The opinion of the court was delivered by: Edgar
Plaintiffs BlueCross BlueShield of Tennessee, Inc. ("BCBST"), VP Buildings, Inc. Health Benefit Plan, and VP Buildings, Inc. (collectively "Plaintiffs") have brought an amended complaint for declaratory judgment pursuant to 28 U.S.C. § 2201 in this court. [Court Doc. No. 23]. Plaintiffs seek a declaration that their decision regarding the administration of benefits under a group health care policy was valid pursuant to the terms of the plan and the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, et seq. ("ERISA").
Defendant Doctors Medical Center of Modesto, Inc. ("DMCM") now moves to dismiss Plaintiffs' amended complaint for lack of jurisdiction. [Court Doc. Nos. 7, 22]. This Court has reviewed the record and the arguments of the parties and has determined that DMCM's motion will be GRANTED.
The parties appear largely to agree on the relevant facts. BCBST is the claims administrator for the VP Buildings, Inc. Health Benefit Plan. Amended Complaint, ¶ 1. VP Buildings is a manufacturer of steel system metal buildings with offices in various states, including Tennessee and California. Id. at ¶ 9. VP Buildings formed a self-funded group health plan, Group Health Plan No. 82043 (the "Plan"), to provide its employees and their dependents with health care benefits. Id. at ¶ 9; [Court Doc. No. 23-2, Plan]. The Plan provides that BCBST is the claims administrator, while VP Buildings is the Plan Fiduciary, Plan Sponsor, and Plan Administrator. Plan, p. 1. The Plan states:
While the Employer has delegated discretionary authority to make any benefit or eligibility determinations to the administrator, the Employer retains the authority to make any final determination. The Employer, as the Plan Administrator, also has the authority to construe the terms of Your Coverage. The Plan shall be deemed to have properly exercised that authority unless it abuses its discretion when making such determinations, whether or not the Employer's benefit plan is subject to ERISA.
An employee of VP Buildings, Norman Thomas, was a participant in the Plan. While he was in California, Mr. Thomas apparently required some health care treatment by DMCM. DMCM had entered into a contract with Blue Cross of California, an entity with which BCBST is unaffiliated. [Court Doc. Nos. 5, 5-2]. This contract is known as the Comprehensive Contracting Hospital Agreement ("CCHA"). Id. The CCHA states that it: constitutes a contract between [DMCM] and [Blue Cross of California] as an independent corporation, operating under a license with the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield Plans (the "Association") permitting [Blue Cross of California] to use the Blue Cross service mark in the State of California and that [Blue Cross of California] is not contracting as an agent of the Association.
The CCHA allowed Mr. Thomas to take advantage of a program called the "Blue Card Program" for provision of health care treatment while he was in California. The "Blue Card Program" provides: the mechanism by which [Blue Cross of California], as the host plan, arranges for the payment of care rendered to Blue Cross and/or Blue Shield Members of outof-state plans by [DMCM]. Blue Card Program Members include those who hold the applicable Blue Cross/Blue Shield plan identification card as well as those who hold a BCBSA National PPO, National POS or HMO-USA identification card.
CCHA, ¶ 2.4. The CCHA provides for Blue Cross of California to take advantage of negotiated health care rates with DMCM while DMCM receives Blue Cross of California's endorsement as a "Participating Hospital", which directs its members to DMCM's health care facilities. CCHA, ¶ 4.1, 5.2, 5.4, 6.6. The Blue Card Program allowed Mr. Thomas to take advantage of Blue Cross of California's negotiated rates of treatment with DMCM. Amended Complaint, ¶ 16.
