Tamraz v. Bakotic Pathology Assocs.

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AARON TAMRAZ, Plaintiff, v. BAKOTIC PATHOLOGY ASSOCIATES, LLC; BAKO PATHOLOGY HOLDINGS CORPORATION, Defendants.

No. 22-cv-0725-BAS-WVG

United States District Court, S.D. California

November 16, 2022

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS (ECF No. 10)

HON CYNTHIA BASHANT, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants' motion brought pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6) to dismiss this putative class action. (Mot., ECF No. 10.) Plaintiff opposes (Opp'n, ECF No. 11), and Defendant replies (Reply, ECF No. 12). The Court finds Defendants' Motion suitable for determination on the papers submitted without oral argument. Civ. L.R. 7.1(d)(i). Having considered the parties' filings, the Court GRANTS Defendants' Motion and GRANTS Plaintiff leave to amend.^[1]

I. BACKGROUND^[2]

Defendant Bakotic Pathology Associates (“BPA”) provides laboratory services to healthcare providers. (First Am Compl. (“FAC”), ECF No. 9 ¶¶ 13, 27.) BPA is a subsidiary of Defendant Bako Pathology Holding (“BPH”), a parent corporation. (Id. ¶ 12; see Statement of Incorporation.) Through its services, BPA collects personal information about the patients of its affiliated healthcare providers. (FAC ¶ 32.) The Privacy Statement provided to BPA's patients describes what types of patient information is collected, how it is used, with whom it is shared, and how it is protected. (Id.)

Plaintiff Aaron Tamraz was a “patient of [BPA] through one of the healthcare providers served by Defendant.” (Id. ¶ 10.) He received a notice letter (“Notice”) from Defendants dated February 25 2022, reporting a data breach. (Id. ¶ 18.) The Notice stated, “We have determined that an unauthorized third party was able to access certain systems that contained personal information and remove some data between December 21 and 28, 2021.” (Id. ¶ 19.) The Notice identified the types of information that were illegally accessed as: “(1) information to identify and contact you, such as full name, date of birth, address, telephone number, and email address; (2) health insurance information, such as name of insurer, plan and/or group number, and member number; (3) medical information, such as medical record number, dates of service, provider and facility names, and specimen or test information; and (4) billing and claims information.” (Id. ¶ 23.)

On March 7, 2022, Plaintiff brought this putative class action in California state court under California's Confidentiality of Medical Information Act (“CMIA”) and California's Unfair Competition Law (“UCL”). (Compl., Ex. 2 to Not. of Removal, ECF No. 1-2; see FAC ¶¶ 94, 101.) Defendants removed the case to federal court on May 19, 2022 (Not. of Removal, ECF No. 1.), and Plaintiff filed his FAC on June 21, 2022. Defendants filed the present Motion to Dismiss on July 21, 2022.

II. LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). “A Rule 12(b)(6) dismissal may be based on either a ‘lack of cognizable legal theory' or ‘the absence of sufficient facts alleged under a cognizable legal theory.'” Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)).

A complaint must plead sufficient factual allegations to “state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (cleaned up). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The court, however, need not accept conclusory allegations as true. Rather, it must “examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff.” Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citations omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

III. ANALYSIS

Defendants launch challenges to both the form and substance of the FAC. First, Defendants accuse Plaintiff of shotgun pleading in violation of Rule 8. Second, Defendants argue Plaintiff substantively fails to state a claim under the CMIA and the UCL, respectively.

A. Rule 8(a)(2)

Rule 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” The primary purpose of Rule 8(a)(2) is “to give the defendant fair notice of the factual basis of the claim[s]” asserted against it. Skaff v. Meridien N. Am. Beverly Hills, LLC, 506 F.3d 832, 841-42 (9th Cir. 2007). To comply with Rule 8(a)(2), a “plaintiff suing multiple defendants ‘must allege the basis of his claims against each defendant[.]'” Altman v. PNC Mortg., 850 F.Supp.2d 1057, 1067-68 (E.D. Cal. 2012) (quoting Gauvin v. Trombatore, 682 F.Supp. 1067, 1071 (N.D. Cal. 1988); Steinmetz v. Gen. Elec. Co., No. 08-cv-1635-JM-AJB, 2009 WL 10671319, at *2 (S.D. Cal. Feb. 25, 2009) (same). Put differently, a pleading that names multiple defendants must “establish the specific personal involvement” of each defendant “in the alleged wrongful acts.” Isidro Mejia v. NYPD, 1:16-cv-9706-GHW, 2019 WL 3412151, at *7 (S.D.N.Y. July 28, 2019). Failure to do so “leaves each defendant with no means of determining exactly what each of them is charged with . . . doing,” and, therefore, violates Rule 8. Harris v. Cty. of San Diego, No. 18-cv-924-BTM-AHG, 2019 WL 6683367, at *6 (S.D. Cal. Dec. 5, 2019) (cleaned up); see also Watts v. Decision One Mortg. Co., LLC, No. 09-cv-0043 JM(BLM), 2009 WL 648669, at *2 (S.D. Cal. Mar. 9, 2009) (“Plaintiff simply asserts all defendants are acting in concert and therefore alleges all claims indiscriminately.”).

