Opinion
G043849
10-21-2011
JUDY WILLIAMS et al., Plaintiffs and Appellants, v. MISSION VIEJO EMERGENCY MEDICAL ASSOCIATES, Defendant and Respondent.
Law Offices of Ron Bochner and Ron Bochner for Plaintiffs and Appellants. Call & Jensen, Ward J. Lott, Melinda Evans and Kent R. Christensen for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2008-00076369)
OPINION
Appeal from a judgment of the Superior Court of Orange County, Nancy Wieben Stock, Judge. Affirmed.
Law Offices of Ron Bochner and Ron Bochner for Plaintiffs and Appellants.
Call & Jensen, Ward J. Lott, Melinda Evans and Kent R. Christensen for Defendant and Respondent.
Plaintiffs Judy Williams and Russell Williams appeal from the judgment entered after the trial court sustained without leave to amend defendant Mission Viejo Emergency Medical Associates's demurrer to their second amended complaint for unjust enrichment and restitution, breach of contract and the implied covenant of good faith and fair dealing, declaratory and injunctive relief, unfair business practices, and fraud. They contend they alleged sufficient facts to support each cause of action and the court abused its discretion in denying leave to amend. Finding no error, we affirm.
FACTS
In 2004, Mr. Williams was treated in the emergency room of Mission Viejo Medical Center, where defendant provided emergency room physicians. Although the medical center accepted his Blue Shield insurance, defendant did not. Because it was an "out-of-network" provider for Blue Shield insureds, defendant charged them a different rate than for in-network patients.
Plaintiffs sued defendant alleging they were unreasonably required to pay defendant "the $281.00 list price solely because they were deemed to be out of network for this treatment and thus, like the uninsured, are members of the sole class of patients compelled to pay [defendant's] unreasonable chargemaster or list price." They alleged this charge was "not the usual, customary or reasonable rate, and was . . . unauthorized by law."
The second amended (operative) complaint asserted five causes of action on behalf of plaintiffs and a putative class: (1) unjust enrichment and restitution; (2) breach of contract and the implied covenant of good faith and fair dealing; (3) declaratory and injunctive relief; (4) unfair business practices; and (5) fraud. Each was based on the claim the rates charged to uninsured and out-of-network patients were unreasonable because they differed from rates charged to patients with private insurance (in-network patients) or those covered by government programs. The putative class included plaintiffs and "similarly-situated insured and uninsured individuals who were responsible for payment for treatment for emergency room and related professional services, who were, or will be, billed by [defendant] at its full list, chargemaster price, which is not the usual, customary or reasonable rate and is otherwise not the lawful rate."
Defendant demurred to the complaint on the ground it failed to state a cause of action. In connection with the demurrer, it requested the court take judicial notice of admissions made by plaintiffs in declarations filed in support of their opposition to defendant's motion for summary judgment. Although the motion had been taken off calendar when the court granted plaintiffs leave to file a first amended complaint, the documents remained part of the court record.
In their declarations, plaintiffs explained their claims arose from one visit to the emergency room by Mr. Williams where he received medical services from defendant. After plaintiffs requested Blue Shield pay defendant's $281 bill, Blue Shield sent them a check for $175.68, representing the full amount minus the $105.32 deductible remaining on their account.
The trial court granted defendant's request for judicial notice and sustained its demurrer without leave to amend. On the breach of contract cause of action, it cited plaintiffs' failure to allege the contract terms or whether the contract was written, oral, or implied. It also noted a contract mandating payment of a specific amount before emergency healthcare is rendered was likely unenforceable and, in any event, plaintiffs conceded they paid only their out-of-network deductible and not defendant's bill. As to the unfair business practices claim, it found insufficient facts to show defendant's acts were unlawful, unfair, or fraudulent, or that defendant's billing practices were unreasonable. Regarding the fraud cause of action, the court again observed plaintiffs did not suffer the alleged harm of being "fully balance-billed [defendant's] full list price or chargemaster rate" because they admitted they only paid their out-of-network deductible. Additionally, plaintiffs had failed to plead scienter or fraud with the necessary specificity. Because these claims failed, the court concluded plaintiffs did not have viable causes of action for unjust enrichment or injunctive and declaratory relief.
