Santa Barbara Cottage Hospital et al vs Magellan Health Inc et al

Case Number

20CV04247

Case Type

Hearing Date / Time

Mon, 12/18/2023 - 10:00

Nature of Proceedings

Motion: Summary Adjudication

Tentative Ruling

Santa Barbara Cottage Hospital v. Magellan Health Services, Inc., et al. (Judge Sterne)

Case No. 20CV04247

           

Hearing Date: December 18, 2023                                                     

HEARING:              (1)       Motion of Defendants for Summary Adjudication

                             (2)       Motion of Defendants to File Documents under Seal

ATTORNEYS:        For Plaintiff Santa Barbara Cottage Hospital: Melanie Joy Stephenson-Laws, Richard A. Lovich, Christopher Hapak, Law Offices of Stephenson, Aquisto & Colman, Inc.

                                    For Defendants Magellan Health Inc., f/k/a Magellan Health Services, Inc., Magellan Healthcare, Inc., f/k/a Magellan Behavioral Health, Inc., Human Affairs International of California, and Magellan Health Services of California, Inc.--Employer Services: Cindy M. Rucker, Maynard Nexsen LLP

                                   

TENTATIVE RULING:

(1)       The motion of defendants for summary adjudication is denied in its entirety.

(2)       The motion of defendants to file documents under seal is continued to February 5, 2024. Any party may file and serve a supplemental brief and declaration(s) on or before January 26, 2024. In the event that no supplemental brief or declaration is timely filed, the court will deny the motion to file documents under seal and order the two documents now lodged provisionally under seal to be filed in the public record.

Background:

(1)       Underlying Facts

Defendants Human Affairs International of California and Magellan Health Services of California Inc.–Employer Services (collectively, Magellan) provide behavioral healthcare management services and act as a third-party administrator for various health care plans, including health care plans underwritten by California Physicians’ Service d/b/a Blue Shield of California (Blue Shield). (Plaintiffs’ Response Separate Statement [PSS], undisputed fact 1.)

On November 8, 2011, plaintiff Santa Barbara Cottage Hospital (SBCH) entered into a Facility and Program Participation Agreement (Agreement) with Magellan pursuant to which SBCH agreed to provide behavioral health services/treatment to members of health plans administered by Magellan, and Magellan agreed to compensate Santa Barbara based upon the applicable reimbursement schedules. (PSS, undisputed fact 2.) The Agreement also requires SBCH to submit all itemized claims for reimbursement no later than 180 days from the date SBCH provided covered services to the members. (PSS, fact 3 [undisputed on this point].) SBCH, on appeal, is required to show “good cause” for any untimely submission. (PSS, undisputed fact 5.) According to defendants, absent a showing of good cause, Magellan’s original denial is deemed to be final. (Defendants’ Separate Statement [DSS], fact 6.) According to SBCH, the language asserted by defendants is not in the Agreement. (PSS, response to fact 6.) (Note: As discussed below, the Agreement itself is not before the court.) The Agreement also requires SBCH to submit any claim-related disputes to Magellan within one year of the date on which the dispute arose. (PSS, undisputed fact 7.)

When Magellan pays or denies claims submitted by SBCH, Magellan issues an EOP or Remittance setting forth, on a claim-by-claim basis, what SBCH charged, what Magellan paid, and an explanation for the payment/ denial. (PSS, undisputed fact 8.)

In its supporting separate statement, defendants discuss information regarding claims arising out of behavioral health treatment provided to nine particular health plan members. (DSS, facts 9-66.) These matters are discussed below.

(2)       Procedural History

On December 17, 2020, SBCH filed its complaint in case No. 20CV04247 (Complaint 1). Complaint 1 asserts a single cause of action for breach of contract against defendants Magellan Health Inc., f/k/a Magellan Health Services, Inc. (Magellan HS), Magellan Healthcare, Inc., f/k/a Magellan Behavioral Health, Inc. (Magellan Healthcare), and Magellan (collectively, defendants). The complaint alleges that defendants breached their contract with SBCH by failing to pay for services rendered by SBCH as to 14 particular patients. Of these, patients identified as (1) C.F., (2) P.A., and (3) T.G. are at issue in this motion.

