-SKO Doctors Medical Center of Modesto, Inc. v. Principal Life Insurance Company, an Iowa corporation, No. 1:2010cv00452 - Document 56 (E.D. Cal. 2011)

Court Description: SUMMARY JUDGMENT DECISION 36 signed by District Judge Lawrence J. O'Neill on April 14, 2011. (Lira, I)
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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE EASTERN DISTRICT OF CALIFORNIA 9 10 DOCTORS MEDICAL CENTER OF MODESTO, INC., CASE NO. CV F 10-0452 LJO SKO 11 SUMMARY JUDGMENT DECISION (Doc. 36.) Plaintiff, 12 13 vs. PRINCIPAL LIFE INSURANCE COMPANY, 14 Defendant. 15 / 16 INTRODUCTION 17 Defendant Principal Life Insurance Company ( Principal ) seeks summary judgment in the 18 absence of supporting evidence for plaintiff Doctors Medical Center of Modesto, Inc. s ( DMC s ) 19 breach of contract and fraud claims for unpaid medical services. DMC responds that Principal 20 misapplies and misinterprets medical services agreements to create genuine issues of material fact to 21 prevent summary judgment. This Court considered Principal s summary judgment motion on the record1 22 and VACATES the April 19, 2011 hearing, pursuant to Local Rule 230(g). For the reasons discussed 23 below, this Court DENIES summary judgment as to all claims but one. 24 25 26 27 28 1 This Court carefully reviewed and considered the record, including all evidence, arguments, points and authorities, declarations, testimony, statements of undisputed facts and responses thereto, objections and other papers filed by the parties. Omission of reference to evidence, an argument, document, objection or paper is not to be construed to the effect that this Court did not consider the evidence, argument, document, objection or paper. This Court thoroughly reviewed, considered and applied the evidence it deemed admissible, material and appropriate for summary judgment. This Court does not rule on objections in a summary judgment context, unless otherwise noted. 1 1 BACKGROUND 2 Summary 3 DMC is an acute-hospital in Modesto. Principal is an insurance company and provides group 4 health insurance and administrative services to self-funded employee benefit plans. DMC claims that 5 Principal is liable for higher contracted rates for hospital services for four patients and which DMC 6 provided on Principal s authorization in 2008. Principal contends that DMC seeks higher rates under 7 an inapplicable contract and that DMC was paid proper rates under applicable contracts. 8 Aetna Network Agreement With Principal 9 Principal contracts with Preferred Provider Organizations ( PPOs ), including Aetna Signature 10 Administrators ( ASA or ASA Plan ). Principal neither owns nor operates a California PPO network. 11 Principal and Aetna Life Insurance Company ( Aetna Life )2 entered into a May 14, 2007 Aetna 12 Signature Administrators Network Administration, Coordination and Oversight Agreement ( ASA 13 Network Agreement ) by which Principal is a third-party administrator for the ASA Plan. Under the 14 ASA Network Agreement, Principal agreed to administer claims and provide services to employers 15 under self-funded health benefit plans. Aetna Life agreed to provide the employers access to Aetna 16 Life s network of participating providers. 17 Under the ASA Network Agreement, Principal and Aetna Life share administration of self- 18 insured health plans. Aetna Life provides network service, claim repricing, stoploss insurance to plan 19 sponsors or customers, and standards for Principal. Aetna Life ensures Principal s compliance with the 20 standards. Principal processes claims, provides customer service, and pre-certifies services using Aetna 21 Life standards. 22 When Principal contracts with an employer to administer its employee benefit plan, the employer 23 selects the medical plan and PPO network and informs Principal. Principal creates and issues member 24 identification cards to eligible employees. The identification cards indicate the name of the primary PPO 25 26 27 28 2 Principal s papers reference several Aetna entities and includes many references to Aetna. DMC s papers at one point define Aetna as Aetna Insurance Company and later define Aetna as Aetna Health of California, Inc. and Aetna Health Management, Inc. collectively. W here possible, this Court attempts to identify that specific Aetna entity and references merely Aetna when the parties do so without identifying the particular Aetna entity. Confusion as to an applicable Aetna entity is attributable to the parties. 2 1 selected by employer under Managed Care Network/Preferred Provider Organization. Principal has 2 a PPO Complementary Network Arrangement with MultiPlan, Inc. ( MultiPlan ) and includes the 3 MultiPlan logo on the back of member identification cards to identify the contractual relationship.3 4 Aetna PPO Agreement With DMC 5 Effective July 1, 2007, DMC entered into a Managed Care Agreement ( Aetna PPO Agreement ) 6 with Aetna Health of California, Inc. and Aetna Health Management, Inc. DMC agreed to provide 7 medical services at reduced rates to patients who participated in certain health plans provided by Aetna 8 Health of California, Inc. and Aetna Health Management, Inc. Under the Aetna PPO Agreement, DMC 9 committed to provide hospital care, facilities, equipment and services which are Covered Services 10 under Members Plans. The Aetna PPO Agreement defines Member as an individual covered by 11 or enrolled in a Plan and Plan as [a]ny health benefit product, plan or program issued, administered 12 by Company or one of its Affiliates. The Aetna PPO Agreement identifies Aetna Health of California, 13 Inc. and Aetna Health Management, Inc. as Company. The Aetna PPO Agreement defines Affiliate 14 as any legal entity (including any Plan) owned or controlled by Company. Principal summarizes that 15 the Aetna PPO Agreement required DMC to provide hospital services to Aetna Members covered under 16 Plans. 17 DMC notes that it did not agree to provide reduced rates to patients who participated in any of 18 the various plans provided by Aetna and agreed to provide reduced rates only to patients who 19 participated in the Aetna plans that were specifically identified in the Aetna PPO Agreement. Pursuant 20 to the Aetna PPO Agreement, DMC agrees to participate in the Plans and other health benefit products 21 listed on the Product Participation Schedule attached hereto and made a part hereof. 22 Attached to the Aetna PPO Agreement is a Product Participation Schedule by which DMC 23 agreed to participate in PPO and NAP Plans (also referred to as Non-Gatekeeper in the Agreement). 24 Including, but not limited to, the following Plans: Open Choice and National Advantage and any Aetna 25 Health Fund product built off the PPO and NAP platform. DMC notes that the ASA Plan in not 26 included in the Aetna PPO Agreement s Product Participation Schedule. In her declaration, Amy Dozier 27 28 3 DMC describes Principal as a MultiPlan client. 3 1 ( Ms. Dozier )4 states: In 2008, [DMC] did not participate in the ASA Plan. 2 Edward Tanida ( Mr. Tanida ) is the Aetna Insurance Company Region Network Operations 3 Head. In his declaration, Mr. Tanida states: The PPO Agreement is an all products contract. ASA 4 is a product included in this description. Nothing in the negotiations between Aetna and [DMC], nor 5 the actual PPO Agreement excludes ASA products. Mr. Tanida explains that ASA is neither an Aetna 6 affiliate nor company but is an Aetna PPO network, i.e. a product offered by Aetna. Mr. Tanida notes 7 that Aetna Signature Administrators is a registered service mark owned by Aetna, Inc., which is the 8 ultimate parent company of Aetna Health of California, Inc. and Aetna Health Management, Inc. Mr. 9 Tanida continues that the ASA Plan is not an affiliate of Aetna in that it is not a corporation, 10 11 12 13 partnership or other legal entity owned or controlled by Aetna. The Aetna PPO Agreement includes an Introduction of New Plans and Products provision which states: 19 Company reserves the right to introduce and designate [DMC s] participation in new Plans and products during the term of this Agreement and will provide [DMC] with written notice of such new Plans and products and the associated compensation; provided that Company shall not require [DMC] to participate in any of such new Plans or products unless it contains incentives to members to utilize participating providers and Covered Benefits, at least materially comparable to those contained in the products listed in the Product Participation Schedule. In the event [DMC] determines that any new Plans or products are not materially comparable to existing programs, [DMC] may decline participation in such programs; in such case, Company and [DMC] shall negotiate alternative rates that shall apply to Members enrolled in such new Plans or products. If Company and [DMC] cannot reach agreement on new rates for the new Plans or products, the terms of this Agreement shall not apply to [DMC] services provided to Members enrolled in such new Plans or product. 20 Ms. Dozier declares that Aetna neither provided DMC with written notice of such new Plans and 21 Products and the associated compensation for the ASA Plan nor introduced and designated the ASA 22 Plan as required under the Introduction of New Plans and Products provision. Ms. Dozier concludes that 23 DMC never agreed to allow the ASA product to access discounted rates until 2010. 14 15 16 17 18 24 The Aetna PPO Agreement includes an integration clause: 25 This Agreement (including any attached schedules) constitutes the complete and sole contract between the parties regarding the subject hereof and supersedes any and all prior 26 27 28 4 Ms. Dozier is AVP, Managed Care with Tenet Healthcare Corporation ( Tenet ), DMC s parent corporation. Ms. Dozier notes that she is responsible for agreements with managed care companies, including Aetna Insurance Company, and arrangements by which companies such as Principal access discounted rates for Tenet facilities. 