Commercial Litigation and Arbitration

Judicial Notice (JN) on 12(b)(6) Motion — JN of Wayback Machine Results OK, But Lack of Wayback Watermark on One Exhibit and Incongruity between Dates on Other Exhibits & on Request for JN Warrant Denial

Prime Healthcare Servs. v. Harris, 2017 U.S. Dist. LEXIS 130853 (S.D. Cal. Aug. 16, 2017):

Before the Court is Defendants Kamala D. Harris ("Defendant" or "Harris") and Attorney General of California Xavier Becerra's1 ("Defendant's" or "Becerra's") (collectively, "Defendants'") motion to dismiss Plaintiffs Prime Healthcare Services, Inc. and Prime Healthcare Foundation, Inc.'s ("Plaintiffs'" or "Prime's") Second Amended Complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike the quid pro quo allegations in Plaintiffs' SAC pursuant to Federal Rule of Civil Procedure 12(f).2

 (Dkt. No. 62.) The motion has been fully briefed. (Dkt. Nos. 69, 74.)

The Court conducted a hearing on April 28, 2017. (Dkt. No. 76.) John Alfred Mills, Esq. appeared on behalf of Plaintiffs. (Id.) S. Michele Inan, Esq. and Sharon O'Grady, Esq. appeared on behalf of Defendants. (Id.)

Having reviewed the parties' arguments and the applicable law, and for the reasons set forth below, the Court DENIES Defendants' motion to strike Prime's quid pro quo allegations, GRANTS Defendants' motion to dismiss Prime's 42 U.S.C. § 1983 claim against Harris in her personal capacity for violation of the Equal Protection Clause, and GRANTS Defendants' motion to dismiss Prime's 42 U.S.C. § 1983 claim against Becerra in his official capacity for prospective injunctive relief. (Dkt. No. 62.)

BACKGROUND [*3] 

I. The Parties

Plaintiff Prime Healthcare Services, Inc. is a California corporation that owns and operates twenty-eight hospitals throughout the country. (Dkt. No. 57, SAC ¶ 21.) Plaintiff Prime Healthcare Foundation, Inc. is a nonprofit public charity that owns seven nonprofit hospitals, each of which was donated by Prime Healthcare Services, in various states.3

 (Id. ¶ 22.) Defendant Kamala D. Harris was the Attorney General of California during the events giving rise to the instant litigation and at the time the instant action was filed. (Id. ¶ 24.) Defendant Xavier Becerra is the current Attorney General of California. This action stems from Harris's allegedly improper, de facto denial of Prime's proposed acquisition of the Daughters of Charity Health System ("DCHS"), a group of five financially distressed hospitals and a skilled nursing facility. (Id. ¶¶ 1, 2, 14, 90.) Prime's core contention is this—at the behest of Service Employees International Union-United Healthcare Workers West, Harris effectively denied the Prime-DCHS transaction by imposing untenable requirements on Prime to continue operating five of the six DCHS facilities in their current state for ten years. (Id. ¶¶ [*4]  1, 14.)

II. Statutory and Regulatory Background

The Attorney General supervises all charitable organizations and enforces the obligations of trustees, nonprofits, and fiduciaries that hold or control property in trust for charitable purposes.4

 Pursuant to California Corporations Code §§ 5914-5925 ("the Nonprofit Hospital Transfer Statute" or "the Statute"), a nonprofit corporation that operates a health facility must provide notice to and obtain the written consent of the Attorney General prior to entering into an agreement to sell a material amount of its assets to a for-profit corporation.5  Cal. Corp. Code § 5914(a)(1). The Attorney General has "discretion to consent to, give conditional consent to, or not consent to any agreement or transaction." Id. § 5917.

