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 the motion for “partial” summary adjudication directed at Plaintiff’s operative Second Amended Complaint (“SAC”). The SAC 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. Brackets added.)

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.” (Brackets added.)

The first cause of action further alleges that “Defendant negligently misrepresented that if Plaintiff rendered medical services to patients insured by Defendant and submitted valid claims for reimbursement, Defendant would reimburse Plaintiff for the value of the medical services rendered. . . . Specifically, by telephone on March 18, 2015, Paula, Case Manager with the Blue Shield Authorization Department . . . provided an authorization code . . . for emergency treatment inpatient stay. Subsequently, by facsimile, Paula sent an authorization code.” (SAC at 46 & 52.) The second cause of action further alleges (SAC at 56) that “Defendant denied Plaintiff’s reimbursement claims without fully and adequately investigating. Defendant’s conduct . . . constitutes part of Defendant’s overall scheme to reduce the costs or reimbursement claims brought by out-of-network providers such as Plaintiff. Defendant’s conduct . . . constitutes an illegal pattern and practice so pervasive as to form a general business practice which is forbidden by Business and Professions Code §§ 17200, et seq.” The third cause of action further alleges (SAC at 62) that “[b]y impliedly providing [Plaintiff] with authorization and approval for the medical care and treatment of their member patients described above and impliedly representing to [Plaintiff] that [Plaintiff] should continue to treat and care for those patients, until their condition stabilized, Blue Shield both expressly and impliedly requested that [Plaintiff] provide care and treatment to their members.” (Brackets added.)

Blue Shield moves for “partial” summary adjudication of the SAC’s three causes of action to the extent they are based on care provided one patient only (referred to as “A.Q.”) citing Lilienthal & Fowler v. Super. Ct. (1993) 12 Cal.App.4th 1848 (Lilienthal). The Lilienthal court held “that under subdivision (f) of [CCP] section 437c, a party may present a motion for summary adjudication challenging a separate and distinct wrongful act even though combined with other wrongful acts alleged in the same cause of action.” (Id. at 1854-1855.) This validity of this approach has been questioned and CCP §437c(f) was subsequently amended to expressly state that a motion for summary adjudication shall be granted only if it would completely dispose of a cause of action. (See Bagley v. TRW, Inc. (1999) 73 Cal.App.4th 1092, 1095, fn. 2 [“We question whether Lilienthal properly construed subdivision (f)(1) of section 437c . . . As subsequently amended, subdivision (f)(1) now provides that 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.’”] Emphasis in original.)

Here, as Plaintiff does not specifically oppose the attempt at partial summary adjudication under Lilienthal in and of itself, and the treatments provided to the four patients do appear to the Court to be distinct events that occurred at different times, the Court will consider the merits of the motion.

Motion for Summary Adjudication

The pleadings limited 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.) Here Blue Shield asserts that preemption by federal law provides it a complete defense.

The sole basis for the MSA is that “[a]t the time of treatment, A.Q. was enrolled in a self-funded plan governed by the [ERISA]. As such, any state law claims brought by Plaintiff are preempted by ERISA.” (Notice of Motion at 1:7-10.) This same ground is repeated under three “issues” presented for adjudication, corresponding to the SAC’s three causes of action. (See Notice of Motion at 1:12-2:8.) More specifically, Blue Shield argues that “ERISA preempts Plaintiff’s state law claims for quantum meruit, unfair business practices, and negligent misrepresentation under ERISA’s express preemption provision, §514(a).” (Memo. of Points & Authorities at 4:17-18.)

“ERISA has two distinct preemption provisions: Preemption under section 514 (29 U.S.C. §1144), known as conflict or ordinary preemption; and so-called complete preemption under section 502(a) (29 U.S.C. §1132(a)). Conflict preemption is an affirmative defense to a plaintiff’s state law cause of action that entirely bars the claim; that is, the particular claim involved cannot be pursued in either state or federal court. Complete preemption, in contrast, is a doctrine that recognizes federal jurisdiction over what would otherwise be a state law claim, an issue that typically arises when the defendant has removed the plaintiff’s state court lawsuit to a federal court. . . . ‘‘Ordinary preemption’ is an affirmative defense to the allegations in a plaintiff’s compliant asserting a state law claiming that the state law conflicts with, and is overridden by, a federal law. On the other hand, complete preemption does not constitute a defense at all. Rather, it is a narrowly drawn jurisdictional rule for assessing federal removal jurisdiction when a complaint purports to raise only state law claims.’ . . . Despite this difference, case authority discussing ERISA preemption often conflates the two doctrines.” (Morris B. Silver, M.D., Inc. v. International Longshore and Warehouse Union-Pacific Maritime Association Welfare Plan (2016) 2 Cal.App.5th 793, 799 (“Silver”), internal citations omitted.)

Blue Shield’s motion is DENIED for failure to meet its initial burden to demonstrate the preemption under §514(a) provides it a complete defense to Plaintiff’s three causes of action.

The Silver decision is published California authority holding that contract and quasi-contract claims by a third party medical provider such as those alleged here are not subject to conflict/ordinary preemption under ERISA. The Court of Appeal in Silver, relying on several federal decisions such as Memorial Hosp. System v. Northbrook Life Ins. Co. (5th Cir. 1990) 904 F.2d 236, 243–246 (Memorial Hospital), ruled that such claims do not address an area of exclusive federal concern, but involve the alleged failure to make payment as promised for services rendered. Applying “the Memorial Hospital test,” the Silver Court concluded the plaintiff’s “contract and quasi-contract claims are not preempted. The gravamen of Silver’s causes of action for breach of oral contract, quantum meruit and promissory estoppel is that the Plan orally agreed to pay Silver for health care services in the specified amounts, authorized the provision of those services and then failed to pay as agreed. Although Silver has not asserted a cause of action for negligent misrepresentation, its claims are indistinguishable from those found not to be preempted by Memorial Hospital and those courts that have applied the two-part Memorial Hospital test. Like those cases Silver’s three contract/quasi-contract causes of action do not address an area of exclusive federal concern. Silver is not, as the Plan argues, seeking compensation for the Plan’s decisions to deny coverage under the terms of an ERISA plan; his alleged right to reimbursement does not depend upon the Plan’s terms. Rather, the claims are predicated on a garden-variety failure to make payment as promised for services rendered. To be sure, the claims would not exist but for an ERISA plan and are predicated on somebody’s interpretation of the plan. But the fact an ERISA plan is an initial step in the causation chain, without more, is too remote of a relationship with the covered plan to support a finding of preemption.” (2 Cal.App.5th at 806-807.)

Plaintiff’s claims here are, like those in Silver (and the negligent misrepresentation claim in Memorial Hospital) “predicated on a garden-variety failure to make payment as promised as promised.” They are therefore not preempted. As this is the sole basis for Blue Shield’s motion, it is denied in its entirety.