Smilow et al v. Anthem Life & Disabilty Insurance Company et al, No. 5:2015cv04739 - Document 22 (N.D. Cal. 2015)

Court Description: Order DENYING Motion to Remand, ECF No. 9 in Smilow, et al. v. Anthem Life & Disability Insurance Company, Case No. 5:15-CV-04739-LHK. Signed by Judge Lucy Koh on 11/24/2015. (lhklc2S, COURT STAFF) (Filed on 11/24/2015)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION United States District Court Northern District of California 11 12 13 Case No. 15-MD-02617-LHK IN RE ANTHEM, INC. DATA BREACH LITIGATION ORDER DENYING MOTION TO REMAND Y. MICHAEL SMILOW and JESSICA KATZ, Case No. 15-CV-04739-LHK 18 19 Plaintiffs, 14 15 16 17 20 21 22 23 24 v. ANTHEM LIFE & DISABIILITY INSURANCE COMPANY, et al., Defendants. Plaintiffs Y. Michael Smilow and Jessica Katz (collectively, “Plaintiffs”) bring this 25 putative class action against Defendants Anthem Life & Disability Insurance Company; Empire 26 Healthchoice Assurance, Inc.; and Empire Healthchoice HMO, Inc. (collectively, “Defendants”). 27 28 1 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 Before the Court is Plaintiffs’ motion to remand the case to the New York Supreme Court of 2 Kings County. ECF No. 9 (“Mot.”).1 Having considered the submissions of the parties, the 3 relevant law, and the record in this case, the Court DENIES Plaintiffs’ motion to remand. 4 I. 5 6 BACKGROUND A. Factual Background Defendants are affiliates of Anthem, Inc. (“Anthem”), an Indiana corporation that is one of 7 the largest health benefits companies in the United States. ECF No. 1 (“Notice of Removal”) ¶ 6. 8 Through its affiliated health plans, Anthem delivers health benefit products and plans to tens of 9 millions of individual members across the country. Id. 10 On February 4, 2015, Anthem announced that cyberattackers had gained unauthorized United States District Court Northern District of California 11 access to its data systems on or about December 10, 2014. See ECF No. 1-1 (“Compl.”) ¶ 2. As a 12 result of this breach, Plaintiffs allege that the personal health information (“PHI”) of current and 13 former Anthem members were compromised. Id. ¶¶ 1–2. The allegedly compromised 14 information included members’ names, addresses, birthdates, and social security numbers, as well 15 as other financial and medical information. Id. Plaintiffs are citizens of New York who are 16 Anthem health insurance customers and who claim that their PHI was compromised as a result of 17 the Anthem data breach. Id. ¶¶ 11–12. 18 19 B. Procedural History On April 2, 2015, Plaintiffs filed the instant putative class action in the Supreme Court of 20 Kings County, New York. Notice of Removal ¶ 1. In Plaintiffs’ complaint, Plaintiffs asserted the 21 following causes of action under New York law: (1) negligence, (2) negligence per se, (3) breach 22 of implied contract, (4) breach of covenant of good faith and fair dealing, (5) unjust enrichment, 23 (6) invasion of privacy, (7) bailment, (8) conversion, (9) violation of New York’s data breach 24 statute, (10) violation of New York’s consumer protection statute. Compl. ¶¶ 54–122. Plaintiffs 25 brought these causes of action on behalf of themselves and a statewide class of similarly situated 26 1 27 28 Unless otherwise indicated, all ECF references are to the docket of Case No. 15-CV04739-LHK in the Northern District of California. 2 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 2 3 4 individuals, defined as follows: [A]ll New York State citizens having or having had health insurance from Anthem and whose PII [personally identifiable information], PHI and/or personal financial information was compromised as a result of the data breach first disclosed by Anthem on February 4, 2015. Id. ¶ 17. On April 27, 2015, Defendants removed this action to the United States District Court 5 for the Eastern District of New York. Defendants provided two independent bases for federal 6 subject matter jurisdiction: (1) federal question jurisdiction under the Employee Retirement 7 Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.; and (2) federal question 8 jurisdiction under HIPAA, 42 U.S.C. § 1320d et seq. See Notice of Removal ¶¶ 12–24. 9 On June 16, 2015, the parties submitted a fully briefed motion to remand. ECF No. 9. 10 United States District Court Northern District of California 11 12 13 14 This filing included Plaintiffs’ motion to remand, ECF No. 9-1; Defendants’ opposition, ECF No. 9-3; and Plaintiffs’ reply, ECF No. 9-6. On June 12, 2015, the Judicial Panel on Multidistrict Litigation (“JPML”) issued a transfer order selecting the undersigned judge as the transferee court for “coordinated or consolidated pretrial proceedings” in the multidistrict litigation (“MDL”) arising out of the Anthem data breach “that allegedly occurred sometime between December 10, 15 2014, and February 4, 2015.” Case No. 15-MD-02617-LHK, ECF No. 1 at 1–3. On October 13, 16 2015, the JPML transferred the instant putative class action from the Eastern District of New York 17 to the undersigned judge in the Northern District of California. ECF No. 18. 