Medic Ambulance Service v. Solano
Emergency Medical Services Cooperative
Filed 6/10/13 Medic Ambulance Service v. Solano Emergency
Medical Services Cooperative CA1/4
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST
APPELLATE DISTRICT
DIVISION
FOUR
MEDIC
AMBULANCE SERVICE, INC.,
Plaintiff and Appellant,
v.
SOLANO
EMERGENCY MEDICAL SERVICES COOPERATIVE,
Defendant and Respondent.
A134772
(Solano
County
Super. Ct.
No. FCS034250)
I.
Appellant
Medic Ambulance Service, Inc. (Medic) had a contract (the Agreement) with
respondent Solano Emergency Medical Services Cooperative (SEMSC), a government
agency, that gave Medic the exclusive right to provide advanced life support
(ALS) ambulance services in a specified geographical area. The Agreement obligated SEMSC to enforce
Medic’s exclusivity rights, and provided for a
event of a dispute. After Medic learned
that some ALS ambulance transports were being handled by competing ambulance
services, the parties engaged in informal communications and negotiations
regarding the enforcement of Medic’s exclusivity rights. These efforts were unsuccessful, and Medic
sued for breach of contract.
SEMSC
demurred on the basis of Medic’s failure to follow the contractual claims
procedure. Medic amended its complaint
to allege that SEMSC was estopped from relying on Medic’s failure to comply
with the contractual claims procedure as a bar to Medic’s damages claims. The trial court found Medic’s estoppel
allegations insufficient, and sustained SEMSC’s renewed demurrer without leave
to amend. On this appeal, we hold
Medic’s fourth amended complaint pleaded sufficient facts to support Medic’s
estoppel claim. We therefore reverse,
and remand for further proceedings.
II.
facts and procedural background
A.
The Agreement
The
Agreement between SEMSC and Medic was entered into in April 2000, and was
periodically extended so that it was in effect continuously through April
2010. It provides that SEMSC will
require that all 911 calls for ambulance services in Medic’s exclusive
operating area be directed to Medic. It
imposes various obligations on Medic with regard to the number and
qualifications of emergency paramedical personnel with whom Medic is required
to staff its ambulances; the level of service Medic is required to deliver, the
standby and special event coverage Medic is required to provide; and the
insurance and bonding Medic is required to maintain. It provides that Medic can provide critical
care transport, but not in response to 911 calls unless expressly requested. It specifies the compensation Medic shall
receive for delivering services; the rates Medic may charge and how those may
be adjusted; and the fees Medic shall pay to SEMSC and other parties in
exchange for its franchise. An exhibit
to the Agreement details fines to be assessed against Medic for particular
types of shortcomings in its adherence to required performance standards.
The
Agreement provides that SEMSC can terminate the Agreement in the event of a
“major breach†by Medic, and defines what constitutes such a breach on Medic’s
part. It also sets forth the procedure
to be followed in the event SEMSC decides that an emergency takeover of Medic’s
operations is necessary to avoid endangering public health and safety. The
Agreement defines “minor breach†to include various types of failure on Medic’s
part to comply with the level of service required by the Agreement; minor
infractions of applicable laws and regulations by Medic; or any other breaches
“not specifically defined as major breaches.â€
The
Agreement also provides that Medic can terminate the Agreement in the event of
a major breach by SEMSC, and defines that to mean either a “breach by SEMSC
which substantially endangers the public health and safety,†or—more pertinent
for our purposes—if “SEMSC fails to take reasonable steps to protect Medic’s
contractual right to provide all emergency ambulance service, advanced life
support and Parahospital medical services in the exclusive operating area as
provided by this Agreement.†A separate
subsection of the Agreement reiterates that “SEMSC shall take all reasonable
steps to ensure that Medic is, during the period of this [Agreement], the sole
provider of ALS[
name="_ftnref1" title="">[1]]
Ambulances for Solano County.†(Original
capitalization.) Various defined
exceptions to Medic’s exclusivity rights are provided in an exhibit to the
Agreement.
The
Agreement contains several provisions relating to the process to be followed in
the event of an alleged major breach or other dispute. The first of these is section 6.0, which
governs major breaches. Subsections 6.1
through 6.9 apply to situations in which the agency administrator of SEMSC (the
Agency Administrator) declares that a major breach has occurred on Medic’s
part.
Major
breaches by SEMSC are addressed in a separate subsection, numbered 6.10
(section 6.10). Section 6.10 reads in
its entirety as set forth below.
“6.10.1[:]
If Medic determines that a major breach has occurred, then Medic shall notify[
SEMSC Medical Director [(the Medical Director)] in writing of such existence
and occurrence and the reason, if any, it endangers public health and safety
and the SEMSC shall have a reasonable period of time to correct the
deficiency. Medic and the EMS Agency
[i.e., SEMSC] shall attempt in good faith and with reasonable effort to resolve
all allegations between and among themselves without recourse to other remedies
available herein.
“6.11.2[:]
[sic] If an allegation of major
breach cannot be resolved under the above, Medic shall notify the SEMSC Agency
[Administrator
title="">[3]] in
writing and the matter shall be referred to the SEMSC Board for resolution.
