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Cotton v. Starcare Medical Group

March 30, 2010


Appeals from judgments of the Superior Court of Orange County, David R. Chaffee, Judge. Affirmed in part and reversed in part. (Super. Ct. No. 30-2008-00101022).

The opinion of the court was delivered by: Rylaarsdam, Acting P. J.



Plaintiffs Sylvia Cotton, Janice Mitchell, Patricia Miller and Terrie Essex appeal from judgments dismissing their claims against defendants StarCare Medical Group, Inc. (StarCare) and PacifiCare of California, Inc. (PacifiCare). In case number G040920, the court entered judgment for StarCare after sustaining its demurrer to plaintiffs' original complaint without leave to amend and denying a motion to either set aside the ruling or grant reconsideration of it. In case number G041809, the court dismissed plaintiffs' action against PacifiCare after sustaining its demurrer to the first amended complaint without leave to amend.

We granted a request to consolidate the appeals because they arose from the same underlying lawsuit and it appeared they presented the same primary issue, whether plaintiffs' claims against these defendants are preempted by the federal Medicare Act (42 U.S.C. § 1395 et seq.; Medicare Act). Upon further review, we reverse the judgment dismissing plaintiffs' action against StarCare because the trial court abused its discretion by ruling on StarCare's demurrer to the original complaint after the parties stipulated to continue the hearing on objections to the original complaint and allow plaintiffs an opportunity to submit an amended complaint. As for the judgment dismissing the action against PacifiCare, we shall affirm the dismissal as to one cause of action but reverse as to the remaining claims.


1. Case No. G040920

a. Background

The original complaint identified plaintiffs as the children of T.J. Jackson, a man over 64 years of age. They alleged Jackson "assigned his Medicare benefit to and enrolled as a member of `Secure Horizons,' a health plan for seniors operated by PacifiCare," which "agreed to provide to [Jackson] all of the services to which he was entitled under Medicare . . . ." StarCare is described as a "business organization of unknown type" in some manner related to Gateway Medical Group, Inc., an entity, described "as a `medical group.'" Plaintiffs alleged StarCare and Gateway contracted with physicians to secure the latter's services and, in turn, contracted with Secure Horizons to "provide all `physician services'" to enrollees plus "`utilization review,' a process by which requests for authorization for medical services of any kind, submitted on behalf of enrollees . . . are reviewed to determine medical appropriateness . . . ."

Plaintiffs alleged that, after Jackson underwent surgery to repair a broken leg, he went to a nursing facility named St. Edna's Subacute and Rehabilitation Center (St. Edna's) operated by another named defendant, Covenant Care California (Covenant). They pleaded St. Edna's failed to provide adequate care to Jackson, causing him to "suffer from starvation, dehydration, and infection, as well as emotional distress," ultimately resulting in his death.

The complaint alleged StarCare was obligated to oversee Jackson's treatment while at St. Edna's, but allowed its receipt of "a fixed or periodic fee" for services and its participation "in a risk sharing agreement" that gave it a portion of "any savings resulting from the denial of reasonably necessary medical care," to affect its decisions concerning his health care. Thus, StarCare breached its duties to "review requests for . . . medical service" based solely on "whether the requested service was reasonably medically necessary" and to "conduct utilization review and quality assurance activities without regard for the cost," and also failed to inform Jackson and his family of its financial conflicts of interest.

StarCare and other defendants filed demurrers and motions to strike the complaint. In part StarCare's demurrer argued the causes of action alleged against it were preempted by the Medicare Act.

The court set a hearing on the demurrers and motions to strike for May 2, 2008. On April 24, the parties submitted an executed stipulation agreeing to continue the hearing to June 6. The trial court denied the request, apparently because it failed to explain the necessity for a continuance.

On April 29, the parties filed an amended stipulation. This stipulation explained that, "upon review of [d]efendants' demurrers and motions to strike" to the original complaint, "[p]laintiffs' counsel has determined that it would be in the interests of justice and economy for [p]laintiffs to amend the complaint to address and attempt to resolve the issues presented by [d]efendant[s,]" but that "[p]laintiffs' lead counsel [was] on vacation . . . through May 6 . . . and w[ould] need until May 30 . . . to prepare and file an amended complaint . . . ." Based on these grounds, the parties stipulated "the hearing on all . . . demurrers and motions to strike . . . shall be continued to June 6 . . . ." (Bold omitted.) Citing the goal of "expeditiously . . . litigat[ing] these cases," concluding the second stipulation's extension request did not "actually [contain a] stipulation for an amendment" or "any specific date . . . by which the amendment [would] be done," plus a disbelief that lead counsel's vacation would in "some way impair the law firm['s] . . . ability to . . . amend" the complaint, the trial judge refused to accept the second stipulation.

