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

• Decision Date: 31 May 2013
• Docket Number: Civ. No. 12–00565 ACK–KSC.
• Citation: 948 F.Supp.2d 1131
• Parties: The QUEEN'S MEDICAL CENTER, Plaintiff, v. KAISER FOUNDATION HEALTH PLAN, INC., Stratose, Inc., formerly known as Coalition America, Inc., John Does 1–100, Jane Does 1–100, Doe Partnerships 1–100, Doe Corporations 1–100, and Doe Entities 1–100, Defendants.
• Court: U.S. District Court — District of Hawaii

948 F.Supp.2d 1131

The QUEEN'S MEDICAL CENTER, Plaintiff,
v.
KAISER FOUNDATION HEALTH PLAN, INC., Stratose, Inc., formerly known as Coalition America, Inc., John Does 1–100, Jane Does 1–100, Doe Partnerships 1–100, Doe Corporations 1–100, and Doe Entities 1–100, Defendants.

Civ. No. 12–00565 ACK–KSC.

United States District Court,
D. Hawai‘i.

May 31, 2013.

[948 F.Supp.2d 1136]

Crystal K. Rose, Sarah Marie Blackman, Bays Deaver Lung Rose & Holma, Honolulu, HI, for Plaintiff.

Ann C. Kemp, Gary G. Grimmer, Gary G. Grimmer & Associates, Robert A. Creps, O'Connor Playdon & Guben, Honolulu, HI, Brandon K. Fields, Kennedy P. Richardson, Mark Palley, Thomas M. Freeman, Marion's Inn LLP, Oakland, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT KAISER'S MOTION TO DISMISS UNDER RULE 12(b)(6), DENYING DEFENDANT KAISER'S MOTION TO DISMISS UNDER RULE (12)(b)(7), AND ORDER RE RULE 19 JOINDER
ALAN C. KAY, Senior District Judge.
PROCEDURAL BACKGROUND

This case arises from a dispute over a health maintenance organization's ability to take discounts on services provided by a hospital. On October 19, 2012, Plaintiff The Queen's Medical Center (“Plaintiff” or “Queen's”) filed a Complaint against Defendants Kaiser Foundation Health Plan, Inc. (“Kaiser”) and Stratose, Inc. (formerly known as Coalition America, Inc.)(“Stratose”). ECF No. 1.

The Complaint alleges the following counts against Defendants: Count I—Breach of Contract Against Defendant Kaiser, Count II—Intentional Misrepresentation, Fraud, and Fraudulent Concealment Against Kaiser, Count III—Negligent Misrepresentation Against Kaiser, Count IV—Intentional Misrepresentations Against Stratose, Count V—Negligent Misrepresentations Against Stratose, Count VI—Violations of RICO (18 U.S.C. §§ 1962(c) and 1964(c)) Against Kaiser and Stratose, Count VII—Unfair and Deceptive Trade Practices Against Kaiser and Stratose, Count VIII—Unjust Enrichment Against Kaiser, Count IX—Tortious Interference with Contractual Relations Against Kaiser and Stratose, and Count X—Promissory Estoppel or Equitable Estoppel Against Kaiser. ECF No. 1 at 18–33.

On December 14, 2012, Kaiser filed a Federal Rule of Civil Procedure (“Rule”) 12(b)(6) “Motion to Dismiss Plaintiff's Complaint for Failure to Join a Necessary Party and Motion for More Definite Statement” (“Motion to Dismiss”). ¹ ECF No. 26. The Motion to Dismiss requests this Court to dismiss Counts 1, 2, 3, 6, 7, 9, and 10 for failure to state a claim under Rule 12(b)(6) and to dismiss the Complaint under Rule 12(b)(7) for failure to join a necessary party under Rule 19. Id. at i–ii.

