2016-00200802-CU-OE

Ann Haas vs. Sutter Medical Foundation

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Davis, Jahmal T.

*** If oral argument is requested, the parties are directed to notify the clerk and opposing counsel at the time of the request which of the 5 issues set forth in the Notice of Motion, which of moving defendant’s 32 Undisputed Material Facts, which of plaintiff’s 17 Additional Material Facts and/or which of the parties’ respective objections to evidence will be addressed at the hearing. The parties should be prepared to point to specific admissible evidence which is claimed to show the existence or non-existence of a triable issue of material fact. ***

Defendant Sutter Valley Medical Foundation’s (“SVMF”) motion for summary

judgment/adjudication is ruled on as follows.

The court notes SVMF lodged conditionally under seal several documents offered in support of this motion but to date, no party has filed any application or motion to seal these documents pursuant to CRC Rule 2.550 et seq. Unless one of the parties to this action promptly files an application or motion to seal these documents, they will be filed by the clerk and become viewable by the public.

Factual Background

This lawsuit was commenced on 9/23/2016 and trial is set to commence on 3/11/2019. SVMF is an affiliate in the Sutter Health System, a network of health care entities operating primarily in northern California. SVMF’s primary purpose is to operate ambulatory care clinics and other health care facilities but is statutorily prohibited from employing its own physicians to provide medical services at these clinics and facilities. Therefore, SVMF contracts with physician medical groups like co-defendant Sutter Medical Group (“SMG”), an independent corporation with its own board of directors and employees, for the medical services of the latter’s physicians at SVMF’s facilities. This is negotiated by SVMF on an annual basis and the parties’ agreement is ultimately memorialized in a Professional Services Agreement (“PSA”) which governs the parties’ relationship for the subsequent year, including the amounts which SVMF will pay SMG for various medical services. In short, after collecting payment from the patients receiving medical services, SVMF makes an aggregate monthly payment based on the PSA’s terms to SMG which thereafter pays its physicians according to the latter’s individual employment contracts with SMG.

In this case plaintiff alleges that she was deprived of her full compensation for certain medical procedures she performed between January 2011 and January 2015 based on SVMF and SMG’s erroneous interpretation of federal law which was incorporated into the PSA for each of these four years. The net result of the alleged error apparently agreed to by both SVMF and SMG is that plaintiff received 10-15% less pay for certain procedures performed during the four year period.

The operative Second Amended Complaint (“2AC”) now asserts that SVMF and co-defendant SMG are plaintiff’s “joint employer,” with SMG paying plaintiff’s wages but SVMF having control over her compensation, hours, etc. pursuant to the PSA between SVMF and SMG. The 2AC contains causes of action against SVMF for “contractual wage loss and quantum meruit,” breach of contract and implied covenant of good faith
& fair dealing, breach of implied covenant of good faith & fair dealing and unjust enrichment. Additional causes of action for violation of Labor Code §2800 and breach of fiduciary duty are directed at co-defendant SMG but these claims against SMG are not implicated by the present motion brought by SVMF alone.

Moving Papers. Defendant SVMF now moves for summary adjudication of the following five (5) issues which are claimed to dispose of each cause of action (“COA”) directed at SVMF:

1. The 3rd COA for quantum meruit fails because plaintiff cannot show she was not paid for any service she performed (but rather merely disagrees with the amount she was paid), SVMF had no obligation to pay plaintiff directly, and the quantum meruit claim is precluded by the existence of the contract governing plaintiff’s pay (i.e., PSA), relying on Undisputed Material Fact (“UMF”) Nos. 1-9;

2. The 4th COA asserting contract-based theories of recovery fails because plaintiff was not a party to the PSA, citing UMF Nos. 10-11;

3. The 4th COA asserting contract-based theories of recovery fails because plaintiff was not an intended third party beneficiary (“3PB”) of the PSA, offering UMF Nos. 12-20;
4. The 5th COA, to the extent it alleges breach of implied covenant of good faith
& fair dealing, fails because plaintiff was not a party to the PSA nor an intended 3PB, advancing UMF Nos. 1-20;
5. The 5th COA, to the extent it alleges unjust enrichment, fails because there was a written contract governing the parties’ relationship (i.e., PSA), relying on UMF Nos. 1-32.

