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Mountain View Surgical Center v. Cigna Health Corporation

United States District Court, C.D. California

February 9, 2015

MOUNTAIN VIEW SURGICAL CENTER, a California corporation, Plaintiff,
v.
CIGNA HEALTH CORPORATION, a Delaware corporation, Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT IN PART AND DENYING IN PART [Dkt. No. 14]

DEAN D. PREGERSON, District Judge.

Presently before the court is Defendants Connecticut General Life Insurance Company and CIGNA Health and Life Insurance Company (collectively, "Cigna")'s Motion to Dismiss. Having considered the submissions of the parties and heard oral argument, the court grants the motion in part, denies in part, and adopts the following order.

I. Background

Plaintiff Mountain View Surgical Center ("Mountain View") is a multiple specialty surgery center whose patients include Cigna's insureds. (First Amended Complaint ("FAC") ¶¶ 14-15.) Before providing medical services to Cigna insureds, Plaintiff calls Cigna to confirm that the patient's insurance covers the specific treatment. (FAC ¶ 16.) Cigna authorizes covered treatments and promises to pay Mountain View for providing the medical services. (Id. ¶ 17.) Cigna authorizes treatments over the phone and/or via a confirmation letter sent to Plaintiff. (Id. ¶ 18.)

Mountain View provided medical services valued at $1, 159, 440.20 to forty-one particular patients insured by Cigna. (FAC ¶ 20.) Mountain View alleges that it provided those services based on "CIGNA's promise to make payments on behalf of its insured patients and on CIGNA's prior course of dealing." (Id. ¶ 21.) Though Mountain View submitted claims for reimbursement to Cigna, Cigna did not pay the claims. (Id. ¶¶ 22, 27.) Instead, Cigna accused Mountain View of engaging in fraudulent "fee-forgiveness, " or improper release of patients from their payment obligations. (Id. ¶ 24).

Mountain View then brought this action. The First Amended Complaint alleges causes of action for breach of oral contract, breach of implied contract, fraud, unjust enrichment, and unfair business practices. Cigna now moves to dismiss the First Amended Complaint.

II. Legal Standard

A complaint will survive a motion to dismiss when it contains "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations, " it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions, " a "formulaic recitation of the elements, " or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

III. Discussion

A. Breach of Oral Contract

The elements of a breach of contract claim are (1) the existence of a contract, (2) performance or excuse for nonperformance, (3) defendant's breach, and (4) damages. Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011). A claim for breach of an oral contract requires the same showing. See Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1141 (N.D. Cal. 2013). A valid contract requires capable, consenting parties, a lawful object, and sufficient cause or consideration. Janda v. Madera Community Hosp., 16 F.Supp.2d 1181, 1186 (E.D. Cal. 1998); Cal. Civ. Code § 1550.

Here, Defendant contends that the FAC does not adequately allege that Cigna received consideration for its promise to pay for medical treatments. (Motion at 4.) The California Civil Code defines good consideration as "[a]ny benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor...." Cal. Civ. Code § 1605. The benefit or prejudice must, however, be bargained for in exchange for the promise. Steiner v. Thexton, 48 Cal.4th 411, 421 (2010). In other words, "the benefit or prejudice must have induced the promisor's promise." Id.

Plaintiff responds that it has adequately alleged consideration by alleging that Defendant has "an obligation to reimburse Plaintiff for valuable medical services rendered to patients insured by Defendant, which Defendant authorized orally and promised to reimburse Plaintiff, " and that "Defendant has breached its obligation to reimburse Plaintiff...." (FAC ¶¶ 33, 34.) But in arguing that "Defendant induced Plaintiff to provide medical services to its insured in exchange for reimbursement, " Plaintiff appears to suggest that it was the promisor. (Opposition at 6)(emphasis added). See Steiner, 48 Cal.4th at 421 ("the benefit or prejudice must have induced the promisor's promise") (emphasis added).

The FAC also introduces some uncertainty regarding Cigna's motivations by alleging that Defendant only authorized medical treatments and promised to pay Plaintiff "upon determining [that] the patient's insurance policy covered the specific treatment." (FAC ¶ 31.) It is therefore unclear whether, putting aside the reversal of roles described above, the FAC alleges that Cigna promised to pay Plaintiff because of patients' insurance policies, because of some benefit to Cigna, and/or because of some detriment to Mountain View. Given this lack of clarity concerning the nature of the bargain for consideration, Plaintiff's breach of oral contract claim is dismissed, with leave to amend.[1]

B. Breach of Implied Contract

A contract may be either express or implied. Cal. Civil Code § 1619. "A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor's conduct." Yari v. Producers Guild of Am., Inc., 161 Cal.App.4th 172, 182 (2008). There cannot, however, "be a valid, express contract and an implied contract, each embracing the same subject matter, existing at the same time." Wal-Noon Corp. v. Hill, 45 Cal.App.3d 605, 613 (1975). "An oral contract claim is based on oral representations, while an implied contract claim is predicated on the promisor's conduct." Davoodi v. Imani, No. C 11-0260 SBA, 2011 WL 250392 at *3 (N.D. Cal. Jan. 26, 2011).

