Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_16-cv-01904/USCOURTS-caed-2_16-cv-01904-1/pdf.json

Parties Involved:
San Joaquin General Hospital
Plaintiff
United Healthcare Insurance Co.
Defendant

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UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF CALIFORNIA 

SAN JOAQUIN GENERAL HOSPITAL, a 

department of the County of San Joaquin, a 

political subdivision of the State of 

California, 

Plaintiff, 

v. 

UNITED HEALTHCARE INSURANCE 

CO., a Connecticut for-profit corporation, 

Defendant. 

No. 2:16-cv-01904-KJM-EFB 

ORDER 

This dispute over insurance payments comes before the court on defendant United 

Healthcare Insurance Co.’s motion to dismiss. ECF No. 11. Plaintiff San Joaquin General 

Hospital opposes. The court held a hearing on December 2, 2016, at which Jennifer Jiao 

appeared for plaintiff, and Edward Stumpp appeared for defendant. 

For the reasons stated below, the court DENIES defendant’s motion. 

I. BACKGROUND 

On January 1, 2014, San Joaquin General Hospital (“the Hospital”) began treating 

patients who had health plans with United Healthcare Insurance Co. (“United Insurance”). 

Compl. ¶ 7, ECF No. 1-1. At some point in time not specified by the complaint, in response to an 

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inquest by the Hospital, United Insurance informed the Hospital that patients covered by United 

Insurance’s plans were eligible for treatment at the Hospital. Id. ¶ 8. At all relevant times, 

United Insurance authorized the medical services rendered by the hospital, id. ¶ 11, verified the 

existence of the patients’ eligibility for benefits, id., and held itself out as being responsible for 

paying for the services provided by the Hospital, id. ¶ 9. The Hospital subsequently submitted to 

United Insurance bills for its services, which United Insurance has refused to pay in full. Id.

¶¶ 13–15. As a result, the Hospital has suffered damages in excess of $3.7 million. Id. ¶ 15. 

On July 5, 2016, the Hospital filed a complaint for damages in the Superior Court 

of California, County of San Joaquin, claiming: (1) breach of implied in fact contract; 

(2) quantum meruit; and (3) breach of oral contract. See id. On August 11, 2016, United 

Insurance removed the case to this court. ECF No. 1. On September 20, United Insurance filed 

the pending motion to dismiss, alleging the Hospital failed to allege elements essential to all three 

claims. See Def.’s Mot. to Dismiss (“MTD”), ECF No. 11. The Hospital opposes United 

Insurance’s motion, Pl.’s Opp’n, ECF No. 16, and United Insurance has replied, Def.’s Reply, 

ECF No. 18. 

II. LEGAL STANDARD 

A party may move to dismiss for “failure to state a claim upon which relief can be 

granted.” Fed. R. Civ. P. 12(b)(6). The motion may be granted only if the complaint lacks a 

“cognizable legal theory” or if its factual allegations do not support a cognizable legal theory. 

Hartmann v. Cal. Dep’t of Corr. & Rehab., 707 F.3d 1114, 1122 (9th Cir. 2013). The court 

assumes these factual allegations are true and draws reasonable inferences from them. Ashcroft v. 

Iqbal, 556 U.S. 662, 678 (2009). 

A complaint need contain only a “short and plain statement of the claim showing 

that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), not “detailed factual allegations,” 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule demands more than 

unadorned accusations; “sufficient factual matter” must make the claim at least plausible. Iqbal, 

556 U.S. at 678. In the same vein, conclusory or formulaic recitations of a cause’s elements do 

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not alone suffice. Id. (quoting Twombly, 550 U.S. at 555). Evaluation under Rule 12(b)(6) is a 

context-specific task drawing on “judicial experience and common sense.” Id. at 679. 

In ruling on a motion to dismiss, the court is not limited by the plaintiff’s 

allegations if the complaint, as here, is accompanied by attached documents. Knievel v. ESPN, 

393 F.3d 1068, 1076 (9th Cir. 2005). Such documents become a part of the complaint and may 

be considered in considering the defendant’s motion to dismiss. Id.

III. DISCUSSION 

A. Claims for Breach of Oral and Implied-in-Fact Contract 

Under California law, “the elements of a cause of action for breach of contract are 

(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, 

(3) defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. 

Goldman, 51 Cal. 4th 811, 821 (2011). United Insurance challenges only the first element, 

whether there exists an enforceable contract. See Def.’s MTD at 4. 