18 On October 23, 2015, the Court held a case management conference. Counsel for Plaintiffs 19 appeared via telephone at the case management conference and communicated their intent to 20 continue to pursue the pending motion to remand. Accordingly, the Court ordered the parties to 21 file supplemental briefing on Plaintiffs’ motion to remand. The Court did so because the parties’ 22 briefs, which were filed in the Eastern District of New York, a division of the Second Circuit, did 23 not cite to or otherwise address relevant Ninth Circuit precedent, which this Court must now 24 25 apply. See Newton v. Thomason, 22 F.3d 1455, 1460 (9th Cir. 1994) (“[W]hen reviewing federal claims, a transferee court in this circuit is bound only by our circuit’s precedent”). Plaintiffs and 26 Defendants filed supplemental briefs on November 3, 2015. Case No. 15-MD-02617-LHK, ECF 27 28 3 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 Nos. 346 (“Defs. Supp. Br.”) & 350 (“Pls. Supp. Br.”). 2 II. LEGAL STANDARD A suit may be removed from state court to federal court only if the federal court would 3 have had subject matter jurisdiction over the case in the first instance. 28 U.S.C. § 1441(a); see 5 Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (“Only state-court actions that originally 6 could have been filed in federal court may be removed to federal court by the defendant.”). “In 7 civil cases, subject matter jurisdiction is generally conferred upon federal district courts either 8 through diversity jurisdiction, 28 U.S.C. § 1332, or federal question jurisdiction, 28 U.S.C. 9 § 1331.” Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1068 (9th Cir. 2005). If it appears at any 10 time before final judgment that the federal court lacks subject matter jurisdiction, the federal court 11 United States District Court Northern District of California 4 must remand the action to state court. 28 U.S.C. § 1447(c). 12 There is no presumption against removal jurisdiction in CAFA cases. See Dart Cherokee 13 Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 554 (2014) (vacating district court’s remand 14 order in putative class action on the ground that “a defendant’s notice of removal need include 15 only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold”). 16 The defendant, however, still bears the burden of establishing removal jurisdiction. See id. A 17 notice of removal must contain a “short and plain statement of the grounds for removal,” a 18 requirement that tracks the general pleading standard of Rule 8(a) of the Federal Rules of Civil 19 Procedure. Id. at 553 (citing 28 U.S.C. § 1446(a)). 20 III. 21 DISCUSSION Defendants argue that there are two independent bases for subject matter jurisdiction in 22 federal court: (1) federal question jurisdiction due to ERISA complete preemption; and (2) federal 23 question jurisdiction under HIPAA. For the reasons stated below, the Court finds that Plaintiffs’ 24 claims are completely preempted by ERISA’s civil enforcement provision and that, as a result, the 25 Court has subject matter jurisdiction over this action. The Court therefore declines to address 26 whether federal question jurisdiction exists under HIPAA. 27 28 A. ERISA Complete Preemption 4 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 ERISA contains “expansive pre-emption provisions . . . which are intended to ensure that 2 employee benefit plan regulation would be ‘exclusively a federal concern.’” Aetna Health Inc. v. 3 Davila, 542 U.S. 200, 208 (2004) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 4 (1981)). One form of ERISA preemption is “complete pre-emption” under ERISA § 502(a), id. at 5 207, which provides that a civil enforcement action may be brought: 6 7 (1) by a participant or beneficiary— . . . (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. 8 29 U.S.C. § 1132(a). Pursuant to this provision, “any state-law cause of action that duplicates, 9 supplements, or supplants the ERISA civil enforcement remedy” is preempted because it “conflicts with the clear congressional intent to make the ERISA remedy exclusive.” Davila, 542 11 United States District Court Northern District of California 10 U.S. at 209. 12 “A party seeking removal based on federal question jurisdiction must show either that the 13 state-law causes of action are completely preempted by § 502(a) of ERISA, or that some other 14 basis exists for federal question jurisdiction.” Marin Gen. Hosp. v. Modesto & Empire Traction 15 Co., 581 F.3d 941, 945 (9th Cir. 2009). “Complete preemption under § 502(a) is ‘really a 16 jurisdictional rather than a preemption doctrine, [as it] confers exclusive federal jurisdiction in 17 certain instances where Congress intended the scope of a federal law to be so broad as to entirely 18 replace any state-law claim.’” Id. (alteration in original) (quoting Franciscan Skemp Healthcare, 19 Inc. v. Cent. States Joint Bd. Health & Welfare Tr. Fund, 538 F.3d 594, 596 (7th Cir. 2008)). 