“6.12.3[:]
[sic] Medic shall not be precluded
hereby from seeking further relief through litigation should the matter not be
resolved by the SEMSC Board to its reasonable satisfaction.â€
A separate
section, section 10.0, addresses “contract monitoring, administration and
dispute resolution.†(Original
capitalization omitted.) It requires
SEMSC to “utilize a multi-layered system to enforce the terms and conditions of
this Agreement,†and provides that “Medic shall assume the initial role by
ensuring that its personnel and equipment comply with the terms of this
Agreement at all times.†This provision
is followed by a diagram of the “hierarchy to be employed by the SEMSC to
enforce [the Agreement].†The diagram
shows Medic at the bottom, with the Agency Administrator as the next layer up,
followed by the Medical Director, and culminating with the Board at the
top. It provides that Medic must
“formally designate†persons to attend and represent Medic at meetings of
various standing committees, and participate in the implementation of system
requirements specified in an exhibit to the Agreement.
Section 10.2
provides for an appeals procedure, defined in exhibit G to the Agreement
(Exhibit G). Section 10.5 states that
both Medic and SEMSC may bring any matter relating to the Agreement, including
allegations of minor breach, to the Agency Administrator for resolution,
followed by an appeal procedure as set forth in Exhibit G.
as provided herein, neither party shall thereby be precluded from pursuing any
other legal or equitable remedies which may be available to it.†A separate section of the Agreement requires
Medic to “keep SEMSC informed at all times as to litigation, or reasonable
expectations of litigation, insofar as it pertains to Medic’s operations under
this Agreement . . . .â€
Regarding
waiver, the Agreement provides that “[w]aiver of a breach or failure to perform
any provision . . . shall not be deemed a waiver of future
performance nor shall it prejudice the waiving party’s right to require strict
performance of the same provision or any other provision. No term or condition of this Agreement shall
be waived except by an instrument, in writing, signed by the parties
hereto.†Another provision specifies
that “No verbal [sic
agreements or conversations prior or subsequent to the execution of this
Agreement shall affect or modify any of the terms or conditions of this
Agreement unless reduced to writing.†The
last section of the Agreement, entitled “Entire Agreement,†provides that “This
Agreement, including any exhibits referenced herein, constitutes the entire
agreement between the parties and there are no inducements, promises, terms,
conditions or obligations made or entered into by SEMSC or Medic other than
those contained herein.â€
B.
Communications and Negotiations Regarding Breach of Exclusivity Claim
The
operative pleading for purposes of this appeal is Medic’s fourth amended
complaint (FAC). By way of introduction,
the FAC alleges in general terms that SEMSC “failed to uphold the material
provisions of the Agreement, including specifically its contractual obligation
to take all reasonable steps to protect Medic’s right to exclusively provide
all ALS ambulance services in the EOA†(i.e., the “Exclusive Operating Areaâ€
defined in the Agreement). Without
specifying a time frame, the FAC alleges that “[d]uring the period of the
Agreement, Medic from time to time learned of patient transports by competing
ambulance providers that it believed were in violation of the exclusivity
provisions of the Agreement, in that Medic believed that those transports were
ALS transports or should have been characterized as ALS transports and were
therefore to be performed by Medic.â€
When this occurred, “[a]t the behest of the Agency Administrator and the
Medical Director and consistent with the terms of the Agreement regarding
contract monitoring, these alleged violations were reported in writing to the
Agency Administrator and his staff for investigation. Medic was repeatedly assured that SEMSC would
investigate the incidents and protect the contractual rights of Medic relating
to the ALS EOA as required by the Agreement.â€
The FAC
also alleges—again in general terms, and without specifying any dates—that
SEMSC’s investigations of the violations of Medic’s exclusivity rights were
untimely, inadequate, and sometimes nonexistent. It alleges that to the extent SEMSC did
investigate the violations, it “communicated to Medic that the incidents were
either isolated and being resolved or permissible exceptions.†It also alleges that Medic “relied entirely
on SEMSC to track the transports and to monitor and enforce [Medic’s]
exclusivity rights,†which Medic had no way of doing, and that SEMSC failed to
fulfill its contractual obligation to “adequately audit and monitor transports
by competing ambulance providers†and “investigate potential violations
. . . .â€
The first
specific date mentioned in the FAC is July 2006, when the SEMSC Board adopted
the Resolution (referred to ante). As described in the FAC, the Resolution
required all ambulance providers operating in the EOA in Solano County to
register with SEMSC to obtain its authorization to operate and to refrain from
providing service at any level and in any area of Solano County as to which
SEMSC had awarded exclusivity rights.
The FAC alleges that SEMSC failed to implement the Resolution until
April 2008, and then only after Medic demanded that SEMSC verify that it had
done so.