A contract is “an agreement to do or not to do a certain thing,” and a contract can 

only exist if the parties are capable of contracting, they manifest objective consent, the contract 

has a lawful object, and there is sufficient consideration. Cal. Civ. Code §§ 1549–1550. There is 

no general requirement that the contract be written, and oral contracts are enforceable. See

Cal. Civ. Code § 1622; Simmons v. Ghaderi, 49 Cal. Rptr. 3d 342, 348 (Cal. Ct. App. 2006), 

rev’d on other grounds, 44 Cal. 4th 570 (2008); Engleman v. Gen. Acc., Fire & Life Assur. Corp., 

250 F.2d 202, 204 (9th Cir. 1957). An implied-in-fact contract also is enforceable, and “differs 

from an express contract only in that the promise is not expressed in language but implied from 

the promisor’s conduct.” Rokos v. Peck, 182 Cal. App. 3d 604, 614 (1986) (quoting Stanley v. 

Columbia Broad. Sys., 35 Cal. 2d 653, 674 (1950)). 

United Insurance contends the parties did not form a valid contract, either oral or 

implied-in-fact, because they never agreed on the price of the Hospital’s services. Def.’s MTD at 

4. Without facts alleging a meeting of the minds on the material issue of price, United Insurance 

posits, the Hospital has insufficiently pled mutual consent, an essential element in contract 

formation. Id. at 4–6. Mutual consent “cannot exist unless the parties ‘agree upon the same thing 

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in the same sense.’” Bustamante v. Intuit, Inc., 141 Cal. App. 4th 199, 208 (2006) (quotation and 

citations omitted). 

Mutual consent is determined under an objective standard applied 

to the outward manifestations or expressions of the parties, i.e., the 

reasonable meaning of their words and acts, and not their 

unexpressed intentions or understandings. 

Where the existence of a contract is at issue and the evidence is 

conflicting or admits of more than one inference, it is for the trier of 

fact to determine whether the contract actually existed. But if the 

material facts are certain or undisputed, the existence of a contract 

is a question for the court to decide. 

Id. (citations and quotations omitted). 

Additionally, for a contract to be enforceable, the contract terms must be 

sufficiently definite, as a matter of law, “for the court to ascertain the parties’ obligations and to 

determine whether those obligations have been performed or breached.” Ersa Grae Corp. v. 

Fluor Corp., 1 Cal. App. 4th 613, 623 (1991). “Stated otherwise, the contract will be enforced if 

it is possible to reach a fair and just result even if, in the process, the court is required to fill in 

some gaps.” Id. Therefore, “the omission of an essential term in a contract, such as price, does 

not vitiate contract formation if the parties otherwise manifested their mutual assent to the 

agreement and the terms of that agreement are sufficiently definite.” ATACS Corp. v. Trans 

World Commc’ns, Inc., 155 F.3d 659, 667 (3d Cir. 1998) (citations omitted); accord Goichman v. 

Rheuban Motors, Inc., 682 F.2d 1320, 1325 (9th Cir. 1982); cf. Restatement (Second) of 

Contracts § 204 (1981) (“When the parties to a bargain sufficiently defined to be a contract have 

not agreed with respect to a term which is essential to a determination of their rights and duties, a 

term which is reasonable in the circumstances is supplied by the court.”). 

In this case, the Hospital pled that it contacted United Insurance to verify the 

patients’ eligibility under a United Insurance health plan and obtain authorization for medical 

services to be provided. Compl. ¶¶ 17, 31. In response, United Insurance confirmed the patients’ 

coverage and authorized their care. Id. ¶ 37. These pleadings are sufficiently definite to plead the 

creation of an oral contract so as to survive a motion to dismiss. Additionally, subsequent to 

these conversations, the Hospital contends it billed United Insurance for its services, and United 

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Insurance partially paid for those services. Id. ¶ 18. United Insurance’s partial performance 

indicates the formation of an implied-in-fact contract sufficient to survive a motion to dismiss. 

Accordingly, the court DENIES United Insurance’s motion to dismiss the 

Hospital’s claims for breach of oral or implied-in-fact contract. 

B. Quantum Meruit

United Insurance contends the Hospital has not pled facts sufficient to sustain a 

quantum meruit cause of action because the Hospital has neither pled that its services were 

performed for United Insurance’s benefit, nor that United Insurance actually requested the 

Hospital’s services. Def.’s MTD at 6–8. 

“Quantum meruit (or quasi-contract) is an equitable remedy implied by the law 

under which a plaintiff who has rendered services benefiting the defendant may recover the 

reasonable value of those services when necessary to prevent unjust enrichment of the 

defendant.” In re De Laurentiis Entm’t Grp. Inc., 963 F.2d 1269, 1272 (9th Cir. 1992) (citations 

omitted); accord George v. Double-D Foods, Inc., 155 Cal. App. 3d 36, 46–47 (1984). 

“Quantum meruit is based not on the intention of the parties, but rather on the provision and 

receipt of benefits and the injustice that would result to the party providing those benefits absent 

compensation.” In re De Laurentiis Entm’t Grp. Inc., 963 F.2d at 1272. 