4 1 2 or contemporaneous oral or written communications or proposals not expressly included herein. Upon the signing of this Agreement, all prior provider services agreements between Company and [DMC] are terminated. 3 Aetna PPO Agreement Amendment With DMC 4 Effective January 1, 2010, DMC, Aetna Healthcare of California, Inc. and Aetna Health 5 Management, LLC entered into an amendment ( 2010 Amendment ) of the Aetna PPO Agreement. The 6 2010 Amendment includes a Product Participation Schedule which states: 7 8 The following Non-Gated Health Benefit Products shall also be paid according to the Services and Compensation Schedules attached to this Agreement: * Aetna Signature Administrators. (Underlining and italics on original.) 9 The 2010 Amendment includes the ASA Plan as a Non-Gated Health Benefit Product to be paid 10 11 according to the Services and Compensation Schedules attached to this Agreement. The 2010 Amendment further provides: 12 1. The Hospital Services and Compensation Schedule is deleted in its entirety and replaced with the attached Hospital Services and Compensation Schedule. 2. The Product Participation Schedule is deleted in its entirety and replaced with the attached Product Participation Schedule. 13 14 15 ... 16 4. Both parties agree to transition to a new Tenet national boilerplate base agreement as negotiated between Aetna and Tenet. The attached Compensation Schedule will remain the same until such time as Aetna and Tenet agree to convert to a new rate structure for all Tenet hospitals or as otherwise agreed upon. . . . 5. All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect. In the event of any inconsistency between the terms of this Amendment and the Agreement, the terms of this Amendment shall govern and control. 17 18 19 20 21 22 DMC points out that express reference to the ASA Plan is limited to the 2010 Amendment. 23 24 Aetna Master Agreement With Tenet Principal notes that the Aetna PPO agreement is not the sole contract to govern DMC s 25 reimbursement for services. Principal points to the July 1, 2007 Master Agreement ( Master 26 Agreement ) between Aetna Health Management, LLC and Tenet. DMC claims that only the Aetna 27 PPO Agreement governed the amounts [DMC] would be paid for providing medical services to Aetna s 28 insureds. 5 1 2 3 4 5 The Master Agreement addresses a standard national hospital agreement and compensation schedule and provides: 1. The parties agree to enter into a National Agreement . . . and standard Compensation Schedule methodology for all Tenet hospitals . . . under such terms and in such format as agreed to between the parties. . . . 6 2. The parties intend that such National Agreement will be completed and will be agreed to between the parties for all participating Tenet hospitals by September 1, 2007 and effective January 1, 2008 . . . 7 The Master Agreement addressed a contingency of failure to enter into a National Agreement: 8 Should the parties fail to enter into a National Agreement by January 1, 2008, the current Tenet hospital service agreements and other agreements will remain in effect and the current Compensation Schedule will be amended in accordance with the changes as contemplated by Sections II, III and IV, unless otherwise agreed to by the parties. 9 10 11 Aetna and Tenet failed to enter into a National Agreement and thus did not enter into a universal 12 agreement or compensation schedule prior to September 2007, as contemplated by the Master 13 Agreement. 14 According to Aetna s Mr. Tanida, the Aetna PPO Agreement must be read in conjunction with 15 the Master Agreement, which modifies the Aetna PPO Agreement. Mr. Tanida explains that the 16 Master Agreement was to develop one contract that would provide a compensation matrix for hospitals, 17 physicians and any free standing facilities Tenet owns and govern[s] the relations between Aetna and 18 the Tenet hospitals, including DMC. Mr. Tanida notes that the Master Agreement is explicit in its 19 inclusion of Aetna Signature Administrators products under its existing Hospital Services Agreements. 20 The Master Agreement defines Compensation Schedule as the schedule of rates attached to 21 a Tenet/Aetna Service Agreement. Mr. Tanida explains that the Aetna PPO Agreement is a 22 Tenet/Aetna Hospital Service Agreement and that the Hospital Services and Compensation Schedule 23 attached to the Aetna PPO Agreement is a Compensation Schedule. The Master Agreement provides: 24 With respect to Tenet hospitals that have separately negotiated percent of charge rates for the Aetna 25 Signature Administrators program, such rates will remain in place as under such current hospital service 26 agreement and for those that are not percent of charge rates will be paid at the PPO rates and modified 27 as specified on Exhibit I. 28 Mr. Tanida notes that DMC and Aetna have not separately negotiated a percent of charge rates 6 1 for the ASA Plan. Mr. Tanida concludes that as of July 1, 2007, Aetna and [DMC] contemplated that 2 ASA products would be paid at the PPO rates set forth in the various Hospital Service Agreements, 3 including, but not limited to, the PPO Agreement. 4 Tenet s Ms. Dozier disputes that the Master Agreement alters or overrides the Aetna PPO 5 Agreement in that the Master Agreement demonstrates Tenet and Aetna Health Management, LLC s 6 intent to negotiate the terms of a global agreement and compensation schedule that would replace their 7 individual hospital service agreements such as the Aetna PPO Agreement. Ms. Dozier declares that 8 in the absence of a National Agreement prior to January 1, 2008, the then-current Tenet hospital 9 service agreements and other agreements remained in effect, including the Aetna PPO Agreement. 10 MultiPlan Participating Facility Agreement With DMC 11 Effective July 1, 2008, DMC and MultiPlan entered in the MPI Participating Facility Agreement 12 ( MultiPlan Agreement ), by which DMC claims that it became a participating health care provider in 13 MultiPlan s nationwide complementary provider network and agreed to provide medical services at 14 reduced rates for patients in healthcare plans which MultiPlan s clients, including Principal, sponsor or 15 administer. The MultiPlan Agreement addresses PPO Primary Network Access Requirements and 16 states: PPO Primary Network access, including access to PPO Primary Network Contract Rates, is 17 available only to Clients that have contracted with . . . MPI [MultiPlan] to utilize the network as the 18 Primary Network in conjunction with Programs. 5 19 Complementary Network Access Requirements and states: PPO Complementary Network access, 20 including access to PPO Complementary Contract Rates, is available only to Clients that have contracted 21 with MPI to utilize the Complementary Network in conjunction with Client s Programs either as an 22 extended network or when the Program does not utilize another network as primary. The MultiPlan Agreement addresses PPO 23 As such, the MultiPlan Agreement provides PPO Primary Network Access and Complementary 24 Network Access, according to the declaration of Principal Compliance Analyst Sherry Ferry ( Ms. 25 Ferry ). Ms. Ferry explains that the MultiPlan Agreement outlines that the Complementary Network 26 27 28 5 The MultiPlan Agreement defines Client to include an employer health plan and defines Program to include Benefit Program, such as a health care plan or other health plan or program under which Participants are eligible for benefits. 7 1 is used in conjunction with Client s Programs either as an extended network or when the program does 2 not utilize another network as primary. Ms. Ferry further explains that as to the four patients at issue 3 in this action, their employer benefit plans use the ASA Plan as the primary PPO, and DMC is a 4 participating provider in the ASA network, thus the Complementary Network was not applicable to 5 the claims of the four patients. 6 DMC explains that MultiPlan s complementary network adds to primary PPO or HMO network 7 coverage by providing additional providers at discounted rates and that when participants seek care 8 outside their primary network, participants pay higher coinsurance rates but share in savings achieved 9 by the network discount. Tenet s Ms. Dozier notes that under the MultiPlan Agreement, DMC provides 10 medical services at reduced rates to MultiPlan clients, which include insurance companies, employer 11 health plans, and sponsors and administrators of health care programs which access MultiPlan s network 12 of participating health care providers. Ms. Dozier explains that since Principal is a MultiPlan client, 13 DMC is obligated under the MultiPlan Agreement to provide medical services at reduced rates to 14 patients who participate in a health plan which Principal sponsors or administers. Patients Claims At Issue6 15 16 In 2008, four patients received care at DMC under plans administered by Principal. Principal 17 claims that it insured neither the patients nor their plans. Principal identifies the patients as members 18 in the ASA Network. 19 Principal attributes DMC to have telephoned for benefit information for three of the patients, and 20 Principal verified that the three patients were eligible for plan benefits and that the PPO was ASA. 21 Ms. Ferry declares that DMC was given benefits for a primary, not complementary, PPO provider. 22 Principal claims that this automated disclaimer was provided: Benefits quoted by an Account 23 Representative are not a guarantee of payment. Benefits are based on eligibility and plan provisions on 24 the date of service. 25 Principal s Ms. Ferry declares that Principal did not represent to DMC that the patients treatment 26 was covered under any of their plans and did not verify or discuss the PPO contracted benefit that 27 6 28 The following recitation of Principal s handling of the four patient claims is derived generally from Ms. Ferry s declaration. 