[948 F.Supp.2d 1137]

The Motion to Dismiss also contains a “Request for Judicial Notice in Support of Motion to Dismiss.” ECF No. 26–12. On April 11, 2013, Plaintiff filed a Memorandum in Opposition to Kaiser's Motion. ECF No. 53. On April 18, 2013, Kaiser submitted its Reply in support of its Motion.² ECF No. 58. Kaiser also filed an “Amended Declaration of Gary G. Grimmer in Support of Defendant Kaiser's Reply for Motion to Dismiss.” ³ ECF No. 62. On April 24, 2013, Defendant Stratose filed a “Joinder in Defendant Kaiser Foundation Health Plan Inc.'s Motion to Dismiss Plaintiff's Complaint.” ⁴ ECF No. 64. On April 25, 2013, Defendant Kaiser filed a “Reply Request for Judicial Notice in Support of Motion to Dismiss Complaint.” ECF No. 67. On May 2, 2013, the Court held a hearing regarding this matter. ECF No. 72.

Because the parties submitted numerous arguments regarding Kaiser's Motion to Dismiss, the Court provides the following Index as a guide to the issues discussed in this order:

Index

Factual Background	1138
Standard	1140
Discussion	1141

I.	Whether This Court Should Consider Kaiser's Exhibits Attached to the Rule 12(b)(6) Motion to Dismiss	1141
II.	Whether This Court Should Dismiss Plaintiff's Count I–Breach of Contract Claim	1144

A.	Whether Plaintiff Sufficiently Pleads a Claim for Breach of an Oral Contract	1144
B.	Whether Plaintiff Sufficiently Pleads a Claim for Breach of an Implied Contract	1146
C.	Whether Haw.Rev.Stat. § 432D–8 Bars Plaintiff's Oral and Implied Contract Claims	1146
D.	Whether the Written Contracts Between Kaiser, Stratose, HMN, and Plaintiff Preclude Plaintiff's Breach of Oral and Implied Contract Claims	1148
E.	Whether Plaintiff is Precluded as a Matter of Law from Using the Chargemaster Rates as the Price Term of a Medical Services Contract	1149
F.	Whether the Patient Consent Forms Create a Contract Between Plaintiff and Kaiser	1150

III. Whether This Court Should Dismiss Plaintiff's Count II—Intentional Misrepresentation, Fraud, and Fraudulent Concealment, Count III–Negligent Misrepresentation, and Count X—Promissory Estoppel or Equitable Estoppel Claims
1151

A.	Whether Plaintiff Sufficiently Pleads Fraud Regarding the Remittance Advice Forms and the June 20, 2012 and August 30, 2012 Letters	1151
B.	Whether Plaintiff Sufficiently Pleads Fraud Regarding Kaiser's Oral Statements in January 2012	1154
C.	Whether Plaintiff Sufficiently Pleads a Claim for Fraudulent Nondisclosure	1154
D.	Whether Plaintiff Sufficiently Pleads a Claim for Negligent Misrepresentation	1156
E.	Whether Plaintiff Sufficiently Pleads a Claim for Promissory Estoppel or Equitable Estoppel	1156

IV.	Whether This Court Should Dismiss Plaintiff's Count VI–Violations of RICO (18 U.S.C. §§ 1962(c) and 1964(c)) Claim	1157
V.	Whether This Court Should Dismiss Plaintiff's Count VII–Unfair and Deceptive Trade Practices Claim	1163
VI.	Whether This Court Should Dismiss Plaintiff's Count IX–Tortious Interference With Contractual Relations Claim	1163
VII.	Whether This Court Should Order Plaintiff to Join HMN as a Necessary Party to This Lawsuit	1164

Conclusion
1165

[948 F.Supp.2d 1138]

FACTUAL BACKGROUND⁵

According to the standard for deciding a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, the Court uses Plaintiff's Complaint to establish the factual background to decide this motion. See Sateriale v. R.J. Reynolds Tobacco Co., 697 F.3d 777, 783 (9th Cir.2012).

