Demurrer To Amended ComplaintDemurrerCal. Super. - 4th Dist.May 14, 2019AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 Divya S. Gupta (SBN 284282) gupta.divya@dorsey.com DORSEY & WHITNEY LLP 600 Anton Blvd., Suite 2000 Tel: (714) 800-1400; Fax: (714) 800-1499 Michelle S. Grant* grant.michelle@dorsey.com Andrew Holly* holly.andrew @dorsey.com Meghan DesLauriers* deslauriers.meghan@dorsey.com Tel: (612) 340-2600; Fax: (612) 340-2868 Attorneys for Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc., UnitedHealthcare Insurance Company, United Behavioral Health, UnitedHealthcare Service LLC, Optumlnsight, Inc., Optum Services, Inc. * Admitted Pro Hac Vice SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF ORANGE SOBERTEC LLC, a California limited liability company, and BEACHSIDE RECOVERY LLC, a California limited liability company, Plaintiffs, Vv. UNITEDHEALTHGROUP INCORPORATED, etal., Defendants. Case No. 30-2019-01069823-CU-CO-CIC Assigned for all purposes to: Hon. James Crandall Dept. C33 DEFENDANTS’ NOTICE OF DEMURRER; DEMURRER; AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF RESERVATION NO. 73197547 Date: March 26, 2020 Time: 1:30 p.m. Dept: C33 Date Action Filed: May 14, 2019 Trial Date: None Set DEFENDANTS’ NOTICE OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 TO PLAINTIFFS AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on March 26, 2020, at 1:30 p.m. or as soon thereafter as the matter may be heard in Department C33 of the above-captioned Court, located at 700 Civic Center Drive, Santa Ana, CA 92701, Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc., UnitedHealthcare Insurance Company, United Behavioral Health, UnitedHealthcare Service LLC, Optumlnsight, Inc., and Optum Services, Inc. (collectively “United”) will, and hereby do, demur to the Complaint filed by Plaintiffs Sobertec LLC and Beachside Recovery LLC (collectively “Sobertec”), and each cause of action Sobertec asserts, pursuant to Code of Civil Procedure Section 430.10(e). In this action, Sobertec alleges that in 2016 United, which was the insurer and/or administrator for Sobertec’s patients pursuant to those patient’s health care insurance plans, began to “implement a pattern of unjustified denials and claim processing ‘roadblocks’ . . . as part of an overall scheme to underpay or indefinitely withhold payment to Plaintiffs for their services.” (Am. Compl. 86.) Specifically, Sobertec brings nine causes of action against United: (1) Breach of Implied-in-fact Contract; (2) Breach of the Implied Covenant of Good Faith and Fair Dealing (3) Quantum Meruit; (4) Unjust Enrichment; (5) Open Book Account; (6) Promissory Estoppel; (7) Fraud and Deceit; (8) Negligent Misrepresentation; and (9) Unfair Competition. The Demurrer should be sustained because the Employee Retirement Income Security Act (“ERISA”) preempts all of Sobertec’s claims and the Complaint fails to sufficiently allege facts that entitle Sobertec to relief under any legal theory. The Demurrer is based upon this Notice of Demurrer, the accompanying Demurrer, Memorandum of Points and Authorities, Declaration of Meghan L. DesLauriers in Support of Defendants’ Demurrer, all matters of which this Court may take judicial notice, the arguments presented to the Court on the hearing on the Demurrer, and such other matters as the Court may properly consider. 2 DEFENDANTS’ NOTICE OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 Dated: January 7, 2020 DORSEY & WHITNEY LLP By: /s/ Meghan L. DesLauriers Divya S. Gupta Michelle Grant (admitted pro hac vice) Andrew Holly (admitted pro hac vice) Meghan L. DesLauriers (admitted pro hac vice) Attorneys for Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc. UnitedHealthcare Insurance Company, United Behavioral Health, United HealthCare Service LLC, OptumlInsight, Inc., and Optum Services, Inc. 3 DEFENDANTS’ NOTICE OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 DEMURRER Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc., UnitedHealthcare Insurance Company, United Behavioral Health, UnitedHealthcare Service LLC, Optumlnsight, Inc., Optum Services, Inc. (collectively “United”) hereby demur to all causes of action in Plaintiffs Sobertec LLC and Beachside Recovery LLC’s (collectively “Sobertec’) Complaint on each of the following separate and independent grounds: FIRST CAUSE OF ACTION FOR BREACH OF IMPLIED-IN-FACT CONTRACT 1. United generally demurs to the First Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged breach of an implied-in-fact contract. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. SECOND CAUSE OF ACTION FOR BREACH Of THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING 2, United generally demurs to the Second Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged breach of the implied covenant of good faith and fair dealing. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. THIRD CAUSE OF ACTION FOR QUANTUM MERUIT 3. United generally demurs to the Third Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged quantum meruit. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. FOURTH CAUSE OF ACTION FOR UNJUST ENRICHMENT 4. United generally demurs to the Fourth Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged unjust enrichment. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. FIFTH CAUSE OF ACTION FOR OPEN BOOK ACCOUNT 5. United generally demurs to the Fifth Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged open book account. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. 1 DEFENDANTS’ DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 SIXTH CAUSE OF ACTION FOR PROMISSORY ESTOPPEL 6. United generally demurs to the Sixth Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged promissory estoppel. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. SEVENTH CAUSE OF ACTION FOR FRAUD AND DECEIT 7. United generally demurs to the Seventh Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged fraud and deceit. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. EIGHTH CAUSE OF ACTION FOR NEGLIGENT MISREPRESENTATION 8. United generally demurs to the Eighth Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged negligent misrepresentation. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. NINTH CAUSE OF ACTION FOR UNFAIR COMPETITION 9. United generally demurs to the Ninth Cause of Action on the ground that it fails to state facts sufficient to constitute a cause of action for alleged violations of Business and Professions Code Section 17200 et seq. Civ. Proc. Code § 430.10(e). Further, the claim is preempted by ERISA Section 514. Dated: January 7, 2020 DORSEY & WHITNEY LLP By: /s/ Meghan L. DesLauriers Divya S. Gupta Michelle Grant (admitted pro hac vice) Andrew Holly (admitted pro hac vice) Meghan L. DesLauriers (admitted pro hac vice) Attorneys for Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc. UnitedHealthcare Insurance Company, United Behavioral Health, United HealthCare Service LLC, OptumlInsight, Inc., and Optum Services, Inc. 2 DEFENDANTS’ DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 TABLE OF CONTENTS L INTRODUCTION ....ooitiitiieeiteittesteeteieeteeetesttest ee e es eeeeetesa e sees st esi eb esbe seas saeens ese se eane ns 1 IL. FACTUAL BATKGROTUTINDD 555.5405 ass ss cao 55 5 55555 5555.06.65 £5555 50 5 55555578 5535 509 4555 1 IIL. ARGUMENT oii eters eee eae sate sees eabeebte seas st eet esis eae eaae ns 1 A. ERISA PREEMPTS SOBERTEC’S STATE LAW CLAIMS .....ccccociiiiiiiienine. 