Opinion
H045977
02-05-2020
COUNTY OF MONTEREY, Plaintiff and Appellant, v. CALIFORNIA EMPLOYEES RETIREMENT SYSTEM, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Monterey County Super. Ct. No. 17CV002800)
Appellant County of Monterey operates Natividad Medical Center (collectively, Natividad), which sought payment for trauma services provided to patients who were members of respondent California Public Employees Retirement System (CalPERS) and those who were members of Municipalities, Colleges, Schools Insurance Group (MCSIG), another public insurance entity. CalPERS successfully demurred to both the first and second amended complaints, and the superior court dismissed it from the action. On appeal, Natividad contends that it stated viable causes of action for breach of contract and declaratory relief, based on an agreement it had reached with insurance provider Anthem Blue Cross. We find no error and therefore must affirm the judgment of dismissal.
The superior court also dismissed MCSIG after sustaining its demurrer without leave to amend. Natividad appealed separately from that order, which was the subject of this court's opinion in County of Monterey v. Municipalities, Colleges, Schools Insurance Group (Sept. 26, 2019, H045724) [nonpub opn.].
Background
Natividad initiated this action in July 2017 against Anthem Blue Cross and its associated entities (collectively, Anthem), CalPERS, and MCSIG to recover payment for its treatment of patients requiring trauma services. The claims against CalPERS were based on theories of "implied-in-law contract" and quantum meruit. Natividad eventually recognized that CalPERS, as a public entity, could not be held liable on those theories, and in September 2017 it amended the complaint. (Cf. Janis v. Cal. State Lottery Com (1998) 68 Cal.App.4th 824, 830 [private party may not sue a public entity on implied-in-law contract theory]; Sheppard v. North Orange County Regional Occupational Program (2010) 191 Cal.App.4th 289, 314 [demurrer to quantum meruit claim properly sustained because such claim cannot be asserted against a public entity].)
In its first amended complaint Natividad described a 2012 Facility Agreement between Natividad and Anthem in which Natividad, as the "Facility" in Anthem's network of providers, would deliver medical services to "Covered Individuals" in exchange for Anthem's assistance in obtaining compensation from "Other Payors," including CalPERS, at rates agreed upon by the Facility and Anthem. At the time the Facility Agreement was executed, Natividad was not yet certified to provide trauma services; but a provision of the agreement stated that once Natividad obtained such certification, Anthem and Natividad would negotiate a trauma reimbursement rate, and that Natividad would be compensated at that new rate rather than the existing emergency services rate. Natividad received certification to provide Level II trauma services on January 5, 2015.
Between September 2014 and March 2016 Anthem and Natividad negotiated the rate to be applied to trauma services provided to patients, but they were unsuccessful. Although trauma patients "require substantially more treatment and resources than regular emergency services patients," Anthem continued pricing trauma claims at the emergency services rate.
In the first cause of action of its amended complaint Natividad alleged that CalPERS and MCSIG, having agreed with Anthem to pay providers in accordance with the terms of the Facility Agreement, were "Other Payors" under that agreement and therefore were, along with Anthem, in breach of the Facility Agreement. CalPERS and MCSIG "breached the Facility Agreement by improperly paying Natividad's trauma claims at the emergency services rate, rather than at Natividad's charges."
The claims exclusively against CalPERS were the second and fourth causes of action. The second cause of action was for breach of contract by CalPERS based on Natividad's status as a third-party beneficiary of the "Evidences of Coverage" (EOCs), contracts between CalPERS and its members. A preferred provider was under contract with Anthem to accept payment under specified conditions for services to plan members. Natividad was a preferred provider with Anthem. According to Natividad, the EOCs permitted emergency care and trauma services to be paid at 80 percent or 90 percent of "Billed Charges" (depending on the member's plan), or the same percentage of the "Negotiated Amount," whichever was less. But because there was no negotiated amount for trauma services, Natividad alleged that it was entitled to 80 percent or 90 percent of its billed charges.
