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Hefczyc v. Rady Children's Hospital-San Diego

California Court of Appeals, Fourth District, First Division

November 17, 2017

ARTUR HEFCZYC, Plaintiff and Appellant,
v.
RADY CHILDREN'S HOSPITAL-SAN DIEGO, Defendant and Respondent.

         APPEAL from an order of the Superior Court of San Diego County, No. 37-2015-00037769- CU-MC-CTL Joan M. Lewis, Judge. Affirmed.

          Carpenter Law, Gretchen Carpenter; Law Office of Barry L. Kramer and Barry L. Kramer for Plaintiff and Appellant.

          Lewis Brisbois Bisgaard & Smith, Julie R. Dann; Hooper, Lundy & Bookman and Jennifer A. Hansen for Defendant and Respondent.

          IRION, JUDGE.

         Artur Hefczyc appeals from an order denying his motion for class certification in his lawsuit against Rady Children's Hospital-San Diego (Rady). On behalf of a proposed class, Hefczyc seeks declaratory relief to establish that Rady's form contract, signed by patients or guarantors of patients who receive emergency room care, authorizes Rady to charge only for the reasonable value of its services, and that Rady therefore is not authorized to bill self-pay patients based on its master list of itemized charge rates, commonly referred to as the "Chargemaster" schedule of rates, which Hefczyc alleges is "artificial" and "grossly inflated." The trial court denied Hefczyc's motion for class certification, concluding that the class was not ascertainable, that common issues did not predominate, and that class action litigation was not a superior means of proceeding.

         Hefczyc contends that the trial court erred in denying class certification because, as the complaint seeks only declaratory relief, the motion for class certification was brought under the equivalent of Federal Rules of Civil Procedure, rule 23(b)(1)(A) or (b)(2) (28 U.S.C.), for which he was not required to establish the ascertainability of the class, that common issues predominate and that class action litigation is a superior means of proceeding. Hefczyc also contends that even if the trial court properly imposed those three requirements in this action, the trial court abused its discretion in concluding that those requirements were not met. We conclude that Hefczyc's arguments lack merit, and accordingly we affirm the order denying class certification.

         I

         FACTUAL AND PROCEDURAL BACKGROUND

         A. Hefczyc's Complaint

         On November 10, 2015, Hefczyc filed a complaint against Rady, in which he alleged that his minor child was treated on October 8, 2015, at Rady's emergency room. Hefczyc alleged that he had no outside source of payment for the emergency room visit, such as insurance, and thus was a "self-pay" guarantor of his child's financial obligation to Rady. The total amount that Rady billed to Hefczyc for the emergency room visit was $9, 831.34.

         According to Hefczyc, the amount of the bill he received was based on "Chargemaster" rates developed by Rady. As alleged in the complaint, a "Chargemaster, " as maintained by Rady and by other hospitals, is a spreadsheet "which include code numbers, descriptions, and gross charges for each of the thousands of items that are provided to patients." Rady explains that its Chargemaster contains thousands of different line items, relating to procedures, services and goods that are either bundled or specific. The Chargemaster and the number of line items on it changes each year.[1]

         According to Hefczyc, the Chargemaster "provide[s] a convenient reference point for negotiating contracts and pricing schedules with commercial insurance carriers and with non-emergency care patients seeking elective treatment and service" but it "is not a pricing schedule which patients are expected to pay." The complaint alleges that Rady's actual reimbursement rates "are set forth in separate governmental regulations, contracts with commercial insurers, agreements with HMOs, etc."

         As alleged by Hefczyc, when a patient seeks care in Rady's emergency room, all guarantors of emergency care patients are required by Rady to sign an agreement titled "Conditions of Treatment/Admission" (the COTA). The COTA contains a section relating to financial obligations, which states, among other things, that "Hospital charges will be in accordance with the Hospital's regular rates and terms." According to the complaint, "each patient is requested to sign" the COTA, "regardless of whether a patient is a Medicaid, privately insured, HMO, or self-pay patient."[2] Hefczyc alleges that "the actual pricing terms that determine the reimbursement rates of the Hospital vary by category of patient" and depend on "governmental regulations and privately negotiated contracts." Hefczyc alleges that unlike other categories of patients, self-pay patients are billed at Chargemaster rates. Further, Hefczyc alleges that Chargemaster rates are "artificially inflated" and "unconscionable, " are "at least three times what other patients pay for the same treatment and services, " and "bear no relation to the Hospital's actual costs for providing treatment or services."

         In interpreting the COTA's financial obligation provision, Hefczyc alleges that "the fact that all patients, regardless of category, are subject to the exact same pricing guarantee to pay 'in accordance with the Hospital's regular rates and terms, ' despite the fact that each category of patients is charged differently, shows that the term 'the Hospital's regular rates and terms, ' as a pricing term for the Hospital's services and treatment, is inherently vague, ambiguous and meaningless." According to the complaint, "[s]ince [the COTA] itself contains no pricing terms for the self-pay patients which are certain or readily identifiable, and fails to identify any means by which such pricing terms for self-pay patients can be made certain (i.e., it contains an 'open' pricing term), applicable law implies a contractual obligation to pay the reasonable value of the services and treatment rendered, and for [Rady] to charge guarantors of self-pay patients no more than such reasonable value."[3]

         Hefczyc alleges that the billed amount of $9, 831.34 for his child's emergency care treatment was based on Chargemaster rates that were "grossly excessive, unfair, and unreasonable." Further, he alleges that because the COTA purportedly contains an " 'open' pricing term, " under the law governing contracts with open pricing terms, Rady is authorized to charge only "the reasonable value of such services."

         Hefczyc brought this action on behalf of himself and a class of persons defined as follows:

         "The guarantors of all persons who within the last four years, had one or more 'eligible patient hospital visits' to [Rady's] emergency department.

