S274927
IN THE SUPREME COURT OF CALIFORNIA
July 10, 2023
Sixth Appellate District H048486; Santa Clara County Superior Court 19CV349757
Chief Justice Guerrero authored the opinion of the Court, in which Justices Corrigan, Liu, Kruger, Groban, Jenkins, and Evans concurred.
Opinion of the Court by Guerrero, C. J.
Hospitals and other medical providers are required by law to provide emergency medical services without regard to the patient‘s insurance status or ability to pay. (
In this case, Doctors Medical Center of Modesto, Inc., and Doctors Hospital of Manteca, Inc., (collectively, the Hospitals) provided emergency medical services to three individuals enrolled in a health care service plan operated by the County of Santa Clara (the County). The Hospitals submitted reimbursement claims to the County, but the County paid only a portion of the claimed amounts. The Hospitals sued the County for the remaining amounts based on the Knox-Keene Act‘s reimbursement provision. The trial court found that the Hospitals could state a quantum meruit claim against the County. On petition for writ of mandate, the Cоurt of Appeal disagreed, holding that the County is immune from suit under the Government Claims Act and that no exception to immunity applies.
We conclude that the Government Claims Act does not bar the Hospitals’ action against the County. The immunity provisions of the Government Claims Act are directed toward tort claims; they do not foreclose liability based on contract or the right to obtain relief other than money or damages. (
The County operates a health care service plan called Valley Health Plan, which is licensed and regulated by the Department of Managed Hеalth Care (DMHC) under the Knox-Keene Act. (
As previously explained, state and federal laws require hospitals and other medical providers to provide emergency medical services regardless of the patient‘s insurance status or ability to pay. (
In 2016 and 2017, the Hospitals provided emergency medical services to three patients enrolled in Valley Health Plan. The Hospitals submitted to the County claims for reimbursement totaling approximately $144,000 for the services provided. The County paid the Hospitals approximately $28,500. The Hospitals challenged the reimbursement decisions by submitting written administrative appeals, which the County denied.
The Hospitals then sued the County, alleging they are entitled to the entire amount claimed for the emergency services provided to the three patients enrolled in Valley Health Plan. The Hospitals’ operative complaint alleged a single cause of action for breach of implied contract. In that complaint, the Hospitals alleged that the Knox-Keene Act imposes a mandatory duty on health care service plans to reimburse noncontracted providers for emergency medical services and that, pursuant to the Act, the Hospitals are entitled to reimbursement at a reasonable and customary rate for the services provided to the patients enrolled in Valley Health Plan. The Hospitals further alleged that the Knox-Keene Act and the DMHC‘s implementing regulations gave rise to implied-in-law agreements between the Hospitals and the County, obligating the County to pay for the emergency care provided by the Hospitals at a reasonable and customary rate. The Hospitals maintained the reasonable and customary rate for the services provided to Valley Health Plan‘s enrollees was the $144,000 claimed by the Hospitals, rather than the $28,500 reimbursed by
The County demurred, asserting that the Hospitals’ implied contract claim is based on a quantum meruit theory that cannot be maintained against the County as a public еntity. The trial court overruled the demurrer. It found that the Hospitals had stated facts sufficient to constitute a cause of action, “whether fashioned as a cause of action for breach of an implied in fact contract or one for quantum meruit.” The court resolved 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.” It further determined that in entering the regulated health care plan market, the County “cannot expect to rely on a public policy regarding contracts as to public entities so that it can be exempted from those regulations.”
The County sought review through a petition for writ of mandate, and the Court of Appeal granted relief. (County of Santa Clara v. Superior Court (2022) 77 Cal.App.5th 1018 (Santa Clara).) The Court of Appeal concluded that the Government Claims Act immunized the County from the Hospitals’ implied-in-law contrаct claim. (Santa Clara, at pp. 1024-1025.) The court first construed the Hospitals’ claim as seeking relief under a quantum meruit theory. (Ibid.) In the court‘s view, this theory was foreclosed by the immunity conferred by
The Court of Appeal acknowledged that under its 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.” (Santa Clara, supra, 77 Cal.App.5th at p. 1032.) The court viewed that result as being “driven by the Legislature broadly immunizing public entities from common law claims and electing not to abrogate that immunity in the context presented here.” (Id. at p. 1032, fn. omitted.)
II. DISCUSSION
A. Standard of Review
When the Court of Appeal grants a writ petition challenging the trial court‘s order overruling a demurrer and directs it to sustain the demurrer, “the ordinary standards of demurrer review still apply.” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747 (City of Stockton).) “We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. [Citations.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whethеr there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse.” (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865 (City of Dinuba); see also Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.)
