SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

GUOCHEN HOU, on behalf of himself and all others similarly situated,

Plaintiff,

vs.

COUNTY OF SANTA CLARA; SANTA CLARA VALLEY MEDICAL CENTER; and DOES 1 through 25, inclusive,

Defendants.
Case No. 2016-1-CV-291496

TENTATIVE RULING RE: DEMURRER TO THIRD AMENDED COMPLAINT

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on October 12, 2018, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION

This is a putative class action. According to the allegations of the Third Amended Complaint (“TAC”) filed on June 4, 2018, plaintiff GuoChen Hou (“Plaintiff”) seeks an interpretation of the “Financial Agreement” section of County of Santa Clara and Santa Clara Valley Medical Center’s (collectively, “Defendant”) “Conditions of Admission” contract (the “COA Contract”). (TAC, ¶ 1.) Specifically, Plaintiff wants a declaratory judgment that the COA Contract, which provides for payment “in accordance with the regular rates and terms established for such services at the hospital,” contains an “open” price term. (Id. at ¶¶ 1, 35.) Plaintiff also alleges she is entitled to a declaration that Defendant’s practice of charging a substantial undisclosed emergency room facility user fee is unconscionable. (Id. at ¶¶ 1, 38.) The TAC sets forth a single cause of action for declaratory relief.

On April 27, 2017, Plaintiff moved for class certification. Following a hearing on July 14, 2017, the Court granted the motion in part and denied it in part.

On December 7, 2017, Defendants moved to decertify the class in light of new law articulated in Hefczyc v. Rady Children’s Hospital-San Diego (2017) 17 Cal.App.5th 518 and Kendall v. Scripps Health (2017) 16 Cal.App.5th 553. On January 26, 2018, the Court granted the motion to decertify.

On May 4, 2018, the Court sustained Defendant’s demurrer to the Second Amended Complaint (“SAC”) with 30 days’ leave to amend. Now before the Court is Defendant’s demurrer to the TAC.

II. DEMURRER

A. Legal Standard for Declaratory Relief

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.

(Code Civ. Proc. § 1060.)

In an action for declaratory relief, the complaint is sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a contract and requests the rights and duties be adjudged. If these requirements are met, the court must declare the rights of the parties whether or not the facts alleged establish the plaintiff is entitled to a favorable declaration. (See Condor Ins. Co. v. Williamsburg Nat. Ins. Co. (1996) 49 Cal.App.4th 554, 565.)

[T]he declaratory procedure operates prospectively, and not merely for the redress of past wrongs. It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.

(Travers v. Louden (1967) 254 Cal. App. 2d 926, 931.)

B. Discussion

Defendant’s demurrer to the TAC is similar to its prior demurrer to the SAC. Defendant again argues Plaintiff cannot maintain the declaratory relief cause of action because there is no actual controversy and because declaratory relief is not necessary or proper under the circumstances of this case.

1. Existence of Actual Controversy

Plaintiff alleges there is a disagreement regarding the COA Contract’s reference to the “regular rates and terms established for such services at the hospital” because Plaintiff interprets this language as an “open” pricing term and Defendant interprets the phrase “regular rates” to refer to its Chargemaster rates. (SAC, ¶ 35.)

Generally, “the broad allegation that the parties are unable to agree on the interpretation of various provisions in a contract does not render declaratory relief necessary and proper.” (Auberry Union School Dist. v. Rafferty (1964) 226 Cal.App.2d 599, 603.) A controversy “must be of a character which admits of specific and conclusive relief by judgment within the field of judicial determination, as distinguished from an advisory opinion upon a particular or hypothetical state of facts. The judgment must decree, and not suggest, what the parties may or may not do.” (Silva v. City and County of San Francisco (1948) 87 Cal.App.2d 784, 789.)

As the Court found in connection with the demurrer to the SAC, a determination that the subject language does or does not refer to an “open” pricing term would not provide any specific relief that would tell the parties what to do. Plaintiff argues that if this Court were to rule that the COA Contract contains an “open” price term, the ruling would limit Defendant to the “reasonable value” of its services by California law. However, a determination that the COA contract contains an “open” price term would not prevent Defendant from billing at Chargemaster rates unless the Court were also to determine the Chargemaster rates do not reflect the reasonable value of Defendant’s services. (See Hefczyc v. Rady Children’s Hospital-San Diego, supra, 17 Cal.App.5th at p. 541.) In other words, if the Chargemaster rates are reasonable, the fact that the COA contract may or may not contain an “open” price term is irrelevant and therefore presents no concrete controversy.

