Opinion
Case No. 8:22-cv-01775-JWH-ADS
2023-07-05
LOS ALAMITOS MEDICAL CENTER, INC.; Placentia Linda Hospital, Inc.; and Lakewood Regional Medical Center, Inc., Plaintiffs, v. LOCAL INITIATIVE HEALTH AUTHORITY FOR LOS ANGELES dba L.A. Care Health Plan; and Does 1 through 25, inclusive, Defendant.
Kim M. Worobec, Ryan Gordon Jacobson, Helton Law Group APC, Costa Mesa, CA, for Plaintiffs. Jerome H. Friedberg, Jeffrey B. Isaacs, Stacey L. Zill, Isaacs Friedberg LLP, Los Angeles, CA, Kevin E. Gilbert, Nicholas D. Fine, Orbach Huff and Henderson LLP, Pleasanton, CA, for Defendant Local Initiative Health Authority for Los Angeles County.
Kim M. Worobec, Ryan Gordon Jacobson, Helton Law Group APC, Costa Mesa, CA, for Plaintiffs. Jerome H. Friedberg, Jeffrey B. Isaacs, Stacey L. Zill, Isaacs Friedberg LLP, Los Angeles, CA, Kevin E. Gilbert, Nicholas D. Fine, Orbach Huff and Henderson LLP, Pleasanton, CA, for Defendant Local Initiative Health Authority for Los Angeles County.
ORDER GRANTING IN PART MOTION OF DEFENDANT L.A. CARE HEALTH PLAN TO DISMISS PETITION FOR WRIT OF MANDATE AND FIRST AMENDED COMPLAINT [ECF No. 10] AND REMANDING ACTION TO STATE COURT
John W. Holcomb, UNITED STATES DISTRICT JUDGE
Before the Court is the motion of Defendant Local Initiative Health Authority for Los Angeles County, operating and doing business as L.A. Care Health Plan ("L.A. Care"), to dismiss the petition for writ of mandate and first amended complaint of Plaintiffs Los Alamitos Medical Center, Inc.; Placentia Linda Hospital, Inc.; and Lakewood Regional Medical Center, Inc. The Court finds this matter appropriate for resolution without a hearing. See Fed. R. Civ. P. 78; L.R. 7-15. After considering the papers filed in support and opposition, and for the reasons stated below, the Court ORDERS that the Motion is GRANTED in part and REMANDS the case to State Court.
Mot. of Def. L.A. Care to Dismiss Petition for Writ of Mandate and First Am. Compl. pursuant to Fed. R. Civ. P. 12(b)(6) (the "Motion") [ECF No. 10].
The Court considered the documents of record in this action, including the following papers: (1) Petition for Writ of Mandate and First Am. Compl. (the "Amended Complaint") [ECF No. 1-3]; (2) Motion (including its attachments); (3) Pls.' Opp'n to the Motion (the "Opposition") [ECF No. 20]; and (4) Def.'s Reply in Supp. of the Motion (the "Reply") [ECF No. 28].
I. BACKGROUND
A. Procedural History
This lawsuit began in March 2022, when Plaintiffs filed their initial complaint in Orange County Superior Court. Plaintiffs amended their complaint five months later, adding a federal claim under 42 U.S.C. § 1983.
Compl. [ECF No. 1-1].
See Amended Complaint.
Following Plaintiffs' amendment of their pleading, in September 2022, L.A. Care removed this action to this Court. The next month, L.A. Care moved to dismiss the Amended Complaint in its entirety. That Motion is fully briefed.
Notice of Removal [ECF No. 1].
See generally Motion.
See generally Opposition; Reply.
B. Factual Background
Plaintiffs operate acute care hospitals in the cities of Los Alamitos, Placentia, and Lakewood, California. The hospitals provide comprehensive healthcare, including emergency care.
Amended Complaint ¶¶ 2, 3, & 4.
Id. at ¶ 9.
L.A. Care is a health care service plan licensed by the California Department of Managed Health Care (the "DMHC"). The health plan operates pursuant to the Knox-Keene Health Service Plan Act of 1975 (the "Knox-Keene Act"), Cal. Health & Safety Code §§ 1340, et seq., and its implementing regulations. Among other things, the Knox-Keene Act requires health plans to reimburse providers for healthcare services provided to their enrollees.
Id. at ¶ 5.
Id.
Id.
