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THC - Orange County Inc. v. Valdez

United States District Court, N.D. California, San Francisco Division

July 21, 2017

PABLO VALDEZ, Defendant.




         Kindred Hospital[1] sued various Sutter Health Plan entities for reimbursement for care that Kindred provided to a patient who was a beneficiary of a Sutter ERISA health plan.[2] It also sued the patient's husband, Pablo Valdez, on the ground that he and his wife agreed to pay Kindred for the patient's care to the extent that the plan did not.[3] The Sutter defendants appeared and answered the complaint; Mr. Valdez did not.[4] Because a non-appearing defendant (such as Mr. Valdez) implicates the undersigned's jurisdiction, the parties stipulated to sever Mr. Valdez from the original case, which the court did.[5] Kindred previously moved to serve Mr. Valdez by publication in the Bay Area Spanish-language newspaper Visión Hispana; the court denied the motion without prejudice, and Kindred renewed the motion.[6]

         The court can decide the matter without oral argument and vacates the August 3, 2017, hearing. Civil L.R. 7-1(b). The court denies Kindred's renewed motion without prejudice because Kindred has not shown “reasonable diligence” in its attempts to serve Mr. Valdez or that a “cause of action exists against [him].” See Cal. Civ. Proc. Code § 415.50(a).


         Kindred treated Mr. Valdez's wife from August 2014 until January 4, 2016, when she died.[7]Kathryn Canete, who is the Senior Regional Director of Patient Accounting, submitted an affidavit verifying the dates of treatment and stating that the patient and her husband executed an Admission Agreement that obligated them to pay Kindred the charges for any services not covered by insurance.[8] The Admission Agreement, attached as an exhibit to her declaration, is in Spanish.[9]Kindred submitted its bills to the Sutter plan, which denied coverage from October 21, 2014 forward; Kindred appealed (unsuccessfully).[10] On December 15, 2015, the claims administrator for the insurance plan advised Kindred that the patient's “coverage terminated retroactively as of September 30, 2015.”[11] Kindred is still trying to convince the plan to pay for the patient's care and treatment.[12] Kindred asserts that Mr. Valdez is responsible for the bills, totaling more than $3 million, under the Admission Agreement.[13]

         Kindred filed its complaint on December 29, 2016 against the insurance plan and related Sutter parties, and it also sued Mr. Valdez based on his agreement at admission to pay Kindred for his wife's care if the plan did not.[14]

         Kindred tried to serve Mr. Valdez. A paralegal at the law firm representing Kindred reviewed the hospital files, including the August 22, 2014 Admission Face Sheet, which identified the address for Mr. Valdez and his wife as 1207 95th Street, Oakland, California.[15] The paralegal subsequently determined that the address is actually 1207 95th Avenue, Oakland, California.[16] On September 3, 2015, she pulled Alameda County Property Tax Assessor's records for that property from the County's website for fiscal year 2014-2015 (July 1, 2014 to June 30, 2015); they reflect that the property owners filed a homeowners' exemption.[17] That same day, she contacted the Assessor's office, which told her that the owners of the property (since 1989) were Pablo V. Uriarte and his wife.[18] The paralegal then searched public records and found a sale of a property in 1989 to Pablo V. Uriarte and his wife.[19] She concluded that Mr. Valdez also is known by the name Pablo Uriarte.[20]

         On August 9, 2016, a lawyer at the firm pulled an Accurint report; the paralegal reviewed it and concluded that “it appeared that Mr. Valdez was still living at the Valdez Address.”[21] On May 18, 2017, the paralegal pulled the tax bill for the tax year July 1, 2016 to June 30, 2017, and then called the Alameda County Assessor's Office, which confirmed that the property owners were still Pablo Uriarte and his wife.[22] She searched online databases - Pipl and Whitepages - which listed Pablo Uriarte and Pablo Valdez at the address.[23]

         Kindred tried to serve Mr. Valdez at that address four times through a process server, Interceptor Legal Support.[24] On February 16, 2017, at 8:38 p.m., the process server observed the address was gated, locked, dark, quiet, and had a “For Sale” sign (with a telephone number for Realty Experts).[25] A van was parked in the back of the residence, and a truck was parked in the front.[26] The process server tried again the next day at 4:29 p.m, but the address remained gated and locked; the server honked his horn but no one answered.[27] On February 18, 2017, at 7:28 a.m., the residence was gated and locked, and the truck was gone; the process server yelled, but no one answered.[28] On February 21, 2017, at 8:01 a.m., the residence was gated and locked; the server yelled and honked his horn, but no one answered; he tried talking to the neighbors, but they did not want to provide information.[29]

