Judge Melvin D. Sandvig, Case 22CHCV00742 2023-01-30 Tentative Ruling

Judge: Melvin D. Sandvig, Case: 22CHCV00742, Date: 2023-01-30 Tentative Ruling

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Case Number: 22CHCV00742 Hearing Date: January 30, 2023 Dept: F47

Dept. F47

Date: 1/30/23

Case #22CHCV00742

DEMURRER TO THE FIRST AMENDED COMPLAINT

Demurrer filed on 1/3/23.

MOVING PARTY: Defendant Local Initiative Health Authority for Los Angeles County dba L.A. Care Health Plan

RESPONDING PARTY: Plaintiff Henry Mayo Newhall Memorial Hospital dba Henry Mayo Hospital

NOTICE: ok

Demurrer is to the entire First Amended Complaint:

1. Breach of Implied-In-Fact Contract

RULING: The demurrer is sustained without leave to amend.

SUMMARY OF FACTS & PROCEDURAL HISTORY

This action arises out of Defendant Local Initiative Health Authority for Los Angeles County dba L.A. Care Health Plan’s (Defendant) failure and refusal to pay the full amounts billed for services provided by Plaintiff Henry Mayo Newhall Memorial Hospital dba Henry Mayo Hospital (Plaintiff) to residents of Los Angeles County who enrolled in health care service plans offered by Defendant.

Defendant is a public entity established by the Board of Supervisors of the County of

Los Angeles pursuant to the authority in the California Welfare & Institutions Code 14087.9605. (FAC ¶¶2, 8). Defendant provides health care services to residents of Los Angeles County, including, but not limited to, Medi-Cal beneficiaries and Covered California plan enrollees.

(Id. at ¶¶2, 7, 8). The health plans administered by Defendant are regulated by the Department of Managed Health Care under the Knox-Keene Act. (Id. at ¶2).

Plaintiff’s original complaint alleged that Defendant’s obligation to pay Plaintiff’s reasonable and customary value for the services at issue in this action arose under the Knox-Keene Act. (See Complaint ¶¶15-18, 30). Based on those alleged statutory obligations, Plaintiff alleged that it and defendant “impliedly agreed” through “custom and practice” that Defendant would pay Plaintiff at the reasonable and customary value of such emergency service which were the “billed charge” unilaterally determined by Plaintiff. (Id. at ¶¶31, 33). Plaintiff alleged that it billed charges for the services at issue in this action totaling over $1.3 million of which Defendant has paid more than $680,000 leaving a balance of $615,608.87. (Id. at ¶¶39-41 and Ex.A thereto). Based on Defendant’s alleged statutory obligation to reimburse Plaintiff for the “reasonable and customary value” of its services, on 4/22/22, Plaintiff filed its original complaint asserting a single cause of action for Breach of Implied-Contract.

After meet and confer efforts regarding Defendant’s demurrer arguments to the original complaint, on 12/2/22, Plaintiff filed the operative First Amended Complaint (FAC) wherein Plaintiff has deleted paragraphs wherein Plaintiff alleged that all of Defendant’s payment obligations which are the subject of this action arose under the Knox-Keene Act and its implementing regulations. (Compare Complaint ¶¶15-18 with FAC). Additionally, in the First Amended Complaint, Plaintiff has deleted references to the Knox-Keene Act regulation requiring payment for certain services at the “reasonable and customary” value and replaces it with an allegation that Plaintiff is entitled to payment at the “reasonable” value. (Compare Complaint ¶30 with FAC ¶26; Complaint ¶33 with FAC ¶29 and Complaint ¶¶22 and 35 with FAC ¶¶18 and 31). Otherwise, the allegations in the First Amended Complaint are essentially the same as the original complaint wherein Plaintiff alleged a single cause of action for breach of implied-in-fact contract seeking damages in the amount of $615,608.57 for the balance on the billed charges. (FAC ¶¶25-44).

On 1/3/23, Defendant filed and served its demurrer to the entire First Amended Complaint. Plaintiff has opposed the demurrer.

ANALYSIS

Defendant’s Request for Judicial Notice (DRJN) is granted.

Plaintiff’s Request for Judicial Notice (PRJN) is denied.

Defendant’s objections to the declaration of Alejandro Bonilla and Jennifer Salter submitted in support of the opposition are sustained.