2 I. ERISA Preempts Sobertec’s Contract Claims .........ccceeeeeueeneenneenneeneennee. 3 2. ERISA Preempts Sobertec’s Quasi-Contract Claims .........ccoecueevvveernineennen. 4 3. ERISA Preempts Sobertec’s Fraud Claims........c.cccoeverieeiieiniienneeniecnecnen. 6 4. ERISA Preempts Sobertec’s Unfair Competition Law Claim..................... 7 B. SOBERTEC’S CLAIMS LIKEWISE FAIL ON THE MERITS .........cccccocvvieennee. 8 I. Sobertec’s Implied Contract Claim Fails To State A Claim........................ 8 2. Sobertec’s Breach of the Implied Covenant Lacks Merit...........ccoceeennee... 10 3. Sobertec’s Quantum Meruit Claim Fails to State a Claim......................... 10 4. Sobertec’s Unjust Enrichment Claim is not a Valid a Claim..................... 11 5. Sobertec’s Open Book Account Claim Fails to State a Claim................... 11 6. Sobertec’s Promissory Estoppel Claim Fails to State a Claim .................. 12 7. Sobertec’s Fraud Claims Are Not Sufficiently Specific.........cccccevveennnenee 13 8. Sobertec’s UCL Count Fails to State a Claim ..........ccoceevieeieeneinneennnennn 14 IV: CONCLUSTON sss aosssnsassnssn onsen ms sos 6558s (5555555 555555 $5555 5 65558 57535555 G455555 5755505 45 15 i DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Armijo v. ILWU-PMA Welfare Plan, 2015 U.S. Dist. LEXIS 192447 (C.D. Cal. Aug. 21, 2015) ....cccoiiiiieieeieeieeeeeiee ee e 3 Barlow Respiratory Hosp. v. Cigna Health & Life Ins. Co., 2016 U.S. Dist. LEXIS 187305 (C.D; Cal. Sept. 30; 201.6):.smmsms summon ssssmsasn sssossnss samsmms ssvsssninsns 11 Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003 (Oth Cir. 1998) «cuits eters ste eaeeeeeteeeate este ene eee 2,4 Bliss v. Richardson, S55 P.2d 591 (Cal. 1936) ...uiiiiieiieeeie eee eee sees bestest eras sabes e ete eaee ee 10 C&H Foods Co. v. Hartford Ins. Co., 211 Cal. Rptr. 765 (Cal. Ct. APP. 1984) cnn eee sees 1 Cadlo v. Owens-Illinois, Inc., 23 Cal. Rptt, 3d 1 (Cal. CF: APD: ZOU} smm00 sumansn so sons ons is 555550 555055. 5555555 555555538 SATE 555558 00555 13 Cal. Pac. Med. Ctr. v. Concentra Preferred Sys., No. C 04-3083 SBA, 2004 U.S. Dist. LEXIS 21389 (N.D. Cal. Oct. 15, 2004) .......cccceevvvenunnnns 5 Cao v. Aetna Life Ins. Co., 2012 U.S. Dist. LEXIS 168339 (S.D. Cal. NOV. 6, 2012) ..cceeeiiiiiiieiieeiie eects 6 Carpenters So. Cal. Admin. Corp. v. El Capitan Dev. Co., B11 P.2d 296 (Cal. 1991) c et e e eae sb esate atest ee sbae sabe ense ee neens 2 Cedars Sinai Med. Ctr. v. Mid-West Nat. Life Ins. Co., 118 BE. Supp. 2d. 1002 (C.D. Cal. ZOO) s sussm. sums 00ssmans cnmsnn sn assess isssn.06 50505555 5550555515 5555558 S50552 9,13 Cleghorn v. Blue Shield of Cal., 408 F.3d 1222 (Oth Cir. 2005) ...eeeiiieiieeiie cites eit esses sree sete e sees ste e sate ssbe eee esas esas enna anne 2 Cmty. Hosp. of the Monterey Peninsula v. Aetna Life Ins. Co., 119 F. Supp. 3d 1042 (N.D. Cal. 2015) ...eeiiieiieieeiieeiie ce 11 Day v. Alta Bates Med. Ctr., 119 Cal. Rptr. 2d 606 (Cal. Ct. APP. 2002) .....veeiiieiieeiie cites et rs sates ese eeseee seen 10 De La Torre v. Icenhower, No. 09¢cv1161 BTM(BLM), 2009 U.S. Dist. LEXIS 100508 (S.D. Cal. Oct. 28, 2009) eee eee eee ee eee teehee eats atte tee ah te este abe ea at eet te ehte ante ante e bee eate esse eneeenraas 8 Delgado v. ILWU-PMA Welfare Plan, 2018 U.S. Dist. LEXIS. 225239 (C.D, Cal: Now. 20, 2018). sus mussnisswsusss s s is sssss srsasmniss 3,4 ii DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dual Diagnosis Treatment Ctr., Inc. v. Blue Cross of Cal., 2016 U.S. Dist. LEXIS 162166 (C.D. Cal. Nov. 22, 2016)....ccccocuerirniiniiieiienieneneerecie ee Durell v. Sharp Healthcare, LOR Cal. Rptr. 3d 682 (Cal. Cl. APP. 20010 ou cumwusn sms coms in smsns sons. mss 555555538 545555 555558 5555 Ellenburg v. Brockway, Inc., 763 F.2d 1091 (Oth Cir. 1985) ..eeiiuiiiiieiie cetera eee st te sabe sabe ene eeeee saan Feitelberg v. Credit Suisse First Bos., LLC, 36 Ca. Rptr. 592 (Cal. Ct. APP. 2005) c.ueeeeuiieieeeiieeiie eit et rs t teers sev sne esse saae ees Filmservice Labs. v. Harvey Bernhard Enters., 256 Cal. Rptr. 735 (Cal. Ct. APP. 1989) connie eee esate erases ee Finn v. United Healthcare Ins. Co., 2013 U.S. Dist. LEXIS 39094 (S.D. Cal. Mar. 20, 2013) ......cccccvssrinvmnesesssnsecssssessasssssarssssssssaes Flores v. EMC Mortg. Co., 997 F. Supp. 2d 1088 (E.D. Cal. 2014) .....cciiiiieiieiie eects sees eee eves ea Forest Ambulatory Surgical Assocs., L.P. v. United HealthCare Ins. Co., 2013 U.S. Dist. LEXIS 190703 (C.D. Cal. Mar. 12, 2013) .....cccoiiieiiecieeeieee cece ee Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 930 (2016) unica e eee eects eee e aerate e ee etar eee settee eeeetar ae ee eaneaas Hedging Concepts, Inc. v. First All. Mortg. Co., 49 Cal. Rptr; 2d 191 (Cal. Ct. APD: 1996 )xs sumsssnss sussnos ssmsssnswsnsss casas sas sassss 55555508 5555555 555555.59 555 Hendy v. Losse, SLT PA © (CEL 1 O00] Uerensrossnessessmsesoosomsosnsossiossssiss essen om sae EH A ME ERE EEE Hutchins v. Nationstar Mortg. LLC, 2017 U.S. Dist. LEXIS 155637 (N.D. Cal. Sept. 22, 2017) c.ceevevieeeiieiiieeieeeeeeeeee e 1V Sols., Inc. v. United Healthcare Servs., 2014 U.S. Dist. LEXIS 197034 (C.D. Cal. May 29, 2014) ....coooiiiieeieeiieiieeiie cece 1V Sols., Inc. v. United Healthcare Servs., No. CV 16-9598-MWF, 2017 U.S. Dist. LEXIS 210782 (C.D. Cal. Sep. 27, 2017) weiter atte esas er —— atte tees eset atte ease esa taateee sess anaaae Iverson, Yoakum, Papiano & Hatch v. Berwald, 76 Cal. App. 4th 990, 90 Cal; Rpte. 2d 665 (1999) isms svssnsnsssmssnss swmassnis samsssnsnsossis samsnms snsssn 55 Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489 (Oth Cir. 1988) ...ueuveiieiiieie ieee eee eect eee eects eee ee erar area ease ee ennranae ees Khobragade v. Covidien Ltd. P’ship, No. 16cv468, 2019 U.S. Dist. LEXIS 25312 (S.D. Cal. Feb. 15, 2019) ...ccccoviieiiiiiiiiieins Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937 (Cal. 2003) «eee eee ste eate eee e teeta sabe e eee t ae ebbe enna ante ebae sree een iit DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kwikset Corp v. Super Ct., 246 P.3d 877 (Cal. 2011) eee eee stae sete e estas sbbe estes nee sseesaae ees 14 Linear Tech. Corp. v. Applied Materials, Inc., 61 Cal. Rptt, 3d 221 (Cal. CL. APD: ZOU ones sumassn.s sons cnssssn is somsnss somes aws558 555555538 55555 55555 5555 15 Laks v. Coast Fed. Sav. & Loan Ass'n, 131 Cal. Rptr. 836 (Cal. Ct. APP. 1976) eeu eee 12 Lodi Mem. Hosp. Ass'n v. Tiger Lines, LLC, 2015 U.S. Dist. LEXIS 110495 (C.D. Cal. Aug. 20, 2015) ..c..coeiieiiiiiieniie cece 5,7 McBride v. Boughton, 20 Cal. Rptr. 3d 115 (Cal. Ct. APP. 2004) ...cocueieiiieiieiie ceases esas eevee eee 11,12 Melchior v. New Line Prods., Inc., 131 Cal. Rpte. 2d 347 (Cal. Cle APD: ZOUB Yas cosmo swssnsn ons sn ws 055055.50.505555508 355555045 555555850555 55. 