Opposition. Plaintiff opposes, arguing that this motion should be denied or continued pursuant to Code of Civil Procedure §437c(h) because she has due to “discovery delays and discovery surprises” been unable to complete the depositions of certain witnesses claimed to knowledge of facts anticipated to show the PSA between SVMF and SMG was intended to benefit doctors including plaintiff. With respect to the 3rd COA for “contractual wage loss and quantum meruit,” the opposition contends (1) SVMF failed to address the “contractual wage loss” portion of the claim and focused solely on the quantum meruit aspect, thereby mandating denial of summary adjudication of the 3rd COA; (2) the quantum meruit claim is valid since the PSA provision which reduced plaintiff’s pay based on application of federal law is alleged to be invalid and since plaintiff is seeking the reasonable value of her services; and (3) quantum meruit may be sought when payment for services has not been fully made and/or where a contract term is “void.” On the 4th COA for breach of contract and of the implied covenant, plaintiff concedes she is not a party to the PSA which governed her pay and is proceeding solely on the theory she was an intended 3PB of the PSA, adding that there are triable issues of fact relating to the question of whether she was an intended 3PB. Among other things, the opposition insists the “plain language” of the PSA itself establishes a triable issue whether all of SMG’s doctors were intended to benefit from the PSA and not only the circumstances under which the PSA was made but also the conduct of the parties reinforce the conclusion that the doctors were intended 3PB, which also mandates denial of summary adjudication on the 5th COA’s breach of implied covenant claim. Finally, plaintiff maintains that there are triable issues of fact precluding summary adjudication of her unjust enrichment claim in the 5th COA inasmuch as “missing contractual terms can be equitably supplied.”

The opposition also characterizes roughly one-third of SVMF’s 32 UMF are “disputed” and offers several Additional Material Facts (“AMF”) in an attempt to demonstrate the existence of triable issues of fact precluding summary judgment/adjudication.

Request for Continuance

As noted above, plaintiff’s opposition includes a request for a continuance of the hearing on this motion pursuant to Code of Civil Procedure §437c(h) but the Anton Declaration submitted with the opposition fails to establish not only that there likely exists evidence which would support an opposition to the present motion but also that such discovery could not with reasonable diligence have been completed prior to the deadline for the opposition papers. Instead, the Anton Declaration merely avers in pertinent part that SVMF produced in response to plaintiff’s PMQ deposition notice in January 2019 a different witness than originally stated. To the extent that plaintiff desired to depose Dr. Wreden who admittedly submitted a declaration in support of

this motion, she should have noticed his deposition upon receipt of this motion back in November 2018 and she has not set forth any justification for failing to do so. As to the other witnesses whose testimony relating to the PSA plaintiff desires (Drs. Atkins, Levin, Ciricillo and Hsui), Mr. Anton has failed to explain why he did not earlier pursue such allegedly critical testimony on the PSA at the heart of this lawsuit in the two-plus years this action was pending before the current summary judgment/adjudication motion was filed or at least, upon receipt of said motion in November 2018. For these reasons, coupled with the fact that trial is currently set to commence on 3/11/2019 and there is insufficient time beforehand for consideration of supplemental evidence, this court will exercise its discretion by denying the continuance sought by plaintiff. (See, e.g., Cooksey v. Alexakis (2004) 123 Cal.App.4th 246, 251, 255-256; Combs v. Skyriver Communications, Inc. (2008) 159 Cal.App.4th 1242, 1270.)

Objections to Evidence

Plaintiff’s purported written objections to defendant’s evidence are overruled as these objections by their own terms appear to be directed at defendant’s UMF themselves, rather than any specific evidence cited by defendant as support for the UMF.

Moreover, to the extent these objections could be construed as being directed at defendant’s evidence, the objections fail to comply with CRC Rule 3.1354(b) which requires objections to evidence to quote or set forth the objectionable statement or material so the court can rule on the objections. Regardless, the basis for plaintiff’s objections do not appear to relate to the admissibility of any evidence but rather takes issue with the fact that the Westfall Declaration in support of summary judgment/adjudication contains privileged material which SVMF has chosen to disclose.

SVMF’s written objections to plaintiff’s evidence are sustained except for objection No. 22 (since SVMF failed to provide a citation to plaintiff’s allegedly contradictory testimony and since plaintiff could have read the PSA after giving the alleged testimony).

The court notes that plaintiff’s declaration in opposition was not executed under penalty of perjury and does not otherwise conform to the requirements of Code of Civil Procedure §2015.5. Ordinarily, this would render the entirety of the declaration inadmissible but SVMF failed to timely assert any written objection on this ground, thereby waiving this defect.

