County of Santa Clara v. Super. Ct. ( 2022 )

Filed 5/18/22 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
COUNTY OF SANTA CLARA, H048486
(Santa Clara County
Petitioner, Super. Ct. No. 19CV349757)
v.
ORDER MODIFYING OPINION
THE SUPERIOR COURT OF SANTA [NO CHANGE IN JUDGMENT]
CLARA COUNTY,
Respondent,
DOCTORS MEDICAL CENTER OF
MODESTO et al.,
Real Parties in Interest.
BY THE COURT:
It is ordered that the opinion filed on April 26, 2022, be modified as follows:
1. On page 11, replace the first sentence of the first full paragraph with:
We acknowledge that under our interpretation of the relevant statutes a provider
has greater remedies against a private health care service plan than it does against a
public entity health care service plan.
There is no change in the judgment.
Dated: _______________ ______________________________________
GROVER, A.P. J.
______________________________________
LIE, J.
______________________________________
WILSON, J.
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Filed 4/26/22 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
COUNTY OF SANTA CLARA, H048486
(Santa Clara County
Petitioner, Super. Ct. No. 19CV349757)
v.
THE SUPERIOR COURT OF SANTA
CLARA COUNTY,
Respondent,
DOCTORS MEDICAL CENTER OF
MODESTO et al.,
Real Parties in Interest.
Petitioner County of Santa Clara operates a health care service plan, licensed
under the Knox-Keene Health Care Service Plan Act. Real parties in interest Doctors
Medical Center of Modesto and Doctors Hospital of Manteca, Inc. (collectively, the
Hospitals) provided emergency medical services to members of the county’s health plan
and submitted reimbursement claims to the county. The county reimbursed the Hospitals
for only part of the claimed amounts. The Hospitals sued the county for the full amounts
of their claims, the operative complaint alleging a single cause of action for breach of an
implied-in-fact or implied-in-law contract. The county demurred, asserting it is immune
from the Hospitals’ suit under the Government Claims Act (Gov. Code, § 810 et seq.).
Respondent court overruled the demurrer, the county petitioned for writ relief
here, and we issued an order to show cause. Because the county is immune from
common law claims under the Government Claims Act and the Hospitals do not state a
claim for breach of an implied-in-fact contract, we will issue a writ of mandate
instructing the trial court to enter a new order sustaining the demurrer without leave to
amend.
I. TRIAL COURT PROCEEDINGS
According to the Hospitals’ operative third amended complaint, the county
operates a health care service plan called Valley Health Plan, which is licensed and
regulated by the state Department of Managed Health Care (Department) under the
Knox-Keene Health Care Service Plan Act of 1975 (Health & Saf. Code, § 1340 et seq.;
“Knox-Keene Act”). The Hospitals provided emergency medical services to three
patients enrolled in the county’s health plan. The Hospitals submitted claims to the
county for over $144,000, amounting to what they allege is the reasonable value of the
emergency medical services provided to those patients. The county reimbursed the
Hospitals approximately $28,500 for those services. The Hospitals submitted written
administrative appeals to the county for the unpaid sums, which the county denied.
The Hospitals sued the county for reimbursement. The Hospitals initially alleged
both tort and implied-in-fact contract causes of action. The trial court sustained the
county’s demurrer to the Hospitals’ second amended complaint. The court denied leave
to amend regarding the tort causes of action, concluding that as a public entity the county
was immune from those common law claims. (Citing Gov. Code, § 815; unspecified
statutory references are to the Government Code.) The trial court granted leave to amend
the breach of implied contract cause of action.
The Hospitals allege in the operative third amended complaint’s single cause of
action that they provided emergency medical services to the county’s patients with the
expectation of “reasonable and customary payment” from the county; that the county did
not “assert that the Patients were not [its] insured[s] or indicate in any way to the
[Hospitals] that [it] would not cover the Patients[’] medical expenses”; that inaction by
the county “gave rise to implied-in-fact agreements between the [Hospitals] and [the
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county] obligating [the county] to pay for the care and treatment rendered by the
[Hospitals] to the Patients at a reasonable and customary rate”; and that the county’s
ordinances “approved by its Board of Supervisors, as well as the statutes contained within
the Knox-Keene Act and regulations of [the Department], give rise to implied-in-law
agreements between the [Hospitals] and [the county] obligating [the county] to pay for
the care and treatment rendered by the [Hospitals] to the Patients at a reasonable and
customary rate.” The county allegedly “acknowledged [its] implied contractual
obligations to the [Hospitals] by issuing partial payment on such claims. However, [it]
failed to fully reimburse the [Hospitals] for the services rendered to the Patients at
reasonable and customary rates as required by the Knox-Keene Act.”
