Avanguard Surgery Center, LLC v. Cigna Healthcare of California, Inc.

• Court: District Court, C.D. California
• Decided: August 28, 2020
• Docket: 2:20-cv-03405
• Status: Unknown

Opinion

O 1

2 3 4 5 6 7 United States District Court 8 Central District of California 9 10

11 AVANGUARD SURGERY CENTER, Case No.: 2:20-cv-03405-ODW (RAOx) LLC, a California Limited Liability 12 Company, 13 ORDER GRANTING DEFENDANT’S Plaintiff, MOTION TO DISMISS [13] 14 v. 15 CIGNA HEALTHCARE OF 16 CALIFORNIA, INC., a California 17 Corporation; CIGNA HEALTH AND 18 LIFE INSURANCE COMPANY, a Connecticut Corporation; and DOES 1 19 through 50, inclusive. 20 Defendants. 21 I. INTRODUCTION 22 Defendant Cigna Health and Life Insurance Company (“Cigna”) filed a Motion 23 to Dismiss (“Mot.”) on May 20, 2020. (Mot., ECF No. 13.) Plaintiff Avanguard 24 Surgery Center, LLC (“Plaintiff”) opposed on June 8, 2020. (Opp’n to Mot. 25 (“Opp’n”), ECF No. 15.) Cigna replied on June 15, 2020. (Reply to Opp’n 26 (“Reply”), ECF No. 16.) For the following reasons, the Court GRANTS the Motion.1 27

28 1 After carefully considering the papers filed in connection with the Motion, the Court deems this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78(b); C.D. Cal. L.R. 7-15. 1 II. PLAINTIFF’S ALLEGATIONS 2 Plaintiff is an outpatient surgery center and an out-of-network provider with 3 respect to Cigna, an insurance company that administers health insurance policies. 4 (Compl. ¶¶ 3, 7, 9, ECF No. 1-3.) Plaintiff claims that Cigna failed to sufficiently 5 reimburse Plaintiff after it provided covered surgical services to forty-seven patients 6 (the “Patients”). (Compl. ¶¶ 7–10.) Before providing a service, Plaintiff obtained 7 authorization and a verification of benefits (“VOB”) from Cigna “to ensure the patient 8 was covered by Cigna” and to confirm “that the procedure was a covered benefit 9 under” each patient’s respective plan. (Compl. ¶ 12.) During the verification process, 10 Cigna represented “that the plans or policies provided for and [that Cigna] would pay 11 for the services provided to” Cigna’s insureds under the applicable Evidence of 12 Coverage (“EOC”) or health care plan. (Compl. ¶ 13.) 13 After the Patients underwent surgery, Plaintiff submitted claims for payment to 14 Cigna for reimbursement, but Cigna did not reimburse Plaintiff in accordance with 15 each respective patient’s EOC or health care plan. (Compl. ¶¶ 15–18.) While 16 Plaintiff identifies no specific representation made by Cigna to Plaintiff, the 17 Complaint avers that Cigna misrepresented “material facts” before and after treatment, 18 “including, but not limited to” assurances that the services at issue “were covered 19 benefits under their respective plans and policies, and that Defendants would pay for 20 the treatments pursuant to the applicable EOC or Insurance Policy.” (Compl. ¶¶ 59, 21 69, 79.) These misrepresentations were made in various calls and correspondence 22 between Plaintiff and Cigna employees or agents. (Compl. ¶¶ 13, 60.) 23 Based on these allegations, Plaintiff sues Cigna for: (1) breach of oral contract; 24 (2) breach of implied contract; (3) promissory estoppel; (4) open book account; (5) 25 intentional misrepresentation; (6) negligent misrepresentation; (7) violations of 26 Business and Professions Code § 17200 (“UCL”). (Compl. ¶¶ 30–95.) Cigna’s 27 Motion only addresses causes of action three through seven. (See Mot.) 28 1 III. LEGAL STANDARDS 2 A. Rule 12(b)(6) 3 A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a statement of 4 a claim for relief. A complaint may be dismissed for failure to state a claim for two 5 reasons: (1) lack of a cognizable legal theory; or (2) insufficient facts under a 6 cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th 7 Cir. 1990). In determining whether a complaint states a claim on which relief may be 8 granted, its allegations of material fact must be taken as true and construed in the light 9 most favorable to the plaintiff. Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th 10 Cir. 2008). “[T]he tenet that a court must accept as true all of the allegations 11 contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 12 U.S. 662, 678, 129 S. Ct. 1937, 173 L.Ed.2d 868 (2009). 13 To survive a Rule 12(b)(6) dismissal, a complaint must allege enough specific 14 facts to provide both “fair notice” of the particular claim being asserted and “the 15 grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 & n.3, 16 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). While detailed factual 17 allegations are not required, a complaint with “unadorned, the-defendant-unlawfully- 18 harmed-me accusation[s]” and “‘naked assertion[s]’ devoid of ‘further factual 19 enhancement’” would not suffice. Iqbal, 556 U.S. at 678, 129 S. Ct. 1937 (citation 20 omitted). Instead, “a complaint must contain sufficient factual matter, accepted as 21 true, to ‘state a claim to relief that is plausible on its face.’ A claim has facial 22 plausibility when the plaintiff pleads factual content that allows the court to draw the 23 reasonable inference that the defendant is liable for the misconduct alleged.” Id. 24 (internal citation omitted). 25 B. Rule 9(b) 26 Fraud-based claims are subject to the heightened Rule 9(b) pleading standard. 27 Rule 9(b) requires a party alleging fraud to “state with particularity the circumstances 28 constituting fraud.” Fed. R. Civ. P. 9(b). The allegations “must set forth more than 1 the neutral facts necessary to identify the transaction. The plaintiff must set forth 2 what is false or misleading about a statement, and why it is false.” Vess v. Ciba– 3 Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotation marks 4 omitted). In essence, the defendant must be able to prepare an adequate answer to the 5 allegations of fraud. Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th Cir. 2007). 6 Although conclusory allegations of the circumstances constituting the alleged fraud 7 are insufficient, see Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th 8 Cir. 1989), a party is not required to plead with specificity the alleged wrongdoer's 9 state of mind, see Concha v. London, 62 F.3d 1493, 1503 (9th Cir. 1995). 10 IV. EXTRANEOUS MATERIALS 11 There are two instances in which courts may consider information outside of 12 the complaint without converting a Rule 12(b)(6) motion into one for summary 13 judgment: judicial notice and incorporation by reference. United States v. Ritchie, 342 14 F.3d 903, 908 (9th Cir. 2003). Judicial notice allows courts to consider a fact that is 15 not subject to reasonable dispute because it is generally known within the territory or 16 can be determined from sources of unquestionable accuracy. Fed. R. Evid. 201. 17 Incorporation by reference allows a court to consider documents which are 18 (1) referenced in the complaint, (2) central to the plaintiff's claim, and (3) of 19 unquestioned authenticity by either party. Marder v. Lopez, 450 F.3d 445, 448 (9th 20 Cir. 2006). 21 In support of its Motion, Cigna submits March 13, 2020 correspondence from 22 Plaintiff’s counsel which enclosed information concerning the forty-seven patients at 23 issue (the “Spreadsheet”). (See Decl. of Courtney C. Hill (“Hill Decl.”) Ex. A, ECF 24 No. 13-2.) The Spreadsheet contains claim data, patient names, member identification 25 numbers, dates of service, diagnostic codes, CPT codes, charge amounts, and other 26 information. (Id.) Cigna did not file a request for judicial notice, nor does it explain 27 in its briefing how the Court could consider the Spreadsheet in connection with a 28 Rule 12(b)(6) motion. However, Plaintiff’s Complaint specifically refers to this 1 document (Compl. ¶ 14), and Plaintiff’s Opposition admits that it is authentic and 2 central to Plaintiff’s claims. (Opp’n 9.) Accordingly, the Court may consider the 3 Spreadsheet in deciding the Motion under the incorporation by reference doctrine. 4 Marder, 450 F.3d at 448. 5 V. DISCUSSION 6 Cigna challenges Plaintiff’s promissory estoppel, fraud-based, and open book 7 account claims under Rule 12(b)(6). (See generally Mot.) The Court addresses 8 Cigna’s arguments below. 9 A. Promissory Estoppel 10 California law requires four elements to establish promissory estoppel: “(1) a 11 promise clear and unambiguous in its terms; (2) reliance by the party to whom the 12 promise is made; (3) [the] reliance must be both reasonable and foreseeable; and 13 (4) the party asserting the estoppel must be injured by his reliance.” Aceves v. U.S. 14 Bank, N.A., 192 Cal. App. 4th 218, 225 (2011) (internal quotation marks omitted). An 15 actionable promise must not only be “clear and unambiguous in its terms,” but also 16 cannot be based on preliminary discussions. Garcia v. World Sav., FSB, 183 Cal. 17 App. 4th 1031, 1044 (2010) (citations omitted) (internal quotation marks omitted). 18 Plaintiff’s promissory estoppel claim is premised on the allegation that Cigna 19 “expressed a clear promise to pay” Plaintiff certain rates for surgical services when 20 Cigna verified coverage, when it authorized treatment, and “in communications 21 following admissions and the submission of claims.” (Compl. ¶ 46.) In its 22 Opposition, Plaintiff walks back its allegations, contending that it “does not allege that 23 Cigna’s VOB or prior authorization is the clear and unambiguous promise,” but that 24 “Cigna’s promise to pay for the services per the terms of the EOC or Insurance Policy 25 is the clear and unambiguous promise.” (Opp’n 8.) 