Defendant argues the FAC violates Rule 8(a)(2) because it groups together Defendants as though they are a single defendant. (Mot. at 9.) Plaintiff does not deny that the FAC indiscriminately groups Defendants together. Rather, he argues that Defendants are properly construed as one entity under the “single enterprise rule.” (Opp'n at 11.) “[c]orporate entities are presumed to have separate existences[.]” Laird v. Capital Cities/ABC, Inc., 80 Cal.Rptr.2d 454, 460 (Cal.Ct.App. 1998) (citing Mesler v. Bragg Mgmt. Co., 702 P.2d 601, 606 (Cal. 1985)). Thus, factual allegations that group corporate defendants together are improper under Rule 8(a)(2).

There are, however, exceptions to this general rule. When corporations are so closely tied that they functionally merge, courts may pierce the corporate veil. The single enterprise rule and the alter ego doctrine are “equitable doctrine[s] used to disregard the separate existence of corporations when corporations are not operated as separate entities, but rather integrate their resources to achieve a common business purpose.” 18 C.J.S. Corporations § 29; accord Greenspan v. LADT, LLC, 121 Cal.Rptr.3d 118, 138 (Cal.Ct.App. 2010). Generally, the alter ego doctrine applies to parent-subsidiary corporations, and the single enterprise rule applies to sister corporations. See Oncology Therapeutics Network Connection v. Va. Hematology Oncology PLLC, No. C 05-3033 WDB, 2006 WL 334532, at *18 (N.D. Cal. Feb. 10, 2006). Thus, although Plaintiff argues the single enterprise rule applies (Opp'n at 11), the alter ego doctrine would seem to better suit the facts of this case. Regardless, the test for alter ego and single enterprise is the same. See In re GGWBrands, LLC, 504 B.R. at 622 (single enterprise rule); Price v. Synapse Grp., Inc., No. 16-CV-01524-BAS-BLM, 2017 WL 3131700, at *12 (S.D. Cal. July 24, 2017) (alter ego doctrine). As such, the Court finds caselaw on both the alter ego doctrine and the single enterprise rule instructive.

Parties seeking a single enterprise or alter ego determination must establish two elements: (1) “such a unity of interest and ownership that the separate corporate personalities are merged, so that one corporation is a mere adjunct of another or the two companies form a single enterprise” (unity) and (2) “an inequitable result if the acts in question are treated as those of one corporation alone” (inequity). In re GGWBrands, LLC, 504 B.R. 577, 622 (Bankr. C.D. Cal. 2013) (quoting Tran v. Farmers Group, Inc., 128 Cal.Rptr.2d 728, 740 (Cal.Ct.App. 2022); accord Gopal v. Kaiser Found. Health Plan, Inc., 203 Cal.Rptr.3d 549, 554 (Cal.Ct.App. 2016), modified (June 23, 2016).

Here, the FAC flunks this veil piercing test. To begin, the FAC makes several conclusory statements regarding the connection between Defendants. For instance, it states, “Defendants, and each of them, were an agent or joint venturer of each of the other Defendants, and in doing the acts alleged herein, were acting with the course and scope of such agency[.]” (FAC ¶ 15.) The Court disregards these allegations. See Holden, 978 F.2d at 1121; see Gerritsen v. Warner Bros. Entm't Inc., 116 F.Supp.3d 1104, 1136 (C.D. Cal. 2015) (“Conclusory allegations of alter ego status are insufficient.”). Aside from conclusory allegations, Plaintiff argues two facts support his invocation of the single enterprise rule: (1) Defendants share the same principal place of business address (FAC ¶¶ 12-13) and (2) BPH is the parent corporation of BPA (see Statement of Incorporation).^[3]But these alone are not enough to establish unity or inequity.

First a parent-subsidiary relationship does not establish unity between the two corporations, even when they share a principal place of business. See Harris Rutsky &...