The county demurred to the operative complaint, arguing there is no private right
of action to sue for reimbursement under the Knox-Keene Act; a breach of an implied
contract cause of action cannot be asserted against a public entity; and (in supplemental
briefing) that the county was immune from the lawsuit by operation of section 815. The
demurrer to the third amended complaint was heard by a different judge, who after the
hearing issued a lengthy order overruling the demurrer. The order states that the county
cannot “rely on a public policy regarding contracts as to public entities so that it can be
exempted from” the Knox-Keene Act. The trial court reasoned that the “public policy to
promote the delivery and the quality of health and medical care to the people of the State
of California outweighs the policy to limit common law, or implied contract claims
against public entities.” On the issue of immunity, the order states neither the county’s
“supplemental brief nor its supplemental reply brief persuade the Court that [the county]
is immune from the quantum meruit cause of action contemplated by statute and the
[Department]. Here, whether fashioned as a cause of action for breach of an implied in
fact contract or one for quantum meruit, [the Hospitals] state facts sufficient to constitute
a cause of action.”
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The county petitioned for writ relief in this court. A different panel issued an
order to show cause, invited further briefing, and granted the California State Association
of Counties’ request to file an amicus curiae letter.
II. DISCUSSION
We review a trial court’s order overruling a demurrer de novo. (Casterson v.
Superior Court (2002) 101 Cal.App.4th 177, 182.) We assume the truth of factual
allegations in the complaint, and determine whether a valid cause of action is stated under
any legal theory. (Mayron v. Google LLC (2020) 54 Cal.App.5th 566, 571.) “Although
extraordinary relief ordinarily is not available at the pleading stage, mandamus is
available when ... extraordinary relief may prevent a needless and expensive trial and
reversal.” (Spielholz v. Superior Court (2001) 86 Cal.App.4th 1366, 1370, fn. 4.)
A. THE KNOX-KEENE ACT
The county (through its Valley Health Plan) and the Hospitals are health care
service plans licensed under the Knox-Keene Act, a “comprehensive system of licensing
and regulation under the jurisdiction of the Department of Managed Health Care.” (Bell
v. Blue Cross of California (2005) 131 Cal.App.4th 211, 215 (Bell).) The county has no
contract for the provision of medical services with either of the Hospitals, making them
noncontracting providers. When, as here, a noncontracting health care service plan
provides emergency services to another plan’s enrollee, the enrollee’s plan “shall
reimburse providers for emergency services and care provided to its enrollees, until the
care results in stabilization of the enrollee.” (Health & Saf. Code, § 1371.4, subd. (b).)
Regulations implementing the Knox-Keene Act define “ ‘Reimbursement of a
Claim’ ” for noncontracting providers as: “the payment of the reasonable and customary
value for the health care services rendered based upon statistically credible information
that is updated at least annually and takes into consideration: (i) the provider’s training,
qualifications, and length of time in practice; (ii) the nature of the services provided;
(iii) the fees usually charged by the provider; (iv) prevailing provider rates charged in the
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general geographic area in which the services were rendered; (v) other aspects of the
economics of the medical provider’s practice that are relevant; and (vi) any unusual
circumstances in the case.” (Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(B).)
Each health care service plan must have a dispute resolution mechanism through
which noncontracting providers can seek resolution of billing and claims disputes.
(Health & Saf. Code, § 1367, subd. (h)(2).) The Department has promulgated regulations
governing that dispute resolution process. (See Cal. Code Regs., tit. 28, § 1300.71.38.)
The Department is charged with periodically reviewing provider dispute resolution
mechanisms and also may do so, “when appropriate, through the investigation of
complaints of unfair provider dispute resolution mechanism(s).” (Cal. Code Regs.,
tit. 28, § 1300.71.38, subd. (m)(1).)
Violations of the Knox-Keene Act and the implementing regulations are subject to
enforcement actions. (Health & Saf. Code, § 1371.39, subds. (a), (d); Cal. Code Regs.,
tit. 28, § 1300.71.38, subd. (m)(3).) Among other penalties for violating the statute and
regulations, the Department’s director can: issue a cease and desist order (Health & Saf.