CalPERS's plans included "Preferred Provider" plans such as PERSCare, PERS Choice, and PERS Select.
In the fourth cause of action Natividad alleged breach of contract by assignment, based on CalPERS members' assignment of their benefits as provided in their EOCs and as they had agreed when they received care at Natividad. The hospital was therefore "an assignee of the rights that CalPERS plan members have in their benefit contracts with CalPERS."
Finally, in its sixth cause of action Natividad sought "a declaration that the rate at which it is entitled to be paid for trauma services are [sic] its billed charges, and that Defendants' practice of pricing and paying Natividad's trauma claims at the emergency services rate in the Facility Agreement is improper."
In November 2017 CalPERS filed its demurrer to the claims against it; alternatively, it sought a stay pending the conclusion of the ongoing arbitration between Natividad and Anthem, which Natividad had initiated with its demand one year earlier, and which was scheduled to be heard in February 2018. In January 2018 the superior court sustained Anthem's unopposed motion to stay the proceedings against it. As to CalPERS, the court sustained the demurrer (1) to the first and second causes of action (breach of contract and breach of contract on a third-party-beneficiary theory) without leave to amend; and (2) to the fourth cause of action (breach of contract by assignment) with leave to amend, to permit Natividad to allege that it had exhausted the administrative appeal remedies provided in the members' EOCs.
Natividad had also filed a complaint against Anthem in federal district court, claiming violations of 29 U.S.C. section 1132, subdivision (a)(1)(B) [ERISA]. On November 1, 2017 the district court granted Anthem's motion to stay that action pending resolution of the arbitration, which was then scheduled for February 2018.
In its second amended complaint Natividad alleged two contract causes of action: breach of contract against Anthem and breach of contract by assignment against CalPERS. This time Natividad added that it had "complied completely with the appeals process as outlined in the contract between Natividad and Anthem," and as directed in CalPERS's "explanation of benefit" (EOB) letters. Having received a response from Anthem informing it that its unfavorable decision was final for each claim, Natividad asserted that it had "exhausted the appeals process with Anthem in regar[d] to each and every CalPERS claim." In addition, Natividad sought, as before, "a declaration that the rate at which it is entitled to be paid for trauma services are [sic] its billed charges, and that Defendants' practice of pricing and paying Natividad's trauma claims at the emergency services rate in the Facility Agreement is improper."
CalPERS again demurred, on the ground that both of the claims against it failed to state a viable cause of action as a matter of law. Both, CalPERS argued, were based on the theory underlying the allegation of breach of contract by assignment, which was fatally defective because the pleading asserted no "facts showing that any rights were assigned to Natividad other than the right to be paid directly—and the [second amended complaint] does not allege any breach of that right." Furthermore, as an assignee, Natividad would be bound by the plan member's obligation to exhaust the EOC's "Medical Claims Review and Appeals Process." Natividad, however, had pleaded exhaustion of the process under its Facility Agreement with Anthem, not under the EOCs on which its claim was predicated. Finally, CalPERS again suggested an alternative disposition, a stay pending the outcome of the completed arbitration, as that proceeding might "resolve some or all of the issues underlying this action" and would "promote the orderly cause of justice, avoid the unnecessary expenditure of judicial and party resources, and prevent the risk of inconsistent rulings."
According to the parties, the arbitration concluded on February 16, 2018, with closing arguments on April 10, 2018. CalPERS advised the court that as of April 16, 2018, the arbitrator had not issued a decision. The arbitrator entered his interim award on April 20, 2018 and his final award on August 10, 2018.
In its opposition, Natividad maintained that it was "entitled to direct payment of the benefits because (a) it had a contract with Anthem and (b) the [CalPERS] members assigned their benefits to Natividad." Along with that right to payment, it argued, a provider had the right to sue to correct an underpayment of trauma claims. Addressing exhaustion of administrative remedies, Natividad argued that CalPERS had waived that issue or was estopped from asserting it as a defense, because it had instructed Natividad to follow Anthem's appeal process, and Anthem had later informed Natividad that it had exhausted the appeal process. Neither CalPERS nor Anthem had told Natividad that it had to appeal to CalPERS; and even if one of them had, following the CalPERS appeal process would have been futile. Finally, Natividad clarified its position with respect to the declaratory relief claim to assert that it was addressing pricing and payment for future services, not past claims.