The allegations in Plaintiff’s original complaint establish that the basis for its theory of recovery against Defendant is based on Defendant’s alleged statutory obligation to pay Plaintiff “at the reasonable and customary value for the services provided” under the Knox-Keene Act. (See Complaint ¶¶15-18, 30, 31, 33). However, the Knox-Keene Act does not “authoriz[e] … suits by private individuals” for damages. Blue Cross of California, Inc. (2009) 180 CA4th 1237, 1250. The remedies available to private parties under the Knox-Keene Act are limited to claims “under the [Unfair Competition Law] or at common law on a quantum meruit theory.” Bell (2005) 131 CA4th 211, 216. Public entities, such as Defendant, are generally immune from common law and tort liability under Government Code 815. Guzman (2009) 46 C4th 887, 897. Therefore, Plaintiff cannot pursue claims against Defendant under the common law and tort theories of quantum meruit/implied-in-law contract and unfair competition allowed under the Knox-Keene Act. Katsura (2007) 155 CA4th 104, 109; California Medical Association, Inc. (2000) 79 CA4th 542, 551.

Plaintiff cannot avoid the foregoing bar to recovery by merely deleting references to the Knox-Keene Act as the basis for recovery in the First Amended Complaint. Owens (1988) 198 CA3d 379, 384; Berg & Berg Enterprises, LLC (2009) 178 CA4th 1020, 1034. However, even without the deleted references to the Knox-Keene Act, the allegations in the First Amended Complaint still allege that the purported implied-in-fact contract is based on statutory obligations under California law (i.e., the Knox-Keene Act). (See FAC ¶¶2, 26, 27, 29, 33).

Under similar circumstances, the Court of Appeal has recently held that a public entity is immune from liability for claims for breach of implied-in-fact contract which arise out of statutory obligations under the Knox-Keene Act. See County of Santa Clara v. Superior Court (Doctors Medical Center of Modesto) (2022) 77 CA5th 1018, 1024-1026, 1033, 1035-1036. While review has been granted of the Court of Appeal’s decision in Doctors Medical Center of Modesto, the decision is still citable for its persuasive value only. See CRC 8.1115(e)(1).

Even if Defendant is not immune from liability under Government Code 815, Plaintiff’s allegations show that there was no meeting of the minds between Plaintiff and Defendant regarding the price Defendant would pay for the alleged services at issue in the First Amended Complaint. The opposition confuses Plaintiff’s claim for breach of implied-in-fact contract with a claim for breach of implied-in-law contract. (See Opposition, p.4:27-p.5:18).

Implied-in-fact contracts are distinct from implied-in-law, or quasi, contracts. McGough (1989) 214 CA3d 1577, 1584. Like express contracts, implied-in-fact contracts require an ascertained agreement between the parties. Unilab Corp. (2016) 244 CA4th 622, 636; Division of Labor Law Enforcement (1977) 69 CA3d 268, 275. On the other hand, implied-in-law contracts are not actually contracts because they are not based on the intention or agreement of the parties but rather “arise[] from a legal obligation that is imposed on the defendant.” Unilab Corp., supra at 639; Janis (1998) 68 CA4th 824, 830.

A claim for breach of implied-in-fact contract requires Plaintiff to plead the agreed upon rate of payment which is a material term of the contract. See Allied Anesthesia Medical Group, Inc. (2022) 80 CA5th 794, 808-810; Pacific Bay Recovery (2017) 12 CA5th 200, 216. Plaintiff fails to allege facts which show any mutual assent as to the price for the subject services (i.e., that the rate was communicated to Defendant before services were rendered). Plaintiff essentially admits no such agreement exists when it argues that Defendant’s obligation to pay is implied-in-law (i.e., the Knox-Keene Act) and when it alleges that it is entitled to the “reasonable value” of its services (i.e., quantum meruit). (See Opposition, p.4:27-p.5:18; Complaint ¶¶15-17; FAC ¶¶16, 18, 26, 29, 31, 33, 35). However, a public entity such as Defendant cannot be held liable on an implied-in-law or quasi-contract theory. Pasadena Live (2004) 114 CA4th 1089, 1094; Katsura, supra at 109; Lundeen Coatings Corp. (1991) 232 CA3d 816, 831, n.9.

Plaintiff’s attempt to distinguish the instant case from Allied Anesthesia and Pacific Bay Recovery is unavailing because the basic elements of an implied-in-fact contract do not change depending on the nature of the underlying services rendered. Division of Labor Law Enforcement, supra.

Finally, Plaintiff has failed to plead sufficient facts to support the conclusory allegation that Plaintiff complied with the requirements of the Government Claims Act. If this were the only defect in the First Amended Complaint, leave would be granted so that Plaintiff could plead the facts included in the declarations submitted in support of the opposition.

CONCLUSION

Based on Defendant’s immunity from liability under the facts alleged and/or the lack of mutual assent regarding a material term of the purported implied-in-fact contract, the demurrer is sustained without leave to amend.