Judge: Jon R. Takasugi, Case: 23STCV03742, Date: 2023-09-06 Tentative Ruling

Case Number: 23STCV03742    Hearing Date: April 22, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

IAS’s demurrer is SUSTAINED, WITHOUT LEAVE TO AMEND.

On 2/21/2023, Plaintiff Intercommunity Anesthesiology Services, Inc. (IAS) and Aidan O’Brien M.D. filed suit against PIH Health Whittier Hospital (Defendant or PIH), alleging: (1) quantum meruit; (2) defamation per se; (3) defamation; (4) intentional interference with contractual relations; (5) intentional interference with prospective economic advantage; and (6) inducing breach of contract.

            On 4/28/2023, PIH filed a cross-complaint (XC) against IAS. On 1/26/2024, PIH filed a second amended cross-complaint (SXC) alleging: (1) civil theft; (2) unjust enrichment; (3) mistaken receipt; and (4) violation of section 17200.

            On 2/27/2024, IAS demurrer to PIH’s SXC.

Discussion

IAS argues that PIH’s SXC fails to state a claim.

            After review, the Court agrees.

            As for the first cause of action, the Court did not grant leave to amend to add a new cause of action. As such, this new claim for civil theft is not properly pled.

            As for the second and third causes of action, the Court previously sustained two rounds of demurrers to these claims on the grounds that PIH had not alleged facts which could show that any benefit was retained unjustly, or there was any fraud or mistake in payment. This was because the pleadings alleged that the money was knowingly paid for services actually rendered.

            In particular, the Court wrote:

Here, just as in original XC, PIH’s claim is based on payments made to IAS for services. While PIH now alleges that IAS induced PIH into believing there was an implied-in-fact contract by demanding payment for services and accepting payment at the same rate, PIH acknowledges that the contract expired, it was not renewed in March 2018, and it was aware of both of these facts. Moreover, as noted by IAS, “PIH has not alleged that it was required or bound to use IAS’s services or that it only used the services under a mistaken belief that it had no other choice. As is clear from the FAXC, as soon as PIH decided it did not want to use IAS’s services, it ‘quickly’ found a replacement group to contract with at the same rate it paid to IAS.” (Demurrer, 13: 3-6.) Taken together, PIH’s own allegations indicate that it knew the express contract had expired, and that it continued, for several years, to pay IAS in exchange for actually received services. PIH alleges that it was misled “into believing the parties had an agreement that required PIH to pay IAS for anesthesiology services to its patients,” but PIH does not allege any facts which could support this. PIH must allege facts which could how it was led to believe there was an agreement, when by its own admission the agreement had knowingly expired. Moreover, given that PIH does not allege fraud, PIH’s unjust enrichment claim still suffers from the fact that the money provided under the assumed contract was for actually provided services. As such, it is still unclear from PIH’s allegations that any benefit was retained unjustly.

                        …

Here, as stated above, PIH does not allege fraud, nor has it alleged facts to show that the money was mistakenly paid.  Rather, PIH alleges that the money was knowingly and willingly paid to IAS for services actually rendered. There is also the issue that IAS changed its position to its detriment based on receipt of the money. (See Thresher v. Lopez (1921) 52 Cal.App. 219, 220.) As noted by IAS:

If PIH had not requested services from IAS, services for which PIH would pay IAS directly, IAS would not have performed any services at all, let alone 24/7 anesthesia coverage for PIH’s entire hospital. Moreover, had IAS’s individual doctors performed services at the hospital on their own as some of them did prior to 2013, they would have taken the steps necessary to bill insurance companies directly. But they cannot do that now, because PIH (or its agent, PacMed) has accepted the assignment of the right to bill and has already billed the patients. Thus, if PIH were to get its wish and owe IAS nothing, after the fact, none of the doctors could actually bill for their services. This is plainly a detriment to IAS, as well as a change in position in reliance on PIH’s request for services. If IAS were to be required to return any of the funds paid to it by PIH, it would never be able to recover the actual market value of the services it provided.

