Mark W Shurtleff et al vs Sanctuary Centers of Santa Barbara Inc et al

Case Number

21CV03687

Case Type

Hearing Date / Time

Fri, 09/12/2025 - 10:00

Nature of Proceedings

Petitions: Approval and Special Needs Trust

Tentative Ruling

For all reasons discussed herein, petitions of plaintiff Mark W. Shurtleff are each continued to October 24, 2025. On or before October 10, 2025, plaintiff shall file and serve a memorandum or supplemental brief addressing the matters described herein.

Background: 

On September 15, 2025, plaintiffs Mark W. Shurtleff (Mark), individually and as the conservator for Ellen P. Shurtleff (Ellen), and Ellen (collectively, plaintiffs) filed a complaint against defendants Sanctuary Centers of Santa Barbara, Inc., (Sanctuary), AVA Billing & Consulting, LLC,(AVA), Lisa B. Moschini (Moschini), Barry R. Schoer (Schoer), and Ashton V. Abernathy (Abernathy) (collectively, defendants), alleging seven causes of action: (1) breach of written contract (against Sanctuary and AVA only); (2) conversion (against Sanctuary); (3) fraud (against all defendants); (4) negligence misrepresentation (against all defendants); (5) negligence (against all defendants); (6) financial abuse and neglect of a dependent adult (alleged by Ellen against all defendants); and (7) elder financial abuse (alleged by Mark against all defendants). (Note: Due to common familial surnames and to avoid confusion, the court will refer to plaintiffs, individually, by their first names. No disrespect is intended.) As alleged in the complaint:

Mark, who is over 65 years of age, is the father of Ellen, a disabled dependent adult. (Complaint, ¶¶ 1-3.) Ellen and Mark are members of the Gibson, Dunn Employee Benefits Plan (the plan) for which Blue Cross of California (Anthem) is the claims administrator. (Id. at ¶ 12.)

Sanctuary is a behavioral health provider that operates a residential program for adults with mental illness in Santa Barbara, California. (Compl., ¶ 5.) Moschini is Sanctuary’s Clinical Director and Schoer is its Chief Executive Officer and President. (Id. at ¶¶ 6, 7.) AVA provides insurance claims and billing services to Sanctuary, including services relating to the recoupment of fees from Sanctuary’s customers’ health plans. (Id. at ¶ 8.) Abernathy is AVA’s Chief Executive Officer and President. (Id. at ¶ 9.)

In April 2019, Ellen received treatment for Bipolar I disorder at UCLA Hospital. (Compl., ¶ 14.) After Anthem cut off further authorization for in-patient services at that hospital, Moschini evaluated Ellen for placement at Sanctuary’s residential facility in Santa Barbara County and advised Mark that Sanctuary could house and help Ellen at that facility. (Compl., ¶ 14.)

Moschini informed Mark that the plan would consider Sanctuary an “out-of-network” provider, and that Ellen and Mark would be required to pay Sanctuary directly and in full for its services. (Compl., ¶ 15.) Moschini stated that Sanctuary would arrange for AVA to submit claims to the plan, that AVA would recoup health plan money as reimbursement to Mark and Ellen for the monthly fees paid to Sanctuary, that Mark and Ellen would be required to use AVA for this purpose, and that Mark and Ellen must pay to AVA a monthly fee of 8.5 percent of all benefits recovered on Mark and Ellen’s behalf. (Id. at ¶ 16.)

In reliance on Moschini’s statements described above, Mark entered into an admissions agreement (the agreement) with Sanctuary for Ellen to receive residential treatment at Sanctuary’s facility. (Compl., ¶ 17.) The agreement provided for an initial monthly admission charge to be paid to Sanctuary of $11,000 per month, which was later raised to $12,000 per month. (Id. at ¶ 17.) The agreement also set forth the services to be provided to Ellen. (Id. at ¶ 18.) On April 10, 2019, Ellen was admitted as a full-time resident at Sanctuary’s Santa Barbara facility. (Id. at ¶ 19.)