The court was unconvinced by Natividad's arguments with respect to the administrative appeal process, and on that ground it sustained the demurrer without leave to amend. From the ensuing judgment dismissing CalPERS from the action, Natividad filed this timely appeal.
Discussion
As this appeal arises from a dismissal following the sustaining of a demurrer without leave to amend, settled rules apply to this court's review. A demurrer is properly sustained when the complaint "does not state facts sufficient to constitute a cause of action." (Code Civ. Proc., § 430.10, subd. (e).) On appeal from the judgment of dismissal, this court examines the complaint de novo to determine whether it alleges facts sufficient to constitute a cause of action. Like the trial court, we assume the truth of all properly pleaded factual allegations, " 'but not contentions, deductions or conclusions of fact or law. [Citation.] . . . ' Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) " 'We also consider matters [that] may be judicially noticed.' " (Ibid.) In addition, when a demurrer is sustained without leave to amend, "we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) 1. Breach of Contract
Natividad contends that it pleaded a sufficient cause of action for breach of the Facility Agreement in its first amended complaint. In implicit acknowledgment that it was not a party to that agreement, it contends, as it did in its opposition below, that Anthem was CalPERS's agent, and that CalPERS "ratified the Facility Agreement (i) in that its EOCs provided that CalPERS will pay contracted providers like Natividad pursuant to the Anthem-Natividad Facility Agreement, and (ii) in paying the claims at issue in this case, CalPERS expressly stated that it was paying the claims pursuant to the Anthem-Natividad Facility Agreement." Natividad maintains that agency and ratification are factual issues that "cannot be decided on demurrer."
Natividad's argument cannot succeed. Contrary to its assertion on appeal, the first amended complaint contains no allegations predicating CalPERS's liability on the ratification of the acts of Anthem as its agent. At best the preliminary recitations in the complaint include a section called "Agency," alleging that the defendants were all agents of each other for purposes of pricing, processing and paying claims. The first cause of action does not explicitly state that Anthem acted as CalPERS's agent when it entered into the Facility Agreement with Natividad. And Natividad did not even mention ratification in its pleading, much less allege that CalPERS had retroactively authorized Anthem's execution of the Facility Agreement. Thus, we cannot agree that the facts recounted in the first amended complaint either allege agency and ratification or are susceptible of such an interpretation. The superior court correctly sustained CalPERS's demurrer to this cause of action. 2. Third-Party-Beneficiary Theory
More specifically, this introductory paragraph alleged that all defendants had "actual or ostensible authority, to act on each others' [sic] behalf . . . for: (a) certifying or authorizing Natividad's provision of services to members; (b) receiving Natividad's claims; (c) pricing the claims; (d) processing and administering the claims and appeals; (e) approving or denying the claims; (f) deciding not to transfer the members to in-network hospitals for post-stabilization services; (g) authorizing Natividad to provide services to Defendants' members; (h) directing whether and how to pay the claims; (i) issuing remittance advices and explanations of benefits; (j) communicating with Natividad regarding the claims and services; (k) communicating with members regarding the claims and services; (l) providing utilization management services; and (m) in many instances issuing payment."
In its second cause of action of the first amended complaint Natividad asserted that it was an intended third-party beneficiary of the EOC agreements between CalPERS and its plan members. Those EOCs, Natividad alleged, "intended that Participating Providers, such as Natividad, receive payment for hospital services, including trauma services, rendered to its members." Because Anthem and Natividad were unable to agree on the amount Natividad should be paid for trauma services, the EOC "entitled [Natividad] to be paid 80% or 90% of its Billed Charges" by CalPERS.
