Southern California Healthcare System, Inc. vs. Universal Care, Inc.

Demurrer to Amended Complaint

Cal. Super. - 4th Dist.April 6, 2015

O © 0 N N a n h B h W W N p = N N N N N N N N N N m m t e m p m m k p m e d e d p d c o N N O N n n B A W L W N D = O O 0 0 N D B R A W N = O RAINES FELDMAN LLP Richard J. Decker, Esq. (Bar No. 119673) rdecker@raineslaw.com Marc Berkemeier, Esq. (Bar No. 234912) mberkemeier@raineslaw.com 9720 Wilshire Boulevard, 5th Floor Beverly Hills, California 90212 Telephone: (310) 440-4100 Facsimile: (310) 691-1367 Attorneys for Defendants UNIVERSAL CARE, INC., dba BRAND NEW DAY (tka HMO CALIFORNIA) and JEFFREY DAVIS SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF ORANGE - CENTRAL DISTRICT SOUTHERN CALIFORNIA HEALTHCARE SYSTEM,INC., a California corporation; and ALTA LOS ANGELES HOSPITALS, INC., a California corporation; Plaintiffs, Vs. UNIVERSAL CARE, INC., dba BRAND NEW DAY (tka HMO CALIFORNIA), a California Corporation; JEFFREY DAVIS, an individual; and DOES 1 through 50, inclusive, Defendant. Case No. 30-2015-00780941-CU-BC-CJC 1.) DEFENDANTS’ NOTICE OF DEMURRER TO PLAINTIFFS’ SECOND AMENDED COMPLAINT; 2.) DEMURRER; AND 3.) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Date: February 25, 2016 Time: 2:00 p.m. Dept.: C15 Reservation No.: 72293838 Date Action Filed: April 6, 2015 Trial Date: None Set DEMURRER TO SECOND AMENDED COMPLAINT O O 0 3 O O » n H B WL W N D = N O N N N N N N N N N e e e m e e e e e e e e e e c o N N A N L n BA N W I N D = O O 0 N N N P R A W N = O TO PLAINTIFFS AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on February 25, 2016 at 2:00 p.m., or as soon thereafter as counsel may be heard in Department C15 of the above-entitled Court located at 700 Civic Center Drive West, Santa Ana, California 92701, Defendants Universal Care, Inc., dba Brand New Day (fka HMO California) and Jeffrey Davis (“Davis”) (“Defendants”) will and hereby do generally and specifically demur to Plaintiffs Southern California Healthcare System, Inc., and Alta Los Angeles Hospitals, Inc.’s (collectively “Plaintiffs”) second amended complaint (“SAC”). Defendants’ Demurrer is based upon California Code of Civil Procedure §§ 430.10(e), on the grounds that the fourth and sixth causes of action do not state facts sufficient to constitute causes of action. Specifically, Defendants demur on the following grounds: Demurrer to the Fourth Cause of Action 1. Defendants demur to the fourth cause of action for Breach of the Implied Covenant of Good Faith and Fair Dealing on the ground that Plaintiffs’ have failed to state facts sufficient to constitute a cause of action. Demurrer to the Sixth Cause of Action 2 Defendants demur to the sixth cause of action for Unfair Business Practices/Violation ofCalifornia Health & Safety Code §1371.35 on the ground that Plaintiffs’ have failed to state facts sufficient to constitute a cause of action. This Demurrer is based upon this Notice, the supporting Memorandum of Points and Authorities filed concurrently herewith, the complete records and files in this action, and upon such further oral and documentary evidence as the Court may consider at the hearing on this Demurrer. DATED: January 5, 2016 RAINES FELDMAN, LLP By: afSC ggTeen erkemeier Attorneys for Defendants UNIVERSAL CARE, INC., dba BRAND NEW DAY (fka HMO CALIFORNIA) and JEFFREY DAVIS 1 DEMURRER TO SECOND AMENDED COMPLAINT O O © 0 3 O o D n B h W w W N h = N N N N N N N N N E e m e R e e e e e e e e c o N N O N W n PB A W N D = O O O N N R W N D = O II. 111. IV. TABLE OF CONTENTS INTRODUCTION .....coiiiiiiiiiiieietetei eee este sree sie ese esaese essere ssesse ste ssese sss ssessesse sss sssessensessenns 1 FACTUAL BACKGROUND AND PROCEDURAL HISTORY..iccossossssssmevosissssssany 1 LEGAL ARGUMENT ........coviierterrenrensessessessessessessassasssssessassassassassessessassassassassassasssssssssensans 3 A. C.C.P. § 430.30 Authorizes Universal And Davis To Demurrer...........ccecevvveuneneee. 3 B. The SAC Was Untimely Filed aussnsssmmmmnrmmmmoimmsssien 3 C. Plaintiffs Failed To Plead Facts To Support Their Fourth Cause Of Action For Breach OfThe Implied Covenant OfGood Faith And Fair Dealing................. 5 1 Plaintiffs Have Ignored The Court’s Concerns About WhyThe Fourth Gauge OfAction 1s Inguthiorently Pled sessnnsamssnsnamsinmmisnms 5 2. Plaintiffs Ignore The Specific Elements Of A Breach Of Implied Covenant Of Good Faith And Fair Dealing Claim .........ccccceevvevvveenrereneennn. 