Judge James C. Chalfant, Case Number: 23STCV02582, Date: 2023-06-29 Tentative Ruling

Plaintiff Med-Plus Pharmacy, LLC, formerly Med-Plus Pharmacy, Inc, doing business as Med-Plus Pharmacy, LTC (“Med-Plus”) applies for right to attach orders against (1) Defendant Community Care Rehab Center, LLC (“Community”) for $297,542.88 and (2) Defendant Villa Rancho Bernardo Health Care, LLC (“Villa Rancho”) for $499,980.48.

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff Med-Plus filed the Complaint on February 6, 2023 against Defendants Anaheim Healthcare Center (“Anaheim”), Bartlett Care Center, LLC (“Bartlett”), Citrus Nursing Center, College Vista, LLC, Country Oaks Partners, LLC, Community; F. & B. Healthcare, Garden Park Care Center, LLC, Gibraltar Convalescent Hospital, Inc. (“Gibraltar”), Gordon Lane Healthcare, LLC, Heritage Manor Healthcare, LLC, Inland Medical Enterprises, Inc., MJB Partners, LLC, Monterey Park Convalescent Hospital, Inc., Paramount Convalescent Group, Inc., Park Regency Care, LLC, PC Care, LLC, Puente Partners, LLC, Riverside Equities, LLC, Sierra View Care Holdings, LLC, Sun Mar Healthcare, Inc., Villa Rancho, and Wyngate Nursing Center. The Complaint alleges a single cause of action for breach of written contract for each Defendant except Gibraltar, for which it alleges two. The Complaint alleges in pertinent part as follows.

Defendants are all affiliates of Sun Mar Management Services (“Sun Mar”), and its CEO is the authorized representative of each Defendant. Med-Plus signed a Pharmacy Service Agreement (“Agreement”) with each Defendant, and two with Gibraltar for two different convalescent hospitals, whereby it agreed to provide the listed pharmacy services at the listed rates and prices. Med-Plus agreed to bill for these services monthly, and each Defendant agreed to pay each invoice within 90 days of its receipt. A Defendant’s failure to pay the invoice on time would cause the invoice to accrue interest on the unpaid balance at the maximum rate under California law.

If a Defendant terminated its Agreement without cause, it would be responsible for payment of all amounts due to Med-Plus for the remainder of the Agreement’s term. In any action over non-payment of amounts owed, the prevailing party would be entitled to reasonable attorney’s fees and costs.

In July 2021, Med-Plus and Defendants entered into written amendments for each Agreement (“Amendment”) that changed the per diem rates, the drugs that Med-Plus would provide, and the pricing of antibiotics and other medications that Med-Plus already provided under each Agreement.

In May 2022, each Defendant breached its Agreement by failing to pay the February 2022 invoice. Defendants subsequently failed to pay the invoices for March through August 2022, and some Defendants also failed to pay an invoice for September 2022. Because all of these invoices are over 90 days overdue, Med-Plus is entitled to interest thereon at the maximum rate.

The original termination date for each Agreement ranged from October to December 2024.

In September 2022, Defendants terminated their Agreements without cause. Med-Plus is entitled to recover all lost profits it would have earned through the remainder of each Agreement’s term.

For each Defendant, Med-Plus seeks the sum of all unpaid invoices, interest at the maximum rate under California law, lost profits through the end of that Agreement’s term according to proof, and attorney’s fees and costs.

2. Course of Proceedings

On February 16, 2023, Defendants signed and filed a joint Notice and Acknowledgment of Receipt.

On March 1, 2023, Med-Plus served all Defendants with a “Proof of Service Re: Notice and Acknowledgment of Receipt” by electronic and first-class mail.

On March 30, 2023, all Defendants filed a joint Answer.

On May 19, 2023, the court denied an ex parte application for a temporary protective order against Anaheim and all Defendants because Med-Plus failed to file a proper application and failed to show that an emergency existed justifying ex parte relief.

