Judge: Mark E. Windham, Case: 22STLC08286, Date: 2023-05-22 Tentative Ruling
Case Number: 22STLC08286 Hearing Date: October 11, 2023 Dept: 26
Nissanoff v. Blue Cross of California, et al.
DEMURRER
(CCP §§ 430.31,
et seq.)
TENTATIVE RULING:
DEFENDANT BLUE
CROSS OF CALIFORNIA DBA ANTHEM BLUE CROSS’ DEMURRER TO THE SECOND AMENDED
COMPLAINT IS SUSTAINED WITH 20 DAYS LEAVE TO AMEND.
ANALYSIS:
Plaintiff Jonathan
Nissanoff (“Plaintiff”) brought this
action for quantum meruit and breach of contract against Defendant Blue
Cross of California dba Anthem Blue Cross (“Defendant”)
on December 14, 2022. Plaintiff filed the First Amended Complaint on February
14, 2023, adding six more causes of action. On May 22, 2023, the Court
sustained Defendant’s Demurrer to the First Amended Complaint with leave to
amend. (Minute Order, 05/22/23.) Plaintiff filed the Second Amended Complaint
on June 8, 2023.
Defendant filed the instant
Demurrer to the Second Amended Complaint on August 9, 2023. Plaintiff filed an opposition
on August 24, 2023 and Defendant replied on October 4, 2023.
Discussion
The Second Amended Complaint alleges
causes of action for (1) quantum meruit;
and (2) breach of implied-in-law contract. Defendant demurs to each cause of action for
failure to allege facts sufficient to state a cause of action. (Citing Code
Civ. Proc., § 430.10, subd. (e).) The demurrer is accompanied by a meet and
confer declaration in compliance with Code of Civil Procedure section 430.41.
(Motion, Kozaczuk Decl., ¶¶2-3.)
Allegations in the Second
Amended Complaint
The Second Amended Complaint
alleges that Plaintiff is a surgeon who, as an assignee of his medical
corporation, Advanced Orthopedic Center (“AOC”), purchased and acquired its
accounts receivable. (SAC, ¶¶1-3 and Exh. 1.) Plaintiff and AOC are in the
business of providing emergent medical care to members, subscribers, and
insureds of Defendant and their physicians became entitled to reimbursement,
payment, or indemnification from Defendant for those services and supplies. (Id.
at ¶¶1-5.) Defendant is licensed to and do business as a health care plan
insurer and/or medical health plan administrator. (Id. at ¶6.)
Defendants are regulated by the Department of Managed Health Care (“DMHC”) DMHC
and/or the California Department of Insurance (“CDI”). (Ibid.)
Defendant withheld reimbursement
and has been unjustly enriched. (Id. at ¶7.) Plaintiff’s patients
bargain for and expect that payment will be made at the medical service
provider’s usual and customary rates. (Id. at ¶10.) By authorizing
Plaintiff to provide services to Defendant’s insured members, Defendant entered
into implied contracts agreeing to pay Plaintiff at his usual, customary, and
reasonable billed rates. (Id. at ¶11.) Defendant failed to pay these
claims correctly by paying the claims at rates far below usual, reasonable, and
customary charges submitted by Plaintiff. (Ibid.) Defendant determines
the payment amount using a flawed database that it manipulates to underpay
out-of-network providers. (Id. at ¶12.) Plaintiff’s claims are based on
state law that regulates insurance and not on ERISA or FEHBA statutes, nor on
the terms of the patients’ plans. (Id. at ¶13.)
This action arises from fees owed
to Plaintiff’s physicians for emergent medical care provided to Defendant’s
insured, members, policyholders, certificate-holders, or patients who were
otherwise covered by policies or certificates issued and underwritten by
Defendant. (Id. at ¶7.)
Each of the patients to whom this
care was provided was insured by Defendant under a policy or certificate of
insurance issued and underwritten by Defendant for the specific purpose of
ensuring they would have access to necessary medical care by practitioners like
Plaintiff and ensuring Defendant would pay for the medical expenses they
incurred. (Id. at ¶8.) Defendant received valuable premium payments or other
consideration from the patients under the policies. (Id. at ¶9.) The physicians
provided emergent and necessary medical care to patients covered under valid
insurance policies issued by Defendant. (Id. at ¶10.) The physicians
provided high-quality care and charge for services on par with other physicians
in the same general area for the same services; the physicians’ billed charges
are usual, customary, and reasonable. (Id. at ¶11.)