6 D. The Sixth Cause Of Action For Unfair Business Practices Fails To State A BEMEITITIE oceans namsnsemendinsibansansomssn nentste So heBsAERAMAS A BRS ARIS 7 1. Plaintiffs Have Ignored The Court’s Concerns About Why The Sixth Cause: OfAction Js Insefficiently Pled ou awmwsmmmmmnnmsmssosmsssssamms 7 2. Plaintiffs Have Not Alleged Unlawful, Unfair, Or Fraudulent Activity nemrtetraeaansoeesn tenahnaTRAM 8 8 Plaintiffs Have Not Sufficiently Pled A Basis For Injunctive Relief............ 9 CONCLUSION suicscnuss ons susencnsvossssmnserssis sms HammiaesasaosSSASRssaes 10 i DEMURRER TO FIRSTAMENDED COMPLAINT © 0 J N O N W n B A W N = N N N N N N N N N m = e m e m e m e m e m e e e e p e co o N N A N L n B A W N D = D O 0 0 N N N R A W N d = O TABLE OF AUTHORITIES Cases Bethman v. City of Ukiah (1989) 216 Cal. APP. 3d 1395oesaeeaeeaeeeeeaaer earn 3 Blank v. Kirwan (1985) PIRES TL], omicAAAASASAAssRsEASESALAShEARREARS 3 Bush v. California Conservation Corps. (1982) 136 CalAPD.3d 194 cosmosssssiiaSeaaaGravssens 10 Campbell v. Superior Court (1996) AX Cal.AppAth T30B13] .mmmmumcnvamvenmmsnsscmmcss owssees orev sis ErrGSTRATTAN ES 7 Cobb v. Ironwood Country Club, (2015) 233 Cal. App. 4th 960, 960 ......ccveoviuieiiieiiiiicieesesee eesasseaseseben 5 Congleton v. National Union Fire Ins. Co. (1987) LITAoo iss00AAASomersAARSAARAAAARRREA8 7 Dalrymple v. United Services Automobile Association (1995) 40 Cal.Appdth 497, S14 .oivemisimmsmsmmmmsasom sas swearsameSssssais sass 7 E & H Wholesale, Inc. v. Glacier Brothers (1984) IRR EALBTEIR FAR commanaammayomRSISonpe 9 Kennedy v. Baxter Healthcare Corp. (1996) 43 Cal.APP.Ath 799, 807 ....eouiiiiieiieiiietctetctreteseteeeerentnn 3 Leader v. Health Industries ofAmerica, Inc., 0 CAL EXPAN OUD is cicimimsiviissnisnmssassiniins ites ras sts sstar tases se asesss eo ARS AS HEPAT RSS BEART SS RES SALES + Levinson v. Bank ofAm. Nat'l Trust & Sav. Ass n., 126 Cal: App, 2d 122, 126-127 saumsomsmsmmsssoiismsmsssaesasssSamantrin = Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d TI36, 118 umeconmsimussosmsssnomnsmsnss isms iisssei sveaosss 6 Olsen v. Breeze, Inc., (1996) 48 CaLAPD-AT 608 coverssetesasseresenesr 9 ii DEMURRER TO SECOND AMENDED COMPLAINT O © 0 3 O N h n B A W N N N N N N N N N N m m e m e m e m e m h m e m p d p e c o J A N L L BA A W I N D = O O 0 N N S N B R A W N = O Pasadena Live LLC v. City ofPasadena, (2004) 114. Cal, App. 4th 1089; 1093 iunimmmmmmmmsosnmmmvsssswing suv sismsissasain 5 Paul v. Milk Depots, Inc. (1964) TETERIE T ER rmocnsmescrmscanwossssssess ssANOAAORYNSTI) 10 People v. McKale (1979) 25 Cal.3d 626, 635 ...ooiviiieiiiieiireiienceeeeessree sass es bebe eta b eras aeas 9 People v. Toomey (1984) IST CBLAIAY | sosmenussiBEFEASimhatasa antasssns 10 Puentes v. Wells Fargo Home Mortg., Inc., 160 Cal. App. 4th 638, 645 (2008) .::scssssvmmsmymacsmnsmamvassavasamass 8 Redding v. St. Francis Medical Center (1989) 208 CALAPP.3A 98eeveeesseseee seeesee esse esses esse sees essese sees sees sess esos 10 Rodrigues v. Campbell Industries (1978) 87 Cal. APP. 3A494...aerasreeeer eaten enna 3 Samura v. Kaiser Foundation Health Plan Inc., (1993) 17 CalApDAth 12B sus nsonmusaminessssmsmimesisseisShaan isasaasnasmns 9 Silva v. Block (1996) 49 Cal.AppAth 345, 350 .ccmuvssommvsnmsomvoasimasomssesssiieissossesasisan 3 State Farm Fire & Casualty Co. v. Superior Court, (1965) 45 CALAPPAT 1093 .oooovveeeeeeeeeseeeeeeeeeeoeesesee ees esssesessesesssssssssssssssessesesssssssssees esses seessssssnees 8 Thayer Plymouth Center, Inc. v. Chrysler Motor Corp. (1967) 255 Cal.APP.2A 300 .eoviirieieieieeieeeeeeie stearateesasebeste ere ere essere ete aensenteas 10 Waller v. Truck Ins. Exchange (1995) 1 LOREAIRT 1s 30 crosmanmsaaiHibato imam anmaaman 6 Waters v. United Services Auto Assn. (1996) 41 CalAPPAR 1063, 1070 ...ovvveereeeeveeeoreseeseeeeesessesssssssssesesesssssssesessssssessessssesesssssesssss 7 Watson Laboratories, Inc. v. Rhone—Poulenc Rorer, Inc., (2001) I78°F. Bopp. 2d 1099, T1 17, Ah, I2Gemansssospe sis ss i ssass 8 iil DEMURRER TO SECOND AMENDED COMPLAINT O © © 0 3 O N h n b h W W N D = N N N N N N N N N N N m e m e e p m e m p e p e d e d p e e d c o N N O N n n B A W N = O O O 0 N N N B N = O Statutes Chiles Cind] HeoopfhutaSdS EE IIE)wunrmsonrasees; 3 Coderal Givi] Pronto Sid Ou LINEcoisafoissoars as Eo sasss es seasons sara mssssy 3 Code of Civil Procedure §430.30(Q) .....cceverreruerierieireerieieetieiesteeees ese sse eres sess sse sae sese sas ess