A difference of opinion among counsel relating to a contract provision does not create an actual controversy where there is no unsettled grievance or other controversy pending under the contract. (See Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 724; see also Conroy v. Civil Service Commission of City and County of San Francisco (1946) 75 Cal.App.2d 450, 454 [“What was really sought was an advisory opinion applying to all 1,300 members, generally, without regard to any acute, specific or pending controversy, so that there would be available and ready for use in any dispute arising in the future a judicial interpretation of the 1941 amendment.”].) Therefore, Plaintiff has not alleged any actual controversy that will be resolved by its cause of action for declaratory relief with regard to the “open” pricing term.

New to the TAC are allegations regarding unconscionability. Plaintiff alleges she is:
entitled to a declaration that Defendant’s practice of charging a substantial undisclosed emergency room facility user fee which is charged on top of the charges for individual items of treatment, which is not based on any particular services or treatment ordered or provided by the treating physician, and which would be a substantial factor in a patient’s decision to remain at the facility and proceed with treatment, is unconscionable.

(TAC, ¶ 38.)

Plaintiff relies on two cases to establish a right to bring a declaratory relief cause of action based on the unconscionability allegations – De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966 and Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131. In De La Torre the Court found the unconscionability doctrine could be applied to certain loan transactions, just like other contracts. However, the case did not include a declaratory relief cause of action and it is not instructive here.

In Moran, the plaintiff requested a declaration that the defendants’ “billing practices as they relate to [self-pay patients] are unfair, unreasonable, and illegal.” (Moran v. Prime Healthcare Management, Inc., supra, 3 Cal.App.5th at pp. 1152-1153.) The court concluded that because the “plaintiff in part seeks injunctive relief to prohibit defendants from future attempts to collect unconscionable amounts for his medical care . . . this issue is ripe for declaratory relief.” (Id. at p. 1153.)

Defendant argues the new allegations regarding unconscionability require reasonable value assessments, which cannot be undertaken on a class-wide basis. (Defendant’s Reply in Support of Demurrer to Plaintiff’s Third Amended Class Action Complaint, p. 2:16-20.) However, Defendant has not demurred to the class allegations, which in any event would be more appropriately examined on a motion for class certification. As in Moran, Plaintiff has alleged an actual controversy regarding the collection of an allegedly unconscionable fee. The fact that Plaintiff may not be able to proceed with the unconscionability claim on a class-wide basis is irrelevant for purposes of the motion now before the Court.

In sum, while the allegations regarding an “open” pricing term cannot support the declaratory relief cause of action, Plaintiff’s allegations regarding unconscionability demonstrate the existence of an actual controversy.

2. Whether Declaratory Relief is Necessary or Proper

“The court may refuse to exercise the power [of declaratory relief] in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc., § 1061.) In connection with the prior demurrer to the SAC, the Court found that even if Plaintiff had alleged an actual controversy with regard to the “open” pricing term, declaratory relief is not necessary or proper under the circumstances of this case. The Court noted that a ruling on Plaintiff’s declaratory relief claim would not resolve any future payment obligation of Plaintiff or another putative class member because it would not establish whether the amounts billed are reasonable and it would not take into account regulations allowing the use of Chargemaster rates.

“[W]hen resolution of the controversy over future remedies would have little practical effect in terms of altering parties’ behavior, courts have considerable discretion, pursuant to Code of Civil Procedure section 1061, to deny declaratory relief because it “is not necessary or proper at the time under all the circumstances.” (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 648.) Since declaratory relief regarding the “open” pricing term would do nothing to prevent future litigation, the Court previously found, and continues to find, declaratory relief is not necessary or proper concerning that issue.

Defendant’s arguments in the demurrer to the TAC do not focus on the new unconscionability allegations. Defendant’s arguments mainly pertain to its billing practices related to Chargemaster rates and the “open” price term. With regard to the new allegations, Defendant argues Plaintiff does not allege any practical consequence resulting from the unconscionability declaration sought. However, a finding that Defendant’s alleged practice of charging a substantial undisclosed emergency room facility user fee is unconscionable could result in injunctive relief. (See Moran v. Prime Healthcare Management, Inc., supra, 3 Cal.App.5th at p. 1153.) Therefore, the Court declines to find declaratory relief is not necessary or proper under these circumstances.

C. Conclusion

A demurrer cannot be sustained to part of a cause of action. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.) Accordingly, Defendant’s demurrer is OVERRULED.

The Court will prepare the final order if this tentative ruling is not contested.