Beruflich Dokumente
Kultur Dokumente
25 Defendants.
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28
PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4:16-cv-03991-JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 2 of 20
1 TABLE OF CONTENTS
2 Page
3 SUMMARY OF ARGUMENT iv
4 I. INTRODUCTION 1
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i
PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4:16-cv-03991 -JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 3 of 20
1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4 Backhaut v. Apple Inc.,
22 In re Sony PS3 "other OS" Litig. v. Sony Computer Entm't Am., Inc.,
551 Fed. Appx. 916 (9th Cir. 2014) 11
23
In re Tobacco II,
24 46 Ca1.4th 298 (2009) 14
25 Jou v. Kimberly-Clark Corp.,
No. C-13-03075 JSC, 2013 WL 6491158 (N.D. Cal. Dec. 10, 2013) 3
26
11
PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4: I 6-cv-03991-JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 4 of 20
1 LiMandri v, Judkins,
52 Cal.App.4th 326 (1997) 9
2
Manchoteck v. Mondelez Int `1 Inc.,
3 No. C 13-02148 WHA, 2013 WL 5400285 (N.D. Cal. Sept. 26, 2013), aff'd sub
4 nom. Manchouck v, Mondelez Int'l, Inc., 603 F. App'x 632 (9th Cir. 2015) 7
20 Statutes
28
111
PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4:16-cv-03991-JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 5 of 20
1 SUMMARY OF ARGUMENT
2 Defendant Aegis Senior Communities, LLC. ("Aegis") contends that all claims in
3 Plaintiffs' Second Amended Complaint ("SAC") fail because Aegis supposedly makes no express
4 representation regarding the "manner" in which facility staffing will be set. But the SAC alleges
5 that Aegis, in standard admission contracts and other uniform statements, represents that residents
6 will receive care services determined by needs assessments conducted by facility personnel.
7 Undisclosed to residents or the public, Aegis does not use the assessments in determining staffing,
8 but instead staffs to meet profit objectives. As a result, residents either fail to receive promised
9 services or are placed at substantial risk that such services will not be provided in the future.
10 The Consumer Legal Remedies Act and other statutes asserted here make actionable
11 statements that are "either actually misleading or which [have] a capacity, likelihood or tendency
12 to deceive or confuse the public." Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir.
13 2008) (reversing dismissal of CLRA and UCL claims). The test followed by the Ninth Circuit is
14 whether a "reasonable consumer" is "likely to be deceived." Ebner v. Fresh, Inc., No. 13-56644,
15 2016 WL 5389307 at *5 (9th Cir. Mar. 17, 2016) (as amended Sept. 27, 2016) (internal citations
16 omitted). Whether statements are likely to deceive is in most cases a question of fact that cannot
18 Here, the SAC contains detailed allegations that specify Defendant's misrepresentations
19 and nondisclosures, and further explain why and how Defendant's conduct deceived Plaintiffs and
20 the putative class. Unlike Ebner -- where the product label disclosed the allegedly misleading
21 package weight -- this is not the "rare case" where the likelihood of public deception can be
23 At least one other court in this District has previously held that similar allegations to those
24 asserted here state valid claims under the Consumers Legal Remedies Act ("CLRA"), the Unfair
25
Competition Law ("UCL"), and the elder abuse statute. See e.g., Winans v. Emeritus Corp., No.
26
13-CV-03962-SC, 2014 WL 970177 at *8 (N.D. Cal. Mar. 5, 2014), clarified on denial of
27
reconsideration, No. 13-CV-03962-SC, 2014 WL 2586370 (N.D. Cal. June 9, 2014).
28
1 I. INTRODUCTION
2 Defendant moves to dismiss Plaintiffs' Second Amended Complaint ("SAC") arguing that
3 Aegis makes no express representation regarding the "manner" in which facility staffing will be
4 determined, and such, Plaintiffs' claims are "implausible." Defendant misstates Plaintiffs'
6 In its standardized admission agreements, Aegis represented that residents would receive
7 the care services they needed and paid for as determined by resident assessments conducted by
8 facility personnel. (SAC 2). But that is not true. Undisclosed to residents or the public, Aegis
9 does not use its assessments in setting staffing. Instead, Aegis determines facility staffing based
10 on pre-determined labor budgets and profit objectives. (SAC IN 5, 37, 40-45, 72, 85). Based on
11 Aegis's contractual promises and other material representations, Plaintiffs reasonably believed that
12 Aegis would use the assessments to set staffing at levels sufficient to meet the assessed needs of
13 all residents, and accordingly, paid initial "Community Fees" to enter the facilities and monthly
14 fees priced based on "care points" set pursuant to the resident assessments. (SAC 12, 35-36,
16 Defendant's misrepresentations and failures to disclose were and are material to the named
17 Plaintiffs and the reasonable consumer. The primary (if not sole) reason that consumers enter an
18 assisted living facility is to receive the care services they require as their needs change.