20 Removal based on ERISA § 502(a) is therefore “an exception to the otherwise applicable rule that 21 a ‘plaintiff is ordinarily entitled to remain in state court so long as its complaint does not, on its 22 face, affirmatively allege a federal claim.’” Id. (quoting Pascack Valley Hosp. v. Local 464A 23 UFCW Welfare Reimbursement Plan, 388 F.3d 393, 398 (3d Cir. 2004)). 24 To determine whether removal is proper on the basis of ERISA complete preemption, the 25 Ninth Circuit, following the U.S. Supreme Court’s lead in Aetna Health, Inc. v. Davila, applies a 26 two-pronged test. See Marin Gen. Hosp., 581 F.3d at 946. Specifically, a state law cause of 27 action is completely preempted and therefore removable to federal court “if (1) ‘an individual, at 28 5 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 some point in time, could have brought [the] claim under ERISA § 502(a)(1)(B),’ and (2) ‘where 2 there is no other independent legal duty that is implicated by a defendant’s actions.’” Id. 3 (alteration in original) (quoting Davila, 542 U.S. at 210). Because Davila’s two-pronged test is 4 stated “in the conjunctive,” a state law cause of action is preempted and removal is proper “only if 5 both prongs of the test are satisfied.” Id. at 947. The Court addresses these two prongs in turn. 6 B. Could Have Brought Claim Under § 502(a) 7 As to the first Davila prong, the Court finds that Defendants have shown that Plaintiffs 8 could have brought their claims under § 502(a). Defendants have submitted documentation 9 showing that Smilow and Katz received health benefits during the relevant time period as dependent beneficiaries of employer-sponsored ERISA plans. See ECF No. 9-4 (“Decl. of Joseph 11 United States District Court Northern District of California 10 Crimmins”) ¶¶ 4–5; ECF No. 9-5 (“Benefits Handbook”) at 41. Plaintiffs have not challenged this 12 documentation. Moreover, § 502(a) provides a cause of action for an ERISA “participant or beneficiary” to 13 14 “enforce [their] rights under the terms of [an ERISA] plan.” 29 U.S.C. § 1132(a)(1)(B). Here, 15 Plaintiffs seek to enforce such rights through their breach of contract and unjust enrichment 16 claims. See Compl. ¶¶ 65–69; 78–91. Plaintiffs allege that “[t]he monies paid for the purchase of 17 services by Plaintiffs . . . were supposed to be used by Anthem, in part, to pay for the 18 administrative and other costs of providing reasonable data security and protection to Plaintiffs.” 19 Id. ¶ 81; see also id. ¶ 66 (“Plaintiffs . . . entered into . . . contracts with Anthem pursuant to which 20 Anthem agreed to safeguard and protect [Plaintiffs’] information.”). As damages for Defendants’ 21 wrongdoing, Plaintiffs request that the Court award Plaintiffs “the difference between the price 22 they paid for Anthem’s services as promised and the actual diminished value of its services.” Id. ¶ 23 84. 24 Plaintiffs’ unjust enrichment and breach of contract claims are thus premised on the 25 insurance contract that Plaintiffs entered into with Defendants, and Plaintiffs’ request for relief is a 26 partial refund of the insurance premiums that Plaintiffs paid to Defendants. These are causes of 27 action that could have therefore been brought under § 502(a). See Nunez v. Monterey Peninsula 28 6 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 Eng’g, 867 F. Supp. 895, 906 (N.D. Cal. 1994) (“Essentially, subsection (a)(1)(B) allows an action 2 in the form of breach of contract.”). 3 Plaintiffs contend that their complaint alleges breach of an implied contract, not breach of the express terms of their ERISA plans. The Court finds this argument unpersuasive. As 5 explained in Davila, ERISA preemption applies “if an individual, at some point in time, could 6 have brought his claim under ERISA § 502(a)(1)(B).” 542 U.S. at 210 (emphasis added). Thus, 7 even if an implied contract between Plaintiffs and Defendants did exist, Plaintiffs could have 8 nonetheless brought their claims under § 502(a). Indeed, Plaintiffs do not dispute that they 9 received health benefits under an ERISA plan, and Plaintiffs’ claims are nearly identical to those 10 of other plaintiffs in this MDL. See, e.g., In re Anthem Data Breach Litig., 15-MD-02617-LHK, 11 United States District Court Northern District of California 4 ECF No. 334-6 (“Consol. Amended Compl.”); Noble v. RightChoice Managed Care, Inc. (In re 12 Anthem Data Breach Litig.), 2015 WL 5286992, *1 (N.D. Cal. Sept. 9, 2015) (describing claims). 13 Accordingly, the Court finds that Plaintiffs’ claims fall under the first prong of Davila. 14 C. Independent Legal Duty 15 As to the second Davila prong, Plaintiffs argue that Defendants had an independent legal 16 duty to protect Plaintiffs’ privacy pursuant to state law. According to Plaintiffs, their “ERISA 17 plan coverage and benefits . . . do not include and have not been shown to include privacy rights.” 