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California Spine and Neurosurgery Institute v. Oxford Health Insurance Inc.

United States District Court, N.D. California

November 20, 2019

CALIFORNIA SPINE AND NEUROSURGERY INSTITUTE, Plaintiff,
v.
OXFORD HEALTH INSURANCE INC, et al., Defendants.

          ORDER ON DEFENDANT'S MOTION TO DISMISS RE: DKT. NO. 11

          DONNA M. RYU, UNITED STATES MAGISTRATE JUDGE

         Defendants Oxford Health Insurance Inc. (“Oxford”) and United Healthcare Insurance Company (“UHC”) move to dismiss Plaintiff California Spine and Neurosurgery Institute's complaint. [Docket Nos. 11 (“Mot”), 17 (“Reply”).] Plaintiff timely opposed. [Docket No. 16 (“Opp.”).] The court held a hearing on September 26, 2019.

         Having considered the parties' submissions and oral arguments, the court denies the motion to dismiss.

         I. BACKGROUND

         The following facts come from Plaintiff's initial complaint.[1] Plaintiff is a private surgical practice that provides complex surgical services at El Camino Hospital in Mountain View. [Docket No. 1-1, Ex. A (“Compl.”) ¶ 1.] UHC is a managed care company that administers health insurance policies. Id. ¶ 5. Oxford is a wholly-owned subsidiary of UHC. Id. ¶¶ 4-5; Mot. at 6. Plaintiff is an out-of-network provider in relation to Defendants. Compl. ¶ 8.

         A nonparty patient identified by his initials, R.N., is insured under a health insurance policy administered by Defendants. Compl. ¶ 6. R.N. is a middle-aged man who presented to Plaintiff for treatment of severe neck and bilateral upper extremity pain. Id. ¶ 7. After conservative management such as physical therapy and epidural steroid injections failed to work, Plaintiff advised R.N. that “neurosurgical intervention was warranted.” Id. ¶ 7. Plaintiff alleges that on November 21, 2018, its staff contacted UHC by phone to verify the details of R.N.'s insurance coverage and benefits. Id. ¶ 9. According to Plaintiff, a representative of UHC informed Plaintiff's staff that “UHC's payment for covered care rendered to R.N. by out-of-network providers would be based on ‘usual and customary' rates.”[2] Id. Plaintiff's staff recorded this information on a verification form and noted that a UHC employee named “Cheryl” had supplied the information. Id.

         Prior to performing surgery on R.N., Plaintiff sought approval of coverage from Oxford. Compl. ¶ 11. On November 29, 2018, Oxford allegedly sent Plaintiff a letter approving back surgery for R.N. and included various Current Procedural Terminology (“CPT”) service codes as eligible for coverage. Id. Plaintiff's principle physician, Adebukola Onibokun, M.D., performed the surgery on R.N. on December 17, 2018. Id. ¶¶ 1, 12. Plaintiff billed Defendants for the surgery using the same CPT service codes that Oxford had previously approved. Id. Dr. Onibokun's charges for the surgery were $147, 000.00, which Plaintiff alleges are his standard rates for such services. Id. Defendants paid Plaintiff a total of $7, 911.24 for the surgery. Id. ¶ 14. Plaintiff alleges that this amount is “far below even the average rates for such services in Plaintiff's geographic area, ” and did not amount to the “usual and customary” (“UCR”) rates Defendants had promised. Id. ¶¶ 14-15.

         Plaintiff now brings claims for relief based on the equitable theories of promissory estoppel and quantum meruit. Defendants move to dismiss both claims. Jurisdiction is based on diversity of the parties.

         II. LEGAL STANDARD FOR RULE 12(B)(6) MOTIONS

         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss a claim “only where there is no cognizable legal theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).

         As a general rule, a court may not consider “any material beyond the pleadings” when ruling on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However, “a court may take judicial notice of ‘matters of public record, '” id. at 689 (citing Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, ” without converting a motion to dismiss under Rule 12(b)(6) into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002). The court need not accept as true allegations that contradict facts that may be judicially noticed. See Mullis v. U.S. Bankr. Court, 828 F.2d 1385, 1388 (9th Cir. 1987).

         III. DISCUSSION

         A. Promissory Estoppel

         Promissory estoppel is “a doctrine which employs equitable principles to satisfy the requirement that consideration must be given in exchange for the promise sought to be enforced.” Crane v. Fargo, No. 13-cv-01932 KAW, 2014 WL 1285177, at *4 (N.D. Cal. Mar. 24, 2014) (quoting Kajima/Ray Wilson v. Los Angeles Cnty. Metro. Transp. Auth., 23 Cal.4th 305, 310 (2000)) (further citations omitted). The elements of a promissory estoppel claim are “(1) a clear and unambiguous promise by the promisor, and (2) reasonable, foreseeable and detrimental reliance by the promisee.” Bushell v. JPMorgan Chase Bank, N.A., 220 Cal.App.4th 915, 929 (2013). In this case, Plaintiff alleges that Defendants made a promise to pay for the surgical services Plaintiff provided to R.N., as evidenced by the phone verification of member eligibility and the prior authorization for ...


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