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Cruz v. PacifiCare Health Systems, Inc.

Supreme Court of California

April 24, 2003, Decided ; April 24, 2003, Filed

No. S101003.


 [***60]  MORENO [*307]  J.

 [**1159]  In Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066 [90 Cal. Rptr. 2d 334, 988 P.2d 67] (Broughton), we held that ] claims for injunctive relief under the Consumer Legal Remedies Act (CLRA) designed to protect the public from deceptive business practices were not subject to arbitration. In this case, we consider whether Broughton is good law in light of two recent United States Supreme Court cases pertaining to arbitration, [***61]   Green Tree Fin. Corp.-Ala. v. Randolph (2000) 531 U.S. 79 [148 L. Ed. 2d 373, 121 S. Ct. 513] (Green Tree) and [****4]   Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105 [149 L. Ed. 2d 234, 121 S. Ct. 1302] (Circuit City). We conclude that it is.

We also consider whether Broughton's holding on the inarbitrability of CLRA public injunctions should be extended to include claims to enjoin unfair competition under Business and Professions Code section 17200 et seq. and to enjoin misleading advertising under Business and Professions Code section 17500 et seq. We conclude that Broughton should be extended to such claims, at least under the circumstances of the present case.

We further consider whether Broughton should be extended to statutory and common law claims for equitable monetary relief--for restitution, disgorgement, and unjust enrichment. We conclude that Broughton should not be thus extended.


In November 1999, plaintiff Jose E. Cruz filed an action against defendants PacifiCare Health Systems, Inc., and PacifiCare of California, Inc.  [*308]  (collectively PacifiCare), alleging claims for unfair competition and false advertising in connection with PacifiCare's sale, marketing, and rendering of medical services. In his first [****5]  amended complaint, Cruz alleged that he was an enrollee in one of the various health plans PacifiCare offers and operates in California. He also alleged that "through its misleading and deceptive material representations and omissions," PacifiCare has employed a "fraudulent, unlawful, and/or unfair scheme designed to induce" persons to enroll in its health plans by "misrepresenting . . . that its primary commitment . . . is to maintain and improve the quality of healthcare provided." In fact, Cruz alleged, PacifiCare "has been aggressively engaged in implementing undisclosed systemic internal policies that are designed, inter alia, to discourage PacifiCare's primary care physicians from delivering medical services and to interfere with the medical judgment of PacifiCare healthcare providers." The result of these policies, he alleged, is a "reduction in the quality of [provided] healthcare" that "is directly contrary to PacifiCare's representations."

Cruz emphasized in his first amended complaint that he "does not challenge the denial of medical benefits to any enrollee or subscriber," but "challenges the manner in which PacifiCare . . . induced persons to subscribe to its [****6]  Health Plans . . . by misrepresenting or failing to disclose internal policies that lower the quality of services provided." Cruz alleged that he was filing the action "in his individual capacity and on behalf of the general public," and he sought to represent a class of "approximately 1.6 million PacifiCare Health Plan enrollees in California."

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30 Cal. 4th 303 *; 66 P.3d 1157 **; 133 Cal. Rptr. 2d 58 ***; 2003 Cal. LEXIS 2624 ****; 2003 Daily Journal DAR 4329; 2003 Cal. Daily Op. Service 3428

JOSE E. CRUZ et al., Plaintiffs and Respondents, v. PACIFICARE HEALTH SYSTEMS, INC., et al., Defendants and Appellants.

Prior History:   [****1]  Superior Court of the City and County of San Francisco, No. 307611 David A. Garcia Judge.

 Cruz v. PacifiCare Health Systems, Inc., 91 Cal. App. 4th 1179, 2001 Cal. App. LEXIS 680, 111 Cal. Rptr. 2d 395 (Cal. App. 1st Dist., 2001)

Disposition: The judgment of the Court of Appeal is affirmed in part and reversed in part, and the cause is remanded for further proceedings consistent with this opinion.


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