8 1 would be paid. Ms. Ferry characterizes verification as nothing more than a communication of the 2 information that coverage exists. Claims are not approved for payment until after the claim is submitted, 3 PPO verification and pricing is completed and eligibility of the patient is verified. 4 Ms. Ferry explains that the benefit plans at issue were self-funded and that the patients 5 employers, not Principal, are ultimately responsible for benefits paid to limit Principal to ensure that 6 claims are paid pursuant to the correct PPO contract and eligibility information provided by the self- 7 funded employer. Ms. Ferry notes that Principal is not financially impacted by the amount of benefits 8 paid. 9 According to Ms. Ferry, after DMC submitted claims for the four patients, Aetna confirmed that 10 the claims were to be paid in accordance with the PPO Agreement. Principal Life then paid the claims 11 according to the reimbursement rates set forth in the PPO Agreement, as instructed by Aetna. 12 Cnythia Baccellieri ( Ms. Baccellieri ) is DMC s Director of Revenue Analysis and responsible 13 for insurance verifications and authorizations. In her declaration, Ms. Baccellieri explains that the 14 identification cards for the four patients at issue indicated the patients were insured through Principal 15 and that their plan was administered by Aetna Signature Administrators or the ASA Plan, with access 16 to MultiPlan s network. According to DMC, at the patients admission, DMC was a participating 17 provider in MultiPlan s network, pursuant to the MultiPlan Agreement, and DMC did not participate 18 in the ASA Plan. Ms. Baccellieri explains that Principal members were limited to MultiPlan network 19 discounts. 20 Ms. Baccellieri points out that prior to the four patients admission, DMC notified Principal that 21 the patients would receive treatment under MultiPlan s network and that Principal verified eligibility 22 and benefits. Ms. Baccellieri attributes to Principal no assertions that: (1) the patients were not Principal 23 insureds; (2) Principal would not cover the patients expenses under Principal s network arrangement 24 with MultiPlan; or (3) the patients were eligible and treated under the ASA Plan. 25 26 Patient 1 Patient 1 was admitted to DMC during July 25-28, 2008. On July 28, 2008, DMC asked 27 Principal to authorize the admission. Ms. Baccellieri notes that on July 28, 2008, Principal 28 representative Andrea verified eligibility and benefits for Patient 1. Principal notes that on July 30, 9 1 2008, Principal orally authorized a three-day stay and confirmed by a letter of that date that this letter 2 is not a guarantee of payment. The actual amount of benefits, if any, is subject to all policy or plan 3 provisions in effect when services are given. 4 DMC submitted a $135,782 claim and expected to be paid $116,772.52 for Patient 1. Principal 5 applied Aetna PPO Agreement reimbursement rates and paid $11,645.19 after applying Patient 1's co- 6 payment. 7 On September 24, 2008, DMC informed Principal that DMC disagreed with DMC s pricing of 8 Patient 1's claim. Principal contacted Aetna which informed Principal that the claim was priced 9 correctly. Principal s October 7, 2008 letter informed DMC of information which Principal obtained 10 from Aetna. 11 DMC s December 11, 2008 letter appealed Principal s claim decision. On January 5, 2009, 12 Aetna confirmed that Principal had repriced Patient 1's claim correctly. Principal s January 7, 2009 13 letter notified DMC of Aetna s confirmation. 14 DMC s April 7, 2009 letter appealed the repricing of Patient 1's claim and noted that DMC does 15 not have a [sic] Aetna Signature Product we have our own separate agreement with Aetna. Principal s 16 April 24, 2009 letter confirmed for DMC that Patient 1's claim was correctly paid. 17 The May 28, 2009 letter of DMC s counsel demanded that Principal arbitrate the claim of Patient 18 1 pursuant to what Principal identifies as the contract with Aetna. 7 Principal claims that it declined 19 20 21 22 23 24 25 26 27 28 7 This Court is unsure as to which contract Principal refers but presumes it is the Master Agreement between Tenet and Aetna Health Management, LLC. The Master Agreement includes a disputes resolution provision, which states in part: 1. If a dispute arises between the parties hereto they shall first, upon written notice from the party who determines that there is a dispute, meet and in good faith attempt to resolve the matter. Both parties shall make available for such meeting appropriate personnel who are authorized to make such decisions as are necessary to resolve the dispute. 2. If the matter is not resolved within thirty (30) days of a party s written request for negotiation (including any dispute related to the Auditor hereunder), either party may initiate arbitration by providing written notice to the other party. Any controversy or claim arising out of or relating to this Agreement or the breach, termination, or validity thereof . . . shall be settled by binding arbitration administered by the American Arbitration Association ( AAA ) and conducted by a sole Arbitrator ( Arbitrator ) in accordance with AAA s Commercial Arbitration Rules ( Rules ). The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, to the exclusion of state laws inconsistent therewith or that would produce a different result, and judgment on the award rendered by the Arbitrator (the Award ) may be entered by any court having jurisdiction thereof. . . . 10 1 to participate in arbitration on the basis that it is not a party to [DMC s] contract with Aetna and, 2 therefore, is not a proper party to any arbitration. 3 Patient 2 4 Patient 2 was admitted to DMC during December 1-3, 2008. Principal notes that [b]enefits 5 were verified on November 24, 2008. On January 30, 2009, DMC submitted a $46,108.97 claim and 6 expected to be paid $39,653.71 for Patient 2. Principal applied Aetna PPO Agreement reimbursement 7 rates, paid DMC $5,095.03, and notified DMC that the charge was reduced per the contractual 8 agreement with Aetna offered through Aetna Signature Administrators. 9 DMC s May 4, 2009 letter appealed the pricing and stated that DMC does not have an Aetna 10 Signature product. According to our contract with Principal Life/MultiPlan inpatient services are to be 11 reimbursed at 86% of total charges. 12 On June 8, 2009, DMC telephoned Principal to claim that DMC is non-par with ASA. On that 13 same date, Principal confirmed with Aetna that DMC is a participating provider and so notified DMC 14 on June 25, 2009. 15 16 Principal s July 20, 2009 letter informed DMC that Principal had overpaid Patient 2's claim by $429.13 because the claim was initially priced incorrectly and requested DMC s $429.13 payment. 17 Patient 3 18 Patient 3 was admitted to DMC December 29-30, 2008. On December 29, 2008, Principal 19 sought Principal s preauthorization to admit Patient 3. Principal informed DMC that no authorization 20 was required. 21 DMC submitted a $19,514.60 claim and expected to be paid $16,782.56 for Patient 3. Principal 22 applied Aetna PPO Agreement reimbursement rates, paid the contracted ASA contracted rate of 23 $10,195.57, and notified DMC that the charge was reduced per the contractual agreement with Aetna 24 offered through Aetna Signature Administrators. 25 On March 6, 2009, DMC appealed the amount paid for Patient 3 and requested further payment 26 pursuant to the MultiPlan Agreement. On May 4, 2009, Principal informed DMC that Aetna verified 27 28 11 1 that DMC was a participating provider and that the appeal was denied. Principal s May 19, 2009 letter 2 claimed a $4,396 overpayment of Patient 3's claim and demanded DMC to pay that amount. 3 Patient 4 4 On August 31, 2008, Patient 4 presented to the DMC emergency room and was admitted to 5 DMC. Principal did not preauthorize the admission and gave no authorization number. DMC notes that 6 since Patient 4 was an emergency admission, no verification of insurance eligibility or benefits could 7 be completed prior to provision of medical services. 8 On September 13, 2008, DMC submitted a $24,502.27 claim and expected to be paid $21,234.66 9 for Patient 4. Principal applied the PPO Agreement reimbursement rates, allowed $3,033.94, paid 10 $2,407.16, and notified DMC that the charge was reduced per the contractual agreement with Aetna 11 offered through Aetna Signature Administrators. 12 DMC s October 21, 2008 and May 29, 2009 letters appealed Patient 4's reimbursement. 13 Principal s June 18, 2009 letter informed DMC that ASA, not MultiPlan, was the applicable PPO 14 network and that the allowable reimbursement was $2,375.70 per ASA to result in a $31.46 overpayment 15 to DMC. 16 Aetna/Tenet Settlement Agreement 17 Tenet, on behalf of itself and its owned or hospital affiliates, entered into an April 8, 2010 18 Settlement Agreement ( Settlement Agreement ) with Aetna Health Management, LLC, on behalf of 19 itself and its affiliates. Aetna s Mr. Tanida explains that the Settlement Agreement resolved all 20 disputes between Aetna and Tenet regarding assertions that claims had not been properly paid pursuant 21 to the terms of various Hospital Agreements for all claims prior to and including December 31, 2008. 22 The Settlement Agreement applies to all hospital facilities listed on its Exhibit A, including 23 DMC. Pursuant to the Settlement Agreement, Aetna Health Management, LLC agreed to pay Tenet a 24 confidential amount. The Settlement Agreement provides: Tenet and Aetna further agree that as part 25 of this Settlement, and after said payment identified above, neither party shall seek overpayment or 26 underpayment recovery, including any prompt pay penalty, for any Disputed Claim. 