In making this determination, the Attorney General "shall consider any factors that the Attorney General deems relevant," including, but not limited to, a non-exhaustive list of nine factors specified by the Statute and the corresponding implementing regulations. Id; see also Cal. Code Regs. tit. 11, § 999.5(f). The factors span an expansive range of considerations, from the terms of the agreement to antitrust concerns and the public interest. See Cal. Corp. Code § 5917; Cal. Code Regs. tit. 11, § 999.5(f). They include, inter alia, whether "[t]he terms and conditions of the agreement or transaction [*5]  are fair and reasonable to the nonprofit corporation," whether the transaction "will result in inurement to any private person or entity," whether the transaction "is at fair market value," with "fair market value" meaning "the most likely price that the assets being sold would bring in a competitive and open market under all conditions requisite to a fair sale," whether "[t]he market value has been manipulated by the actions of the parties in a manner that causes the value of the assets to decrease," whether "[t]proposed use of the proceeds from the agreement or transaction is consistent with the charitable trust on which the assets are held by the health facility or by the affiliated nonprofit health system," whether the transaction "involves or constitutes any breach of trust," whether "[t]he Attorney General has been provided . . . with sufficient information and data by the nonprofit corporation to evaluate adequately the agreement or transaction or the effects thereof on the public," whether the transaction "may create a significant effect on the availability or accessibility of health care services to the affected community," and whether the transaction is "in the public interest." Cal. Corp. Code § 5917; see also Cal. Code Regs. tit. 11, § 999.5(f).

 [*6] If consent is granted to a transaction, the Attorney General's policy is to "require for a period of at least five years the continuation at the hospital of existing levels of essential healthcare services, including but not limited to emergency room services." Cal. Code Regs. tit. 11, § 999.5(f)(8)(C). It is also the policy of the Attorney General "to require for a period of at least five years that a minimum level of annual charity costs be incurred by the hospitals that are the subject of the agreement or transaction." Id. § 999.5(f)(8)(B). Notwithstanding this policy, the Attorney General "retain[s] complete discretion to determine whether this policy shall be applied in any specific transaction under review." Id. § 999.5(f)(8)(B)—(C). Further, "[p]otential adverse effects on availability or accessibility of health care may be mitigated through provisions negotiated between the parties to the transaction, through conditions adopted by the Attorney General in consenting to the proposed transaction, or through any other appropriate means." Id. § 999.5(f)(8)(A).

The Attorney General considers information from a variety of sources in making the determination on a proposed transaction. The selling entity must submit to the Attorney General details about the transaction, reasons for the sale, the fair market value of the transaction, and the impact of the sale on the availability and accessibility of healthcare services in the community affected by the sale, among other information. Cal. Corp. Code § 5914(b); Cal. Code Regs. tit. 11, § 999.5(d). The written notice must include a section entitled "Impacts on Health Care Services." Cal. Code Regs. tit. 11, § 999.5(d)(5). This section of the written notice must include, inter alia, a "description of all charity care provided in the last five years by each health facility"; a "description of all services provided by each health facility . . . in the past five years to Medi-Cal patients, county indigent patients, and any other class of patients," including details about "the type and volume of services provided, the payors for [*7]  the services provided, the demographic characteristics of and zip code data for the patients served by the health facility . . . and the costs and revenues for the services provided"; a "description of current policies and procedures on staffing for patient care areas; employee input on health quality and staffing issues; and employee wages, salaries, benefits, working conditions and employment protections," including "a list of all existing staffing plans, policy and procedure manuals, employee handbooks, collective bargaining agreements or similar employment-related documents"; "all existing documents setting forth any guarantees made by any entity that would be taking over operation or control of the health facility . . . relating to employee job security and retraining, or the continuation of current staffing levels and policies, employee wages, salaries, benefits, working conditions and employment protections"; and a "statement describing all effects that the proposed agreement or transaction may have on health care services provided by each facility proposed to be transferred." Id. The Attorney General may also request that the seller provide additional information that he or [*8]  she deems reasonably necessary to make the determination. Id. § 999.5(c)(2).

Before issuing a written decision, the Attorney General must conduct one or more public meetings in order to hear comments from interested parties. Cal. Corp. Code § 5916. The Attorney General's policy is to receive and consider all relevant information concerning the proposed transaction from "[a]ny interested person." Cal. Code Regs. tit. 11, § 999.5(e)(7). The Attorney General may contract with consultants and experts to review the proposed sale or receive expert opinion from any state agency. Id. § 999.5(e)(4).

