaintiff's complaint. Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002).

Federal Rule 4(k)(1)(A) provides that in the absence of a federal statute governing personal jurisdiction, “the district court applies that law of the state in which the district court sits.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). Since “California's long-arm jurisdictional statute is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same.” Id. at 800–01.

The Federal Rules require a complaint to include only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). In considering a Rule 12(b)(6) motion contending that a complaint fails to state a claim, the Court must “accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable” to the non-moving party. Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1029 (9th Cir. 2009). Dismissal is required if the plaintiff fails to allege facts allowing the Court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). While legal conclusions “can provide the complaint's framework,” the Court will not assume they are correct unless adequately “supported by factual allegations.” Id. at 664.

ANALYSIS

I. The Court Lacks Personal Jurisdiction Over Claims Involving Patients 1, 2, 4, 6, 7.

In order for a court to exercise personal jurisdiction over a particular defendant, due process requires that the defendant have “minimum contacts” with the chosen forum such that the exercise of jurisdiction “does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The “minimum contacts” required by due process depend upon whether a court is exercising general or specific jurisdiction.

General jurisdiction extends to all claims that might be asserted against a defendant, and thus requires a substantial degree of contact with the forum. “A court may assert general jurisdiction over foreign ․ corporations to hear any and all claims against them when their affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). The “paradigm” bases for general jurisdiction are “the place of incorporation and principal place of business,” although operations in another state might also be “so substantial and of such a nature as to render the corporation at home in that State.” Daimler AG v. Bauman, 571 U.S. 117, 137, 139 n.19 (2014).

Specific jurisdiction “covers defendants less intimately connected with a State, but only as to a narrower class of claims.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1024 (2021). For a court to have specific personal jurisdiction, the defendant “must have taken some act by which it purposefully avails itself of the privilege of conducting activities” in the forum state, and the claims “must arise out of or relate to the defendant's contacts with the forum.” Id. at 1024–25 (cleaned up). While the Ninth Circuit applies a slightly different “purposeful direction” test in tort cases, because this case sounds in contract the standard “purposeful availment” test applies. Davis v. Cranfield Aerospace Solutions, Ltd., 71 F.4th 1154, 1162 (9th Cir. 2023) (“The ‘purposeful direction’ test ‘typically’ applies to tort claims while the ‘purposeful availment’ test ‘typically’ applies to contract cases.”); Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (noting that availment and direction are two distinct concepts).

In a case asserting multiple claims against the same defendants, the plaintiff must establish specific personal jurisdiction over the defendants for each claim. See Phillips Exeter Academy v. Howard Phillips Fund, 196 F.3d 284, 289 (1st Cir. 1999) (“Questions of specific jurisdiction are always tied to the particular claims asserted”); Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001) (holding that specific jurisdiction is “claim specific because a conclusion that the District Court has personal jurisdiction over one of the defendants as to a particular claim ․ does not necessarily mean that it has personal jurisdiction over that same defendant as to [plaintiff's] other claims”). Thus, even if defendants concede personal jurisdiction over claims involving patients 3 and 5 (by failing to move as to those patients, see Fed. R. Civ. P. 12(h)(1)), specific jurisdiction must be established for the claims involving patients 1, 2, 4, 6, and 7. See 5B Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 3d § 1351, at 299 n.30 (2004) (“There is no such thing as supplemental specific personal jurisdiction; if separate claims are pled, specific personal jurisdiction must independently exist for each claim and the existence of personal jurisdiction for one claim will not provide the basis for another claim.”).

Defendants maintain their principal places of business in Maryland or Washington, D.C. and are incorporated in those locations. None of the defendants are licensed in California, sell insurance in California, have an agent for service of process in California, or directly advertise and solicit business in California. Dkt. No. 24-1, at 4. Defendants therefore cannot be regarded as being “at home” in California and are not subject to general personal jurisdiction in this Court.

Defendants argue that they are also not subject to specific personal jurisdiction as to the claims involving patients 1, 2, 4, 6, and 7. Defendant GHMS provides claim administrative services for self-funded plans sponsored by the employers of patients 1, 4, and 7—employers whose headquarters are in Maryland and Washington, D.C. Id. at 15. Patient 2 is a Hawaii resident in a group health plan issued by GHMS in Hawaii, and patient 6 is a Virginia resident enrolled in a Federal Employee Health Benefit plan that is administered by Defendant BlueChoice under the Federal Employee Program. Id.² Defendants contend that they are not subject to personal jurisdiction in this District “simply because their members elected to seek treatment from a California provider,” Dkt. No. 24, at 20, and that the independent decisions made by these non-California residents to receive care in California do not establish that defendants purposefully availed themselves of the privilege of conducting business in the state.