On March 5, 2020, defendants filed their answer to Complaint 1, generally denying the allegations thereof and asserting 26 affirmative defenses.

On December 17, 2021, SBCH filed its complaint in case No. 21CV04943 (Complaint 2). Complaint 1 asserts a single cause of action for breach of contract against defendants. The complaint alleges that defendants breached their contract with SBCH by failing to pay for services rendered by SBCH as to nine particular patients. Of these, patients identified as (4) K.B, (5) M.B., (6) L.H., (7) C.K., (8) S.M., and (9) V.T. are at issue in this motion.

On February 9, 2022, defendants filed their answer to Complaint 2, generally denying the allegations thereof and asserting 25 affirmative defenses.

On March 1, 2022, on the stipulation of the parties, the court entered its order consolidating case No. 21CV04943 with case No. 20CV04247 for all purposes, with the latter as the lead case.

On June 27, 2023, defendants filed this motion for summary adjudication. Defendants seek summary adjudication as to the claims arising from nine of the patients from among the 23 patient claims asserted in Complaint 1 and Complaint 2 (collectively, the Complaint). Defendants concurrently filed a motion to file documents under seal.

SBCH opposes the motion for summary adjudication as to eight of the patient claims, but does not dispute the motion as to patent C.F. (Opposition, at p. 4, fn. 1.) No opposition or other response has been filed as to the motion to file documents under seal.

Analysis:

(1)       Procedural Issues

            (A)       Requests for Judicial Notice

In support of the motion, defendants request that the court take judicial notice of:

(i)        “On December 17, 2020, [SBCH] filed Case No. 20CV04247 … alleging that Magellan breached the parties’ Agreement by denying or partially denying [SBCH’s] invoices for behavioral health treatment provided to 14 plan members. (Defendants’ Request for Judicial Notice [DRJN], item 1.)

(ii)       “On December 17, 2021, [SBCH] filed Case No. 21CV04943 … alleging that Magellan breached the parties’ Agreement by denying or partially denying [SBCH’s] claims for payment/reimbursement based on behavioral health treatment [SBCH] provided to 9 additional health plan members.” (DRJN, item 2.)

(iii)      “By Order entered March 1, [2022], the Court consolidated [case No. 20CV04247 and case No. 21CV04943] under lead Case No. 20CV04247.” (DRJN, item 3.)

The court will take judicial notice of the filing and contents of Complaint 1 and Complaint 2, and of the fact of consolidation as provided in the court’s order of March 1, 2022. (See Evid. Code, § 452, subds. (c), (d)(1).) Judicial notice does not extend to the truth of factual matters set forth in court records. (Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1569.) In all other respects, the request is denied.

            (B)       Scope of Summary Adjudication Motion

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code, or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

Defendants assert that they bring this motion for summary adjudication so as to dispose of an issue of duty without disposing of an entire cause of action.

“It will be noted from the text of section 437c(f) … that the substantive areas which may be challenged by motion for summary adjudication are stated in the disjunctive—‘... a cause of action, an affirmative defense, a claim for damages or an issue of duty.’ … We believe that the plain meaning of this language is that a motion for summary adjudication may be granted or denied as to any one of these substantive areas, standing alone, and without reference to the dispositive effect of such ruling on any of the companion substantive areas. A ruling which ‘completely disposes’ of an issue of duty as required by the last sentence of the section, but which has no dispositive impact on other issues would appear to be fully in conformance with legislative intent and the straightforward, unambiguous language of the section.” (Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 519–520 (Linden Partners).)

“If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.” (Cal. Rules of Court, rule 3.1350(b).)

Defendants notice of motion states: Defendants “will move for summary adjudication in their favor on the breach of contract claim asserted in Plaintiff Santa Barbara Cottage Hospital’s (‘Santa Barbara’) First Complaint (Case No. 20CV04247) and Second Complaint (Case No. 21CV04943). [Fn.] [¶] This motion is made on the grounds that Santa Barbara’s breach of contract claim is barred, in part, due to its failure to satisfy a condition precedent to payment. Specifically, with respect to nine (9) health plan members identified in the Complaints, Santa Barbara failed to submit a claim for payment/reimbursement within the time-frame required by the parties’ Contract.” (Notice, at p. ii.) (Note: Defendants’ motion is not paginated as required by California Rules of Court, rules 2.109 and 3.1110(c) [“Documents must be consecutively paginated. The page numbering must begin with the first page and use only Arabic numerals (e.g., 1, 2, 3).”].)