On June 29, 2023, the court denied Med-Plus’s applications for right to attach orders against Anaheim for $606,439.75 and Bartlett for $334,587.99.

On January 2, 2024, the parties stipulated to amend the Complaint to reflect that Med-Plus was now a limited liability company. The court ordered the amendment on January 4, 2024.

B. Applicable Law

Attachment is a prejudgment remedy providing for the seizure of one or more of the defendant’s assets to aid in the collection of a money demand pending the outcome of the trial of the action. See Whitehouse v. Six Corporation, (1995) 40 Cal.App.4th 527, 533. In 1972, and in a 1977 comprehensive revision, the Legislature enacted attachment legislation (CCP §481.010 et seq.) that meets the due process requirements set forth in Randone v. Appellate Department, (1971) 5 Cal.3d 536. See Western Steel & Ship Repair v. RMI, (12986) 176 Cal.App.3d 1108, 1115. As the attachment statutes are purely the creation of the Legislature, they are strictly construed. Vershbow v. Reiner, (1991) 231 Cal.App.3d 879, 882.

A writ of attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500). CCP §483.010(a). A claim is “readily ascertainable” where the amount due may be clearly ascertained from the contract and calculated by evidence; the fact that damages are unliquidated is not determinative. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (“CIT”) (2004) 115 Cal.App.4th 537, 540-41 (attachment appropriate for claim based on rent calculation for lease of commercial equipment).

All property within California of a corporation, association, or partnership is subject to attachment if there is a method of levy for the property. CCP §487.010(a), (b). While a trustee is a natural person, a trust is not. Therefore, a trust’s property is subject to attachment on the same basis as a corporation or partnership. Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, supra, 197 Cal.App.3d at 4.

The plaintiff may apply for a right to attach order by noticing a hearing for the order and serving the defendant with summons and complaint, notice of the application, and supporting papers any time after filing the complaint. CCP §484.010. Notice of the application must be given pursuant to CCP section 1005, sixteen court days before the hearing. See ibid.

The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). The application must be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based. CCP §484.030.

Where the defendant is a corporation, a general reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). Where the defendant is a partnership or other unincorporated association, a reference to “all property of the partnership or other unincorporated association which is subject to attachment pursuant to subdivision (b) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). A specific description of property is not required for corporations and partnerships as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.

A defendant who opposes issuance of the order must file and serve a notice of opposition and supporting affidavit as required by CCP section 484.060 not later than five court days prior to the date set for hearing. CCP §484.050(e). The notice of opposition may be made on a Judicial Council form (Optional Form AT-155).

The plaintiff may file and serve a reply two court days prior to the date set for the hearing. CCP §484.060(c).

At the hearing, the court determines whether the plaintiff should receive a right to attach order and whether any property which the plaintiff seeks to attach is exempt from attachment. The defendant may appear the hearing. CCP §484.050(h). The court generally will evaluate the attachment application based solely on the pleadings and supporting affidavits without taking additional evidence. Bank of America, supra, 207 Cal.App.3d at 273. A verified complaint may be used in lieu of or in addition to an affidavit if it states evidentiary facts. CCP §482.040. The plaintiff has the burden of proof, and the court is not required to accept as true any affidavit even if it is undisputed. See Bank of America, supra, at 271, 273.

The court may issue a right to attach order (Optional Form AT-120) if the plaintiff shows all of the following: (1) the claim on which the attachment is based is one on which an attachment may be issued (CCP §484.090(a)(1)); (2) the plaintiff has established the probable validity of the claim (CCP §484.090(a)(2)); (3) attachment is sought for no purpose other than the recovery on the subject claim (CCP §484.090(a)(3); and (4) the amount to be secured by the attachment is greater than zero (CCP §484.090(a)(4)).

A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP §481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp Bros. Construction, Inc. v. Titan Electric Corp., (“Kemp”) (2007) 146 Cal.App.4th 1474, 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP §484.050(b).