ese sne ene ene 3 Code:of Civil Procedune BBDDcumsrossiassisioammoaesspaiscisss 9 Code of Civil Procedure §581(£)(2) cvvvueriirieieiiieieieriesieie citeseterseaseseae ens sae sne sees +4 Rules Businessand Professions Code § 17200seasonsimeemimine7,8,9 California Health & Safety Code § 1371.35o.ooeres7 Cdlifeihia ealth 8 Baféty Coded 13TLITD)wrassesess 9 iv DEMURRER TO SECOND AMENDED COMPLAINT O O © 0 J O N n n B h W W N N = N O N N N N N N N N m m E e e e e e e e e e e d c o ~ ~ O N W n BR A W N = O o V O 0 O N n n R W N Y = O MEMORANDUM OF POINTS AND AUTHORITIES Le INTRODUCTION Plaintiffs Southern California Healthcare System, Inc. and Alta Los Angeles Hospital (collectively “Plaintiffs”) have filed a second amended complaint (“SAC”) seeking approximately $2,500,000.00 for medical services they purportedly provided to various patients who were alleged to have had insurance coverage through Defendant Universal Care, Inc. dba Brand New Day (fka HMO California) (“Universal”).! Plaintiffs filed the SAC after the Court sustained Universal’s demurrerto the first amended complaint, in part, and with leave to amend. In the SAC, Plaintiffs attemptto re-plead their breach of implied covenant of good faith and fair dealing claim and unfair business practices claim (both of which the Court dismissed). Despite adding pages and pages of new “allegations,” Plaintiffs’ attempt to sufficiently plead these claims fails for numerous reasons. Indeed, Plaintiffs’ new allegations do nothing to satisfy the Court’s concerns that these two causes of action need to show harm and damages that are separate and apart from the parties’ agreements. The breach of implied covenant of good faith and fair dealing claim also still fails because it does not include any allegations of unfair or unreasonable conduct by Universal, which is required by the case law. The unfair business practices claim is insufficiently pled because Plaintiffs’ only allegations related thereto are the breach of contract, which cannot serve as a basis for an unfair business practices claim when contract damages are available. Plaintiffs also have still not pled unlawful, unfair, or fraudulent conduct in relation to this claim. For all ofthese reasons,the fourth (breach ofimplied covenant ofgood faith and fair dealing) and sixth (unfair business practices) claims should be dismissed, without leave to amend. II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY Plaintiffs plead that they operate hospitals located in Southern California that offer a wide range of emergency, inpatient, and outpatient services, some of which allegedly include 24-hour emergency rooms staffed by board certified emergency physicians and nurse specialists. Plaintiffs !' Jeffrey Davis (“Davis”), the Chief Operating Officer ofUniversal,is also named as a party defendant to this case under an alleged “alter ego” theory. 1 DEMURRER TO SECOND AMENDED COMPLAINT O W 0 3 a O n B h W L N o = N O N N N N N N N N H E E E e e e e e e e e e e c o N I O N w n B A W N D = O o V O N N N P R W N = O do not plead how many patient claims are at issue or the time frame for their dates of service. Plaintiffs also do not plead the types of services at issue. Notwithstanding these ambiguities, Plaintiffs allege that Universal was the provider of insurance coverage for these unnamed patients and services. Plaintiffs include no allegations of how Davis was involved in any ofthis. The SAC lists different hospitals within Plaintiffs’ systems that have written contracts with Universal: Alta Los Angeles Hospitals, Inc., Alta Hollywood Hospitals, Inc. (to include Hollywood Community Hospital and Van Nuys Community Hospital, which are purportedly now known as Southern California Healthcare Systems, Inc., dba Southern California Hospital at Hollywood and Southern California Hospital at Van Nuys), and Brotman Medical Center, Inc. (which is purportedly now known as Southern California Healthcare Systems, Inc., dba Southern California Hospital at Culver City). Plaintiffs further allege that Universal failed to pay the services provided at these hospitals for the patients (unknown in name or number) in an amount totaling approximately $2,500,000.00. Plaintiffs filed their original complaint on or about April 6, 2015. In response, Universal filed a demurrer and motion to strike on May 26, 2015, with a hearing date of August 6, 2015. Universal’s demurrer sought to dismiss numerous causes of action for failure to