27 The Settlement Agreement includes the following release: 28 In consideration of Aetna s and Tenet s execution and delivery of this Settlement 12 1 5 Agreement and settlement check, the Parties do hereby release and forever discharge each other and each other s respective officers, directors, employees and other agents from any and all actions, causes of action, suits, debts, accounts, damages, judgments, claims and demands whatsoever, whether at law or in equity, whether known or unknown, which Aetna or Tenet ever had, now have or may or might in the future have against the other or against any of the entities or individuals hereby released, which relate to, or arise out of the Dispute. The Parties do not intend this release and discharge to have any affect on any claims other than those Disputed Claims which fall within the Dispute Period. 6 Mr. Tanida declares that Aetna considers Principal Life an agent pursuant to the Network 7 Agreement between Principal and Aetna Life. According to Mr. Tanida, DMC raises in this action 8 claims subject to the Settlement Agreement and its Dispute Period in that DMC claims to have been 9 underpaid for claims, and those claims arise under the PPO Agreement. 2 3 4 10 Tenet s Ms. Dozier characterizes the Settlement Agreement to have resolved various disputes 11 between Aetna and Tenet but not those at issue in this action. Ms. Dozier notes that the Settlement 12 Agreement did not relate to, or resolve, any disputes or claims arising out of Doctors Medical s 13 agreement with MultiPlan, or Doctors Medical Center s provision of medical services under MultiPlan s 14 complementary network. 15 DMC Claims 16 DMC proceeds on its Complaint for Damages ( complaint ) to pursue claims, which will 17 addressed below, for breach of contract, breach of implied contract, quantum meruit, and negligent 18 misrepresentation due to Principal s failure to pay the four patient claims based on rates under the 19 MultiPlan Agreement, which DMC claims is controlling. DMC seeks $161,562.42 on its breach of 20 contract claims, and alternatively, $193,216.01 on its other claims. 21 The parties agree that the gist of this dispute is whether rates under the Aetna PPO Agreement 22 or MultiPlan Agreement control. Principal construes this dispute as between Principal and Aetna in that 23 Principal is not a party to the applicable Aetna PPO Agreement and is merely the third-party 24 administrator for the self-funded employer health plans participating in the Aetna Signature 25 Administrators PPO network. Principal contends that it is not a proper party to this action in that 26 Aetna had the sole authority to price the claims and the employer plans were ultimately responsible for 27 payments of benefits. Principal further claims that the Settlement Agreement bars DMC s claims in 28 that DMC is bound to it through its parent company Tenet. 13 1 DMC contends that the four patients were covered under the MultiPlan and ASA networks and 2 that since DMC did not agree to participate in the ASA Plan at the time of the patients admissions, the 3 patients received treatment under the MultiPlan network and under the MultiPlan Agreement rates. In 4 short, DMC argues that the MultiPlan Agreement controls the parties dispute. 5 DISCUSSION 6 Summary Judgment Standards 7 Principal seeks summary judgment in that: 8 1. 9 10 the MultiPlan Agreement; 2. 11 12 The Aetna PPO Agreement controls to bar DMC s breach of contract claims based on The Aetna PPO Agreement is a valid express contract to bar DMC s implied-in-fact and quasi-contract claims; and 3. DMC is unable to establish negligent misrepresentation elements of Principal s assertion 13 that benefits would be paid and DMC s justifiable reliance on Principal s verification of 14 benefits. 15 F.R.Civ.P. 56(a) permits a party to seek summary judgment identifying each claim or defense 16 or the part of each claim or defense on which summary judgment is sought. 8 A district court may 17 dispose of a particular claim or defense by summary judgment when one of the parties is entitled to 18 judgment as a matter of law on that claim or defense. Beal Bank, SSB v. Pittorino, 177 F.3d 65, 68 (1st 19 Cir. 1999). 20 Summary judgment is appropriate when the movant shows there is no genuine dispute as to any 21 material fact and the movant is entitled to judgment as a matter of law. F.R.Civ.P. 56(a); Matsushita 22 Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986); T.W. Elec. Serv., 23 Inc. v. Pacific Elec. Contractors Ass n, 809 F.2d 626, 630 (9th Cir. 1987). The purpose of summary 24 judgment is to pierce the pleadings and assess the proof in order to see whether there is a genuine need 25 for trial. Matsushita Elec., 475 U.S. at 586, n. 11, 106 S.Ct. 1348; International Union of Bricklayers 26 v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985). 27 8 28 Principal s papers reference California Code of Civil Procedure section 437c is inapplicable as this action proceeds in federal court. 14 1 On summary judgment, a court must decide whether there is a genuine issue as to any material 2 fact, not weigh the evidence or determine the truth of contested matters. F.R.Civ.P. 56(a), (c); Covey 3 v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir. 1997); see Adickes v. S.H. Kress & Co., 4 398 U.S. 144, 157, 90 S.Ct. 1598 (1970); Poller v. Columbia Broadcast System, 368 U.S. 464, 467, 82 5 S.Ct. 486 (1962); Loehr v. Ventura County Community College Dist., 743 F.2d 1310, 1313 (9th Cir. 6 1984). Credibility determinations, the weighing of the evidence, and the drawing of legitimate 7 inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for 8 summary judgment or for a directed verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 9 S.Ct. 2505 (1986) 10 The evidence of the party opposing summary judgment is to be believed and all reasonable 11 inferences that may be drawn from the facts before the court must be drawn in favor of the opposing 12 party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Matsushita, 475 U.S. at 587, 106 S.Ct. 1348. The 13 inquiry is whether the evidence presents a sufficient disagreement to require submission to a jury or 14 whether it is so one-sided that one party must prevail as a matter of law. Anderson, 477 U.S. at 251- 15 252, 106 S.Ct. 2505. 16 To carry its burden of production on summary judgment, a moving party must either produce 17 evidence negating an essential element of the nonmoving party s claim or defense or show that the 18 nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of 19 persuasion at trial. Nissan Fire & Marine Ins. Co. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th 20 Cir. 2000); see High Tech Gays v. Defense Indus. Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir. 21 1990). [T]o carry its ultimate burden of persuasion on the motion, the moving party must persuade the 22 court that there is no genuine issue of material fact. Nissan Fire, 210 F.3d at 1102; see High Tech 23 Gays, 895 F.2d at 574. As to materiality, the substantive law will identify which facts are material. 24 Only disputes over facts that might affect the outcome of the suit under the governing law will properly 25 preclude the entry of summary judgment. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. 26 If a moving party fails to carry its initial burden of production, the nonmoving party has no 27 obligation to produce anything, even if the nonmoving party would have the ultimate burden of 28 persuasion at trial. Nissan Fire, 210 F.3d at 1102-1103; see Adickes, 398 U.S. at 160, 90 S.Ct. 1598. 15 1 If, however, a moving party carries its burden of production, the nonmoving party must produce 2 evidence to support its claim or defense. Nissan Fire, 210 F.3d at 1103; see High Tech Gays, 895 F.2d 3 at 574. If the nonmoving party fails to produce enough evidence to create a genuine issue of material 4 fact, the moving party wins the motion for summary judgment. Nissan Fire, 210 F.3d at 1103; see 5 Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548 (1986) (F.R.Civ.P. 56 mandates the entry 6 of summary judgment, after adequate time for discovery and upon motion, against a party who fails to 7 make the showing sufficient to establish the existence of an element essential to that party s case, and 8 on which that party will bear the burden of proof at trial. ) 9 But if the nonmoving party produces enough evidence to create a genuine issue of material fact, 10 the nonmoving party defeats the motion. Nissan Fire, 210 F.3d at 1103; see Celotex, 477 U.S. at 322, 11 106 S.Ct. 2548. The amount of evidence necessary to raise a genuine issue of material fact is enough 12 to require a jury or judge to resolve the parties differing versions of the truth at trial. Aydin Corp. 13 v. Loral Corp., 718 F.2d 897, 902 (quoting First Nat l Bank v. Cities Service Co., 391 U.S. 253, 288- 14 289, 88 S.Ct. 1575, 1592 (1968)). The mere existence of a scintilla of evidence in support of the 15 plaintiff s position will be insufficient. Anderson, 477 U.S. at 252, 106 S.Ct. 2505. 16 Under F.R.Civ.P. 56(g), a summary judgment/adjudication motion, interlocutory in character, 17 may be rendered on the issue of liability alone. In cases that involve . . . multiple causes of action, 18 summary judgment may be proper as to some causes of action but not as to others, or as to some issues 19 but not as to others, or as to some parties, but not as to others. Barker v. Norman, 651 F.2d 1107, 1123 20 (5th Cir. 1981); see also Robi v. Five Platters, Inc., 918 F.2d 1439 (9th Cir. 1990); Cheng v. 21 Commissioner Internal Revenue Service, 878 F.2d 306, 309 (9th Cir. 1989). A court may grant 22 summary adjudication as to specific issues if it will narrow the issues for trial. First Nat l Ins. Co. v. 23 F.D.I.C., 977 F.Supp. 1051, 1055 (S.D. Cal. 1977). 