Except in unlawful detainer actions, the amount to be secured by the attachment is the sum of (1) the amount of the defendant’s indebtedness claimed by the plaintiff, and (2) any additional amount included by the court for estimate of costs and any allowable attorneys’ fees under CCP section 482.110. CCP §483.015(a); Goldstein v. Barak Construction, (2008) 164 Cal.App.4th 845, 852. This amount must be reduced by the sum of (1) the amount of indebtedness that the defendant has in a money judgment against plaintiff, (2) the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff, and (3) the value of any security interest held by the plaintiff in the defendant’s property, together with the amount by which the acts of the plaintiff (or a prior holder of the security interest) have decreased that security interest’s value. CCP §483.015(b); see also CCP §483.010(b) (“an attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule of law…However, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim). A defendant claiming that the amount to be secured should be reduced because of a cross-claim or affirmative defense must make a prima facie showing that the claim would result in an attachment against the plaintiff.

Before the issuance of a writ of attachment, the plaintiff is required to file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action. CCP §489.210. The undertaking ordinarily is $10,000. CCP §489.220. If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment. CCP §489.220. The court also has inherent authority to increase the amount of the undertaking sua sponte. North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 691.

Neil Farage (“Farage”) is Med-Plus’s current Vice-President of Operations and was its Chief Operating Officer (“COO”) until March 2020. Farage Decl., ¶2.[2] In that capacity, he negotiated and wrote the first drafts of the Agreements. Farage Decl., ¶2. A Med-Plus account executive then revised, negotiated, and executed the final Agreement with each Defendant. Farage Decl., ¶3.

On August 29, 2019, Farage negotiated and signed the Agreements at issue in this application (“Community Agreement” and “Villa Rancho Agreement”) at the Sun Mar offices. Farage Community Decl., ¶4, Ex. A; Farage Villa Rancho Decl., ¶4, Ex. A. The Community Agreement was entered into as of November 1, 2019, and the Villa Rancho Agreement was entered into as of December 1, 2019. Id. Pursuant to the Agreements, Med-Plus agreed to provide various pharmacy services to each Defendant. Id.

The Agreements charged a “per diem” rate per resident. Id. They then added fees for different medications and for each attempt to provide certain services to residents. Id. Med-Plus agreed to first bill Medi-Cal, Medicare, or the patient’s private insurer for the amount owed and would only bill the facility for the balance not covered by the payors. Id.

Payment for Med-Plus’s services would be due 90 days after that Defendant received an invoice from Med-Plus. Farage Community Decl., ¶¶ 4, 8, Ex. A; Farage Villa Rancho Decl., ¶¶ 4, 8, Ex. A. Under Agreement section 3.5a, the Defendants were required to notify Med-Plus in writing of any dispute as to any of the patient days, skilled care, non-covered products, or supplies and quantity not allowed. Ex. A. Med-Plus would have access to any reasonable and necessary documents that would tend to sustain its claim. Ex. A. When a Defendant disputed the amounts for non-covered products or supplies, it was required to promptly furnish any information to Med-Plus to enable it to exhaust all attempts to obtain reimbursement within the time allowed by the paying agency. Ex. A.

No claim or disputed amounts from either party could arise more than 30 days after the invoice’s billing date. Ex. A. The parties agreed to resolve such a dispute within 30 days of when it arose. Ex. A. Depending on whether the disputed claim was sustained, either the Defendant must pay the bill in full or Med-Plus must issue a credit. Ex. A.

In June 2021, Sun Mar President Nathan Ure (“Ure”) asked Farage for better pricing on some of the drugs Med-Plus sold to Defendants. Farage Decl., ¶5. On July 21, 2021, the parties signed the Amendment decreasing the per diem rate, adding new drugs, and adjusting the prices for existing drugs under the original Agreements. Farage Decl., ¶5, Ex. B.