30555 11 Mesbahi v. Geico Ins., No. CV 07-05772 JF (HRL), 2009 U.S. Dist. LEXIS 92725 (N.D. Cal. Oct. 5, BHCYOT stsre 0, 500 050,500 SE A ES Hh SE SS 8 Moeller v. Qualex, Inc., 458 F. Supp. 2d 1069 (C.D. Cal. 2000) ....ccueerueieiieiiieeieeieeeitie s t si esee estes esser ssaee esas enna ns 2 NYSPA v. UnitedHealth Grp., T98 F.3d 125 (2d Cir. 2014). c..eeeieeeeeeeeeeeeeeeeeteeeee et ae ev s seas sa e eens assess ae san ee ssne ee saneens 7 Or. Teamsters Empl. Trust v. Hillsboro Garbage Disposal, Inc., 800 F.3d 1151 (9th Cir. 2015) weenie eee steers a ee sbae ene eee aeas 2 Pac. Bay Recovery, Inc. v. Cal. Physicians’ Servs., Inc., 218 Cal. Rutt. 3d 562 (Cal. Ct. ADP. 2007 Ys sumsssn snsmwsnss snsasms swans snvassnin swwssss cosas sossmanss io 9,10, 12 Pilot Life Ins. Co. v. Dedeaux, ABT U.S. 41 (1987) tic ee etter sate sae be sate sates estes sues sees seein ens 2 Port Med. Wellness, Inc. v. Conn. Gen. Life Ins. Co., 233 Cal. Rptr. 3d 830 (Cal. Ct. App. 2018) eevee sees passim Rakestraw v. Cal Physicians’ Serv., 96 Cal. Rptr. 2d 354 (Cal. Ct. APP. 2000) ...ccveeiueeeiieeiieriie eisai eeseee sae saree see eneeas 1 RJG Consultants, Inc. v. Force Prot., Inc., No. SACV 10-01465-CIC(PIJWx), 2010 U.S. Dist. LEXIS 150913 (C.D. Cal. DEC. 16, 2010) cei eieeeeeeeteeeteeeeteeteeet te sabe e ete h tesa be eee e tee ehbeenbe ene ee bee aae enna anne 8 Sarkisyan v. CIGNA Healthcare of Cal., Inc., 613 BE. Supp. 2d. 1199 (CD. Call 2OOD «ssn sums snsmwss oosossnn sss ox50550-5 5555575 5055555 545755558 53355555 55555 7 Silva v. Providence Hosp. of Oakland, OT P.2d 798 (Cal. 1939)... eters shee sabe atest esate este e testes saae enna anne 8 Sobertec LLC v. UnitedHealth Group, Inc., No. SACV 19-1206 JVS (MRWXx), slip op (C.D. Cal. Sept. 5, 2019)...ccceenieeeiiiinieniecreenne 2 iv DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Sobertec, LLC v. UnitedHealth Group Incorporated, et al., 8:19-cv-01206 (C.D. Cal. JUNe 17, 2019) ...ccouiiiiieiiiieie eee 1 Stansfield v. Starkey, 269 Cal. Rpte. 337 (Cal. Ct: APD: 10) uusnss sumnnsn so sons ons is 55550 5505055.5.5555 555 555555538 SATE 555558 50555 13 Stevens v. Pfizer, Inc., No. 06cv0287-L(BLM), 2006 U.S. Dist. LEXIS 105331 (S.D. Cal. Apr. 6, DOVOIE) 565.505 rn, sn. SRS SSS 18 SBT E35. 530 SE SAH S55 0A 10 Summit Estate v. Cigna Healthcare of Cal., Inc., 2017 U.S. Dist. LEXIS 167462 (N.D. Cal. Oct. 2017) .c..cocteriiiiniiniiniineciecie see 11 Tenet Healthsystem Desert, Inc. v. Fortis Ins. Co., Inc., S520 F. Supp. 2d 1184 (C.D. Cal. 2007) ..eeeeeeirieeiieeieeeieesiie eters eset stee sree eave esieeeneees 9 Wilhelm v. Pray, Price, Williams & Russell, 231 Cal. Rptr. 355 (Cal. Ct. APP. 19860) ...ccoueiiiiiiieiiinieeeeece eects seers ee eee 13 Young v. Gannon, L18 Cal. Rptr. 2d 187 (Cal. Cl. APD. ZOU) ous sumanss snmsnnsn samssnsn sass. oo 5055 55505515 5555558 S5055.55555 1 Youngman v. Nev. Irrigation Dist., 449 P.2d 462 (Cal. 1969) ......oiuiiriiiiiiiiiecie etcetera este eee eae seers sate sees 12 Statutes 29 U.S.Cl § TTAA(Q) eevee eee eee eae steers ee eae eae sa testes eae ebb sb east estes enna enaes 2 BUS. & Prof. COE § 17204... eee eee e eases sete ae asaeaeaeeeaeaeaes 14 BUS. & Prof. COE § 17535 coi eee eee assesses as aeae sete ae aeaeaeasaeaeaeaes 14 Cal. Bus. & Prof. Code § 17200 .....oooeieiiieiieieiiieieeeeeeeeeeeee ee ae ases ases aea aeaeaea eeseaeaes 14 Cal. Civ. Proc. Code § 430.100€) .cuvrreeeeiirieeeeiiieeeeiiiieee ee eieee e estte ee esstbeee es ssssae ee sssaeeessssssaessssssseaesnnns 1 ERISA § 503 eee eee eee sate sate t eee be eb be ebt estes tesa eae eb te eb tent eet eabe eaten 6 Other Authorities 29 CFR § 2560.503-1 cece sete sates tees bestest tees eae eb teehee sees eae eaees 6 v DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION Sobertec seeks payment for medical services allegedly provided to participants in unidentified health care plans governed by ERISA and allegedly administered by United. Nevertheless, Sobertec refuses to pursue its remedies under ERISA. Instead, Sobertec raises a series of state law claims that, as a practical matter, complain about United’s failure to process and pay participants’ ERISA claims. These claims are fundamentally disputes over the processing and payment of ERISA claims. They are therefore preempted under Section 514(a) of ERISA. Even if not preempted, however, Sobertec’s claims fail as a matter of law. II. FACTUAL BACKGROUND Plaintiffs own and operate addiction treatment facilities. (Am. Compl. { 53-54.) United either insured or administered the group health plans that are at issue in this case, most of which are governed by ERISA.! (Id. 455-63.) Sobertec alleges that starting in “middle to late 2016,” United began auditing and specifically reviewing claims submitted by Sobertec “as an overall scheme to underpay or indefinitely withhold payment” from Sobertec for its services. (Id. qq 89- 90.) Avoiding the natural and obvious ERISA claims that would generally be available, Sobertec instead raises nine state law causes of action. All of Sobertec’s claims should be dismissed. III. ARGUMENT A demurrer lies to a complaint where “the pleading does not state facts sufficient to constitute a cause of action.” Cal. Civ. Proc. Code § 430.10(e). When ruling on a demurrer, material facts alleged in a complaint are treated as true. C&H Foods Co. v. Hartford Ins. Co., 211 Cal. Rptr. 765, 768 (Cal. Ct. App. 1984). But the court need not accept “contentions, deductions or conclusions of fact or law.” Young v. Gannon, 118 Cal. Rptr. 2d 187, 196 (Cal. Ct. App. 2002). The facts “must be . . . specific, not vague or conclusory.” Rakestraw v. Cal Physicians’ Serv., 96 Cal. Rptr. 2d 354, 357 (Cal. Ct. App. 2000). For all the reasons stated below, Sobertec’s complaint does not sufficiently state a viable cause of action. I See, e.g., Declaration of Ngoc Han Nguyen in Support of Notice of Removal (“Nguyen Decl.”) 1914-10, Sobertec, LLC v. UnitedHealth Group Incorporated, et al., 8:19-cv-01206 (C.D. Cal. June 17, 2019). 1 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. ERISA PREEMPTS SOBERTEC’S STATE LAW CLAIMS ERISA Section 514 preempts all state laws, including state law causes of action that “relate to” employee benefit plans.” 29 U.S.C. § 1144(a). As the U.S. Supreme Court explained in Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 945 (2016), ERISA preempts two categories of state laws. First, ERISA preempts a state law if it has a “reference to” ERISA plans, i.e., the state law “acts immediately and exclusively upon ERISA plans . . . or where the existence of ERISA plans is essential to the law’s operation . . ..” Id. Second, ERISA preempts a state law that has an impermissible “connection with” ERISA plans, meaning “a state law that ‘governs. . . a central matter of plan administration’ or ‘interferes with nationally uniform plan administration.” Id. “[Clommon law causes of action . . . based on alleged improper processing of a claim for benefits under an employee benefit plan, undoubtedly meet the criteria for pre- emption.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48 (1987); Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1007-08 (9th Cir. 1998). This is particularly true when an “analysis of the terms of the ERISA plan is . . . required,” even if that analysis “is admittedly straightforward.” Or. Teamsters Empl. Trust v. Hillsboro Garbage Disposal, Inc., 800 F.3d 1151, 1156 (9th Cir. 2015). A claim that is preempted under Section 514 must be dismissed on a demurrer. Carpenters So. Cal. Admin. Corp. v. El Capitan Dev. Co., 811 P.2d 296, 298 (Cal. 1991). Here, all of Sobertec’s state law claims interfere with ERISA-regulated relationships between a plan, its participants, and its claims fiduciaries. See Gobeille, 136 S. Ct. at 944-46. Those claims further challenge the “alleged improper processing of a claim for benefits under an employee benefit plan.” Pilot Life, 481 U.S. at 48. ERISA therefore preempts these claims. 