Buller v. Sutter Health

• Decision Date: 05 March 2008
• Docket Number: No. A118541.,A118541.
• Citation: 160 Cal.App.4th 981,74 Cal.Rptr.3d 47
• Court: California Court of Appeals Court of Appeals
• Parties: Terry D. BULLER, Plaintiff and Appellant, v. SUTTER HEALTH et al., Defendants and Respondents.

74 Cal.Rptr.3d 47

160 Cal.App.4th 981

Terry D. BULLER, Plaintiff and Appellant, v. SUTTER HEALTH et al., Defendants and Respondents.

No. A118541.

Court of Appeal, First District, Division 1.

March 5, 2008.

Schrag & Baum, P.C., Thomas F. Schrag, Esq., James S. Baum, Esq., Meade & Schrag LLP, Tyler Meade, Esq.,

Michael Schrag, Esq., Berkeley, Deborah A. Kemp, Esq., for Plaintiff and Appellant.

Jones Day, Jeffrey A. LeVee, Esq., Samantha S. Eisner, Esq., Los Angeles, for Defendants and Respondents.

SWAGER, J.

In this action brought under California's Unfair Competition Law (UCL) (Bus. & Prof.Code, § 17200 et seq.), appellant Terry D. Buller appeals from the judgment of dismissal entered after the trial court sustained without leave to amend the demurrer of respondents Sutter Health and Alta Bates Summit Medical Center on the ground that the complaint fails to state a cause of action. We affirm.

ALLEGATIONS OF THE COMPLAINT AND PROCEDURAL BACKGROUND

On February 2, 2007, appellant filed his complaint as a class action, alleging that respondents' billing practices violate the UCL and the Consumers Legal Remedies Act (CLRA) (Civ.Code, § 1750 et seq.) The complaint also alleges a third cause of action for "Unjust Enrichment/Restitution/Constructive Trust."¹

Appellant purports to represent a class of consumers who have private medical insurance and who have received a bill for medical services from respondents beginning on February 1, 2003. The essence of the complaint is that the billing invoices overstate the amount due because respondents have an undisclosed policy of discounting balances for consumers who pay promptly. The complaint further alleges that this practice violates the UCL and the CLRA because respondents do not inform consumers about the availability of the discount, and because consumers who pay in full in a timely manner without requesting a discount are not automatically given corresponding refunds.

The following factual allegations are taken from the complaint. Appellant is insured by Blue Cross. From 2004 to 2006, he was treated at Alta Bates Hospital for a shoulder injury. He received billing statements from respondents for the portion of the charges that his insurance did not cover. He paid these charges in full within 30 days of receiving these bills. He never requested a discount.

The complaint alleges that respondents "have an undisclosed policy of allowing a 10 to 44% discount if a patient's bill is paid within a specified period of time, typically 30 or 60 days. [They] do not disclose this prompt-pay discount. It is hidden and does not appear on the face of the bill." "If the consumer pays the bill within 30 days or 60 days, he does not receive a refund. Nor is the consumer advised that there is any way to seek a refund.... There is no information ... which would lead a reasonable consumer who has private medical insurance to seek the discount, or discern that the promptpay discount is available to all who pay promptly." The complaint does reveal, however, that respondents describe "Financial Assistance Programs" on the reverse side of the billing statements, advising patients who have financial need to call a phone number. The complaint alleges that discounts are actually available to all customers who contact respondents, regardless of their financial need.²

On March 23, 2007, respondents filed a demurrer to the complaint, alleging that it failed to state a claim for violations of the UCL and the CLRA, and that, as a result, the third common law cause of action also was not viable. With respect to the UCL claim, respondents argued that the complaint did not demonstrate unfairness as appellant was charged according to the terms of his insurance policy. They also argued that the fraud allegation was flawed, as respondents were not under an affirmative duty to disclose their discount policy.