Farage oversaw the preparation of invoices for Defendants, whom Med-Plus billed monthly. Farage Decl., ¶7. Under his supervision, Med-Plus employees prepared the invoices and transmitted them by email. Farage Decl., ¶7. Invoices included patient names, prescription numbers, and descriptions of specific medications and products ultimately furnished to patients. Farage Decl., ¶7. Although Med-Plus sent the invoices to each Defendant, Sun Mars sent payment checks for all Agreements in a single envelope each month. Farage Decl., ¶7.

Community did not pay any of Med-Plus’ invoices for February to August 2022. Farage Community Decl., ¶8.

The invoices for Community list the charges by category. Farage Community Decl., ¶8, Ex. C. They show that the amount due for services rendered was $35,405.82 in February 2022, $29,453.40 in March 2022, $45,233.07 in April 2022, $37,518.03 in May 2022, $54,100.03 in June 2022, $49,038.13 in July 2022, and $47,381.42 in August 2022. Farage Community Decl., ¶8, Ex. C. After credits, the total amount owed is $297,542.88. Farage Community Decl., ¶8.

Neither Sun-Mar nor Community has ever complained to Med-Plus as to the unpaid invoices or the products and services Med-Plus provided as shown on those invoices. Farage Community Decl., ¶9. They also have not explained why the invoices remain unpaid. Farage Community Decl., ¶9.

Villa Rancho did not pay any of Med-Plus’ invoices from February to August 2022. Farage Villa Rancho Decl., ¶8.

The invoices for Villa Rancho list the charges by category. Farage Villa Rancho Decl., ¶8, Ex. C. They show that the amount due for services rendered was $90,392.13 in February 2022, $85,468.02 in March 2022, $57,548.30 in April 2022, $61,014.12 in May 2022, $68,906.18 in June 2022, $70,369.36 in July 2022, and $66,453.35 in August 2022. Farage Villa Rancho Decl., ¶8, Ex. C. After credits, the total amount owed is $499,980.48. Farage Villa Rancho Decl., ¶8.

Neither Sun-Mar nor Villa Rancho has ever complained to Med-Plus as to the unpaid invoices or the products and services Med-Plus provided as shown on those invoices. Farage Villa Rancho Decl., ¶9. They also have not explained why the invoices remain unpaid. Farage Villa Rancho Decl., ¶9.

Community houses 162 patient beds and averages about 90% occupancy. Mader Decl., ¶2. Villa Rancho houses 299 patient beds and averages about 94% occupancy. Rhead Decl., ¶2.

Both facilities timely paid the amount they owed Med-Plus through most of their business relationship. Mader Decl., ¶3; Rhead Decl., ¶3. Med-Plus prepared invoices every month that reflected the goods and services it provided. Mader Decl., ¶3; Rhead Decl., ¶3. These invoices typically included hundreds of pages of back-up documentation with the types and amounts of services provided to each patient. Mader Decl., ¶3; Rhead Decl., ¶3.

Med-Plus did not include back-up documentation for Community’s August 2022 invoice or Villa Rancho’s invoices from March through August 2022. Mader Decl., ¶3; Rhead Decl., ¶3. For those months, Med-Plus provided only a one-page summary invoice. Mader Decl., ¶3; Rhead Decl., ¶3.

Because Defendants buy their pharmaceutical goods in bulk, they qualify for rebates from drug manufacturers to offset the cost of the medications. Dehghanmanesh Decl., ¶2. To receive these rebates, they had to submit medication claims provided by Med-Plus. Dehghanmanesh Decl., ¶3. Defendants submitted medication claims from Med-Plus beginning in March 2019, which included claims starting in September 2018. Dehghanmanesh Decl., ¶5. Defendants received rebates for every month they submitted claims through 2021. Dehghanmanesh Decl., ¶¶ 6-7.