This case arises from a series of billing disputes between Plaintiffs and L.A. Care concerning 13 different patients. As alleged in their operative pleading, Plaintiffs complain that L.A. Care shirked its obligations under the Knox-Keene Act and DMHC's implementing regulations by failing to reimburse Plaintiffs the "reasonable and customary" value for their services. Specifically, as it pertains to 12 patients, Plaintiffs allege that L.A. Care paid approximately "100% of the Medicare rate"—an amount that Plaintiffs contend is "substantially less than the reasonable charges for such services." With respect to the thirteenth patient, Plaintiffs aver that L.A. Care paid nothing. In total, Plaintiffs accuse L.A. Care of failing to pay a shortfall of $1,220,572.46 for Plaintiffs' services. Plaintiffs submitted written appeals to L.A. Care requesting payment or reasonable reimbursement, but Plaintiffs assert that those appeals were futile; L.A. Care simply upheld its prior determinations.
Id. at ¶¶ 14-26.
Id. at ¶ 34.
Id. at ¶ 11.
Id. at ¶ 1.
Id. at ¶ 12.
On the theory that they were not paid the reasonable and customary value for their services, Plaintiffs assert 12 claims for relief against L.A. Care:
• breach of implied-in-law contract (emergency services);
• breach of implied-in-law contract (post-stabilization services);
• breach of implied-in-fact contract (post-stabilization services);
• breach of implied-in-fact contract (elective services);
• quantum meruit;
• negligence under Cal. Gov. Code § 815.6 (emergency services);
• negligence under Cal. Gov. Code § 815.6 (post-stabilization services);
• negligence under Cal. Gov. Code § 815.6 (elective services);
• petition for writ of mandamus under Cal. Civ. Proc. Code § 1085 (emergency services);
• petition for writ of mandamus under Cal. Civ. Proc. Code § 1085 (post-stabilization services);
• petition for writ of mandamus under Cal. Civ. Proc. Code § 1085 (elective services); and
• violation of 42 U.S.C. § 1983.
Id. at ¶¶ 27-309.
II. LEGAL STANDARD
A defendant may move to dismiss a complaint for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). To survive such a motion, the complaint must articulate "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint need not contain "detailed factual allegations," but it must contain "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 555, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
"[T]o be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." AE ex rel. Hernandez v. Cty. of Tulare, 666 F.3d 631, 637 (9th Cir. 2012). "[T]he factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Id. In addition, "a court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f).
III. ANALYSIS
L.A. Care moves to dismiss the entirety of Plaintiffs' Amended Complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Additionally, both parties make requests for judicial notice.
A. Judicial Notice
1. L.A. Care's Request
L.A. Care asks the Court to take judicial notice, pursuant to Rule 201 of the Federal Rules of Evidence, of the following documents and filings:
• An ordinance adopted by the County of Los Angeles, labelled Ordinance No. 94-0100, establishing the Local
Initiative Health Authority for Los Angeles County on December 13, 1994;The first two items are matters of public record, and, thus, L.A. Care's request for judicial notice is GRANTED. See Santa Monica Food Not Bombs v. City of Santa Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006) (stating that courts may take judicial notice of matters of public record, including municipal ordinances); Theta Chi Fraternity, Inc. v. Leland Stanford Junior Univ., 212 F. Supp. 3d 816, 823 (N.D. Cal. 2016) (taking judicial notice of public filings from the California Secretary of State).
• A California Secretary of State "Statement of Facts, Roster of Public Agencies Filing," updating the Officers of the Board of Governors of the Local Initiative Health Authority for Los Angeles County and identifying as "operating as L.A. Care Health Plan"; and
• Portions of L.A. Care's 2017 L.A. Care Medi-Cal Provider Manual.
Defs.' Request for Judicial Notice [ECF No. 13], Ex. A.
Id., Ex. B.
Id., Ex. C.
The Court may also take judicial notice of "public record[s] downloaded from a public agency's official website." Coal. for a Sustainable Delta v. Fed. Emergency Mgmt. Agency, 812 F. Supp. 2d 1089, 1093 (E.D. Cal. 2011). The third item is a publicly available document that can be accessed from L.A. Care's website at https://lacare.org/sites/default/files/la1722_mcla_provider_manual_202201_0.pdf. The Court therefore GRANTS L.A. Care's request for judicial notice of that document. See Peckerar v. General Motors, LLC, 2020 WL 6115083, at *1 n.1 (C.D. Cal. Aug. 17, 2020) (judicially noticing publicly available document published by NHTSA because it "is a publicly available government document, whose accuracy no party questions").