         Kindred's attorney wrote Mr. Valdez a letter transmitting the complaint, summons, other pleadings, and a waiver of service; she had it translated into Spanish (because Kindred's records showed the need for an interpreter).[30] On March 16, 2017, she sent it to the Oakland address by U.S. Priority Mail Express 1-Day service; it was delivered on March 17 but she received no response.[31]

         On May 19, 2017, the paralegal pulled an online real-estate listing for the property from Zillow, showing a purchase order pending on the property; she called and left a message for the listing realtor, Francisco Acosta.[32] On May 22, 2017, she spoke with Mr. Acosta, who said that as far as he knew, Mr. Valdez was still living at the house and that he should be able to receive documents there.[33] She asked for an email address for Mr. Valdez; Mr. Acosta said that he did not have one and offered to deliver the documents.[34] The paralegal responded that she would let the realtor know.[35]

         In June, the process server (Interceptor Legal Support) conducted two four-hour stakeouts at the address, one in the morning and one at night.[36] The first stakeout was on June 8, 2017, from 5:00 a.m. to 9:00 a.m.[37] The house was gated and locked, and there were two trucks parked, one inside the fence and one outside the fence.[38] (The declaration does not say whether either truck was the same as the truck seen previously.) At 5:33 a.m., the server heard the front door close but did not see anyone come out of the house.[39] At 9:00 a.m, the server went to the gate and called out the subject's name, but there was no response and the shades remained closed.[40] The second stakeout was on June 13, 2017, from 6:00 p.m. to 10:00 p.m. The curtains were closed, no cars were present, the house was dark, and there was no sign of activity.[41]


         Under Federal Rule of Civil Procedure 4(e), a plaintiff may serve an individual defendant using any method permitted by the law of the state in which the district court is located or in which service is affected. Fed.R.Civ.P. 4(e)(1). California law allows for five basic methods of service: (1) personal delivery to the party, see Cal. Civ. Proc. Code § 415.10; (2) delivery to someone else at the party's usual residence or place of business with mailing after (known as “substitute service”), see Id. § 415.20; (3) service by mail with acknowledgment of receipt, see Id. § 415.30; (4) service on persons outside the state by certified or registered mail with a return receipt requested, see Id. § 415.40; and (5) service by publication, see Id. § 415.50.

         California Code of Civil Procedure § 413.30 also provides that a court “may direct that summons be served in a manner which is reasonably calculated to give actual notice to the party served.” To comport with due process, the method of service must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Rio Props., Inc. v. Rio Intern. Interlink, 284 F.3d 1007, 1016 (9th Cir. 2002) (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)). Under section 413.30 (in Article 4), courts in this district have authorized service by email. See Facebook, Inc. v. Banana Ads, LLC, No. 11-CV-3619 YGR, 2012 WL 1038752, at *3 (N.D. Cal. Mar. 27, 2012); Balsam v. Angeles Tech. Inc., No. 06-CV-04114-JF (HRL), 2007 WL 2070297, at *4 (N.D. Cal. July 17, 2007).

         California law permits service by publication “if upon affidavit it appears to the satisfaction of the court in which the action is pending that the party to be served cannot with reasonable diligence be served in another manner” specified in Article 3 of the California Code of Civil Procedure. Cal. Civ. Proc. Code § 415.50(a). In determining whether a plaintiff has exercised “reasonable diligence, ” the court examines the affidavit to see whether the plaintiff “took those steps a reasonable person who truly desired to give notice would have taken under the circumstances.” Donel, Inc. v. Badalian, 87 Cal.App.3d 327, 333 (1978). The “reasonable diligence” requirement “denotes a thorough, systematic investigation and inquiry conducted in good faith by the party or his agent or attorney.” Kott v. Super. Ct., 45 Cal.App.4th 1126, 1137 (1996). “Before allowing a plaintiff to resort to service by publication, the courts necessarily require him to show exhaustive attempts to locate the defendant, for it is generally recognized that service by publication rarely results in actual notice.” Watts v. Crawford, 10 Cal.4th 743, 749 n.5 (1995) (internal quotations and citations omitted). And because of due process concerns, service by publication should be allowed only “as a last resort.” Donel, 87 Cal.App.3d at 333.