19 Materiality is further established by the real health and safety risks triggered by Defendant's
20 conduct. Because Aegis does not use resident assessments to set facility staffing, residents fail to
21 receive promised care services, or face a substantial risk that such services will not be provided in
22 the future, thus resulting in significant harm or risk of the same to this highly vulnerable group.
23 (SAC 2, 6, 47-48).
24 These allegations state valid claims under the Consumers Legal Remedies Act ("CLRA"),
25 the Unfair Competition Law ("UCL"), and the elder abuse statute. See e.g., Winans v. Emeritus
26 Corp., No. 13-CV-03962-SC, 2014 WL 970177 at *8 (N.D. Cal. Mar. 5, 2014), clarified on denial
27 of reconsideration, No. 13-CV-03962-SC, 2014 WL 2586370 (N.D. Cal. June 9, 2014). For these
28 and the other reasons set forth below, Defendant's motion to dismiss should be denied.
1
PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4:16-cv-03991-JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 7 of 20
2 Plaintiffs June Newirth, Barbara Feinberg, and Margaret Pierce (deceased), bring this class
3 action on behalf of themselves and all current and former residents of Aegis's assisted living
4 facilities in California from April 12, 2012, through the present (SAC IN 1, 91).
5 Plaintiffs allege that in choosing to enter Aegis's assisted living facilities, they relied on
6 Aegis's material representations that it would provide care services sufficient to meet the needs of
7 all residents, as determined through assessments conducted by facility staff. These representations
8 turned out to be false and misleading. Aegis sets facility staffing based on profit objectives, not
9 resident needs. As a result, Plaintiffs and other residents failed to receive promised care or face a
10 substantial risk that future care will be lacking. (SAC 51, 54, 62, 73, 80, 105).
12 contract ("Residence Agreement") signed by every incoming resident. Section 1.B of this contract
18 (SAC 29). Upon admission and periodically thereafter, Aegis prepares needs assessments and
19 Resident Service Plans that assign a certain number of "care points" to each resident based on the
20 assessed needs. (SAC 17 31-32). In its marketing document provided to all residents, Aegis
21 explains the connection between the needs assessment and contract pricing, stating:
26 (SAC 4532).
1 meet the assessed needs of all residents. (SAC IN 35-36, 51, 62, 76, 82). Plaintiffs paid initial
2 "Community Fees" (ranging from $4,000 to $15,000) to enter their respective Aegis facilities, in
3 addition to monthly fees of up to $10,000. (SAC 12, 49, 51, 54, 63, 75, 83, 85).
4 As Plaintiffs would later discover, Aegis's representations were false and misleading.
5 . Aegis does not use the resident assessments or care points to determine or provide staffing at its
6 facilities. (SAC IT 5, 37, 38, 67). Instead, as a matter of corporate policy, Aegis sets and provides
7 facility staffing per shift based on pre-determined labor budgets and profit margins established by
8 corporate headquarters, (SAC 11 5, 40-45), facts that Aegis conceals and fails to disclose. (SAC IN
9 37, 72, 85). As a result of Aegis staffing procedure, facility residents fail to receive promised care
10 services, or are placed at substantial risk that such services will not be provided in the future.
13 Aegis's "no plausibility" argument ignores the express language and reasonable
14 construction of its form documentation. Each Resident Agreement promises to provide care
15 services sufficient to meet resident needs as determined by resident assessments, which in turn
16 generate "care points" upon which contract pricing is based. But undisclosed to residents and the
17 general public, Aegis sets facility staffing based on profit objectives and pre-determined budgets,
18 rather than using assessed resident needs. (SAC 44). Indeed, Aegis did not increase its staffing
19 levels when the overall assessed needs of Plaintiffs and their corresponding care point charges
20 were increased. (SAC 68, 70, 77-79, 84). This undisclosed policy and practice results in its
21
22
23 I Contrary to Aegis's suggestion, the SAC alleges that the Named Plaintiffs read or relied on the
misrepresentations in the Resident Agreement. The SAC alleges that Dr. Newirth read and relied
24 on Aegis's misrepresentations in the admissions agreement. (SAC 62). It also alleges Sheri
Feinberg and Linda Bardin "relied" on Aegis's representations in the contract and "understood"
25 them to mean that increased care needs meant increased care points and charges because of the
26 increased staffing costs. (SAC TT 75-76, 82). Nothing more is required. See e.g., Jou v.