26 The parties therefore agree that neither Cigna’s verification of coverage nor its 27 authorization of treatment constitutes, on its own, the clear and unambiguous promise 28 required to state a promissory estoppel claim. Pac. Bay Recovery, Inc. v. Cal. 1 Physicians' Servs., Inc., 12 Cal. App. 5th 200, 215 n.6 (2017) (explaining that an 2 insurer’s representation that a patient was “insured, covered, and eligible for 3 coverage . . . for the services to be rendered by” a health care provider under the 4 patient’s insurance policy was not a clear and unambiguous promise by the insurer to 5 pay for the services). Notwithstanding this agreement, the parties dispute whether the 6 Complaint sufficiently identifies a clear and unambiguous promise, independent of the 7 authorization and verification processes, for Cigna to reimburse Plaintiff according to 8 each patient’s EOC or insurance policy. (Mot. 11–12; Opp’n 8.) 9 Plaintiff has alleged no actionable promise, as the Complaint relies exclusively 10 on vague representations and does not identify a promise that Cigna would reimburse 11 Plaintiff for the amounts Plaintiff seeks. Summit Estate, Inc. v. Cigna Healthcare of 12 California, Inc., No. 17-CV-03871-LHK, 2017 WL 4517111, at *6 (N.D. Cal. 13 Oct. 10, 2017) (dismissing promissory estoppel claim based on allegations “that when 14 Plaintiff contacted Defendants, Defendants told Plaintiff that certain insurance policies 15 issued by Defendants provided for reimbursement of treatment rendered at customary 16 rates”); Casa Bella Recovery Int'l, Inc. v. Humana Inc., No. SACV-17-01801 AG 17 (JDEx), 2017 WL 6030260, at *4 (C.D. Cal. Nov. 27, 2017) (dismissing promissory 18 estoppel claim because complaint did not sufficiently allege “when Plaintiff obtained 19 authorization, for what types of service or how many patients, or how much 20 Defendants agreed to pay when authorizing treatments”). Plaintiff’s cited allegations 21 do not establish otherwise. (Opp’n 9 (citing Compl. ¶¶ 13, 15, 17, 46).) Those 22 deficient allegations merely parrot elements of promissory estoppel, state legal 23 conclusions, and reference unspecified communications “including telephone calls 24 requesting VOB” where Cigna allegedly represented that it “would pay for the 25 services” under “the applicable EOC or Insurance Policy.” (Compl. ¶¶ 13, 15, 17, 26 46.) 27 In fact, Plaintiff implicitly concedes that Summit Estate and Casa Bella 28 Recovery support dismissal of its promissory estoppel claim with leave to amend so 1 that Plaintiff can bolster its vague allegations with additional factual content. 2 (Opp’n 8.) The Court appreciates that Cigna’s Motion addresses Plaintiff’s first 3 Complaint, filed in state court, and is mindful of the different pleading standards in 4 state and federal courts. Moreover, it does not appear futile that Plaintiff’s Complaint 5 could be cured with additional facts. Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 6 2000) (“[A] district court should grant leave to amend even if no request to amend the 7 pleading was made, unless it determines that the pleading could not possibly be cured 8 by the allegation of other facts.”). 9 Thus, the Court GRANTS Cigna’s Motion as to Plaintiff’s promissory estoppel 10 claim and DISMISSES Plaintiff’s third claim with leave to amend. 11 B. Fraud-Based Claims 12 Plaintiff’s fifth claim is for intentional misrepresentation; its sixth claim is for 13 negligent misrepresentation; and its seventh claim is for UCL violations. (Compl. 14 ¶¶ 58–89.) Plaintiff’s UCL claim incorporates the same allegations as its fraud-based 15 claims and expressly accuses Cigna of fraud and misrepresentation. (Compl. ¶¶ 77– 16 89.) Plaintiff’s UCL claim is therefore subject to Rule 9(b) to the same extent as its 17 other fraud-based claims. Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir. 18 2009) (stating that Rule 9(b)’s heightened pleading standards apply to claims for 19 violations of California’s UCL where the claim “sounds in fraud”) (citation omitted). 