24 25 26 As discussed below, DMC has raised factual issues as to all of its claims but one to necessitate trial. Breach Of Contract 27 The complaint s first through fourth claims allege that Principal breached the MultiPlan 28 Agreement by incorrectly adjusting payment and underpaying claims for the four patients by 16 1 $161,562.42. The claims further allege that Principal breached the MultiPlan Agreement by refusing 2 to pay the full amount due under its terms. 3 The standard elements of a claim for breach of contract are: (1) the contract, (2) plaintiff's 4 performance or excuse for nonperformance, (3) defendant's breach, and (4) damage to plaintiff 5 therefrom. 6 Cal.Rptr.3d 6 (2008). To form a contract, an offer must be sufficiently definite . . . that the 7 performance promised is reasonably certain. Alexander v. Codemasters Group Limited, 104 8 Cal.App.4th 129, 141. 127 Cal.Rptr.2d 145 (2002). 9 Wall Street Network, Ltd. v. New York Times Co., 164 Cal.App.4th 1171, 1178, 80 Aetna PPO Agreement s Effects 10 Principal contends that the Aetna PPO Agreement governed amounts owed to DMC and that 11 Principal undisputably paid required amounts under the Aetna PPO Agreement. Principal argues that 12 DMC misapplies the MultiPlan Agreement in that the Aetna PPO Agreement governs the services 13 provided to Members of the ASA Network, including the Patients. Principal explains that the Aetna 14 PPO Agreement is an all products contract and that its Participation Schedule defines Plans in which 15 DMC agreed to participate and includes ASA. Principal points to Aetna Insurance Company s Mr. 16 Tanida s declaration that [n]othing in the negotiations between Aetna and [DMC], nor the actual PPO 17 Agreement excludes ASA products. 18 Principal challenges DMC s claim that the Aetna PPO Agreement allows only Aetna entities 19 which are listed as Affiliates to participate in discounts. Principal points out that ASA is an Aetna PPO 20 network or product, not an Aetna-owned corporation, partnership, affiliate or other legal entity. 21 Principal points to Aetna Signature Administrators as a registered service mark owned by Aetna, Inc., 22 the parent company of Aetna Health of California, Inc. and Aetna Health Management, Inc. 23 DMC argues that the Aetna PPO Agreement and its Product Participation Schedule reflect that 24 DMC did not participate in the ASA Plan in 2008, when the patients were treated. DMC notes that it 25 provided reduced rates only to patients who participated in Aetna plans specifically listed in the Aetna 26 PPO Agreement. DMC relies on the Aetna PPO Agreement s Plan Participation provision by which 27 DMC agrees to participate in the Plans and other health benefit products listed on the Product 28 Participation Schedule attached hereto and made a part hereof. (Bold added.) DMC points to the 17 1 Product Participation Schedule s limited reference to PPO and NAP Plans . . . Including, but not limited 2 to . . . Open Choice and National Advantage and any Aetna Health Fund product built off the PPO and 3 NAP platform. DMC argues that the Plan Participation provision and Plan Participation Schedule 4 reveal that the Aetna PPO Agreement is not an all products contract. 5 DMC futher points to the Aetna PPO Agreement s Introduction of New Plans and Products 6 provision as a mechanism for Aetna to add new products and which provides that if Aetna and DMC 7 cannot reach agreement on new rates for the new plans or products, the terms of this Agreement shall 8 not apply to [DMC] services provided to Members enrolled in such new Plans or products. DMC 9 points to Ms. Dozier s declaration that Aetna neither provided DMC with written notice of such new 10 Plans and Products and the associated compensation for the ASA Plan nor introduced and designated 11 the ASA Plan as required under the Introduction of New Plans and Products provision. 12 DMC continues that the ASA Plan s addition by the 2010 Amendment to the Aetna PPO 13 Agreement demonstrates that DMC did not participate in the ASA Plan when it treated the patients in 14 2008. DMC concludes that there would be no need to add the ASA Plan if it were already part of the 15 agreement. 16 In its reply papers, Principal responds that the Product Participation Schedule s including, but 17 not limited to language was broad enough to cover the ASA Plan to demonstrate that the Aetna PPO 18 Agreement is an all products contract. Principal further notes that the ASA Plan was an existing 19 product, not a new plan or product introduced by Aetna during the pendency of the PPO Agreement. 20 This Court agrees with DMC s analysis of the Aetna PPO Agreement. At a minimum, DMC 21 creates factual challenges whether the Aetna PPO Agreement controls. Principal offers nothing 22 meaningful to support that the Aetna PPO Agreement is an all products contract and itself raises 23 factual issues as to, among other things, whether the including, but not limited to language was broad 24 enough to cover the ASA Plan. The 2010 Amendment belies such notion given the 2010 Amendment s 25 explicit addition of the ASA Plan. The 2010 Amendment replaced the Aetna PPO Agreement s Product 26 Participation Schedule and Hospital Compensation Schedule, the result of which was to include 27 expressly for the first time the ASA Plan as a Non-Gated Health Benefit Product to be paid according 28 to the Services and Compensation Schedules attached to this Agreement. Principal s points as to other 18 1 impacts of the 2010 Amendment are immaterial and unavailing, and its claim that [b]eing a PPO Plan, 2 ASA fell within this general description of the Product Participation Schedule reiterates factual issues 3 as to interpretation of the Aetna PPO Agreement, the Product Participation Schedule and the 2010 4 Amendment. 5 Master Agreement Modification 6 Principal urges to read the Aetna PPO Agreement as modified by the Master Agreement between 7 Aetna Health Management, LLC and Tenet, DMC s parent corporation. Principal points to Mr. Tanida s 8 declaration that the Master Agreement continues to govern relations between Aetna and the Tenet 9 hospitals, including DMC and that the Master Agreement is explicit in its inclusion of Aetna Signature 10 Administrators products under its existing Hospital Services Agreements, including the Aetna PPO 11 Agreement. Principal explains that since DMC lacks a separately negotiated percent of charge rates 12 for ASA, ASA products are to be paid at the PPO rates set forth in the PPO Agreement. 13 DMC accuses Principal of exploiting the multifaceted structure of health care contracts to create 14 confusion as to which PPO network contract applies to the services at issue. DMC raises an initial 15 challenge to the Master Agreement based on the parol evidence rule. 16 The Parol Evidence Rule 17 The Aetna PPO Agreement includes an integration clause that the Aetna PPO Agreement is 18 the complete and sole contract between the parties and supersedes any and all prior or 19 contemporaneous oral or written communications or proposals not expressly included herein. DMC 20 argues that applying the Master Agreement to the Aetna PPO Agreement is inconsistent with the 21 Aetna PPO Agreement and its integration clause. 22 Principal responds that the Master Agreement may be considered to interpret the Aetna PPO 23 Agreement because the Master Agreement does not alter the Aetna PPO Agreement s terms and proves 24 a meaning to which the Aetna PPO Agreement is reasonably susceptible. Principal contends that failure 25 to designate every conceivable Aetna product in the [Aetna PPO Agreement s] Product Participation 26 Schedule does not limit the scope of the PPO Agreement. 27 The parol evidence rule generally prohibits the introduction of any extrinsic evidence, whether 28 oral or written, to vary, alter or add to the terms of an integrated written instrument. Alling v. Universal 19 1 Manufacturing Corp., 5 Cal.App.4th 1412, 1433, 7 Cal.Rptr.2d 718 (1992). However, [e]xtrinsic 2 evidence is admissible to interpret the instrument, but not to give it a meaning to which it is not 3 susceptible . . ., and it is the instrument itself that must be given effect. City of Manhattan Beach v. 4 Superior Court, 13 Cal.4th 232, 238, 914 P.2d 160 (1996), cert. denied, 519 U.S. 1008, 117 S.Ct. 511 5 (1996). 6 7 8 In Casa Herrera, Inc. v. Beydoun, 32 Cal.4th 336, 344, 9 Cal.Rptr.3d 97 (2004), the California Supreme Court explained effects of the parol evidence rule: 12 The parol evidence rule therefore establishes that the terms contained in an integrated written agreement may not be contradicted by prior or contemporaneous agreements. In doing so, the rule necessarily bars consideration of extrinsic evidence of prior or contemporaneous negotiations or agreements at variance with the written agreement. [A]s a matter of substantive law such evidence cannot serve to create or alter the obligations under the instrument. (Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11, 23, 92 Cal.Rptr. 704, 480 P.2d 320 . . .) In other words, the evidentiary consequences of the rule follow from its substantive component which establishes, as a matter of law, the enforceable and incontrovertible terms of an integrated written agreement. 13 The parol evidence rule applies to any type of contract, and its purpose is to make sure that the 14 parties' final understanding, deliberately expressed in writing, shall not be changed. Casa Herrera, 32 15 Cal.4th at 346, 9 Cal.Rptr.3d 97 (citation omitted). 