2017-00220058-CU-NP

Gloria Single vs. Congregational Church Retirement Community

Nature of Proceeding: Hearing on Demurrer to 1st Amended Complaint

Filed By: Schroeder, Matthew M.

This matter was continued for oral argument only. The tentative ruling is repeated below.

*** If oral argument is requested, the parties must at the time oral argument is requested notify the clerk and opposing counsel of the causes of action that will be addressed at the hearing. The parties are also reminded that pursuant to

local court rules, only limited oral argument is permitted on law and motion matters. ***

Defendants Cathedral Pioneer Church Homes II (“Pioneer House”); Congregational Church Retirement Community; Bixby Knolls Towers, Inc.; Gold Country Health Center; Mayflower Gardens Health Facilities, Inc.; Stockton Congregational Homes, Inc.; Foundation Property Management, Inc. (“FPMI”); RHF Management, Inc. (“RHF Management”) and RHF Foundation’s (“RHF Foundation”) (collectively “Defendants”) demurrer to Plaintiffs’ first amended complaint (“FAC”) is ruled upon as follows.

Congregational Church Retirement Community, Bixby Knolls Towers, Inc., Gold Country Health Center, Mayflower Gardens Health Facilities, Inc., and Stockton Congregational Homes, Inc. are herein referred to as “Facility Defendants.” Foundation Property Management, Inc., RHF Management, Inc., and RHF Foundation are herein referred to as “Corporate Defendants.”

The Court, in its discretion, considered Plaintiffs’ opposition although it appears that it may have been untimely served.

Overview

The plaintiffs in this case are Gloria Single (“Single”) and Long Term Care Ombudsman Association (“Association”) (collectively “Plaintiffs”). The Association consists of local long-term care ombudsman programs, staff, volunteers and supporters. The Association advocates for long-term care recipients such as Single. Single is in her 80s.

Plaintiffs allege that Defendants engage in the “practice of dumping vulnerable nursing facility residents into hospitals.” (FAC, ¶ 1.) According to Plaintiffs, Defendants “dump” their neediest residents and, to maximize profits, refuse to readmit them. With respect to Single, Plaintiffs allege the California Department of Health Care Services (“DHCS”) ordered Pioneer House to readmit her, but she was not readmitted. Single was allegedly a resident of Pioneer House. Single’s husband allegedly resides at Pioneer House, but Single is unable to see him given Defendants’ refusal to readmit her. Single alleges that her lack of human interaction after being placed in the hospital caused her to stop talking.

The complaint contains causes of action for Violation of California Health & Safety Code § 1430(b), Violation of Business & Professions Code §§ 17200 et seq., and Declaratory ReIief.

Defendants demur on grounds the Association is not a proper party and lacks standing. They also demur on grounds the allegations fail to state facts sufficient to state a valid cause of action. Plaintiffs oppose.

Association’s Standing

Defendants argue that the Association lacks standing because the FAC can only be construed to establish an injury that Single suffered, not one on the Association’s part. Thus, they argue the Association lacks standing and is not a proper party. (See Coldren v. Hart, King & Coldren, Inc. (2015) 239 Cal.App.4th 237, 245 [“Standing generally requires that the plaintiff be able to allege injury, that is, an invasion of a legally protected interest.”].) “An association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and

(c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” (Bhd. of Teamsters & Auto Truck Drivers v. Unemployment Ins. Appeals Bd. (“Bhd. Of Teamsters” (1987) 190 Cal.App.3d 1515, 1522 [emphasis added.])

In the Court’s ruling on Defendants’ demurrer to the original complaint, the Court applying Bhd. of Teamsters, found that “[a]ll the causes of action in the complaint, however, require Single’s participation. Each cause of action is predicated on allegations that Single was injured because Defendants violated her rights as a nursing home resident. The Association cannot prove up such claims without Single.” (1/8/2018 Order.)

