Alvarado v. Selma Convalescent Hosp.

• Decision Date: 01 August 2007
• Docket Number: No. B184533.,B184533.
• Citation: 153 Cal.App.4th 1292,64 Cal.Rptr.3d 250
• Court: California Court of Appeals Court of Appeals
• Parties: Alex ALVARADO, Plaintiff and Appellant, v. SELMA CONVALESCENT HOSPITAL et al., Defendants and Respondents.

64 Cal.Rptr.3d 250

153 Cal.App.4th 1292

Alex ALVARADO, Plaintiff and Appellant, v. SELMA CONVALESCENT HOSPITAL et al., Defendants and Respondents.

No. B184533.

Court of Appeal, Second District, Division 3.

August 1, 2007.

McNicholas & McNicholas, Patrick McNicholas, Redwood City, Holly N. Boyer; Garcia Law Firm and Stephen M. Garcia for Plaintiff and Appellant.

Paul Gallegos, District Attorney (Humboldt), and Paul Gallegos as Amicus Curiae on behalf of Plaintiff and Appellant.

Manatt, Phelps & Phillips, Barry S. Landsberg, Tern D. Keville, Joanna S. McCallum and Andrew H. Struve, Los Angeles, for Defendants and Respondents.

Hooper, Lundy & Bookman, Inc., Mark E. Reagan, Scott J. Kiepen, San Francisco, and Felicia Y. Sze, Los Angeles, for California Association of Health Facilities as Amicus Curiae on behalf of Defendants and Respondents.

KITCHING, J.

INTRODUCTION

Plaintiff and appellant Alvaro Alvarado (Alvarado), now deceased, filed a class action lawsuit under section 17200 et seq. of the Business and Professions Code (the UCL) seeking restitution and injunctive relief to require owners and operators of skilled nursing and intermediate care facilities to comply with certain nursing hour requirements set forth in Health and Safety Code section 1276.5, subdivision (a).¹

We affirm the trial court order sustaining a demurrer without leave to amend. The trial court did not abuse its discretion by abstaining from adjudicating this lawsuit. Adjudicating the alleged controversy would have required the trial court to become involved in complex health care matters concerning the staffing of skilled nursing and intermediate care facilities and assume regulatory functions of the Department of Health Services (DHS). In addition, granting and enforcing the requested relief would place an unnecessary burden on the trial court given the power of the DHS to monitor and enforce compliance with section 1275.6.

FACTUAL AND PROCEDURAL BACKGROUND

1. Plaintiff's Complaint

On February 11, 2004, by and through his successor-in-interest, Alvarado, purporting to act as a private attorney general, filed a class action lawsuit against a number of defendants, including Sun Healthcare Group, Inc. (Sun), which owned or operated more than 20 skilled nursing and/or intermediate care facilities.² Alvarado alleged three causes of action: (1) unlawful business practice in violation of Business and Professions Code section 17200; (2) unfair and fraudulent business practice in violation of Business and Professions Code section 17200; and, (3) false advertising in violation of Business and Professions Code 17500.

In the complaint, Alvarado defined the purported class as follows: "[A]U residents of skilled nursing facilities owned, operated and/or managed by [Sun] between February 1, 2000 through the date of the filing of this complaint wherein the defendants were reimbursed for services provided to 'class member' by private pay and/or privately acquired insurance and/or any HMO or PPO."

Alvarado alleged that defendants engaged in a pervasive and intentional failure to provide sufficient direct nursing care for the residents of the skilled nursing facilities. Alvarado further alleged that Sun received substantial profit by failing to comply with section 1276.5, subdivision (a).

Alvarado also alleged that defendants falsely advertised that they provided greater nursing levels than those actually provided. Finally, Alvarado alleged that defendants engaged in unlawful business practices by failing to maintain adequate levels of skilled nursing staff and by misrepresenting to residents and family members the level of staffing provided at the nursing centers.

2. Sun Files A Demurrer

Sun filed a demurrer and motion to strike. Sun asserted the trial court should abstain from adjudicating the action or defer to the primary jurisdiction of the DHS. Sun further asserted that section 1276.5, subdivision (a), did not create a private cause of action.

3. Alvarado's Opposition to the Demurrer

In opposition, Alvarado asserted that section 1276.5, subdivision (a), created a private cause of action, the abstention doctrine did not apply, and the doctrine of primary jurisdiction was also inapplicable.

4. Trial Court Sustains Demurrer Without Leave To Amend

The trial court sustained Sun's demurrer without leave to amend. The trial court found that even if section 1276.5 permitted a private right of action, the court would nevertheless exercise its discretion to abstain from adjudicating the case. The trial court entered judgment in favor of all defendants. Alvarado timely filed a notice of appeal.