2 There are two types of preemption: complete preemption and conflict preemption. See, e.g., Cleghorn v. Blue Shield of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005). Only conflict preemption is at issue here. To be clear, United does not challenge the September 5, 2019 order remanding the case to this Court due to the absence of complete preemption. Sobertec LLC v. UnitedHealth Group, Inc., No. SACV 19-1206 JVS (MRWXx), slip op (C.D. Cal. Sept. 5, 2019). But ERISA’s broader conflict preemption doctrine can provide a complete defense to a state law cause of action, even if the case cannot be removed to federal court under the complete preemption doctrine. See Moeller v. Qualex, Inc., 458 F. Supp. 2d 1069, 1075 (C.D. Cal. 2006) (“even though Plaintiff is not subject to ‘complete preemption’ under § 502(a), Defendants may still assert the defense of ‘conflict preemption’ under ERISA § 5147). 2 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1. ERISA Preempts Sobertec’s Contract Claims Sobertec’s breach of an implied contract claim (Count I) and open book account claim (Count V) seek the payment of benefits in the amount that would have been due under the applicable patients’ ERISA group health plans. The thrust of the claims is that because United paid benefit claims covered by ERISA plans in the past, it must continue to do so now. (See Am. Compl. qq 88-89, 117-119, 138). Although Sobertec fails to plead any details about the alleged implied contract at issue or United’s alleged breach, its claims are based entirely on United’s history of paying ERISA benefit claims. (Id. |] 84, 88, 138). Because these claims have an impermissible connection with ERISA plans, they are preempted and must be dismissed. ERISA preempts state law claims that, as a practical matter, interfere with ERISA’s claims processing procedures. See, e.g., Port Med. Wellness, Inc. v. Conn. Gen. Life Ins. Co., 233 Cal. Rptr. 3d 830, 850 (Cal. Ct. App. 2018) (holding that Section 514 preempted a provider’s claim predicated on a “history of paying claims for benefits” due under the terms of an ERISA plan). Courts recognize that claims based upon a “prior course of conduct” of “making payments” pursuant to ERISA plan terms have an impermissible connection with ERISA plans. For example, the California Court of Appeals has already held that claims indistinguishable from Sobertec’s are preempted. In Port Medical, the court dismissed claims alleging an insurer/ERISA administrator breached an implied contract because it had previously paid claims in a consistent “course of conduct” but, upon suspicion of fraud, started to deny claims and seek additional documentation. 233 Cal. Rptr. 3d at 849. The court ruled the alleged “course of conduct” existed “because—and only because—[the Plan] is obligated to reimburse Plan members for the cost of covered health care services” under ERISA plan terms. Id. This obligation to pay the provider existed only because of ERISA. Id. at 849-50. Therefore, despite the provider’s “creative pleading,” the court held that its implied contract claim was preempted. Id.; see also Delgado v. ILWU-PMA Welfare Plan, 2018 U.S. Dist. LEXIS 225239, at *7-8 (C.D. Cal. Nov. 20, 2018) 3 Armijo v. ILWU-PMA Welfare Plan, 2015 U.S. Dist. LEXIS 192447, at *70 (C.D. Cal. Aug. 21, 2015) (holding that Section 514 preempted a provider’s claim based on “course of conduct” of payments “for benefits under the Plan”). 3 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (holding that ERISA preempted an implied contract claim where alleged “prior course of conduct was nothing more than the Plan making payments pursuant to the ERISA plan”). Like those claims, Sobertec’s implied contract claim and open book account claim are preempted. Both of these claims are based on United's “course of conduct” or the “course of dealings” of paying ERISA-covered benefit claims in the past. (Am. Compl. 117, 138.) Pursuant to that “course of conduct,” prior to 2016, United would “typically process and pay Plaintiffs’ claims fairly and promptly” and “consistent with the rate structure” provided by members’ plans. (Id. 85; see also id. 81.) United allegedly deviated from this conduct in “middle to late 2016” when it stopped paying those claims and placed Sobertec in an “audit” and “pre-payment review.” (Id. 1989-90.) But the parties’ prior “course of conduct” was “nothing more than [United] making payments pursuant to the ERISA plan.” Delgado, 2018 U.S. Dist. LEXIS 225239, at *7. Thus, “[t]he source of [United’s] obligation . . . was the ERISA plan.” Id.; see also Port Med., Cal. Rptr. 3d at 849. Sobertec’s claims are “fundamentally” claims “for unpaid ERISA benefits” and are preempted by ERISA Section 514(a). Port Med., 233 Cal. Rptr. 3d at 846. 2. ERISA Preempts Sobertec’s Quasi-Contract Claims Plaintiffs’ quasi-contract claims (Counts II, III, IV and VI) must be dismissed for the same reasons. These claims are based upon the same alleged “course of conduct” regarding United’s payment and processing of claims as described above and ERISA preempts them for the same reason: they are claims for unpaid ERISA benefits. (See Am. Compl. |] 120-135, 140-146.) First, ERISA preempts Sobertec’s claim for breach of the implied covenant of good faith and fair dealing. Sobertec claims that United violated the implied covenant by “abusing [its] discretionary power” by conducting an allegedly “fraudulent pre-payment claim review” and by “request[ing] records it did not need,” among other claims. (Id. 122.) “[Clommon law claims. . . which are based upon an interference with an attainment of benefits are preempted by ERISA.” Bast, 150 F.3d at 1008. Put otherwise, ERISA preempts a cause of action “based upon an insurance company’s negligent administration of a claim.” Id. (citation omitted). Claims based on a “delay in payments” are claims for “improper processing” and are likewise preempted. Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489, 493 (9th Cir. 1988). That is precisely what Sobertec is arguing 4 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and why the claim is preempted. Second, ERISA preempts Sobertec’s quantum meruit claim. In that claim, Sobertec alleges that United “confirmed . . . that the treatment was authorized and would be covered” under patients’ “policies” but then did not pay Sobertec for the treatment it provided to patients. (Am. Compl. {ql 119-20.) As the California Court of Appeals has already held, this claim is “plainly preempted.” Port Medical, 233 Cal. Rptr. 3d at 852. As that court noted, when a provider “contends it provided covered services to Plan members and now seeks payment for those services . . . it is difficult to imagine a more apparent claim for unpaid benefits under an ERISA plan than [a] quantum meruit claim.” Id.