Judge William A. Crowfoot, Case Number: 23AHCV02716, Date: 2024-03-04 Tentative Ruling

Judge: William A. Crowfoot, Case: 23AHCV02716, Date: 2024-03-04 Tentative Ruling

On November 17, 2023, plaintiff City of Hope National Medical Center (“Plaintiff”) filed this action against defendants Blue Cross and Blue Shield of South Carolina (“South Carolina Blue”) (erroneously named as “BlueCross BlueShield of South Carolina”) and California Physicians’ Service dba Blue Shield of California ("Defendant”). Plaintiff brings this action to recover $1,647,205.52 plus applicable interest in reimbursement owed for medically necessary hospital care provided to a patient (“Patient D.B.”). Plaintiff asserts causes of action for intentional misrepresentation, negligent misrepresentation, promissory estoppel, unjust enrichment, breach of written contract, breach of implied contract, and quantum meruit.

On January 12, 2024, Defendant filed this motion to dismiss or stay action pending arbitration. Defendant notes it is already involved in an arbitration proceeding with Plaintiff regarding the reimbursements at issue in this action. South Carolina Blue was named as another party in the arbitration, but the arbitrator dismissed South Carolina Blue upon finding that it was not a party to the Agreement between Defendant and Plaintiff. The arbitrator stayed the proceeding for 180 days, during which Plaintiff filed this action against South Carolina Blue and Defendant.

In deciding a motion to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)¿

“The party seeking to compel arbitration bears the burden of proving the existence of a valid arbitration agreement.” (Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, 586.)

The fee-for-service hospital agreement between Plaintiff and Defendant (“Agreement”) provides the following under Section 9, entitled “Resolution of Disputes”:

9.2 Arbitration of Disputes Any dispute (other than a claim of medical malpractice) between the parties that exceeds the jurisdiction of Small Claims Court and that was reviewed through, but not resolved by, the Appeal Process set forth in Section 9.1 shall be settled by final and binding arbitration in Los Angeles, California. Arbitration shall be conducted by and under the Commercial Rules of the American Arbitration Association. The arbitrator shall be a retired judge of the State of California, unless otherwise agreed to by the parties. The arbitration decision shall be binding on both parties. The arbitrator shall be bound by applicable state and federal law and shall issue written findings of fact and conclusions of law. The arbitrator shall have no authority to award damages or provide a remedy that would not be available to such prevailing party in a court of law nor shall the arbitrator have the authority to award punitive damages. The cost of the arbitration shall be shared equally by Hospital and Blue Shield; provided that each party shall be responsible for its own attorneys' fees and costs

(Schoenfeld Decl., Exh. A.) Section 9.1(e) of the Agreement also states that “[Defendant] and [Plaintiff] agree to submit any disputes that cannot be resolved by the Appeal Process to binding arbitration pursuant to Section 9.2 of this Agreement.” (Id. at p. 24.)

Additionally, the Agreement includes a section relating to “Other Payors” such as South Carolina Blue for whom Defendant provides administrative services (e.g., claims processing) if their members use Defendant’s contracted facilities. The Agreement states, in relevant part:

11.1 Other Payors. Blue Shield may contract with employers, insurance companies, associations, health and welfare trusts, or other organizations to provide administrative services for plans provided by those entities that are not underwritten by Blue Shield (including both local and Blue Cross/Blue Shield National Accounts Programs). In addition, Blue Shield may extend this Agreement to managed care arrangements established by Blue Shield subsidiaries, or by persons or entities using the network Blue Shield has established pursuant to agreements with CareTrust Networks and Blue Shield of California Life & Health Insurance Company. All such entities shall be referred to as “Other Payors.” Blue Shield shall require that the health programs of Other Payors include provisions to encourage the use of Blue Shield Providers (including Hospital).

11.2 Responsibility for Payment. Hospital agrees to look solely to Other Payors for payment for services furnished to Members of such Other Payor. If Hospital is unable to obtain payment from any Other Payor, Blue Shield shall, upon notice from Hospital, make reasonable efforts to assist Hospital in obtaining such payment. However, any continuing dispute with respect to such payment shall be settled solely between Hospital and such Other Payor.

The Agreement requires the parties to arbitrate “any dispute between the parties”, which includes tort and contractual liabilities. (EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1322.) Plaintiff’s claims stem from the Agreement because Plaintiff claims that payment was due under the Agreement and that Defendant did not cause South Carolina Blue to pay for the services provided to Patient D.B. (Compl., ¶¶ 31-34, 95-98.)

In opposition, Plaintiff does not dispute that its claims in this action relate to the same claims of underpayment brought in arbitration. Instead, Plaintiff argues that its fraud claims are not arbitrable because they are premised on Defendant’s representations made during the Appeals Process, therefore, the dispute could not be “subject to review” through the Appeals Process. However, this interpretation ignores Section 9.1, which states that the parties agree to submit any disputes which cannot be resolved by the Appeals Process to arbitration.

Plaintiff also argues that the motion should be denied pursuant to Code of Civil Procedure section 1281.2(c) because it is required to litigate its claims against South Carolina Blue and there is a risk of inconsistent rulings. South Carolina Blue has been dismissed from this case due to lack of personal jurisdiction and there is no indication that any other court action is pending. Therefore, Code of Civil Procedure section 1281.2(c) is inapplicable. And, even if another action were pending, thus creating the risk of inconsistent rulings, the Court would not be inclined to deny Defendant’s motion, but would stay the instant action until Plaintiff’s claims against South Carolina Blue have been resolved in court before ordering Plaintiff to arbitrate its claims against Defendant. (Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 679, 692-693.)

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.