(Demurrer, 14:25-15:9.)

            (1/12/2024 Minute Order)

            Now, in the SXC, PIH alleges that IAS knowingly induced PIH into believing there was an implied agreement requiring the hospital to continue paying IAS because IAS continued to send monthly invoices that demanded payment for services IAS had rendered to its own patients. Moreover, PIH alleges that the benefit retained was unjust because IAS’s patients, as opposed to PIH, were receiving IAS’s services, and if there was no agreement PIH would have paid IAS nothing.

            However, these facts remain insufficient to state a claim for several reasons.

First, PIH acknowledges that the contract expired, it was not renewed in March 2018, and it was aware of both of these facts. As such, PIH has already alleged that it knew there was no active agreement. There is no dispute that IAS continued to perform services at IAS. PIH has not alleged facts which could show that the receipt of invoices, for services actually render, fraudulently induced PIH into believing it was legally bound to continue contracting with IAS. Given that IAS continued to provide services, it seems clear that IAS would continue to send invoices for services rendered. PIH does not allege facts which could show how IAS’s issuance of invoices for services rendered fraudulently induced PIH into believing it was bound by an implied agreement when it has already admitted it knew that the actual agreement had expired and had not been renewed. 

Second, while PIH creates a distinction between it as a hospital and the patients receiving care at PIH, this ignores the fact that PIH was still able to bill the patients directly and collect from them. As PIH notes in opposition, the benefit of the agreement between PIH and IAS—wherein PIH paid IAS, and PIH then assumed the cost and risks of collecting payment from IAS’s patients—had been that it “streamlined the delivery of patient care, minimized the administrative burden on the anesthesiologists, and eliminated surprise bills.” (Opp., 5: 11-12.) PIH argues that IAS was unjustly enriched and mistakenly received money because “[w]ithout an agreement, PIH did not have to pay IAS anything. IAS would need to bill its own patients directly and collect what it could from them.” (Opp., 5: 14-15.) However, again, there is no dispute that services were actually rendered by IAS to the patients, and that when PIH provided payment to IAS, they remained entitled to then collect payment from IAS’s patients. As such, PIH has not alleged facts that it was not able to collect payment from IAS’s patients, such that IAS was enriched by PIH’s payment but PIH was not able to recover payment.  In other words, while PIH’s allegations show an extra administrative hurdle in recovering payments, PIH’s allegations do not allege that IAS received payment from PIH but PIH did not receive payment.

Given that PIH does not allege that it was not able to recoup those payments, PIH is arguing that IAS was unjustly enriched because it was paid directly by PIH instead of having to receive that payment directly from the patients. However, PIH has not set forth any legal authority that could show that an unjust enrichment claim can be supported by an allegation that one party did not have to go through certain administrative hurdles that it otherwise would have been able to go through.

Moreover, PIH, as a hospital, did need to provide anesthesia coverage for its hospital. As such, the Court is somewhat confused by PIH’s suggestion that these services were purely for IAS’s benefit, and that it would not have paid for anesthesiology coverage but for its belief that it was bound by an implied agreement to do so.

In sum, PIH has still not alleged facts which could show that IAS was unjustly enriched or that it received mistaken receipt of funds. PIH does not allege that it would not have procured anesthesiology services for the hospital but for the belief in the implied agreement. PIH also alleges that it knew the agreement expired and did not renew, and does not allege facts which could show how IAS’s continued issuances of invoices—when they were still providing services at the hospital—induced PIH into believing they were bound by an implied contract which they would otherwise not have complied with.

PIH has been afforded multiple opportunities to address this defect. Given that PIH’s allegations remain deficient to state a claim, the Court is persuaded that further leave to amend would be futile.

Based on the foregoing, IAS’s demurrer is sustained, without leave to amend.

It is so ordered.

Dated:  April    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

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