Kaiser Found. Health Plan, Inc. v. Queen's Med. Ctr., Inc.

• Decision Date: 31 October 2019
• Docket Number: Case No. 19-cv-00301-DKW-WRP
• Citation: 423 F.Supp.3d 947
• Parties: KAISER FOUNDATION HEALTH PLAN, INC., Plaintiff, v. The QUEEN'S MEDICAL CENTER, INC., et al., Defendants.
• Court: U.S. District Court — District of Hawaii

423 F.Supp.3d 947

KAISER FOUNDATION HEALTH PLAN, INC., Plaintiff,

v.The QUEEN'S MEDICAL CENTER, INC., et al., Defendants.

Case No. 19-cv-00301-DKW-WRP

United States District Court, D. Hawai‘i.

Signed October 31, 2019

Jordon Jun Kimura, Jordan K. Inafuku, McCorriston Miller Mukai MacKinnon, Honolulu, HI, Moe Keshavarzi, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLP, Los Angeles, CA, John T. Brooks, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLP, San Diego, CA, for Plaintiff.

Stephen L. Goff, Pro Hac Vice, King & Spalding LLP, Sacramento, CA, Christian D. Chambers, Crystal K. Rose, Grant R. F. Allison, Bays Lung Rose & Holma, Honolulu, HI, for Defendants.

ORDER (1) GRANTING DEFENDANTS' MOTION TO DISMISS, (2) DENYING AS MOOT PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER AND FOR A PRELIMINARY INJUNCTION, AND (3) DISMISSING THIS CASE WITHOUT LEAVE TO AMEND

Derrick K. Watson, United States District Judge

This litigation arises following the breakdown of a contractual relationship between Kaiser, a health maintenance organization, and Defendants, various hospitals in the State of Hawai'i. That breakdown may put Kaiser's members in the position of being billed the balance for emergency services they receive while in Defendants' care.

Pending before the Court are two motions that, although seeking different relief, present, at least in part, similar arguments. First, Defendants The Queen's Medical Center, Inc., North Hawai'i Community Hospital, Inc., and Molokai General Hospital (collectively, QMC or Defendants) argue that, because each of Kaiser's claims depends on the existence of a contract between QMC and Kaiser, and because no such contract exists, this entire action must be dismissed. Second, Kaiser moves for an injunction, seeking to put an end to QMC's threat to balance bill Kaiser's members. Kaiser argues that it has an implied contract with QMC, and, even if it did not, QMC should not be able to bill Kaiser's members for the balance of unpaid emergency services.

The Court has thoroughly reviewed the parties' briefs and supporting materials and carefully considered the legal principles relevant to the same. Having done so, the Court agrees with QMC that no implied in-fact contract exists with Kaiser relating to the provision of emergency services, and neither Hawai'i law nor the common law create an implied in-law contract between the parties under the facts presented here. The Court further agrees with QMC that the absence of a contract between the parties mandates the dismissal of each of Kaiser's claims, including the claims based upon balance billing. Further, because Kaiser's claims must be dismissed, its request for injunctive relief is DENIED AS MOOT. Finally, the Court finds that leave to amend would be futile, as no amendment would be able to cure the deficiencies discussed below. As a result, this case is DISMISSED WITH PREJUDICE.

PROCEDURAL BACKGROUND

This case began on June 12, 2019 with the filing of the Complaint against Defendants. Dkt. No. 1. Attached to the Complaint is a letter, dated June 3, 2019, from QMC to Kaiser. Dkt. No. 1-1. On August 13, 2019, QMC filed a motion to dismiss the Complaint with prejudice. Dkt. No. 18. Before any responsive briefing on the motion to dismiss, on August 22, 2019, Kaiser filed a motion for temporary restraining order and for preliminary injunction ("the motion for a preliminary injunction"). Dkt. No. 29. Attached to the motion for a preliminary injunction are numerous exhibits and declarations. Dkt. Nos. 29-2 to 26. After a conference with the parties, briefing with respect to both of the foregoing motions was placed on identical tracks. Dkt. No. 38. On September 6, 2019, both sides filed opposition papers to the respective motions, as well as exhibits attached thereto. See generally Dkt. Nos. 44, 46. On September 12, 2019, replies in support of the respective motions were filed. Dkt. Nos. 53, 54.