Kimberly-Clark Corp., No. C-13-03075 JSC, 2013 WL 6491158 at *5 (N.D. Cal. Dec. 10, 2013)
27 (allegations that plaintiffs "purchased these products in person at a store, and that they relied on
the representations that the products were, among other things, 'natural,'" are sufficient; court can
28 infer that Plaintiffs read packaging terms).
1 residents not receiving the contractually promised services and/or running the substantial risk that
2 they will not receive those services in the future (SAC iidif 2, 6, 47-48, 96-97).
3 The CLRA and the UCL protect consumers not only against false statements, but also
4 against statements which, while true, are "either actually misleading or which [have] a capacity,
5 likelihood or tendency to deceive or confuse the public." Williams v. Gerber Prods. Co., 552 F.3d
6 934, 938 (9th Cir. 2008). The test articulated by California courts and the Ninth Circuit is whether
7 a "reasonable consumer" is "likely to be deceived." Ebner v. Fresh, Inc., No. 13-56644, 2016 WL
8 5389307 at *5 (9th Cir. Mar. 17, 2016) (as amended Sept. 27, 2016) (internal citations omitted).
9 Whether statements are likely to deceive is in most cases a question offact and cannot be decided
11 Defendant contends this is the rare case where, as a matter of law on the pleadings, the
12 Court should rule that no reasonable consumer could interpret Aegis's statements as Plaintiffs did.
13 But the claims in Ebnerthe case on which Aegis primarily relieswere based on the allegation
14 that consumers were deceived by a lip gloss product that accurately stated its content. weight on
15 the label, but contained a push-up mechanism that did not allow consumers to readily access the
16 last 25% of the product. Elmer, 2016 WL 5389307 at *5. Not surprisingly, the Ninth Circuit
17 found those allegations failed to demonstrate "more than a mere possibility that [the statements]
19 manner,' Id. quoting Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 508 (2003). Here,
20 unlike the packaging which disclosed the accurate product weight in Ebner, Aegis fails to tell
21 consumers that the care points generated by resident assessments are not used to determine or
22 provide staffing in the Resident Agreement. Instead staffing at Aegis facilities is determined by
23 pre-set labor budgets designed to meet corporate profit goals. (SAC 39, 64, 72, 85, 106, 113-
26 would reasonably interpret to mean that it will staff its facilities with at least the amount of
27 caregiver time Aegis itself has determined is necessary to perform the services its residents need
28 and for which they are billed. Through its standard admission agreement, Aegis promises each
1 resident that he or she will "receive the services appropriate to your individual need" as
3 and as the resident's needs change. (SAC If 29). The agreement also states that "[c]are fees are
4 charged based on assessment points," which are multiplied by a set amount, producing a "per day"
5 fee. (SAC If 30). Each resident also receives an "Individualized Service Plan," generated by the
6 assessment, specifying how particular resident's needs will be met by facility "staff," and linking
7 the number of care points to the amount of time staff will expend. (SAC 1131). These statements
8 underline the obviouscare can only be provided by people, and a resident who has additional
9 needs requires additional staff time. Indeed, the promise of additional staff time is what allows
11 Given these and other statements, consumers reasonably expect that Aegis will consider
12 the assessments in staffing its facilities with at least the amount of caregiver time it has determined
13 necessary to meet its contractual promise to meet the assessed needs of its residents. The
14 reasonable consumer will certainly be misled by Aegis's undisclosed practice of staffing facilities
15 based on profit objectives, and without regard to the resident assessments so prominently
16 referenced in its form contract and pricing documents. The reasonable consumer also expects that
17 Aegis will not fail to provide promised services, or place residents at substantial risk of not getting
18 such services.
19 As this Court has ruled, allegations that a defendant promised one thing and delivered
20 another are sufficient to defeat a pleading challenge. See Perrine v. Sega of Am., Inc., No. C 13-
21 01962 JSW, 2013 WL 6328489 at *6 (N.D. Cal. Oct. 3, 2013) (denying motion to dismiss,
22 plaintiffs alleges facts to show that "the retail version of [defendant's] game was not the version
25 reasonable consumer would be misled, the Court must consider how the statement could be
26 reasonably interpreted by the general public or targeted consumers, "acting reasonably in the
27 circumstances." Ebner, 2016 WL 5389307 at *5. Here, the circumstances involve assisted living.
28 The persons who enter assisted living facilities, or their relatives who admit them, are doing so
1 because they need assistance. Assistance is provided by facility employees, who must devote time
2 to performing those services. Prospective residents and their families have a reasonable
3 expectation that, when Aegis assesses their needs, calculates them on a points system, and then
4 charges them a daily care point fee, that fee represents the additional time it takes facility staff to
5 perform the specified services. They have a reasonable expectation that Aegis will staff its
6 facilities such that it can provide the caregiver time Aegis has itself deemed necessary to perform
7 the services its residents need and for which they are paying. (SAC Illf 36, 62, 76, 82).
