THC - Orange County Inc. v. Valdez

Filing 42

Order by Magistrate Judge Laurel Beeler denying 39 Renewed Motion for Service by Publication.(lblc1S, COURT STAFF) (Filed on 7/21/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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San Francisco Division

United States District Court
Northern District of California

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THC - ORANGE COUNTY INC.,
Plaintiff,

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v.

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Case No. 17-cv-01911-LB
ORDER DENYING RENEWED
MOTION FOR SERVICE BY
PUBLICATION

PABLO VALDEZ,
Defendant.

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Re: ECF No. 39

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INTRODUCTION

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Kindred Hospital1 sued various Sutter Health Plan entities for reimbursement for care that

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Kindred provided to a patient who was a beneficiary of a Sutter ERISA health plan.2 It also sued

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the patient’s husband, Pablo Valdez, on the ground that he and his wife agreed to pay Kindred for

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the patient’s care to the extent that the plan did not.3 The Sutter defendants appeared and answered

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the complaint; Mr. Valdez did not.4 Because a non-appearing defendant (such as Mr. Valdez)

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The plaintiff’s full name is THC – Orange County, Inc., d/b/a Kindred Hospital San Francisco – Bay
Area.

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Id. ¶¶ 60–70.

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See Case No. 3:16-cv-07386-LB, ECF Nos. 7–10, 15.

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See generally Compl. – ECF No. 1. Record citations refer to material in the Electronic Case File
(“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of documents.

ORDER – No. 17-cv-01911-LB

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implicates the undersigned’s jurisdiction, the parties stipulated to sever Mr. Valdez from the

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original case, which the court did.5 Kindred previously moved to serve Mr. Valdez by publication

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in the Bay Area Spanish-language newspaper Visión Hispana; the court denied the motion without

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prejudice, and Kindred renewed the motion.6
The court can decide the matter without oral argument and vacates the August 3, 2017,

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hearing. Civil L.R. 7-1(b). The court denies Kindred’s renewed motion without prejudice because

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Kindred has not shown “reasonable diligence” in its attempts to serve Mr. Valdez or that a “cause

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of action exists against [him].” See Cal. Civ. Proc. Code § 415.50(a).

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STATEMENT

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United States District Court
Northern District of California

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Kindred treated Mr. Valdez’s wife from August 2014 until January 4, 2016, when she died.7

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Kathryn Canete, who is the Senior Regional Director of Patient Accounting, submitted an affidavit

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verifying the dates of treatment and stating that the patient and her husband executed an

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Admission Agreement that obligated them to pay Kindred the charges for any services not covered

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by insurance.8 The Admission Agreement, attached as an exhibit to her declaration, is in Spanish.9

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Kindred submitted its bills to the Sutter plan, which denied coverage from October 21, 2014

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forward; Kindred appealed (unsuccessfully).10 On December 15, 2015, the claims administrator

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for the insurance plan advised Kindred that the patient’s “coverage terminated retroactively as of

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September 30, 2015.”11 Kindred is still trying to convince the plan to pay for the patient’s care and

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treatment.12 Kindred asserts that Mr. Valdez is responsible for the bills, totaling more than $3

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Case No. 3:16-cv-07386-LB, ECF Nos. 25, 30.

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Initial Motion – ECF No. 33; Order – ECF No. 34; Renewed Motion – ECF No. 39.

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Canete Decl. – ECF No. 39-2, ¶ 2.

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Id. ¶¶ 2–3.

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Id. & Ex. 1.

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Id. ¶ 4.

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Id.

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Id.

ORDER – No. 17-cv-01911-LB

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million, under the Admission Agreement.13
Kindred filed its complaint on December 29, 2016 against the insurance plan and related Sutter

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parties, and it also sued Mr. Valdez based on his agreement at admission to pay Kindred for his

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wife’s care if the plan did not.14
Kindred tried to serve Mr. Valdez. A paralegal at the law firm representing Kindred reviewed

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the hospital files, including the August 22, 2014 Admission Face Sheet, which identified the

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address for Mr. Valdez and his wife as 1207 95th Street, Oakland, California.15 The paralegal

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subsequently determined that the address is actually 1207 95th Avenue, Oakland, California.16 On

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September 3, 2015, she pulled Alameda County Property Tax Assessor’s records for that property

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from the County’s website for fiscal year 2014–2015 (July 1, 2014 to June 30, 2015); they reflect

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United States District Court
Northern District of California

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that the property owners filed a homeowners’ exemption.17 That same day, she contacted the

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Assessor’s office, which told her that the owners of the property (since 1989) were Pablo V.