After insurance reimbursements from Anthem began to decline, Mark requested from Sanctuary information regarding AVA’s claims submission process with Anthem. (Complaint, ¶¶ 22-26.) AVA would not provide Mark with claims submission details. (Id. at ¶¶ 24, 25.) Abernathy told Mark that AVA would resubmit certain claims for service dates occurring after August 2, 2019, which would void the original claims submissions. (Id. at ¶ 25.) At the end of December 2019, Mark discovered that Abernathy and AVA had not been in contact with Anthem, and had submitted few claims after August 2, 2019. (Id. at ¶ 27.)

In January 2020, Mark again inquired of AVA about reimbursements from Anthem, but AVA provided no explanation. (Complaint, ¶ 29.) Despite no known change in Ellen’s medical status or treatment rendered, Anthem suddenly began processing claims for service dates in January 2020 at full post-hospitalization rates, confirming for the first time that AVA and Sanctuary had failed to properly submit claims to Anthem during Ellen’s stay at Sanctuary’s facility. (Id. at ¶ 29.) Following a 30-day notice, Ellen left Sanctuary on the morning of February 1, 2020. (Id. at ¶ 30.)

In February 2020, Mark received a written demand from Anthem for repayment of the amount of $20,300 based on “incorrect billing” submitted by Sanctuary and AVA in April, May, and June of 2019. (Complaint, ¶ 32.) Anthem confirmed that AVA had resubmitted claims for service dates prior to August 3, 2019, only. (Ibid.) According to Anthem, AVA’s re-submission of pre-August 3, 2019, claims effectively “voided” prior claims submissions for April, May and June 2019, for which Mark and Ellen had already been reimbursed by Anthem. (Ibid.) The post-August 3, 2019, claims submissions were di minimis, and did not reflect charges Mark and Ellen had paid to Sanctuary for after August 2019. (Ibid.)

Anthem also informed Mark that the January claims from Sanctuary included a representation from AVA and Sanctuary that Sanctuary was authorized to receive the Anthem payments instead of Mark and Ellen, to which Mark had not agreed. (Complaint, ¶ 35.) Anthem paid Sanctuary directly for services in January 2020, which Mark and Ellen had already paid in full. (Id. at ¶ 36.) AVA and Sanctuary refused to remit these funds to Mark or Ellen, who have not been fully reimbursed by the plan for money paid to Sanctuary. (Id. at ¶¶ 36, 38.)

In addition, Sanctuary misrepresented the scope of services it would provide to Ellen. (Compl., ¶ 42.) Ellen weighed approximately 142 pounds when admitted to Sanctuary, and weighed approximately 205 pounds when she left Sanctuary on February 1, 2020. (Id. at ¶ 44.) Ellen was also allowed to go absent without leave or supervision from Sanctuary despite the 24-hour supervision promised in the Agreement. (Id. at ¶ 45.)

On October 13, 2022, Sanctuary, Moschini, and Schoer filed an answer to plaintiffs’ complaint.

On October 28, 2022, AVA and Abernethy filed a demurrer to the first, sixth and seventh causes of action alleged in the complaint which was opposed by Mark and Ellen. The court overruled that demurrer by order dated February 17, 2023, and directed AVA and Abernethy to file and serve an answer to the complaint on or before March 1, 2023.

On May 1, 2023, AVA and Abernethy filed an answer to plaintiff’s complaint.

On August 12, 2025, plaintiffs filed a notice of a conditional settlement of this case.

On August 13, 2025, Mark filed an unopposed verified petition (the Approval Petition) for approval of compromise of claim or action or disposition of proceeds of judgment for minor or person with a disability, and separately filed an unopposed verified petition (the Special Needs Petition) for an order establishing a special needs trust to be funded with the proceeds of a settlement in this action.