On February 17, 2005 DMCM submitted a request for prior authorization for inpatient hospitalization for Mr. Thomas. Amended Complaint, ¶ 17. BCBST followed its procedures for evaluating requests for benefit authorization and forwarded the request to the "Utilization Management Department" ("UMD") for review and a decision on whether the treatment was authorized under the Plan. Id. at ¶ 18. The UMD reviewed the request and Mr. Thomas' records and determined that Mr. Thomas' condition warranted two days of inpatient hospitalization under the Plan. Id. at ¶ 19. When DMCM requested an extension of the inpatient stay, BCBST agreed to extend Mr. Thomas' inpatient hospital stay by two days until February 21, 2005. Id. at ¶ 20. However, Mr. Thomas remained in inpatient care until February 27, 2005. On March 2, 2005 BCBST denied approval for the inpatient hospitalization between February 21st and February 27th because it determined that Mr. Thomas' symptom, difficulty breathing, failed to meet the standard for acute inpatient care. BCBST's letter to DMCM states in part:
Review of the clinical information submitted shows the current level of services being provided to treat for difficulty in breathing fails to meet criteria for continued acute inpatient hospitalization. The level of services being rendered could be provided safely in a different setting, which may include a sub-acute care unit, skilled nursing facility, or home health care services. The request for continued acute inpatient hospitalization is not eligible for payment. [Court Doc. No. 23-4].
On May 16, 2005 DMCM appealed the decision to deny payment, a cost of approximately $20,000. In accordance with its procedures for appeal, BCBST obtained an opinion from an independent hematologist/oncologist regarding whether the extended inpatient hospitalization was covered under the Plan. Amended Complaint, ¶ 23. The independent physician reviewed Mr. Thomas' medical records and determined that the extended treatment was not "medically necessary" as defined by the Plan. BCBST reviewed the independent determination and its prior decision, and based upon that review, affirmed its prior decision. Id. at ¶ 25; [Court Doc. No. 23-5].
Following denial of its appeal, DMCM filed a Demand for Arbitration against Blue Cross of California with the American Arbitration Association in California seeking payment of $20,028.00 for Mr. Thomas' unpaid medical bills. Amended Complaint, ¶ 27. DMCM subsequently amended the Demand for Arbitration on July 3, 2007 to include BCBST as a party against whom the Demand for Arbitration was made. [Court Doc. No. 4-2]. The Demand for Arbitration states: "[t]he named claimant, a party to an arbitration agreement contained in a written contract, dated 02/01/05 and providing for arbitration under the Commercial Arbitration Rules of the American Arbitration Association, hereby demands arbitration thereunder." [Court Doc. No. 4-2]. The Demand describes the nature of the dispute as follows: "[f]ailure to reimburse hospital pursuant to contract rates for services provided to the patient listed on Exhibit A." Exhibit A of the Demand states an active balance of $20,028.00 for Norman Thomas. It asserts that the type of claim is one of "Medical Necessity." Id. The CCHA also defines the term "Medically Necessary." CCHA, ¶ 2.19.
The CCHA contains an arbitration provision that states: Any problem or dispute arising under this Agreement and/or concerning the terms of this Agreement, other than a Utilization Review decision as provided for in Article VII, that is not satisfactorily resolved under Section 9.1, shall be arbitrated. BLUE CROSS [of California] and [DMCM] agree to use binding arbitration for any such problem or dispute under the Commercial Rules of the American Arbitration Association, unless otherwise mutually agreed in writing by BLUE CROSS [of California] and [DMCM]. The arbitration shall also be subject to the California Code of Civil Procedure . . . unless otherwise mutually agreed. Such arbitration shall be initiated by either party making a written demand for arbitration on the other party.
BCBST asserts that it is not a party to the CCHA. It appears clear that BCBST did not sign the CCHA. However, the CCHA contains provisions that purport to bind defined entities such as "Affiliates" and "Other Payors." For instance, the CCHA states that "This AGREEMENT is effective on January 1, 1996, between BLUE CROSS OF CALIFORNIA and Affiliates as defined below . . . and [DMCM]." CCHA, p. 1. The Amendment to the CCHA, effective February 1, 2005, includes similar language regarding Affiliates. [Court Doc. No. 5]. An "Affiliate" is defined as a "corporation or other organization owned or controlled, either directly or through parent or subsidiary corporations, by Blue Cross of California, or under common control with Blue Cross of California." CCHA, ¶ 2.1. BCBST asserts that it does not fit the definition of an Affiliate under the CCHA.