* Because Sobertec “contends it provided covered services to Plan members and now seeks payment for those services,” its quantum meruit claim is preempted. Id. Third, ERISA preempts Sobertec’s unjust enrichment claim. In that claim, Sobertec alleges that United “confirmed to [Sobertec] that the treatment was authorized and would be covered” and that it “would be unjust” to allow United to “receive the benefit of having their insureds receive healthcare for which [United] received premium payments [under the patient’s ERISA plan] but without having to pay for the services . . ..” (Am. Compl. qq 133-34.). Courts addressing this situation have concluded that such claims are preempted, as they would not exist but for the plan, and the alleged losses are ““ inextricably intertwined with the plan’s decision not to pay.” Cal. Pac. Med. Ctr. v. Concentra Preferred Sys., No. C 04-3083 SBA, 2004 U.S. Dist. LEXIS 21389, at *15 (N.D. Cal. Oct. 15, 2004) (dismissing a claim for unjust enrichment brought by a medical provider against an insurer was preempted by ERISA). Sobertec’s unjust enrichment claim is simply an attempt to circumvent ERISA, and should be dismissed. Fourth, ERISA also preempts Sobertec’s promissory estoppel claim, which is likewise E13 based on United's “course of conduct” in paying and processing Sobertec’s patients’ “claims.” (Compl. qq 142-45.) Just as above, ERISA preempts promissory estoppel claims based on the 4 See also Lodi Mem. Hosp. Ass'n v. Tiger Lines, LLC, 2015 U.S. Dist. LEXIS 110495, at *19-20 (C.D. Cal. Aug. 20, 2015) (ERISA preempted a quantum meruit claim); Forest Ambulatory Surgical Assocs., L.P. v. United HealthCare Ins. Co., 2013 U.S. Dist. LEXIS 190703, at *30-32 (C.D. Cal. Mar. 12, 2013) (same). 5 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “improper handling of claims” under ERISA plans. Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1095 (9th Cir. 1985). Sobertec’s own allegations concede that United’s conduct “must” be viewed through the “comprehensive regulatory scheme” that requires United to “handle claims in good faith” and to not “delay or obstruct claims processing.” (Am. Compl. J 142.) That “regulatory scheme” is plainly ERISA, which specifies how United must “handle” and “process[]” Sobertec’s claims. See, e.g., ERISA § 503; 29 CFR § 2560.503-1. Because Sobertec’s promissory estoppel claim “relates to” its obligations to “handle” and “process” claims under ERISA, it is preempted. 3. ERISA Preempts Sobertec’s Fraud Claims Sobertec’s claims for fraud and deceit and negligent misrepresentation (Counts VII and VIII) allege that United intentionally or negligently made false statements regarding its “audits, records requests, and coverage and payment of [Sobertec’s] services.” (Am. Compl. {{ 151, 158.) ERISA preempts those claims because they are based on alleged improper claims processing. ERISA preempts fraud claims based on an insurer or administrator’s audit and claims handling functions. In Port Medical, the California Court of Appeals held that such a fraud claim was preempted. There, an insurer believed that a provider was billing for services it had not rendered and, as a result, “audited” the provider and “require[d] it to submit medical records to support each of its claims.” Id. at 162-63. The provider sued, alleging that the insurer “falsely represented that [its] claims were ‘temporarily declined’ or ‘denied pending receipt of additional documentation’ when in reality they were purposefully, and wrongfully, withholding payment ..” Id. at 163-64. That conduct was allegedly part of a “scheme to put [the provider] out of business.” Id. at 165. The Court of Appeals held that ERISA Section 514(a) preempted the provider’s fraud claim because the insurer’s statement and conduct regarding its audits “goes to the core of the claims handling function.” Id. at 180. Here, Sobertec’s misrepresentation allegations center on United’s statements and conduct > Finn v. United Healthcare Ins. Co., 2013 U.S. Dist. LEXIS 39094, at *4 (S.D. Cal. Mar. 20, 2013) (ERISA preempted a promissory estoppel claim “based on United’s failure to pay benefits provided for under the plan”); Cao v. Aetna Life Ins. Co., 2012 U.S. Dist. LEXIS 168339, at *6 (S.D. Cal. Nov. 6, 2012) (ERISA preempted claim because “had Defendant approved Plaintiff’s claim under the plan, Plaintiff would have no cause of action for . . . promissory estoppel”). 6 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 regarding its pre-payment review and audit processes. Similar to the preempted claim in Port Medical, Sobertec alleges that United falsely represented that patients’ claims were under a valid “audit” but that, in reality, United suspended payment of those claims “indefinitely” and never intended to pay Sobertec. (Am. Compl. J 150-53.) Like the provider in Port Medical, Sobertec alleges that the audits were “false and pretextual” and a knowing and intentional attempt to force Sobertec to “close and cease operations.” (Id. 155.) United’s decision to audit Sobertec’s claims, and its representations regarding the same, are therefore governed by ERISA. That conduct “goes to the core of the claims handling function” and is therefore preempted under Section 514(a). Port Med., Cal. App. 5th at 180. 4. ERISA Preempts Sobertec’s Unfair Competition Law Claim Sobertec’s claim for violations of California’s Unfair Competition Law (“UCL”), Bus. & Prof. Code §§ 17200, et. seq. (Count IX) is also preempted. Sobertec alleges that United engaged in an unfair, unlawful, and fraudulent “scheme” of refusing to pay patients’ claims. (Am. Compl. 167.) Sobertec seeks “restitution” and a declaration that its “claims” are valid. (Id. 171-72.) Just as above, ERISA preempts UCL claims, like the ones here that, as a practical matter, are essentially claims for denial of benefits. UCL claims “cannot” be based on “a failure to pay benefits” because that injury derives “solely from ERISA.” Dual Diagnosis Treatment Ctr., Inc. v. Blue Cross of Cal., 2016 U.S. Dist. LEXIS 162166, at *54 (C.D. Cal. Nov. 22, 2016). Those claims are “subject to ERISA’s exclusive remedies” and are preempted. 1d.; see, e.g., Sarkisyan v. CIGNA Healthcare of Cal., Inc.,613 F. Supp. 2d 1199, 1205-1206 (C.D. Cal. 2009) (Section 514(a) preempts UCL claim based on “improper claims handling practices”). Although couched in various state and federal statutes, Sobertec’s UCL claim is based on United’s “failure” to properly process and pay benefits. Sobertec alleges, infer alia, that United failed to adopt standards for the “processing of claims,” failed to “handle submitted claims carefully, promptly, and transparently,” and improperly used “audits” to review Sobertec’s claims. ¢ See also Tiger Lines, 2015 U.S. Dist. LEXIS 110495, at*19-20 (ERISA preempts provider’s UCL claim for “improper payment of claims”) (citing Cleghorn, 408 F.3d at 1225). In addition, ERISA preempts claims for violations of federal mental health parity laws such as ERISA Section 712a. NYSPA v. UnitedHealth Grp., 798 F.3d 125, 132-134 (2d Cir. 2014). 7 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (Am. Compl. 