The FAC
alleges that until September 7, 2007, SEMSC “misled Medic as to both the scope
and nature of the exclusivity violations and SEMSC’s efforts to enforce
[Medic’s] exclusivity rights [under] the Agreement.†Although “SEMSC and its agents and/or employees
had actual knowledge prior to September 7, 2007, that competing ambulance
providers were frequently transporting ALS patients within the EOA in violation
of Medic’s contractual rights under the Agreement,†it was not until SEMSC
released an internal audit (the Audit), on or about September 7, 2007, that it
was “for the first time demonstrated to Medic that several ambulance companies
were blatantly violating the exclusivity provision granted to Medic under the
Agreement,†and that “these violations were not merely isolated incidents as
had been previously reported by SEMSC to Medic.â€
The FAC
alleges that at a meeting of the SEMSC Board in October 2007, after the Audit
results were released, Medic provided oral
notice to the Board that SEMSC had committed a major breach of the Agreement by
not taking all reasonable steps to protect Medic’s exclusivity rights. The Board responded by “remov[ing] the matter
from the Agency Administrator and the Medical Director and form[ing] an Ad Hoc
Committee . . . to specifically address Medic’s complaints that its
contractual exclusivity rights were being violated.†The Ad Hoc Committee was charged with
“investigat[ing] Medic’s complaints on behalf of the Board and attempt[ing] to
resolve the matter directly with Medic,†and was appointed “to act as the final
arbiter of Medic’s allegation of major breach.â€
The FAC
alleges that the Board created the Ad Hoc Committee and charged it with
resolving the issue “even after having been reminded by Medic of the procedures
for resolution as set forth in Section 6.10, et seq., of the Agreement.†When the Board created the Ad Hoc Committee,
SEMSC “knew and intended that Medic . . . would be reasonably induced
to rely on the SEMSC Board’s representations and stated intentions that the
resolution of the issue . . . was in the sole hands of the SEMSC’s Ad
Hoc Committee and the SEMSC Board and no further notice to the Medical Director
or Agency Administrator was required of Medic under Sections 6.10.1 and 6.11.2
of the Agreement.†Medic relied upon and
acted on these representations by “participat[ing] in good faith in the Ad Hoc
Committee meetings,†and “was ignorant of the true state of facts, namely that
SEMSC would later . . . assert that Medic had failed to exhaust
administrative remedies under Section 6.10 of the Agreement.â€
According
to the FAC, SEMSC intended that Medic rely on its representations by taking no
further action under section 6.10 of the Agreement, and that Medic would
instead deal only with the Ad Hoc Committee in attempting to resolve the
issue. Indeed, if not for SEMSC’s
“representations and stated intentions . . . concerning
. . . the formation of the Ad Hoc Committee to act as the final
arbiter of Medic’s allegation of major breach, Medic would have . . .
followed the requirements of Section 6.10†of the Agreement. Thus, the FAC alleges if SEMSC is allowed to
defend against Medic’s claims on the basis of Medic’s failure to exhaust
administrative remedies, Medic will be damaged by its reliance on SEMSC’s representations,
because Medic will be unable to pursue its claims through litigation.
From
October 2007 through July 2008, Medic met with the Ad Hoc Committee, and
continued to communicate with the SEMSC Board Chair and Solano county counsel,
who were aware of the actions of the Ad Hoc Committee. During this period, Medic also continued to
report newly discovered violations of Medic’s exclusivity rights to the Agency
Administrator and the Medical Director.
On March 19, 2008, Dr. Paul Kivela, a Medic representative, sent an
email to the Medical Director, Dr. Richard Lotsch, in which Kivela
reported that that “the EMS Agency [i.e., SEMSC] suspects that ‘pirating’ of
ALS calls has occurred,†and suggested the adoption of criteria and procedures
to address the problem.
name="_ftnref8" title="">[8] Lotsch was “indisputably made aware,†through
other written and in-person communications, of SEMSC’s failure to enforce
Medic’s exclusivity right by preventing ALS calls from being mischaracterized.
On August
25, 2008, Medic for the first time received a copy of an independent audit, the
Fitch Report, which SEMSC had requested and obtained. The Fitch Report was based on data which had
been in SEMSC’s possession for some time, but which SEMSC had not revealed to
Medic. Unbeknownst to Medic until August
28, 2008, the Fitch Report had been completed in late May 2008, three months
before it was provided to Medic. The
Fitch Report “demonstrated that the number of ongoing ALS calls taken by
non-authorized ambulance providers was substantially greater than was
previously known to Medic and substantially greater than demonstrated in the
[internal] Audit results obtained in September, 2007.â€
On August
28, 2008, three days after Medic obtained the Fitch Report, the Agency
Administrator of SEMSC reported to the Board that he was not enforcing, and was
unable to enforce, Medic’s exclusivity rights under the Agreement. After that, “SEMSC took no further action to
protect Medic’s rights to be the exclusive provider of ALS ambulance service in
the EOA.â€
On
September 5, 2008, Medic served a formal claim pursuant to Government Code
section 910 (dated September 4, 2008) on Solano County, its counsel, the Board,
and the Agency Administrator, for damages resulting from the failure to enforce
Medic’s exclusivity rights. The FAC
alleges that this claim also satisfied the requirement of written notice in
section 6.11.2 of the Agreement. SEMSC
never responded to the claim, nor did it inform Medic that it was taking the
position that Medic’s claim was deficient or that Medic had failed to exhaust
its administrative remedies.
C.