Plaintiffs filed a motion for reconsideration, to allow discovery to locate new class representatives, and to compel further responses to discovery. They reasoned the court's order sustaining defendant's demurrer without leave to amend may have been premised on their lack of standing and they were entitled to discovery to seek substitute class representatives. They also submitted a proposed third amended complaint. The court denied the motion and dismissed the action with prejudice.
DISCUSSION
1. Standard of Review
A demurrer tests the legal sufficiency of the complaint. We review the complaint de novo to determine whether it alleges facts sufficient to state a cause of action, considering judicially noticeable matters and accepting as true all material facts alleged in the complaint, but not contentions, deductions or conclusions of fact or law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) When a demurrer "is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.]" (Ibid.) Plaintiffs have the burden to show a reasonable possibility the complaint can be amended to state a cause of action. (Ibid.)
2. Order Sustaining Demurrer Without Leave to Amend
a. Breach of Contract
The breach of contract cause of action alleged defendant "entered into contracts with plaintiffs, leaving the price term to be implied, then billed . . . plaintiffs at its full, undisclosed chargemaster or list prices, which plaintiffs are informed and believe are not the usual, customary or reasonable rate, not the lawful rate and far exceed those rates." But plaintiffs never alleged whether these purported contracts were written, oral, or implied, making their complaint susceptible to demurrer under Code of Civil Procedure section 430.10, subdivision (g) [failure to allege whether contract is oral, written or implied is grounds for demurrer to a breach of contract claim]; see also Holcomb v. Wells Fargo Bank, N.A. (2007) 155 Cal.App.4th 490, 501 [court properly sustained demurrer where complaint failed to state either "nature of the contract" or its specific terms the plaintiff claimed had been breached, and at most alleged a form of express contract with implied terms].
In their opening brief, plaintiffs contend they "alleged an implied in fact contract . . . that services were provided . . . ." Yet in the very same sentence they also allege "the Conditions of Admissions form, which left the price term out was written, so the contract could be deemed to be written . . . ." To this end, they attach to their reply brief a copy of the Conditions of Admission form they claim every patient or their representative must sign. But in addition to being unauthenticated, unsigned, and not part of the trial court record, the document shows on its face that it is between the patient and the hospital, not defendant.
As for their asserted implied in fact contract, plaintiffs failed to allege its material terms. In order for a contract to be enforceable the terms of the contract must be sufficiently certain so as to provide a basis for determining to what obligations the parties have agreed. (Weddington Productions., Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.) Whether a proposed contract is sufficiently definite to form an enforceable contract is a question of law for the court. (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 770, fn. 2; Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal.App.4th 613, 623.) The above quoted allegation does not satisfy the requirement of being sufficiently certain.
Plaintiffs argue they pleaded "their performance, . . . that they were deemed out-of-network, paid $281 and breach, that this was a balance bill and was not the usual, customary or reasonable rate." But none of this sets forth the terms of the contract. Because the second amended complaint does not identify the terms of the agreement sought to be enforced, the demurrer was properly sustained on this ground as well.
Plaintiffs maintain they should have been given leave to amend because they urged at the hearing on the demurrer that defendant provided health care services and "left the price term open and therefore to be implied and reasonable and that breach occurred by imposing an unagreed to sticker price which was more than the usual, customary and reasonable rate." They cite page 12 of the reporter's transcript but that page relates to a hearing on a motion by Mission Hospital Regional Medical Center, not defendant. It is not this court's obligation to search the record for evidence supporting plaintiffs' argument. (See ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1270.)