9 10 11 16 Application of the parol evidence rule rests on whether the writing [was] intended to be an 17 integration, i.e., a complete and final expression of the parties' agreement, precluding any evidence of 18 collateral agreements [citation]; and 2) . . . the agreement [is] susceptible of the meaning contended for 19 by the party offering the evidence? Banco Do Brasil, S.A. v. Latian, Inc.,234 Cal.App.3d 973, 1001, 20 285 Cal.Rptr. 870 (1992) (internal quotation marks omitted). The parol evidence rule does not prohibit 21 the introduction of extrinsic evidence to explain the meaning of a written contract . . . [if] the meaning 22 urged is one to which the written contract terms are reasonably susceptible. BMW of North America, 23 Inc. v. New Motor Vehicle Bd.,162 Cal.App.3d 980, 990, fn. 4, 209 Cal.Rptr. 50 (1984). The test of 24 admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it 25 appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant 26 to prove a meaning to which the language of the instrument is reasonably susceptible. Pacific Gas & 27 E. Co. v. G. W. Thomas Drayage, 69 Cal.2d 33, 37, 69 Cal.Rptr. 561 (1968). 28 The Aetna PPO Agreement s integration clause reflects that the Aetna PPO Agreement is 20 1 intended as a complete, final expression of the agreement, to that point, of DMC, Aetna Health of 2 California, Inc. and Aetna Health Management, Inc. At a minimum, the integration clause raises factual 3 challenges as to Principal s explanation that the Master Agreement clarified that in the absence of a 4 National Agreement, ASA products would be paid at Aetna PPO Agreement rates. Nothing in the record 5 suggests that the Master Agreement overrides the Aetna PPO Agreement s integration clause or that the 6 Aetna PPO Agreement requires extrinsic evidence to explain it, despite DMC s acceptance of unrelated 7 benefits under the Master Agreement. 8 Agreement To Agree 9 DMC characterizes the Master Agreement as an unenforceable agreement to agree or 10 agreement to negotiate. The general rule is that if an essential element of a promise is reserved for 11 the future agreement of both parties, the promise gives rise to no legal obligation until such future 12 agreement is made. City of Los Angeles v. Superior Court of Los Angeles County, 51 Cal.2d 423, 433, 13 333 P.2d 745 (1959). 14 DMC points to Master Agreement provisions that the parties agree to enter into a National 15 Agreement . . . and a standard Compensation Schedule methodology for all Tenet hospitals . . . under 16 such terms and in such format as agreed to between the parties and that the parties intend that such 17 National Agreement will be completed and will be agreed to between the parties for all participating 18 Tenet hospitals by September 1, 2007. DMC attributes the Master Agreement to express Tenet and 19 Aetna Healthcare Management, LLC s desire to accomplish future arrangements to render it 20 unenforceable as to DMC s treatment of the four patients. 21 DMC raises valid points. The Master Agreement reflects intentions to reach a National 22 Agreement and Compensation Schedule subject to future negotiations. Principal fails to demonstrate 23 viable application of the Master Agreement to the issues at hand, especially given the factual issues 24 raised by DMC. 25 No Obligation To Participate In ASA Plan 26 DMC interprets the Master Agreement to the effect that the Aetna PPO Agreement remained 27 effective until Tenet and Aetna Health Management, LLC replaced or amended the Aetna PPO 28 Agreement. DMC notes that since the Aetna PPO Agreement was not amended until 2010, the Aetna 21 1 PPO Agreement s original terms, without ASA Plan obligations, remained in effect at the time of the 2 four patients admissions. To reflect intentions to negotiate replacement of the Aetna PPO Agreement, 3 DMC points to the Master Agreement s Failure to Meet Deadlines provision: Should the parties fail 4 to enter into a National Agreement by January 1, 2008, the current Tenet hospital service agreements 5 and other agreements will remain in effect and the current Compensation Schedule will be amended . 6 . . DMC explains that since Tenet and Aetna Health Management, LLC failed to enter into a National 7 Agreement by January 1, 2008, the then-current Tenet hospital service agreements and other 8 agreements remained in effect. As such, DMC notes that the Aetna PPO Agreement, without ASA Plan 9 obligations, would not have needed amending if the Master Agreement actually modified it as Principal 10 11 12 contends. DMC s analysis of the Master Agreement raises factual issues as to its effect and whether DMC was subject to ASA Plan obligations. 13 MultiPlan Agreement Effects 14 DMC argues that the MultiPlan Agreement sets rates for the four patients care in that DMC did 15 not participate in the ASA Plan during the patients admissions and thus could not be treated under the 16 ASA Plan. DMC notes that DMC and Principal participated in MultiPlan s network and thus the 17 patients were treated under the only available network, MultiPlan. As such, DMC holds Principal to pay 18 MultiPlan Agreement rates. 19 DMC s takes a process of elimination approach. In other words, since the Aetna PPO 20 Agreement and Master Agreement do not apply, the only available option is the MultiPlan Agreement. 21 DMC s approach makes sense. At a minimum, DMC has raised factual issues as to the governing and 22 modifying effects of the Aetna PPO and Master Agreement to withstand summary judgment on DMC s 23 breach of contract claims. 24 Quasi-Contract Claims 25 The complaint s fifth through eighth claims allege that [b]y providing authorization to DMC 26 Modesto, Principal promised to pay for the expenses incurred by DMC Modesto in its care and treatment 27 of its insured, creating an implied contract. The claims continue that Principal breached its implied 28 agreement with DMC Modesto by refusing to pay DMC Modesto s claim for the charges incurred for 22 1 the four patients. 2 The complaint s thirteenth through sixteenth quantum meruit claims allege that by representing 3 to DMC that it should care for the four patients, Principal expressly and impliedly requested that DMC 4 Modesto provide care and treatment to the four patients. The claims further allege that DMC s 5 treatment of the four patients benefitted Principal in that the patients received treatment which Principal 6 was obligated to provide. 7 8 9 Principal characterizes the complaint s breach of implied contract and quantum meruit claims as quasi contract and barred by the express Aetna PPO Agreement or MultiPlan Agreement. Existence Of Binding Agreement 10 [A]s a matter of law, a quasi-contract action for unjust enrichment does not lie where, as here, 11 express binding agreements exist and define the parties' rights. California Medical Ass'n, Inc. v. Aetna 12 U.S. Healthcare of California, Inc., 94 Cal.App.4th 151, 172, 114 Cal.Rptr.2d 109 (2001). When 13 parties have an actual contract covering a subject, a court cannot not even under the guise of equity 14 jurisprudence substitute the court's own concepts of fairness regarding that subject in place of the 15 parties' own contract. Hedging Concepts, Inc. v. First Alliance Mortgage Co., 41 Cal.App.4th 1410, 16 1419-1420, 49 Cal.Rptr.2d 191 (1996). 17 18 19 20 21 22 23 24 25 In Hedging Concepts, 41 Cal.App.4th at 1419, 49 Cal.Rptr.2d 191, the California Court of Appeal explained limits to quantum meruit or quasi-contract recovery: A quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. . . . However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation. . . . Quantum meruit is an equitable theory which supplies, by implication and in furtherance of equity, implicitly missing contractual terms. Contractual terms regarding a subject are not implicitly missing when the parties have agreed on express terms regarding that subject. A quantum meruit analysis cannot supply missing terms that are not missing. The reason for the rule is simply that where the parties have freely, fairly and voluntarily bargained for certain benefits in exchange for undertaking certain obligations, it would be inequitable to imply a different liability. . . . Wal-Noon Corp. v. Hill (1975) 45 Cal.App.3d 605, 613, 119 Cal.Rptr. 646. 26 27 There cannot be a valid, express contract and an implied contract, each embracing the same 28 subject matter, existing at the same time. Wal-Noon Corp. v. Hill, 45 Cal.App.3d 605, 613, 119 23 1 Cal.Rptr. 646 (1975). 2 Principal contends that the subject matter of the complaint s implied contract and quantum 3 meruit claims is the amount of compensation which DMC is entitled from Principal and is governed 4 by one of the express contracts alleged by the parties. Principal notes that DMC acknowledges that 5 written contracts govern the manner in which it is to receive compensation from Principal given 6 DMC s reliance on MultiPlan Agreement rates. Principal continues that this Court is unable to supply 7 missing terms in that the Aetna PPO Agreement and MultiPlan Agreement set rates. Principal further 8 notes that since the complaint fails to allege a voided or rescinded contract, DMC lacks quasi-contract 9 claims. 10 DMC responds that Principal misapprehends the nature of DMC s breach of implied contract 11 and quantum meruit claims, pled in the alternative under F.R.Civ.P. 8(d)(2) and (3). DMC continues 12 that Principal misapplies the governing law in that existence of an enforceable contract between 13 parties will prevent recovery in quasi-contract, as between those parties. DMC points to the absence 14 of an agreement directly between it and Principal in that DMC entered the Aetna PPO Agreement with 15 Aetna Health of California, Inc. and Aetna Health Management, Inc. and entered the MultiPlan 16 Agreement with MultiPlan. DMC concludes that in the absence of its contract with Principal, the 17 rationale underlying the rule disappears. 18 DMC raises valid points, especially considering factual issues as to which agreement sets DMC s 19 rates for the four patients. Potential exists that a factfinder may conclude that neither the Aetna PPO 20 Agreement nor MultiPlan Agreement apply to leave no binding agreement which would bar DMC s 21 quasi-contract claims. If there is no binding agreement, the factfinder will need a means to supply 22 missing terms. Although this Court is not prepared to conclude the absolute absence of a binding 23 express agreement, it must be prepared to face such potential at trial. Principal is unable to prevail on 24 its contentions that a binding agreement bars DMC s quasi-contract claims. 