Case Number: 19STCV04529 Hearing Date: September 10, 2019 Dept: 4A

Demurrer without a Motion to Strike

Having considered the demurring, opposing, and reply papers, the Court rules as follows.

BACKGROUND

On August 27, 2019, Plaintiff Stephanie Kubacki (“Plaintiff”) filed a complaint against Defendant Rita Seiden alleging negligence for the distribution of medical records and psychotherapy notes to a third party without Plaintiff’s consent on February 16, 2018.

On May 23, 2019, Defendant/Cross-Complainant Rita Seiden, LCSW, Ph.D. filed a cross-complaint against Cross-Defendant Oscar Health Plan of California alleging fraud-intentional misrepresentation, fraud-negligent misrepresentation, equitable indemnity, apportionment, and contribution.

On August 5, 2019, Cross-Defendant Oscar Health Plan of California filed a demurrer pursuant to California Code of Civil Procedure section 431.10.

Trial is set for August 10, 2020.

PARTY’S REQUEST

Cross-Defendant Oscar Health Plan of California (“Cross-Defendant”) requests that the Court sustain its demurrer to the cross-complaint of Defendant/Cross-Complainant Rita Seiden, LCSW, Ph.D. (“Opposing Party”) arguing that it fails to plead facts sufficient to state a cause of action for (1) the fraud-intentional misrepresentation; (2) the fraud-negligent misrepresentation; (3) equitable indemnity; (4) apportionment; or (5) contribution.

LEGAL STANDARD

Meet and Confer

Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred to, in person or telephonically, for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer.¿ (See Code of Civ. Proc. § 430.41.)

Demurrer

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.” (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn, supra, 147 Cal.App.4th at p. 747.)

DISCUSSION

Meet and Confer Requirement

The Court finds that Cross-Defendant has submitted a sufficient meet and confer declaration pursuant to Code of Civil Procedure section 430.41, subdivision (a). (Tatayon Decl., ¶¶ 3-6.) The parties were unable to reach an agreement regarding the issues raised in the demurrer and motion to strike at bar. (Ibid.)

Intentional Misrepresentation

“The elements of [intentional] fraud . . . are: (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e. to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974 (quotations and citation omitted).)

Fraud must be alleged specifically and conclusory allegations are insufficient. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) “[T]he requirement of specificity is relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of the controversy . . . or when the facts lie more in the knowledge of the opposite party.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal. App. 4th 153, 157 [citations omitted]).

The cross-complaint alleges the following. On or about January or February of 2018, Cross-Defendant, through its employee David Weaver, sent a letter to Opposing Party stating the following:

We’re reaching out to let you know what we’ve partnered with CIOX Health to facilitate the retrieval of medical records for our members, as a part of a risk adjustment program.

As you may be aware, risk adjustment is a payment methodology used by the Centers for Medicare and Medicaid Services (CMS). It’s important to perform ongoing chart reviews in order to ensure complete documentation of our member’s health conditions for submission to CMS and so that we can improve the coordination of their care. In consultation with our doctors and nurses on staff, Oscar uses information about member health to design population health programs and interventions that will help our members lead healthier, more fulfilled lives.

We have executed a Business Associate Agreement with CIOX Health; all information shared during the medical record retrieval and chart review project will be kept in the strictest of confidence, in accordance with all applicable State and Federal laws regarding the confidentiality of patient records, including HIPAA requirements.

Below is a list of components that’ll be requested, if applicable, for encounters during 2017, 1/1/2017 through 12/31/2017:

Demographic/Face Sheet

History & Physical

Consult Notes

Progress Notes

Problem List

Signature Log . . . .

HIPAA allows a covered entity to disclose [protected health information “PHI”] to another covered entity for the health care operations of the entity receiving the information, without an enrollee’s authorization or consent, under certain circumstances. Under this provision, you are permitted to disclose PHI to CIOX, as CIOX Health is a Business Associate of Oscar Insurance and acting on behalf of Oscar Insurance.

(Cross-Compl., ¶ 8, Exh. A.) Opposing Party alleged the falsity of Cross-Defendant’s representation that Opposing Party was permitted to disclose Plaintiff’s record. (Cross-Compl., ¶ 9.) It is also alleged that Cross-Defendant knew this representation was false, but made this statement to induce Opposing Party’s release of Plaintiff’s information to benefit Cross-Defendant’s risk adjustment program. (Cross-Compl., ¶ 10.) Opposing Party reasonably relied on this representation because it came from Plaintiff’s health insurance provider and assured Opposing Party that the disclosure of Plaintiff’s records was permitted. (Cross-Compl., ¶ 12.) The misrepresentation caused Opposing Party harm by forcing litigation with respect to Plaintiff’s claims. (Cross-Compl., ¶¶ 13-15.)