Even if plaintiffs had referred us to the correct portion of the transcript, Carney v. Hayter (1944) 62 Cal.App.2d 792, on which they rely, does not support their claim the absence of a price term creates an enforceable contract whereby defendant agreed to charge only what plaintiffs deemed reasonable. Unlike this case, Carney involved an express contract. Moreover, it held that "„[w]here work is done under an express contract which does not specify the compensation to be paid, the law implies a promise to pay what the service is reasonably worth.' [Citations.]" (Carney v. Hayter, supra, 62 Cal.App.2d at p. 798.) Plaintiffs cite no authority for the proposition that their implied promise to pay the reasonable worth of services means defendant entered into a contract, the breach of which gives rise to a cause of action, to charge no more than an amount plaintiffs considered fair. Their claim under Civil Code section 1611 ["When a contract does not determine the amount of the consideration, nor the method by which it is to be ascertained, or when it leaves the amount thereof to the discretion of an interested party, the consideration must be so much money as the object of the contract is reasonably worth"] fails for this reason as well.
Plaintiffs have not shown a reasonable possibility the complaint can be amended to state a cause of action for breach of contract. In their proposed third amended complaint, they again fail to specify the terms of the purported contract or state whether it was written, oral or implied by conduct, leading to the conclusion the defect cannot be cured by amendment. The demurrer to the breach of contract claim, including the covenant of good faith and fair dealing, was properly sustained without leave to amend and we need not address the other bases for the court's ruling.
b. Unfair Business Practices
To establish a claim for unfair business practices under Business and Professions Code section 17200 (section 17200), plaintiffs had to plead and prove that the defendant engaged in a business practice that was "either unlawful (i.e., is forbidden by law), unfair (i.e., harm to victim outweighs any benefit) or fraudulent (i.e., is likely to deceive members of the public). [Citations.]" (Albillo v. Intermodal Container Services, Inc. (2003) 114 Cal.App.4th 190, 206.) The cause of action for unfair business practices alleges "defendant's] conduct constitutes unfair practices . . . in that defendant[] unfairly, unlawfully, fraudulently and/or in a deceptive manner led [p]laintiffs . . . to believe that their emergency healthcare services would be billed in a reasonable manner and at a reasonable rate, when, instead, they allowed [them] . . . to be charged full undisclosed and unwarranted rates . . . that [p]laintiffs are informed and believe[d] are not the usual, customary and reasonable and lawful rate."
(1) Unlawful Prong
According to plaintiffs, defendant's alleged acts are unlawful because they violated Health and Safety Code section 1317, which prohibits the denial of emergency room services due to "ethnicity, citizenship, age, preexisting medical condition, insurance status, economic status, [or] ability to pay for medical services" (id., subd. (b)), and "the holdings and inferences to be drawn" from Bell v. Blue Cross [of California] (2005) 131 Cal.App.4th 211[ and] Prospect Medical Group[, Ins.] v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497 and unlawful breaches of contract . . . ." But plaintiffs concede defendant provided services, not denied them, and thus no violation of Health and Safety Code section 1317 occurred. And as the trial court found, Bell "is inapposite because it involved the reasonable amount of reimbursement by a health insurer to a[n] emergency physician under the Knox-Keene Health Care Service Plan Act of 1975," which is inapplicable "because neither [p]laintiff[s] nor [d]efendant [are] health care insurer[s] . . . ."
As for Prospect Medical Group, the Supreme Court addressed only the narrow issue of whether "emergency room doctors [can] directly bill the patient for the difference between the bill submitted and the payment received—i.e., engage in the practice called 'balance billing,'" answering that question in the negative. (Prospect Medical Group, Inc. v. Northridge Emergency Group, supra, 45 Cal.4th at p. 502.) But "Proposition 64 requires that a plaintiffs economic injury come 'as a result of the unfair competition . . . ." (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326; Bus. & Prof. Code, § 17204.) Plaintiffs' judicially admissible and binding declarations show the $105.32 that they are out-of-pocket resulted from the deductible remaining on their Blue Shield account, not from defendant's alleged practice of balance billing. Thus Prospect Medical Group also does not support a section 17200 claim based on plaintiffs' allegation defendant's conduct was unlawful.