25 26 27 28 Coverage Verification Principal argues that its verification of coverage for the four patients does not establish a binding oral contract. DMC responds that it seeks to recover on an implied, not an oral, contract. Essential elements to contract existence are: (1) [p]arties capable of contracting; (2) [t]heir 24 1 consent; (3) a lawful object; and (4) a sufficient cause or consideration. Cal. Civ. Code, § 1550. 2 [C]reation of a valid contract requires mutual assent. . . . Parties must communicate their 3 mutual consent to enter into a contract. Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 315 (9th Cir. 4 1996) (citing Cal. Civ. Code, §§ 1550, 1565). The California Court of Appeal has explained: 5 8 One of the essential elements of a contract is the consent of the parties. (Civ. Code, § 1550.) This consent must be mutual. (Civ. Code, § 1565.) Consent is not mutual, unless the parties all agree upon the same thing in the same sense. (Civ. Code, § 1580.) It is only on evidence of such consent that the law enforces the terms of a contract or gives a remedy for the breach of it. One cannot be made to stand on a contract to which he has never consented. (Amer. Aero. Corp. v. Grand Cen. Aircraft Co. (1957) 155 Cal.App.2d 69, 79, 317 P.2d 694.) 9 Khajavi v. Feather River Anesthesia Medical Group, 84 Cal.App.4th 32, 60, 100 Cal.Rptr.2d 627 (2000) 10 ( a party is entitled to the benefit of only those provisions to which the contracting parties agreed, not 11 the ones to which they might have subsequently agreed ). 6 7 12 Principal explains that no oral contract to pay for patient treatment arises when a healthcare 13 provider obtains telephone verification of the patient s coverage from a health insurer. See Cedars Sinai 14 Medical Center v. Mid-West Nat. Life Ins. Co., 118 F.Supp.2d 1002, 1008 (C.D. Cal. 2000) ( within the 15 medical insurance industry, an insurer's verification is not the same as a promise to pay ); see also Tenet 16 Healthsystem Desert, Inc. v. Fortis Ins. Co., Inc., 520 F.Supp.2d 1184, 1194 (C.D. Cal. 2007) (coverage 17 verification cannot be construed as a binding contractual agreement ). 18 Principal argues that DMC is unable to establish Principal s intent to contract with DMC for 19 payment of full billed charges when it verified that the Patients were eligible for benefits in that 20 Principal did not discuss the PPO contract benefit to be paid for the patients. Principal points to its 21 Compliance Analyst Ms. Ferry s declaration that Principal telephone representatives are not authorized 22 to provide claim approvals and Principal s practice is that a verification is nothing more than a 23 communication of the information that coverage exists. Claims are not approved for payment until after 24 the claim is submitted, PPO verification and pricing is completed and eligibility of the patient is 25 verified. 26 DMC responds that a meeting of the minds as to amounts which it would be paid was not 27 required in that DMC and Principal s acts and conduct manifested their assent to contract. An 28 implied-in-law contract is actually not a contract at all, but merely an obligation imposed by the law 25 1 to bring about justice. It has been held that a contract may be formed even though there is no meeting 2 of the minds. Arcade County Water Dist. v. Arcade Fire Dist., 6 Cal.App.3d 232, 236, 85 Cal.Rptr. 3 737 (1970). In California, a party's intent to contract is judged objectively, by the party's outward 4 manifestation of consent. Weddington Productions, Inc. v. Flick, 60 Cal.App.4th 793, 811, 71 5 Cal.Rptr.2d 265 (1998). Whether or not an implied contract has been created is determined by the act 6 and conduct of the parties and all the surrounding circumstances involved and is a question of fact. Del 7 E. Webb Corp. v. Structural Materials Co., 123 Cal.App.3d 593, 611, 176 Cal.Rptr. 824 (1981). 8 At a minimum, the record creates factual issues as to what the parties intended. Although 9 Principal did not verify payment amounts, it verified the four patient s coverage which DMC attributes 10 to have been under the MultiPlan network. The record raises factual issues as to whether Principal, 11 through its acts and conduct, no less than implied that DMC would be paid at MultiPlan network rates. 12 The record s absence of clarity prevents summary judgment in Principal s favor on the breach of implied 13 contract and quantum meruit claims. 14 Negligent Misrepresentation 15 The complaint s ninth through twelfth negligent misrepresentation claims allege that Principal s 16 verification of the four patients eligibility, benefits and authorization was an untrue representation that 17 Principal would cover the patients treatment. 18 Principal challenges DMC s evidence to support negligent misrepresentation elements. 19 The elements of negligent misrepresentation are (1) the misrepresentation of a past or existing 20 material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's 21 reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting 22 damage. Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226, 243, 70 23 Cal.Rptr.3d 199 (2007). In contrast to fraud, negligent misrepresentation does not require knowledge 24 of falsity. Apollo Capital, 158 Cal.App.4th at 243, 70 Cal.Rptr.3d 199. A defendant who makes false 25 statements honestly believing that they are true, but without reasonable ground for such belief, . . . may 26 be liable for negligent misrepresentation. Bily v. Arthur Young & Co., 3 Cal.4th 370, 407, 11 27 Cal.Rptr.2d 51 (1992) (citation omitted). However, a positive assertion is required; an omission or an 28 implied assertion or representation is not sufficient. Apollo Capital, 158 Cal.App.4th at 243, 70 26 1 Cal.Rptr.3d 199. 2 Positive Assertions 3 Principal challenges DMC s ability to establish a positive assertion of the exact amount of 4 benefits that would be paid. Principal points to the complaint s allegations that Principal confirmed 5 that no authorization was required for requested services for these patients. Principal notes that it did 6 not misrepresent the patients benefits eligibility and that as a third-party administrator, it could not 7 represent payment amounts in that Principal lacked responsibility to make payments. Principal points 8 to its automated disclaimer that quoted benefits are not a guarantee of payment and that benefits 9 are based on eligibility and plan provisions on the date of service. Principal argues that an implied 10 verification that benefits would be paid in a specific amount fails to satisfy the positive assertion 11 requirement for negligent misrepresentation. 12 DMC responds that it need not show that Principal represented the exact amount of benefits to 13 be paid in that DMC s burden is to establish the misrepresentation of a past or existing fact. Apollo 14 Capital, 158 Cal.App.4th at 243, 70 Cal.Rptr.3d 199. DMC claims there are triable factual issues as to 15 Principal s requisite misrepresentations in that: 16 1. 17 The Principal-issued insurance cards indicated that the patients were insured through Principal with access to MultiPlan s network; 18 2. DMC notified Principal that the patients would receive care under MultiPlan s network; 19 3. Principal verified the patient s eligibility and benefits; and 20 4. Principal did not notify DMC that the patients were treated under the ASA Plan. 21 DMC argues that if the patients were ineligible under the MultiPlan network, the contrary statements 22 made at the time the patients were admitted were misrepresentations of past or existing fact. 23 Discrepancies exist in the parties versions of information provided by Principal at the patients 24 admissions. Principal contends it communicated that the PPO was ASA and did not represent that the 25 patients treatment was covered under any Principal plan. DMC claims that it notified Principal that 26 the patients would receive treatment under MultiPlan s network and that Principal verified eligibility 27 and benefits. DMC notes the absence of Principal s assertions that: (1) the patients were not Principal 28 insureds; (2) Principal would not cover the patients expenses under Principal s network arrangement 27 1 with MultiPlan; or (3) the patients were eligible and treated under the ASA Plan. DMC s evidence 2 contradicts Principal s evidence that it communicated that the PPO was ASA. The crux is what 3 exactly Principal verified, that is, whether there was coverage under and limited to the ASA Plan, 4 whether there was coverage through the MultiPlan network, or whether there was coverage under an 5 unspecified network. In the end, Principal fails to negate the absence of evidence for the positive 6 assertion element. 7 Justifiable Reliance 8 Principal further attacks the justifiable reliance element of negligent misrepresentation. As to 9 Patient 1, Principal notes that the complaint negates DMC s justifiable reliance in that the complaint 10 alleges that Patient 1 was admitted on July 25, 2008 and discharged on July 28, 2008, the day on which 11 Principal authorized treatment. Principal notes, in other words, that treatment was provided before any 12 authorization was obtained. 13 As to all four patients, Principal argues that DMC s reliance on Principal s verification was not 14 justifiable given Principal s automated disclaimer that quoted benefits are not a guarantee of payment 15 and that benefits are based on eligibility and plan provisions on the date of service. Principal points 16 to the absence of specifics on DMC s reliance on an alleged misrepresentation. The mere assertion of 17 reliance is insufficient. The plaintiff must allege the specifics of his or her reliance on the 18 misrepresentation to show a bona fide claim of actual reliance. Cadlo v. Owens-Illinois, Inc., 125 19 Cal.App.4th 513, 519, 23 Cal.Rptr.3d 1 (2004). Actual reliance occurs when the defendant's 20 misrepresentation is an immediate cause of the plaintiff's conduct, altering his legal relations, and when, 21 absent such representation, the plaintiff would not, in all reasonable probability, have entered into the 22 transaction. Cadlo, 125 Cal.App.4th at 519, 23 Cal.Rptr.3d 1. 