Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Doctors Medical Center of Modesto v. Global Excel Management

August 14, 2009


The opinion of the court was delivered by: Oliver W. Wanger United States District Judge



Plaintiff Doctors Medical Center of Modesto ("Doctors Medical") filed this action against Defendants Global Excel Management, Inc. ("Global") and Maximus, Inc. ("Maximus") in the Superior Court of California, County of Stanislaus, on June 9, 2008, asserting claims for breach of contract and common counts (goods and services rendered) against Global and a claim for intentional interference with contractual relations against Maximus. Defendants removed this action based on diversity of citizenship on August 19, 2008. Plaintiff contends it provided emergency hospital services in June 2006 to a patient who was a member of Global's health plan.*fn1 Global retained Maximus to provide a review of Plaintiff's charges and Maximus allegedly recommended that Global pay Plaintiff less than one-third of Plaintiff's total charges for the services. Plaintiff alleges that Global tendered a check in the amount recommended by Maximus and marked it "payment in full." Plaintiff asserts that it deposited the check under protest. Doctors Medical now sues to recover the remaining balance.

Before the court for decision are five motions, one brought by Defendant Maximus, three brought by Defendant Global, and one motion for sanctions brought by Plaintiff. First, Maximus moves for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) on the grounds that: 1) Maximus's conduct in rendering an opinion to Global on the reasonable value of Plaintiff's services was privileged because a) Maximus was acting as Global's agent and thus cannot be held liable for inducing a breach of the corporation's contract, b) Maximus is protected by the common interest privilege proscribed by Cal. Civ. Code § 47(c), and c) Maximus is protected by the common law adviser's privilege, and 2) the complaint fails to allege facts establishing the existence of an enforceable contract between Plaintiff and Global, which is required to support a claim for intentional interference with contractual relations. (Doc. 7.)

Second, Defendant Global moves to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(2) on the grounds that as a Canadian corporation with its principal place of business in Quebec, Canada, there is insufficient evidence to establish that Global has or had minimum contacts with California to subject it to the jurisdiction of this court. (Doc. 10.) Third, Defendant Global moves to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) on the ground that the facts as alleged demonstrate the existence of the defense of accord and satisfaction. (Doc. 11.) Finally, Plaintiff and Defendant Global cross-move for sanctions pursuant to Fed. R. Civ. P. 11. (Docs. 30 & 35.)


This action arises out of a dispute between Plaintiff Doctors Medical and Defendant Global Excel over what constitutes a reasonable and customary value of Plaintiff's services to a patient. Doctors Medical Center is a non-profit California corporation that has its principal place of business in Modesto, California. Doctors Medical Center is a hospital that provides medical care to patients. Defendant Global is a Canadian corporation. It maintains that it acts as a third party claims administrator, not a health plan or insurer. Defendant Maximus is a company that provides independent external reviews of claims to private entities as well as the federal and various state governments. Plaintiff contends that it provided emergency hospital services from June 6, 2006 to June 9, 2006 to a patient who was a member-enrollee of Global's "health plan." (Complaint at ¶8.) According to Global, the patient, identified as M.D. in the complaint, was insured under a traveler's health insurance policy issued by Elvia France. M.D., a citizen of France, was hospitalized while on a visit to the United States.

Doctors Medical charged $159,207.21 for M.D.'s three-night stay. (Complaint at ¶11.) Plaintiff alleges Global hired Maximus to review Plaintiff's charges and, in a letter to Global dated November 21, 2006, Maximus recommended that Global pay Plaintiff $46,404.26. (Complaint at ¶14.) Plaintiff alleges Global tendered a check to Plaintiff for this amount. An accompanying letter advised Plaintiff that negotiation of the check constituted "payment in full" and would release Global from any further liability. (Complaint at ¶13.) Plaintiff deleted the "payment in full" language on the check stub and deposited the check under protest. (Id. at ¶15.) Plaintiff now sues to recover the remaining $112,802.95 it claims it is owed. (Id. at ¶16.)


A. Legal Standard

A Rule 12(c) motion challenges the legal sufficiency of the opposing party's pleadings after the pleadings are closed. Judgment on the pleadings is appropriate when, even if all material facts in the pleading under attack are true, the moving party is entitled to judgment as a matter of law. Honey v. Distelrath, 195 F.3d 531, 532-33 (9th Cir. 1999) (citing Nelson v. City of Irvine, 143 F.3d 1196, 1200 (9th Cir. 1998)). The court must assume the truthfulness of the material facts alleged in the complaint. All inferences reasonably drawn from these facts must be construed in favor of the responding party.

