Judge: Michael P. Linfield, Case: 22STCV38118, Date: 2023-03-01 Tentative Ruling

Case Number: 22STCV38118    Hearing Date: March 1, 2023    Dept: 34

SUBJECT:         Demurrer

Moving Party:  Defendant PIH Health Good Samaritan Hospital

Resp. Party:    Plaintiff Angel Medical Group, Inc.

Defendant’s Demurrer is SUSTAINED in part. The Demurrer is OVERRULED to the first, second, third and fourth causes of action. The Demurrer is SUSTAINED to the fifth cause of action for declaratory relief.

BACKGROUND:

On December 7, 2022, Plaintiff Angel Medical Group, Inc. (d.b.a. Superior Choice Medical Group, Inc.) filed its Complaint against Defendant PIH Health Good Samaritan Hospital on the following causes of action:

(1)       Breach of contract;

(2)       Breach of implied covenant of good faith and fair dealing;

(3)       Common count – open book account;

(4)       Negligence; and

(5)       Declaratory relief.

On January 27, 2023, Defendant filed its Demurrer.

On February 15, 2023, Plaintiff filed its Opposition.

On February 22, 2023, Defendant filed its Reply.

ANALYSIS:

I.           Legal Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (Code Civ. Proc., §§ 422.10, 589.)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure section 430.10 (grounds), section 430.30 (as to any matter on its face or from which judicial notice may be taken), and section 430.50(a) (can be taken to the entire complaint or any cause of action within).

A demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty (Code of Civil Procedure section 430.10, subdivision (f)), is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (Khoury v. Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Id.)

II.        Discussion

Defendant demurs to all five causes of action in the Complaint, arguing that they fail to state facts sufficient to constitute a cause of action against Defendant. (Demurrer, p. 6.)

A.      Breach of Contract

1.       Legal Standard

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) 

If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.) “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.) 

2.       Discussion

Among other things, Plaintiff alleges: (1) that Plaintiff and Defendant were parties to an agreement; (2) that at all relevant times Plaintiff performed all of its obligations, requirements, and conditions precedent under the terms of the agreement; (3) that Defendant breached its obligations under the agreement by failing and refusing to pay out any Shared Risk Incentive Pool surpluses in 2018, 2019, 2020, or 2021, and by failing to allow Plaintiff to obtain relevant data and information sufficient to audit the Shared Risk Incentive Pool’s performance during the lifetime of the agreement; and (4) that Plaintiff has been damaged as it has not been compensated as contemplated under the agreement. (Complaint, ¶¶ 15–17.)

The Court assumes that all well-plead allegations are true for the purpose of the Demurrer.  The Court is not persuaded by Defendant’s arguments regarding this cause of action. The allegations are not stated in conclusory terms. (Demurrer, p. 10:19–20.) It is not required that Plaintiff cite to specific sections of the contract in order for its allegations to be sufficiently certain. (Id. at p. 11:4–7, 14:3–6.) The lack of a “Final Calculation” does not appear relevant to the analysis, but even if it were, it does not stop the other allegations from constituting the essential elements of the cause of action. (Id. at p. 11:8–22, 12:1–13.)

These allegations are sufficient to constitute a cause of action for breach of contract.  The Court OVERRULES Defendant’s Demurrer to the first cause of action for breach of contract.

B.          Breach of the Implied Covenant of Good Faith and Fair Dealing

1.       Legal Standard

“A breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself and it has been held that bad faith implies unfair dealing rather than mistaken judgment.” (Careau & Co. v. Sec. Pac. Bus. Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.)

“If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated … [T]he only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id. at pp. 1394–95.)

To recover in tort for breach of the implied covenant, the defendant must “have acted unreasonably or without proper cause.” (Id. at p. 1395, citations and italics omitted.)

2.       Discussion

Here, Plaintiff initially provides a restatement of the allegations for breach of contract when describing the alleged breach of the implied covenant of good faith and fair dealing. However, Plaintiff also provides the new allegation that “[Defendant’s] decision to not act fairly or in good faith when it breached the written Agreement was done intentionally, maliciously, without good cause, in bad faith, and for reasons extraneous to the Agreement.” (Complaint, ¶ 22.)

Assuming as true these allegations for the purpose of the Demurrer, these allegations are sufficient to constitute a cause of action for breach of the implied covenant of good faith and fair dealing.