state a claim, and to dismiss Davis as a party to the action due to Plaintiffs’ failure to plead any basis to hold Davis personally liable for Universal’s acts. In response thereto, Plaintiffs filed a first amended complaint on August 11, 2015. Again Universal filed a demurrer and motion to strike on September 10, 2015, challenging the alter ego allegations against Davis and each of the seven causes of action pled, which were (1) breach of contract; (2) breach of contract; (3) breach of contract; (4) breach of implied covenant ofgood faith and fair dealing; (5) breach of implied contract/quantum meruit; (6) unjust enrichment; and (7) unfair business practices. After the demurrer was fully briefed, the Court heard oral argument on November 5, 2015. The Court overruled the motion to strike and the demurrer to the first, second, third, and fifth causes of action. However, the Court sustained Universal’s demurrer to the fourth (breach of implied covenant of good faith and fair dealing), sixth (unjust enrichment), and seventh (unfair business practices) causes of action, with leave to amend. 2 DEMURRER TO SECOND AMENDED COMPLAINT O © 0 0 I O O L n H B WL W N D = N N N N N N N N N N m m e e e m e e e m e e e e e e c o N O O N L n BA A W I N D = O O O 0 0 N D R A W N D = O Asa result, Plaintiffs filed a second amended complaint on December 4, 2015. It included the original first, second, and third causes of action (all for breach of contract) and the fifth cause of action (breach of implied contract/quantum meruit). It also included the fourth (breach of implied covenant of good faith and fair dealing) and now sixth cause of action (unfair business practices). Plaintiffs have withdrawn their unjust enrichment claim. III. LEGAL ARGUMENT A. C.C.P. § 430.30 Authorizes Universal And Davis To Demurrer The party against whom a complaint or cross-complaint has been filed may object, by demurrer, “when any ground for objection to a complaint, cross-complaint or answer appears on the face thereof...” Code of Civil Procedure § 430.30(a). A demurreris appropriate where a complaint does notstate facts sufficient to constitute a cause of action. Code of Civil Procedure § 430.10(e). Demurrers may also be filed for uncertainty in a pleading. Code ofCivil Procedure §430.10(f). When considering a demurrer, the Court should treat all material facts as true if they are properly pled, however, the Court should not consider as true any contentions, deductions, or conclusions of fact or law. See, Silva v. Block (1996) 49 Cal.App.4th 345, 350 (citing Kennedy v. Baxter Healthcare Corp. (1996) 43 Cal.App.4th 799, 807). When a pleading fails to set forth facts amounting to any cause ofaction, a general demurreris proper. See, Bethman v. City ofUkiah (1989) 216 Cal. App. 3d 1395. General demurrers are also proper as to alleged causes of action which are merely redundant, i.e., purported causes of action which add nothing new. (See, Rodrigues v. Campbell Industries (1978) 87 Cal. App. 3d 494) Demurrers are sustained without leave to amend whenit is clear there is no possibility of any cause of action being pled. See, Blank v. Kirwan (1985) 39 Cal. 3d 311. B. The SAC Was Untimely Filed As discussed above, the Court heard oral argument on Universal’s demurrer to the first amended complaint on November 5, 2015. In the Court’s tentative ruling, it provided Plaintiffs 10 days to file and serve a second amended complaint. At the oral argument, counsel for Plaintiffs requested a total of 20 daysto file and serve the second amended complaint. The Court granted this request. 3 DEMURRER TO SECOND AMENDED COMPLAINT O O 0 3 O a w n B h WL W = N N N N N N N N N m m e m e m e m e e a e e e e c o N O O N L n BA A W I N D = O 0 N N N R W W = O Based on the 20 days permitted by the Court, Plaintiffs’ SAC was due to be filed on November 25, 2015. However, Plaintiffs did not file the pleading until December 4, 2015. This was nine days after the Court’s ordered deadline for same. Pursuant to Code of Civil Procedure section 581(f)(2), the court may dismiss the complaint as to a defendant “...when after a demurrer to the complaint is sustained with leave to amend, the plaintiff fails to amend it within the time allowed by the court and either party moves for dismissal.” The court dismissal can be sought any time after the allotted period to amend has expired. Levinson v. Bank ofAm. Nat’l Trust & Sav. Ass’n., 126 Cal. App. 2d 122, 126-127. Leader v. Health