Defendants are correct. The Supreme Court has held that a defendant cannot be “haled into a jurisdiction solely as a result of ․ the unilateral activity of another party or a third person.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Here, defendants provided health insurance plans or plan administration to individuals or entities outside of California, and their enrollees then unilaterally elected to seek treatment from a California provider. Such contact with the proposed forum is insufficient to establish specific personal jurisdiction. See Hunt v. Erie Ins. Group, 728 F.2d 1244, 1245–49 (9th Cir. 1984) (holding that an East Coast automobile insurance company was not subject to specific personal jurisdiction in California simply because an enrollee who got into an accident in Colorado later obtained medical care in California).

Stanford responds that it participates in the BlueCard Program, “which allows participating providers [to] be paid by [defendants] at the provider's participating agreement.” Dkt. No. 28, at 10. Stanford further argues that “Stanford Hospital is on the BlueCard participating provider list,” so defendants (who also purportedly participate in BlueCard's nationwide coverage program) should have reasonably foreseen that their enrollees would seek care at Stanford. Id. at 25. Multiple courts, however, have already refused to premise specific personal jurisdiction on an out-of-state health insurance organization's participation in BlueCard. See, e.g., Stanford Health Care v. Hawaii Medical Service Association, 2022 WL 4021759, at *3 (N.D. Cal. Sept. 2. 2022) (“[C]ourts regularly find a provider's participation in the BlueCard program insufficient to establish specific personal jurisdiction.”). Because patients 1, 2, 4, 6, and 7 are insured through out-of-state plans issued primarily to out-of-state residents, “[a]ny contacts with California are ‘attenuated’ at best and do not create a ‘substantial connection’ with the state.” Id.

Healthcare Ally Management of California, LLC v. Blue Cross Blue Shield of Minnesota, 787 F. App'x 417 (9th Cir. 2019) is instructive. In that case, “six of the nine patients [at issue] were covered under plans administrated—but not insured—by Blue Cross [of Minnesota], and the other three patients were insured through Blue Cross plans issued in Minnesota to Minnesota residents.” Id. at 418. The Ninth Circuit concluded that the Minnesota Blue Cross health plans did not purposefully avail themselves of the privilege of conducting business in California solely because their Minnesota enrollees chose to receive out-of-state care in California. Analogously, three of the five patients here are enrolled in plans administered (but not provided) by GHMS in Maryland or Washington, D.C., one patient is in a federal health plan administered by BlueChoice in Virginia, and the other patient is insured through a Hawaii health care plan issued by GHMS primarily to residents of that state.

In short, Stanford has failed to demonstrate that defendants purposefully availed themselves of the privilege of conducting business in California with respect to the claims involving patients 1, 2, 4, 6, and 7. The Court therefore grants defendants’ motion to dismiss those claims for lack of personal jurisdiction under Rule 12(b)(2).

II. Stanford's Request for Jurisdictional Discovery is Denied.

Stanford alternatively requests jurisdictional discovery, arguing that pertinent facts bearing on the question of jurisdiction are in dispute. Dkt. No. 28, at 27. “A district court is vested with broad discretion to permit or deny discovery.” Laub v. U.S. Dep't of Interior, 342 F.3d 1080, 1093 (9th Cir. 2003). In the Ninth Circuit, jurisdictional discovery may be granted where “pertinent facts bearing on the question of jurisdiction are controverted or where a more satisfactory showing of the facts is necessary.” Butcher's Union Local No. 498, United Food & Commercial Workers v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986). Stanford, however, has not met its burden to demonstrate which pertinent jurisdictional facts are disputed or how further discovery might “demonstrate facts sufficient to constitute a basis for jurisdiction.” Laub, 342 F.3d at 1093. The Court therefore denies Stanford's request for jurisdictional discovery.

III. The Claims Involving Patients 3 and 5 Fail To State a Claim.

Regarding patients 3 and 5, defendants argue that Stanford fails to state a claim for breach of any written contract because the alleged contract is between Stanford and non-party Anthem Blue Cross of California, rather than between Stanford and any of the defendants.