         Taking a few reasonable steps to serve a defendant does not necessarily mean that all “myriad . . . avenues” have been properly exhausted to warrant service by publication. Id. But a plaintiff will generally satisfy its burden through “[a] number of honest attempts to learn [a] defendant's whereabouts or his address” by asking his relatives, friends, acquaintances, or employers, and by investigating “appropriate city and telephone directories, the voters' register, and the real and personal property index in the assessor's office, near the defendant's last known location.” Kott, 45 Cal.App.4th at 1137 (internal quotations omitted). “These are likely sources of information, and consequently must be searched before resorting to service by publication.” Id. The reasonable-diligence inquiry is fact and case specific. Id. at 1137-38 (“[T]he showing of diligence in a given case must rest on its own facts and no single formula or mode of search can be said to constitute due diligence in every case.”).

         In addition to the reasonable-diligence requirement, a plaintiff requesting service by publication must show, by affidavit, that “[a] cause of action exists against the party upon whom service is to be made or he or she is a necessary or proper party to the action.” Cal. Civ. Proc. Code § 415.50(a)(1). The plaintiff “must offer ‘independent evidentiary support, in the form of a sworn statement of facts, for the existence of a cause of action against the defendant.'” Cummings v. Hale, No. 15-CV-04723-JCS, 2016 WL 4762208, at *2 (N.D. Cal. Sept. 13, 2016) (quoting McNamara v. Sher, No. 11-CV-1344-BEN (WVG), 2012 WL 760531, at *4 (S.D. Cal. Mar. 8, 2012)); see also Zhang v. Tse, Nos. 07-CV-4946-JSW, 05-CV-2641-JSW, 2012 WL 3583036, at *3 (N.D. Cal. Aug. 20, 2012) (collecting cases). The declaration must be signed by someone with personal knowledge of the essential facts. Cummings, 2016 WL 4762208 at *3 (denying the plaintiff's request for service by publication because the submitted declaration “d[id] not purport to be an affidavit, [was] not sworn, and d[id] not demonstrate counsel's personal knowledge of the facts at issue”).


         1. Reasonable Diligence

         The first issue is whether Kindred exercised reasonable diligence in its attempts to serve Mr. Valdez. Because Kindred did not make “exhaustive attempts to locate” Mr. Valdez, it has not met its burden. Watts, 10 Cal.4th at 749 n.5.

         In particular, by conducting the stakeouts, Kindred may have been pursuing service at a property that Mr. Valdez no longer owned. And Kindred could discover more information about the property and about Mr. Valdez. In February, there was a “For Sale” sign; by May, there was a contract pending. But the record is silent about whether the “For Sale” sign was there in May; if it was, perhaps it suggested that Mr. Valdez still owned the house and lived there. Trucks were seen there; was there any effort to follow up on DMV information for the plates? The real estate agent said that he had no email information; did he have a telephone number? When parties finalize real estate sales, money is transmitted to parties and their bank accounts. Mr. Valdez's wife died. Usually legal process attaches to death, and the hospital records may reveal identifying information about the patient or Mr. Valdez (such as a driver's license number, other financial information, or his work).The hospital records may reflect visitors (friends or relatives) or next of kin. The process server mentions uncooperative neighbors; it is not clear whether he could clarify from them whether Mr. Valdez still lived there or whether he could obtain contact information. Kindred pulled an Accurint report but reports only that “it appeared that Mr. Valdez was still living at the Valdez address.”[42] What else did it say? Mr. Valdez apparently goes by “Pablo V. Uriarte”; what investigation was conducted about that name (given that the property records are in that name)? These investigative avenues reasonably could lead to contact information for Mr. Valdez or information about his location.

         In Castillo-Antonio v. Azurdia, for example, the court initially found the following steps insufficient to meet the plaintiff's burden to show reasonable diligence: (1) counsel's “investigation at the Contra Costa County Tax Assessor's Office regarding the owner of the [defendant's business's] property, ” (2) a process server's four attempts to personally serve the defendant at that address, and (3) counsel's attempt to mail “packages” to the same address. No. 13-CV-05709-DMR, 2014 WL 4060219, at *2 (N.D. Cal. Aug. ...

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