Industries ofAmerica, Inc., 88 Cal. App. 4th 603 is instructive on this issue. In Leader, the Court sustained the defendant’s demurrer and granted the plaintiffs twenty days leave to amend. Id. at 608. Shortly before the expiration of that period, the plaintiffs’ counsel obtained the defendants’ counsel’s stipulation to extend the period by several days. Id. The plaintiffs failed to meet that new deadline, but still attempted to file an amended complaint after that deadline had passed. Id. The defendants objected, arguing that the action should be dismissed for a number of reasons: the action had been pending for a long time, demurrers had repeatedly been sustained with leave to amend, the plaintiffs had requested and been granted an extension oftime to amend but had failed to meet the deadline; the plaintiffs had not asked for any further extension from the court or the defendants, and the amendment did not adequately address the pleading deficiencies noted in sustaining the latest demurrers. Id. at 610. The Court agreed with the defendants and subsequently dismissed the case under section 581(f)(2). Many of these factors are present in this case. First, this is the third time Universal is demurring to Plaintiffs’ fourth and sixth causes of action. Second, Plaintiffs asked for an additional 10 daysto file their SAC and were granted a total of 20 days to file and serve their SAC. Still they failed to timely file and serve same. Third, Plaintiffs did not request leave of court or ask Universal for an extension to file their SAC nine days after the Court’s ordered deadline. Lastly, as explained herein below, the amendments in the SAC do not adequately address the pleading deficiencies. 4 DEMURRER TO SECOND AMENDED COMPLAINT O W 0 I O N W n B h WL W N D = N N N N N N N N N m e m E e e e e d p e e d c o 3 O N D n B A W N = O O O 0 N B L = O Accordingly, Universal argues that the fourth and sixth causes ofaction should be dismissed, without leave to amend, because Plaintiffs did not timely file their amended pleading with respect to these two causes of action. C. Plaintiffs Failed To Plead Facts To Support Their Fourth Cause Of Action For Breach Of The Implied Covenant Of Good Faith And Fair Dealing Even if the Court concludes that the SAC was timely filed (which it was not), Plaintiffs’ fourth and sixth causes of action still fail to state a claim, despite the fact that the Court gave clear direction in its tentative ruling on Universal’s demurrer to the first amended complaint about the deficiencies of these two claims. 1. Plaintiffs Have Ignored The Court’s Concerns About Why The Fourth Cause OfAction Is Insufficiently Pled Regarding Plaintiffs’ fourth cause of action for breach ofthe implied covenant of good faith and fair dealing, the Court stated in its tentative ruling that the fist amended complaint failed to adequately allege facts showing that Universal’s actions pursuant to the contract destroyed or injured the rights of Plaintiffs to receive the benefits under the contract. Instead, the facts alleged showed the breach of the express terms and conditions of the contracts, not the implied terms. The implied covenant imposes on a contracting party not only a duty to refrain from acting in a mannerthat frustrates performance of the contract, “but also the duty to do everything that the contract presupposes that he will do to accomplish its purpose.” Pasadena Live LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 1093 (2004). The implied covenant ofgood faith and fair dealing operates as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which, while not technically transgressing the express covenants, frustrates the other party’s rights to the benefits of the contract. Cobb v. Ironwood Country Club, 233 Cal. App. 4th 960, 966 (2015). Here, the SAC includes nothing that addresses or resolves the Court’s concerns. Although Plaintiffs added sixteen new paragraphs to its fourth cause of action, this is form over substance (and, notably, are cut and pasted from Plaintiffs’ sixth cause of action for unfair business practices). None of these paragraphs specifically allege that Universal’s actions destroyed or injured any rights 5 DEMURRER TO SECOND AMENDED COMPLAINT O © 0 3 O N h n B h W W N p = N N N N N N N N N N m E e e e e e p e d e d p e d c o N N O N D n B A W I N D = O O O O 0 S R A W N d = O of Plaintiffs separate and apart from the express terms of the parties’ contracts. In fact, Plaintiffs