(2) Unfair Prong
Plaintiffs also alleged defendant's acts were unfair because instead of charging the "usual, customary and reasonable rate, [defendant] charged and charges a rate much higher than such a rate, based on the fact that its usual and customary rates are an amalgam of set and negotiated fees with government and private programs that are significantly less than its chargemaster or list rates." Noticeably missing are any facts to support the claim that these negotiated fees should be deemed the "usual" rate for out-of-network patients.
At the hearing on the demurrer, plaintiffs argued "[w]hat's unfair under the unfair prong is basically very close to the court's equitable powers[ a]nd those powers are to find a breach of fundamental rules of honesty and fair dealing . . . ." Similarly in their opening brief, plaintiffs assert defendant's practice "appears to violate fair dealing . . . because to allow providers to impose on consumers its unilaterally chosen price without disclosure or negotiation . . . violates fundamental premises of our legal system . . . ." But the Supreme Court has rejected the notion that "[c]ourts may . . . simply impose their own notions of the day as to what is fair or unfair." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182 (Cel-Tech).)
"'The proper definition for the term "unfair" in a consumer action is uncertain. . . . Cel-Tech . . . held that in the context of an unfair competition claim by a competitor, the term "unfair" in . . . section 17200 "means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." [Citation.]'" (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1364.) Nevertheless it "'left open the question of whether its definition of "unfair" should also apply to consumer actions. [Citation.]'" (Id. at p. 1365.) "'[T]his has resulted in a split in the Courts of Appeal. [Citation.] One line of cases applies Cel-Tech's definition of "unfair" to consumer cases [citation], the other recognizes the new Cel-Tech definition, but applies the old definitions to consumer cases [citation.]' [Citation.]" (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 991, fn. omitted.) Plaintiffs fail to allege a claim under either test.
"The test applied in one line of cases is similar to the Cel-Tech test . . ., and requires 'that the public policy which is a predicate to a consumer unfair competition action under the "unfair" prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.' [Citations.]" (Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 256 (Drum).) The only such provision plaintiffs cite is Civil Code section 1611, which we already concluded does not support their theory of liability.
"The test applied in a second line of cases is whether the alleged business practice 'is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim.' [Citations.]" (Drum, supra, 182 Cal.App.4th at p. 257.) Plaintiffs assert defendant's "conduct is against public policy, since it is clear that balance billing is unlawful as set forth by Prospect [Medical Group v. Northridge Emergency Group]" The contention lacks merit, as we have rejected plaintiffs' attempt to state a section 17200 claim based on that case.
Plaintiffs also argue defendant's conduct "appears to violate fair dealing . . . because to allow providers to impose on consumers its unilaterally chosen price without disclosure or negotiation—particularly where those rates far exceed what it normally charges—violates fundamental premises of our legal system, such as notions that obligations cannot be imposed absent agreement, consent and/or reasonableness." Their failure to cite any supporting legal authority forfeits this claim. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.)
"[A] third line of cases draws on the definition of 'unfair' in section 5 of the Federal Trade Commission Act (15 U.S.C. § 45, subd. (n)), and requires that '(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.' [Citations.]" (Drum, supra, 182 Cal.App.4th at p. 257.) According to plaintiffs, "it appears the balance favors a finding of unfairness: the rates are alleged to be substantially higher than the usual rate, are unavoidable by the consumer and serve no apparent purpose." This is nothing more than a conclusory restatement of the FTC elements without any supporting facts. Plaintiffs have not stated a section 17200 cause of action based on the unfair prong.
(3) Fraud Prong
Plaintiffs contend the trial court did not address their allegation defendant's conduct was deceptive and fraudulent because it did not disclose the fact it did not accept certain types of insurance. But they alleged no facts demonstrating defendant owed them a legal duty to make that disclosure. "'Absent a duty to disclose, the failure to do so does not support a claim under the fraudulent prong of the UCL.' [Citation.]" (Buller v. Sutter Health, supra, 160 Cal.App.4th at p. 987; see also Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1136.)