         "For purposes of this class definition, an 'eligible patient hospital visit' is defined as one for which (1) the patient was billed at the hospital's full Chargemaster rates; (2) there have been no full writeoffs, discounts or adjustments to the full Chargemaster billing under [Rady's] charity care policies; (3) the bill has not otherwise been waived or written off in full by [Rady]; and (4) no payments for the hospital visit have been made by other than the guarantor, the patient or the patient's representatives."[4]

         The single cause of action alleged in the complaint is for declaratory judgment. Specifically, the complaint seeks the following declarations on behalf of the alleged class: (1) "a declaration... with respect to their payment obligations to [Rady], including a determination of the construction and validity of the financial obligation provision of their [COTA] with [Rady], specifically finding that [Rady's COTA] contains an 'open price' term, and does not permit [Rady] to bill and demand payment from self-pay emergency care patients based upon its Chargemaster rates"; (2) "a declaration that they are liable to [Rady], under [the COTA], for no more than the reasonable value of the treatment/services provided"; and (3) "a declaration that [Rady's] billing practices as they relate to Class members are unfair, unconscionable, and/or unreasonable."

         In relating these prayers for declaratory relief to the request for class treatment in this action, the complaint alleges that a determination as to whether the COTA should be interpreted to "only require[] payment at a reasonable rate and for no more than the reasonable value of the services rendered" "should be made only once, and should be equally applicable to all Class members." The complaint alleges that "[w]hile such a Declaratory Judgment would not, in itself, determine the reasonable value of services rendered, it would allow a patient the ability to dispute [Rady's] unreasonable demands, and provide the ability to negotiate an appropriate payment amount and reasonable payment terms."

         B. The Class Action Certification Motion

         Hefczyc filed a motion for class certification, in which he sought an order certifying a class pursuant to Code of Civil Procedure section 382, "the equivalents of Rules 23(b)(1) and/or 23(b)(2) of the Federal Rules of Civil Procedure, " or in the alternative, an order certifying a class based on a single issue pursuant to California Rules of Court, rule 3.765(b).[5] In opposition, Rady argued, among other things, that certification under the equivalent of Federal Rules of Civil Procedure, rule 23(b)(1) or (b)(2) (28 U.S.C.) was not appropriate and that Hefczyc had not satisfied the requirements for class certification applied by California courts.

         The trial court issued a ruling denying class certification. With respect to Hefczyc's contention that a class should be certified under Federal Rules of Civil Procedure, rule 23(b)(1) and/or (b)(2) (28 U.S.C.), the trial court's ruling stated that it "disagrees" with Hefczyc's position. At the hearing on the class certification motion, the trial court provided the further explanation that "given the facts of this case, it's... this Court's opinion" that the provisions in the Federal Rules of Civil Procedure cited by Hefczyc did not apply, "so the analysis... has to be done under the California rule." The trial court therefore, "examine[d] this motion under principles that generally guide California courts in deciding whether to certify a class." Applying the applicable California case law, the trial court concluded that (1) the class was not ascertainable because "to identify class members could not be accomplished without unreasonable expense or time"; (2) "common questions of fact do not predominate over individualized questions"; and (3) class certification "would not provide substantial benefits that would render proceeding as a class superior to the alternatives." The trial court further rejected the argument "that an issue should be certified in this case pursuant to [California Rules of Court, rule] 3.765(b)."

         Hefczyc appeals from the order denying class certification.[6]

         II

         DISCUSSION

         A. Standard of Review

         We review the order denying class certification for an abuse of discretion. (Sav-on Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327 (Sav-on).) " 'Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification.' " (Id. at p. 326.) "[A] trial court ruling supported by substantial evidence generally will not be disturbed 'unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made.' " (Linder, supra, 23 Cal.4th at p. 435.) " 'Any valid pertinent reason stated will be sufficient to uphold the order.' " (Id. at p. 436.)

         However, " 'appellate review of orders denying class certification differs from ordinary appellate review. Under ordinary appellate review, we do not address the trial court's reasoning and consider only whether the result was correct. [Citation.] But when denying class certification, the trial court must state its reasons, and we must review those reasons for correctness. [Citation.] We may only consider the reasons stated by the trial court and must ignore any unexpressed reason that might support the ruling. [Citations.] [¶] We will affirm an order denying class certification if any of the trial court's stated reasons was valid and sufficient to justify the order, and it is supported by substantial evidence.' " (Mies v. Sephora U.S.A., Inc. (2015) 234 Cal.App.4th 967, 980.)

         " 'The certification question is "essentially a procedural one that does not ask whether an action is legally or factually meritorious." ' " (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1023 (Brinker).) However, "[w]hen evidence or legal issues germane to the certification question bear as well on aspects of the merits, a court may properly evaluate them.... [¶] In particular, whether common or individual questions predominate will often depend upon resolution of issues closely tied to the merits." (Id. at pp. 1023-1024.)

         B. There Is No Merit to Hefczyc's Contention That the Requirements of Federal Rules of Civil Procedure, Rule 23 (28 U.S.C.) Should Apply Here, Rather than the Requirements Set Out in California Case Law

         1. Applicable California and Federal Standards for Class Certification

         Hefczyc's main appellate argument is that because his complaint seeks only declaratory relief, the trial court should have applied the class certification requirements set forth in Federal Rules of Civil Procedure, rule 23(b)(1)(A) or (b)(2) (28 U.S.C.) rather than the requirements set forth in California case law.

         a. Class Certification Requirements in California Courts

         The authority for class action litigation in California is set forth in Code of Civil Procedure section 382, which provides that "when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all." For several decades, our Supreme Court has consistently "articulated clear requirements for the certification of a class. The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives.... 'In turn, the "community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class ...


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