If a proposed transaction affects an acute care hospital with more than fifty beds or may result in a significant effect on the availability or accessibility of existing healthcare services, the Attorney General prepares an independent healthcare impact statement that evaluates the transaction's potential impact on the availability and accessibility of services to the affected community. Id. § 999.5(e). The independent statement may assess factors such as the transaction's potential impact on the "level and type of charity care that the hospital has historically provided" and the "provision of health care services to Medi-Cal patients, county indigent patients, and any other class of patients."  [*9] Id. § 999.5(e)(6). The information in the statement is then used to consider whether the proposed transaction may "create a significant effect on the availability or accessibility of health care services," one of the nine factors listed in Cal. Corp. Code § 5917. Id. § 999.5(e). The statement is public. Id. § 999.5(e)(3)(D).

The Attorney General notifies the applicant of the decision in writing. Cal. Corp. Code § 5915. The decision is reviewable in state court in an administrative mandamus proceeding. Cal. Civ. Proc. Code § 1085.

III. Factual Background

A. The Alleged Agreement Between Harris and SEIU-UHW

Since 2009, Prime has been engaged in a protracted dispute with Service Employees International Union-United Healthcare Workers West ("SEIU-UHW), a labor union that represents California hospital workers, in large part due to Prime's unwillingness to allow SEIU-UHW to unionize Prime's California hospitals.6

 (SAC ¶ 10.) Prime alleges that Harris entered into an unlawful scheme with SEIU-UHW: in exchange for SEIU-UHW s political and financial support of her United States Senate campaign, Harris would prevent Prime from acquiring nonprofit hospitals in California unless Prime agreed to allow SEIU-UHW to unionize its hospital workers. (Id. ¶¶ 112-14.) Prime alleges that pursuant to this unlawful scheme, [*10]  Harris "refus[ed] to reasonably approve the sale of [DCHS] to [Prime] because Prime rejected [SEIU-UHW's] extortionate demands . . . to unionize workers at all Prime hospitals." (Id. ¶ 1.)7

As evidence for this scheme, Prime cites SEIU-UHW's donations to Harris's 2010 and 2014 campaigns for Attorney General. (Id. ¶ 37.) Prime alleges on information and belief that SEIU-UHW promised Harris up to $25 million in political contributions to her United States Senate campaign if she denied Prime's acquisition or imposed conditions that would effect a de facto denial of the DCHS sale. (Id. ¶ 38.) Prime also alleges on information and belief that SEIU-UHW advised Harris that the union would support Harris's opposing candidates if she refused to comply with the union's demands. (Id.)

B. The Prime-VVCH Transaction

On September 20, 2011, Harris denied consent to Prime Healthcare Foundation's proposed acquisition of Victor Valley Community Hospital (" VVCH"). (Id. ¶¶ 42-60.) Prime asserts that Harris's denial of the VVCH transaction was the first and only time Harris denied the sale of a California nonprofit [*11]  hospital. (Id. ¶¶ 51, 94.) Prime does not appear to seek relief with respect to the VVCH transaction.

Prime alleges on information and belief that Harris denied the 2011 VVCH sale at SEIU-UHW's request. (Id. ¶¶ 44-45, 50.) In support of its assertion, Prime cites examples of statements and conduct by SEIU-UHW. An SEIU-UHW attorney stated at a bankruptcy hearing that Harris would deny the VVCH transaction; SEIU-UHW campaigned against the sale; and SEIU-UHW opposed the sale at the Attorney General's public hearing on the transaction. (Id. ¶¶ 42, 44, 47.) Harris denied the sale, stating generally that it was not in the public's best interest. (Id. ¶ 49.) After Harris denied Prime's proposed acquisition of VVCH, SEIU-UHW publicly claimed credit for the decision. (Id. ¶¶ 42, 59.)

During labor negotiations with Prime in July 2014, Dave Regan, president of SEIU-UHW, stated that Harris denied the VVCH sale to Prime at the union's request. (Id. ¶ 50.) In 2015, a senior staff member in the Attorney General's Office informed Prime that Harris had "made a mistake and was inexperienced and new to the job" when she denied consent to the VVCH transaction. (Id.)