We disagree. "In California, as in other jurisdictions, it is well established that under some circumstances a third party may bring an action for breach of contract based upon an alleged breach of a contract entered into by other parties. Civil Code section 1559, enacted as one of the provisions of the original 1872 Civil Code, declares: 'A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it.' " (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 826-827.) In Goonewardene, the California Supreme Court reviewed prior decisions interpreting the third-party-beneficiary doctrine and explained that the relevant inquiry in applying the doctrine is "not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party action to go forward." (Id. at pp. 829-830, italics added.)
Here, although we agree that the complaint adequately alleges the benefit of the EOCs to medical providers like Natividad, the complaint does not state facts indicating either that "a motivating purpose" of CalPERS and its members was to provide a benefit to the providers or that permitting Natividad to bring its own breach of contract action against CalPERS is "consistent with the objectives of the contract and the reasonable expectations" of CalPERS and its members in the EOCs. Even if we could read into the complaint an allegation of these elements, there is nothing in the EOCs for the plans at issue that supports the claim. Natividad's opening brief on appeal contains no argument to the contrary; it confirms only the first element, that CalPERS's performance under the EOCs by paying for its members' medical care contemplates and "confers a direct benefit on Natividad."
CalPERS's comparison of this case to Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 795-796 is appropriate. In Ochs, the Second District, Division Six, observed that "[g]enerally speaking, a health care service provider's agreement to pay for medical care is intended to benefit the enrollees, not treating physicians with whom there is no contractual relationship. (See generally Hollister v. Benzl (1999) 71 Cal.App.4th 582, 586-587 [treating physician not employed by HMO was neither a party to nor a third-party beneficiary of the contract between patients and HMO and was not bound by that contract's arbitration agreement].)" (Id. at p. 795.) The demurrer by the health care service plan, PacifiCare, was thus properly sustained because Ochs's complaint did not allege "a more specific agreement that might support a third party beneficiary theory." (Id. at pp. 795-796.)
The same outcome must attend Natividad's pleading. It is not significant that Ochs was a "noncontracting" provider while Natividad is a preferred provider under the CalPERS health care plans; in either case the intended beneficiaries were the enrollee members, not the providers. The Supreme Court in Goonewardene emphasized that knowledge by the contracting parties that the contract will benefit a third party does not suffice to allege a cause of action based on the third-party-beneficiary doctrine. (See Goonewardene, supra, 6 Cal.5th at p. 830 ["Because of the ambiguous and potentially confusing nature of the term 'intent' [citation], this opinion uses the term 'motivating purpose' in its iteration of this element to clarify that the contracting parties must have a motivating purpose to benefit the third party, and not simply knowledge that a benefit to the third party may follow from the contract."]) Here, the language of the EOCs demonstrates that the "motivating purpose" of the health benefit plan documents was to benefit each plan's members, not Natividad. Furthermore, a right to bring suit is properly recognized only if "necessary to effectuate the objectives of the contract." (Id. at p. 836.) We see no indication in the EOCs that such necessity is contemplated. Rather, they address the members' right to review and a hearing to resolve disputes. Accordingly, arming the provider with a right to sue is not necessary to effectuate the objectives of the EOCs.
Our conclusion that Natividad was not an intended beneficiary of the EOCs is not altered by Natividad's argument that it belongs to a class of intended beneficiaries—i.e., hospitals that are "expected to provide emergency and inpatient services to CalPERS's members." Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1023, represents the general point that the third party need not be identified individually to be an express beneficiary. But the contract must still intend to benefit that class; here, as we have concluded, there is no such expressed intent.
Also unavailing is Natividad's reliance on Harris v. Superior Court (1986) 188 Cal.App.3d 475 (Harris). That case involved the "unusual situation" of a physician defendant who sought to avoid arbitration of a medical malpractice claim and wanted to proceed to a trial by jury. (Id. at p. 476.) The Court of Appeal (Second District, Division Two) held that the physician was bound by an arbitration clause signed by a professional corporation that employed the physician because the arbitration clause applied to claims against " 'employees or other contracting health professionals.' " (Id. at p. 479.) The Harris court's discussion of the third-party-beneficiary doctrine was limited to noting that a third-party beneficiary of a contract "can gain no greater rights under that contract than the contracting parties"; accordingly, the physician was obligated to arbitrate once the parties to the contract had waived their rights to trial. (Ibid.) Just as he accepted the benefit of the transaction entered into by the corporation, "[h]is acceptance of this benefit necessarily entailed acceptance of the agreement that members' claims would be subject to binding arbitration." (Ibid.) The decision thus does not support Natividad's position here.