23 Whether reliance is justified is a question of fact for the determination of the trial court; the 24 issue is whether the person who claims reliance was justified in believing the representation in the light 25 of his own knowledge and experience. Gray v. Don Miller & Associates, Inc., 35 Cal.3d 498, 503, 198 26 Cal.Rptr. 551 (1984). In OCM Principal Opportunities Fund v. CIBC World Markets Corp., 157 27 Cal.App.4th 835, 865, 68 Cal.Rptr.3d 828 (2007), the California Court of Appeal further explained 28 justifiable reliance: 28 1 2 3 4 Generally, [a] plaintiff will be denied recovery only if his conduct is manifestly unreasonable in the light of his own intelligence or information. It must appear that he put faith in representations that were preposterous' or shown by facts within his observation to be so patently and obviously false that he must have closed his eyes to avoid discovery of the truth. [Citation.] Even in case of a mere negligent misrepresentation, a plaintiff is not barred unless his conduct, in the light of his own information and intelligence, is preposterous and irrational. [Citation.] (Hartong v. Partake, Inc. (1968) 266 Cal.App.2d 942, 965, 72 Cal.Rptr. 722.) 5 6 DMC argues that it justifiably relied on Principal s representations in that Principal s statements 7 verifying the patients [sic] eligibility and benefits were neither preposterous, nor patently and 8 obviously false. DMC points to Principal s requirement to call and verify the eligibility and benefits. 9 DMC attributes to Principal to know and expect that providers like Doctors Medical will rely upon the 10 information that Principal provides to them in verification calls. DMC characterizes as irrelevant 11 Principal s disclaimer in that this action addresses wrong rates, not denied benefits. 12 DMC raises valid points except as to justifiable reliance on coverage for Patient 1. The 13 complaint alleges that Patient 1 was admitted on July 25, 2008 and discharged on July 28, 2008, the day 14 on which Principal authorized treatment. DMC had discharged Patient 1 prior to any point in which it 15 could have reasonably relied on Principal s verification. Principal successfully negates the justifiable 16 reliance element as to Patient 1 to warrant summary judgment for Principal on the (ninth) negligent 17 misrepresentation claim. 18 However, Principal s success ends there. The parties agree that Principal represented the 19 availability of benefits for Patients 2-4. The parties disagree on what coverage was represented to be 20 available. DMC has presented evidence that it reasonably relied that it would be paid more than it 21 received. DMC surmised that the patients would receive care under the MultiPlan network and has 22 raised factual issues as to application of the Aetna PPO Agreement and ASA Plan. Such factual issues 23 preclude finding that its reliance on Principal s coverage verification was unjustified. Principal s resort 24 to its disclaimer offers it little comfort in that the issue is the applicable network and rates. Summary 25 judgment is not warranted on the negligent misrepresentation claims as to Patients 2-4. 26 Settlement Agreement Effects 27 Principal argues that the Settlement Agreement bars DMC s claims because they arose during 28 the Dispute Period defined in the Settlement Agreement. Principal contends that pursuant to the 29 1 Settlement Agreement, Tenet, on DMC s behalf, released claims of underpayment for treatment 2 rendered to Aetna s Members through December 31, 2008. Principal argues that such release extends 3 to Principal Life as it is an agent of Aetna for the administration of the Patients claims pursuant to the 4 Network Agreement between Principal and Aetna Life. Principal concludes that Tenet, DMC s parent 5 company, has already settled the claims and released Principal Life from all liability. 6 7 DMC responds that the Settlement Agreement does not apply because this action arises out of the MultiPlan Agreement and the Settlement Agreement resolved claims against only Aetna. 8 DMC correctly challenges the applicability of the Settlement Agreement, which is between Tenet 9 and Aetna Health Management, LLC. Principal is not a party to the Settlement Agreement and fails to 10 connect the Settlement Agreement to this action, especially given the factual issues whether the Aetna 11 PPO Agreement or MultiPlan Agreement govern the rates at issue. Moreover, there is no meaningful 12 evidence that the Settlement Agreement released claims against Principal. 13 14 15 16 Principal As Proper Party Principal contends that it is not a proper defendant in that this dispute is between DMC and Aetna. Principal summarizes that: 1. 17 18 19 If the Aetna PPO Agreement, as modified by the Master Agreement, applies to ASA products, the Aetna PPO Agreement dictates applicable rates; or 2. If the Aetna PPO Agreement does not apply to ASA products, the MultiPlan Agreement dictates rates. 20 Principal notes that it is not a party to either the Aetna PPO Agreement, Master Agreement or MultiPlan 21 Agreement and that Aetna claims that ASA products are covered under the PPO Agreement and has 22 instructed Principal Life to pay the claims accordingly. Principal absolves itself of responsibility for 23 plan benefits and attributes responsibility to Aetna to set rates to be paid to DMC. Principal urges to 24 examine and interpret the business dealings among Aetna, DMC and Tenet and characterizes itself 25 as a stranger to such dealings with no stake in the outcome of this dispute. 26 DMC responds that it provided services to the four patients under the MultiPlan Agreement, for 27 which Principal is the responsible payor. Because this action is based upon the [MultiPlan] Agreement, 28 not the Aetna PPO Agreement, Principal is a proper party. 30 1 Principal has not absolved itself of liability. Principal sifts through multiple agreements and 2 offers varying interpretations of and interchanges among the agreements and parties to them. Principal 3 fails to define clearly its role other than an as a healthcare plan administrator. Based on the murky 4 record, this Court is unable to conclude that Principal is an improper defendant. 5 MultiPlan Agreement s Dispute Resolution Provision 6 Principal argues that if the MultiPlan Agreement governs DMC s claims, the MultiPlan 7 Agreement s dispute resolution provision bars DMC s claims in this action. The dispute resolution 8 provision calls for progressive steps to attempt to resolve disputes short of litigation. The dispute 9 resolution provision requires DMC to provide MultiPlan at its Waltham, Massachusetts address with 10 written notice specifying the nature of the dispute. The dispute resolution provision states: Neither 11 party shall institute any legal action or proceeding until the expiration of sixty days from the date of the 12 notice . . . Principal concludes that to enforce the MultiPlan Agreement, DMC was required to follow 13 the procedures set forth therein. 14 Principal notes that under the MultiPlan Agreement, DMC was required to provide MultiPlan 15 with written notice of the nature of its dispute with Principal, and MultiPlan was required to initiate 16 discussions with Principal. Principal points to an absence of DMC s compliance with this condition 17 to filing suit in that per Ms. Ferry s declaration, Principal has not been contacted by any representative 18 of MultiPlan, Inc. initiating discussions to resolve this dispute. 19 DMC responds that the parties have waived the dispute resolution procedure by dogged pursuit 20 of this action. See Maxum Foundations, Inc. v. Salus Corp., 779 F.2d 974, 981 (4th Cir. 974) ( A litigant 21 may waive its right to invoke [arbitration] by so substantially utilizing the litigation machinery that to 22 subsequently permit arbitration would prejudice the party opposing the stay); Davis v. Blue Cross of 23 Northern California, 25 Cal.3d 418, 425, 158 Cal.Rptr. 828 (1979) ( California courts have found a 24 waiver of the right to demand arbitration in a variety of contexts, ranging from situations in which the 25 party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke 26 arbitration . . . to instances in which the petitioning party has unreasonably delayed in undertaking the 27 procedure ); see also Khan v. Parsons Global Servs., Ltd., 521 F.3d 421, 428 (D.C. Cir. 2008) (filing 28 summary judgment motion suggests waiver of arbitration). 31 1 DMC is correct that Principal has substantially utilized the litigation machinery to vitiate 2 benefits of the MultiPlan Agreement s dispute resolution procedure. Moreover, the record reveals 3 significant unsuccessful attempts to resolve the disputes at issue here to negate ceasing this action in 4 favor of other procedures. The MultiPlan Agreement s dispute resolution provision fails to support 5 summary judgment for Principal as does Principal s meaningless points regarding the parties settlement 6 communications and DMC s apparent misunderstandings of which Principal seeks to take advantage. 7 CONCLUSION AND ORDER 8 For the reasons discussed above, this Court: 9 1. 10 GRANTS Principal summary adjudication on the complaint s (ninth) negligent misrepresentation claim as to Patient 1; 11 2. DENIES otherwise summary judgment; and 12 3. CONFIRMS the May 12, 2011 pretrial conference and June 6, 2011 trial. 13 IT IS SO ORDERED. 14 Dated: 66h44d April 14, 2011 /s/ Lawrence J. O'Neill UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32