themselves state throughout these paragraphs that Universal’s actions frustrated the benefits owed under the contracts (see, e.g., p. 12, lines 18). Also, many of these new paragraphs have no relation to Plaintiffs at all. Indeed, Plaintiffs allege that Universal receives money from the State ofCalifornia and CMS in paragraph 46(a), but nothing is pled to tie this fact to any harm that has been caused to Plaintiffs. The same is true in paragraphs 46(b) and 46(j) — nothing is pled to tie these allegations specifically to actions that Universal performed here in relation to Plaintiffs. Further, Plaintiffs’ allegations in paragraph 46(c) — (i) and paragraphs 48 — 51 that Universal has contested paying Plaintiffs’ claims (for various absurd reasons) all relates to payment Plaintiffs expected to receive under the express terms ofthe parties’ contracts, nothing more. Plaintiffs appear to be trying to trick the Court into believing their fourth cause of action is sufficiently pled by throwing in pages ofnew “allegations” with the hope that something will stick. Plaintiffs fool no one but themselves. 2. Plaintiffs Ignore The Specific Elements Of A Breach Of Implied Covenant Of Good Faith And Fair Dealing Claim As a result, Plaintiffs do not satisfy the basic requirements for pleading a breach of the implied covenant of good faith and fair dealing claim. When such a claim is based on an insurance “bad faith” theory, it must include certain basic allegations in order to be properly pled. At the very least, such a claim must include: 1. The existence of a contract for insurance; 2. An alleged breach ofthat contract; and 3. Allegations that the insurer unreasonably refused or delayed the payment of policy benefits. See, Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136, 1148, and Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 36. A claim for the breach of the implied covenant of good faith and fair dealing is specifically designed to provide a remedy against an insurance company that unreasonably withholds or delays 6 DEMURRER TO SECOND AMENDED COMPLAINT O O © 0 3 O N D n B h W w W d p = N N N N N N N N N N N e e e m e m p e e m e e p e e d c o J O N L n BA A W N D = O O 0 0 N D B R E W N d = O payment of insurance benefits under an insurance policy. See, Waters v. United Services Auto Assn. (1996) 41 Cal.App.4th 1063, 1070. Plaintiffs’ allegations are deficient here because the “breach of the implied covenant requires unreasonable conduct or an action taken without proper cause.” Campbell v. Superior Court (1996) 44 Cal.App.4th 1308, 1321. Plaintiffs have in no way pled that Universal acted unfairly or unreasonably here in how it handled the patient claims. Plaintiffs also have failed to plead that Universal’s interpretation ofthe insurance contractis more than just erroneous. As the court found in Congleton v. National Union Fire Ins. Co. (1987) 189 Cal.App.3d 51, 59, bad faith requires unfair dealing, not simply mistaken judgment on the part of the insurer. “[I]t is firmly established that an erroneous interpretation of an insurance contract by an insurer does not necessarily result in tort liability for breach of the covenant of good faith and fair dealing.” Dalrymple v. United Services Automobile Association (1995) 40 Cal.App.4th 497, 514. Without providing any concrete facts, Plaintiffs suggest that they performed medically necessary services and, thus, Universal must pay for these expenses pursuant to the contracts. Plaintiffs have still not pointed to any unreasonable actions taken on the part of Universal that led to the denial of coverage or payment. For all of these reasons, Plaintiffs’ fourth cause of action is insufficient to support a breach of the implied covenant of good faith and fair dealing claim. D. The Sixth Cause Of Action For Unfair Business Practices Fails To State A Claim 1; Plaintiffs Have Ignored The Court’s Concerns About Why The Sixth Cause OfAction Is Insufficiently Pled Plaintiffs’ sixth cause of action also remains insufficiently pled. Plaintiffs base this claim on Business and Professions Code section 17200 et seq. for unfair business practices, and have added to the cause ofaction title (but no new allegations) Universal’s purported violation ofHealth & Safety Code § 1371.35.2 Again Plaintiffs ignore the concerns of the Court. In sustaining 2 These allegations about Health & Safety Code §1371.35 were included, verbatim, in the first amended complaint. The Court concluded they were not sufficient to support an unfair business practices cause of action. 