Nor is National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 51 helpful to our analysis. There the First District, Division One, held that an excess insurance provider was a third-party beneficiary of a contract between an employer bank and its workers' compensation claims administrator. In reaching this conclusion, the court cited "two interrelated reasons." (Ibid.) First, the excess insurer would "necessarily benefit" from the services the claims administrator was contractually obligated to provide, because one purpose of the contract was to limit the employer's liability for workers' compensation claims. (Id. at pp. 51-52.) Second, the allegations of the complaint and the text of the contract demonstrated that the claims administrator "was to administer all of the [employer's] workers' compensation claims, including those that were likely to exceed and had exceeded the self-insurance limit"; this provision reflected "the intent of the parties to benefit" the excess provider. (Id. at p. 52.) Here, by contrast, the language of the EOCs does not reflect such an intent. To the contrary, these contracts allow the member the freedom to choose his or her service provider— or to select an out-of-network provider. This distinction undermines any suggestion that the motivating purpose of the EOCs was to benefit Natividad.
We thus conclude that the superior court did not err in rejecting Natividad's theory that it was a third-party beneficiary of the EOCs. Any benefit to Natividad and other providers was not a motivating purpose of these contracts, and according Natividad the right to sue CalPERS was not necessary to effectuate the plan members' contractual rights. 3. Breach of Contract by Assignment
Natividad next contends that it pleaded a viable cause of action for breach of contract (the EOCs) by assignment. In the second cause of action of the second amended complaint Natividad alleged that the EOCs provided that the "benefits of [the member's] Plan will be paid directly to Preferred Providers . . . ." When a CalPERS plan member received care at Natividad, the patient agreed by written contract to assign his or her insurance benefits to Natividad; thus, according to the second amended complaint, "Natividad became an assignee of the rights that CalPERS plan members have in their benefit contracts with CalPERS." Natividad pointed to the EOC of a sample plan, PERS Select, which provided for payment for emergency care "at 80% of Billed Charges or 80% of the Negotiated Amount, whichever is less." The term "Billed Charges" was defined as "the amount the provider actually charges for services provided to a Member."
In the complaint Natividad quoted from an "Assignment of Benefits" form, as follows: "I assign and authorize direct payment to the hospital of all insurance benefits payable for this hospitalization or for these outpatient services. I agree that the insurance company's payment to the hospital pursuant to this authorization shall discharge the insurance company's obligations to the extent of such payment. I understand that I am financially responsible for charges not paid according to this assignment."
Similarly, the PERS Choice plan provided payment for emergency care provided by a "Preferred Hospital" "at 80% of Billed Charges or 80% of the Negotiated Amount, whichever is less." And PERS Care paid for emergency care at a preferred hospital "at 90% of Billed Charges or 90% of the Negotiated Amount, whichever is less."
In sustaining the demurrer to the second amended complaint, the superior court ultimately rejected Natividad's assignment theory, because Natividad was unable to overcome the defense that it had failed to exhaust the administrative remedies provided in the EOCs. Natividad first argued that CalPERS had waived this defense; the court, however, stated that CalPERS could not waive a jurisdictional requirement. On appeal, Natividad maintains that CalPERS waived the exhaustion requirement "[b]y instructing Natividad to follow the appeals process in its contract with Anthem, as opposed to the appeals process in the EOCs." Once it was informed by Anthem that it had exhausted Anthem's appeal process, "[n]either CalPERS nor Anthem informed Natividad that it then had to appeal a second time to CalPERS."