8 Defendant's arguments are also contradicted by Aegis's marketing statements that directly
9 tie its "point system" to the "amount of staff time" required to provide "services [residents] need
10 and receive." (SAC 32) (quoting Aegis marketing document; "The number of care points that is
11 assigned to a particular service is based on the average amount of staff time required to provide
12 that service, the frequency, and the cost of the staff person that will be performing the task.").
13 Given Aegis's pre-lawsuit interpretation of how the care points work, Defendant can hardly argue
15 These allegations present an even stronger "reasonable consumer" case than that upheld in
16 Williams. There, the Ninth Circuit held that reasonable consumers could be misled by packaging
17 and the statement that the snack product was made with "fruit juice and other all natural
18 ingredients," even though the package label disclosed non-natural ingredients. Williams, 552 F.3d
19 at 939-40. Here, Aegis makes numerous uniform statements that would lead an ordinary
20 consumer under these circumstances to expect that facility staffing is based on resident needs
21 assessments, and Aegis does not disclose (even in fine print) that such is not the case.
22
23
2 Nor can Defendant reasonably argue that the reference to "average" staff time in the contract
24 bars Plaintiffs' claim. As its own marketing documents show, Aegis's contract statements lead a
reasonable consumer to assume that care point pricing is correlated to the staffing required to meet
25
assessed resident needs. Indeed, that is precisely how facility management staff justify increased
26 contract fees. In response to Sheri Feinberg's question as to why the care points for her mother
had increased, the General Manager at Aegis Laguna Niguel stated, "If [Barbara Feinberg] now
27 requires 40+ min of assistance to do her hair every day, then that would be considered a higher
number of points due to increased time demands on existing staff and we need to pay for the
28 additional staff required to meet the time demands." (SAC 78).
1 Defendant argues that plaintiff Newirth's initial satisfaction with the care provided
2 "demonstrate[s]" that adequate staffing is possible even "without utilizing the resident assessment
3 system" to set staffing. That argument ignores the allegations that Aegis ultimately did indeed
4 fail to provide Ms. Newirth with the care services it had promised. (SAC '167-70). As Plaintiffs
5 allege, Aegis's staffing procedurewith its reliance on pre-determined labor budgets irrespective
6 of residents' changing needsputs all residents at risk that at some point they will not receive
7 their contracted services. (SAC 1112, 47, 52-55, 96, 97). The risk of future harm is actionable
8 under the CLRA. Mui Ho v. Toyota Motor Corp., 931 F. Supp. 2d 987, 997-98 (N.D. Cal. 2013);
9 see also, Chamberlan v. Ford Motor Co., 369 F. Supp. 2d 1138, 1145 (N.D. Cal. 2005).
10 In sum, this case is not the "rare situation" in which the Court can find as a matter of law
11 that reasonable consumers could not be misled by Aegis's misrepresentations and failures to
12 disclose material facts. Williams, 552 F.3d at 939. Plaintiffs' allegations clearly allege a
16 the CLRA and UCL can be based on a non-disclosure or concealment of material facts. Ho, 931 F.
17 Supp. at 997. Aegis is also liable for failing to disclose material facts it was obligated to disclose;
18 namely, that it does not use resident assessments to provide facility staffing and, as a result,
19 residents fail to receive contracted services or are placed at future risk of the same.
20
21 3 The other cases cited by Defendant do not warrant a different conclusion, as they are clearly
distinguishable. Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 508 (2003) (re-affirming
22 the "reasonable consumer" standard after a defense verdict following a trial on the merits); Brod v.
Sioux Honey Ass 'n Coop, 927 F. Supp. 2d 811, 828 (N.D. Cal 2013), aff'd, 609 F. App'x 415 (9th
23 Cir. 2015) (the plaintiff did "not cite a single source to support his legal theory that 'members of
the public would likely be deceived' by seller's failure to label honey container with a statement
24 that it contained no pollen); Carrea v. Dreyer 's Grand Ice Cream, Inc., No. C 10-01044 JSW,
2011 WL 159380 at *5-6 (N.D. Cal. Jan. 10, 2011), aff'd, 475 F. App'x 113 (9th Cir. 2012) (ice
25 cream packaging stating that the products were "Classic" or "Original," without more, would not
cause a reasonable consumer to think that the items were nutritious or healthy); Manchouck v.