Defendants’ separate statement sets forth one, and only one, issue for summary adjudication: “Defendants are entitled to adjudication on Santa Barbara’s breach of contract claim arising out of behavioral health treatment provided to nine (9) health plan members identified in the Complaints as Santa Barbara failed to submit a claim for payment/reimbursement within the timeframe required by the parties’ Contract.” (DSS, at p. 1.) Defendants’ separate statement does not state specifically what is the issue of duty sought to be adjudicated and the statement of the requested adjudication is not repeated verbatim from the notice.

Taken together, the court concludes that defendants do not seek to completely adjudicate an issue of duty, but instead seek to adjudicate claims of breach, i.e., causes of action, with respect to the nine patients. Based upon the parties’ arguments and the claims set forth in the notice, the court will construe the motion for summary adjudication as seeking summary adjudication of separate causes of action asserted together within the first cause of action of the Complaint. (See Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848, 1854–1855 [“a party may present a motion for summary adjudication challenging a separate and distinct wrongful act even though combined with other wrongful acts alleged in the same cause of action”].) Otherwise, the motion is denied as improperly seeking an adjudication that does not completely dispose of an issue of duty and as failing to comply with the notice and separate statement requirements for summary adjudication of an issue of duty.

            (C)       Separate Statement

An additional but different procedural issue exists because of the format of the separate statement.

“The Separate Statement of Undisputed Material Facts in support of a motion must separately identify:

            (A)       Each cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion; and

            (B)       Each supporting material fact claimed to be without dispute with respect to the cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion.” (Cal. Rules of Court, rule 3.1350(d)(1).)

As noted above, defendants’ separate statement lists one issue for summary adjudication and neither the separate statement nor the notice separately identifies causes of action or issues of duty that are subject to the motion specific to any particular claim as to a single patient. “The separate statement should include only material facts and not any facts that are not pertinent to the disposition of the motion.” (Cal. Rules of Court, rule 3.1350(d)(2).) Under these circumstances, the court construes the separate statement facts as identified as material to the one requested adjudication. The court will not attempt to separate out what separate statement facts might be applicable to different aspects of the adjudication or as between unique patient claims.

            (D)       Lodged Documents

In addition to the motion for summary adjudication, defendants also bring a motion to file documents under seal that have been lodged provisionally under seal.

One of the documents which defendants seek to seal is exhibit 1 to the declaration of Annette Sumrall, specifically, the Agreement. The publicly filed Defendants’ Compendium of Evidence in Support of their Motion for Summary Adjudication includes the declaration of Sumrall and a page for exhibit 1 that states “filed under seal.” (Defendants’ Compendium, pp. 6-10.) However, notwithstanding the notice of lodging, only two documents were lodged provisionally under seal: (1) Defendants’ Motion; and (2) Defendants’ Separate Statement. Exhibit 1 to the declaration of Sumrall has not been filed with the court in a public filing or lodged with the court provisionally under seal. The court therefore does not have exhibit 1 before it. Because separate statement fact 6 is both supported and disputed based upon the text of exhibit 1, either defendants have failed in their initial burden to provide evidence supporting their motion or there are triable issues as to separate statement fact 6. This omission is a sufficient basis for denying the motion for summary adjudication. The discussion below is an alternative basis for denying the motion for summary adjudication.

(The court addresses the motion to seal more fully below.)

            (E)       Reply Evidence

The court notes that defendants have presented additional evidence in reply. “The general rule of motion practice, which applies here, is that new evidence is not permitted with reply papers. This principle is most prominent in the context of summary judgment motions, which is not surprising, given that it is a common evidentiary motion. ‘[T]he inclusion of additional evidentiary matter with the reply should only be allowed in the exceptional case …’ and if permitted, the other party should be given the opportunity to respond. [Citations.]” (Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-1538.)

In view of the discussion herein, the court need not further address the reply evidence.

(2)       Motion for Summary Adjudication

“A defendant … has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant … has met that burden, the burden shifts to the plaintiff … to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff … shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).)

