Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_07-cv-05497/USCOURTS-cand-5_07-cv-05497-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

**E-filed 1/23/08**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

STANFORD HOSPITAL AND CLINICS,

 Plaintiff,

 v.

MULTINATIONAL UNDERWRITERS, INC., and

DOES 1 THROUGH 25, INCLUSIVE

 Defendants.

Case Number C-07-05497 JF

ORDER GRANTING IN PART WITH

LEAVE TO AMEND AND DENYING

IN PART WITHOUT PREJUDICE

DEFENDANT’S MOTION TO

DISMISS

[re: doc. no. 8]

Defendant Multinational Underwriters, LLC (“Multinational”) moves to dismiss

Plaintiff’s complaint. The Court has considered the moving and responding papers and the oral

arguments presented at the hearing. For the reasons discussed below, the motion will be granted

in part with leave to amend and denied in part without prejudice.

I. BACKGROUND

The following facts are alleged in the complaint. Plaintiff Stanford Hospital and Clinics

(“Stanford”) admitted a patient to its facility on July 4, 2005. The patient was discharged from

Stanford Hospital on July 6, 2005. During the patient’s stay, Stanford rendered medically

necessary services, equipment, and supplies to the patient. 

Case 5:07-cv-05497-JF Document 12 Filed 01/23/08 Page 1 of 6
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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

During the patient’s admission process, Stanford contacted Multinational and/or

Multinational’s agent to verify the patient’s health coverage. Multinational and/or

Multinational’s agent confirmed that the patient was an enrollee of a health plan sponsored or

underwritten by Multinational. Multinational and/or Multinational’s agent confirmed that

authorization of services provided was not required and that Stanford should submit its claim. 

Stanford’s charges for rendering medically necessary services, equipment, and supplies to the

patient from July 4, 2005 through July 6, 2005 amounted to $76,590.49. On or about July 12,

2005, Stanford submitted the final bill to Multinational for payment. After receiving the bill,

Multinational stated that it would not pay any amount as it did not cover services rendered in the

United States or Canada under the patient’s policy. Stanford attempted unsuccessfully to resolve

the matter with Multinational. 

II. LEGAL STANDARD

For purposes of a motion to dismiss, the plaintiff’s allegations are taken as true, and the

Court must construe the complaint in the light most favorable to the plaintiff. Jenkins v.

McKeithen, 395 U.S. 411, 421 (1969); Argabright v. United States, 35 F.3d 472, 474 (9th Cir.

1994). Leave to amend must be granted unless it is clear that the complaint’s deficiencies cannot

be cured by amendment. Lucas v. Department of Corrections, 66 F.3d 245, 248 (9th Cir. 1995). 

When amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v.

Kipp, 90 F.3d 386, 393 (9th Cir. 1996); Albrecht v. Lund, 845 F.2d 193, 195-96 (9th Cir. 1988);

Beezley v. Fremont Indemnity Co., 804 F.2d 530, 531 (9th Cir. 1986).

III. DISCUSSION

A. Statute of Frauds

Multinational argues that Stanford’s first and second claims for “breach of oral contract”

and “negligent misrepresentation” should be dismissed because California’s statute of frauds

requires that such obligations be in writing. Stanford argues that the statute of frauds does not

apply in the instant case.

The relevant statute provides in pertinent part:

a) The following contracts are invalid, unless they, or some note or memorandum thereof,

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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

are in writing and subscribed by the party to be charged or by the party’s agent:

...

(2) A special promise to answer for the debt, default, or miscarriage of another,

except in the cases provided for in Section 2794.

Cal. Civ. Code § 1624.

 In this case, Stanford alleges that Multinational operates a health plan and that the patient

to whom the medical services at issue were rendered was an enrollee of that health plan. See

Complaint at ¶7. Stanford alleges that it “reasonably relied on Multinational’s and/or

Multinational’s agents representations that Multinational would pay for medical services

rendered to Patient.” Complaint at ¶14. Thus, Stanford is not alleging that Multinational made a

special promise to pay the debt of another. Rather, it alleges that Multinational made a direct

promise.

In Cedars-Sinai Medical Center v. National League of Postmasters, 497 F.3d 972 (9th

Cir. 2007), the Ninth Circuit noted that a health insurer was contractually obligated to pay for

medical treatment received by its enrollee when it represents to a medical services provider that it

will cover the enrollee. While Multinational argues that Cedars-Sinai is distinguishable because

there was a formal contract between Cedars-Sinai and the insurance provider in that case, the

Ninth Circuit nonetheless concluded that Cedars-Sinai’s claims arose from the insurance

provider’s representation that a patient was covered by the provider’s health plan. Id. at 981. 

The representation, not the formal contract, established the obligation in question. 