18 Pls. Supp. Br. at 6. 19 These contentions, however, are belied by the benefits handbook that Plaintiffs received 20 from Defendants, which summarized Plaintiffs’ coverage and benefits. This handbook states, 21 under a section titled “State Notice of Privacy Statutes,” “we [Defendants] must follow state laws 22 that are more strict than the federal HIPAA privacy law.” Benefits Handbook at 43. The 23 handbook proceeds to then “explain[] [Plaintiffs’] rights and [Defendants’] legal duties under state 24 law.” Id. 25 As the U.S. Supreme Court has held, duties under state law are not independent of ERISA 26 when “interpretation of the terms of respondents’ benefit plans forms an essential part of 27 [respondents’] claim.” Davila, 543 U.S. at 213. In Marin General Hospital, the Ninth Circuit 28 7 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 further held that state law legal duties are not independent of ERISA if they are “based on an 2 obligation under an ERISA plan” and if “they would [not] exist [if the] ERISA plan” did not exist. 3 581 F.3d at 950. In the instant case, Defendants’ duty to comply with state privacy laws clearly 4 represents “an obligation under [Plaintiffs’] ERISA plan.” Id. In addition, Defendants would not 5 have been under such an obligation but for the fact that Plaintiffs’ were members of an ERISA 6 plan that was administered by Defendants. Thus, Defendants did not have an independent legal 7 duty to protect Plaintiffs’ privacy pursuant to state law. 8 9 Plaintiffs’ arguments to the contrary are unavailing. Plaintiffs rely primarily upon a case from the Northern District of Texas, Quintana v. Lightner, 818 F. Supp. 2d 964 (N.D. Tex. 2011). As an initial point, Quintana applied Fifth Circuit precedent, not Ninth Circuit precedent. Id. at 11 United States District Court Northern District of California 10 968–69. Resolution of the instant motion, however, requires the Court to apply Ninth Circuit 12 precedent. Second, and more importantly, the facts in Quintana differ significantly from the facts 13 in the instant case. Although plaintiff in Quintana was a participant in an ERISA plan, plaintiff 14 did not actually assert any claims against the plan’s administrators. Instead, plaintiff asserted 15 claims against the plan’s subrogation vendor, which had sent a copy of Quintana’s medical bills to 16 a third party. As the Quintana court noted, the plan’s terms required the plan’s administrators to 17 comply with certain privacy provisions. Id. at 971 n.9. However, “the ‘Subrogation’ section 18 [was] silent regarding privacy,” id., and defendants in Quintana did not argue that the privacy 19 provisions governing the plan’s administrators should also be applied to defendants. In the instant 20 case, on the other hand, Plaintiffs have brought suit against the administrators of their plans. 21 These administrators were obligated to comply with state privacy laws, and these obligations are 22 memorialized in materials that summarize the plan’s coverage and benefits. 23 Plaintiffs’ reliance on two other cases, Community Hospital of the Monterey Peninsula v. 24 Aetna Life Insurance, 2015 WL 138197 (N.D. Cal. Jan. 9, 2015), and Arizona State Carpenters 25 Pension Trust Fund v. Citibank (Arizona), 125 F.3d 715 (9th Cir. 1997), is likewise inapposite. 26 Community Hospital involved a hospital bringing suit against an ERISA plan administrator. In 27 deciding not to apply ERISA complete preemption to the hospital’s claims, the district court stated 28 8 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND 1 that the hospital was not a plan “participant or beneficiary,” as expressly required under § 502(a). 2 See 29 U.S.C. § 1132(a); see also Cmty. Hosp. of the Monterey Peninsula, 2015 WL 138197, *2 3 (discussing “participant or beneficiary” requirement). Arizona State Carpenters does not even 4 discuss § 502(a) at all, focusing instead on different ERISA provisions that are inapplicable to the 5 instant case. 6 Accordingly, the Court finds that Plaintiffs’ breach of contract and unjust enrichment 7 claims are completely preempted by ERISA § 502(a), that the Court has subject matter jurisdiction 8 over this action under 28 U.S.C. § 1331, and that removal was therefore proper under 28 U.S.C. 9 § 1441(a). 10 United States District Court Northern District of California 11 IV. CONCLUSION For the foregoing reasons, the Court DENIES Plaintiffs’ motion to remand the case to the 12 New York Supreme Court of Kings County. 13 IT IS SO ORDERED. 14 15 Dated: November 24, 2015 ______________________________________ LUCY H. KOH United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 9 Case Nos. 15-MD-02617-LHK; 15-CV-04739-LHK ORDER DENYING MOTION TO REMAND

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