Case Name: San Jose Neurospine v. Cal. Physicians’ Service, et al.
Case No.: 16CV296868

This is an action by a medical services provider, Plaintiff San Jose Neurospine (“Plaintiff”), to recover the unpaid costs of providing emergency medical services to four patients insured by Defendant California Physicians’ Service dba Blue Shield of California (“Blue Shield”). Currently before the Court is Blue Shield’s motion for summary judgment/adjudication directed at Plaintiff’s operative Second Amended Complaint (“SAC”). The SAC, filed February 8, 2017, states three causes of action: 1) Negligent Misrepresentation; 2) Unfair Business Practices, and; 3) Quantum Meruit.

The SAC alleges (at 11) that Plaintiff “submitted valid claims for reimbursement” to Blue Shield which it was “obligated to pay based on its representations to [Plaintiff] and based on its fraudulent inducement for [Plaintiff] to render valuable medical services to Blue Shield’s insured.” (Brackets added.) It further alleges that “[t]he services rendered” by Plaintiff were “induced by Blue Shield’s promise to make payments on behalf of its insured patients and on Blue Shield’s prior course of dealing,” (SAC at 17) that Plaintiff “was in regular communications with claims representatives and billing department representatives at Blue Shield,” (SAC at 19) and that Plaintiff “relied upon the information provided by Defendants during this verification process, including representations from Defendants that Plaintiff was to be reimbursed at the usual and customary rate for the medical services provided. After medical services were preformed, Plaintiff properly and timely submitted claims through Defendants’ designated claims handling channels. Defendants either denied the claims outright or drastically underpaid the claims.” (SAC at 27-28.)

The SAC also alleges at 33 that “[b]y authorizing [Plaintiff] to provide services to Defendants’ insured members, Defendants entered into implied contracts with [Plaintiff] whereby Defendants agreed to pay Plaintiff as a non-participating provider at Plaintiff’s usual, customary and reasonable billed rates,” and at 36 alleges that “[b]ecause [Plaintiff] and Blue Shield did not have a contract applicable to its members, [Plaintiff] is entitled to [Plaintiff’s] usual and customary total billed charges for the medical services rendered to patients. The usual and customary total billed charges were $335,479.” The SAC further alleges at 34 that the care was provided to Blue Shield’s insureds in 2015 and at 37-39 alleges that “[i]n 2015” Plaintiff submitted the final bill for $335,479 to Blue Shield for payment “which reflected [Plaintiff’s] usual and customary total billed charges. Blue Shield paid [Plaintiff] a total of $37,377.09 . . . Blue Shield failed to pay [Plaintiff] for the remaining balance of $298,101.91 for the necessary medical care rendered . . . despite demands thereof.”

Request for Judicial Notice
A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 fn. 2.)

With its motion Blue Shield has submitted a request for the Court to take judicial notice of exhibit M to the Declaration of Blue Shield Counsel Michael Zorkin “under Evidence Code Sections 452(c) and (h) and 453.” (Request at 2:9-10.) Exhibit M consists of copies of pages printed from the webpage of the Cal. Dept. of Managed Health Care. Such material is not normally a proper subject of judicial notice. (See Searles Valley Minerals Operations, Inc. v. State Bd. of Equalization (2008) 160 Cal.App.4th 514, 519 [refusing to take notice of web site pages of the American Coal Foundation and the U.S. Dept. of Energy]; Duronslet v. Kamps (2012) 203 Cal.App.4th 717, 737 [refusing to take judicial notice of information on the Cal. Bd. of Registered Nursing web site].)

Blue Shield’s request is DENIED. Evidence Code § 452(h) does not apply. (See Gould v. Md. Sound Indus. (1995) 31 Cal.App.4th 1137, 1145 [“Judicial notice under Evidence Code section 452, subdivision (h) is intended to cover facts which are not reasonably subject to dispute and are easily verified. These include, for example, facts which are widely accepted as established by experts and specialists in the natural, physical, and social sciences which can be verified by reference to treatises, encyclopedias, almanacs and the like or by persons learned in the subject matter.”].) As for Evidence Code § 452(c), even if this internet material were otherwise a proper subject of judicial notice and the making of the list could be construed as an official act of the Department of Managed Health Care, Plaintiff’s status in 2017 is irrelevant to whether it is entitled to payment for medical services rendered to Blue Shield insureds and submitted for payment in 2015.