B. The Knox-Keene Act and Implementing Regulations
” ‘The Knox-Keene Act is a comprehensive system of licensing and regulation under the jurisdiction of the Department of Managed Health Care.’ ” (Prospect Medical Group, supra, 45 Cal.4th at p. 504.) The Knox-Keene Act requires every health care service plan to be licensed by the DMHC. (
The purpose of the Knox-Keene Act is “to promote the delivery and the quality of health and medical care to the people of the State of California who enroll in, or subscribe for the services rendered by, a health care service plan or specialized health care service plan.” (
In 1994, the Legislature amended the Knox-Keene Act to require health care service plans to “reimburse providers for emergency services and care provided to its enrollees, until the care results in stabilization of the enrollee.” (
The Knox-Keene Act assigns a significant implementation role to the DMHC. “The [DMHC] is charged with the administration and enforcement of the laws relating to health care service plans. [Citation.] To carry out its duties, the DMHC is authorized to promulgate regulations.” (Children‘s Hospital Central California v. Blue Cross of California (2014) 226 Cal.App.4th 1260, 1271 (Children‘s Hospital).)
Following the Legislature‘s enactment of
These factors provide a framework for reimbursement, but do not necessarily resolve every dispute regarding the proper amount of payment. “In the final statement of reasons for [Regulation 1300.71], the DMHC explained that the intent was to establish a methodology for determining the reasonable value of health care services by noncontracted providers but that the criteria specified do not dictate a specific payment rate. Rather, the payor is required to calculate the appropriate reimbursement based on statistically credible information that takes the [specified] factors into consideration. If a payor fulfills its claims payment obligation using these criteria, the DMHC will consider the payor compliant with Health and Safety Code sections 1371 and 1371.35, i.e., the reimbursement of the claim will be deemed timely. ‘However, the definition is not a substitute for traditional forums for contract dispute resolution. If a provider disputes the payor‘s calculation of the fair and reasonable value of the health care services he has rendered, the provider is free to seek resolution of that dispute in a court of law or through any other available civil remedy.’ ” (Children‘s Hospital, supra, 226 Cal.App.4th at p. 1273.)
In this respect, Children‘s Hospital further explained that in adopting
Thus, as this court and others have previously observed, the Knox-Keene Act‘s statutory and regulatory scheme contemplates that private actions under a quantum meruit theory may be used to recoup appropriate reimbursement for services rendered.4 (E.g., Prospect Medical Group, supra, 45 Cal.4th at pp. 505-507; Long Beach Memorial, supra, 71 Cal.App.5th at p. 329; Bell, supra, 131 Cal.App.4th at pp. 216-217; California Emergency Physicians Medical Group v. PacifiCare of California (2003) 111 Cal.App.4th 1127, 1134 (California Emergency Physicians);
C. The Government Claims Act Does Not Bar the Hospitals’ Implied-In-Law Contract Cause of Action Based on the Knox-Keene Act
The legislative committee comments to
The County argues that the immunity conferred under
The impetus for the Government Claims Act and its general aims are well understood. In Quigley v. Garden Valley Fire Protection Dist. (2019) 7 Cal.5th 798, 803 (Quigley), we recounted that “[f]or many decades before the Act, tort liability for public entity defendants was barred by a common law rule of governmental immunity. Over time, however, the common law rule became ‘riddled with exceptions,’ both legislative and judge made, and in 1961 this court abolished the rule altogether. (Muskopf v. Corning Hospital Dist. (1961) 55 Cal.2d 211, 216 (Muskopf).) In response to Muskopf, the Legislature temporarily suspended the decision‘s effect [citation] and directed the California Law Revision Commission to complete a study of the issue it had begun some years earlier [citations]. The end product of the commission‘s study was a series of recommendations [citation], on which the Legislature relied in enacting the [Government Claims Act].” (Quigley, at p. 803, fn. omitted.) “The basic architecture of the [Government Claims Act] is encapsulated in
This history has informed our repeated characterization of the Government Claims Act as concerned with common law torts, as opposed to
In Kizer, supra, 53 Cal.3d 139, we rejected an expansive interpretation of the Tort Claims Act, as the statute was then called, similar to the one advanced by the County in this case. The defendant in Kizer, also a county, was licensed to operate a long-term health care facility but failed to comply with the statutory scheme regulating such facilities. (Kizer, at pp. 141-144.) The county asserted that the Act shielded it from statutory penalties sought by the state. (Kizer, аt p. 144.) We held otherwise, explaining: “The County argues that the Legislature intended to cover a wider range of liabilities than torts. The County points to the comment to