Trial Court Proceedings
On
September 3, 2009, Medic filed a complaint against SEMSC in the Solano County
Superior Court. As already noted,
several rounds of demurrers and amended complaints ensued. Finally, on August 17, 2011, Medic filed the
FAC, pleading causes of action for breach of contract and breach of the duty of
good faith and fair dealing. On August
30, 2011, SEMSC again responded with a demurrer.
On January
6, 2012, the trial court entered an order sustaining the demurrer to the FAC
without leave to amend, and ordering the matter dismissed in its entirety with
prejudice. On February 29, 2012, Medic
filed a notice of appeal.
name="_ftnref9" title="">[9]
III.
discussion
A.
Standard of Review and Effect of Sham Fact Allegations
Our
standard of review of a trial court’s ruling sustaining a demurrer is governed
by well settled principles. “ ‘A
demurrer tests the sufficiency of a complaint as a matter of law.’ [Citation.]â€
(Hale v. Sharp Healthcare
(2010) 183 Cal.App.4th 1373, 1379.) Accordingly, we review the trial court’s
ruling de novo, exercising our independent judgment. (Ibid.;
Lazar v. Hertz Corp. (1999) 69
Cal.App.4th 1494, 1501.) “ ‘The
judgment must be affirmed “if any one of the several grounds of demurrer is
well taken. [Citations.]†[Citation.]
However, it is error for a trial court to sustain a demurrer when the
plaintiff has stated a cause of action under any possible legal theory. [Citation.]
And it is an abuse of discretion to sustain a demurrer without leave to
amend if the plaintiff shows there is a reasonable possibility any defect
identified by the defendant can be cured by amendment.’ [Citation.]â€
(Hale v. Sharp Healthcare,
Normally,
“[i]n reviewing the propriety of the sustaining of a demurrer, the ‘court gives
the complaint a reasonable interpretation, and treats the demurrer as admitting
all material facts properly pleaded.
[Citations.]’ †(
sustaining a demurrer, our statement of facts simply summarizes the allegations
of the plaintiff’s complaint, and our opinion assumes the truth of those facts.
fn. 3.)
In the
present case, however, SEMSC argues that certain of the allegations in the FAC
contradict those pleaded in earlier versions of Medic’s complaint, and should
therefore be disregarded as a sham.
SEMSC is correct that a plaintiff cannot survive a demurrer by pleading
facts flatly inconsistent with those alleged in an earlier version of the
plaintiff’s complaint. (See
(2005) 134 Cal.App.4th 1035, 1044 [when complaint contains allegations fatal to
cause of action, plaintiff cannot avoid defects by filing amended complaint
that omits problematic facts or pleads inconsistent facts].) Thus, to the extent any allegations in
Medic’s FAC squarely contradict those made in its earlier pleadings, we cannot
accept their truth. In addition, we must
disregard facts alleged in the pleadings if they are contradicted by exhibits
to the complaint. (See
On the
other hand, the sham pleading doctrine is intended to enable courts to prevent
abuse of process, not to prevent honest complainants from correcting erroneous
allegations or clarifying ambiguous facts.
(See Deveny v. Entropin, Inc.
(2006) 139 Cal.App.4th 408, 425-427 [where party’s counsel offered plausible
explanation for change in factual allegations in amended complaint, trial court
improperly granted summary judgment against plaintiffs based on treatment of
earlier allegations as binding judicial admissions].) Thus, “[a]n amendment which supplements a
pleading with new facts which are neither inconsistent nor contradictory is
permissible.†(Parsons v. Tickner (1995) 31 Cal.App.4th 1513, 1530.) Where a plaintiff’s amended complaint
presents a fuller explanation of the operative circumstances, and is not fatally
inconsistent with its earlier complaint, the facts alleged in the amended
complaint should be accepted for demurrer purposes. (See Morgan
Phillips, Inc. v. JAMS/Endispute, L.L.C. (2006) 140 Cal.App.4th 795, 802,
fn. 2.)
In accord
with the above principles, in our summary of the facts, ante, we noted those factual allegations in the FAC that SEMSC
contends are a sham. Before analyzing
the legal sufficiency of the FAC, we must determine whether these allegations
should be accepted as true or disregarded.
B.
Allegations SEMSC Contends Are Sham
1.
When Medic Learned of Exclusivity Violations
SEMSC’s
brief on appeal characterizes the first two versions of Medic’s complaint (the
original and first amended versions) as alleging that Medic first learned of
the exclusivity violations on August 25, 2008, and argues that this allegation
contradicts allegations made in later versions of the complaint. This is based on a misreading of the
allegations of Medic’s original and first amended complaints. In those versions of the complaint, Medic
alleged that it was unaware until August 25, 2008 (when it received the Fitch
Report) that (1) SEMSC had known at least since May 2008 that Medic’s
exclusivity rights were being violated, and (2) SEMSC had not disclosed
these violations to Medic. These
statements do not address the issue of when Medic
itself first learned of the violations.