On December 10, 2021, Ure announced in an email to Sun Mar and Med-Plus employees that it was his last day as a Sun Mar employee. Dehghanmanesh Decl., ¶10, Ex. 1.

Starting in January 2022, Defendants’ medication claims for January through May 2022 were all rejected as duplicate claims. Dehghanmanesh Decl., ¶¶ 7-8.

On May 13, 2022, Dehghanmanesh emailed several Med-Plus employees that Sun Mar’s claims for January, February, and March had been rejected as duplicates because another party had already claimed the rebate. Dehghanmanesh Decl., ¶10, Ex. 1. Dehghanmanesh asked if Med-Plus was that party. Dehghanmanesh Decl., ¶10, Ex. 1. Med-Plus replied that day that it had been sending data to “Nathan” and never had any issue of duplication before. Dehghanmanesh Decl., ¶10, Ex. 1. It would continue to submit the data after the end of the business day on the 23rd of each month. Dehghanmanesh Decl., ¶10, Ex. 1.

On July 19, 2022, Med-Plus asked Dehghanmanesh to confirm when Sun Mar would pay the invoices for February or March 2022. Dehghanmanesh Decl., ¶11, Ex. 2. Dehghanmanesh replied the checks were ready, but he would not send them until the rebate issue was resolved. Dehghanmanesh Decl., ¶11, Ex. 2. He asserted that everything indicated that Med-Plus had received the rebate money. Dehghanmanesh Decl., ¶11, Ex. 2.

On July 21, 2022, Dehghanmanesh again told Med-Plus that Sun Mar’s medication claims for the first five months of 2022 had been rejected as duplicates. Dehghanmanesh Decl., ¶10, Ex. 1. Empirian Health, the company submitting these claims for Sun Mar, had confirmed Med-Plus was submitting those claims. Dehghanmanesh Decl., ¶10, Ex. 1. Dehghanmanesh attached a few examples of duplicate claims from January through March 2022. Dehghanmanesh Decl., ¶10, Ex. 1.

On June 29, 2023, the court denied Med-Plus’s applications for right to attach orders against Defendants Anaheim and Bartlett. Brucker Decl., Ex. 1. The memoranda for the applications were deficient under CRC 3.1113(a) for failure to cite relevant law. Ex. 1, p. 6. Med-Plus also did not discuss the services provided or how the invoices were calculated. Ex. 1, p. 6.

As to whether the damages were ascertainable, Defendants argued that one-page invoices were insufficient. Ex. 1, p. 8. Med-Plus provided hundreds of pages of back-up documentation with most invoices, but it failed to do so for select months. Ex. 1, p. 8. The court held that the lack of backup detail did not render the damages for those months unascertainable. June 2023 Decision at 9.

However, section 3.5a of the Agreement allows Defendants to dispute any of the patient days, skilled care, non-covered products, or supplies and quantity on an invoice within 30 days of its billing date. Ex. 1, p. 9. This implies that Med-Plus was required to provide sufficient information to enable Defendants to review individual charges. Ex. 1, p. 9. The one-page summary of costs by category provided by Med-Plus was insufficient for such review. Ex. 1, p. 9. Because invoices for any month that Med-Plus did not provide supporting pages never became due, these damages were unascertainable. Ex. 1, p. 9.

Defendants also argued that they were entitled to offset based on the rebates Med-Plus had misappropriated. June 2023 Decision at 7. The court noted that an offset claim must be supported by sufficient evidence to prove a prima facie case of attachment. Ex. 1, p. 7. Because Defendants offered no evidence as to the value of the rebates, they could not use them to offset the amount subject to attachment. Ex. 1, p. 7.

As to probability of success on the merits, Defendants argued Med-Plus failed to provide proof that they received the invoices at issue. Ex. 1, p. 10. However, Anaheim and Bartlett both stated that Med-Plus prepared invoices every month that reflected the goods and services it provided. Ex. 1, p. 10. Defendants admitted to receipt of these invoices every month, albeit sometimes without the usual backup documentation. Ex. 1, p. 10. Med-Plus had therefore demonstrated a probability of success on the merits.