7 DEMURRER TO SECOND AMENDED COMPLAINT O O 0 N N O N h n B W = N N N N N N N N N m m m m e m e m p m p m p d c o I A N n n BR A W I N D = O N N N R W N d = O Universal’s demurrerto this cause of action in the first amended complaint, the Court stated that the pleading failed to adequately allege facts showing that Universal’s actions caused Plaintiffs injury- in-fact and loss of money or property suffered as a result of unfair business practices. The Court added at oral argumentthat nothing was pled in this claim that was separate and apart from contract damages. Plaintiffs’ SAC does nothing to remedy these concerns. Courts have uniformly held that a mere breach of contract cannot state a viable claim under Section 17200. Puentes v. Wells Fargo Home Mortg., Inc., 160 Cal. App. 4th 638, 645 (2008). The only way a breach of contract claim may form the predicate for section 17200 is if it also constitutes conduct that is “unlawful, or unfair, or fraudulent.” Id. See also Watson Laboratories, Inc. v. Rhone—Poulenc Rorer, Inc., 178 F. Supp. 2d 1099, 1117, fn. 12 (2001) ([A] breach of contract may ... form the predicate for Section 17200 claims, provided it also constitutes conduct that is ‘unlawful, or unfair, or fraudulent.””). Here, Plaintiffs set forth the same allegations described above in relation to the fourth cause of action. None of these show an injury-in-fact or loss of money or property that is separate and apart from the alleged breach of contracts. Plaintiffs again are hoping that form beats substance. They are grossly mistaken. 2. Plaintiffs Have Not Alleged Unlawful, Unfair, Or Fraudulent Activity Plaintiffs also include the allegations from their first amended complaint, where they alleged that Universal purposefully failed to pay for patient services, failed to pay interest related thereto, failed to timely contest Plaintiffs’ bills, and worked to undermine the delivery ofhealthcare services, all in breach ofthe parties’ written contracts. Again, none of these allegations supports a §17200 unfair business practices claim. A claim of unfair business practices under Business and Professions Code section 17200 requires a showing ofbusiness acts or practices that are “unlawful,” “unfair,” or “fraudulent.” State Farm Fire & Casualty Co. v. Superior Court, (1965) 45 Cal.App.4™ 1093. Further, where,as here, a plaintiff“borrows” another statute in support of a Section 17200 claim, a plaintiffmust plead facts demonstrating that the practice actually violates that law. An allegation that the conduct is in 8 DEMURRER TO SECOND AMENDED COMPLAINT O O 0 3 O& O D n B h WL W od d = N N N N N N N N N = e m e m e m e m e m e e e e e e C O ~ ~ O N L n B A W N D = D O V V 0 N N B W W N Y = O violation of a specific statute is “purely conclusory and insufficient to withstand demurrer.” People v. McKale (1979) 25 Cal.3d 626, 635. Plaintiffs’ allegations here stem only from their disagreements with Universal’s payments on the patient claims. This amounts to nothing more than a breach of contract allegation underthe guise of a section 17200 cause of action. Section 17200 does not give courts a general license to review the fairness of contracts, and does not serve as a basis for obtaining contract damages as Plaintiffs are attempting to do here. Id. The purpose of section 17200 is to enjoin deceptive or unfair business practices, not to reinforce a breach of contract claim. Samura v. Kaiser Foundation Health Plan Inc., (1993) 17 Cal.App.4th 1284. In addition, a private party may only seek to enjoin acts made unlawful by section 17200 if those practices are actually declared unlawful, such as by the Knox-Keene Act itself. Samura at 1284. Universal is unaware of any statutes it is allegedly violating here. Plaintiffs cite California Health & Safety Code § 1371.37(c)(1) to assert that Universal engaged in a “demonstrable and unjust pattern, as defined by the department, of reviewing or processing complete and accurate claims that result in payment delays.” However, Universal’s withholding of payments, in order to conduct investigations into the claims, is a prudent business practice and far from unlawful or unfair. Furthermore, to allege a violation of section 17200, a “plaintiff must show that members of the public are likely to be deceived” by the actions of the defendant. Olsen v. Breeze, Inc., (1996) 48 Cal.App.4™ 