At the same time that the foregoing briefing was taking place, the parties also agreed to undertake mediation with, inter alia , Magistrate Judge Kevin Chang. Dkt. No. 38. Following two separate mediation sessions, though, no settlement was reached. Dkt. Nos. 57, 59. As a result, with the agreement of counsel, a hearing on the motion to dismiss and the motion for a preliminary injunction was set for, and took place, on October 23, 2019. Dkt. Nos. 60, 61. This Order follows.

STANDARD OF REVIEW

I. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a complaint that fails "to state a claim upon which relief can be granted." Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Pursuant to Ashcroft v. Iqbal , "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). Factual allegations that only permit the court to infer "the mere possibility of misconduct" do not show that the pleader is entitled to relief as required by Rule 8(a)(2). Id. at 679, 129 S.Ct. 1937.

When a complaint fails to state a plausible claim, leave to amend should be given when "justice so requires." Fed.R.Civ.P. 15(a)(2). Justice does not require leave to amend when (1) it would prejudice an opposing party, (2) it is sought in bad faith, (3) it would produce an undue delay in litigation, (4) it would be futile, or (5) there has been repeated failure to cure a deficiency. Abagninin v. AMVAC Chem. Corp. , 545 F.3d 733, 742 (9th Cir. 2008) ; AmerisourceBergen Corp. v. Dialysist West, Inc. , 465 F.3d 946, 951 (9th Cir. 2006).

II. Preliminary Injunction

"A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008).¹ When a party "has not shown any chance of success on the merits, no further determination of irreparable harm or balancing of hardships is necessary." Global Horizons, Inc. v. U.S. Dep't of Labor , 510 F.3d 1054, 1058 (9th Cir. 2007).

DISCUSSION

While the parties' motions collectively present many issues, not all of them require resolution.² The most significant issue, suggested in part by the time and briefing space each side has allotted, is whether a contract exists between Kaiser and QMC. The Court accordingly addresses that issue first and then addresses the effect of its contract determinations on each of Kaiser's four claims.

I. A Contract or Not?

The parties agree that there are two potential principles through which Kaiser and QMC could be considered to be in a contractual relationship: (1) an implied in-fact contract; and/or (2) an implied in-law contract.³ The Court therefore addresses each.

A. Implied In-Fact

Both Kaiser and QMC rely on the same legal construct as to when an implied in-fact contract exists under Hawai'i law. That construct comes from Durette v. Aloha Plastic Recycling, Inc. , 100 P.3d 60 (Haw. 2004). See Dkt. No. 18-1 at 10; Dkt. No. 46 at 13. In Durette , the Hawai'i Supreme Court explained the principle of an implied contract as follows:

Implied contracts arise under circumstances which, according to the ordinary course of dealing and the common understanding of men, show a mutual intention to contract. An implied contract, in the proper sense, is where the intention of the parties is not expressed, but an agreement in fact, creating an obligation, is implied or presumed from their acts, as in the case where a person performs services for another, who accepts the same, the services not being performed under such circumstances as to show that they were intended to be gratuitous, or where a person performs services for another on request.

Durette , 100 P.3d at 74.

The relevant evidence upon which to apply the foregoing principles is the June 3, 2019 letter from QMC to Kaiser that is attached to the Complaint (and the motion for a preliminary injunction). The letter opens by confirming the termination of the parties' written agreements as of May 30, 2019. Dkt. No. 1-1. In the next paragraph, QMC "reject[s]" reimbursement practices proposed by Kaiser in a letter Kaiser allegedly sent to QMC. The third paragraph states that, from May 31, 2019, QMC will provide emergency services to Kaiser members "at 100% of billed charges...." The final relevant paragraph reads: "Members will be billed for any claim for services not reimbursed by Kaiser, in whole or in part, within 30 days of submission." Id.

Kaiser argues that the letter summarized above plausibly suggests an implied in-fact contract because QMC expects to receive payment from Kaiser. Dkt. No. 46 at 15. That argument, however, is divorced from any plausible reading of the letter. Contrary to Kaiser's assertion, QMC does not expect to receive payment from Kaiser–that much is borne out by the statement that members will be billed for services that are not reimbursed in whole or in part. In other words, Kaiser members will be billed the full amount if Kaiser reimburses nothing.

In any event, even if the Court was willing to accept that QMC expects some amount of payment from Kaiser, there would still be no implied in-fact contract under Durette's explanation of the concept. The reason is straightforward and can be found in the...