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YDM Management Co., Inc. v. Aetna Life Insurance Co.

United States District Court, C.D. California

July 13, 2016

YDM MANAGEMENT CO., INC., Plaintiff,
v.
AETNA LIFE INSURANCE COMPANY, a Connecticut corporation, Defendants.

          ORDER GRANTING MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT [DKT. 33]

          DEAN D. PREGERSON, United States District Judge

         Before the court is Defendant Aetna Life Insurance Company's ("Aetna") Motion to Dismiss Plaintiff's Second Amended Complaint pursuant to Rule 12(b)(6). (Dkt. 33.) After considering the parties' submissions, the court adopts the following Order.

         I. BACKGROUND

         The factual background of this case has been set forth by the court in its prior Order granting Defendant's Motion to Dismiss Plaintiff's First Amended Complaint. (See Dkt. 22.) The Court will note additional allegations made in Plaintiff's Second Amended Complaint ("SAC") as relevant. In brief, this case arises out of an underpayment dispute between Plaintiff, an assignee of certain physicians, and Defendant Aetna, an insurance company. The assignor physicians are "a certain medical group, known as Morris B. Silver, M.D. A Medical Corporation and [] a certain physician, Morris B. Silver, M.D.." (SAC ¶ 4.) According to the SAC, assignors were "‘out-of-network providers' or ‘non-participating providers' who had no preferred provider contracts or other written contracts with AETNA." (Id. ¶ 11.)

         This case arises out of claims the assignors submitted to Aetna primarily between 2013 and 2014 for medical services provided to Aetna-insured individuals. (Id. ¶¶ 5, 10; SAC, Ex. B.) Before providing any treatment, the assignors contacted Aetna about each patient with an Aetna insurance card. (SAC ¶ 13.) The assignors "identified the type of treatment that would be provided to the particular Patient, " "verified that each of the Patients were covered for such professional services and treatment, " and sought "to obtain prior authorization, pre-certification and consent of AENTA to perform surgery, render treatment or perform procedures open each Patient." (Id.) According to the SAC, Aetna "agreed to pay, reimburse, compensate, remunerate, and indemnify the Physicians for the specified services, treatments and supplies to be provided and rendered to each of the Patients." (Id.) The assignors then provided the treatments "fully expecting that they would be paid for the usual, customary and reasonable value of their services." (Id.)

         With regard to payment specifics, the SAC notes:

At no time prior to the provision of services to each of the Patients by the Physicians, during conversations between the Physicians and AETNA, did AETNA advice the Physicians of the actual amount that would be paid or allowed for services to be rendered by the Physicians for each Patient, nor did the Physicians have any ability to determine the amount of money that would be paid or allowed be AETNA for the services to be rendered.

(Id. ¶ 21.) Rather than specify a reimbursement rate, "AETNA warranted, promised and represented that it would pay an unspecified amount to the Physicians for the services performed and to be rendered by the Physicians to each of the Patients, which amount would be determined by AETNA after the claims were submitted and adjudicated by AETNA." (Id.) Once the insurance claims were submitted, Plaintiff conceded that AETNA provided payment but alleged that the payment was below what Plaintiff believes to be the usual, customary and reasonable rate. (Id. ¶ 42.) Aetna also provided an "Explanation of Benefits Statement" with its payments. (Id. ¶ 42.)

         Plaintiff filed this action seeking to recover the difference between the payment AETNA provided and the usual, customary, and reasonable rate. Both the First Amended Complaint ("FAC") and the SAC allege seven causes of action: (1) recovery of payment for services rendered; (2) recovery of payment on open book account and / or accounted stated; (3) quantum meruit; (4) breach of implied-in-fact and/or implied-in-law contract; (5) declaratory relief; (6) breach of oral contract; and (7) promissory estoppel.

         Defendant's first Motion to Dismiss argued that Plaintiff's claims were overly vague and precluded by California law. Specifically, Defendant relied on a California regulation that states an insurer is required to pay "[f]or nonemergency services provided by non-contracted providers to PPO and POS enrollees: the amount set forth in the enrollee's Evidence of Coverage." Cal. Code Regs. Tit. 28, § 1300.71(a)(3)(C).

         In its prior Order, the court dismissed the FAC for failing to identify the specific claims or contracts at issue in this case. (Dkt. 27 at 8.) The Order also dismissed with prejudice all of Plaintiff's claims to the extent they relied on section 1300.71 for recovery because the provision only entitles Plaintiff to reimbursement at the rates set forth in the Evidence of Coverage. (Id. at 12.) The court did, however, leave open the possibility that Plaintiff could recover if Plaintiff alleged "a promise, oral contract, or implied contract by Aetna to pay something other than what is required under law." (Id.)

         In the SAC, Plaintiff addresses the vagueness issue by providing a spreadsheet detailing all claims at issue. The spreadsheet also identifies the billed amount, the amount paid, and the amount Plaintiff believes it is owed. (SAC, Ex. B.) The SAC further clarifies that it does not seek to recover under section 1300.71 and alleges that it does "posses or have access to any of the Evidence of Coverage documents." (Id. ¶ 23.) Rather, Plaintiff believes that it is entitled to "be paid by AETNA in an amount which was commensurate with the usual, customary and reasonable value (or the quantum meruit) of the services and treatments to be rendered (offset only by deductible and coinsurance amounts) in conformance with California Civil Code Section 1611 . . . ." (Id. ¶ 25.) California Civil Code Section 1611 provides:

When a contract does not determine the amount of the consideration, nor the method by which it is to be ascertained, or when it leaves the amount thereof to the discretion of an interested party, the consideration must be so much money as the object of the contract is reasonably worth.

(Id.) Essentially, Plaintiff alleges that the telephone conversations its assignors had with Aetna verifying coverage, identifying treatments, and receiving authorization to provide care constituted a contract with Aetna governed by section 1611's consideration requirement. Plaintiff's SAC does not, however, contain any new ...


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