“But other principles guide us as well, including that ‘[w]e accept as true the facts … in the evidence of the party opposing summary judgment and the reasonable inferences that can be drawn from them.’ [Citation.] And we must ‘“view the evidence in the light most favorable to plaintiff[] …’ and “liberally construe plaintiff[’s] evidentiary submissions and strictly scrutinize defendant[’s] own evidence, in order to resolve any evidentiary doubts or ambiguities in plaintiff[’s] favor.”’ [Citation.]” (Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 254.)

Putting aside the absence of exhibit 1, and regardless of whether defendants have met their initial burden on summary adjudication, there are triable issues of material fact which preclude summary adjudication.

It is undisputed in this motion that the Agreement initially requires SBCH to submit itemized claims no later than 180 days from the date SBCH provided covered services. (PSS, fact 3 [undisputed on this point].) If a claim is submitted outside of this time period, it may nonetheless be considered upon a showing of good cause. (PSS, undisputed fact 5.) The issue presented in this motion is the timeliness of the submission of these claims. There are triable issues as to the timeliness of SBCH’s submissions.

For example, with respect to patient P.A., separate statement fact 15 is: “[SBCH] submitted its claim for reimbursement to Magellan on January 14, 2019.” SBCH provides evidence that its claim for reimbursement was submitted to Magellan on March 5, 2018. (Gress decl., ¶ 3 & exhibit A.) According to this evidence, Magellan represented to SBCH that the claim was at that time received but was deleted. (Ibid.) This evidence is sufficient to dispute separate statement fact 15.

“ ‘[T]he separate statement effectively concedes the materiality of whatever facts are included. Thus, if a triable issue is raised as to any of the facts in your separate statement, the motion must be denied!’ ” (Nazir v. United Airlines, Inc., supra, 178 Cal.App.4th at p. 252, quoting Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) ¶ 10:95.1, p. 10-35 (rev. # 1, 2009).)

As another example, with respect to patient K.B., it is undisputed that SBCH provided service until August 1, 2019. (PSS, undisputed fact 25.) SBCH submitted its claim to Magellan on August 3, 2019. (PSS, undisputed fact 26.) On August 10, 2019, Magellan denied the claim because K.B.’s health care plan did not cover the services provided. (PSS, undisputed fact 27.) According to defendants, SBCH did not submit a corrected claim until April 2, 2020, reflecting a different diagnosis code. (DSS, fact 28; Rucker decl., ¶ 12 & exhibit 33.) SBCH provides evidence that it resubmitted an updated corrected claim on October 3, 2019, within 180 days of August 1. (Gress decl., ¶ 5 & exhibit E.) This evidence further shows that Magellan represented to SBCH that it had received the corrected claim and had incorrectly processed it as a duplicate. (Ibid.) This evidence is sufficient to dispute whether a timely claim had been submitted as to patient K.B. and to dispute the implication of separate statement fact 28 that a corrected claim had not been submitted until April 2, 2020.

These examples are sufficient to demonstrate the existence of triable issues of material fact precluding summary adjudication. Because, as discussed above, the sole issue presented is for summary adjudication as to all of the patients identified in the separate statement together, it is unnecessary for the court further to identify triable issues as to each patient. The motion for summary adjudication will therefore be denied.

(3)       Motion to Seal

In connection with defendants’ motion for summary adjudication, defendants move to file under seal: (i) exhibit 1 of the declaration of Annette Sumrall in support of defendants’ motion for summary adjudication; (ii) portions of defendants’ motion for summary adjudication citing exhibit 1; and (iii) portions of defendants’ separate statement citing exhibit 1.

With respect to exhibit 1, as discussed above, no redacted or unredacted version of exhibit 1 has been filed or lodged with the court. Insofar as there is nothing presented to the court for filing with respect to exhibit 1, the motion to file exhibit 1 under seal will be denied.

Unredacted versions of defendants’ motion for summary adjudication and separate statement have been lodged with the court provisionally under seal and redacted versions filed in the public file.

“Unless confidentiality is required by law, court records are presumed to be open.” (Cal. Rules of Court, rule 2.550(c).) “A record must not be filed under seal without a court order. The court must not permit a record to be filed under seal based solely on the agreement or stipulation of the parties.” (Cal. Rules of Court, rule 2.551(a).)