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Uriarte and his wife.18 The paralegal then searched public records and found a sale of a property in

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1989 to Pablo V. Uriarte and his wife.19 She concluded that Mr. Valdez also is known by the name

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Pablo Uriarte.20
On August 9, 2016, a lawyer at the firm pulled an Accurint report; the paralegal reviewed it

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and concluded that “it appeared that Mr. Valdez was still living at the Valdez Address.”21 On

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May 18, 2017, the paralegal pulled the tax bill for the tax year July 1, 2016 to June 30, 2017, and

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then called the Alameda County Assessor’s Office, which confirmed that the property owners

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Id. ¶ 5.

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Compl – ECF No. 1.

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Clayton Decl. – ECF No. 39-2, ¶ 3.

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Id., Exs. 2–9.

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Id. ¶ 5 & Ex. 2.

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Id. ¶ 6.

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Id. ¶ 7.

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Id. ¶ 8.

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Id. ¶ 9.

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ORDER – No. 17-cv-01911-LB

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were still Pablo Uriarte and his wife.22 She searched online databases — Pipl and Whitepages —

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which listed Pablo Uriarte and Pablo Valdez at the address.23
Kindred tried to serve Mr. Valdez at that address four times through a process server,

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Interceptor Legal Support.24 On February 16, 2017, at 8:38 p.m., the process server observed the

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address was gated, locked, dark, quiet, and had a “For Sale” sign (with a telephone number for

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Realty Experts).25 A van was parked in the back of the residence, and a truck was parked in the

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front.26 The process server tried again the next day at 4:29 p.m, but the address remained gated and

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locked; the server honked his horn but no one answered.27 On February 18, 2017, at 7:28 a.m., the

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residence was gated and locked, and the truck was gone; the process server yelled, but no one

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answered.28 On February 21, 2017, at 8:01 a.m., the residence was gated and locked; the server

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United States District Court
Northern District of California

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yelled and honked his horn, but no one answered; he tried talking to the neighbors, but they did

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not want to provide information.29

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Kindred’s attorney wrote Mr. Valdez a letter transmitting the complaint, summons, other

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pleadings, and a waiver of service; she had it translated into Spanish (because Kindred’s records

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showed the need for an interpreter).30 On March 16, 2017, she sent it to the Oakland address by

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U.S. Priority Mail Express 1-Day service; it was delivered on March 17 but she received no

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response.31

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On May 19, 2017, the paralegal pulled an online real-estate listing for the property from

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Zillow, showing a purchase order pending on the property; she called and left a message for the

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Id. ¶¶ 10–11 & Ex. 5.

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Id. ¶ 12 & Ex. 7.

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Simon Decl. – ECF No. 39-1, ¶ 3.

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Id.

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Id.

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Id.

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Id.

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Id.

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Id. ¶ 5 & Exs. 2–3.

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Id. ¶ 6 & Ex. 4.

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ORDER – No. 17-cv-01911-LB

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listing realtor, Francisco Acosta.32 On May 22, 2017, she spoke with Mr. Acosta, who said that as

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far as he knew, Mr. Valdez was still living at the house and that he should be able to receive

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documents there.33 She asked for an email address for Mr. Valdez; Mr. Acosta said that he did not

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have one and offered to deliver the documents.34 The paralegal responded that she would let the

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realtor know.35

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In June, the process server (Interceptor Legal Support) conducted two four-hour stakeouts at

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the address, one in the morning and one at night.36 The first stakeout was on June 8, 2017, from

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5:00 a.m. to 9:00 a.m.37 The house was gated and locked, and there were two trucks parked, one

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inside the fence and one outside the fence.38 (The declaration does not say whether either truck
was the same as the truck seen previously.) At 5:33 a.m., the server heard the front door close but

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United States District Court
Northern District of California

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did not see anyone come out of the house.39 At 9:00 a.m, the server went to the gate and called out

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the subject’s name, but there was no response and the shades remained closed.40 The second

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stakeout was on June 13, 2017, from 6:00 p.m. to 10:00 p.m. The curtains were closed, no cars

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were present, the house was dark, and there was no sign of activity.41

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GOVERNING LAW

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Under Federal Rule of Civil Procedure 4(e), a plaintiff may serve an individual defendant

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using any method permitted by the law of the state in which the district court is located or in

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which service is affected. Fed. R. Civ. P. 4(e)(1). California law allows for five basic methods of

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Id. ¶ 14 & Ex. 9.

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Simon Decl. – ECF No. 39-1, ¶ 15.

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Id.

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Id.

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Id. ¶ 8.

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Id., Ex. 5.

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Id.

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Id.

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Id.

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Id.