Code, § 1391); suspend or revoke a health care service plan’s license (Health & Saf.
Code, § 1386, subd. (a)); impose civil penalties of up to $2,500 per violation (Health &
Saf. Code, § 1387, subd. (a)); and seek injunctive relief in a civil action (Health & Saf.
Code, § 1392, subd. (a)(1)). Willful violations can be punished through criminal
prosecution. (Health & Saf. Code, § 1390.) Health and Safety Code section 1394 states
that the “civil, criminal, and administrative remedies available to the director pursuant to
this article are not exclusive, and may be sought and employed in any combination
deemed advisable by the director to enforce the provisions of this chapter.”
When all health care service plans involved in a dispute are private entities, a
noncontracting provider can bring an action seeking reimbursement for the reasonable
value of emergency services under the Unfair Competition Law (Bus. & Prof. Code,
§ 17200 et seq.) or on a quantum meruit theory. (Bell, supra, 131 Cal.App.4th at p. 216.)
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B. IMPLIED-IN-LAW CONTRACT CLAIM
The county argues it is immune from any implied-in-law contract cause of action
by operation of the Government Claims Act. There is “no common law tort liability for
public entities in California; instead, such liability must be based on statute.” (Guzman v.
County of Monterey (2009) 46 Cal.4th 887, 897 (Guzman).) Section 815 sets out the
general rule regarding immunity: “Except as otherwise provided by statute: (a) A public
entity is not liable for an injury, whether such injury arises out of an act or omission of
the public entity or a public employee or any other person.” The intent of the
Government Claims Act is “not to expand the rights of plaintiffs in suits against
governmental entities, but to confine potential governmental liability to rigidly delineated
circumstances.” (Williams v. Horvath (1976) 16 Cal.3d 834, 838; accord Guzman, at
p. 897.) The Government Claims Act includes exceptions to immunity, including, as
relevant to the Hospitals’ argument here, section 815.6: “Where a public entity is under a
mandatory duty imposed by an enactment that is designed to protect against the risk of a
particular kind of injury, the public entity is liable for an injury of that kind proximately
caused by its failure to discharge the duty unless the public entity establishes that it
exercised reasonable diligence to discharge the duty.”
1. Government Code Section 815 Bars a Quantum Meruit Action
Section 815 immunizes public entities from liability on common law theories.
Quantum meruit is an equitable doctrine under which the “ ‘law implies a promise to pay
for services performed under circumstances disclosing that they were not gratuitously
rendered.’ ” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458; Sheppard, Mullin,
Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 88, fn. 11.)
A court faced with a similar question concluded that a quantum meruit action against a
public entity is barred by section 815. (Sheppard v. North Orange County Regional
Occupational Program (2010) 191 Cal.App.4th 289, 314 (Sheppard) [noting that
generally “ ‘ “a private party cannot sue a public entity on an implied-in-law or quasi-
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contract theory, because such a theory is based on quantum meruit or restitution
considerations which are outweighed by the need to protect and limit a public entity’s
contractual obligations” ’ ”].) Consistent with that authority, we conclude that the
Hospitals cannot state a claim based solely on the common law doctrine of quantum
meruit.
The Hospitals cite cases involving reimbursement disputes between private health
care service plans, contending those cases demonstrate the viability of their cause of
action. (Citing Bell, supra, 131 Cal.App.4th 211; Children’s Hospital Central California
v. Blue Cross of California (2014) 226 Cal.App.4th 1260, 1270 (Children’s Hospital).)
But because no public entity was involved in those cases, those courts had no occasion to
decide the immunity question presented here. (Fricker v. Uddo & Taormina Co. (1957)
48 Cal.2d 696, 701 [“[C]ases are not authority for propositions not considered.”].) And
the bases for the cause of action in Bell were the Unfair Competition Law (Bus. & Prof.