More recently, in City of Dinuba, supra, 41 Cal.4th 859, we rеjected the County of Tulare‘s claim that the Government Claims Act immunized it from an action to recover misallocated tax revenue, which the county was obligated by statute to allocate and distribute. (City of Dinuba, at pp. 865-868.) We held that the Government Claims Act did not foreclose the plaintiffs’ claim for reimbursement, both because the injury alleged did not come within the Act‘s definition of ” ‘injury’ ” (City of Dinuba, at p. 867, citing
The Courts of Appeal have likewise recognized that the Government Claims Act‘s immunity and liability provisions are aimed at common law tort claims for money damages. (See, e.g., Schooler v. State of California (2000) 85 Cal.App.4th 1004, 1013 [“Courts have determined that under
Notwithstanding this authority demonstrating that the Legislature was primarily focused on common law tort claims when it enacted the Act‘s immunity and liability provisions, the County maintains that the Government Claims Act forecloses the Hospitals’ quantum meruit cause of action. The County argues, first, that the Hospitals’ compliance with the Government Claims Act‘s claims presentation requirements establishes that they seek money or damages covered by the Act‘s immunity provisions. We reject this argument. As noted in footnote 6, ante, the claims presentation requirements of the Government Claims Act are broader in scope than the Act‘s
public entity immunity or liability provisions. (City of Stockton, supra, 42 Cal.4th at pp. 738, 741 [a public entity is not immune from liability on its contracts, but the claims presentation requirements nonetheless apply to such contract actions]; see Hart v. County of Alameda (1999) 76 Cal.App.4th 766, 779 [“the Legislature intended the claims presentation statutes to broadly apply to “‘all forms of monetary demands . . . ,‘“’ and the earlier conclusion that the Claims Act was limited to tort claims was based on the government immunity statutes, which contain different statutory language“]).7 The Hospitals’ mere compliance with the Act‘s claims presentation requirements does not control or determine the nature of their action.
The County also argues that the Government Claims Act‘s immunity provisions apply broadly to any common law claim, other than a claim alleging an express contract, seeking “money or damages” (
“Quantum meruit refers to the well-established principle that ‘the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered.’ [Citation.] To recover in
In this respect, the Court of Appeal below applied a rubric whereby “[w]hether 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 based on breach of a noncontractual duty it is tortious.‘” (Santa Clara, supra, 77 Cal.App.5th at p. 1033, quoting Roe v. State of California (2001) 94 Cal.App.4th 64, 69.) Although this distinguishing principle may be useful in other contexts, we regard it as unhelpful in ascertaining the nature of the Hospitals’ quantum meruit claim, which is premised on a theory of a promise implied in law (see Huskinson & Brown, supra, 32 Cal.4th at p. 458), and, more specifically, on a reimbursement duty imposed by statute. Instead, we draw support from our decisions in City of Dinuba and Kizer, which share sufficient commonalities with this matter to lead us to conclude that the Government Claims Act does not immunize the County from the Hospitals’ action.
In City of Dinuba, the plaintiffs sought to recover misallocated tax revenue, which the defendant county was obligated by statute to distribute to the plaintiffs. (City of Dinuba, supra, 41 Cal.4th at p. 863.) We held that the Government Claims Act‘s immunity provisions did not apply to the plaintiffs’ action, in part because we determined that the plaintiffs did not seek money damages. (City of Dinuba, at p. 867, citing
Certain aspects of our decision in Kizer are also on point. In determining that the state‘s enforcement action in Kizer did not fall within the purview of the Government Claims Act‘s immunity provisions, we first emphasized that this particular action “lies outside the perimeters of a tort action and therefore does not readily lend itself to a liability analysis based on tort principles.” (Kizer, supra, 53 Cal.3d at p. 146.) Based on the detailed statutory scheme regulating long-term health care facilities, we concluded that “[g]ranting immunity to public entities from the [statutory] penalties would be contrary to the intent of the Legislature to provide a citation system for the imposition of prompt and effective civil sanctions against long-term health care facilities in violation of the laws and regulations of this state.” (Ibid.) We also emphasized that “nothing in the statutory scheme . . suggests that state and other government health facilities should be treated differently than private facilities” (id. at p. 148), and we perceived “no significant public policy reason to exempt a state licensed health-care facility from liability for penalties under the [Act] simply beсause it is operated by a public rather than a private entity” (ibid.).