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ORDER – No. 17-cv-01911-LB

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service: (1) personal delivery to the party, see Cal. Civ. Proc. Code § 415.10; (2) delivery to

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someone else at the party’s usual residence or place of business with mailing after (known as

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“substitute service”), see id. § 415.20; (3) service by mail with acknowledgment of receipt, see id.

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§ 415.30; (4) service on persons outside the state by certified or registered mail with a return

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receipt requested, see id. § 415.40; and (5) service by publication, see id. § 415.50.

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California Code of Civil Procedure § 413.30 also provides that a court “may direct that
summons be served in a manner which is reasonably calculated to give actual notice to the party

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served.” To comport with due process, the method of service must be “reasonably calculated,

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under all the circumstances, to apprise interested parties of the pendency of the action and afford

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them an opportunity to present their objections.” Rio Props., Inc. v. Rio Intern. Interlink, 284 F.3d

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United States District Court
Northern District of California

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1007, 1016 (9th Cir. 2002) (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,

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314 (1950)). Under section 413.30 (in Article 4), courts in this district have authorized service by

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email. See Facebook, Inc. v. Banana Ads, LLC, No. 11-CV-3619 YGR, 2012 WL 1038752, at *3

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(N.D. Cal. Mar. 27, 2012); Balsam v. Angeles Tech. Inc., No. 06-CV-04114-JF (HRL), 2007 WL

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2070297, at *4 (N.D. Cal. July 17, 2007).

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California law permits service by publication “if upon affidavit it appears to the satisfaction of

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the court in which the action is pending that the party to be served cannot with reasonable

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diligence be served in another manner” specified in Article 3 of the California Code of Civil

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Procedure. Cal. Civ. Proc. Code § 415.50(a). In determining whether a plaintiff has exercised

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“reasonable diligence,” the court examines the affidavit to see whether the plaintiff “took those

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steps a reasonable person who truly desired to give notice would have taken under the

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circumstances.” Donel, Inc. v. Badalian, 87 Cal. App. 3d 327, 333 (1978). The “reasonable

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diligence” requirement “denotes a thorough, systematic investigation and inquiry conducted in

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good faith by the party or his agent or attorney.” Kott v. Super. Ct., 45 Cal. App. 4th 1126, 1137

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(1996). “Before allowing a plaintiff to resort to service by publication, the courts necessarily

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require him to show exhaustive attempts to locate the defendant, for it is generally recognized that

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service by publication rarely results in actual notice.” Watts v. Crawford, 10 Cal. 4th 743, 749 n.5

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(1995) (internal quotations and citations omitted). And because of due process concerns, service
ORDER – No. 17-cv-01911-LB

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by publication should be allowed only “as a last resort.” Donel, 87 Cal. App. 3d at 333.
Taking a few reasonable steps to serve a defendant does not necessarily mean that all “myriad

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. . . avenues” have been properly exhausted to warrant service by publication. Id. But a plaintiff

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will generally satisfy its burden through “[a] number of honest attempts to learn [a] defendant’s

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whereabouts or his address” by asking his relatives, friends, acquaintances, or employers, and by

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investigating “appropriate city and telephone directories, the voters’ register, and the real and

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personal property index in the assessor’s office, near the defendant’s last known location.” Kott,

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45 Cal. App. 4th at 1137 (internal quotations omitted). “These are likely sources of information,

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and consequently must be searched before resorting to service by publication.” Id. The reasonablediligence inquiry is fact and case specific. Id. at 1137–38 (“[T]he showing of diligence in a given

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United States District Court
Northern District of California

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case must rest on its own facts and no single formula or mode of search can be said to constitute

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due diligence in every case.”).

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In addition to the reasonable-diligence requirement, a plaintiff requesting service by

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publication must show, by affidavit, that “[a] cause of action exists against the party upon whom

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service is to be made or he or she is a necessary or proper party to the action.” Cal. Civ. Proc.

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Code § 415.50(a)(1). The plaintiff “must offer ‘independent evidentiary support, in the form of a

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sworn statement of facts, for the existence of a cause of action against the defendant.’” Cummings

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v. Hale, No. 15-CV-04723-JCS, 2016 WL 4762208, at *2 (N.D. Cal. Sept. 13, 2016) (quoting

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McNamara v. Sher, No. 11-CV-1344-BEN (WVG), 2012 WL 760531, at *4 (S.D. Cal. Mar. 8,

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2012)); see also Zhang v. Tse, Nos. 07-CV-4946-JSW, 05-CV-2641-JSW, 2012 WL 3583036, at

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*3 (N.D. Cal. Aug. 20, 2012) (collecting cases). The declaration must be signed by someone with

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personal knowledge of the essential facts. Cummings, 2016 WL 4762208 at *3 (denying the

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plaintiff’s request for service by publication because the submitted declaration “d[id] not purport

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to be an affidavit, [was] not sworn, and d[id] not demonstrate counsel’s personal knowledge of the

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facts at issue”).
ANALYSIS

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1. Reasonable Diligence
The first issue is whether Kindred exercised reasonable diligence in its attempts to serve Mr.
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Valdez. Because Kindred did not make “exhaustive attempts to locate” Mr. Valdez, it has not met

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its burden. Watts, 10 Cal. 4th at 749 n.5.