Plaintiff Med-Plus applies for right to attach orders against Defendant Community for $297,542.88 and Villa Rancho for $499,980.48.

Med-Plus’s claims are for breach of contract based on the Agreements with Community and Villa Rancho. Farage Community Decl., ¶4, Ex. A; Farage Villa Rancho Decl., ¶4, Ex. A. The contract claims are claims on which attachment may be based.

A claim is “readily ascertainable” where the damages may be readily ascertained by reference to the contract and the basis of the calculation appears to be reasonable and definite. CIT, supra, 115 Cal.App.4th at 540-41. The fact that the damages are unliquidated is not determinative. Id. But the contract must furnish a standard by which the amount may be ascertained and there must be a basis by which the damages can be determined by proof. Id. (citations omitted).

Community’s invoices show that the net amount due for services rendered was $35,405.82 in February 2022, $29,453.40 in March 2022, $45,233.07 in April 2022, $37,518.03 in May 2022, $54,100.03 in June 2022, $49,038.13 in July 2022, and $47,381.42 in August 2022. Farage Community Decl., ¶8, Ex. C.

Villa Rancho’s invoices show that the amount due for services rendered was $90,392.13 in February 2022, $85,468.02 in March 2022, $57,548.30 in April 2022, $61,014.12 in May 2022, $68,906.18 in June 2022, $70,369.36 in July 2022, and $66,453.35 in August 2022. Farage Villa Rancho Decl., ¶8, Ex. C.

The amount owed by Community under the invoices totals $35,405.82 + $29,453.40 + $45,233.07 + $37,518.03 + $54,100.03 + $49,038.13 + $47,381.42 = $298,119.90. The amount owed by Villa Rancho under the invoices totals $90,392.13 + $85,468.02 + $57,548.30 + $61,014.12 + $68,906.18 + $70,369.36 + $66,453.35 = $500,151.46.

Med-Plus asserts that after credits, the total amount owed is $297,542.88 for Community and $499,980.48 for Villa Rancho. Farage Community Decl., ¶8; Farage Villa Rancho Decl., ¶8.

The invoices Med-Plus provides include only one page of expenses by category. Farage Community Decl., Ex. C; Farage Villa Rancho Decl., Ex. C. Med-Plus states that the invoices it sent to Defendants included patient names, prescription numbers, and descriptions of specific medications and products ultimately furnished to patients. Farage Decl., ¶7. Defendants respond that, although Med-Plus usually provided this information, it failed to do so for Community’s August 2022 invoice and for Villa Rancho’s invoices from March through August 2022. Mader Decl., ¶3; Rhead Decl., ¶3. Med-Plus fails to provide any evidence refuting this.

Section 3.5a of the Agreement allows Defendants to dispute any of the patient days, skilled care, non-covered products, or supplies and quantity on an invoice within 30 days of its billing date. Farage Community Decl., ¶¶ 4, 8, Ex. A; Farage Villa Rancho Decl., ¶¶ 4, 8, Ex. A. This implies that Med-Plus needed to provide sufficient information to enable Defendants to review the charges. While the hundreds of pages Med-Plus usually sent might provide that, the one-page summary does not. This court previously ruled for Med-Plus’s right to attach applications against Defendants Anaheim and Bartlett that an invoice never became due if Med-Plus failed to provide the supporting pages. Brucker Decl., Ex. 1, p. 9. The same ruling applies here.

The damages sought for Community’s August 2022 invoice and Villa Rancho’s invoices from March through August 2022 are disallowed for purposes of attachment. The readily ascertainable damages are $250,161.46 for Community ($297,542.88 - $47,381.42) and $90,221.15 for Villa Rancho ($499,980.48 - ($85,468.02 + $57,548.30 + $61,014.12 + $68,906.18 + $70,369.36 + $66,453.35).