Code, § 17200 et seq.) and quantum meruit (Bell, supra, 131 Cal.App.4th at pp. 214,
216), theories of relief which cannot be asserted against a public entity. (People for
Ethical Treatment of Animals, Inc. v. California Milk Producers Advisory Bd. (2005)
125 Cal.App.4th 871, 878–879 [Unfair Competition Law]; Sheppard, supra,
191 Cal.App.4th 289, 314 [quantum meruit].)
2. The Mandatory Duty Exception in Gov. Code Section 815.6 Does Not Apply
The Hospitals argue that their suit is authorized by section 815.6, an exception to
immunity which applies where a public entity fails to discharge a “mandatory duty
imposed by an enactment that is designed to protect against the risk of a particular kind of
injury.” “[A]pplication of section 815.6 requires that the enactment at issue be
obligatory, rather than merely discretionary or permissive, in its directions to the public
entity; it must require, rather than merely authorize or permit, that a particular action be
taken or not taken.” (Haggis v. City of Los Angeles (2000) 22 Cal.4th 490, 498.) And it
is not enough that the “public entity or officer have been under an obligation to perform a
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function if the function itself involves the exercise of discretion.” (Ibid.) Whether a
statute imposes a mandatory duty is a question of law (id. at p. 499), which we review de
novo.
The Hospitals argue that Health & Safety Code section 1371.4, subdivision (b)
imposes a mandatory duty on the county that triggers the section 815.6 exception to
immunity. Under that subdivision, the county “shall reimburse [the Hospitals] for
emergency services and care provided to its enrollees, until the care results in
stabilization of the enrollee.” (Health & Saf. Code, § 1371.4, subd. (b).) The
implementing regulations state that the reimbursement must be for the “reasonable and
customary value” of the health care services performed. (Cal. Code Regs., tit. 28,
§ 1300.71, subd. (a)(3)(B).) Though the duty to reimburse is mandatory under Health &
Safety Code section 1371.4, the county has discretion in the amount of that
reimbursement since it is vested with the discretion to determine the reasonable and
customary value of the services. Because the county is vested with discretion in
determining the value of the reimbursement to be paid under Health & Safety Code
section 1371.4, that section does not create a purely mandatory duty. Section 815.6
therefore does not authorize the Hospitals’ implied-in-law contract cause of action.
3. No Other Statute Authorizes an Action for Damages
Though section 815 describes broad immunity, it also contains the limiting phrase,
“[e]xcept as otherwise provided by statute.” The Supreme Court has explained that
“direct tort liability of public entities must be based on a specific statute declaring them
to be liable, or at least creating some specific duty of care.” (Eastburn v. Regional Fire
Protection Authority (2003) 31 Cal.4th 1175, 1183 (Eastburn).) We interpret the phrase
“specific statute declaring them to be liable” as requiring that a statute include a private
right of action authorizing a suit against a public entity. We invited supplemental
briefing regarding whether Health and Safety Code section 1371.4 or any other section of
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the Knox-Keene Act authorizes a private right of action that would support the Hospitals’
reimbursement suit.
Not all violations of a statute give rise to a private right of action. (Lu v. Hawaiian
Gardens Casino, Inc. (2010) 50 Cal.4th 592, 596–597 (Lu).) “[W]hether a party has a
right to sue depends on whether the Legislature has ‘manifested an intent to create such a
private cause of action’ under the statute.” (Ibid.) That intent can be shown through
“ ‘ “clear, understandable, unmistakable terms” ’ ” in the text of the statute itself that
“strongly and directly indicate that the Legislature intended to create a private cause of
action.” (Id. at p. 597; e.g., Health & Saf. Code, § 1285, subd. (c) [“Any person who is
detained in a health facility solely for the nonpayment of a bill has a cause of action
against the health facility for the detention.”], Veh. Code, § 17001 [“A public entity is
liable for death or injury to person or property proximately caused by a negligent or
wrongful act or omission in the operation of any motor vehicle by an employee of the
public entity acting within the scope of his employment.”].) Even absent such clear
statutory language, legislative history can reveal an intent to impose liability. (Lu, at
p. 597.)
The Hospitals acknowledge that “there is no express[] language providing a
private right of action under the Knox-Keene Act.” Having reviewed the Knox-Keene
Act, we agree that nothing in that statutory scheme provides a private right of action that
would support the Hospitals’ reimbursement action against the county. Though under
Health and Safety Code section 1371.4 the county has an obligation to reimburse the
Hospitals for the care provided to the county’s enrollees, nothing in that section
demonstrates a legislative intent to allow the Hospitals to sue directly under that statute to
enforce the obligation. Unlike statutes that provide a private right of action, Health and
Safety Code section 1371.4 does not state that the health care service plan entitled to
reimbursement “has a cause or action,” or that the debtor health care service plan “is
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liable” for that reimbursement. (Compare Health & Saf. Code, § 1371.4 with Health &
Saf. Code, § 1285, subd. (c), Veh. Code, § 17001.)