Analysis

Issue One. As noted above, SVMF seeks summary adjudication of the 3rd COA on the ground quantum meruit is inapplicable since plaintiff cannot demonstrate she was not paid for rendering any service she performed and her pay was determined by contract but regardless, SVMF had no obligation to pay plaintiff directly since she admits her pay came not from SVMG but rather from SMG, relying on UMF Nos. 1-9. The threshold question is whether SVMF’s moving papers are sufficient to carry its initial burden of production under Code of Civil Procedure §437c(p)(2) by showing entitlement to summary adjudication of the 3rd COA for “contractual wage loss and quantum meruit.” This court holds that SVMF has met its initial burden inasmuch as there is under California law no recognized COA for “contractual wage loss” but even if there were, it has no application to SVMF to the extent the 2AC concedes plaintiff’s pay has at all relevant times come from SMG, not SVMF. Moreover, the reality is that

the 3rd COA for “contractual wage loss and quantum meruit” effectively asserts two separate and distinct COA and thus, summary adjudication will not be categorically denied merely because of plaintiff’s irregular form of pleading and SVMF’s alleged failure to address a “contractual wage loss” claim which has no apparent merit especially as against the moving party.

Although the decision of Children’s Hospital Central California v. Blue Cross of California (2014) 226 Cal.App.4th 1260 appears to support the opposition’s assertion that a claim for quantum meruit may be stated where less than “full” payment is made (as opposed to no payment at all), the court concludes plaintiff’s quantum meruit claim nevertheless fails as against SVMF since she failed to produce admissible evidence sufficient to create a triable issue of fact that SVMF, as distinguished from SMG, was obligated to pay plaintiff directly for her services. Instead, the evidence before the court uniformly demonstrates SVMF paid SMG for services the latter’s doctors provided to the former, after which SMG then paid its doctors for those services and thus, to the extent plaintiff maintains she was not paid fully for her services between January 2011 and January 2015, her quantum meruit claim, if any, is against SMG but not SVMF. In light of this conclusion, it is not necessary to consider the opposition’s argument about whether the PSA’s provision which resulted in plaintiff’s pay reduction from 2011 to 2015 was the consequence of mistake or misrepresentation, making the provision “invalid” or “void.”

For these reasons, summary adjudication is granted in favor of SVMF on the 3rd COA for “contractual wage loss and quantum meruit.”

Issue Two. In this second issue, SVMF insists the 4th COA for breach of contract and of the implied covenant of good faith & fair dealing is defective because plaintiff was not a party to the underlying contract, the PSA between SVMF and SMG. Because the opposition admits plaintiff was not a party to the PSA, Issue Two will be dropped as moot.

Issue Three. According to SVMF, the 4th COA for breach of contract and the implied covenant fails because plaintiff was not an intended 3PB of the PSA between SVMF and SMG, offering UMF Nos. 12-20 as support for this proposition. SVMF argues that under California Supreme Court precedent including Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, the question of whether one is a third party beneficiary entitled to enforce a contract turns to the contracting parties’ intent to benefit the third party and “Ascertaining this intent is a question of ordinary contract interpretation” but the mere fact the contract results in a benefit to the third party is not enough to entitle the latter to demand enforcement. (Hess, at 524 [citations omitted].) Moreover, “Under long-standing contract law, a ‘contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful’” and “the intention of the parties is to be ascertained from the writing alone, if possible.” (Id. [citations omitted].) In light of this standard, SVMF contends the PSA’s own terms clearly establish that plaintiff is not an intended 3PB since Paragraph 9.4 of the PSA provides in its entirety:

No Third Party Beneficiaries. Except as otherwise set forth herein, nothing contained in this Agreement is intended, nor shall it be construed to create rights running to the benefit of third parties. (Emphasis in original.)

Finding that SVMF has correctly cited the legal standard for determining the existence

of an intended 3PB and the pertinent language from the PSA between SVMF and SMG, the court holds that SVMF has carried its initial burden of production with respect to Issue Three and has successfully shifted to plaintiff the burden to produce admissible evidence sufficient to show a triable issue of material fact relative to her status as an intended 3PB with the legal standing to enforce the PSA between SVMF and SMG. However, plaintiff has failed to satisfy this burden.

While the moving party relies on the California Supreme Court’s recent analysis relating to 3PB, the opposition chooses to rely primarily on a decision by the Sixth District Court of Appeal (Spinks v. Equity Residential Briarwood Apartments (2009)

171 Cal.App.4th 1004) for the proposition that “The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract” but even then, the opposition concedes that the court’s analysis must begin with the “plain and ordinary” language of the contract. (Oppos. p.7:26-p.8:1.) Here, plaintiff does not dispute that the PSA to which she claims to be an intended 3PB contains a statement in “plain and ordinary” language that “nothing…in this Agreement is intended…to create rights running to the benefit of third parties” but nevertheless argues that because the “PSA is loaded with terms that benefit the doctors of SMG, including [plaintiff]” and even mentions her and other SMG doctors by name in the attachments, this court should now disregard the “plain and ordinary” language of the PSA which concisely describes the contracting parties’ mutual intent when the PSA was executed. In reality, the formulation of the standard in Spinks is effectively the same as in Hess inasmuch as both mandate consideration of the plain terms of the contract and in the case at bar, there can be no genuine dispute that the PSA by its own language plainly specifies the parties (i.e., SVMF and SMG) do not intend to create rights which may be enforced by any third party except as stated otherwise.