        The Court OVERRULES Defendant’s Demurrer to the second cause of action for breach of the implied covenant of good faith and fair dealing.

C.      Common Count – Open Book Account

1.       Legal Standard

The required elements of a common count claim are “(1) the statement of indebtedness in a certain sum, (2) the consideration, i.e., goods sold, work done, etc., and (3) nonpayment. A cause of action for money had and received is stated if it is alleged the defendant is indebted to the plaintiff in a certain sum for money had and received by the defendant for the use of the plaintiff.” (Farmers Ins. Exch. v. Zerin (1997) 53 Cal.App.4th 445, 460, citation and quotation marks omitted.)

2.       Discussion

Plaintiff alleges: (1) that Defendant maintained a statement in the regular court of business in accordance with the Parties’ agreement; (2) that Plaintiff provides professional/physician services pursuant to the agreement; and (3) that Defendant has not paid Plaintiff for Plaintiff’s provision of these services. (Complaint, ¶¶ 4, 25–29.)

The Court does not find persuasive Defendant’s argument that “surpluses” are not “invoices.” (Demurrer, p. 16:4–11.) If the contract provides that Plaintiff is entitled to a partial distribution of the surpluses, and such surpluses were not distributed to Plaintiff — which is what Plaintiff has alleged — then that could still constitute a cause of action for common count. (Complaint, ¶ 6.)

Assuming as true these allegations for the purpose of the Demurrer, these allegations are sufficient to constitute a cause of action for common count. The Court OVERRULES Defendant’s Demurrer to the third cause of action for common count.

D.      Negligence

1.       Legal Standard

In order to state a claim for negligence, Plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.) 

2.       Discussion

Plaintiff alleges: (1) that Defendant had a general duty to Plaintiff and the Shared Risk Incentive Pool to protect the financial soundness of the Shared Risk Incentive Pool and to timely notify the reinsurer of all catastrophic hospital claims that could and would impact the financial soundness and profitability of the Shared Risk Incentive Pool; (2) that Defendant had a specific duty to Plaintiff and the Shared Risk Incentive Pool to notify the reinsurer of the City of Hope hospital claim, which involved excess of $3,000,000.00 in billed charges; (3) that Defendant failed to exercise appropriate and reasonable care regarding these duties; (4) that it was foreseeable that Plaintiff would be financially harmed by Defendant’s failure to timely notify the Shared Risk Incentive Pool reinsurer of a high-dollar hospital claim and then use those resources to pay the claim; and (5) that Plaintiff was financially harmed as a result of Defendant’s failure to exercise appropriate and reasonable care as described above. (Complaint, ¶¶ 32–35.)

Assuming as true these allegations for the purpose of the Demurrer, these allegations are sufficient to constitute a cause of action for negligence.

        The Court OVERRULES Defendant’s Demurrer to the fourth cause of action for negligence.

E.       Declaratory Relief

1.       Legal Standard

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) 

A cause of action for declaratory relief should not be used as a second cause of action for the determination of identical issues raised in another cause of action. (General of America Insurance Co. v. Lilly (1968) 258 Cal.App.2d 465, 470.) “The availability of another form of relief that is adequate will usually justify refusal to grant declaratory relief” (Cal. Ins. Guar. Ass’n v. Super. Ct. (1991) 231 Cal.App.3d 1617, 1624), and a duplicative cause of action is subject to demurrer (Palm Springs Villas II Homeowners Ass’n, Inc. v. Parth (2016) 248 Cal.App.4th 268, 290). Further, “there is no basis for declaratory relief where only past wrongs are involved.” (Osseous Tech. of Am., Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366, quotation marks omitted.) 

2.       Discussion

Here, Plaintiff has only alleged past wrongs, including issues with distributions for calendar years 2018, 219, 2020, and/or 2021. (Complaint, ¶¶ 38–40.) There does not appear to be any allegations regarding relief for a current or prospective issue.

These allegations are insufficient to survive demur. The Court SUSTAINS Defendant’s Demurrer to the fifth cause of action for declaratory relief.

III.      Conclusion

Defendant’s Demurrer is SUSTAINED in part. The Demurrer is OVERRULED to the first, second, third and fourth causes of action. The Demurrer is SUSTAINED to the fifth cause of action for declaratory relief.