The Hospitals argue that despite the lack of express language creating a private
right of action under the Knox-Keene Act, “there is clear legislative intent providing for
such a right, as further supported by established case[ ]law.” But the Hospitals point to
nothing in the legislative history of the Knox-Keene Act evincing an intent to allow
private rights of action. They cite Health & Safety Code section 1399.5, which states in
relevant part that the Knox-Keene Act “shall be applicable to any private or public entity
or political subdivision which, in return for a prepaid or periodic charge paid by or on
behalf of a subscriber or enrollee, provides, administers or otherwise arranges for the
provision of health care services.” But that section merely discusses the general
applicability of the Knox-Keene Act, and does not show clear legislative intent to allow a
private right of action in this context.
According to the Hospitals, “California Courts have repeatedly held that private
rights of action are permitted to challenge violations of the Knox-Keene Act under the
UCL and common law.” That contention reflects a misunderstanding of the private right
of action concept. A statute which creates a private right of action is one that can be sued
on directly, not through the common law or another statute. The cases the Hospitals cite,
including Bell, were brought on unfair competition law and quantum meruit theories
(Bell, supra, 131 Cal.App.4th at p. 216), and did not assert a private right of action under
Health and Safety Code section 1371.4. Because the Hospitals cannot point to a “specific
statute declaring [the county] to be liable” (Eastburn, supra, 31 Cal.4th at p. 1183),
section 815 applies to bar the Hospitals’ implied-in-law contract action.
The Hospitals assert that finding the county immune from the Hospitals’ implied-
in-law contract action will allow the county “to unilaterally underpay the patient accounts
at issue” without any recourse to the Hospitals. They argue in their supplemental brief
that “there is no remedy available under the Knox-Keene Act or any statutory framework
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that would ensure that non-contracted provider health care service plans are reimbursed
for the reasonable and customary value of the services rendered to public entity health
care service plan enrollees.” But the Knox-Keene Act contains enforcement alternatives
to litigation. Noncontracting provider disputes are processed through a dispute resolution
process governed by statute and regulation. (Health & Saf. Code, § 1367, subd. (h)(2);
Cal. Code Regs., tit. 28, § 1300.71.38.) The Department has authority to review provider
dispute resolution mechanisms, including “through the investigation of complaints of
unfair provider dispute resolution mechanism(s).” (Cal. Code Regs., tit. 28,
§ 1300.71.38, subd. (m)(1).) Providers may report allegedly unfair payment patterns to
the Department, which “shall review complaints” and “may conduct an audit or an
enforcement action.” (Health & Saf. Code, § 1371.39, subds. (a), (d).) The Department
director also has broad regulatory authority to investigate health care service plans and to
impose financial or other penalties for violations of the Knox-Keene Act (see Health &
Saf. Code, §§ 1386–1392), including penalties as severe as criminal prosecution and
revocation of a health care service plan’s license. (Health & Saf. Code, §§ 1386,
subd. (a), 1390.) We recognize that financial penalties to be paid to the Department may
deter violations but do not directly reimburse service providers. Nonetheless, although
section 815 forecloses the Hospitals’ chosen means of enforcement, they are not without
any recourse to address their dispute with the county.
We acknowledge that under our interpretation of the relevant statutes a health care
service plan has greater remedies against a private health care service plan than it does
against a public entity health care service plan. (E.g., Bell, supra, 131 Cal.App.4th 211.)
But that result is driven by the Legislature broadly immunizing public entities from
common law claims and electing not to abrogate that immunity in the context presented
here. We have no authority to rewrite the statutes we are called upon to interpret.
(People v. Statum (2002) 28 Cal.4th 682, 692.)
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4. The Trial Court’s Constitutional Concerns Are Unfounded
The trial court’s order expressed the view that the public policy argument the
county proffered would “ultimately result in acts that are both unconstitutional [citations]
and against the stated Legislative purposes and the underlying policies of the Knox-
Keene Act.” The Hospitals embrace the trial court’s constitutional concerns, which
appear to derive from a statement in Bell rejecting the notion that a plan was “free to
reimburse emergency care providers at whatever rate it unilaterally and arbitrarily
selects” because under that interpretation “emergency care providers could be reimbursed
at a confiscatory rate that, aside from being unconscionable, would be unconstitutional.”