We are not convinced by Natividad's excuse for failing to follow the written procedures delineated in the EOCs, since those are the contracts on which its claim of assignment is founded. The procedures set forth in each Preferred Provider plan clearly call for a process of CalPERS administrative review following exhaustion of the Anthem "Internal Review" process. It was not for either Anthem or CalPERS to remind Natividad of its obligation to move forward from the unsuccessful outcome of the Anthem appeal. No sustainable legal or factual basis for finding waiver was set forth in Natividad's pleadings.
Natividad contends that the superior court should have permitted it to amend its complaint to allege that it would have been futile to use the CalPERS review procedures because it was up to Anthem, not CalPERS, to determine the value of provider services. At the hearing Natividad's attorney did not request leave to amend this cause of action; instead, he urged the court to overrule the demurrer. There were, he explained, "facts that need to be fleshed out about this process; facts that need to be fleshed out about the agency relationship; the facts that need to be fleshed out about what CalPERS would do with such an appeal; whether it would, indeed, be futile whether CalPERS has any ability to price blend itself." In response, CalPERS's counsel pointed out that the court had already granted leave to amend the first amended complaint to allege exhaustion of remedies; instead, Natividad had relied on its compliance with the Anthem review process, which was insufficient. The court implicitly agreed with CalPERS, and it regarded Natividad's suggestion of futility as speculation. Indeed, the court queried, "why would CalPERS have, in their Evidence of Coverage, an appeal process that you can appeal to CalPERS, if you're dissatisfied, with respect to the outcome of Anthem? If, in fact, they were just going to listen to you and automatically deny, why would that be in the Evidence of Coverage? Why would they permit that process?" Ultimately the court denied further opportunity to amend on this ground.
This ruling was a matter within the court's sound discretion, which may not be disturbed on appeal absent a clear showing of abuse. (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) We see no such abuse, given the facts before the court at that time. At the May 11, 2018 hearing, Natividad's counsel agreed with the court that "the only thing [Natividad] has is what the covered employee has." Natividad thus had no greater rights than its patients, including the right to pursue its remedies—through the Anthem and CalPERS administrative review procedures. In an assignment, " 'the assignee "stands in the shoes" of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.' [Citation.]" (Johnson v. County of Fresno (2003) 111 Cal.App.4th 1087, 1096.) Having failed to follow the review procedures available to CalPERS members, Natividad, as their assignee, was subject to the defense based on failure to exhaust administrative remedies. 4. Declaratory Relief
In its ruling the court noted that Natividad "is not without recourse," as it believed that "arbitration will resolve the entire problem." Natividad has asked this court to take judicial notice of (1) the August 10, 2018 final arbitration award in favor of Natividad in its action against Anthem and (2) CalPERS's October 9, 2018 letter responding to Natividad's September 11, 2018 appeal. CalPERS submitted opposition. Reviewing courts generally do not take judicial notice of evidence not presented to the trial court and "will consider only matters which were part of the record at the time the judgment was entered." (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 813.) "It has long been the general rule and understanding that 'an appeal reviews the correctness of a judgment as of the time of its rendition, upon a record of matters which were before the trial court for its consideration.' [Citation.]" (In re Zeth S. (2003) 31 Cal.4th 396, 405.) We therefore deny the request as to the October 2018 letter. In light of the court's comment, however, we take judicial notice of the issuance and result of the arbitrator's decision in the proceeding between Natividad and Anthem. Nevertheless, we "may not take judicial notice of the truth of a factual finding made in another [forum]. [Citation.]" (Fowler v. Howell (1996) 42 Cal.App.4th 1746, 1749.) Furthermore, the matters considered in both documents are not necessary or helpful to a resolution of the dispute between Natividad and CalPERS.
In the third cause of action of the second amended complaint Natividad alleged (as it had in its previous pleading) that "[a]n actual and ongoing controversy now exists between Natividad and Defendants regarding the rate at which Natividad is entitled to be paid for the trauma services it provided to Defendants' members and insureds." Natividad sought "a declaration that the rate at which it is entitled to be paid for trauma services are [sic] its billed charges, and that Defendants' practice of pricing and paying Natividad's trauma claims at the emergency services rate in the Facility Agreement is improper." In its demurrer CalPERS asserted that the claim should be dismissed because it was "duplicative" of the assignment cause of action.