On May 29, 2007, the trial court issued its order sustaining respondents' demurrer to the complaint without leave to amend. The court dismissed appellant's attempt in his opposition to characterize respondents' billing statements as affirmative misrepresentations. Rather, the court found the complaint had to be read as alleging a failure to disclose. Citing to Dougherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 838, 51 Cal.Rptr.3d 118 (Daugherty), the court determined that a claim under the "fraud" prong of the UCL does not lie where one has no duty to disclose the operative fact. The court concluded that respondents had no duty to disclose the existence of their discount policy. The claim under the "unfair" prong of the UCL also failed because the public policies cited to by appellant regarding discounts do not apply to patients who have private medical insurance. The court also found appellant failed to state a claim under the "unlawful" prong of the UCL because respondents' practice does not violate the CLRA. This appeal followed.

DISCUSSION

I. Standard of Review

On appeal from a judgment of dismissal after a demurrer is sustained without leave to amend, the reviewing court assumes the truth of all facts properly pleaded by the plaintiff. Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6, 40 Cal. Rptr.3d 205, 129 P.3d 394; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569; Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) We also accept as true all facts that may be implied or reasonably inferred from those expressly alleged. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403, 44 Cal.Rptr.2d 339.) We do not assume the truth of "`"contentions, deductions or conclusions of fact or law."'" (Evans v. City of Berkeley, supra, at p. 6, 40 Cal. Rptr.3d 205, 129 P.3d 394, citing Blank, supra, at p. 318, 216 Cal.Rptr. 718, 703 P.2d 58.) We review the trial court's action de novo and exercise our own independent judgment whether a cause of action has been stated under any legal theory. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125, 271 Cal. Rptr. 146, 793 P.2d 479.) We review the court's refusal to allow leave to amend under the abuse of discretion standard. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171.)

II. The UCL

Enacted in 1977, "The purpose of the UCL `is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services.' [Citation.] Section 17200 defines unfair competition to `mean and include "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law (§ 17500 et seq.) ]." [Citation.]' [Citation.] Because section 17200 is written in the disjunctive, a business act or practice need only meet one of the three criteria—unlawful, unfair, or fraudulent—to be considered unfair competition under the UCL." (Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1092-1093, 61 Cal.Rptr .3d 716.) Appellant contends that his complaint states a claim under both the "fraudulent" and the "unfair" prongs of the UCL.

A. Appellant Did Not State a Cause of Action for Unfair Competition Based on the "Fraudulent" Prong of the UCL

It has been stated that "In order to state a cause of action under the fraud prong of the UCL a plaintiff need not show that he or others were actually deceived or confused by the conduct or business practice in question. `The "fraud" prong of [the UCL] is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to tie deceived.' [Citations.]" (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167, 93 Cal.Rptr.2d 439.) Appellant claims that the allegations of his complaint satisfy the "likely to deceive" standard because respondents' bills "misstate[ ] the amount due." We disagree.

Fairly read, the complaint's focus is on respondents' alleged failure to disclose their prompt-pay discount policy. The distinction is significant as it appears settled that "Absent a duty to disclose, the failure to do so does not support a claim under the fraudulent prong of the UCL." (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1557, 62 Cal. Rptr.3d 177 [failure to disclose detailed listings or breakdowns of specific escrow charges comprising transfer or document fees did not violate the UCL].) This is because a consumer is not "likely to be deceived" by the omission of a fact that was not required to be disclosed in the first place.

We agree with respondents that this case is controlled by Daugherty and Bardin v. Daimlerchrysler Corp. (2006) 136 Cal.App.4th 1255, 39 Cal.Rptr.3d 634. In Bardin, the plaintiff alleged that an automobile manufacturer had "omitted and concealed material facts about the exhaust manifolds" allegedly causing members of the public to be deceived about the quality, performance, and durability of those manifolds. (Bardin, supra, at p. 1275, 39 Cal. Rptr.3d 634.) The court found that, in order to be deceived, "members of the public must have had an expectation or an assumption" about the materials used in manufacturing the vehicle. (Ibid.) The operative complaint failed to state a claim because it did not allege that "(1) members of the public had any expectation or made any assumptions that DCC's exhaust manifolds would be made from cast iron, as opposed to tubular steel, (2) the public had any expectation or made any assumptions regarding the life span of the exhaust manifold of a DCC vehicle, or (3) facts showing DCC had made any representation of any kind, much less any misrepresentation, regarding its vehicles." (Ibid.) The court found the complaint's "vague reference to plaintiffs' assumption that the exhaust manifolds...