Medic’s
second amended complaint added the allegation that August 25, 2008, was when
“Medic initially received information . . . [regarding] the breadth
and extensive nature of the exclusivity violations . . . .†It also alleged that “[o]n or about August
25, 2008, Medic learned of violations of the exclusivity provision of the
Agreement.†However, none of the first
three versions of the complaint alleged that August 25, 2008, was the
there had been any violations of its
exclusivity rights. Thus, contrary to
SEMSC’s argument on appeal, the second amended complaint’s references to
Medic’s communications with SEMSC about the issue prior to August 25, 2008, do
not contradict the allegations in other versions of Medic’s complaint regarding
what Medic learned when it obtained the Fitch Report.
SEMSC also
argues that the earlier versions of the complaint contradict an allegation
added in Medic’s third amended complaint regarding Medic’s knowledge of the
exclusivity violations. Again, this
argument is based on a misreading of the third amended complaint. SEMSC’s brief says the third amended
complaint alleged that September 7, 2007, was when Medic first learned of
SEMSC’s breach. What the third amended
complaint actually alleged was that the internal audit SEMSC released on
September 7, 2007 “for the first time demonstrated to Medic that
provision†and that “Medic only then initially learned of the
the exclusivity violations†which SEMSC had previously told Medic were “merely
isolated incidents.†(Italics added.) Thus, nothing in this aspect of the third
amended complaint contradicts any of the allegations in the earlier
versions. The subsequent FAC repeats the
same allegations on these points that were already pleaded in the
In short,
all of the versions of the complaint, taken together, paint the following
picture. Medic knew prior to September
2007 that violations of its exclusivity rights were occurring, but believed
SEMSC’s assurances that these were isolated incidents. Then, on September 7, 2007, Medic learned for
the first time from SEMSC’s internal audit that the violations were not
isolated; that several of Medic’s competitors were blatantly violating Medic’s
exclusivity rights; and that the problem was possibly more serious than SEMSC
had given Medic reason to believe.
Finally, on August 25, 2008, when Medic obtained the Fitch Report, Medic
learned for the first time that SEMSC had been concealing the extent of the
violations from Medic. The Fitch Report
also confirmed Medic’s suspicions that the violations were even broader and
more extensive than indicated by the September 2007 internal audit.
The
foregoing version of the events is essentially what is pleaded in the FAC. Nothing in Medic’s earlier pleadings
contradicts it. Accordingly, we construe
the FAC as alleging these facts, assume their truth for purposes of this
appeal, and reject SEMSC’s argument that this aspect of the FAC is a sham. (See Parsons
v. Tickner, supra, 31 Cal.App.4th
at p. 1530; Morgan Phillips, Inc. v.
JAMS/Endispute, L.L.C., supra,
140 Cal.App.4th at p. 802, fn. 2.)
2.
Written Notice of Breach
As already
noted, on March 19, 2008, a Medic representative sent an email to the Medical
Director conveying Medic’s suspicions that ALS calls were being pirated, and
thus its exclusivity rights were being violated. In that same email, it was suggested that
criteria be adopted and procedures implemented to address the problem. This email was referenced in, but not
attached to, Medic’s second amended complaint.
In that version of the complaint, Medic characterized the email as
having constituted written notice of a major breach to the Medical Director, in
compliance with the notice provisions
of the Agreement.
In Medic’s
third amended complaint, the email was attached as an exhibit. In sustaining SEMSC’s demurrer to the third
amended complaint, the trial court properly looked to the contents of the
email, rather than Medic’s characterization of it, and determined that it did
not qualify as a formal written notice of a major breach under the terms of the
Agreement. (See Banis Restaurant Design, Inc. v. Serrano, supra, 134 Cal.App.4th at pp. 1044-1045.)
Presumably
for that reason, in the FAC, Medic alleged that the notice of claim served by
Medic on September 5, 2008, constituted written notice of a major breach under
section 6.11.2 of the Agreement.
However, section 6.11.2 of the Agreement is the second step in the procedure governing claims by Medic of a major
breach of the Agreement. The first step,
set forth in section 6.10.1, is that Medic is to notify the Medical Director in
writing, and then engage in a good faith attempt to resolve the matter. Neither the third amended complaint, nor the
FAC, alleges facts showing that Medic gave written
notice of a claim of major breach to the Medical Director as required by
section 6.10.1. For purposes of this
appeal, therefore, we decline to assume the truth of Medic’s allegation that it
complied with the notice requirements of section 6.10 of the Agreement.
C.
Excuse from Compliance
As both
parties acknowledge in their briefs on appeal, because SEMSC is a government
agency, Medic cannot sue it for breach of
contract without first complying with the claims procedures set forth in
the Agreement. These procedures function
as a substitute for the government claims procedures required under the
Government Claims Act (Gov. Code, § 810 et seq.). (See generally Arntz Builders v. City of Berkeley (2008) 166 Cal.App.4th 276,
287-289 (Arntz).) Thus, Medic’s failure to comply with section
6.10 of the Agreement vitiates its claim against SEMSC unless Medic can
establish a legally valid ground for excusing it from that requirement.
When the
trial court sustained SEMSC’s demurrer to the third amended complaint, it
granted leave to amend specifically in order to allow Medic to allege facts in
support of the contention that SEMSC either was estopped from relying on
Medic’s failure to comply with the contractual claims procedure, or had waived
its right to enforce that provision of the contract. Accordingly, we consider the estoppel and
waiver issues first, and then proceed to assess Medic’s contentions on appeal
that it actually or at least substantially complied with the contractual claims
procedure, and, alternatively, that SEMSC agreed to an oral modification of the
contract in this regard.