(Bell, supra, 131 Cal.App.4th at p. 220; citing Cunningham v. Superior Court (1986)
177 Cal.App.3d 336, 348 [requiring private attorney to represent indigent client and
provide free legal services violated equal protection].)
In contrast to the issues raised in Cunningham and Bell, the county does not
contest its obligation to reimburse the Hospitals for the reasonable and customary value
of the services provided to the county’s enrollees. The issue here is what remedies may
be pursued against the county when the reasonableness of the reimbursement is disputed.
As we have discussed, the Knox-Keene Act and its implementing regulations provide
alternative mechanisms to challenge the amount of emergency medical services
reimbursements.
C. IMPLIED-IN-FACT CONTRACT CLAIM
The operative complaint alleges the existence of an implied-in-fact contract with
the county. Because section 815 does not “affect[] liability based on contract” (Gov.
Code, § 814), the county’s immunity from common law and tort claims does not
necessarily preclude the Hospitals from maintaining an action for breach of an implied-
in-fact contract. Whether an action sounds in contract or tort for purposes of
governmental immunity “ ‘depends upon the nature of the right sued upon, not the form
of the pleading or relief demanded. If based on breach of promise it is contractual; if
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based on breach of a noncontractual duty it is tortious.’ ” (Roe v. State of California
(2001) 94 Cal.App.4th 64, 69.)
The operative complaint contains a single cause of action for breach of an implied
contract; within that cause of action are allegations based on an implied-in-law contract
and an implied-in-fact contract. But ultimately the nature of the right sued upon is the
breach of a noncontractual duty, described in the complaint as the county’s obligation
under ordinances “approved by its Board of Supervisors, as well as the statutes contained
within the Knox-Keene Act and regulations of [the Department] ... to pay for the care and
treatment rendered by the Plaintiffs to the Patients at a reasonable and customary rate.”
That the operative complaint uses the phrase “reasonable and customary” rate, taken from
the regulations implementing the Knox-Keene Act, indicates that the right sued upon
derives from statute rather than contract. (See Cal. Code Regs., tit. 28, § 1300.71,
subd. (a)(3)(B).) Because the Hospitals’ suit is based on an alleged breach of statutory
duty rather than an alleged breach of promise, the nature of the Hospitals’ action is
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tortious and the county is immune from suit under section 815.
San Mateo Union High School Dist. v. County of San Mateo (2013)
213 Cal.App.4th 418 (San Mateo) is instructive and supports our reasoning. The
plaintiffs in San Mateo were school districts that invested money in a pooled retirement
fund operated by the defendant County of San Mateo. The fund invested substantial
capital with Lehman Brothers Holdings, Inc. (Lehman Brothers), losing over $150
million when the company went bankrupt. The plaintiffs sued the county following the
collapse of Lehman Brothers, alleging statutory violations of prudent investor standards
as well as breach of contract. (Id. at p. 424.) On appeal from a sustained demurrer, the
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That the Hospitals allege a breach of statutory duty factually distinguishes this
case from Children’s Hospital, supra, 226 Cal.App.4th at pp. 1268–1270, where the jury
found an implied-in-fact contract between a hospital and a health care service plan to fill
a gap for the time period separating the entities’ two written contracts which set
reimbursement rates.
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San Mateo court determined that the statutory claims were barred by section 815. (Id. at
pp. 432, 434.) The court also concluded the plaintiffs did not state a cause of action for
breach of contract because the “nature of the right sued upon in the [breach of contract]
cause of action is not for breach of a promise, but rather for acts or omissions that
constitute violations of independent noncontractual duties” set forth in statute. (Id. at
p. 440.) The court reasoned that the “gravamen of plaintiffs’ claim is the failure of
defendants to manage the [investment fund] competently, in accordance with investment
policies and statutory requirements, not breach of any separate or additional contractual
obligations.” (Ibid.)
The Hospitals cite Retired Employees Assn. of Orange County, Inc. v. County of
Orange (2011) 52 Cal.4th 1171 (Retired Employees), which determined that “a county
may be bound by an implied contract under California law if there is no legislative
prohibition against such arrangements, such as a statute or ordinance.” (Id. at p. 1176.)
