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Health Net of California, Inc v. Department of Health Care Services

July 19, 2011

HEALTH NET OF CALIFORNIA, INC., PLAINTIFF AND RESPONDENT,
v.
DEPARTMENT OF HEALTH CARE SERVICES, DEFENDANT AND APPELLANT.



(Super. Ct. No. 00CS00523)

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

Health Net of California v. Dept. of Health Care CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

In the prior appeal in this case, we found, in relevant part, that the Department of Health Care Services (Department) breached its contract with Health Net of California, Inc. (Health Net).*fn1 On remand, the trial court awarded Health Net prejudgment interest as provided by statute on the prepayment discount refund and on the recalculated capitation rate differential. (Civ. Code, § 3287.) We reject the Department's argument that the plain meaning of the contract usurps Health Net's statutory right to prejudgment interest and affirm the judgment.

FACTS

Whether Health Net is entitled to prejudgment interest turns on the applicable statutes and the terms of its contract with the Department. Thus, the few facts needed to provide a context can be extracted from our earlier opinion.

In 12 California counties, beneficiaries of California's Medicaid program (Medi-Cal) can choose between two prepaid health plans, a commercial plan or a local initiative, under what has come to be known as the two-plan model. (Cal. Code Regs., tit. 22, §§ 53800, subd. (a), 53810, subd. ll.) The Department is the agency responsible for implementing the Medi-Cal program. In 1996 Health Net and the Department executed a two-plan model managed care contract (the contract). Health Net agreed to provide all covered services to eligible Medi-Cal beneficiaries in Contra Costa, Fresno, Los Angeles, and Tulare Counties regardless of cost in return for a fixed capitation rate per member per month. The Department agreed to recalculate the capitation rates annually. In 1998 the parties amended the contract.

THE STATUTES

Civil Code section 3287, subdivision (a) creates a statutory right to prejudgment interest as follows: "Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day . . . ." The Department does not argue that the amount of its obligation is not "capable of being made certain by calculation." "'If allowable, interest is an element of damages provided by statute.' [Citations.]" (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830, fn. 4.)

Instead, the Department argues that the contract rate of interest prevails over the statutory rate as set forth in Civil Code section 3289, subdivision (a): "Any legal rate of interest stipulated by contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation." The Department contends that the contract prohibits the award of interest and therefore, pursuant to the terms of section 3289, Health Net was not entitled to interest. The contractual interest rate applies "up to the date of judgment." (Reid v. Balter (1993) 14 Cal.App.4th 1186, 1196.) We therefore must ascertain whether the contract provided for interest applicable to the date of judgment.

THE CONTRACT

The Department bases its appeal on language found within the "Disputes and Appeals" section of the contract, including language contained in amendment 7 to the contract. The dispute resolution provision outlines the procedures to be followed, from the initial notification that a dispute exists through the administrative appeal. Three sections provide the necessary context in which to ...


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