Plaintiffs first insist that the Association has associational standing. Plaintiffs, relying on Bhd. of Teamsters, claim that the Court can grant standing to the Association based on “its determination that the unions have a beneficial interest and thus, standing to represent their members even without their members’ personal involvement. (Opposition, 6:26-28.) The Court disagrees with Plaintiffs. In Bhd. of Teamsters, the Court of Appeal determined that participation of individual members was not required because the suit raised a pure question of law. (Bhd. of Teamsters, supra, at 1523 [“the mandate proceeding raises a pure question of law, i.e., whether the Board properly interpreted section 1262 in denying its benefits to the union member claimants. Although the Board may have to determine each claimant’s benefits, the unions may litigate this case without the participation of its members and still insure that the remedy, if granted, will inure to the benefit of those union members who have been injured.”] Here, there is no showing that the lawsuit raises a pure question of law such that Single need not participate. As the Court previously expressed, “[e]ach cause of action is predicated on allegations that Single was injured because Defendants violated her rights as a nursing home resident. The Association cannot prove up such claims without Single.” (1/8/2018 Order.)

Plaintiffs next contend that the Association has organizational standing because it has “expended resources addressing the wrongs at issue. “ (Opposition, 7:13.) Plaintiffs’ reliance on Smith v. Pac. Props. & Dev. Corp. (9th Cir. 2003) 358 F.3d 1097 is misplaced. In Smith, an individual plaintiff and the Disabled Rights Action Committee

(“DRAC”) filed suit against a property development company for violations of the Fair Housing Amendments Act (“FHAA”). The individual plaintiff died and the trial court granted the defendant’s motion to dismiss on the ground that DRAC did not have standing “separate and apart” from the individual plaintiff under the FHAA. The Ninth Circuit disagreed. It explained that “an organization may satisfy the Article III requirement of injury in fact if it can demonstrate: (1) frustration of its organizational mission; and (2) diversion of its resources to combat the particular housing discrimination in question.” (Smith v. Pac. Props. & Dev. Corp. (9th Cir. 2004) 358 F.3d 1097, 1105 [emphasis added].) With regard to diversion of resources, DRAC “specifically stated in its complaint that ‘in order to monitor the violations and educate the public regarding the discrimination at issue, DRAC has had (and, until the discrimination is corrected, will continue) to divert its scarce resources from other efforts to promote awareness of–and compliance with–federal and state accessibility laws and to benefit the disabled community in other ways (for example, DRAC’s efforts to free disabled persons from nursing homes.)[.]” (Id.)

Here, Plaintiffs’ allegations do not assert a “diversion of resources.” Although Plaintiffs allege that the Association “expends extensive resources providing support and education to Local Ombudsman programs about substantive and procedural due process rights in the event of a discharge or eviction as this issue is a top concern to such programs in California and throughout the country” (FAC, ¶ 11), there are no allegations that the Association has been required to “divert” its resources from its other efforts.

Plaintiffs’ allegations are insufficient to invoke associational or organizational standing.

The demurrer is SUSTAINED with leave to amend.

Violation of California Health & Safety Code § 1430(b)

Section 1430(b) reads, in relevant part:

A current or former resident or patient of a skilled nursing facility…may bring a civil action against the licensee of a facility who violates any
rights of the resident or patient as set forth in the Patients Bill of Rights…or any other right provided for by federal or state law or regulation. […] The licensee shall be liable for the acts of the licensee’s employees. The licensee shall be liable for up to five hundred dollars ($500), and for costs and attorney fees, and may be enjoined from permitting the violation to continue. (Emphasis added.)

The Corporate and Facility Defendants demur on the ground that there are no factual allegations that they committed any of the wrongful acts. As alleged, Single only resided at Pioneer House.

In opposition, Plaintiffs advance that they have sufficiently alleged alter ego and/or

single enterprise liability.