26 Mondelez Int'l Inc., No. C 13-02148 WHA, 2013 WL 5400285 at *2 (N.D. Cal. Sept. 26, 2013),
aff'd sub nom. Manchouck v. Mondelez Int?, Inc., 603 F. App'x 632 (9th Cir. 2015) (no
27 reasonable consumer would believe that the statement "made with real fruit" does not include fruit
pure).
28
2 Even Defendant does not question that adequate staffing is material to incoming residents
3 at Aegis's facilities. Consumers seek assisted living because they need assistance with their daily
4 activities. (SAC 49). Aegis has recognized the importance of staffing in selecting an assisted
5 living facility in its own marketing materials. (SAC 50) (urging residents and family members to
6 inquire regarding "staffing" ratios). While Aegis ignores the connection for purposes of this
7 motion, its admission contract and marketing materials repeatedly tie the resident assessments that
8 define care needs to contract pricing which is determined by the amount of staff time required to
10 In an effort to muddy the waters, Defendant argues Plaintiffs fail to allege facts to show
11 that Aegis's failure to "use its resident assessment system in setting staffing levels" would cause a
12 reasonable consumer to alter his/her purchase decision. But Plaintiffs specifically allege that it
13 matters to consumers whether a facility sets staffing based on "comprehensive assessments of its
14 residents' care needs," such as those promised in the Aegis admission contracts, as that ensures
15 staffing will be adequate to meet resident needs. (SAC 49), Defendant's argument that resident
16 assessments are not the "only" method to ensure adequate staffing is a merits argument that flatly
17 ignores the reality of its own marketing scheme. Having induced residents to enter its facilities
18 with promises of providing care services sufficient to meet resident needs, as determined by its
19 own resident assessments, (SAC 2, 9, 11, 111, 123), Aegis can hardly argue that resident
20 assessments "don't matter." In any event, Defendant's duplicitous position is at best a merits
22 In Winans, where similar defense arguments were raised, the Court held that similar
6 A duty to disclose exists for purposes of CLRA or UCL liability if the complaint alleges
7 the defendant: (1) had exclusive knowledge of material facts not known to the plaintiff; (2)
8 actively conceals a material fact from the plaintiff; or (3) makes partial representations but also
9 suppresses some material fact. Falk v. General Motors, 496 F. Supp. 2d 1088, 1094-95 (N.D. Cal.
10 2007), citing LiMandri v. Adkins, 52 Cal. App. 4th 326, 337 (1997). The SAC alleges facts to
12 Aegis Had Exclusive Knowledge. Defendant had exclusive knowledge of the fact that it
13 did not consider resident assessments or aggregate care points, but based staffing on pre-
14 determined labor budgets and corporate profit goals. (SAC in 39-46). Further, it knew that, as a
15 result, its facilities did not have sufficient staff to meet the needs of its residents. (SAC 115).
16 Residents and their family members did not and could not have been expected to know of these
17 facts prior to paying to enter an Aegis facility. (SAC IN 109, 115, 132).
18 These allegations, standing alone, are sufficient to trigger a duty to disclose. The fact that
19 the non-disclosed information implicates facility staffing, which in turn raises health and safety
20 concerns, is an additional reason for finding a duty to disclose. (SAC 55). Defendant's
21 argument that "safety" concerns fall outside the Falk factors is incorrect. Falk 496 F. Supp. 2d at
22 1094-95 (faulty speedometers posed a safety risk to Jeep owners; court holds duty to disclose
23 pled). The safety consequences of understaffing in a facility designed to assist vulnerable seniors
24 are obvious, but Plaintiffs have alleged specific examples of the safety hazards created, including
25 but not limited to increased falls, medication errors, elopements, delayed emergency assistance,
26 malnutrition, and dehydration problems. (SAC igif 48, 77, 84, 87).
27 Active Concealment. Not only did Aegis fail to disclose these facts, but it actively
28 concealed them, reassuring residents and family members and promising to remedy problems
I when they did not receive care or noticed staffing shortages. (SAC 11if 69, 75, 78, 85). Aegis's
2 active concealment of its true staffing policies and practices is an independent basis mandating
3 disclosure under the CLRA and the UCL. Collins v. eMachines, Inc., 202 Cal. App. 4th 249, 256-
4 58 (2011), as modified (Dec. 28, 2011); Rutledge v. Hewlett-Packard Co., 238 Cal. App. 4th 1164,
5 1175 (2015), as modified on denial of reh'g (Aug. 21, 2015), review denied (Nov. 10, 2015).
7 assessments in its admission contract and other uniform documentation. Defendant's promise to
8 provide care services sufficient to meet resident needs through its assessment process triggers a
9 duty to disclose that Aegis in fact does not use those assessments to determine facility staffing.