The CCHA also Contains Provisions Relating to "Other Payors." The CCHA Defines
"Other Payors" as "persons or entities utilizing the Managed Care Network pursuant to an agreement with [Blue Cross of California], including without limitation, other Blue Cross and/or Blue Shield Plans, self-administered or self-insured programs providing health care benefits; or employers or insurers." CCHA, ¶ 2.21. The CCHA further provides that
[DMCM] agrees that when the Managed Care Network is utilized by an Affiliate or Other Payor, [DMCM] agrees to provide services to Covered Persons of that Affiliate or Other Payor in accordance with the terms of this Agreement. In all events, however, [DMCM] shall look for payment only to the particular Affiliate or Other Payor that covers the particular services for which [DMCM] seeks to be compensated. . . . [Blue Cross of California] shall require that Other Payor compensate Provider in accordance with the terms of this Agreement. . . . When an Other Payor utilizes the Managed Care Network, [DMCM] shall follow such Other Payor's specified utilization review requirements.
On July 25, 2007 BCBST filed its initial complaint in this court. [Court Doc. No. 1]. BCBST seeks a declaratory judgment pertaining to the appropriateness of its decision to deny extended hospitalization benefits to Mr. Thomas on the basis of lack of medical necessity in accordance with the terms of the Plan. DMCM moved to dismiss the complaint for lack of subject matter jurisdiction, personal jurisdiction, and improper venue. [Court Doc. No. 6]. BCBST then moved to amend its complaint to add VP Buildings, Inc. Health Benefit Plan and VP Buildings as plaintiffs. [Court Doc. No. 13]. This Court granted BCBST's motion. [Court Doc. Nos. 21, 34]. DMCM then amended its motion to dismiss to account for the newly added parties. [Court Doc. No. 22]. BCBST then filed its amended complaint. [Court Doc. No. 23]. DMCM does not purport to be seeking payment on behalf of Mr. Thomas or as an assignee of Mr. Thomas, nor does the record contain any evidence that Mr. Thomas assigned his right to Plan benefits to DMCM. DMCM states in its motion to dismiss that it "is not asserting the patient's rights under ERISA." [Court Doc. No. 7, p. 13].
DMCM brings a motion to dismiss for lack of subject matter jurisdiction and lack of personal jurisdiction. DMCM also argues that venue is not proper in this court. Federal Rule of Civil Procedure 12(b) provides in relevant part:
Every defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required. But a party may assert the following defenses by motion:
(1) lack of subject-matter jurisdiction;
(2) lack of personal jurisdiction;
(3) improper venue; . . . .
Fed. R. Civ. P. 12(b)(1)-(3).*fn1
1. Dismissal Pursuant to Fed. R. Civ. P. 12(b)(1)
"When subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion." Madison-Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996). Further, a district court may "resolve factual disputes when necessary to resolve challenges to subject matter jurisdiction." Id. The Sixth Circuit adheres to the standard of review for Rule 12(b)(1) motions explained in Mortensen v. First Federal Savings and Loan Ass'n, 549 F.2d 884, 890 (3d Cir. 1977):
The basic difference among the various 12(b) motions is, of course, that 12(b)(6) alone necessitates a ruling on the merits of the claim, the others deal with procedural defects. Because 12(b)(6) results in a determination on the merits at an early stage of plaintiff's case, the plaintiff is afforded the safeguard of having all its allegations taken as true and all inferences favorable to plaintiff will be drawn. The decision disposing the case is then purely on the legal sufficiency of plaintiff's case: even were plaintiff to prove all its allegations he or she would be unable to prevail. In the interests of judicial economy it is not improper to dispose of the claim at that stage. . . .
The procedure under a motion to dismiss for lack of subject matter jurisdiction is quite different. At the outset we must emphasize a crucial distinction, often overlooked between 12(b)(1) motions that attack the complaint on its face and 12(b)(1) motions that attack the existence of subject matter jurisdiction in fact, quite apart from any pleadings. The facial attack does offer similar safeguards to the plaintiff: the court must consider the allegations of the complaint as true. The factual attack, however, differs greatly for here the trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.Pro. 56. Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction--its very power to hear the case--there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's ...