Analysis:

“The guardian or conservator of the estate or guardian ad litem so appearing for any ... person who lacks legal capacity to make decisions, or person for whom a conservator has been appointed shall have power, with the approval of the court in which the action or proceeding is pending, to compromise the same, to agree to the order or judgment to be entered therein for or against the ward or conservatee, and to satisfy any judgment or order in favor of the ward or conservatee or release or discharge any claim of the ward or conservatee pursuant to that compromise.” (Code Civ. Proc., § 372, subd. (a)(3).) The requirement that the court must approve any proposed compromise of a claim of any person described in Code of Civil Procedure section 372, subdivision (a)(3), “exist[s] to protect the best interests of” that person. (Pearson v. Superior Court (2012) 202 Cal.App.4th 1333, 1338.)

“A petition for court approval of a compromise or covenant not to sue under Code of Civil Procedure section 372 must comply with rules 7.950 or 7.950.5, 7.951, and 7.952.” (Cal. Rules of Court, rule 3.1384(a).) The petition must “be verified by the petitioner and must contain a full disclosure of all information that has any bearing on the reasonableness of the compromise, covenant, settlement, or disposition. Except as provided in rule 7.950.5, the petition must be submitted on a completed Petition for Approval of Compromise of Claim or Action or Disposition of Proceeds of Judgment for Minor or Person With a Disability (form MC-350).” (Cal. Rules of Court, rule 7.950.)

The allegations of the complaint described above, which are set forth in 80 paragraphs exclusive of subparagraphs, indicate to the court that the claims and damages alleged in the complaint arise primarily from what Mark and Ellen contend constitutes a breach of the agreement, conversion, fraud, negligence, and financial abuse arising from a failure by Sanctuary and AVA to obtain or process claims for reimbursement from the plan, and false promises or representations by Sanctuary and AVA that they would take all steps necessary to obtain reimbursement with the intention to defraud Ellen and to misappropriate or convert Ellen’s funds. (See, e.g., Compl., ¶¶ 16-42, 46(a), 49, 51, 59(b), 60(b), 67, & 74.)

Though the complaint also includes allegations regarding a purported failure by defendants to use reasonable care in caring for Ellen, it appears that these allegations give rise to part of the third, fifth, and sixth causes of action for, respectively, fraud, negligence, and financial neglect of a dependent adult. (See, e.g., Compl., ¶¶ 42, 43, 44, 45, 59(a), 60(a), 67, 73.)

The petition seeks the court’s approval of a settlement of Ellen’s disputed claims in the amount of $999,996. (Appr. Pet., ¶ 10.) The petition states that the relevant facts, events, and circumstances giving rise to that claim are that the Sanctuary was negligent in caring for Ellen, leading to Ellen suffering rapid weight gain and emotional distress. (Appr. Pet., ¶ 5.)

Assuming without deciding that the claim described in the petition is alleged in the complaint, wholly absent from the petition is any reference to Ellen’s claim for misappropriation, theft, or conversion of Ellen’s personal funds, or fraud or financial abuse arising from the purported failure by Sanctuary and AVA to obtain or submit claims for reimbursement from the plan on Ellen’s behalf as alleged in the complaint. There is also no information in the petition explaining whether the proposed settlement includes these claims.

For reasons further discussed above, the court is required to protect Ellen’s bests interests when determining whether the proposed settlement is reasonable under the circumstances present here. Even if the present record was sufficient to show that the settlement is reasonable as to any claims arising from the care provided to Ellen or Ellen’s residency at Sanctuary, the absence of any information regarding whether the settlement includes the claims described above with respect to the purported misappropriation, theft, or abuse of Ellen’s personal funds, deprives the court of full and complete information sufficient to permit it to discharge its duty in determining whether the settlement is reasonable and in Ellen’s best interests.

Though California Rules of Court, rule 3.114(a), does not require the submission of a memorandum in support of the petition, the court will, in the interests of justice, continue the hearing on the petition to require petitioner to submit a memorandum explaining why the proposed compromise of the claim described in the petition is reasonable as to all of the claims alleged in the complaint. (Cal. Rules of Court, rule 3.1114(b).)

In the interests of judicial efficiency, the court will also continue the hearing on the Special Needs Petition to permit that petition to be heard concurrently with the Approval Petition.