In 1996, Plaintiff and Kaiser entered into a Services Agreement where Plaintiff agreed to provide hospital services to patients who were members of one or more of Kaiser's health plans. Compl. at 5, ¶ 9. Under this agreement, Plaintiff agreed to provide certain discounts for hospital services to Kaiser and its members. Id. The Services Agreement was set to expire on December 31, 2011; upon expiration, Kaiser would be obligated to pay 100% of the billed charges for hospital services provided to its members and would no longer receive discounts. Compl. at 5 ¶ 10.

Before the Services Agreement expired on December 31, 2011, Plaintiff and Kaiser attempted to negotiate a new written contract or extension of the Services Agreement. Compl. at 5 ¶ 11. During the discussions between Plaintiff and Kaiser in

[948 F.Supp.2d 1139]

2011–2012, Plaintiff's employees stated, and Kaiser's employees acknowledged, that Kaiser would not be able to take discounts on Plaintiff's services. Compl. at 6, ¶ 12–13. Plaintiff explicitly told Kaiser that Kaiser would not receive discounts for services unless a new written contract between them was agreed upon and signed. Id. at 6, ¶ 13. Without a contract, Kaiser would need to pay 100% of the billed charges for Plaintiff's services to Kaiser patients. Id. Kaiser and its employees stated that they understood and agreed that Kaiser would need to pay 100% of the billed charges after the Services Agreement expired. Id. at 7, ¶ 14.

Specifically, during a meeting held sometime around December 13, 2011, Plaintiff's employees stated that Kaiser would need to pay 100% of the billed charges for services, and Kaiser employees stated they understood that no discounts would be available without a new contract. Compl. at 7, ¶ 15. Plaintiff subsequently sent an email to Kaiser confirming that payments would “revert to 100% of charge” for services provided to Kaiser patients without a new written agreement. Id. at ¶ 16. Kaiser did not reply to this e-mail. ⁶Id. Kaiser did not express any disagreement with Plaintiff's communications regarding the pricing arrangement. Id. Plaintiff had similar conversations with Kaiser in January 2012 regarding bill charges and expected payment, and Kaiser gave “direct, verbal agreement that Kaiser would pay 100% of [the] billed charges.” Id. at 9, ¶ 19.

During the negotiations in 2011 and 2012 before the expiration of the Services Agreement, Kaiser did not tell Plaintiff of Kaiser's intention to claim discounts through an agreement with Defendant Stratose, a “re-pricing” service that Kaiser contracted with sometime in 2007. Compl. at 10, ¶ 23. The Services Agreement between Plaintiff and Kaiser expired on December 31, 2011. Id. at 11, ¶ 26.

Kaiser continued to send patients to Plaintiff's facilities for medical services after the Services Agreement expired, and Plaintiff continued to treat Kaiser's patients. Compl. at 9 ¶ 21, 11 ¶¶ 28–29. Before each Kaiser patient was admitted or treated, the patient had to sign a form entitled “Consent To Treatment and Terms And Conditions of Service” (“Patient Consent Form”). Id. The Patient Consent Form required each patient to agree that Plaintiff's bill must be paid in full within 30 days of treatment. Id. Furthermore, the Patient Consent Form stated that each Kaiser patient assigned his or her insurance benefits to Plaintiff and provided authorization for Plaintiff to bill the patient's insurance carrier for the full charges due. Id.

During January 2012 and February 2012, Kaiser paid Plaintiff for 100% or nearly 100% of the billed charges. Id. at 11, ¶ 31. Around March 2012, Kaiser started to take discounts on Plaintiff's services by paying less than 100% of the billed charges. Id. at 12, ¶ 32. In connection with the discounts, Kaiser issued Remittance Advice forms to Plaintiff reflecting discounted rates. Id. at 12, ¶ 33. The Remittance Advice forms were also accompanied by forms sent by Defendant Stratose entitled “Payor Repricing...