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In particular, by conducting the stakeouts, Kindred may have been pursuing service at a

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property that Mr. Valdez no longer owned. And Kindred could discover more information about

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the property and about Mr. Valdez. In February, there was a “For Sale” sign; by May, there was a

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contract pending. But the record is silent about whether the “For Sale” sign was there in May; if it

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was, perhaps it suggested that Mr. Valdez still owned the house and lived there. Trucks were seen

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there; was there any effort to follow up on DMV information for the plates? The real estate agent

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said that he had no email information; did he have a telephone number? When parties finalize real
estate sales, money is transmitted to parties and their bank accounts. Mr. Valdez’s wife died.

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United States District Court
Northern District of California

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Usually legal process attaches to death, and the hospital records may reveal identifying

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information about the patient or Mr. Valdez (such as a driver’s license number, other financial

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information, or his work).The hospital records may reflect visitors (friends or relatives) or next of

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kin. The process server mentions uncooperative neighbors; it is not clear whether he could clarify

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from them whether Mr. Valdez still lived there or whether he could obtain contact information.

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Kindred pulled an Accurint report but reports only that “it appeared that Mr. Valdez was still

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living at the Valdez address.”42 What else did it say? Mr. Valdez apparently goes by “Pablo V.

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Uriarte”; what investigation was conducted about that name (given that the property records are in

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that name)? These investigative avenues reasonably could lead to contact information for Mr.

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Valdez or information about his location.
In Castillo-Antonio v. Azurdia, for example, the court initially found the following steps

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insufficient to meet the plaintiff’s burden to show reasonable diligence: (1) counsel’s

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“investigation at the Contra Costa County Tax Assessor’s Office regarding the owner of the

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[defendant’s business’s] property,” (2) a process server’s four attempts to personally serve the

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defendant at that address, and (3) counsel’s attempt to mail “packages” to the same address.

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No. 13-CV-05709-DMR, 2014 WL 4060219, at *2 (N.D. Cal. Aug. 14, 2014). As in Castillo-

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Clayton Decl. – ECF No. 39-2, ¶ 9.

ORDER – No. 17-cv-01911-LB

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Antonio, the court is concerned that at the time of attempted service, Mr. Valdez may not have

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owned the property. Id. at *3.

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After the Castillo-Antonio court denied service by publication initially, the plaintiff researched
California DMV records, confirmed a telephone number, made contact by telephone, and

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confirmed that the defendant still lived at the property. Id. The court held that the four subsequent

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attempts to serve were still not enough, given the ability to (1) contact the codefendant for contact

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information, (2) confirm current ownership of the property, and (3) contact relatives, friends, and

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neighbors. Id. at *4. As in Castillo-Antonio, Kindred took additional steps (such as searching

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online directories – apparently in a limited way about the property, speaking with the realtor, and

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conducting two stakeouts). But these additional efforts did “not exhaust the myriad other options

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United States District Court
Northern District of California

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available” and were not “the ‘step[s] which patently appeared to hold the most promise for

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locating’” Mr. Valdez. Id. at *3 (citation omitted).

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Kindred’s options include a more robust internet search (beyond the property), obtaining

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information from the realtor (such as sales information, information about funds disbursed, and

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Mr. Valdez’s telephone number), follow-up with neighbors, identifying family members and

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friends from the hospital records, and obtaining information through the Post Office, the DMV,

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any post-death legal process, and any accounts (such as telephone providers or bank accounts). See

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id.; accord Kott, 45 Cal. App. 4th at 1137–38 (A plaintiff satisfies his burden through “[a] number

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of honest attempts to learn [a] defendant’s whereabouts or his address” by asking his relatives,

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friends, acquaintances, or employers, and by investigating “appropriate city and telephone

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directories, the voters’ register, and the real and personal property index in the assessor’s office,

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near the defendant’s last known location.”).