B. Oral Contract

Multinational next argues that the complaint does not allege a valid oral contract. 

Specifically, Multinational contends that Stanford has not pled either consent or consideration

sufficiently. 

1. Consent

Under California law, parties must communicate their mutual consent in order to enter

into a contract. Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 315 (9th Cir. 1996). Consent is

not mutual unless the parties agree upon the same thing in the same sense. Khajavi v. Feather

River Anesthesia Medical Group, 84 Cal. App. 4th 32, 60 (2000). 

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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

Multinational contends that Stanford alleges only that Multinational invited Stanford to

submit a claim. However, in fact Stanford alleges that Multinational notably verified the

insurance coverage for the patient but also stated that an authorization for the services was not

required. Complaint at ¶ 9. Stanford also alleges that Multinational agreed to pay for the

medical services rendered to the Patient, Complaint at ¶14, and that the terms of the oral contract

were that Stanford would provide medical treatment to the patient and that Multinational would

pay for those services. Complaint at ¶ 17. Accordingly, treating the allegations in the complaint

as true, Stanford has pled sufficiently that the parties mutually consented to the agreement that

Stanford would provide medical treatment to the patient and Multinational would pay for those

services. 

2. Consideration

Multinational argues that Stanford has not alleged any benefit conferred upon it or a

bargained-for exchange and therefore Stanford has not alleged sufficient consideration to

establish a contractual agreement. Stanford replies that Multinational received consideration for

its promise to pay when Stanford Hospital changed its legal position by rendering care to the

patient.

Under California law, “[a]ny benefit conferred . . . upon the promissory, by any person, to

which the promissory is not lawfully entitled, or any prejudice suffered . . . by such person . . . as

an inducement to the promissory, is good consideration for a promise.” Cal. Civ. Code § 1605. 

In the instant case, the complaint states that “[Stanford] was induced not to make other financial

arrangements to obtain payment for the medical services, equipment, and supplies eventually

rendered to Patient.” Complaint at ¶ 14. Accordingly, viewing the allegations in the complaint

as true, Stanford has sufficiently pled consideration.

C. Negligent Misrepresentation. 

Multinational asserts that the Court should dismiss Stanford’s claim for negligent

misrepresentation on the separate grounds that Stanford failed to plead this claim with

particularity. Federal Rule of Civil Procedure 9(b) requires that claims based upon fraud or

mistake be pled with particularity. The particularity requirement is satisfied if the pleading

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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

“identifies the circumstances constituting fraud (or mistake) so that the defendant can prepare an

adequate answer from the allegations.” Moore v. Kayport Package express, Inc., 885 F.2d 531,

540 (9 Cir. 1989). Multinational asserts that: th

Plaintiff alleges a general time, because to state the specific date would show that

the medical treatment provided to patient occurred largely before Plaintiff

contacted MNU. Plaintiff also fails entirely to allege when the claim was denied,

because to do so would show it had failed to satisfy the statute of limitation on

breach of an oral contract. Plaintiff does not identity who at MNU purportedly

made the statements alleged, nor does it allege other then generally that MNU

stated Patient had some form of insurance through MNU, that authorization of

services was unavailable, and that Plaintiff would need to submit a claim. 

Plaintiff does not allege who at Stanford Hospital the alleged misrepresentations

were made. 

Reply, pg. 10.

The Court agrees that such details are required under Rule 9(b). Accordingly, the Court

will grant Multinational’s motion to dismiss Stanford’s claim for negligent misrepresentation,

with leave to amend.

D. Statute of Limitations

Finally, Multinational argues that Stanford’s claim of a breach of oral contract is timebarred based upon a two-year statute of limitations. Multinational attaches a letter dated

September 20, 2005, which states that Multinational denied the claim on July 28, 2005. However,

this letter does not state when notice of the denial was given to Stanford. The only fact that can be

inferred from the letter is that Stanford received notice of the denial on or after September 20,

2005. As stated above, Stanford must amend its factual allegations concerning the denial of the

claim; Multinational’s motion thus will be denied without prejudice. 

E. Common Counts

Multinational alleges that because Stanford has failed to state its first two claims for relief,

Stanford’s third claim for common counts also should be dismissed. Stanford acknowledges that

it has asserted the claim in the alternative. Accordingly, the Court’s ruling with respect to the

common counts will be denied without prejudice pending Stanford’s amendment of its complaint.

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Case No. C-07-5497 JF

ORDER RE MOTION TO DISMISS

(JFLC3)

IV. ORDER

Good cause therefor appearing, IT IS HEREBY ORDERED that the motion to dismiss by

Multinational is granted in part with leave to amend and denied in part without prejudice. 

IT IS SO ORDERED.

DATED: January 23, 2008

 

JEREMY FOGEL

United States District Judge

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