“The essential elements of a breach of contract claim are the existence of an enforceable contract, the defendant's breach, and damages to the plaintiff caused by the breach.” Hickcox-Huffman v. US Airways, Inc., 855 F.3d 1057, 1062 & n.33 (9th Cir. 2017). Stanford's complaint does not include its written contract with Anthem, but Stanford concedes that defendants are not signatories to that contract. Stanford nonetheless contends that defendants accessed the discounted rates that were negotiated in Stanford's contract with Anthem (presumably pursuant to some agreement between Anthem and defendants), and that defendants should therefore be liable under the Anthem contract to pay for their enrollees’ medical care at Stanford. Dkt. No. 28, at 9. But Stanford has provided no case law to support this novel theory of contract liability, which disregards the principle that a third-party beneficiary of a contract “cannot be bound to a contract it did not sign or otherwise assent to.” Comer v. Micor, Inc., 436 F.3d 1098, 1102 (9th Cir. 2006). If Stanford's agreement with Anthem required it to provide defendants with certain privileges and Stanford did not receive the benefits it expected in return, any contractual remedies would have to be pursued against Anthem instead of against third-party beneficiaries who never consented to the agreement's terms.³

Nor do Stanford's allegations support an implied-contract claim. “An implied-in-fact contract requires proof of the same elements necessary to evidence an express contract: mutual assent or offer and acceptance, consideration, legal capacity and lawful subject matter.” Northstar Fin. Advisors Inc. v. Schwab Investments, 779 F.3d 1036, 1050–51 (9th Cir. 2015). Defendants contend that there was no mutual assent to any contract with Stanford, either express or implied, meaning that an implied-in-fact contract was never formed. Stanford responds that it contacted defendants about the patients to verify their eligibility and that “[d]efendants represented that the Patients were a beneficiary of [d]efendants’ health plan.” Dkt. No. 20, at 7. Stanford additionally alleges that “[d]efendants offered to reimburse Stanford Hospitals should Stanford Hospitals provide medically necessary care to [d]efendants’ enrollees.” Id. at 8.

The Court agrees with defendants that Stanford's allegations do not support a plausible implied-contract claim. Mere “verification of benefits and authorization of services” is insufficient “to plead mutual assent for an implied contract claim.” Stanford Health Care v. Blue Cross Blue Shield of North Carolina, Inc., 2022 WL 195847, at *6 (N.D. Cal. Jan. 21, 2022). Stanford must plead more to establish the parties’ mutual assent to an implied-in-fact contract. Crucially, Stanford's threadbare allegations about defendants’ oral offer to reimburse Stanford for medical services provided to its enrollees do not demonstrate the existence of an implied-in-fact contract under the Rule 12(b)(6) pleading standards set forth in Iqbal. While these allegations might sufficiently plead mutual assent, Stanford fails to include any allegations regarding the terms of that mutual assent, and certainly does not provide allegations establishing that reimbursement would occur under the specific terms of Stanford's agreement with Anthem. To the contrary, Stanford simply states in a conclusory manner that “Carefirst was a member of the Blue Card Program and had access to the Anthem Contract. Carefirst hence agreed to pay hospitals contracted with Anthem pursuant to the terms of the Anthem Contract.” Dkt. No. 28, at 9.

In short, Stanford's conclusory statements about an implied-in-fact contract with defendants are not supported by sufficient factual allegations. Because the Court finds that Stanford has failed to adequately plead either a breach of implied contract claim or a breach of written contract claim, the Court grants defendants’ Rule 12(b)(6) motion as to the claims involving patients 3 and 5.

CONCLUSION

For the foregoing reasons, the Court grants, without leave to amend, defendants’ Rule 12(b)(2) motion to dismiss the claims involving patients 1, 2, 4, 6, and 7, and denies Stanford's request for jurisdictional discovery. The Court grants with leave to amend defendants’ 12(b)(6) motion to dismiss the claims involving patients 3 and 5. Any amended complaint as to these two patients must be filed within 21 days of the date of this Order.

IT IS SO ORDERED.

FOOTNOTES

1.   Because the Court grants the Rule 12(b)(2) motion as to the claims involving patients 1, 2, 4, 6, and 7, it will not address the Rule 12(b)(1) motion involving patient 6.

2.   Defendants note that Defendant CareFirst of Maryland “did not issue or administer any of the health plans at issue in this case.” Dkt. No. 24, at 11. Stanford does not rebut this contention.

3.   Stanford does not contend that it has third-party beneficiary rights under any agreement between defendants and Anthem.

P. Casey Pitts, United States District Judge