The “single business enterprise doctrine” is an application of alter ego principles to multiple corporate entities, as opposed to
a single corporation and its shareholders. (See Toho-Towa Co. Ltd. v. Morgan Creek Productions, Inc. (2013) 217 Cal.App.4th 1096, 1106-1109.) The two basic requirements for alter ego liability are: 1) that there be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and 2) that, if the acts are
treated as those of the corporation alone, an inequitable result will follow. To recover on an alter ego theory, a plaintiff need not use the words “alter ego,” but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor. (Vasey v. California Dance Co. (1977) 70 Cal.App.3d 742, 749.)

Neither the single business enterprise doctrine nor the alter ego doctrine more generally applies unless necessary to avoid an inequitable result. (See id., p. 1109; Leek v. Cooper (2011) 194 Cal.App.4th 399, 417.)

The Court concludes that Plaintiffs sufficiently allege single enterprise/alter ego liability. Plaintiffs allege that the Defendants have interlocking officers and directors, some share the same mailing address, and that the Facility Defendants, including Pioneer House, paid to the Corporate Defendants significant “related-party fees” every year, despite the facilities generating substantial losses. (See FAC, ¶¶ 13-41.)

Additionally, Plaintiffs sufficiently allege an inequitable result if judgment was solely entered against Pioneer House. An inequitable result is defined as where the facts are such that the recognition of the “separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice.” (Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 837.) Here, Plaintiffs allege that Pioneer House “has paid Retirement Housing Foundation hundreds of thousands of dollars (roughly 10% of gross revenues) in ‘related-party fees’ every year, that it has paid Defendant Retirement Property Management over a hundred thousand dollars a year in ‘related party transactions,’ and that the other facilities named as Defendants herein are ‘commonly owned and controlled.’” (FAC, ¶ 18.) “At the same time Pioneer House was making all these payments to other entities owned and controlled by the same individuals that run Pioneer House and ‘borrowing’ money ‘payable to related parties,’ Pioneer House reported that its health care operations generated a loss a loss exceeding $748,000 (with Pioneer House showing a net loss of $110,676) in 2016, an operating loss for health care operations exceeding $702,000 in 2015, and an operating loss for health care operations exceeding $741,000 in 2014.” (FAC, ¶ 19.) Pioneer House “operated at a negative 0.18 margin in 2016, and similarly low margins in other years.” (Id.) Thus, as Plaintiffs explain “it would be unjust to hold only Pioneer House liable give[n] its precarious financial health after having made substantial related party payments to Retirement Housing Foundation and the other

corporation defendants.” (Opposition, 12: 17-19.)

Taking these allegations as true, they are sufficient. The demurrer is OVERRULED.

Violation of Business & Professions Code §§ 17200 et seq.

Having overruled the demurrer to the Violation of California Health & Safety Code § 1430(b) cause of action which may form the predicate to this cause of action, the demurrer is similarly OVERRULED.

Declaratory Relief

The demurrer is OVERRULED. The Court disagrees with Defendants that Plaintiffs are merely seeking an advisory opinion, and that Plaintiffs fail to state a justiciable controversy between the Facility/Corporate Defendants and themselves.

Plaintiffs allege:

Defendants contend that they were allowed to discharge Ms. Single without following the statutory procedures for effecting a discharge, that they did not have to honor Ms. Single’s bedhold right because they asserted that she was dangerous and that they were not required to follow the lawful order issued by DHCS requiring them to readmit Ms. Single. Ms.
Single contends that a facility may never discharge a resident without following all of the statutorily required discharge procedures, that a facility never has any ground for refusing to honor a resident’s bedhold right, and that failure to follow a lawful readmission order by DHCS violates a

resident’s rights. An actual controversy exists as to at least each of these issues and as to whether Defendants violated Ms. Single’s other rights as identified above.

At this stage of the proceedings, these allegations are sufficient to allege an actual controversy.

Where leave to amend is granted, Plaintiffs may file and serve a second amended complaint (“SAC”) by no later than March 23, 2018, Response to be filed and served within 30 days thereafter, 35 days if the SAC is served by mail. (Although not required by any statute or rule of court, Plaintiffs are requested to attach a copy of the instant minute order to the SAC to facilitate the filing of the pleading.)