C. The Prime-DCHS Transaction

Facing financial [*12]  difficulty in 2014, the Daughters of Charity Health System decided to sell five nonprofit hospitals and a skilled nursing facility that it owned and operated in California.8

 (Id. ¶¶ 3, 62, 91.) After a thirteen-month bidding process, DCHS selected Prime's bid to purchase the hospitals on October 10, 2014. (Id. ¶¶ 4, 7, 75.) Alongside acknowledging Prime's strengths, DCHS identified the potential shortcomings of a Prime transaction, citing resistance from SEIU-UHW, potential transaction resistance from the Attorney General and California politicians, and Prime's litigious history. (Id. ¶ 6.) DCHS and Prime's sale agreement required Prime to keep each of the hospitals open and to "maintain all existing healthcare services, including emergency rooms and trauma centers, for at least five years." (Id. ¶ 75.) DCHS submitted written notice of the proposed sale to the Attorney General on October 24, 2014. (Id. ¶¶ 8, 78.) Prime alleges that its proposed acquisition was "the single largest hospital transaction ever reviewed by the Attorney General's office" and "the largest bail-out of non-profit hospitals in California history." (Id. ¶¶ 8-9.)

The Attorney General's Office made public five [*13]  healthcare impact statements prepared by MDS Consulting. (Id. ¶ 79.) Harris allegedly requested that these statements recommend requiring Prime to continue operating five of the six DCHS facilities in their current state for a period of ten years. (Id. ¶¶ 15, 79, 88, 122.) On information and belief, Prime alleges that Harris made this request "before the report or any studies had been generated." (Id. ¶¶ 79, 83.) In January 2015, the Attorney General received written comments and held multiple public hearings over a period of five days to receive input on the proposed sale. (Id. ¶ 82.)

In February 2015, prior to Harris's issuance of her final decision, Prime met with staff members of the Attorney General's Office to express its concerns about the proposed ten-year conditions. (Id. ¶ 85.) The Attorney General's Office stated that the ten-year conditions were non-negotiable, and that Harris would require a ten-year commitment for future sales of nonprofit hospitals to for-profit operators in California. (Id. ¶ 86.)

D. The Attorney General's Decision

On February 20, 2015, the Attorney General conditionally consented to the Prime-DCHS transaction. (Id. ¶¶ 14, 87, 93.) Harris imposed numerous [*14]  conditions on the sale. (Id. ¶ 87.) Harris's conditions effectively required Prime to operate five hospitals as acute care facilities for ten years and to maintain the majority of current hospital services at each hospital, with the exception of St. Vincent Medical Center, for ten years. (Id.) Staff members of the Attorney General's Office informed Prime that Harris personally requested the ten-year conditions. (Id. ¶¶ 15, 79, 83, 88.) Harris allegedly stated that the conditions were "unique and tailored to Prime." (Id. ¶ 120.)

Prime alleges that the Attorney General's unprecedented ten-year conditions rendered the proposed transaction financially unviable, requiring Prime to operate the financially failing hospitals at a loss for ten years. (Id. ¶¶ 18, 89-91, 93.) Accordingly, Prime characterizes the Attorney General's conditional approval of the DCHS sale as a de facto denial, as an outright denial of consent to the transaction was "politically impossible" for Harris. (Id. ¶¶ 14, 83, 91-92.) On March 10, 2015, Prime withdrew its bid to purchase the DCHS hospitals because of the ten-year conditions. (Id. ¶¶ 18, 90.)