As the opposition has failed to identify any provision in the PSA which states or even suggests an exception to Paragraph 9.4 plain statement of the contracting parties’ intent relative to the creation of an intended 3PB and plaintiff’s reliance on the PSA’s provision for the contract to be construed as a whole so as to give effect to every part falls short of creating a triable issue on the question of whether plaintiff is a 3PB since plaintiff’s proposed construction is diametrically opposed to the concise language in Paragraph 9.4 and would run afoul of the very provision which plaintiff cites. Additionally, the Third District Court of Appeal’s decision in Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225 [holding that employees were intended 3PB despite language to the contrary] is of no legal consequence here as the facts of Prouty are easily distinguishable from those of the case at bar. In the end, this court finds no triable issue relating to plaintiff’s claimed status as an intended 3PB which vests here with the right to enforce the PSA between SVMF and SMG and therefore, SVMF and SMG grant summary adjudication of the 4th COA based on plaintiff’s lack of standing to pursue recovery based on a breach of contract or implied covenant theory.

Issue Four. In light of plaintiff’s admission she is not a party to the PSA and this court’s finding she has failed to establish any triable issue relating to her status as an intended 3PB, SVMF is also entitled to summary adjudication of the 5th COA’s claim based on breach of the implied covenant of good faith.

Issue Five. In this final issue, SVMF contends plaintiff’s unjust enrichment claim fails because there was a written contract governing the parties’ relationship (i.e., PSA),

advancing UMF Nos. 1-32. More specifically, SVMF insists that unjust enrichment is a quasi-contract claim which is unavailable when a there is in existence a contract covering the subject(s) at issue, citing inter alia Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388 [“A plaintiff may not, however, pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter”] and California Medical Association v. Aetna U.S. Healthcare of California (2001) 94 Cal.App.4th 151, 170-173 [appellate court affirmed sustaining of demurrer, explaining that plaintiff could not proceed on its quasi-contract claim because the subject matter of such claim was governed by express contracts specifically alleged in complaint]. SVMF further asserts that plaintiff cannot prove SVMF unjustly retained any benefit at the expense of plaintiff given that SVMF had a contract with SMG whereby the former agreed to pay for the latter’s services at rates stated in the PSA and SVMF did make the agreed upon payments. Coupled with the opposition’s failure to argue otherwise, the court finds that SVMF satisfied its initial burden of production and shifted to plaintiff the burden to produce admissible evidence which reveals at least one triable issue of material fact which precludes summary adjudication of the unjust enrichment claim found in the 5th COA.

In opposing, plaintiff first argues that because the unjust enrichment claim is pled as an alternative to the contract-based claims, it is permissible but this argument is inconsequential since SVMF is not here challenging the mere sufficiency of the plaintiff’s allegations in the 5th COA but rather is seeking summary adjudication of the unjust enrichment claim based on plaintiff’s inability to actually produce evidence sufficient to enable her to prevail on the merits of this quasi-contract claim. (See, e.g., 1550 Laurel Owner’s Association, Inc. v. Appellate Division of Superior Court (Munshi) (2018) 28 Cal.App.5th 1146, 1152-1153 [motions for summary judgment ‘pierce the pleadings and require an evidentiary showing].) The opposition’s remaining assertion ( i.e., the 5th COA alleges in the alternative that the PSA contains no specific provision identifying plaintiff’s medical specialty and thus, the court may exercise its equitable powers to supply the missing term (Oppos., p.15:21-26)) misses the mark not only because, as explained in the Klein and California Medical Association decisions, recovery on an unjust enrichment theory is not permitted where there is a contract governing the parties’ relationship but also because plaintiff has still not offered any admissible evidence which tends to show that SVMF unjustly retained any benefit at her expense.

Conclusion

For the reasons explained above, the motion for summary adjudication is dropped as moot on Issue Two, granted as to Issue One, Three, Four and Five.

Since summary adjudication has been granted on each of the COA alleged in the 2AC as against SVMF, the latter is also entitled to summary judgment.

Pursuant to CRC Rule 3.1312, moving counsel to prepare a judgment of dismissal as to SVMF only.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)