The physicians were
“out-of-network providers” who did not have contracts with Defendants at the
time the emergent care was provided. (Id. at ¶12.) Unlike in-network
providers who are reimbursed at a discounted rate by the health plan,
out-of-network providers are entitled to receive payment based on their total
charges for the services. (Id. at ¶¶13-14.) The medical services
provided by the physicians was for emergent or post-stabilization care that
they were legally required to provide to the patients. (Id. at ¶15.) The
physicians either requested and were provided authorization for the services,
or requested authorization and received no response within the 30-minute
timeframe such that authorization was provided by operation of law. (Ibid.)
At no time did Defendant request that the patients be transferred to an
in-network facility. (Ibid.) Based on these factors, Defendant was
required by law and/or its own contract to compensate the physicians at usual,
customary, and reasonable rates. (Ibid.)
Defendant paid for these services
in amounts that were less than the physicians’ usual, customary, or reasonable
rate and were less than the physicians’ billed charges. (Id. at ¶16.)
Physicians fully documented and supported the charges sought and expected to be
reimbursed at their usual, customary, or reasonable rate. (Id. at
¶¶17-18.) The rates at which Defendant reimbursed Plaintiff were arbitrary,
capricious, and inexplicable and Defendant never explained how the rates were
calculated. (Id. at ¶21.) The physicians were often paid different rates
for the exact same procedure or service at different times of the same year, or
paid at rates less than they would have received had they been in at an
in-network provider. (Id. at ¶22.) The DMHC’s regulations provide a
methodology to define the amount health care service plans like Defendant are
to pay out-of-network providers. (Id. at ¶23.) These criteria
demonstrates that the physician’s charges are reasonable and customary. (Id.
at ¶24.)
Defendant determined the payment
amount using flawed databases that it manipulated to underpay out-of-network
providers. (Id. at ¶¶25-27.) Therefore, Defendant breached its
obligation to reimburse the physicians for the out-of-network services at
usual, customary, and reasonable rates. (Id. at ¶¶28-29.) This
underpayment also harms the physicians’ relationship with their patients when
the patients discover they will not be fully reimbursed. (Id. at ¶31.)
Demurrer to Entire Second
Amended Complaint
Defendant first demurs to the
entire Second Amended Complaint on the grounds Plaintiff has not alleged a
valid assignment from AOC. Like the First Amended Complaint, the Second Amended
Complaint alleges that Plaintiff acquired accounts receivable from AOC but does
not allege that the scope of the assignment relates to causes of action with
respect to those accounts. (See FAC, ¶¶1-3.) The Court previously noted that an
assignment of the right to property does not necessarily effectuate an
assignment of a cause of action with respect to that property. (See Jasmine
Networks, Inc. v. Superior Court (2009) 180 Cal.App.4th 980, 995; Schauer
v. Mandarin Gems of Cal., Inc. (2005) 125 Cal.App.4th 949, 956-57.) The
Second Amended Complaint now attaches an assignment agreement that purports to
assign all of AOC “rights, remedies, titles, and interest in and to any and all
Outstanding Bills that the Assignor provides to the Assignee during the term of
the Agreement.” (SAC, Exh. 1 at Exh F, ¶1.) The assigned claims, however, are
not attached to Exhibit F as intended. (Id. at Exh. F, ¶5.) Plaintiff
apparently realized this error and filed a “Notice of Errata Pursuant to its
Complaint of Omission of Attachment to ‘Exhibit F’ of Assignment Agreement” on
August 24, 2023 with the opposition to the Demurrer.
The Court agrees with Defendant
that Plaintiff cannot correct his failure to attach the list of assigned claims
to the Second Amended Complaint by filing a Notice of Errata concurrently with the
opposition to the Demurrer. Correction should be made by amending the Second
Amended Complaint. Therefore, the Court declines to sustain the Demurrer to the
entire Second Amended Complaint without leave to amend when there is a
possibility Plaintiff can correct the allegations regarding assignment of the
claims.