E. SEIU-UHW's Alleged Involvement

Prime asserts that Harris de facto [*15]  denied Prime's acquisition at the bidding of SEIU-UHW. (Id. ¶¶ 1-2, 17, 38.) As evidence, Prime cites various statements and conduct by SEIU-UHW. SEIU-UHW comprised the main source of public opposition to the Prime-DCHS deal, (id. ¶¶ 76-77, 81-82), and publicly took credit for Harris's decision to impose "unprecedented conditions" on Prime's acquisition of DCHS, (id. ¶ 89). Prime alleges on information and belief that SEIU-UHW's actions were "all political theater, designed to mask the fact that . . . Harris would ultimately follow the bidding of SEIU-UHW regardless of the true merits of Prime's bid to acquire the DCHS hospitals." (Id. ¶ 76.) For example, SEIU-UHW created a website to oppose Prime's bid.9

 (Id. ¶ 65.) SEIU-UHW aired television ads and initiated a calling campaign urging Harris to deny consent to the sale. (Id. ¶ 76.) SEIU-UHW and a competing bidder, Blue Wolf Capital Partners LLC ("Blue Wolf), met with Harris to show Harris that an alternative buyer existed. (Id. ¶ 80.) SEIU-UHW passed a resolution calling on Harris to halt the sale of any hospital to Prime during the pendency of investigations of Prime for alleged Medicare fraud. (Id. ¶ 70.)

Prime alleges that SEIU-UHW [*16]  threatened to withdraw its support for any Democratic politician who accepted contributions from Prime. (Id. ¶ 71.) SEIU-UHW issued a press release announcing that twenty-seven state legislators had submitted a letter to Harris asking her to stop the sale to Prime. (Id.) SEIU-UHW issued a subsequent announcement that thirty-eight state legislators, two United States Representatives, and other elected officials had signed the letter to Harris. (Id.)

Dave Regan, the president of SEIU-UHW, repeatedly informed Prime and DCHS that Harris would approve Prime's acquisition only if Prime agreed to allow SEIU-UHW to unionize workers at Prime's hospitals. (Id. ¶¶ 9 -11, 39-40, 61, 68-69, 83.) Regan boasted to Prime that "he has the influence with Harris to either make or break Prime with respect to the Prime-DCHS sale transaction," that Harris "would do what she was told and nothing more," that "a SEIU-UHW deal was the price for doing business in California and obtaining a sale approval from Harris," and that Regan "control[s] Harris and the political process in California." (Id. ¶¶ 39, 68, 83.)

Similarly, during Prime's 2014 labor negotiations with SEIU-UHW, Conway Collis (DCHS's senior advisor and primary [*17]  lobbyist) and former Attorney General William Lockyer (a mediator for Prime's negotiations with SEIU-UHW) informed Prime that Harris would deny Prime's acquisition or require financially unviable conditions unless Prime agreed to SEIU-UHW's demands. (Id. ¶¶ 9, 12-13.) Collis and Lockyer allegedly informed Prime that they had learned of this condition from Harris. (Id. ¶¶ 12-13.)

F. The BlueMountain-DCHS Transaction

After Prime withdrew its bid to acquire DCHS, DCHS opened a new round of bidding for potential buyers. (Id. ¶ 103.) On or about July 17, 2015, DCHS entered into a System Restructuring and Support Agreement with BlueMountain Capital Management, LLC ("BlueMountain") and Integrity Healthcare, LLC ("Integrity"), a company owned by BlueMountain. (Id.) Unlike Prime, BlueMountain received political support from SEIU-UHW. (Id. ¶ 102.) Pursuant to the restructuring agreement, Integrity would manage DCHS in exchange for a management fee of 4% of DCHS's annual operating revenue, and BlueMountain would have the option to purchase the hospitals, beginning three years from the closing date. (Id. ¶ 103.) The agreement required BlueMountain to maintain the DCHS hospitals for five years. ( [*18] Id.)

Prime distinguishes the BlueMountain-DCHS agreement from its proposed acquisition of DCHS. (Id.) Prime avers that the agreement posed "little, if any, financial risk" for BlueMountain, as BlueMountain did not agree to actually purchase the hospitals. (Id.) If the hospitals closed within a year, BlueMountain would not be held responsible for the closure and would have no legal responsibility to keep the facilities open. (Id.)