Westlands Water Dist. v. Firebaugh Canal, 10 F.3d 667, 670 (9th Cir. 1993); see also General Conference Corp. of Seventh-Day Adventists v. Seventh Day Adventist Congregation Church, 887 F.2d 228, 230 (9th Cir. 1989). In addition, all allegations of fact by the party opposing the motion are accepted as true, and are construed in the light most favorable to that party. McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir. 1988). Allegations of the moving party which have been denied are assumed to be false. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1990)

As with a motion to dismiss pursuant to Rule 12(b)(6), if matters outside of the pleadings are presented to and not excluded by the court on a motion for judgment on the pleadings, the motion shall be treated as one for summary judgment. Fed. R. Civ. P. 12(c). Nevertheless, a court may take judicial notice of matters of public record, including "records and reports of administrative bodies" without converting the motion to one for summary judgment. See Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Generally when ruling on a motion to dismiss, the court must disregard facts that are not alleged on the face of the complaint or contained in documents attached to the complaint. Hal Roach, 896 F.2d at 1555 n. 19. However, the "incorporation by reference" doctrine permits a court to take into account documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)). The Ninth Circuit has extended the "incorporation by reference" doctrine to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint. Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) (holding that the district court properly considered documents attached to a motion to dismiss that described the terms of plaintiff's group health insurance plan, where plaintiff alleged membership in the plan, his claims depended on the conditions described in the documents, and plaintiff never disputed their authenticity); see also Horsley v. Feldt, 304 F.3d 1125, 1135 (11th Cir. 2002) (taking into account newspaper article containing allegedly defamatory statement under the "incorporation by reference" doctrine where it was "central" to plaintiff's claim, defendant attached it to the motion for judgment on the pleadings, and plaintiff did not contest its authenticity).

B. Is Maximus's Conduct Protected Because It Was Acting as Global's Agent?

The tort cause of action for interference with a contract does not lie against a party to the contract. Shoemaker v. Myers, 52 Cal. 3d 1, 24 (1990). Otherwise, a litigant would be able to circumvent the restriction against recovery of tort damages in breach of contract cases. See Dryden v. Tri-Valley Growers, 65 Cal. App. 3d 990, 999 (1977) (allowing a plaintiff to transform a breach of contract claim into the tort of intentional interference with contractual relations would "enable him to recover tort damages... to which he is not entitled under California law."). Just as a corporation cannot be sued for inducing a breach of the corporation's own contract, neither can its corporate agents. Shoemaker, 52 Cal. 3d at 24; Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 576 (1973) ("ordinarily corporate agents and employees acting for and on behalf of the corporation cannot be held liable for inducing a breach of the corporation's contract since being in a confidential relationship to the corporation their action in this respect is privileged"). In Gruenberg, the California Supreme Court dismissed claims against an insurance company's attorneys and insurance adjuster who were deemed to be acting within the scope of their agency. Id.

Maximus argues that, as Global's agent, its conduct was protected and no claim can be brought against it for intentional interference with contractual relations. Maximus cites the complaint in asserting that "[p]laintiff here expressly alleges in the complaint that Maximus was Global Excel's agent and that it was acting within the scope of that agency in performing the acts alleged in the complaint." (Doc. 7 at 6.) The section of the complaint Maximus cites reads:

At all relevant times each of the defendants, including employer, joint venturer, representative, alter ego, the DOE defendants was and is the agent, employee, defendants, and was, in performing the acts complained subsidiary, and/or partner of one or more of the other employment, joint venture, or partnership authority, of herein, acting within the scope of such agency, and/or is in some other way responsible for the acts of one or more of the other defendants.

(Complaint at ¶6.) This paragraph is on the second page of the complaint, in the section entitled "Parties" and comes before the section on "Factual Background."

Plaintiff disputes this characterization, arguing Maximus was not an agent of Global. Plaintiff explains that Paragraph 6 of the complaint was pled in the alternative. A review of the paragraph reveals that it does not assert Maximus is an agent of Global but makes general allegations about agency and authority with respect to the multiple defendants' acts.

Plaintiff further notes that in the November 21, 2006 letter from Maximus to Global regarding the recommended payment amount for Doctors Medical's services, attached by Maximus as Exhibit A to the Declaration of Thomas Naughton, Maximus states: "Maximus is an organization that contracts with Global Excel Management to provide independent external reviews of denials of requested health care services and/or reimbursement of health care services. Maximus review personnel and consultant specialty physicians are impartial. They do not work for Global Excel Management (the Health Plan)."*fn2 (Doc. 7-2 at 4.) Plaintiff contends this statement by Maximus and its description of itself as an independent external review entity casts doubt on the existence of an agency relationship between Maximus and Global.