CalPERS alternatively sought a stay pending the conclusion of the arbitration, as that proceeding would "address the rate at which Natividad is entitled to be paid for trauma services." While the arbitration was between only Natividad and Anthem, CalPERS observed that "the ultimate issue to be decided in this lawsuit—i.e., the amount purportedly owed to Natividad for trauma services under the terms of the Agreement for the underlying medical claims at issue—is the same as in the Arbitration." Because in both proceedings Natividad was seeking "a determination that it is entitled to a higher trauma services rate," a stay, in CalPERS's view, would "prevent the risk of inconsistent rulings." In its opposition, Natividad agreed with CalPERS that the "ultimate issue[]" was the appropriate trauma rate; however, it urged the court not to stay the action because "[t]he arbitration should [be] completed soon." As noted earlier (see fn. 8, ante), the arbitrator issued his final decision in August 2018. He found that because the parties had not agreed on a rate for trauma services, "an implied contract was created that Anthem would pay Natividad the reasonable value of those services." He then determined the "reasonable value" to be fair market value between January 2015 through the current date. The arbitrator declined, however, to express an opinion regarding a reasonable value of "trauma rates in the future," as the proper level of medical reimbursement "is a highly moving target." On appeal, neither party suggests that their dispute on this issue is moot. --------
"Code of Civil Procedure section 1060 authorizes actions for declaratory relief under a 'written instrument' or 'contract.' Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs. [Citations.] It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs. In short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them." (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.) " 'To qualify for declaratory relief, [a party] would have to demonstrate [that] its action presented two essential elements: "(1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to [the party's] rights or obligations." ' " (Ibid.) "It is elementary that questions relating to the formation of a contract, its validity, its construction and effect, excuses for nonperformance, and termination are proper subjects for declaratory relief." (Fowler v. Ross (1983) 142 Cal.App.3d 472, 478.)
On appeal, Natividad contends that it "has properly [pleaded] a cause of action for declaratory relief," again asserting "an actual and ongoing controversy between it and CalPERS regarding the rate at which Natividad is entitled to be paid for trauma services it renders to CalPERS's plan members." In response to CalPERS's renewed assertion that this claim is "duplicative" of the other causes of action in the first and second amended complaints, Natividad insists that it properly pleaded those other causes of action. As discussed earlier, however, the rate of payment was the subject of the Facility Agreement between Natividad and Anthem, and the theories on which Natividad sought to impose liability on CalPERS in the first and second amended complaints were properly rejected. Because the availability of declaratory relief depended on the viability of those substantive claims, the court did not err in sustaining the demurrer to this cause of action.
5. Leave to Amend
As noted earlier, after a demurrer is sustained without leave to amend, on appeal we consider "whether there is a 'reasonable possibility' that the defect in the complaint could be cured by amendment. [Citation.] The burden is on plaintiffs to prove that amendment could cure the defect." (King v. CompPartners, Inc. (2018) 5 Cal.5th 1039, 1050.) Natividad addresses this point only with respect to the cause of action for breach of contract by assignment: It argues that the court should have permitted it to amend that cause of action to allege futility in opposition to the demurrer to the second amended complaint. As discussed above, however, Natividad has not met its burden to show a reasonable possibility that such amendment would have corrected the exhaustion defect and thus produced a viable claim for breach of contract by assignment. Nor has Natividad suggested any reason the superior court should have granted leave to amend any other cause of action in the first and second amended complaints. We thus cannot discern any abuse of discretion in the court's sustaining of CalPERS's demurrers without leave to amend.
Disposition
The judgment is affirmed.
/s/_________
ELIA, ACTING P. J. WE CONCUR: /s/_________
GROVER, J. /s/_________
DANNER, J.