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Similarly, other courts have required more exhaustive efforts than Kindred’s efforts. Judge

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Lloyd granted permission for service by publication when the plaintiff conducted an Internet

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WHOIS search, hired a private investigator, and subpoenaed several internet companies to

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discover the defendants’ true identities. Combs v. Doe, No. 10-CV-01120-HRL, 2010 WL

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4065630, at *1 (N.D. Cal. Oct. 15, 2010). Judge Chen denied permission when the plaintiff

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attempted personal service and conducted internet searches through Accurint.com, but did not
ORDER – No. 17-cv-01911-LB

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search any Bay Area city telephone directories or attempt service by mail. Duarte v. Freeland, No.

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05-CV-2780 EMC, 2008 WL 683427, at *3 (N.D. Cal. Mar. 7, 2008). The undersigned granted

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service by publication after exhaustive efforts to identify addresses for the defaulting defendant.

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See Alameda Cnty. Elec. Indus. Serv. Corp. v. Stuward, No. 11-CV-05676-LB, ECF No. 20; see

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also Cummings, 2016 WL 47622208, at *2 (diligence shown by speaking to defendant’s daughter,

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using a paid investigative tool to locate a number of address, and having the U.S. Marshal visit the

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most promising addresses on multiple occasions without success).

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There are reasonable measures that Kindred could take that might lead to Mr. Valdez’s contact

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information and a more reliable method of service (such as service by email), which is a method of
service that is “‘reasonably calculated to give actual notice.’” See, e.g., Facebook, Inc., 2012 WL

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United States District Court
Northern District of California

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1038752, at *3 (quoting Cal. Civ. Proc. Code § 413.30) (courts have permitted service by email

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when a plaintiff has not succeeded in serving a defendant at a physical address, has been unable to

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contact the defendant by mail or telephone, and has a functional email address for the defendant).

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Another possible outcome is identifying Mr. Valdez’s work address, which may allow for

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substitute service. See Cal. Civ. Proc. Code § 415.20(a).

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2. Affidavit Showing a Cause of Action Exists
Kindred must also demonstrate, by affidavit, that a cause of action exists against Mr. Valdez.

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The complaint pleads two claims: (1) breach of contract (based on the Admission Agreement), and

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(2) an “open book account” claim for the amount due on the contract.43
“A cause of action for breach of contract requires pleading of a contract, plaintiff’s

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performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting

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therefrom.” McKell v. Washington. Mut., Inc., 142 Cal. App. 4th 1457, 1489 (2006). “A written

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contract may be pleaded either by its terms — set out verbatim in the complaint or a copy of the

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contract attached to the complaint and incorporated therein by reference — or by its legal effect.”

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Haskins v. Symantec Corp., No. 13-CV-01834-JST, 2013 WL 6234610, at *10 (N.D. Cal. Dec. 2,

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2013).

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Compl. ¶¶ 60–70.

ORDER – No. 17-cv-01911-LB

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Here, the court cannot conclude from the submission by Kindred’s Senior Director of Patient

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Accounting that Mr. Valdez is personally obliged to pay anything under the contract. For one, the

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Admission Agreement is in Spanish and the court cannot tell what responsibility it assigns to the

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patient or to Mr. Valdez. Kindred’s counsel’s declaration does not change this outcome. It is

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nearly identical to the prior declaration that the court found inadequate and contains only

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information about service of process; it does not have a sworn statement of facts supporting the

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conclusion that a cause of action exists against Mr. Valdez. 44 Cummings, 2016 WL 476208, at *2.

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Kindred’s complaint cites Family Code § 914 and Probate Code § 13554 and alleges that they

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establish a surviving spouse’s personal liability for the deceased spouse’s debts. Family Code
§ 914 states a married person is personally liable for “a debt incurred for necessaries of life of the

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United States District Court
Northern District of California

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person’s spouse,” and Probate Code § 13554 states that a debt “may be enforced against the

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surviving spouse in the same manner as it could have been enforced against the deceased spouse if

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the deceased spouse had not died.” These statutes generally support the proposition that a

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surviving spouse is personally liable for the debts of a deceased spouse, including hospital and

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medical bills. See Collection Bureau of San Jose v. Rumsey, 6 P.3d 713, 718 (Cal. 2000). That

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legal conclusion does not change the outcome here: the court cannot conclude anything about a

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cause of action based on this fact record.

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CONCLUSION

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The court denies Kindred’s renewed motion for service by publication without prejudice.

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IT IS SO ORDERED.

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Dated: July 21, 2017

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______________________________________
LAUREL BEELER
United States Magistrate Judge

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See Simon Decl. – ECF No. 39-1 at 1–2; Simon Decl. – ECF No. 33 at 6–7.

ORDER – No. 17-cv-01911-LB

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