2. Plaintiff's Request for Judicial Notice
Plaintiffs filed a request for judicial notice in support of their Opposition. Although the documents attached to their request appear to be properly subject to judicial notice, "Plaintiffs cannot utilize the documents to amend the complaint and defeat defendants' motions to dismiss." Oklahoma Firefighters Pension & Ret. Sys. v. IXIA, 50 F. Supp. 3d 1328, 1350 (C.D. Cal. 2014). That appears to be the purpose of Plaintiffs' request. The Court, therefore, DENIES Plaintiffs' request for judicial notice.
Pls.' Request for Judicial Notice [ECF No. 22].
B. Claim 12: Violation of 42 U.S.C. § 1983
Plaintiffs appear to assert three theories for relief under to 42 U.S.C. § 1983. Specifically, Plaintiffs allege: (1) a substantive due process claim under the Fourteenth Amendment; (2) a procedural due process claim under the Fourteenth Amendment; and (3) an improper taking under the Fifth and Fourteenth Amendments. The Court addresses each of those claims in turn.
1. Procedural Due Process
In their Amended Complaint, Plaintiffs allege that L.A. Care failed to provide adequate procedural safeguards to ensure that Plaintiffs received a reasonable reimbursement. Plaintiffs aver that that failure amounts to a violation of procedural due process. In its Motion, L.A. Care argues that Plaintiffs' procedural due process claim fails because, as a preliminary matter, Plaintiffs cannot claim a property interest. L.A. Care is correct.
Id. at ¶ 299.
Id.
Whether asserting a substantive or procedural due process violation under the Fourteenth Amendment, Plaintiffs must show they were deprived of a "constitutionally protected life, liberty or property interest." Hotop v. City of San Jose, 982 F.3d 710, 718 (9th Cir. 2020) (citing Shanks v. Dressel, 540 F.3d 1082, 1087, 1090 (9th Cir. 2008)). A property interest protected by the Constitution is an "interest[ ] that a person has already acquired in [a] specific benefit[ ]." Board of Regents of State Colleges v. Roth, 408 U.S. 564, 576, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972). A property interest is more than a unilateral expectation, abstract need, or desire; it is "a legitimate claim of entitlement" to the benefit. Id. at 577, 92 S.Ct. 2701.
Whether the benefit vests the applicant with a property "claim of entitlement" or merely a "unilateral expectation" is determined by the discretion that the agency retains. Colson on Behalf of Colson v. Sillman, 35 F.3d 106, 108-109 (1994); see also Plaza Health Labs. v. Perales, 878 F.2d 577, 581 (2d Cir. 1989) ("[T]he existence of provisions that retain for the state significant discretionary authority over the bestowal or continuation of a government benefit suggests that the recipients . . . have no entitlement to them."). Thus, while state statutes can create protected property rights, they must have been clearly intended as a substantive restriction on the state's discretion. See Mustafa v. Clark Cnty. Sch. Dist., 157 F.3d 1169, 1178 (9th Cir. 1998).
In this case, Plaintiffs appear to allege that their property interest in a right to be reimbursed at their full billed charges is derived from a state statute—namely, Cal. Health & Safety Code § 1371 within the Knox-Keene Act, and more specifically, its implementing regulation, Cal. Code. Regs. tit. 28, § 1300.71(a)(3)(B). However, the regulation upon which Plaintiffs rely does not contain the kind of substantive restriction on the state's discretion that the Ninth Circuit imagined in Mustafa. For instance, as Plaintiffs allege in their Amended Complaint, Cal. Code. Regs. tit. 28, § 1300.71(a)(3) identifies six factors to be considered in calculating the "reasonable and customary" amount to be paid. Those factors include:
Id. at ¶ 292.
(i) the provider's training, qualifications, and length of time in practice; (ii) the nature of the services provided; (iii) the fees usually charged by the provider; (iv) prevailing provider rates charged in the general geographic area in which the services were rendered; (v) other aspects of the economics of the medical provider's practice that are relevant; and (vi) any unusual circumstances in the case.Cal. Code. Regs. tit. 28, § 1300.71(a)(3)(B). Not only is § 1300.71(a)(3)(B) devoid of any language placing significant constraints on the decisionmaker—i.e., L.A. Care—the regulation also requires that the decisionmaker only " take[ ] into consideration " those open-ended criteria. Id. (emphasis added). In their Opposition, Plaintiffs do not address this argument—which L.A. Care raises in its Motion —nor do Plaintiffs direct the Court to any statutory language limiting the health plan's discretion. Accordingly, the Court concludes that Plaintiffs fail to allege a property interest.