A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP §481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp, supra, 146 Cal.App.4th at 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP §484.050(b).

Under the Agreements, payment for Med-Plus’s services was due 90 days after a Defendant received an invoice for those services. Farage Community Decl., ¶¶ 4, 8, Ex. A; Farage Villa Rancho Decl., ¶¶ 4, 8, Ex. A. Farage asserts that he oversaw the preparation of invoices for Defendants, whom Med-Plus billed monthly. Farage Decl., ¶7. Under his supervision, Med-Plus employees prepared the invoices and transmitted them by email. Farage Decl., ¶7. Despite this, neither Community nor Villa Rancho paid any of Med-Plus’ invoices from February to August 2022. Farage Decl., ¶8.

On May 13, 2022, Sun Mar asked if Med-Plus had filed for rebates in Sun Mar’s stead. Dehghanmanesh Decl., ¶10, Ex. 1. In July 2022, Sun Mar said it was ready to pay some of the invoices but refused to do so until the rebate issue was resolved. Dehghanmanesh Decl., ¶11, Ex. 2. On July 21, 2022, Dehghanmanesh again told Med-Plus that Sun Mar’s medication claims for the first five months of 2022 had been rejected as duplicates. Dehghanmanesh Decl., ¶10, Ex. 1. Empirian Health, the company that submitted these claims for Sun Mar, had confirmed Med-Plus was submitting those claims. Dehghanmanesh Decl., ¶10, Ex. 1. Dehghanmanesh attached a few examples of duplicate claims from January through March 2022. Dehghanmanesh Decl., ¶10, Ex. 1.

The court previously held Defendants could not use the rebates to offset the amount subject to attachment without evidence as to their value. Mem. at 8; Brucker Decl., Ex. 1, p. 7. A defendant may raise a claim of offset for any indebtedness of the plaintiff to the defendant raised in a cross-complaint or affirmative defense in an answer. CCP §483.015(b)(2), (3). The defendant’s offset claim under CCP section 483.015(b)(2) or (3) must be supported by sufficient evidence to prove a prima facie case of attachment in its own right. Lydig Construction, Inc. v. Martinez Steel, (“Lydig”) (2015) 234 Cal.App.4th 937, 945; Pos-A-Traction, Inc. v. Kelly Springfield, (C.D. Cal. 1999) 112 F.Supp.2d 1178, 1183.

To avoid this valuation problem, Defendants argue that part of the Agreement’s benefits included Sun Mar’s ability to claim rebates by buying pharmaceutical goods in bulk. Opp. at 6; Dehghanmanesh Decl., ¶2. When Med-Plus claimed the rebates for itself, it deprived Defendants of one benefit of the Agreement which breached the implied covenant of good faith and fair dealing. Opp. at 6-7.

To establish a breach of the covenant of good faith and fair dealing, the non-breaching party must show: (1) a contract between the parties; (2) the non-breaching party fulfilled all obligations under the contract; (3) any conditions precedent for the breaching party’s performance occurred or were excused; (4) the breaching party did not act fairly or in good faith and prevented plaintiff from receiving the benefits of the contract; and (5) the non-breaching party was harmed. Herskowitz v. Apple Inc., (N.D. Cal. 2013) 940 F.Supp.2d 1131.

The breach of the implied covenant is a breach of contract. Under Alder v. Drudis, (1947) 30 Cal. 2d 372, 381-82. After the other party’s breach of contract, the offended party may choose to treat the breach as a repudiation ending the contract and sue for the profits he would have realized if he had not been prevented from performing. Defendants contend that Med-Plus’s breach excused Defendants from having to pay under the Agreement. Opp. at 7.