20 To state an intentional misrepresentation claim, a plaintiff must plead seven 21 elements with particularity: (1) the defendant represented to the plaintiff that an 22 important fact was true; (2) that representation was false; (3) the defendant knew that 23 the representation was false when the defendant made it, or the defendant made the 24 representation recklessly and without regard for the truth; (4) the defendant intended 25 that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the 26 representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the 27 representation was a substantial factor in causing that harm to the plaintiff. 28 Manderville v. PCG & S Group, Inc., 146 Cal. App. 4th 1486, 1498 (2007). “The 1 elements of negligent misrepresentation are the same except for the second element, 2 which for negligent misrepresentation is the defendant made the representation 3 without reasonable ground for believing it to be true.” Badame v. J.P. Morgan Chase 4 Bank, N.A., 641 F. App'x 707, 710 (9th Cir. 2016). And California's UCL prohibits 5 “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, 6 untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. 7 Plaintiff’s claims for intentional misrepresentation, negligent misrepresentation, 8 and UCL violations are subject to Rule 9(b), which requires Plaintiff to “state with 9 particularity the circumstances constituting fraud,” meaning that the “pleading must 10 identify ‘the who, what, when, where, and how of the misconduct charged.’” United 11 States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 12 2011) (citation omitted). To satisfy Rule 9(b), a plaintiff must allege the “time, place, 13 and specific content of the false representations as well as the identities of the parties 14 to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). 15 “Where fraud has allegedly been perpetrated by a corporation, plaintiff must allege the 16 names of the employees or agents who purportedly made the fraudulent 17 representations or omissions, or at a minimum identify them by their titles and/or job 18 responsibilities.” Griffin v. Green Tree Servicing, LLC, 166 F. Supp. 3d 1030, 1057– 19 58 (C.D. Cal. 2015) (citing U.S. ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 20 1048, 1051 (9th Cir. 2001) (holding that Rule 9(b) was not satisfied because, inter 21 alia, plaintiff did not “identify the [defendant's] employees who performed the tests, 22 or provide any dates, times, or places the tests were conducted”).) 23 Just as Plaintiff has failed to sufficiently allege a “clear and unambiguous 24 promise,” Plaintiff does not plead with specificity the “who what, when, where, and 25 how” of any fraud allegedly perpetrated by Cigna. Plaintiff’s negligent 26 misrepresentation, intentional fraud, and UCL claims each ambiguously reference 27 misrepresentation of “material facts . . . including, but not limited to, that the surgical 28 services . . . were covered benefits under their respective plans and policies, and that 1 Defendants would pay for the treatments pursuant to the applicable EOC or Insurance 2 Policy.” (Compl. ¶¶ 59, 69, 79.) All three claims also incorporate the Complaint and 3 recite legal elements, but they lack dates, identities, or the content of any alleged 4 misrepresentation with particularity. (Compl. ¶¶ 58–89.) Many of Plaintiff’s 5 allegations in support of claims five through seven are asserted upon Plaintiff’s 6 information and belief, and all of Plaintiff’s fraud accusations consist of nothing more 7 than bare allegations concerning unidentified representations made by unknown 8 individuals at unknown times. (Compl. ¶¶ 58–89.) These claims as currently pled 9 therefore fall far short of offering sufficient factual content to survive Rule 9(b), 10 depriving Cigna of the ability to meaningfully respond. Griffin, 166 F. Supp. 3d 11 at 1058 (dismissing fraud claim with leave to amend due to failure to identify when 12 communications took place, the content of said communications, and the identity of 13 the speaker). Again, however, leave to amend is appropriate because it is not clear 14 that amendment would be futile. 15 Accordingly, the Court GRANTS Cigna’s Motion to Dismiss Plaintiff’s claims 16 for negligent misrepresentation, intentional misrepresentation, and UCL violations and 17 DISMISSES Plaintiff’s fifth, sixth, and seventh claims with leave to amend. 