“A party requesting that a record be filed under seal must file a motion or an application for an order sealing the record. The motion or application must be accompanied by a memorandum and a declaration containing facts sufficient to justify the sealing.” (Cal. Rules of Court, rule 2.551(b)(1).)

“The court may order that a record be filed under seal only if it expressly finds facts that establish:

            “(1)      There exists an overriding interest that overcomes the right of public access to the record;

            “(2)      The overriding interest supports sealing the record;

            “(3)      A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;

            “(4)      The proposed sealing is narrowly tailored; and

            “(5)      No less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court, rule 2.550(d).)

In support of the motion to seal, defendants present the declaration of counsel for defendants, attorney Cindy M. Rucker. Rucker declares:

“The Contract forming the basis of Plaintiff’s Complaint contains confidential and proprietary business information, including competitively sensitive, non-public financial and pricing information that the Court will be required to consider in adjudicating Defendants’ Motion for Summary Adjudication. Plaintiff does not object to the filing of the Contract under seal.” (Rucker decl., ¶ 3.)

“The subject Contract contains provisions making all of the terms of the Contract confidential, and the parties have an interest adhering to these provisions because the information contained therein is not generally known to the public and is sufficiently sensitive to result in substantial prejudice or competitive harm to the parties from disclosure or use. The confidential nature of the Contract serves as a sufficient, overriding interest and enables Defendants to request the sealing of the Contract. Defendant’s interests in abiding by the Contract’s confidentiality provisions overcome the right of public access to Defendants’ Motion for Summary Adjudication.” (Rucker decl., ¶ 5.)

As provided in rule 2.551(a), the agreement of the parties is not itself a sufficient basis for confidentiality of court records. The fact that the agreement to keep matters confidential is within the Agreement does not alter this legal requirement. As provided in rule 2.551(b)(1), the declaration supporting the motion to seal must provide a factual basis justifying filing the document under seal.

Looking at defendants’ separate statement, there are only two redactions, one in fact 4 following the unredacted words, “[t]he Agreement contains the following language,” and one in fact 7 following the unredacted words, “The Agreement also requires Santa Barbara to submit any claim related disputes to Magellan within one year of the date on which the dispute arose.” The surrounding unredacted separate statement facts are:

“The Agreement also requires [SBCH] to submit all itemized claims for reimbursement no later than 180-days from the date Santa Barbara provided covered services to the member(s).” (DSS, fact 3.)

“[SBCH], on appeal, is required to show ‘good cause’ for any untimely submission.” (DSS, fact 5.)

“Absent a showing of good cause, Magellan’s original denial is deemed to be final.” (DSS, fact 6.)

“When Magellan pays or denies claims submitted by [SBCH], Magellan issues an EOP or Remittance setting forth, on a claim-by-claim basis, what [SBCH] charged, what Magellan paid, and an explanation for the payment/denial.” (DSS, fact 8.)

In view of the unredacted text of separate statement facts 3 through 8 and the discussion of the contractual issues in the motion and opposition, it is wholly unclear why the redacted text is confidential. Unlike pricing, reimbursement amounts, or other financial information, there is no inherent basis for concluding that the contract language redacted from the separate statement (and the corresponding language redacted from the motion) is competitively sensitive in any manner. Attorney Rucker merely asserts that the entire matter is competitively sensitive but provides no basis either in general experience or particular to this transaction why that would be so. (Indeed, in the absence of exhibit 1, there is only a conclusory statement of the parties’ agreement that this matter is confidential.)

Based upon the evidence presented, the court cannot conclude that the specific contractual language redacted from the separate statement and from the memorandum is confidential so that maintaining its confidentiality is an overriding interest. As noted by Rucker, the contractual provisions form the basis of this dispute. Because the interpretation and application of those provisions are central to the disposition of this matter, it appears to the court that there is a strong public interest in the inclusion of the exact text in the public record.

The court will therefore continue the hearing on the motion to seal to give the parties the opportunity, if they so choose, to provide a sufficiently factual basis for sealing the specific language redacted from the motion and from the separate statement. The court will otherwise file the two documents now lodged provisionally under seal in the public record. Because the entire contract (exhibit 1) was never presented to the court, it is not now necessary for the court to consider redactions from the entirety of the contract of matters other than those cited in the motion and separate statement.