1.
Estoppel
In its
ruling on SEMSC’s demurrer to the FAC, the trial court acknowledged that Medic
had attempted to plead estoppel, but ruled that Medic had not adequately
alleged the necessary facts. On appeal,
Medic contends this was error.
“The
doctrine of equitable estoppel is founded on concepts of equity and fair
dealing. It provides that a person may
not deny the existence of a state of facts if he intentionally led another to
believe a particular circumstance to be true and to rely upon such belief to
his detriment. The elements of the
doctrine are that (1) the party to be estopped must be apprised of the
facts; (2) he must intend that his conduct shall be acted upon, or must so
act that the party asserting the estoppel has a right to believe it was so
intended; (3) the other party must be ignorant of the true state of facts;
and (4) he must rely upon the conduct to his injury. [Citation.]â€
v. County of Santa Cruz (1975) 15 Cal.3d 720, 725.) The elements of equitable estoppel may also
be described as follows: “(1) The party to be estopped has engaged in
blameworthy or inequitable conduct; (2) that conduct caused or induced the
other party to suffer some disadvantage; and (3) equitable considerations
warrant the conclusion that the first party should not be permitted to exploit the
disadvantage he has thus inflicted upon the second party.†(City
of Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 488 (
A
government entity defendant can be estopped from raising the plaintiff’s
failure to file a claim under the Government Claims Act as a bar to the
plaintiff’s right to sue. “ ‘It is
well settled that a public entity may be estopped from asserting the
limitations of the claims statute where its agents or employees have prevented
or deterred the filing of a timely claim by some affirmative act. [Citations.]’
[Citation.] ‘The purpose of the
requirement that claims be filed is to provide the public entity with full
information concerning rights asserted against it, so that it may settle those
of merit without litigation. Therefore,
the public entity cannot frustrate a claimant’s ability to comply with the
statutes enacted for its benefit and then assert noncompliance as a
defense. [Citation.]’ [Citation.]â€
(Ard v. County of Contra Costa
(2001) 93 Cal.App.4th 339, 346-347.)
SEMSC
argues that “estoppel is applied in a very limited manner against public
entities, and only in those special cases where the
citing only a 50-year-old case, Imperial
Beach v. Algert (1962) 200 Cal.App.2d 48, 52, in support of this
proposition. SEMSC also cites cases from
the same era, Adler. v City of Pasadena
(1962) 57 Cal.2d 609, 615, and City of
Los Angeles v. Industrial Acc. Com. (1965) 63 Cal.2d 255, 257-258, for the
proposition that “[t]o invoke estoppel against a public entity, that entity
must have acted in an unconscionable or unreasonable manner or have set out to,
and did, take unfair advantage of the plaintiff.â€
However,
the law on this point has changed since the cases relied on by SEMSC were
decided. In 1970, our Supreme Court
formulated a less stringent test that still governs today: “The government may
be bound by an equitable estoppel in the same manner as a private party when
the elements requisite to such an estoppel against a private party are present
and, in the considered view of a court of equity, the injustice which would
result from a failure to uphold an estoppel is of sufficient dimension to
justify any effect upon public interest or policy which would result from the
raising of an estoppel.†(
Cal.3d 462, 496-497.)
Thus, in
determining whether a party has properly pleaded estoppel against a government
entity, we apply the same principles as in a case involving private parties,
with only one addition. If the other
elements of estoppel are properly pled, we must also consider “ ‘[w]hether
the injustice [that] would result from a failure to uphold an estoppel is of
sufficient dimension to justify the effect of the estoppel on the public
interest . . . .’ â€
(Feduniak v. California Coastal
Com. (2007) 148 Cal.App.4th 1346, 1360 (Feduniak),
quoting Smith v. County of Santa Barbara
(1992) 7 Cal.App.4th 770, 776.) This is
a question that “ ‘must be decided by considering the matter from the
point of view of a court of equity.’
[Citation.]†(
“The goals
of the claims statutes [i.e., the Government Claims Act] are to provide
entities with sufficient information to investigate and appropriately resolve
claims and to plan for potential liabilities.â€
(DiCampli-Mintz v. County of Santa
Clara (2012) 55 Cal.4th 983, 994.)
In the present case, according to the allegations of the FAC, SEMSC had
actual notice at least as early as September 2007, from its own internal audit,
that Medic’s exclusivity rights were being violated; SEMSC commissioned an
external investigation of the extent of those violations, resulting in the
Fitch Report; and SEMSC then sought to resolve Medic’s claims by setting up a
special committee (the Ad Hoc Committee) to deal with them. Accordingly, assuming the truth of the
allegations in Medic’s FAC, applying estoppel against SEMSC in the present case
would not frustrate the goals of the Government Claims Act.