The court then sustained StarCare's demurrer to the original complaint without leave to amend on preemption grounds. Plaintiffs moved to set aside the ruling or to reconsider it, but the trial court denied this request as well and entered judgment dismissing the action against StarCare.

b. Denial of Continuance

Plaintiffs' first contention is a procedural one; the trial court abused its discretion by rejecting the parties' stipulation to continue the hearing on the demurrers and motions to strike. We agree.

"A stipulation in proper form is binding upon the parties if it is within the authority of the attorney. [Citations.] Unless contrary to law, court rule or public policy, a stipulation is also binding upon the court. [Citations.]" (Bechtel Corp. v. Superior Court (1973) 33 Cal.App.3d 405, 411-412; see also Glade v. Superior Court (1978) 76 Cal.App.3d 738, 744 ["a stipulation in proper form is binding upon a court unless it is contrary to law, court rule, or public policy" or "if it purports to bind the court upon a question of law"].) Since the parties sought a continuance of the hearing on the demurrers and motions to strike, they needed to show good cause for it. (Lerma v. County of Orange (2004) 120 Cal.App.4th 709, 716; Cal. Rules of Court, rule 3.1332(c).) Here, plaintiffs and all defendants who filed demurrers or motions to strike the original complaint agreed to continue the hearing on their objections and allow plaintiff's counsel, who was temporarily absent from the firm's office, the opportunity to consider filing an amended complaint that would eliminate or limit the objections. Thus, good cause existed for the stipulated one-month continuance sought by the parties. (Pham v. Nguyen (1997) 54 Cal.App.4th 11, 16-17; Code Civ. Proc., § 595.2; Cal. Rules of Court, rule 3.1332(c)(3), (d)(3) & (9).)

The trial court's concern for avoiding undue delay in the proceedings is contradicted by the contents of the stipulation. The second stipulation provided a date, May 30, by which plaintiffs were to file an amended complaint. At the hearing, plaintiffs' counsel also explained that since filing the original complaint they had been "going through additional medical records" and other information defendants had provided that would allow them to amend the complaint and "address some of the issues with regard to the demurrers" and "sufficiency of the pleadings . . . ." Thus, this is not a case where the parties were dilatory in litigating the issues. If it had allowed a continuance, the court could have notified the parties of its intent to limit future delays. While the trial judge noted the second stipulation did not include an express agreement to file an amended complaint, the contrary is clear from the terms of that stipulation. Defendants were willing to afford plaintiffs the opportunity to file an amended complaint before seeking a ruling on their objections to the original complaint.

The order denying the stipulated continuance request is governed by the abuse of discretion standard. "An abuse of discretion occurs when, in light of applicable law and considering all relevant circumstances, the court's ruling exceeds the bounds of reason. [Citations.]" (North American Capacity Ins. Co. v. Claremont Liability Ins. Co. (2009) 177 Cal.App.4th 272, 285; see also Shamblin v. Brattain (1988) 44 Cal.3d 474, 478.) "[T]rial court discretion is not unlimited. `The discretion of a trial judge is not a whimsical, uncontrolled power, but a legal discretion, which is subject to the limitations of legal principles governing the subject of its action, and to reversal on appeal where no reasonable basis for the action is shown. [Citation.]' [Citations.]" (Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348, 355.)

"Action that transgresses the confines of the applicable principles of law" constitutes "an `abuse' of discretion. [Citation.]" (City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 1297.) "The trial judge must exercise his discretion with due regard to all interests involved. The denial of a continuance which has the practical effect of denying the applicant a fair hearing is often held reversible error. [Citations.]" (Cohen v. Herbert (1960) 186 Cal.App.2d 488, 494.) These principles apply in this case.

We conclude the trial court abused its discretion by denying a continuance that effectively barred plaintiffs from responding to the demurrers and motions to strike by either filing an amended complaint or written opposition. ...

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