Case Number: 22TRCV00277    Hearing Date: April 21, 2023    Dept: B

LOS ANGELES SUPERIOR COURT – SOUTHWEST DISTRICT

Honorable Gary Y. Tanaka                                                                                               Friday, April 21, 2023

Department B                                                                                                                             Calendar No. 3

PROCEEDINGS

R&R Surgical Institute v. Blue Cross Blue Shield of Arizona, et al.     

22TRCV00277

1.      Teamsters Western Region & Local 177 Health Care Plan’s Demurrer to Complaint

2.      Blue Cross and Blue Shield of Arizona, Inc.’s Demurrer to Complaint  

3.      Blue Cross and Blue Shield of Arizona, Inc.’s Motion to Quash Service of Summons and Complaint   

TENTATIVE RULING

            Teamsters Western Region & Local 177 Health Care Plan’s Demurrer to Complaint is overruled.

            Blue Cross and Blue Shield of Arizona, Inc.’s Demurrer to Complaint is overruled.

            Blue Cross and Blue Shield of Arizona, Inc.’s Motion to Quash Service of Summons and Complaint is denied.

            Background

            Plaintiff filed its Complaint on April 11, 2022. Plaintiff alleges the following facts. Plaintiff is an out-of-network medical provider with a history of treating participants of the health plan of Defendants. Plaintiff alleges that it provided medically necessary services to insured member patients (Patients A-C). Plaintiff alleges that Defendants made oral promises and representations that they would pay certain percentages of the allowable rate and that no pre-authorization was required. However, ultimately, the benefits paid were inadequate. Plaintiff asserts causes of action for (1) Breach of Oral Contract; (2) Promissory Estoppel; (3) Breach of Oral Contract; (4) Promissory Estoppel. The first and second causes of action are only asserted against Blue Cross and Blue Shield of Arizona, Inc. The third and fourth causes of action are asserted against all Defendants.

            On April 11, 2023, Plaintiff dismissed the first and second causes of action.

            Meet and Confer

Defendants set forth a meet and confer declaration in sufficient compliance with CCP § 430.41. (Decl., Michael Zorkin, ¶ 2.)

Request for Judicial Notice

Plaintiff’s request for judicial notice is granted in part. The Court takes judicial notice of its own file, but makes no order, comment, or finding that this order has or does not have any precedential value in this action.

Objections

            Defendant’s objection to the request for judicial notice is sustained, in part. The Court takes judicial notice of its own file but does not make a finding that this order has any precedential value in this action.

Demurrer

            A demurrer tests the sufficiency of a complaint as a matter of law and raises only questions of law. (Schmidt v. Foundation Health (1995) 35 Cal.App.4th 1702, 1706.)  In testing the sufficiency of the complaint, the court must assume the truth of (1) the properly pleaded factual allegations; (2) facts that can be reasonably inferred from those expressly pleaded; and (3) judicially noticed matters. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  The Court may not consider contentions, deductions, or conclusions of fact or law.  (Moore v. Conliffe (1994) 7 Cal.App.4th 634, 638.)  Because a demurrer tests the legal sufficiency of a complaint, the plaintiff must show that the complaint alleges facts sufficient to establish every element of each cause of action.  (Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.)  Where the complaint fails to state facts sufficient to constitute a cause of action, courts should sustain the demurrer.  (C.C.P., § 430.10(e); Zelig v. County of Los Angeles (2002) 27 Cal.App.4th 1112, 1126.)

Sufficient facts are the essential facts of the case "with reasonable precision and with particularity sufficiently specific to acquaint the defendant with the nature, source, and extent of his cause of action.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 643-644.)  "Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer."  (Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610.)  Under Code Civil Procedure § 430.10(f), a demurrer may also be sustained if a complaint is “uncertain.”  Uncertainty exists where a complaint’s factual allegations are so confusing they do not sufficiently apprise a defendant of the issues it is being asked to meet.  (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.)