158.) Sobertec also seeks “restitution,” as well as a declaration that its “claims” are valid and that it has a “right to be reimbursed”—i.e., payment of claims for ERISA benefits. (Id. | 171.) Moreover, Sobertec’s UCL claim is expressly based on ERISA’s mental health parity provisions found at ERISA Section 712a—Sobertec alleges that United imposed “non-quantitative treatment limitations” on the mental health benefits it offered, in violation of the regulations the Department of Labor issued interpreting ERISA’s mental health parity law. (See Am. Compl. J 13-14 (citing 29 C.F.R. § 2590.712(c)(4)(i1)).) Because Sobertec’s allegations are based on United’s alleged “failure to pay benefits,” and other violations of ERISA, its UCL claim is preempted. B. SOBERTEC’S CLAIMS LIKEWISE FAIL ON THE MERITS’ 1. Sobertec’s Implied Contract Claim Fails To State A Claim Sobertec alleges that United breached an implied contract because United used to process and pay claims without further review but in 2106 started to audit and further review its patients’ claims. That contract was allegedly based on a “course of conduct” and Sobertec “expected [United] would continue to honor the parties’ course of dealing . . ..” (Compl. J 89.) But that unilateral expectation cannot be the basis for an implied contract. An implied contract “consists of obligations arising from a mutual agreement and intent to promise where the agreement and promise have not been expressed in words.” Silva v. Providence Hosp. of Oakland, 97 P.2d 798, 804 (Cal. 1939). “The essential elements of an implied-in-fact contract are mutual assent and consideration.” Mesbahi v. Geico Ins., No. CV 07-05772 JF (HRL), 2009 U.S. Dist. LEXIS 92725, at *31-32 (N.D. Cal. Oct. 5, 2009) (internal quotation marks omitted) (citations omitted) (concluding that an allegation based on a claim of an implied-in-fact 7 Several of Sobertec’s claims are also untimely because they were brought after the applicable two-year statute of limitations expired. RJG Consultants, Inc. v. Force Prot., Inc., No. SACV 10- 01465-CJC(PIWx), 2010 U.S. Dist. LEXIS 150913, at *8-9 (C.D. Cal. Dec. 16, 2010) (breach of implied contract); Iverson, Yoakum, Papiano & Hatch v. Berwald, 76 Cal. App. 4th 990, 996, 90 Cal. Rptr. 2d 665, 669 (1999) (quantum meruit); Khobragade v. Covidien Ltd. P’ship, No. 16¢v468, 2019 U.S. Dist. LEXIS 25312, at *22 (S.D. Cal. Feb. 15, 2019) (promissory estoppel); De La Torre v. Icenhower, No. 09cv1161 BTM(BLM), 2009 U.S. Dist. LEXIS 100508, at *15 (S.D. Cal. Oct. 28, 2009) (negligence). All claims that accrued prior to May 14, 2017 are barred by the statute of limitations. 8 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 contract failed for lack of consideration). Here, Sobertec fails to allege mutual assent or consideration. Sobertec’s only basis for the purported contract is an alleged “course of conduct” prior to 2016, in which Sobertec would call to verify benefits and United would generally process and pay for those benefits for other patients in prior instances within 45 days. (See Am. Compl. 91, 120.) But a unilateral expectation that that “course of conduct” would continue does not create an implied-in-fact contract. IV Sols., Inc. v. United Healthcare Servs., No. CV 16-9598-MWF (AGRx), 2017 U.S. Dist. LEXIS 210782, at *46 (C.D. Cal. Sep. 27, 2017) (dismissing a claim alleging breach of an implied-in-fact contract claim without leave to amend where the plaintiff alleged that United paid “between 90 and 100 percent of the billed charges” for ten years, holding that this conduct was not sufficient to establish an agreement that United “would pay whatever [the plaintiff] billed). Although United may have approved prior payments to Sobertec, that does not mean that it is required to approve each and every payment in the future, or is prohibited from asking for necessary detail regarding the proposed payments. See id. Were it otherwise, United would be effectively obligated to pay every patient’s claims for plan benefits simply because it had paid prior claims for benefits for other patients. Sobertec fails to allege any facts that would indicate United mutually assented to the implied contract. Nor is United’s confirmation of patient coverage sufficient to create an implied-in-fact contract. The California Court of Appeals has, in fact, specifically held that coverage confirmation and/or preauthorization phone calls do not create promises to pay benefits separate and apart from the terms of the ERISA plans at issue. See Pac. Bay Recovery, Inc. v. Cal. Physicians’ Servs., Inc., 218 Cal. Rptr. 3d 562, 574-75 (Cal. Ct. App. 2017) (dismissing implied contract claim where provider failed to allege “specific facts” that would show a “meeting of the minds” in pre- authorization communications).® As Pacific Bay recognized, allegations that fail to specify the 8 Cedars Sinai Med. Ctr. v. Mid-West Nat. Life Ins. Co., 118 F. Supp. 2d 1002, 1008 (C.D. Cal. 2000) (“[W]ithin the medical insurance industry, an insurer’s verification is not the same as a promise to pay.”); see also Tenet Healthsystem Desert, Inc. v. Fortis Ins. Co., Inc., 520 F. Supp. 2d 1184, 1194 (C.D. Cal. 2007) (coverage verification “cannot be construed as a binding contractual agreement” (quotations omitted)). 9 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “type [] or extent of treatment” as well as “what exactly” an insurer agreed to pay are insufficient to support an implied contract. Id. at 575. Sobertec’s general allegations contain no such “specific facts.” (See generally, Compl.) For all those reasons, Sobertec’s implied contract claim should be dismissed. 2 Sobertec’s Breach of the Implied Covenant Lacks Merit Sobertec’s claim for breach of the implied covenant of good faith and fair dealing is entirely dependent upon the existence of an implied contract, and therefore is subject to dismissal. “Without a contract, either express or implied, a claim for breach of the implied covenant of good faith and fair dealing is invalid.” Stevens v. Pfizer, Inc., No. 06cv0287-L(BLM), 2006 U.S. Dist. LEXIS 105331, at *9 (S.D. Cal. Apr. 6, 2006). As detailed above, Sobertec has not alleged the existence of an implied contract between it and United. See Bliss v. Richardson, 55 P.2d 591, 593 (Cal. 1936) (holding that a contract that is “void for lack of consideration” is “no agreement” and that in such circumstances, such a holding is tantamount to a conclusion that “no such valid agreement exists”). Absent this underlying agreement, Count II should be dismissed. 3. Sobertec’s Quantum Meruit Claim Fails to State a Claim Sobertec’s quantum meruit claim alleges that United must reimburse it for its services to United’s insureds because United “confirmed that the treatment was authorized and would be covered.” (Am. Compl. { 127.) But Sobertec fails to allege—as it must—that “(1) the plaintiff acted pursuant to ‘an explicit or implicit request for the services’ by the defendant, and (2) the services conferred a benefit on the defendant.” Port Med., 233 Cal. Rptr. 3d at 852 (citation omitted). First, Sobertec’s quantum meruit claim fails because United never requested Sobertec’s services. “[W]hen the services are rendered by the plaintiff to a third person, the courts have required that there be a specific request therefor from the defendant . . . .” Day v. Alta Bates Med. Ctr., 119 Cal. Rptr. 2d 606, 610 (Cal. Ct. App. 2002) (internal quotation marks omitted) (citation omitted). Although Sobertec states that United “specifically requested and authorized Plaintiff’s services,” it bases this allegation on the claim that United “confirmed to [Sobertec] that the treatment was authorized and would be covered.” (See Am. Compl. J 127.) Such an allegation 10 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 does not constitute a “specific request” for services. In fact, courts routinely hold that it does not. See Summit Estate v. Cigna Healthcare of Cal., Inc., 2017 U.S. Dist. LEXIS 167462, at *32-33 (N.D. Cal. Oct. 2017) (dismissing plaintiff’s quantum meruit claim because “[e]ven assuming that Defendants verified coverage and authorized Plaintiff to provide substance abuse treatment services,” those representations did not “plausibly suggest that Defendants requested Plaintiff to render those services”) (internal citations omitted); see also Barlow Respiratory Hosp. v. Cigna Health & Life Ins. Co., 2016 U.S. Dist. LEXIS 187305, at *8 (C.D. Cal. Sept. 30, 2016); Cmty. Hosp. of the Monterey Peninsula v. Aetna Life Ins. Co., 119 F. Supp. 3d 1042, 1052 (N.D. Cal. 2015) (“No reasonable jury could conclude that [the plaintiff] ‘performed services at [Aetna’s] request,” when in fact [the plaintiff] initiated contact with Aetna as to authorization.”). Second, Sobertec’s quantum meruit claim should be dismissed because a valid contract exists that covers the same subject matter. “[I]t is well settled that there is no equitable basis for [quantum meruit] when the parties have an actual agreement covering compensation.” Hedging Concepts, Inc. v. First All. Mortg. Co., 49 Cal. Rptr. 2d 191, 197 (Cal. Ct. App. 1996). Because a contract—the insurance or group health plan itself—exists between United and the patients at issue, any claim for quantum meruit fails. 