10 (SAC 11 2, 32, 64, 106). As stated in Winans, that is sufficient to trigger a duty to disclose:
20 sufficient 'notice of the particular misconduct' to enable them to 'defend against the charge and
21 not just deny that they have done anything wrong.'" Garrison v. Whole Foods Mkt. Grp., Inc., No.
22 13-cv-05222, 2014 U.S. Dist. LEXIS, 75271 at *11 (N.D. Cal. June 2, 2014), quoting Vess v.
23 Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).
24 Here, the SAC includes detailed factual allegations that specify the "who, what, when,
25 where and how" of defendant's misrepresentations, omissions and misleading conduct. Plaintiffs
26 allege that Aegis [who] makes the affirmative representation to each resident [to whom] in its
27 uniform resident admissions agreements [where]. (SAC TT 28-30). Plaintiffs allege the "what" in
28 exhaustive detail, quoting the resident admission agreement at length. (SAC r 29-30). The SAC
1 details other uniform statements that reiterate Aegis's promise that each resident will be provided
2 with care services tailored to meet each resident's needs, as determined by facility-conducted
5 are false and misleading. The SAC identifies specific provisions in Aegis's standardized
6 admission contract and other uniform written statements that promise each resident's needs will be
7 met by care services provided by facility personnel. (SAC 1111129-33). Aegis represents that each
8 resident's needs will be determined through resident assessments, which are conducted at the time
9 of admission and updated thereafter during the resident's stay. (SAC 2, 4, 28-29, 105). These
10 statements are false and misleading, as the SAC explains in detail, because Aegis does not use the
11 resident evaluation system in setting or providing facility staffing. (SAC 2, 5, 106). Instead,
12 Defendant sets staffing levels based on "pre-determined labor budgets and does not alter the
13 number of staff or staffing hours per facility or shift regardless of changes in occupancy or
15 staffing levels are so low that residents have not received promised care and/or are placed at a
16 substantial risk that they will not in the future. (SAC r 2, 6, 47-48). Plaintiffs also allege that
17 Aegis "does not disclose and affirmatively conceals these crucial and material facts" from
18 Plaintiffs, other residents and the consuming public. (SAC ir 7, 69, 75, 78, 85).
19 As other Courts in the Northern District have recognized in analogous cases, these
20 allegations satisfy the requirements of Rule 9(b). Winans at *8; see also, In re Sony PS3 "other
21 OS" Litig. v. Sony Computer Entin't Am., Inc., 551 Fed. Appx. 916, 920-921 (9th Cir. 2014)
22 (plaintiffs met Rule 9(b) by alleging that "Sony's representations at the time of sale
23 miseharacterized the dual functionality of the PS3 and were likely to deceive members of the
24 publicbecause Sony later restricted users to using either the Other OS feature or accessing the
26
27 In Carnes v. Atria, No. 14-CV-02727-VC (N.D. Cal. Nov. 6, 2014), the District Court (Hon.
4
28 Vince Chabbria) granted a Rule 9(b) challenge to misrepresentation claims arising from Atria's
failure provide promised services to assisted living residents. Judge Chabbria granted leave to
11 PLAINTIFFS' AMENDED OPPOSITION TO DEFENDANT'S
MOTION TO DISMISS
CASE NO. 4:16-cv-0399I-JSW
Case 4:16-cv-03991-JSW Document 38 Filed 10/05/16 Page 17 of 20
1 Defendant's argument that the Aegis documents "make no reference to how staffing
2 schedules would be set by Aegis" misses the point. Aegis cannot dispute that each resident is
3 promised care services tailored to meet resident needs, as determined through resident assessments
4 conducted by facility personnel. (SAC 2, 29). Plaintiffs specifically allege that the reasonable
5 consumer would expect Aegis to use the facility-conducted assessments to set staffing, due in
6 large part to the fact that Aegis touts this procedure in its marketing materials. (SAC lit 4, 35-36).
7 Because Aegis instead sets staffing based on profit margins, residents have either not received
8 their promised care services or been subjected to a substantial future risk of not receiving
9 contractual benefits. (SAC 11112, 6, 10, 47-48, 67, 77, 84). Thus, whether or not Aegis's
10 documents are ultimately construed to contain specific promises regarding "staffing," the SAC
13 Defendant's challenge to the causation allegations rests on the strawman position that the
14 SAC identifies no "staffing" representations and, hence, fails to allege reliance under Rule 9(b).
15 As a threshold matter, that argument misstates Plaintiffs' claim. The SAC alleges that residents
16 and their family members are induced to enter Aegis facilities based on Defendant's promise to
18 professional staff at move-in and thereafter during the resident's stay. (SAC TT 8, 12, 49, 54,108).