Motion for Summary Judgment/Adjudication
The pleadings limit the issues presented for summary judgment or summary adjudication. (See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 98; Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258; Nieto v. Blue Shield of Calif. Life & Health Ins. (2010) 181 Cal.App.4th 60, 73 [“the pleadings determine the scope of relevant issues on a summary judgment motion.”].) The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (See CCP §437c(f)(1); McClasky v. California State Auto. Ass’n (2010) 189 Cal.App.4th 947, 975 [“If a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.”]; Palm Spring Villas II Homeowners Association, Inc. v. Parth (2016) 248 Cal.App.4th 268, 288.) Summary adjudication of general “issues” or of facts is not permitted. (See Raghavan v. The Boeing Company (2005) 133 Cal.App.4th 1120, 1136.)

The moving party’s declarations and evidence will be strictly construed in determining whether they negate or disprove an essential element of a plaintiff’s claim “in order to resolve any evidentiary doubts or ambiguities in plaintiff’s (or opposing party’s) favor.” (Johnson v. American Standard, Inc. (2008) 43 Cal.4th 56, 64, parentheses added.) While the same standards of admissibility govern both, the opposition declarations are liberally construed while the moving party’s evidence is strictly scrutinized. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) The evidence must be liberally construed in support of the opposing party, resolving any doubts in favor of that party. (Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.) “A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; internal citations omitted.)

Blue Shield’s motion for summary judgment is DENIED as it has failed to show that all of Plaintiff’s claims fail as alleged against it. Blue Shield’s alternative motion for summary adjudication of six “issues” is GRANTED in part and DENIED in part as follows.

Summary adjudication of “Issue No. 1,” asserting that the SAC’s first cause of action for Negligent Misrepresentation fails as alleged against it is GRANTED as it is unopposed by Plaintiff. (See Plaintiff’s response to Undisputed Material Fact no. 1, stating in pertinent part, “Plaintiff agrees to dismiss this cause of action.”) No dismissal of the claim has been filed by Plaintiff so summary adjudication is granted.

Summary adjudication of “Issue No. 2,” asserting that the SAC’s third cause of action for Quantum Meruit fails because “Plaintiff has already been reimbursed far more than the prevailing market rate for the Patients’ services,” (See Blue Shield’s Notice of Motion at 2:28-3:1) is DENIED.

“Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefore was to be made. The measure of recovery in quantum meruit is the reasonable value of the services rendered, provided they were of direct benefit to the defendant. A plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1673 [internal citations omitted].) Blue Shield cannot meet its initial burden simply by insisting that paying Plaintiff 300% of the Medicare rate undeniably establishes that Plaintiff received reasonable value for services rendered.

Plaintiff correctly points out that the prevailing rate paid in the area is just one factor in determining reasonable value for health care services rendered under 28 CCR § 1300.71(a)(3)(B). That provision defines “reimbursement of a claim” to a non-contracted provider of emergency medical services like Plaintiff in pertinent part as “the payment of the reasonable and customary value for the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration: (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 any unusual circumstances in the case.”

The decisions in Children’s Hospital Central Cal. v. Blue Cross of Cal. (2014) 226 Cal.App.4th 1260 and Goel v. Regal Medical Group, Inc. (2017) 11 Cal.App.5th 1054, cited by Blue Shield, do not support its argument on this issue. The Goel court stated that “[p]roperly interpreted, Children’s Hospital supports the decision that the trial court made here to consider a variety of evidence to determine the ‘reasonable market value’ of the services that Goel provided under quantum meruit principles.” (Goel, supra, 11 Cal.App.5th at 1060.) It further stated that “[l]ike all decisions, the opinion in Children’s Hospital must be understood in the context of the issue that was presented for decision. . . . [T]he issue in Children’s Hospital was whether the trial court improperly limited the jury to considering only the hospital’s fully billed charges rather than what insurers actually paid. In light of this focus, the opinion naturally emphasized the significance of amounts previously accepted by the medical provider as an indication of market value. However, the case cannot fairly be read to hold that this factor is the only determinant of reasonable market value as a matter of law. In fact, the court in Children’s Hospital concluded that a quantum meruit claim for medical services rendered may require consideration of a ‘wide variety of evidence’ bearing upon the reasonable value of those services. The court held that this evidence is not limited even by the factors identified in section 1300.71(a)(3)(B), but will depend upon the ‘facts and circumstances of the particular case.’ Thus, the holding in Children’s Hospital did not limit the evidence relevant to the reasonable value of medical services to any single factor, but rather confirmed that, consistent with the law on quantum meruit, any evidence bearing upon the ‘reasonable market value’ of such services is relevant.” (Id. at 1063, emphasis in original, internal citations omitted.) The court closed by stating that “Medicate rates, like other evidence bearing upon the determination of a reasonable rate for a particular medical procedure, might be more or less probative in light of the facts of the particular case. But that is a decision for the trial court to make within the scope of its discretion.” (Id. at 1065.)