4. Sobertec’s Unjust Enrichment Claim is not a Valid a Claim Sobertec’s claim for unjust enrichment should be dismissed as California does not recognize such a claim. McBride v. Boughton, 20 Cal. Rptr. 3d 115, 121 (Cal. Ct. App. 2004) (“Unjust enrichment is not a cause of action . . ..”); Durell v. Sharp Healthcare, 108 Cal. Rptr. 3d 682, 699 (Cal. Ct. App. 2010) (“[TThere is no cause of action in California for unjust enrichment.”); Melchior v. New Line Prods., Inc., 131 Cal. Rptr. 2d 347, 357 (Cal. Ct. App. 2003) (same). Rather, unjust enrichment is a type of restitution, available to remedy equitable claims. Durell, 108 Cal. Rptr. 3d at 699 (“Unjust enrichment is synonymous with restitution.”). As California law does not recognize an independent cause of action for unjust enrichment, the Court should dismiss this count. 5s Sobertec’s Open Book Account Claim Fails to State a Claim Sobertec’s claim for open book account is subject to dismissal for the same reasons as its 11 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 contract claim. An “open book account” claim is a “common count” cause of action that Sobertec expressly states is based upon the same conduct underlying its breach of contract claim. (Am. Compl. 138) (noting that the claim is based on the “course of their dealings alleged above”); see also Filmservice Labs. v. Harvey Bernhard Enters., 256 Cal. Rptr. 735, 741 (Cal. Ct. App. 1989) (noting that an open book account is a “common count”). As the California Court of Appeals has held, “[w]hen a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.” McBride v. Boughton, 20 Cal. Rptr. 3d 115, 127 (Cal. Ct. App. 2004). As Sobertec’s open book account claim seeks the same relief as its claim for breach of contract, (Compl. |] 119, 137-39.) it is therefore demurrable for the same reasons as Count I. Supra at 11-12, 17-18. 6. Sobertec’s Promissory Estoppel Claim Fails to State a Claim Sobertec’s promissory estoppel claim alleges that United made a “promise” to Sobertec by confirming coverage, and by previously paying claims submitted by Sobertec. (Am. Compl. q143- 46.) The claim should be dismissed because Sobertec fails to plausibly allege a “clear and unambiguous” promise. Laks v. Coast Fed. Sav. & Loan Ass’n, 131 Cal. Rptr. 836, 839 (Cal. Ct. App. 1976). It is well settled that a verification of health benefits does not create an implied promise to pay. Pac. Bay Recovery, 218 Cal. Rptr. 3d at 574-75 n.6. (insurer’s representation that a patient was “insured, covered, and eligible for coverage” did not constitute a clear and unambiguous promise to pay). Here, the “promises” Sobertec relies on are merely representations of what the plan covers in certain circumstances—not assurances that United would pay based on the circumstances at hand. (See, e.g., Am. Compl. | 141 (claiming that United's representatives “promised” that Sobertec’s services “would be covered and paid for by Defendants™).). Because those representations do not amount to clear and unambiguous promises to pay, Sobertec’s promissory estoppel claim should be dismissed. Sobertec’s claim that the parties’ “course of conduct” constituted a “promise” fares no better. (Id.) Prior conduct “cannot be construed to allege an affirmative promise.” Youngman v. 12 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Nev. Irrigation Dist., 449 P.2d 462, 469 (Cal. 1969). That United and Sobertec interacted one way in the past does not mean that they must continue to do so in the future. Accordingly, Sobertec’s claim for promissory estoppel should be dismissed. 7. Sobertec’s Fraud Claims Are Not Sufficiently Specific Sobertec’s claims for fraud or deceit and negligent misrepresentation allege that United falsely claimed that Sobertec’s treatments “would be covered and paid for by [United],” and that ccc 999 Sobertec’s claims were under a legitimate “‘audit,”” when in fact United intended to “suspend” processing of the claims “indefinitely.” (Am. Compl. {q 148-150, 158.) Those general allegations fail to state a claim with the specificity required by California law. California law requires that intentional and negligent misrepresentation claims be pled with specificity. Stansfield v. Starkey, 269 Cal. Rptr. 337, 345 (Cal. Ct. App. 1990); Cadlo v. Owens- Illinois, Inc., 23 Cal. Rptr. 3d 1, 5 (Cal. Ct. App. 2004). To satisfy that requirement, Sobertec must “show how, when, where, to whom, and by what means the representations were tendered.” Stansfield, 269 Cal. Rptr. at 345 (internal quotation marks omitted) (citation omitted). To the extent Sobertec’s fraud claims are based on pre-authorization communications, its allegations entirely fail to adequately detail the how, when, where, to whom, or means of the purported fraudulent scheme. Sobertec’s claims span “since September 2016,” (Am. Compl. 112), and claim to encompass “hundreds” of claims, (id.), yet Sobertec has declined to identify even one single specific call or interaction where United confirmed or stated that Sobertec’s patient’s claims would be covered, let alone paid for by United. (See generally, id.) Sobertec’s failure to include this necessary information merits dismissal. See Stansfield, 269 Cal. Rptr. at 345 (affirming dismissal of fraud claims based on the absence of information regarding the person making the allegedly fraudulent statement). Further, as noted above, even if these allegations were specifically pled, statements about benefits are not promises to pay, meaning Sobertec could not have reasonably relied on the representations. See Cedars Sinai Med. Ctr., 118 F. Supp. 2d at 1008. Sobertec’s conclusory allegations regarding United's knowledge and intent are also deficient. Sobertec alleges that United’s statements were “knowingly false when made,” without alleging any basis for that conclusion. See Wilhelm v. Pray, Price, Williams & Russell, 231 Cal. 13 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rptr. 355, 358 (Cal. Ct. App. 1986) (sustaining a demurrer because the plaintiff did not “plead with specificity a factual basis for how [the defendant] ‘knew’ the representations she communicated . . . were false.”); see also (Am. Compl. { 148.) There is no indication in the Complaint that the patients lacked coverage under their ERISA plans, or that United had a general prohibition on payments to Sobertec. Moreover, Sobertec alleges no facts supporting its legal conclusion that United’s statements concerning its audits were false when made. In fact, Sobertec’s patients’ ERISA plans include procedures that allow United to request additional information prior to approving a claim for benefits. (See Nguyen Decl. at Ex. 1, 111 (“We may request additional information from you to decide your claim for Benefits.”); Ex. 2, 287 (same).) Sobertec’s allegation that these audits are part of some nefarious scheme are unfounded and based on general assumptions—not particular, plausible allegations. Therefore, the fraud claims should be dismissed. 