The Court will further consider
the specific arguments raised in the Demurrer to each cause of action.
2nd Cause of Action for Breach
of Implied-in-Law Contract
The Court will address the second
cause of action first due to Defendant’s contention that the first cause of
action is duplicative of the second cause of action.
“[A]n implied-in-law contract or
quasi-contract is not based on the intention of the parties, but arises from a
legal obligation that is imposed on the defendant.” (Unilab Corp. v.
Angeles-IPA (2016) 244 Cal.App.4th 622, 639.) The elements are: (1)
defendant used for its benefit property of plaintiff; (2) in such manner and
under circumstances that the law will impose a duty of compensation therefore.
(Weitzenkorn v. Lesser (1953) 40 Cal.2d 778, 794.) The cases to which
Defendant cites do not hold that mutual assent is required for a valid
implied-in-law contract but rather, pertain to implied-in-fact contracts. (See Unilab
Corp. v. Angels-IPA (2016) 244 Cal. App. 4th 622, 637; Pacific Bay
Recovery, Inc. v. California Physicians' Services, Inc. (2017) 12
Cal.App.5th 200, 215-216.) Nor do implied-in-law contacts require the pleading
of the usual elements of contract formation, as Defendant contends. (Weitzenkorn
v. Lesser (1953) 40 Cal.2d 778, 794.) Indeed, one of the main cases to
which Defendant cites, Allied Anesthesia Med. Grp., Inc. v. Inland Empire
Health Plan (2022) 80 Cal.App.5th 794, is cited for the holding regarding
the claim for breach of implied-in-fact contract. (See Allied Anesthesia
Med. Grp., Inc. v. Inland Empire Health Plan (2022) 80 Cal.App.5th 794,
808-813.)
Despite the first cause of action
being named “Breach of Implied In Law Contract” on the face page of the Second
Amended Complaint, Defendant does not address what allegations are necessary to
allege an implied-in-law contract until the Reply. (Reply, p. 4:8-10.) The
Reply broadly argues that the Second Amended Complaint does not assert a legal
obligation imposed on Defendant. (Id. at p. 5:8-9.) The Second Amended
Complaint, however, does make such allegations: “The Department of Managed
Health Care has adopted regulations that define the amount that health care
service plans such as Defendant . . .
are obligated to pay non-contracted providers such as the Physicians.” (SAC,
¶23.) Plaintiff also earlier alleged that Defendant’s obligation to pay the
physicians’ usual, customary, or reasonable rates arises under state law. (Id.
at ¶¶13, 15.) The Second Amended Complaint also sufficiently alleges that by
failing to pay the physicians’ usual, customary, or reasonable rates, Defendant
was unjustly enriched in order to maximize its profits. (Id. at ¶¶7-11.)
Finally, Defendant demurs on the grounds that this cause of action is duplicative of the first cause of action for quantum meruit. Quantum meruit is a type of implied-in-law contract. (Long Beach Memorial Medical Center v. Kaiser Foundation Health Plan, Inc. (2021) 71 Cal.App.5th 323, 338 [citing Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370.) However, Defendant cites no authority that a duplicative cause of action is subject to demurrer. (Demurrer, p. 9:16-10:14.)
Therefore, Defendant has not
demonstrated that the second cause of action for breach of implied-in-law
contract is insufficiently alleged.
1st Cause of Action for Quantum
Meruit
Other than its contention that
the cause of action for quantum meruit is duplicative, Defendant does not
provide a basis to sustain the Demurrer to the first cause of action. Defendant improperly seeks to raise arguments against the
quantum meruit cause of action for the first time in its reply. (See Reply, p.
4;11-17.)
Conclusion
DEFENDANT BLUE
CROSS OF CALIFORNIA DBA ANTHEM BLUE CROSS’ DEMURRER TO THE SECOND AMENDED
COMPLAINT IS SUSTAINED WITH 20 DAYS LEAVE TO AMEND.
Moving party to give notice.