608. There is no basis in this case to assert that the public is likely to be deceived by Universal’s business practice of applying clear contractual provisions and reimbursing Plaintiffs for these claims pursuant to those provisions. There simply is no basis for Plaintiffs to allege that Universal acted unfairly, unlawfully, or fraudulently here. 3. Plaintiffs Have Not Sufficiently Pled A Basis For Injunctive Relief Although a plaintiff can obtain injunctive relief when there is a clear violation of section 17200, Plaintiffs have not pled such a violation here. E & H Wholesale, Inc. v. Glacier Brothers (1984) 158 Cal.App.3d 728. Specifically, Plaintiffs seek an injunction “to enjoin Universals’ improper conduct.” To obtain such an injunction under section 17200, Plaintiffs must make the traditional showing under Code ofCivil Procedure section 526 (which sets forth instances when an 9 DEMURRER TO SECOND AMENDED COMPLAINT O W 0 0 3 O O WO » B h WL W N o N N N N N N N N N D m m e m e m e m e m e m e e e m 0 N N O N n n h h W N D = O O L V N N N D W N — = O O injunction can be granted). Redding v. St. Francis Medical Center (1989) 208 Cal.App.3d 98. As part of this showing, Plaintiffs must establish they have no adequate remedy at law for damages available to them. Bush v. California Conservation Corps. (1982) 136 Cal.App.3d 194 (sustaining demurrer to cause of action for injunctive relief was proper when plaintiffs had an adequate remedy at law); see also, Thayer Plymouth Center, Inc. v. Chrysler Motor Corp. (1967) 255 Cal.App.2d 300 (injunction improper where plaintiff had an adequate remedy of damages for breach of contract). An injunction, where an adequate remedy at law is available, would serve no purpose in preventing future wrongful acts. Here, an injunction is unnecessary because Plaintiffs already have an adequate remedy at law — they can seek contractual damages for Universal’s alleged wrongful conduct. The threat of such a civil action for damagesis sufficient to deter any “future bad acts.” Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129; People v. Toomey (1984) 157 Cal.App.3d 1. There is no reason to determine (and Plaintiffs have not pled a reason) that injunctive relief is appropriate here in addition to the “remedies at law” available to Plaintiffs. IV. CONCLUSION For the reasons above, Defendants respectfully request this Demurrer be sustained and that the fourth (breach of implied covenant of good faith and fair dealing) and sixth (unfair business practices) causes of action in the SAC be dismissed, in full, and without leave to amend. DATED: January 5, 2016 RAINES FELDMAN, LLP By: Tek5C a fc Berkemeier Attorneys for Defendants UNIVERSAL CARE, INC., dba BRAND NEW DAY (fka HMO CALIFORNIA) and JEFFREY DAVIS 10 DEMURRER TO SECOND AMENDED COMPLAINT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I am employed in the County of Los Angeles, State of California. I am over the age of 18 years and not a party to within action; my business address is 9720 Wilshire Boulevard, 5" Floor, Beverly Hills, CA 90212. On January 5, 2016, I served the following document(s) on the interested parties in this action: 1.) DEFENDANTS’ NOTICE OF DEMURRER TO PLAINTIFFS’ SECOND AMENDED COMPLAINT; 2.) DEMURRER; AND 3.) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF by placing true copies thereof enclosed in sealed envelopes addressed as follows: David Outwater Cathleen Mulligan Golden Attorneysfor Plaintiffs Outwater & Pinckes, LLP 900 Roosevelt Irvine, CA 92620 E-mail: doutwater@oplawyers.com cgolden@oplawyers.com Fax: (949) 748-7481 xX (BY MAIL) I caused such envelope to be deposited in the mail at Beverly Hills, California. The enveloped was mailed with postage thereon fully prepaid. I placed such envelope with postage thereon prepaid in the United States mail at Beverly Hills, California. I am “readily familiar” with the firm’s practice of collection and processing correspondence for mailing. Underthat practice it would be deposited with the U.S. postal service on that same day with postage thereon fully prepaid in Beverly Hills, California in the ordinary course of business. X (BY ELECTRONIC TRANSMISSION) I submitted an electronic version of the document(s) to One Legal, LLC, through the user interface at www.onelegal.com. Xx (STATE) I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct Executed on January 5, 2016, at Beverly Hills, California. (DD) “Stephihie Segovia 1 PROOF OF SERVICE