Motion 25:21-26:18.
Because the Amended Complaint does not sufficiently allege a property interest, it fails to plead a procedural due process violation. Accordingly, the Court need not reach L.A. Care's additional argument that the California Health and Safety Code already provides Plaintiffs with certain procedural safeguards. Plaintiffs' procedural due process claim is DISMISSED without leave to amend.
Id. at 26:10-27:24.
The Court makes this ruling with prejudice because any future amendment would be futile. Cf. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962) (indicating leave to amend may be denied where the amendment would be futile).
2. Substantive Due Process
Even if Plaintiffs could establish a property interest, to the extent that Plaintiffs allege a substantive due process claim, that claim fails as well. Substantive due process "forbids the government from depriving a person of life, liberty, or property in such a way that 'shocks the conscience' or 'interferes with the rights implicit in the concept of ordered liberty.' " Corales v. Bennett, 567 F.3d 554, 568 (9th Cir. 2009) (quoting Nunez v. City of Los Angeles, 147 F.3d 867, 871 (9th Cir. 1998)). To the extent that Plaintiffs attempt to state a substantive due process claim, Plaintiffs have not even come close to alleging conduct that is egregious enough to shock the conscience. That claim is DISMISSED. Because amending this claim would be futile, this dismissal is without leave to amend.
Amended Complaint ¶ 300.
3. Takings Clause
L.A. Care also maintains that Plaintiffs' Takings Clause claim fails because an alleged right to receive a statutory payment is not considered "property." L.A. Care is correct.
Motion 30:1-2.
An alleged right to receive a statutory payment is not considered "property" within the meaning of the Takings Clause. See Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) (mere obligations to pay money could not constitute a regulatory taking unless connected to a specific property right); see also Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 613, 133 S.Ct. 2586, 186 L.Ed.2d 697 (2013); Ballinger v. City of Oakland, 24 F.4th 1287, 1294-97 (9th Cir. 2022).
Plaintiffs have not made any allegation under their Takings claim other than one based upon an alleged right to receive a statutory payment. Nor have Plaintiffs identified any case in which a mere obligation to pay a reimbursement is sufficient to establish an improper taking under the Constitution. For these reasons, the Court concludes that Plaintiffs have failed to state a claim for relief under the Takings Clause. To the extent that Plaintiffs allege a Takings Clause claim, that claim is DISMISSED. Because amending this claim would be futile, this dismissal is also without leave to amend. C. Plaintiffs' Remaining State Law Claims
In support of their claim under the Taking Clause, Plaintiffs refer to Lynch v. U.S., 292 U.S. 571, 580, 54 S.Ct. 840, 78 L.Ed. 1434 (1934), seemingly in support of the proposition that "[c]ontracts between individuals or corporations are impaired within the meaning of the Constitution whenever the right to enforce them by legal process is taken away or materially lessened." However, that case is inapposite for two reasons. First, Plaintiffs do not allege that there is a contract between the parties in this case. Second, Lynch does not involve the Takings Clause.
Because the Court dismisses Plaintiffs' 42 U.S.C. § 1983 claim in its entirety, the Court need not reach the question of whether L.A. Care is considered a "state actor."
Under 28 U.S.C. § 1367(c)(3), this Court may decline to exercise supplemental jurisdiction over state law claims if it has "dismissed all claims over which it has original jurisdiction." The Supreme Court in United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), stated that supplemental jurisdiction "is a doctrine of discretion, not of plaintiff's right." Ordinarily, where the federal claims are dismissed prior to trial, "the state law claims should be dismissed as well." Id.
Having dismissed Plaintiffs' sole federal claim, the Court declines to exercise supplemental jurisdiction over Plaintiffs' 11 remaining claims that arise under California law. The Court determines that those state law claims will be more appropriately decided in state court.
IV. CONCLUSION
For the foregoing reasons, the Court hereby ORDERS as follows:
1. The Motion is GRANTED with respect Plaintiffs' twelfth claim for relief.
2. Since the Court declines to exercise supplemental jurisdiction over Plaintiffs' remaining state law claims, the case is REMANDED to state court for lack of federal jurisdiction.
IT IS SO ORDERED.