Moran v. Prime Healthcare Management CA4/3
3 Cal. App. 5th 1131
| Cal. Ct. App. | 2016Background
- Moran, an uninsured "self-pay" patient, visited defendants' hospital ER three times in Oct 2013, signed a standard admission/financial responsibility contract, and received bills exceeding $10,000.
- He sued in a putative class action alleging the hospital’s practice of charging self-pay patients its Chargemaster rates was discriminatory, unconscionable, and exceeded reasonable value; causes of action included UCL, CLRA, and declaratory relief.
- The hospital’s admission contract referenced "reasonable charges" as listed in the hospital charge description master (Chargemaster) and informed patients of charity care/discount programs; Moran alleged he did not receive a substantive response when he informed the hospital of his uninsured status.
- Trial court sustained a demurrer to Moran’s third amended complaint without leave to amend, finding insufficient pleading of standing; Moran appealed.
- The Court of Appeal reviewed de novo and held Moran adequately alleged standing and viable claims limited to unconscionability-based theories (under the UCL and CLRA) and a ripe claim for declaratory relief; other misrepresentation-based theories failed for lack of reliance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing under UCL/CLRA for billing practices | Moran paid part of the bill, remained liable, and thus suffered economic injury; his billing exposure and utility of suit confer standing | No injury in fact; any exposure was eliminated or avoidable via charity/discount policies; claims barred by statutory safe harbors | Moran has standing to pursue unconscionability-based UCL and CLRA claims; payment/remaining liability and burden of applying for aid sufficed to show injury in fact |
| Whether statutory "safe harbors" bar UCL attack on variable pricing | Chargemaster-based billing is unlawful/unconscionable even if variable pricing otherwise permitted | Statutes (e.g., Business & Professions Code §§ 16770, 17042; Hospital Fair Pricing Act) permit differential/published rates and thus preclude UCL challenge | Safe-harbor statutes permit variable pricing but do not bar a UCL/CLRA claim that pricing is unconscionable; discriminatory-pricing challenge, however, is foreclosed by legislative authorization for differential rates |
| Reliance requirement for misrepresentation predicates (UCL unlawful/fraud prongs and CLRA) | Moran expected to be billed no more than other patients or no more than reasonable value, supporting misrepresentation claims | Moran did not allege he read or relied on any contract or representations; misrepresentation-based predicates require actual reliance | Misrepresentation-based UCL and CLRA claims fail for lack of pleaded actual reliance (In re Tobacco II / Durell reasoning applies) |
| Whether Contract’s financial-liability clause is unconscionable | Chargemaster rates are grossly excessive (4–6x cost) and imposed via adhesion contract on vulnerable ER patients, making the price term substantively and procedurally unconscionable | Contract and statutory charity/discount procedures provide an avoidable remedy; price terms reflect hospital billing practices and permitted published rates | Court held Moran adequately pleaded procedural (adhesion) and substantive unconscionability to proceed on UCL (unlawful/unfair) and CLRA (a(19)) grounds; factual development required under Civ. Code § 1670.5 |
Key Cases Cited
- Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (California 1999) (establishes UCL "safe harbor" analysis and limits on judicially imposing unfairness where legislature has permitted conduct)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (California 2011) (standing under UCL requires injury in fact and loss of money or property causation)
- In re Tobacco II Cases, 46 Cal.4th 298 (California 2009) (private UCL fraud claims require actual reliance causation)
- Durell v. Sharp Healthcare, 183 Cal.App.4th 1350 (Cal. Ct. App. 2010) (misrepresentation-based UCL/CLRA claims fail absent pleaded reliance)
- Hale v. Sharp Healthcare, 183 Cal.App.4th 1373 (Cal. Ct. App. 2010) (distinguishes cases where a plaintiff plausibly alleges reliance on expectation of "regular rates")
- Sarun v. Dignity Health, 232 Cal.App.4th 1159 (Cal. Ct. App. 2014) (invoice demanding full charges and the burdensome financial-assistance process can supply injury in fact for UCL standing)
- Perdue v. Crocker National Bank, 38 Cal.3d 913 (California 1985) (price-term challenges require inquiry into basis/justification for price; overprice alone insufficient)
- Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (California 2015) (explains procedural and substantive elements of unconscionability)