Plaintiff asserts that Maximus is not Global's agent in its opposition brief. Because in a 12(c) motion, factual allegations by the non-moving party are accepted as true and allegations of the moving party which are denied are assumed to be false, Maximus cannot prevail on this ground that it is a party to the hospital contract for medical services. Hal Roach, 896 F.2d at 1550.

C. Is Maximus's Conduct Protected by the Common Interest Privilege as Set Forth in California Civil Code § 47(c)?

California Civil Code section 47, subdivision (c), states, in pertinent part, that a privileged publication is one made: "In a communication, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information." Malice, as used in section 47(c), means "a state of mind arising from hatred or ill will, evidencing a willingness to vex, annoy or injure another person." Cabanas v. Gloodt Assocs., 942 F.Supp. 1295, 1301 n.7 (E.D. Cal. 1996) (internal quotations and citation omitted). The plaintiff has the obligation to plead and prove malice, which may not be inferred from the publication itself. Cal. Civ. Code § 48; Lundquist v. Reusser, 7 Cal. 4th 1193, 1211-12 (1994). The existence of the common interest privilege is ordinarily a question of law for the court. Institute of Athletic Motivation v. University of Illinois, 114 Cal. App. 3d 1, 13 n. 5 (1980). Maximus argues that it contracted with Global to evaluate and make a recommendation regarding the reasonable value of Plaintiff's services to Global. It asserts that this meets the test set forth in Cal. Civ. Code § 47(c) because Maximus communicated to an interested party who requested its evaluation when it sent the November 21 billing payment recommendation letter to Global. Maximus contends the privilege applies because Global fails to allege Maximus acted with malice, which is the only exception to the privilege.

Plaintiff rejoins it has alleged Maximus acted with malice in Paragraph 31 of the complaint where it alleges that Maximus "improperly interfered" with the contractual relationship "by convincing Global Excel to withhold full and proper payment...on the pretext that Global Excel had such a right." (Complaint at ¶31.) Plaintiff also cites Paragraph 32: "Maximus knew that Global Excel had no such right, yet nevertheless counseled Global Excel to withhold full payment in the belief that Doctor's Medical Center would compromise the full amount of the claim due to a desire to avoid the expense and effort needed to collect the proper amount due (and not because of any substantive merit to [M]aximus's advice), and that Maximus would be compensated based upon a percentage of such ill-gotten gain." (Complaint at ¶31.)

While Plaintiff claims it alleged malice by Maximus in the complaint, it is not clearly asserted based on the excerpts of the complaint above. Maximus's motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) on this ground is GRANTED WITH LEAVE TO AMEND.

D. Privilege"?

Is Maximus's Conduct Protected by the Common Law "Adviser's

The adviser's or agent's privilege extends to individuals and entities who serve as business advisors or agents and is applicable to advice relating to contracts generally. Los Angeles Airways, Inc. v. Davis, 687 F.2d 321, 326 (9th Cir. 1982). A business advisor may counsel his principal to breach a contract that he reasonably believes to be harmful to his principal's best interests. Id. "The privilege is designed to further certain societal interests by fostering uninhibited advice by agents to their principals." Id. at 328. The privilege applies when the defendant acts with a predominant motive to benefit the corporation's interest. The privilege is not vitiated if the agent's motive to advance its personal interests is secondary to benefitting the principal.*fn3 Huynh v. Vu, 111 Cal. App. 4th 1183, 1200 (2003).

California Civil Code § 2295 defines agent: "An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency." Under California law, the primary characteristic of an agency relationship is the principal's right to control the agent's conduct. In re Tsurukawa, 287 B.R. 515, 521 (9th Cir. 2002). The essential characteristics of an agency relationship are as follows: "(1) An agent or apparent agent holds a power to alter the legal relations between the principal and third persons and between the principal and himself; (2) an agent is a fiduciary with respect to matters within the scope of the agency; and (3) a principal has the right to control the conduct of the agent with respect to matters entrusted to him." Garlock Sealing Technologies, LLC v. NAK Sealing Technologies Corp., 148 Cal.

App. 4th 937, 964 (2007) (citation omitted). Moreover, the existence of agency is a question of fact. Michelson v. Hamada, 29 Cal. App. 4th 1566, 1576 (1994).

The relationship between Maximus and Global does not appear to fit the definition of agency. Maximus did not represent Global in dealing with any third party nor did Global have the right to control the conduct of Maximus, as the latter is an independent external review organization. Maximus claims it was an agent of Global and Plaintiff asserts it was not. This is a disputed issue of fact and thus is not the proper subject of a 12(c) motion. In addition to the issue of whether Maximus and Global had an agency relationship, the standard of decision for a Rule 12(c) motion requires that Plaintiff's assertions be taken as true. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.