But the only relevant conduct the Hospitals point to here is the issuance of “partial
payment” by county employees in response to the Hospitals’ claims. The administrative
actions of a county employee do not themselves create contractual liability on the part of
the county, whose contracting authority originates with its Board of Supervisors. (Santa
Clara County Charter, art. III, § 300 [“The county may exercise its powers only through
the Board of Supervisors or officers acting under its authority or of law or of this
2
Charter.”] ; see Dones v. Life Insurance Company of North America (2020)
55 Cal.App.5th 665, 693 [distinguishing Retired Employees; “Conduct by a County
employee such as setting up payroll deductions and issuing confirmations of open
2
Both parties cite this section of the Santa Clara County Charter in their
supplemental brief, but neither requested judicial notice. We take judicial notice of the
Santa Clara County Charter on our own motion. (Evid. Code, §§ 452, subd. (b), 459,
subd. (c), 455, subd. (a).)
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enrollment benefit elections cannot operate to create an implied contract for provision of
benefits in a manner contrary to legislative constraints.”].)
The Hospitals argue that the county’s charter provision restricting to the Board of
Supervisors the authority to act on behalf of the county cannot be used to “abridge its
statutory liability” under the Knox-Keene Act. But the county does not dispute its
obligation under the Knox-Keene Act to reimburse the Hospitals for the reasonable and
customary value of the services provided to the county’s enrollees. Indeed, the county
has a local ordinance authorizing “Valley Health Plan payment[s] to providers for
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medical services.” The cited charter provision is a generally applicable section that was
not designed to evade statutory liability. That fact distinguishes this case from those
relied on by the Hospitals, such as Societa Per Azioni De Navigazione Italia v. City of
Los Angeles (1982) 31 Cal.3d 446, where the City of Los Angeles attempted to use a
local enactment to shield itself from respondeat superior liability. (See id. at p. 463 [“To
the extent that the tariff/ordinance purports to exculpate the City from respondeat
superior liability for the torts of its pilot-employees, it is in direct conflict with general
state law.”].)
D. LEAVE TO AMEND
We requested supplemental briefing about whether leave to amend should be
granted if the operative complaint fails to state a cause of action. Leave to amend would
be appropriate if there is a reasonable possibility an amendment would cure the defect
that caused the demurrer to be sustained. (Smith v. BP Lubricants USA Inc. (2021)
64 Cal.App.5th 138, 145.)
Based on our conclusion that the nature of the Hospitals’ action against the county
is tortious rather than contractual, government immunity applies. The Hospitals have not
identified any statute that would abrogate the immunity. Nor have they identified any
3
We take judicial notice of this ordinance as a matter properly noticed by the trial
court. (Evid. Code, § 459.)
15
conduct by the county’s Board of Supervisors that might support a breach of implied
contract cause of action. As the Hospitals have not demonstrated a reasonable possibility
of successfully amending their complaint, they are not entitled to that opportunity.
III. DISPOSITION
Let a peremptory writ of mandate issue directing respondent court to vacate its
September 3, 2020 order overruling petitioner County of Santa Clara’s demurrer and to
enter a new order sustaining the demurrer without leave to amend. Costs in this original
proceeding are awarded to petitioner. (Cal. Rules of Court, rule 8.493(a)(2).) Upon
issuance of the remittitur, the temporary stay order is vacated.
16
____________________________________
Grover, Acting P. J.
WE CONCUR:
____________________________
Lie, J.
____________________________
Wilson, J.
H048486 - County of Santa Clara v Superior Court
Trial Court: Santa Clara County Superior Court
Superior Court No. 19CV349757
Trial Judge: Hon. Maureen A. Folan
Petitioner COUNTY OF SANTA CLARA James R. Williams, County Counsel
Douglas M. Press, Assistant County Counsel
Melissa R. Kiniyalocts, Lead County Counsel
Susan P. Greenberg, Deputy County Counsel
David P. McDonough, Deputy County Counsel
Office of the County Counsel
County of Santa Clara
Real Parties in Interest DOCTORS Albert Edward Stumpp
MEDICAL CENTER OF MODESTO, INC. Mikaela Grace Cox
and DOCTORS HOSPITAL OF Everett Casey Mitchnick
MANTECA, INC. Faatima Seedat
Helton Law Group
Amicus Curiae for CALIFORNIA STATE Aurelia M. Razo, Sen. Deputy County Counsel
ASSOCIATION OF COUNTIES County of San Diego