18 C. Open Book Account 19 A book account is “a detailed statement which constitutes the principal record 20 of one or more transactions between a debtor and a creditor arising out of a contract or 21 some fiduciary relation, and shows the debits and credits in connection therewith, and 22 against whom and in favor of whom entries are made, is entered in the regular course 23 of business as conducted by such creditor or fiduciary, and is kept in a reasonably 24 permanent form and manner.” Cal. Civ. Proc. Code § 337a. Importantly, “[a] book 25 account is created by the agreement or conduct of the parties in a commercial 26 transaction.” H. Russell Taylor's Fire Prevention Serv., Inc. v. Coca Cola Bottling 27 Corp., 99 Cal. App. 3d 711, 728 (1979). If there is “no evidence of an agreement” 28 between the parties to form a book account, and if the parties’ conduct does not “show 1 that they intended or expected such an account would be created,” then “there is 2 insufficient evidence to support the finding of an open book account.” Maggio, Inc. v. 3 Neal, 196 Cal. App. 3d 745, 752 (1987). To state a claim for open book account, a 4 plaintiff must show: 5 [T]he parties intend that the individual items of the account shall not be considered independently, but as a connected series of transactions, 6 and that the account shall be kept open and subject to a shifting 7 balance as additional related entries of debits and credits are made, 8 until it shall suit the convenience of either party to settle and close the account, and where, pursuant to the original express or implied 9 intention, there is but one single and indivisible liability arising from 10 such series of related and reciprocal debits and credits. 11 R.N.C., Inc. v. Tsegeletos, 231 Cal. App. 3d 967, 972 (1991). 12 Cigna argues that Plaintiff has not stated a claim for open book account because 13 Cigna did not agree to be bound by a book account and because the transactions 14 involved forty-seven different patients with varying care and therefore constitute 15 unrelated dealings that cannot be deemed a book account. (Mot. 13–15.) Plaintiff 16 responds that Cigna’s agreement to be bound by a book account is evidenced by its 17 conduct, not an express contract, and that the health care claims at issue are “a 18 connected series of transactions.” (Opp’n 10–12.) But a review of Plaintiff’s 19 Complaint reveals that its open book account claim improperly recasts its generally 20 alleged right to payment instead of identifying an independent legal duty for Cigna to 21 reimburse Plaintiff. David M. Lewis, D.M.D. v. William Michael Stemler, Inc., No. S- 22 13-0574 KJM, 2013 WL 5373527, at *5 (E.D. Cal. Sept. 25, 2013) (dismissing open 23 book account claim based on allegation “that plaintiffs have kept accounts of the 24 debits and credits involved in these [out-of-network] transactions” because it restated 25 “plaintiffs’ general allegation that they have not been reimbursed for services they 26 provided to plan members as an out-of-network provider”). 27 Indeed, the Complaint ambiguously avers that Cigna “became indebted to” 28 Plaintiff for the surgical services rendered, and that Cigna must therefore compensate 1 || Plaintiff in accordance with “the applicable EOC or Insurance Policy.” (Compl. 2 | 53-55.) Plaintiff then notes that it “has maintained an accounting of the amounts 3 || owed” but that Cigna has not paid those amounts despite demand. (Compl. □□□ 56-57.) Not only do these allegations unduly replicate Plaintiff’s other claims, they do not 5 || even mention Cigna’s conduct as a basis for Plaintiff's open book account claim, let 6 || alone demonstrate that Cigna’s conduct somehow committed it to a book account. 7 | (Compl. §§ 53-57.) Nor does passing reference to the Spreadsheet save □□□□□□□□□□□ 8 | open book claim, as the Spreadsheet merely documents Plaintiff’s internal accounting 9 || and payment expectations—it does not create an inference that Cigna’s conduct 10 | amounted to assent to a book account. Maggio, Inc., 196 Cal. App. 3d at 752 11 || C‘[M]ere incidental keeping of accounts does not alone create a book account.”). 12 || Because Plaintiff’s open book account claim improperly replicates its other claims and 13 || provides no allegations to show Cigna agreed to be bound by a book account, it must 14 || be dismissed. As it is unclear whether additional facts could cure the Complaint’s 15 || deficiencies, leave to amend is appropriate. 16 Thus, the Court GRANTS Cigna’s Motion to Dismiss Plaintiff's open book 17 || account claim and DISMISSES Cigna’s fourth claim with leave to amend. 18 VI. CONCLUSION 19 For the foregoing reasons, the Court GRANTS Cigna’s Motion and 20 | DISMISSES Plaintiffs third through seventh causes of action with leave to amend. 21 || Plaintiff may file a First Amended Complaint curing the deficiencies identified in this 22 || Order within fourteen (14) days of this Order. If Plaintiff does not so file a First 23 | Amended Complaint, Cigna shall answer within twenty-one (21) days of this Order. 24 25 IT IS SO ORDERED. 26 August 28, 2020 SOP Oy 27 Litel hee 28 OTIS D. IGHT, UNITED STATES DISTRICT JUDGE