8. Sobertec’s UCL Count Fails to State a Claim Sobertec alleges that United violated the UCL by violating a laundry list of state and federal statutes. (See Am. Compl. 168.) But the barebones allegations are insufficient to state a claim under the UCL, which prohibits “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. To have standing to bring a claim under the UCL, Sobertec must allege that it “suffered injury in fact” and “lost money or property” as a result of United’s actions. Bus. & Prof. Code §§ 17204, 17535; Kwikset Corp v. Super Ct., 246 P.3d 877, 884-85 (Cal. 2011). To make this showing, Sobertec must allege facts supporting an equitable restitution claim—that is, that “a defendant has wrongfully acquired funds or property in which a plaintiffs has an ownership interest.” Feitelberg v. Credit Suisse First Bos., LLC, 36 Ca. Rptr. 592, 601 (Cal. Ct. App. 2005).° Although Sobertec claims that it should have been paid damages for breach of contract, “contract damages” are not an “an identifiable fund in United’s position in which [the plaintiff] could claim an ownership interest for the purposes of a claim for restitution.” IV Sols., Inc. v. United Healthcare 9 See Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 949 (Cal. 2003) (restitution requires that “money or property [came] from the prospective plaintiff in the first instance”). 14 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Servs., 2014 U.S. Dist. LEXIS 197034, #24 (C.D. Cal. May 29, 2014). This is fatal to Sobertec’s UCL claim. Even if it could seek some relief, however, Sobertec cannot state a claim under any of the three prongs of the UCL. First, Sobertec cannot state a claim under the UCL’s “unfair” prong, which is limited to consumers and competitors. See Linear Tech. Corp. v. Applied Materials, Inc., 61 Cal. Rptr. 3d 221, 237 (Cal. Ct. App. 2007). A non-competing business cannot resolve a business-to-business contract dispute through a claim under the UCL’s “unfair” prong. Id. Sobertec is neither a competitor nor a consumer of United. Rather, it is a non-competing business seeking to recover money it claims United was obligated to pay for services it provided to United’s insureds. Therefore, Sobertec cannot to pursue a claim under the “unfair” prong of the UCL. Second, Sobertec also cannot state a claim under the “fraudulent” prong of the UCL. A plaintiff alleging a fraudulent business practice under the UCL “must state with reasonable particularity the facts supporting the statutory elements of the violation.” Flores v. EMC Mortg. Co., 997 F. Supp. 2d 1088, 1118 (E.D. Cal. 2014) (citation omitted). As established above, Sobertec has failed to adequately allege fraud (see supra pp. 13-14), and therefore cannot state a claim under the UCL’s “fraudulent” prong. Third, Sobertec also cannot state a claim under the “unlawful” prong of the UCL. A business practice is “unlawful” if it violates an underlying state or federal statute or the common law. Id. A plaintiff cannot state a claim merely by alleging a “laundry list” of statutes. Hutchins v. Nationstar Mortg. LLC, 2017 U.S. Dist. LEXIS 155637, at *35 (N.D. Cal. Sept. 22, 2017). Here, in the span on one paragraph, Sobertec alleges United's “conduct” was “unlawful” because it violated a series of state and federal statutes. (Am. Compl. 168.) That “laundry list” of conclusory allegations fails to allege a claim under the “unlawful” prong of the UCL. IV. CONCLUSION United respectfully requests that the Court sustain its demurrer to the Complaint without leave to amend. See Hendy v. Losse, 819 P.2d 1, 14 (Cal. 1991). 15 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 Dated: January 7, 2020 DORSEY & WHITNEY LLP By: /s/ Meghan L. DesLauriers Divya S. Gupta Michelle S. Grant (admitted pro hac vice) Andrew Holly (admitted pro hac vice) Meghan L. DesLauriers (admitted pro hac vice) Attorneys for Defendants UnitedHealth Group Incorporated, United HealthCare Services, Inc., UnitedHealthcare Insurance Company, United Behavioral Health, UnitedHealthcare Service LLC, Optumlnsight, Inc., Optum Services, Inc. 16 DEFENDANTS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEMURRER AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF ORANGE I am employed in the City of Minneapolis, County of Hennepin, State of Minnesota. I am over the age of 18 years and not a party to the within action. My business address is 50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402. On January 7, 2020, I served a copy of the following document described as: DEFENDANTS’ NOTICE OF DEMURRER; DEMURRER; AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF on the interested parties in this action as follows: Zachary Rothenberg Attorneys for Plaintiffs Salvatore J. Zimmitti SOBERTEC LLC and Katherine A. Bowles BEACHSIDE RECOVERY LLC NELSON HARDIMAN LLP 1100 Glendon Avenue, 14" Floor Los Angeles, CA 90024 Tel: (310) 203-2800; Fax: (310) 203-2727 Email: zrothenberg@nelsonhardiman.com Email: szimmitti@nelsonhardiman.com Email: kbowles @nelsonhardiman.com BY MAIL: By placing a true copy thereof enclosed in a sealed envelope(s) addressed as above, and placing each for collection and mailing on that date following ordinary business practices. I am “readily familiar” with this business’ practice for collecting and processing correspondence for mailing. On the same day that correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the U.S. Postal Service in Minneapolis, Minnesota, in a sealed envelope with postage fully prepaid. [] BY OVERNIGHT DELIVERY: I enclosed the document(s) in an envelope or package provided by an overnight delivery carrier and addressed as above. I placed the envelope or package for collection and overnight delivery at an office or a regularly utilized drop box of the overnight delivery carrier. [ BY MESSENGER SERVICE. I served the documents by placing them in an envelope or package addressed to the person(s) at the address(es) above and providing them to a professional messenger service for service. A declaration by the messenger is attached. [] BY FACSIMILE: Based on an agreement of the parties to accept service by fax transmission, I faxed the document(s) to the person(s) at the fax number(s) listed above. The telephone number of the sending facsimile machine was (714) 800-1499. The sending facsimile machine issued a transmission report confirming that the transmission was complete and without error. A copy of that report is attached. Ol BY E-MAIL OR ELECTRONIC TRANSMISSION: Based on a court order or an agreement of the parties to accept service by e-mail or electronic transmission, I caused the document(s) to be sent from roadfeldt.christi@dorsey.com to the person(s) at the e- mail address(es) listed above. 1 PROOF OF SERVICE AN Un BA W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 23 26 27 28 STATE: I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. FEDERAL: I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on January 7, 2020, at Minneapolis, Minnesota. Christi Roadfeldt /s/ Christi Roadfeldt (Type or print name) (Signature) 2 PROOF OF SERVICE