(4) Leave to Amend
Plaintiffs do not suggest any manner in which the complaint can be amended to state a claim under section 17200. The court did not err in sustaining the demurrer to this cause of action without leave to amend.
c. Fraud
"In California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.]" (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) "'The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or "scienter"); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.' [Citations.]" (Id. at p. 638.)
The fraud cause of action alleged defendant falsely "represented in and by its bills for service to plaintiffs and members of the class that a sum much more than the usual, customary and reasonable rate was due and owing," plaintiffs reasonably relied on those representations, paid the bills and were damaged. These conclusory allegations fail to meet the specificity requirement.
In particular, the element of scienter is absent. Plaintiffs have not shown how billing more than the usual, customary and reasonable rate constitutes a knowingly false representation. It is simply the rate defendant charges out-of-network patients; there is no truth or falsity to the statement. We thus reject plaintiffs' claim the statement was false because "only the usual, customary and reasonable amount was due and owing, not a list price."
Moreover, plaintiffs' allegation of reliance is belied by their admissions in their declarations in support of their opposition to defendant's summary judgment of which the court took judicial notice. "[T]he mere assertion of 'reliance' is insufficient. The plaintiff must allege the specifics of his or her reliance on the misrepresentation to show a bona fide claim of actual reliance. [Citation.]" (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.)
Plaintiffs contend they sufficiently alleged reliance because they paid defendant's bill and were overcharged. But in their declarations they concede they refused to make any payments for the services and that Blue Shield, not plaintiffs, ultimately paid the bill while plaintiffs paid only their deductible amount of $105.32. These judicially noticeable admissions render the conflicting allegations of the complaint meritless (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604-605), and distinguish this case from Vasquez v. Superior Court (1971) 4 Cal.3d 800, 814 [inference of reliance arises where no contrary evidence], Massachusetts Mutual Life Ins. Co v. Superior Court (2002) 97 Cal.App.4th 1282, 1292-1293, and National Solar Equipment Owners' Assn. v. Grumman Corp (1991) 235 Cal.App.3d 1273, 1283, on which plaintiffs rely for their claim reliance may be inferred.
Plaintiffs assert the court abused its discretion in dismissing the fraud claim because "it certainly could be" properly alleged. But they do not explain how. Because they failed to show how the complaint can be amended to state a cause of action, we affirm the court's order sustaining the demurrer to the fraud claim without leave to amend.
d. Unjust Enrichment, Restitution, and Injunctive and Declaratory Relief
"'[T]here is no cause of action in California for unjust enrichment.' [Citations.] Unjust enrichment is synonymous with restitution. . . . [¶] . . . [¶] 'Under the law of restitution, "[a]n individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another's expense. [Citation.]" [Citation.] However, "[t]he fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it. [Citation.]"' [Citation.]" (Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at p. 1370.)
Plaintiffs argue it is unjust for defendant to retain funds obtained "by balance billing, a practice which has been determined to be unlawful, and to which it, therefore, has no entitlement . . . ." But given our rejection of their claims for breach of contract and the covenant of good faith and fair dealing, unfair competition, and fraud, plaintiffs have not shown any basis under which they would be entitled to restitution. Moreover, no actual controversy exists and declaratory relief is unnecessary. (Gilbert v. State of California (1990) 218 Cal.App.3d 234, 248; Code Civ. Proc., § 1061.) The court properly sustained without leave to amend the demurrers to the first cause of action for "unjust enrichment/restitution/action in equity" (capitalization and emphasis omitted) and the third cause of action for declaratory relief.
3. Discovery to Seek Proper Class Representatives
Plaintiffs argue that upon determining they had no standing, the court should have allowed them discovery to seek alternative class representatives. But the court never ruled plaintiffs were not "suitable representatives." In addition to finding plaintiffs had not suffered their alleged harm, the court determined they had failed to state valid claims despite several opportunities to do so. We agree and affirm the judgment.
DISPOSITION
The judgment of dismissal is affirmed. Respondent shall recover its costs on appeal.
RYLAARSDAM, ACTING P. J. WE CONCUR: BEDSWORTH, J. O'LEARY, J.