Cross-Defendant argues the alleged misrepresentation was a true statement because federal law allows a covered entity, such as Cross-Defendant, to use a patient’s PHI without patient authorization “[f]or treatment, payment, or health care operations, as permitted by and in compliance with § 164.506.” (Demurrer, pp. 5:25-6:11 (citing 45 CFR § 164.506, subd. (b)(1).) “Payment” is defined to be “[r]isk adjusting amounts due based on enrollee health status and demographic characteristics.” (45 CFR § 164.501, subd.(2)(ii).)

Contrary to Cross-Defendant’s contentions on demurrer, the face of the complaint does not reflect that only “health status and demographic characteristics” were requested. Rather, according to the complaint, face sheets, history and physical, consult notes, progress notes, problem lists, and signature logs were requested. As such, Cross-Defendant’s representation was not true when considering the facts of the demurrer in light of federal law.

Cross-Defendant also argues that the alleged misrepresentation was a true statement because California law allows a covered entity, such as Cross-Defendant, to use a patient’s PHI without patient authorization for “. . . medical data processing, or other administrative services.” (Demurrer, p. 6:12-6:23 (citing Civ. Code § 56.10, subd. (a), (c)(3)).) Cross-Defendant argues the request for medical records of its members for risk adjustment falls within this category for medical data processing and administrative services. (Ibid.)

As Opposing Party indicates, California Civil Code section 56.104, subdivision (a) states: “Notwithstanding subdivision (c) of Section 56.10, except as provided in subdivision (e), no provider of health care . . . may release medical information to persons or entities who have requested that information and who are authorized by law to receive that information pursuant to subdivision (c) of Section 56.10, if the requested information specifically relates to the patient’s participation in outpatient treatment with a psychotherapist, unless the person or entity requesting that information submits” a number of things to the patient. (Opposition, pp. 5:23-5:8.) The cross-complaint alleges that psychotherapy notes were among the items provided to Cross-Defendant based on its misrepresentation. (Cross-Compl., ¶ 1.) Thus, the Court finds that the requested documents could reasonably be read to include notes related to outpatient treatment with a psychotherapist and such a disclosure is not permitted without prior notice to the patient.

Accordingly, the demurrer cannot be sustained.

Negligent Misrepresentation

For a negligent misrepresentation, a plaintiff must prove there has been (1) a “misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with the intent to induce another’s reliance on the fact misrepresented;” (2) “ignorance of the truth;” (3) justifiable reliance on the misrepresentation by the party to whom it was directed;” and (4) “resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154 (quotations and citation omitted).) A cause of action for negligent misrepresentation must be alleged with specificity. (Cadlo v. Owens-Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) “[T]he requirement of specificity is relaxed when the allegations indicate that the defendant must necessarily possess full information concerning the facts of the controversy . . . or when the facts lie more in the knowledge of the opposite party.” (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157 (citations omitted).)

Opposing Party’s negligent misrepresentation cause of action rests on the same facts as the intentional misrepresentation cause of action. (See Cross-Compl., ¶¶ 7-24.) The negligent misrepresentation cause of action also alleges that Cross-Defendant did not have a reasonable ground for believing its representations were true because it knew Opposing Party provided psychotherapy to Plaintiff and, thus, Plaintiff’s authorization for disclosure of such records was required. (Cross-Compl., ¶ 19.)

Cross-Defendant argues the contention that Cross-Defendant knew its representation to be false is too conclusory. (Demurrer, pp. 7:27-8:11.) The Court disagrees. The statement that Cross-Defendant knew Opposing Party provided psychotherapy to Plaintiff is a sufficient factual contention in this early pleading stage and the Court accepts it as true in the context of considering this demurrer.

The Court further finds the demurrer to Opposing Party’s negligent misrepresentation cause of action must be overruled for the same reasons the demurrer to Opposing Party’s intentional misrepresentation cause of action is overruled.

Equitable Indemnity, Apportionment, & Contribution

Cross-Defendant argues Opposing Party’s equitable indemnity and contribution causes of action fail because the intentional and negligent misrepresentation causes of action fail. However, as seen above, the Court overrules Cross-Defendant’s objections to those causes of action. Thus, the demurrer cannot be sustained with respect to Opposing Party’s related causes of action for equitable indemnity or contribution.

Cross-Defendant argues Opposing Party’s apportionment cause of action is duplicative of the equitable indemnity cause of action. Cross-Defendant does not provide authority to support a demurrer on this basis. As such, the Court overrules the demurrer on this ground.

CONCLUSION

The demurrer is OVERRULED.

Opposing Party is ordered to give notice.