19 Based on Aegis's representations, consumers reasonably expect that Aegis sets staffing based on
20 resident needs assessment. In reliance on Aegis's representations, the Named Plaintiffs (and
21
allow plaintiffs to add allegations that, as a result of Atria's conduct, residents were denied
22 promised services or placed at risk of not receiving future services. (Id. at 2). After plaintiff
added those allegations, Atria dropped its Rule 9(b) argument and instead asserted abstention and
23 other arguments that were rejected. (Carnes v. Atria, No. 14-CV-02727-VC (N.D. Cal. Feb. 20,
2015)). Aegis's counsel served as co-counsel for defendant in the Atria case. Here, the SAC
24 contains essentially the same allegations that resolved the Rule 9(b) challenge in Atria. (See e.g.,
SAC iplj 2,10) (residents have failed to receive promised services or face future risk of same).
25
5 Defendant's contention that the Aegis documents contain no "reference" to staffing is an
26
overreach, In its Residence Agreement, Aegis promises to provide each resident with "services
27 appropriate to your individual need," as determined by Aegis's "professional staff." (SAC 29).
The Resident Service Plan -- attached to each resident's admission contract -- details how facility
28 "staff' will provide the specific promised services. (SAC 31).
1 putative class members) were induced to pay significant move-in fees (ranging from $4,000 to
2 $15,000) and pay monthly fees and other expenses to Aegis. (SAC 9, 63, 75, 81).
3 Undisclosed to incoming residents, however, Aegis does not use assessments to determine
4 staffing, which results in residents either not getting promised care or being placed at a future risk
5 of not receiving the same. (SAC r5-6, 8, 47-48). Had Plaintiffs and residents been advised of the
6 true facts (including that Aegis sets staffing to meet profit objectives rather than resident needs),
7 they would not agree to make those payments. (SAC IN 12, 51).
8 These allegations are more than sufficient to establish reliance/causation for purposes of
9 Rule 9(b). Defendant's argument to the contrary cites no case authority, but instead asserts that it
10 is "fundamentally illogical" for residents to rely on Aegis's promises in deciding to move into
11 Defendant's facilities. To the contrary, it defies logic to believe that incoming residents and
12 family members would find it inconsequential that Aegis does not set facility staffing based on
13 resident needs assessment, particularly given the statements made in Aegis's admission contract
14 and marketing materials. Aegis reinforces and encourages consumer expectation that facility
15 staffing will be based on resident assessments with uniform promises that it will: a) provide care
16 services to meet resident needs; b) conduct ongoing resident evaluations to update resident need
17 requirements; and c) price the facility's services through a point system based on resident needs
19 Defendant's argument also ignores the rule that where, as here, material representations or
20 omissions are made to an entire class, reliance is presumed. As the Ninth Circuit has held,
21 "causation, on a classwide basis, may be established by materiality, if the trial court finds material
22 misrepresentations have been made to the entire class," an inference of reliance arises to the entire
23 class. Stearns v. Ticketnuister Carp., 655 F.3d 1013, 1022 (9th Cir. 2011). The same rule "applies
25 Here, the SAC contains detailed allegations showing that the facts misrepresented and not
27 argument to the contrary is belied by its own statements linking resident assessments to facility
28 staffing (SAC III 2-4, 28-33, 60-61, 74-76, 80-83). In any event, materiality and by inference,
1 reliance and causation, generally presents a "question of fact." Stearns, 655 F.3d at 1025; In re
2 Tobacco II, 46 Cal. 4th 298, 327 (2009). Defendant's request that the Court rule now, on the
5 To state a valid claim under the UCL statute, Plaintiffs need only allege facts sufficient to
6 show an "unlawful, unfair or fraudulent" business practice. Rubio v. Capital One Bank, 613 F.3d
7 1195, 1203 (9th Cir. 2010). As stated by the Ninth Circuit, "[w]hether a practice is deceptive,
9 pleading challenge. Williams at 938-939. Here, Plaintiffs allegations clearly state viable claims
11 As to the unlawful prong of the UCL, the SAC pleads facts sufficient to show predicate
12 violations of the CLRA and Elder Abuse statutes. (SAC 1112, 103-117, 136-141). Aegis's
13 contention that Plaintiffs fail to allege sufficient "fraudulent or misleading" conduct under these
14 claims fails. (See above, pp. 3-6). In addition, the Elder Abuse statute is violated where, as here,
15 the Defendant obtains personal property of an elder "for a wrongful use or with intent to defraud,
16 or both." Cal. Welf. & Inst. Code 15610.30(a)(1) (emphasis added); see also, Negrete v.