The Goel decision makes clear that Blue Shield’s argument that a payment of 300% of the Medicare rate somehow undeniably establishes that Plaintiff was “reimbursed far more “ than the reasonable value of the services rendered is simply incorrect. The other factors listed in § 1300.71(a)(3)(B) and mentioned by Plaintiff (provider’s level of experience, fees usually charged, etc.), present triable issues of material fact as to whether the amount Plaintiff was paid was the “reasonable value for services rendered.”

Summary adjudication of “Issue No. 3,” asserting that the SAC’s second cause of action for Unfair Business Practices (“UCL” claim) “fails as a matter of law,” is DENIED.

The UCL prohibits, and provides civil remedies for, unfair competition, which it defines as “any unlawful, unfair or fraudulent business act or practice.” (Kwikset Corp. v. Super. Ct. (2011) 51 Cal.4th 310, 320 (“Kwikset”), citing Bus. & Prof. Code § 17200.)

Blue Shield’s first and second arguments against this cause of action, that it fails because the other causes of action on which it is based fail and/or that it fails because Plaintiff was reimbursed “at levels far beyond the market rate,” (Blue Shield Memo. of P&As at 11:15-18) fail as the Quantum Meruit claim survives as described above. Blue Shield’s third argument, that Plaintiff lacks standing to bring a UCL claim because it is not a consumer or a competitor, is incorrect as a matter of law.

Blue Shield’s reliance on Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 135, is misplaced as the court’s actual holding in that decision was that “where a UCL action is based on contracts not involving either the public in general or individual consumers who are parties to the contract, a corporate plaintiff may not rely on the UCL for the relief it seeks.” Plaintiff is not alleging any contractual relationship between itself and Blue Shield, instead it is alleging that it was not paid reasonable value for services rendered (quantum meruit).

The Supreme Court in Kwikset noted that “[i]n 2004, the electorate substantially revised the UCL’s standing requirement; where once private suits could be brought by ‘any person acting for the interests of itself, its members or the general public’ [citation], now private standing is limited to any ‘person who has suffered injury in fact and has lost money or property’ as a result of unfair competition [citation.] The intent of this change was to confine standing to those actually injured by a defendant’s business practices and to curtail the prior practice of filing suits on behalf of ‘ ‘clients who have not used the defendant’s product or service, viewed the defendant’s advertising, or had any other business dealing with the defendant … .’ ’ [Citations.] [¶] While the voters clearly intended to restrict UCL standing, they just as plainly preserved standing for those who had had business dealings with a defendant and had lost money or property as a result of the defendant’s unfair business practices. [Citations.]” (Kwikset, at pp. 320-21 quoting Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758, 788.)

In Kwikset, the Supreme Court also held that “[t]o satisfy the narrower standing requirements imposed by Proposition 64, a party must now (1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” (Kwikset, supra, 51 Cal.4th at p. 322, emphasis in original.) Kwikset explained that the economic injury requirement is generally not difficult to satisfy: “There are innumerable ways in which economic injury from unfair competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.” Id. at p. 323.) Also, “ineligibility for restitution is not a basis for denying standing” under the UCL. (Id. at pp. 335-337.)

It is clear that the Supreme Court did not recognize a “business dealings,” “consumer relationship,” or “competitor relationship” requirement on standing under Business and Professions Code section 17204. To the extent the Linear decision could be interpreted as holding otherwise (and read closely it cannot reasonably be so interpreted) it would nonetheless give way to the Supreme Court’s later statements in Kwikset and Clayworth that Bus. & Prof. Code § 17400 sets forth the only standing requirements for bringing a UCL claim.

Finally summary adjudication of Blue Shield’s issues 4-6, each of which only asserts that a certain “prong” of the second cause of action fails, is DENIED as none of these three issues wholly disposes of the UCL claim. (See CCP §437c(f)(1).)