This argument is dependent in part on whether Defendants performed their own obligations under the Agreement. See Herskowitz v. Apple Inc., supra, 940 F.Supp.2d at 1131. As Med-Plus has attachment claims of $250,161.46 for Community and $90,221.15 for Villa Rancho that are fully supported by invoice backup detail, it appears that Defendants cannot do so. Additionally, Defendants do not fully support their right to the rebates. While Defendants certainly are aided by the parties’ practice of allowing Defendants to receive the rebates, this is not sufficient. As Med-Plus argues (Reply at 4-5), Defendants fail to present any contractual right to the rebates. The implied covenant is limited to assuring compliance with the express terms of the contract and cannot be extended to create new obligations. Gibson v. Government Employees Ins. Co., (1984) 162 Cal.App.3d 441, 448. In addition, Defendants fail to present evidence of the pharmaceutical manufacturer’s rebate offer and to whom it applies, as well any law pertaining to rebates. Finally, Defendants fail to show that Med-Plus actually took the rebates for itself. Reply at 7.

Defendants may prevail in whole or in part at trial on the rebate issue. However, they fail to demonstrate a breach of the covenant of good faith and fair dealing that would permit termination of their Agreements and obviate attachment. Med-Plus has demonstrated a probability of success on the merits.

Attachment must not be sought for a purpose other than the recovery on the claim upon which attachment is based.¿ CCP §484.090(a)(3). Med-Plus seeks attachment for a proper purpose.[4]

The applications for right to attach orders are granted in the amount of $250,161.46 for Community and $90,221.15 for Villa Rancho. Med-Plus has failed to submit proposed right to attach orders and must do so within two court days or it will be waived.

No writ shall issue for either Defendant until Med-Plus files an undertaking for each. The undertaking ordinarily is $10,000. CCP §489.220. If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment. CCP §489.220. Defendants request that the undertaking be $1,000,000 per Defendant. They assert that because a writ of attachment could lead to the closure of the nursing facilities, the damages from wrongful attachment are in the millions. Opp. at 9.

Defendants misunderstand the undertaking required by CCP section 489.220, which is an undertaking protecting a defendant from the damages of a wrongful attachment. Such damages generally consist of the loss of bank interest for attached funds and the attorney fees necessary to set the attachment aside, not speculative consequential damages from lost use of funds. Defendants provide no evidence on the proper issues. Nor do they provide evidence that Community and Villa Rancho are in such a risky financial position that attachment of $250,161.46 for Community and $90,221.15 for Villa Rancho would lead to their shutdown. The undertaking is $10,000 for each Defendant.

[1] All of Defendants’ written objections to the Farage declaration are overruled. In its supporting memoranda, Med-Plus requests judicial notice of all prior pleadings and records in this action. Mem. at 4, n. 1. Med-Plus failed to make this request in a separate document. CRC 3.1113(l). It also failed to file a copy of the material for which it sought judicial notice. CRC 3.1306(c). In any event, the court need not judicially notice a document in the court file of the case at hand because it is always free to review prior filings in the action.

[2] If not otherwise specified, the cited evidence is common to both applications.

[3] Sun Mar Chief Financial Officer (“CFO”) Adrian Dehghanmanesh (“Dehghanmanesh”) submits three declarations in support of the opposition. The opposition only cites to a Dehghanmanesh declaration filed “in Support of Defendants’ Joint Opposition.” Opp. at 2-3, 6. Unless otherwise stated, citations to “Dehghanmanesh Decl.” are to this declaration. The other two declarations include UCC filings for each Defendant. Dehghanmanesh Community Decl., Exs. 1-2; Dehghanmanesh Villa Rancho Decl., Ex. 1. Defendants do not explain the relevance of these documents, but they apparently concern lien priority.

Most, but not all, of Med-Plus’s written evidentiary objections are overruled. The clerk is directed to scan and electronically file the court’s rulings.

[4] Although Defendants claim an exemption and provide evidence that their property and receivables are subject to senior liens, they fail to discuss the issue in their memorandum. Additionally, a senior lien is not a statutory exemption and does not prevent attachment.