Defendants demur to the Complaint and each cause of action on the ground that the Employee Retirement Income Security Act (“ERISA”) Section 514(a) preempts all state law causes of action.  29 USC § 1144(a); Blue Cross of Cal. v. Anesthesia Care Assocs. Medical Grp., Inc., 187 F.3d 1045, 1051 (9^th Cir. 1999). “Section 514(a) of ERISA preempts state law claims that relate to employee benefit plans. 29 U.S.C. § 1144(a). We have held that ERISA preempts common law theories of breach of contract implied in fact, promissory estoppel, estoppel by conduct, fraud and deceit and breach of contract.”  Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1034 (9^th Cir. 2000). The demurrer also refers to preemption pursuant to the civil enforcement provision - 29 U.S.C. § 1132(a) (§ 502(a)). However, the Reply appears to clarify that the demurrer is solely based on “conflict” preemption under Section 514(a).

However, here, the causes of action are not preempted because ERISA does not preempt claims by a third-party suing an ERISA Plan not as the assignee of a Plan member, but as an independent entity. The causes of action are not dependent on the right to recover Plan benefits. Plaintiff’s allegations refer to Defendants’ conduct outside the Plan. For example, Plaintiffs allege that Defendants made promises and representations that they would provide benefits independent of the Plan.  In Morris B. Silver M.D. v. ILWU-PMA Welfare Plan (2016) 2 Cal.App.5th 793 (“Silver”), the Court held that the state law claims for breach of oral contract, quantum meruit, and promissory estoppel were not subject to preemption under ERISA because the claims were based on the Plan’s alleged oral agreement to pay the medical provider for health care services. Similarly, here, in the instant action, Plaintiff’s claims are based on oral representations and promises to pay for the represented rate of services.

Defendants’ attempt to distinguish Silver is unavailing. Defendants argue that the Plaintiff in Silver did not invoke the Plan terms, whereas here, Plaintiff reiterated Plan payment terms in detail, with respect to the amount it believes it should have been paid. Defendants also argue that the facts in Silver involved a denial of all payments, whereas, in the instant action, there is no dispute regarding coverage, but instead regarding insufficient payments.

The Court finds the following passage in Morris B. Silver M.D., Inc. v. International Longshore & Warehouse etc. (2016) 2 Cal.App.5th 793, 806–807 instructive:

“The gravamen of Silver's causes of action for breach of oral contract, quantum meruit and promissory estoppel is that the Plan orally agreed to pay Silver for health care services in the specified amounts, authorized the provision of those services and then failed to pay as agreed. Although Silver has not asserted a cause of action for negligent misrepresentation, its claims are indistinguishable from those found not to be preempted by Memorial Hospital and those courts that have applied the two-part Memorial Hospital test. Like those cases, Silver's three contract/quasi-contract causes of action do not address an area of exclusive federal concern. Silver is not, as the Plan argues, seeking compensation for the Plan's decisions to deny coverage under the terms of an ERISA plan; its alleged right to reimbursement does not depend on the Plan's terms. Rather, the claims are predicated on a garden-variety failure to make payment as promised for services rendered. To be sure, the claims would not exist but for an ERISA plan and are predicated on somebody's interpretation of the plan. But the fact an ERISA plan is an initial step in the causation chain, without more, is too remote of a relationship with the covered plan to support a finding of preemption.” Id.

Thus, the fact that the claim was not paid rather than underpaid was not essential to the Silver Court’s analysis. Likewise, the details of the type of payment terms that were set forth in the Plan as opposed to allegations of representations of the type of payments that were promised to be made to Plaintiff (which apparently resemble payment terms under the Plan) was also not dispositive to the analysis. The instant action closely mirrors the facts of Silver in that the Plan itself is simply an initial step in the causation chain. The claims asserted by Plaintiff is not dependent on the Plan, but instead are “garden variety” claims for failure to make promised payments for services rendered.

            Third Cause of Action for Breach of Oral Contract

            Defendants’ demurrers to the third cause of action are overruled. Plaintiff states facts sufficient to constitute a cause of action.

            “The elements of a cause of action for breach of contract are: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.” Coles v. Glaser (2016) 2 Cal.App.5th 384, 391(internal quotations omitted). Plaintiff has alleged facts setting forth the existence of the contract, plaintiff’s performance, defendants’ breach, and resulting damages. (Complaint, ¶¶ 69-76).

            Defendants’ demurrers to the third cause of action are overruled.

            Fourth Cause of Action for Promissory Estoppel

            Defendants’ demurrers to the fourth cause of action are overruled. Plaintiff states sufficient facts to state a cause of action.