Like the defendant in Kizer, the County is subject to the terms of the Knox-Keene Act, a detailed regulatory scheme, because it chose to enter the
As in Kizer, we see “nothing in the statutory scheme that suggests that state and other government health [care service plans] should be treated differently than private [health plans],” nor do we perceive any “‘significant public policy reason to exempt a state licensed [health care service plan] from liability . . . under the [Knox-Keene] Act simply because it is operated by a public rather than a private entity . . . .‘” (Kizer, supra, 53 Cal.3d at p. 148.) To the contrary, disallowing such a claim against the County would undermine an important purpose of the Knox-Keene Act, as we and others have interpreted it. As the DMHC, appearing as amicus curiae in Bell, emphasized, “The prompt and appropriate reimbursement of emergency providers ensures the continued financial viability of California‘s health care delivery system. . . . [D]enying emergency providers judicial recourse to challenge the fairness of a health plan‘s reimbursement determination[] allows a health plan to systematicаlly underpay California‘s safety-net providers . . . .” (Bell, supra, 131 Cal.App.4th at p. 218.) The Legislature‘s purpose in enacting
Moreover, and as noted ante, the DMHC “lacks the authority to set specific reimbursement rates under theories of quantum meruit and the
We conclude from the foregoing that allowing the Hospitals to proceed with their quantum meruit claim premised on the County‘s statutory obligation of reimbursement violates neither the letter nor the spirit of the Government Claims Act. It also furthers a fundamental purpose of the Knox-Keene Act, protecting the continued financial viability of California‘s health care delivery system, by ensuring that all emergency medical providers have an adequate remedy if there are disputes over payment, either by alleging breach of contract (if there is a contract between the provider and health care plan), or by raising a quantum meruit claim based on the Knox-Keene Act‘s reimbursement obligation (if there is no contract in place).
In arguing that the Government Claims Act‘s immunity prоvisions extend to quantum meruit claims, the County cites three decisions by this court predating the Act in which we discussed the availability of quantum meruit claims against government entities: Miller v. McKinnon (1942) 20 Cal.2d 83 (Miller), Los Angeles Dredging Co. v. Long Beach (1930) 210 Cal. 348 (Los Angeles Dredging Co.), and Zottman v. San Francisco (1862) 20 Cal. 96 (Zottman). The County asserts that these decisions convey a general hostility toward quantum meruit claims against the government that was then maintained under the Act.
We draw a more limited rule from these cases. Each of these decisions involved express contracts entered into by public entities that were found to be void and unenforceable because they were made in violation of a statute or municipal charter. (Miller, supra, 20 Cal.2d at p. 86 [contract between county and contractor held illegal because it did not comply with statute requiring
Read together and as relevant here, Miller, Los Angeles Dredging Co., and Zottman stand for the narrow principle that if a contractor enters into an express contract with a public entity, and the contract is later found to be in violation of an applicable statute or charter and therefore deemed void, the contractor has no right to recover the reasonable value of services in quantum meruit. These decisions are readily distinguishable from the Hospitals’ quantum meruit claim against the County, which concerns no express contract and is instead based on a statutorily mandated reimbursement provision. We are doubtful that the Legislature understood these decisions to mean that a quantum meruit claim for payment required by statute and otherwise resembling the claim pursued here is “a non-contractual action for money or damages, and thus a ‘tort,‘” as the County asserts it must have.11
Although other Court of Appeal decisions have broadly held that quantum meruit claims may not proceed against public entities, those decisions contain thin analyses and are distinguishable on their facts. It has been said, for example, that “[a]s a general rule, a public entity cannot be sued on an
In concluding that
Without calling the result in Sheppard into question, to the extent it relied on the Government Claims Act, its analysis failed to undertake a careful review of the claim before it, comparable to our inquiries in City of Dinuba, supra, 41 Cal.4th 859 and Kizer, supra, 53 Cal.3d 139, before determining whether such claim fell within or outside the purview of the Government Claims Act‘s immunity provisions. To the extent it held that a quantum
To summarize, we are not persuaded that the Legislature intended to foreclose all quantum meruit claims against public entities when it drafted the Government Claims Act‘s immunity and liability provisions, and certainly not the claim at issue in this case.
In light of our holding that the Government Claims Act does not immunize the County from the Hospitals’ action for reimbursement as mandated by
III. DISPOSITION
We reverse the judgment of the Court of Appeal and remand the matter for further proceedings consistent with this opinion.
GUERRERO, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
EVANS, J.