The elements of a claim based on quantum meruit are as follows: “(1) that the 

plaintiff performed certain services for the defendant; (2) their reasonable value; (3) that they 

were rendered at defendant’s request; and (4) that they are unpaid.” Cedars Sinai Med. Ctr. v. 

Mid-W. Nat. Life Ins. Co., 118 F. Supp. 2d 1002, 1013 (C.D. Cal. 2000) (citing Haggerty v. 

Warner, 115 Cal. App. 2d 468, 475 (1953)). “To recover on a claim for the reasonable value of 

services under a quantum meruit theory, a plaintiff must establish both that [it] was acting 

pursuant to either an express or implied request for services from the defendant and that the 

services rendered were intended to and did benefit the defendant.” Ochs v. PacifiCare of 

California, 115 Cal. App. 4th 782, 794 (2004). 

In this case, the court may reasonably infer from the Hospital’s pleadings that 

United Insurance implicitly requested the Hospital’s services by authorizing them and partially 

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paying for them. See Ristau v. Madhvani, 1991 WL 283666, at *3 (D.D.C. Dec. 20, 1991) 

(finding partial payment to be evidence that parties entered into an agreement). Also, the 

Hospital pleads that it rendered services benefitting patients with a United Insurance healthcare 

policy, which, in turn, benefited United Insurance. Compl. ¶ 25. Although United Insurance 

argues that it received no benefit, and was in fact harmed by its customers going out-of-network, 

this argument raises a dispute of fact. It is plausible on its face that the patients received a benefit 

from the Hospital’s services. It is also plausible that because United Insurance would no longer 

have to pay for the patients to receive the same services elsewhere, United Insurance benefited 

from the Hospital’s services. The Hospital has sufficiently alleged the elements of a claim for 

quantum meruit. 

United Insurance also contends the Hospital’s quantum meruit claim is preempted 

by the Employee Retirement Income Security Act (“ERISA”). Def.’s MTD at 8. “There are two 

strands of ERISA preemption: (1) ‘express’ preemption under ERISA § 514(a), 29 U.S.C. 

§ 1144(a); and (2) preemption due to a ‘conflict’ with ERISA’s exclusive remedial scheme set 

forth in [ERISA § 502(a),] 29 U.S.C. § 1132(a).” Paulsen v. CNF Inc., 559 F.3d 1061, 1081 (9th 

Cir. 2009) (citation omitted). United Insurance invokes only conflict preemption, arguing the 

Hospital’s claims “arise out of the routine eligibility and authorization process” governed by 

ERISA. Def.’s MTD at 8–9. 

Under § 502(a)’s conflict preemption provision, “a state-law cause of action is 

completely preempted if (1) an individual, at some point in time, could have brought the claim 

under ERISA § 502(a)[ ], and (2) where there is no other independent legal duty that is implicated 

by a defendant’s actions.” Fossen v. Blue Cross & Blue Shield of Montana, Inc., 660 F.3d 1102, 

1107–08 (9th Cir. 2011) (quotation omitted). On the issue of whether ERISA preempts the 

Hospital’s claims in this case, the Ninth Circuit’s opinion in Marin Gen. Hosp. v. Modesto & 

Empire Traction Co., 581 F.3d 941 (9th Cir. 2009), is instructive. In Marin, a hospital brought 

state law claims, including claims for quantum meruit and breach of implied and oral contract, 

arising out of an alleged telephone conversation whereby an insurance company agreed to pay 

90 percent of a patient’s hospital charges. Id. at 947. The Ninth Circuit found the hospital’s 

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claims were not preempted by ERISA because the hospital alleged it was entitled to relief under 

the oral contract, not the patient’s ERISA plan. Id. United Insurance attempts to distinguish 

Marin by arguing the insurance company in Marin, unlike in this case, agreed to pay a specific 

amount. Thus, according to United Insurance, because the Hospital “does not assert this 

necessary fact anywhere in its pleadings, it does nothing more than seek benefits due the patients 

under their ERISA governed plan.” Def.’s Reply at 4. The court disagrees. As in Marin, the 

claims in this case arise out of a telephone conversation between the parties whereby they 

allegedly formed an implied or oral contract. As stated previously, “the omission of an essential 

term in a contract, such as price, does not vitiate contract formation if the parties otherwise 

manifested their mutual assent to the agreement and the terms of that agreement are sufficiently 

definite.” ATACS Corp., 155 F.3d at 667. 

The court finds that the Hospital’s quantum meruit claim is not preempted by 

ERISA. 

IV. CONCLUSION 

For the reasons stated above, United Healthcare Insurance Co.’s motion to dismiss 

is DENIED, and it shall file an answer within fourteen days. 

IT IS SO ORDERED. 

DATED: March 22, 2017. 

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