The
question remains whether the FAC adequately alleges the elements of equitable
estoppel against SEMSC. We note, at the
outset, that the general fact pattern alleged by Medic in this case has been
described by one court as a paradigm for the proper application of equitable
estoppel. “The paradigmatic equitable
estoppel arises where a prospective defendant induces a prospective plaintiff
not to protect his rights, and when the plaintiff attempts to assert them, raises
a defense that exploits the plaintiff’s lapse.
The classic example is the assertion of a procedural bar, such as a
statute of limitations, after the defendant has induced plaintiff not to file
suit within the allotted time. If the
court is satisfied that the facts and the equities justify application of the
doctrine, it will hold the defendant estopped to assert the defense, and the
matter will proceed as if the claim had been seasonably asserted.†(City
of Hollister, supra, 165
Cal.App.4th at p. 487.) Moreover,
the determination of equitable estoppel ordinarily is a question of fact for
the trier of fact, unless the facts are undisputed and can support only one
reasonable conclusion as a matter of law.
(Platt Pacific, Inc. v. Andelson
(1993) 6 Cal.4th 307, 319.) Thus, the
question of equitable estoppel is generally inappropriate for resolution at the
demurrer stage. (Ard v. County of Contra Costa, supra,
93 Cal.App.4th at p. 347.)
In its
ruling on SEMSC’s demurrer, the trial court concluded that Medic had pleaded
“conclusory allegations essentially rephrasing the various elements of
estoppel.†Nonetheless, the court went
on to sustain the demurrer on the grounds that Medic had failed to allege “any
specific facts showing [(1)] that [SEMSC] knew or intended that its
creation of the Ad Hoc Committee would be construed as a satisfactory
substitute for the written claims procedure, [(2)] that [Medic] was
ignorant of the true state of facts, or [(3)] that [Medic] actually acted
upon [SEMSC’s] conduct.â€
It was not
necessary, however, for Medic to allege that SEMSC knew or intended that Medic would construe SEMSC’s conduct as
dispensing with the need for compliance with the contractual claims
requirement. As SEMSC implicitly
acknowledges in its brief, estoppel may apply even if the estopped party did
not intend to induce the other
party’s detrimental reliance, so long as the estopped party “acted in such a
way that the party asserting estoppel would have a right to believe that that
was its intention.†(
Café & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59 (
estoppel is not limited to situations amounting to fraud]; 13 Witkin, Summary
of Cal. Law (10th ed. 2005) Equity, § 192, p. 530 [“Actual fraudulent
intent is ordinarily unnecessary to raise an estoppel if the circumstances are
such that a fraud would be perpetrated by permitting a denial of the
representationsâ€]; cf. Shaffer v. Debbas
(1993) 17 Cal.App.4th 33, 43 [defendant will be estopped to invoke statute of
limitations where defendant’s conduct, relied on by plaintiff, induced
plaintiff to refrain from instituting legal proceedings; “[i]t is not necessary
that the defendant acted in bad faith or intended to mislead the plaintiffâ€].)
In our
view, Medic’s allegations adequately allege that SEMSC’s conduct led Medic
reasonably to believe SEMSC would not insist on receiving formal written notice
of Medic’s claims. In particular, the
FAC alleges that when the violations of Medic’s exclusivity rights were brought
to the attention of the Board, its response was not to demand that Medic comply
with the process outlined in section 6.10 of the Agreement, but rather to
establish the Ad Hoc Committee and charge it with resolving Medic’s complaints
on behalf of the Board. Given these
allegations, a trier of fact could properly find that it was reasonable for
Medic to believe that formal notice of its claims was not necessary in order to
preserve Medic’s right to pursue litigation if the parties could not resolve
their dispute.
Second, the
FAC alleges Medic was unaware that SEMSC intended to insist on Medic’s formal
adherence to the contractual claims resolution procedure. Indeed, SEMSC itself appeared, for all
practical purposes, to have telescoped that process into the single step of
attempting a resolution under the auspices of the Ad Hoc Committee. In our view, this is an adequate allegation
that Medic was ignorant of the true facts.
Finally,
the FAC alleged that if not for SEMSC’s representations and stated intentions
concerning the formation of the Ad Hoc Committee to act as the final arbiter of
Medic’s allegation of major breach, Medic would have followed the requirements
of Section 6.10 of the Agreement. We do
not see how Medic could have alleged any more clearly that its course of action
was induced by SEMSC’s conduct.
In short,
upon our review of the record and the parties’ arguments, we conclude that the
trial court erred in sustaining SEMSC’s demurrer to the extent that the court’s
ruling was premised on the conclusion that Medic had not adequately pleaded
estoppel. Medic’s allegations in that
regard, if true, were adequate to estop SEMSC from relying on Medic’s failure
to exhaust the contractual claims procedure as a bar to Medic’s claim for
damages.
2.
Waiver
In addition
to its argument on estoppel, Medic also contends that SEMSC waived Medic’s
compliance with the contractual claims procedure. Estoppel and waiver are related doctrines, “often
invoked in the same breath, and sometimes confused with [one another].†(City
of Hollister, supra, 165
Cal.App.4th at p. 487.) The
critical difference between the two is that “ ‘ “[w]aiver always
rests upon intent. Waiver is the
intentional relinquishment of a known right after knowledge of the
facts.[â€] [Citations]. The burden, moreover, is on the party
claiming a waiver of a right to prove it by clear and convincing evidence that
does not leave the matter to speculation, and “doubtful cases will be decided
against a waiver.†’
[Citations.]†(
In the
present case, the FAC does not allege facts that, if true, would establish that
SEMSC intentionally relinquished its right to require Medic’s compliance with
the contractual claims procedure. Medic
does not allege that SEMSC ever manifested an intent to waive section 6.10
of the Agreement, or informed Medic that SEMSC did not expect Medic to comply
with that provision in making its exclusivity violation claims.