On information and belief, Prime alleges that BlueMountain and DCHS, pursuant to a mitigation and performance improvement plan, collaboratively closed certain services—including ones that Harris had required Prime to maintain for ten years—and reduced labor and physician costs prior to submitting the DCHS-BlueMountain transaction to Harris for review. (Id. ¶¶ 104-05, 107.) Prime surmises that Harris informed DCHS and BlueMountain that she would approve the transaction before they even submitted it for review. (Id. ¶ 106.)

In August 2015, DCHS submitted notice to the Attorney General of a proposed transaction with BlueMountain. (Id. ¶ 109.) Harris conditionally approved the transaction in December 2015. (Id.) As she did with the Prime-DCHS transaction, Harris required [*19]  that existing service lines be maintained for ten years. (Id. ¶ 109.) Notwithstanding Harris's imposition of ten-year conditions on the BlueMountain-DCHS transaction, Prime alleges BlueMountain received "less onerous" conditions than the ones Harris imposed on Prime, largely due to the fact that DCHS and BlueMountain closed several service lines and programs before submitting the transaction to Harris for review. (Id. ¶¶ 110-11.) Prime alleges on information and belief that Harris imposed the ten-year conditions on account of Prime filing the instant lawsuit in September 2015. (Id. ¶ 109.)

IV. Procedural Background

Prime filed a Complaint in the United States District Court for the Central District of California on September 21, 2015, (Dkt. No. 1), and filed a FAC on November 12, 2015, (Dkt. No. 14). Prime asserted five claims for relief in the FAC: (1) a 42 U.S.C. § 1983 claim for violation of Prime's rights under the Due Process Clause of the Fourteenth Amendment; (2) a 42 U.S.C. § 1983 claim for violation of Prime's rights under the Equal Protection Clause of the Fourteenth Amendment; (3) a 42 U.S.C. § 1983 claim for violation of Prime's rights under the National Labor Relations Act, 29 U.S.C. §§ 151-169; (4) a declaratory judgment that Cal. Corp. Code §§ 5914-5925 is unconstitutional under the Fourteenth Amendment, both facially and as applied to Prime; and (5) a permanent injunction [*20]  enjoining Harris from enforcing Cal. Corp. Code §§ 5914-5925, both generally and with respect to Prime. (Dkt. No. 14.)

Harris moved to transfer the case to the United States District Court for the Southern District of California or, in the alternative, to dismiss Prime's FAC on November 30, 2015. (Dkt. Nos. 17, 18.) Harris's motion to transfer was granted on March 31, 2016 by Chief Judge George H. King of the United States District Court for the Central District of California. (Dkt. No. 38.) Accordingly, Harris's motion to dismiss, (Dkt. No. 18), and Prime's Ex Parte Application to Strike New Arguments and Evidence in Defendant's Reply Brief, (Dkt. No. 35), were denied without prejudice to their reassertion in the transferee court, (Dkt. No. 38). On April 12, 2016, the parties jointly moved the Court to accept as reasserted and filed Harris's motion to dismiss Prime's FAC and Ex Parte Application, together with all related briefing. (Dkt. No. 42.) Judge John A. Houston of the United States District Court for the Southern District of California granted the parties' joint motion on April 12, 2016. (Dkt. No. 43.) The case was reassigned to the undersigned judge on July 11, 2016. (Dkt. No. 44.)

The Court held [*21]  a hearing on Harris's motion to dismiss Prime's FAC on September 30, 2016. (Dkt. No. 51.) On October 31, 2016, the Court granted in part and denied in part Harris's motion to dismiss Prime's FAC. (Dkt. No. 54.) The Court dismissed all claims with prejudice except for Prime's § 1983 claim for violation of Prime's rights under the Equal Protection Clause of the Fourteenth Amendment. (Dkt. No. 54 at 44-45.)

Prime filed a SAC on November 30, 2016. (Dkt. No. 57.) In the SAC, Prime asserts a 42 U.S.C. § 1983 claim against Harris in her personal capacity for violation of its equal protection rights under the Fourteenth Amendment. (SAC ¶¶ 117-24.) Prime also seeks injunctive relief under 42 U.S.C. § 1983, requesting a permanent injunction preventing the Attorney General of California from enforcing Cal. Corp. Code §§ 5914-5925 in a manner that violates its equal protection rights. (SAC ¶ 126.)