17 Fidelity & Guaranty Life Ins. Co., 444 F. Supp. 2d 998, 1001 (C.D. Cal. 2006). The SAC alleges
19 The same is true for the fraudulent practice claim. That claim requires only that Plaintiffs
20 alleges facts sufficient to show that "members of the public are likely to be deceived." Davis v.
21 HSBC Bank Nevada, 691 F.3d 1152, 1169 (9th Cir. 2012). Here, the SAC provides detailed
22 allegations that identify statements and conduct by Aegis that are likely to deceive the consuming
24 Likewise, the SAC states a valid claim for unfair business practices. Plaintiffs allege that
25 Aegis promises to provide care services sufficient to meet resident needs, as determined by
26 assessments conducted by Aegis facility personnel. It sets contract pricing based on a point
27 system predicated on those resident assessments. But residents are never told that, when it comes
28 to setting and maintaining facility staffing, Aegis ignores resident assessments and instead sets
1 staffing to meet profit objectives by minimizing the amount of staff available to provide care
2 services. (SAC IN 6, 37, 55). That conduct is "unfair" under any test applied for that prong of the
3 UCL statute. Backhaut v. Apple Inc., 74 F. Supp. 3d 1033, 1050 (N.D. Cal. 2014) (unfair business
4 practice includes conduct that is "unscrupulous" and causes "injury to consumers which
5 outweighs its benefits"); Davis, 691 F.3d at 1169-1171 (citing alternative tests for UCL
6 "unfairness").
7 VII. CONCLUSION
8 For these reasons, Defendant's motion to dismiss the Second Amended Complaint should
10 Respectfully submitted,
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1 Christopher J. Healey, State Bar No. 105798 W. Timothy Needham, State Bar No. 96542
DENTONS US LLP JANSSEN MALLOY LLP
2 4655 Executive Drive, Suite 700 730 Fifth Street
San Diego, CA 92121 Eureka, CA 95501
3 Tel: (619) 236-1414 Tel: (707) 445-2071
Fax: (619) 232-8311 Fax: (707) 445-8305
4
Kathryn A. Stebner, State Bar No. 121088 Guy B. Wallace, State Bar No. 176151
5 Sarah Colby, State Bar No. 194475 Jennifer A. Uhrowczik, State Bar No. 302212
George Kawamoto, State Bar No. 280358 SCHNEIDER WALLACE COTTRELL
6 STEBNER AND ASSOCIATES KONECKY WOTKYNS, LLP
870 Market Street, Suite 1212 180 Montgomery Street, Suite 2000
7 San Francisco, CA 94102
Tel: (415) 362-9800 San Francisco, CA 94102
8 Fax: (415) 362-9801 Tel: (415) 421-7100
Fax: (415) 421-7105
9 Michael D. Thamer, State Bar No. 101440
LAW OFFICES OF MICHAEL D. THAMER Robert S. Arns, State Bar No. 65071
10 Old Callahan School House THE ARNS LAW FIRM
12444 South Highway 3 515 Folsom Street, 3rd Floor
11 Post Office Box 1568 San Francisco, CA 94105
Callahan, California 96014-1568 Tel: (415) 495-7800
12 Tel: (530) 467-5307 Fax: (415) 495-7888
Fax: (530) 467-5437
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PROOF OF SERVICE
Case 4:16-cv-03991-JSW Document 38-1 Filed 10/05/16 Page 2 of 3
2 I am employed with the law firm of Dentons US LLP, whose address is 4655 Executive
Drive, Suite 700, San Diego, CA 92121. I am over the age of eighteen years, and am not a party
3 to this action.
15 Sarah S Colby
sscolby@schneiderwallace.com
16
Katherine Carol Den Bleyker
17 katherine.denbleyker@lewisbrisbois.com,
Catherine.Blumenfeld@lewisbrisbois.com, Melinda.Timms@lewisbrisbois.com,
18 Evy.Lopez@lewisbrisbois.corn
19 Julie C. Erickson
jce@arnslaw.com
20
Kirsten M. Fish
21 kfish@nkf-law.com, blaherran@nkf-law.com, pbrown@nkf-law.corn
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PROOF OF SERVICE
Case 4:16-cv-03991-JSW Document 38-1 Filed 10/05/16 Page 3 of 3
1 Victoria Lin
Victoria.Lin@Lewisbrisbois.com
2
William Timothy Needham
3 tneedham@janssenlaw.com, amason@janssenlaw.com, kellis@janssenlaw.com
12 I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.
13
Executed on October 5, 2016, at San Diego, California.
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s/ Chris Healey
16 Chris Healey
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PROOF OF SERVICE