Moreover,
the Agreement itself provides that all waivers of its terms must be in writing,
and Medic does not allege the existence of such a writing, nor does Medic
allege facts showing that SEMSC intended to waive its contractual right to require
that waivers of any provision in the Agreement be documented in writing. (Cf. Biren
v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 141
[parties’ prior conduct may demonstrate waiver of provision requiring
amendments to contract to be in writing].)
Accordingly, we are not persuaded that the trial court erred in
sustaining SEMSC’s demurrer to the extent that Medic sought to plead waiver as
an excuse for its failure to comply with the contractual claims provision.
3.
Actual or Substantial Compliance
Medic
contends that the trial court erred in ruling that Medic did not allege facts
showing that it actually or substantially complied with the contractual claims
procedure. Medic premises its argument
for actual compliance on the March 19, 2008 email from Kivela to Lotsch,
SEMSC’s Medical Director. As discussed
the trial court that this email cannot be construed as the written notice
called for by section 6.10.1 of the Agreement. (See Shaefer
Dixon Associates v. Santa Ana Watershed Project Authority (1996) 48
Cal.App.4th 524, 533.) Lotsch’s actual
knowledge that Medic’s exclusivity rights were being violated is not a
substitute for that written notice. (
(2007) 42 Cal.4th 730, 738 [“ ‘claims statutes must be satisfied even in
[the] face of the public entity’s actual knowledge of the circumstances
surrounding the claim.’ [Citation.]â€].)
Moreover,
Medic alleged no facts showing that it complied, even substantially, with the
requirement of section 6.11.2 that Medic notify the Agency Administrator
in writing after notifying the
Medical Director, and after
attempting without success to resolve the matter informally. Medic’s September 5, 2008 notice of claim
does not constitute such compliance, because it did not reference the
contractual claims procedure, and did not include any language that can be
construed as giving notice to the Agency Administrator of the failure of
attempts to resolve the issue via the informal dispute resolution process, as
required by section 6.10.1 of the Agreement. Accordingly, even if substantial compliance
with a contractual claims procedure is sufficient (an issue we need not and do
not resolve), we are not persuaded that Medic’s FAC pleaded facts sufficient to
show substantial compliance.
4.
Oral Modification
Finally,
Medic argues that the establishment of the Ad Hoc Committee constituted an oral
modification of the contractual claims procedure, substituting the Ad Hoc
Committee process for the one contemplated by the Agreement. As Medic acknowledges in its reply brief,
however, the Agreement includes a provision precluding oral modification, and a
contract that so provides can only be modified orally if the modification is
fully executed by both parties. (
763, 775.)
In order to
allege sufficient facts to show modification of the Agreement by an executed
oral agreement, Medic would have to plead facts showing both that SEMSC manifested an intent to agree to substitute the Ad
Hoc Committee for the contractual claims process, and that the modification was fully performed by both parties. (See Lockheed
Missiles & Space Co. v. Gilmore Industries, Inc. (1982) 135 Cal.App.3d
556, 559 [in order to be “executed,†agreement must be fully performed on both
sides].) As already noted, however, the
FAC does not allege facts showing that SEMSC manifested the necessary
intent. Moreover, full performance by
SEMSC of the alleged modification could not occur unless and until SEMSC
complied with the new terms of the Agreement by recognizing Medic’s right to
file suit once the Ad Hoc Committee process concluded without resolving the
dispute. Obviously, SEMSC did not fully
perform that aspect of the alleged oral modification.
Accordingly,
we are not persuaded that the trial court erred in rejecting Medic’s contention
that it was excused from compliance with the Contract’s claims procedure by
virtue of a fully executed oral modification.
IV.
disposition
The trial
court’s order sustaining SEMSC’s demurrer to Medic’s fourth amended complaint
is REVERSED. This proceeding is remanded
for further proceedings consistent with the views set forth in this opinion. Medic shall recover its costs on appeal.
_________________________
RUVOLO,
P. J.
We concur:
_________________________
RIVERA, J.
_________________________
HUMES, J.
Resolution) adopted by the SEMSC’s board of directors (the Board), which is
attached as an exhibit to the fourth amended complaint, that “ALS†is an
abbreviation for “advanced life support,†which is a particular level of
ambulance service. The other levels of
service, with their abbreviations, are basic life support (BLS), limited advanced
life support (LALS), and critical care transport (CCT) (also referred to as
specialty care transport, or SCT). As
will be discussed post, the
Resolution purported to protect Medic’s exclusivity rights, but Medic alleges
that SEMSC failed to implement it.
necessary to the performance of this Agreement shall be given in writing by
personal delivery†or by mail to specified addresses.