STANDARD OF REVIEW

In this case, the trial court sustained the demurrer without leave to amend. Thus, we give the complaint a reasonable interpretation and treat the demurrer as admitting all material facts properly pled. (Shamsian v. Department of Conservation (2006) 136 Cal.App.4th 621, 631, 39 Cal.Rptr.3d 62 (Shamsian).) Because the trial court dismissed this case on the basis of the doctrine of judicial abstention, however, our standard of review is abuse of discretion. (Id. at p. 641, 39 Cal.Rptr.3d 62 ["The trial court properly exercised its discretion to abstain from employing the remedies available under the unfair competition law."]; see also Desert Healthcare Dist. v. PacifiCare, FHP, Inc. (2001) 94 Cal.App.4th 781, 795, 114 Cal.Rptr.2d 623 (Desert Healthcare) ["Therefore, because the remedies available under the UCL, namely injunctions and restitution, are equitable in nature, courts have the discretion to abstain from employing them."].)

ISSUE PRESENTED

The issue presented is whether the trial court abused its discretion by abstaining from adjudicating the alleged controversy.³

DISCUSSION

Plaintiff contends that the trial court abused its discretion by dismissing this action on the basis of the equitable abstention doctrine. We disagree.

1. The Abstention Doctrine a. Introduction

Plaintiff seeks relief under the UCL. In California, the remedies available for alleged violations of the UCL include injunctions and restitution. Because these remedies are equitable in nature, under the doctrine of judicial abstention, courts have the discretion to abstain from employing them. (Desert Healthcare, supra, 94 Cal.App.4th at p. 795, 114 Cal.Rptr.2d 623.)

There are various theories underlying the application of judicial abstention in UCL lawsuits. Courts may abstain when the lawsuit involves determining complex economic policy which is best handled by the legislature or an administrative agency. (California Grocers Assn. v. Bank of America (1994) 22 Cal.App.4th 205, 218, 27 Cal.Rptr.2d 396 (California Grocers).) Judicial abstention is appropriate in cases where granting injunctive relief would be unnecessarily burdensome for the trial court to monitor and enforce given the availability of more effective means of redress. (Diaz v. Kay-Dix Ranch (1970) 9 Cal.App.3d 588, 599, 88 Cal.Rptr. 443 (Diaz).) Courts may also abstain when federal enforcement of the subject law would be "`more orderly, more effectual, less burdensome to the affected interests.'" (People ex rel. Dept. of Transportation v. Naegele Outdoor Advertising Co. (1985) 38 Cal.3d 509, 523, 213 Cal.Rptr. 247, 698 P.2d 150, quoting Diaz, supra, 9 Cal.App.3d 588, 599, 88 Cal.Rptr. 443.)

b. Application of the Abstention Doctrine in UCL Cases

(i) Certain Complex Economic Policies and Issues Should Be Handled by the Legislature or Administrative Agencies

Judicial intervention in areas of complex economic policy is inappropriate. (Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142, 1168, fn. 15, 278 Cal.Rptr. 614, 805 P.2d 873.) The courts of appeal have "neither the power nor the duty to determine the wisdom of any economic policy; that function rests solely with the legislature." (Max Factor & Co. v. Kunsman (1936) 5 Cal.2d 446, 454, 55 P.2d 177.)

Judicial abstention is appropriate when granting the requested relief would require a trial court to assume the functions of an administrative agency, or to interfere with the functions of an administrative agency. (Shamsian, supra, 136 Cal.App.4th at p. 642, 39 Cal.Rptr.3d 62; Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, 1301-1302, 22 Cal.Rptr.2d 20 (Samura).)

In Samura, the plaintiff sued Kaiser and others for injunctive relief pursuant to the UCL. (Samura, supra, 17 Cal.App.4th at p. 1288, 22 Cal.Rptr.2d 20.) The plaintiff alleged that Kaiser's third party liability provisions in service agreements violated the UCL. These provisions provided, inter alia, that if a member received medical services under the service agreement for injuries caused by a third party, and the member recovered a settlement or judgment as compensation, the member would pay for the medical services from the settlement or judgment. (Id. at p. 1289, 22 Cal.Rptr.2d 20.) Following a trial, the trial court granted the plaintiff injunctive relief, requiring Kaiser, among other things, to re-write and clarify in plain English the third party liability provisions. (Id. at p. 1291, 22 Cal.Rptr.2d 20.)

The Samura Court of Appeal reversed, concluding that the trial court erred when it tried to enforce compliance with the "regulatory guidelines and requirements of the Knox-Keene Act." (Samura, supra, 17 Cal.App.4th at p. 1301, 22 Cal.Rptr.2d 20.) The court stated as follows: "It is immaterial whether or not the challenged contract provisions and business practices comply with these portions of the Knox-Keene Act because the statutes do not define unlawful acts that may be enjoined under Business and Professions Code section 17200. In basing its order on these provisions, the trial court assumed a regulatory power over Health Plan that the Legislature has entrusted exclusively to the Department of Corporations. Samura unquestionably has certain remedies if the Department of Corporations fails to discharge its responsibilities under...