Defendant argues that it has plead breaches of an express, oral contract and an implied contract as separate causes of action, in the alternative. Indeed, parties may plead inconsistent allegations in the alternative. Adams v. Paul, 11 Cal.4th 583, 593 (1995). As plead here, however, the breach of implied contract and breach of oral contract claims are not distinct. Plaintiff's cause of action for breach of oral contract includes several allegations regarding oral promises, but also the allegation that Plaintiff acted "in conformity with Defendant's requirements and based upon prior identical transactions between the parties." (FAC ¶ 32.) The claim also incorporates several allegations regarding the parties' "long standing business relationship" and history of prior dealings by reference. (FAC ¶ 28.) Similarly, Plaintiffs' cause of action for breach of an implied contract refers not only to the parties' pattern of prior conduct, but also to "the contract it bargained for." (FAC ¶ 46.) The Second Cause of Action also incorporates, by reference, numerous allegations of oral promises. (FAC ¶ 37).

Plaintiff's First Amended Complaint does not adequately distinguish the breach of express, oral contract claim from the incompatible breach of implied contract claim. The Second Cause of Action is dismissed, with leave to amend.

C. Fraud

Under California law, the elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud, (4) plaintiff's justifiable reliance, and (5) damages. Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996). A party alleging fraud must state the circumstances constituting fraud with particularity. Fed.R.Civ.P. 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). This must include more than just the facts necessary to identify the transaction, and should include the "who, what, when, where, and how of the misconduct charged." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124-25 (9th Cir. 2009).

The FAC alleges that Cigna authorized Mountain View to perform certain medical procedures, affirmatively instructed Mountain View to perform those procedures, and promised to pay Mountain View for those procedures. (FAC ¶ 49.) The FAC further alleges that Defendant never intended to reimburse Plaintiff, and that Plaintiff performed the procedures in reliance upon Defendant's promises and prior practice of "routinely" reimbursing Plaintiff for similar medical services. (FAC ¶¶ 52-54.) These allegations, coupled with additional detailed examples of Defendant's alleged misrepresentations (FAC ¶ 51), are sufficient to enable Cigna to defend against the charge, and to establish that the filing of the FAC is not a mere pretext to discover unknown wrongs. See Kearns, 567 F.3d at 1125 (describing purposes of Rule 9(b)).[2]

C. Unjust Enrichment

The elements of an unjust enrichment claim are receipt of a benefit and unjust retention of that benefit at the expense of another. Peterson v. Cellco Partnership, 164 Cal.App.4th 1583, 1593 (2008). Like the original complaint, the FAC alleges that "Plaintiff conferred a tangible economic benefit on Defendant by rendering medical services to patients insured by Defendant." (FAC ¶ 61.) As explained in this court's earlier order, absent any explanation how provision of medical services to Cigna insureds conferred an economic benefit on Cigna itself, the claim was not adequately plead.

Plaintiffs' amended complaint now also alleges that "Defendant routinely collects premium payments by its insured in exchange for the promise to pay for medical services. Defendant received an economic benefit and is unjustly enriched by collecting premium payments from its insured and failing to pay Plaintiff for the services provided. In addition, Defendant accepted and retained the benefit of its duty to provide medical coverage to its insured." (FAC ¶ 61).

These new allegations are not adequate. The tangible economic benefit described in the FAC appears to have been derived not from Plaintiff, but from the non-party insureds. It is the insureds, not Plaintiff, who allegedly pay Cigna. Given Plaintiff's representation that it does not engage in "fee-forgiveness, " those insureds, who presumably still owe Plaintiff for medical services rendered, might have some unjust enrichment claim against Cigna based upon the alleged premium payments. Plaintiff, however, does not. The unjust enrichment claim is dismissed, with prejudice.[3]

IV. Conclusion

For the reasons stated above, Defendant's Motion to Dismiss is GRANTED, in part, and DENIED, in part. The motion is DENIED with respect to Plaintiff's Third Cause of Action for Fraud. Plaintiff's contract claims are dismissed, with leave to amend. Plaintiff's unjust enrichment claim is dismissed with prejudice. Any amended complaint shall be filed within fourteen days of the date of this Order.[4]

IT IS SO ORDERED.


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