            “[T]he doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise.... The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange....” Aceves v. U.S. Bank, N.A. (2011) 192 Cal.App.4th 218, 230–231 (internal citations and quotations omitted). “The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734.

            Plaintiff pleads sufficient facts to meet the elements of promissory estoppel. Plaintiff pleads a clear and unambiguous promise – to pay the out-of-network provider, Plaintiff, 80 percent of the allowable rate for the patients, after the deductible is met, and that there were no pre-authorization or pre-certification requirements that were needed to be satisfied.  (Complaint, ¶¶ 77-79.)  Plaintiff alleges that it reasonably and foreseeably relied upon these promises and then provided medical services to the patients.  (Complaint, ¶¶ 80-81.) Plaintiff alleges that it was damaged by the reliance by not obtaining full payment for services rendered.  (Complaint, ¶¶ 82-83.)

            Defendants’ demurrers to the fourth cause of action are overruled.

            Thus, for the foregoing reasons, Defendant Teamsters Western Region & Local 177 Health Care Plan (“Teamsters”) and Defendant Blue Cross and Blue Shield of Arizona, Inc.’s demurrers to the Complaint are overruled.

            Defendants are ordered to file and serve an Answer within 10 days of this date.

            Motion to Quash Service of Summons and Complaint

            Defendant Blue Cross and Blue Shield of Arizona, Inc. moves for an order quashing service of the summons and complaint pursuant to Code of Civil Procedures section 418.10(a)(1). Defendant asserts that it is an Arizona corporation and lacks minimum contacts with California for this Court to exercise personal jurisdiction.

            Objections

            Defendant’s objections 1 to 9 are moot.

            Motion to Quash

            Plaintiff has the burden to show that sufficient minimum contacts exist between Defendant and California to establish personal jurisdiction.  See Mihlon v. Superior Court (1985) 169 Cal.App.3d 703, 710; See also Edmunds v. Superior Court (1994) 24 Cal.App.4th 221, 230-31.  Plaintiff must meet this burden by a preponderance of the evidence.  See Ziller Elec. Lab GmbH v. Superior Court (1988) 206 Cal.App.3d 1222, 1232.

            General Jurisdiction

            A non-resident defendant may be subject to the forum state’s general jurisdiction if the defendant’s contacts are substantial, continuous, and systematic.  See Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445. Plaintiff must provide competent evidence to establish that Defendant’s connections with California are sufficiently continuous and systematic to impose general jurisdiction.  See Int’l Shoe Co. v. Wash., 326 U.S. 310, 317 (1945).

            Specific Jurisdiction

            “When determining whether specific jurisdiction exists, courts consider the relationship among the defendant, the forum, and the litigation. A court may exercise specific jurisdiction over a nonresident defendant only if: (1) the defendant has purposefully availed himself or herself of forum benefits; (2) the controversy is related to or arises out of the defendant's contacts with the forum; and (3) the assertion of personal jurisdiction would comport with fair play and substantial justice.”  Snowney v. Harrah’s Ent., Inc. (2005) 35 Cal.4th 1054, 1062 (internal citations and quotations omitted).

            Ownership and control by a nonresident parent corporation of a subsidiary that does business in California does not, without more, subject the parent to jurisdiction. DVI, Inc. v Superior Court (2002) 104 Cal.App.4th 1080, 1092-97. However, a parent corporation may be subject to specific jurisdiction if it causes its subsidiary to engage in forum contacts despite the fact that the separateness of the corporations is maintained. Anglo Irish Bank Corp., PLC v Superior Court (2008) 165 Cal.App.4th 969, 982. So long as the parent entity purposefully directed its activities toward California, either directly or through its subsidiary, specific jurisdiction may be found. Healthmarkets, Inc. v Superior Court (2009) 171 Cal.App.4th 1160, 1169.

            Defendant’s motion to quash is denied. At the hearing on February 16, 2023, Defendant stated that it did not challenge jurisdiction as to the third and fourth causes of action, but, only as to the first and second causes of action. Subsequently, Plaintiff dismissed the first and second causes of action leaving only the third and fourth causes of action. Therefore, the motion to quash is denied as Defendant concedes on the issue of personal jurisdiction.

            Therefore, Defendant’s Motion to Quash Service of Summons and Complaint is denied.  

            Plaintiff is ordered to given notice of this ruling.