Harris and Becerra filed the instant motion to dismiss on January 27, 2017. (Dkt. No. 62.) Prime responded on March 17, 2017, (Dkt. No. 69), and Defendants replied on April 7, 2017, (Dkt. No. 74). The Court conducted a hearing on April 28, 2017 and took the matter under submission. (Dkt. No. 76.)

LEGAL STANDARDS

A. Rule 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted under Rule 12 (b)(6) where the complaint lacks [*22]  a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984); see also Neitzke v. Williams, 490 U.S. 319, 326, 109 S. Ct. 1827, 104 L. Ed. 2d 338 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law."). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. While a plaintiff need not give "detailed factual allegations," a plaintiff must plead sufficient facts that, if true, "raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 547). A claim is facially plausible when the factual allegations permit "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. In other words, "the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009). "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

In reviewing a motion to dismiss [*23]  under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe all inferences from them in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions, however, need not be taken as true merely because they are cast in the form of factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a motion to dismiss, the court may consider the facts alleged in the complaint, documents attached to the complaint, documents relied upon but not attached to the complaint when authenticity is not contested, and matters of which the court takes judicial notice. Lee v. Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

B. Rule 12(f)

Under Federal Rule of Civil Procedure 12(f), the Court may, by motion or on its own initiative, strike "an insufficient defense or any redundant, immaterial, impertinent or scandalous" matter from the pleadings. Fed. R. Civ. P. 12(f). The purpose of Rule 12(f) is "to avoid the expenditure of time and money that must arise from litigating spurious issues by disposing of those issues prior to trial." Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (quoting Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds by Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994)).

The Court must view the pleading in the light more favorable to the pleader when ruling on a motion to strike. In re 2TheMart.com, Inc. Sec. Litig., 114 F. Supp. 2d 955, 965 (CD. Cal. 2000) (citing California v. United States, 512 F. Supp. 36, 39 (N.D. Cal. 1981)). Motions to strike are regarded with disfavor because striking is such a drastic remedy. Freeman v. ABC Legal Servs., Inc., 877 F. Supp. 2d 919, 923 (N.D. Cal. 2012). If a claim is stricken, [*24]  leave to amend should be freely given when doing so would not cause prejudice to the opposing party. Vogel v. Huntington Oaks Delaware Partners, LLC, 291 F.R.D. 438, 440 (CD. Cal. 2013) (citing Wyshak v. City Nat'l Bank, 607 F.2d 824, 826 (9th Cir. 1979)).

C. Requests for Judicial Notice

Defendants filed a request for judicial notice in support of their motion, (Dkt. No. 64), to which Plaintiffs objected, (Dkt. No. 70), and Defendants replied, (Dkt. No. 74-1). Plaintiffs separately filed a request for judicial notice in support of the opposition to Defendants' motion, (Dkt. No. 71), to which Defendants objected, (Dkt. No. 74-2).

Generally, a court may not consider materials outside of the pleadings in ruling on a Rule 12(b)(6) motion without converting the motion into a Rule 56 motion for summary judgment. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). Two exceptions to this general rule exist—"documents incorporated into the complaint by reference, and matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 168 L. Ed. 2d 179 (2007).

First, "a court may consider 'material which is properly submitted as part of the complaint' on a motion to dismiss without converting the motion to dismiss into a motion for summary judgment." Id. (citation omitted). "Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document [*25]  forms the basis of the plaintiff's claim." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Put simply, "a court may consider evidence on which the complaint necessarily relies if: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion." Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010) (citation and internal quotation marks omitted); see also Lee, 250 F.3d at 688. A "defendant may offer such a document, and the district court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)." Ritchie, 342 F.3d at 908. To illustrate, "[t]he doctrine of incorporation by reference may apply . . . when a plaintiff's claim about insurance coverage is based on the contents of a coverage plan, or when a plaintiff's claim about stock fraud is based on the contents of SEC filings." Id. (citations omitted).

Second, a "court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). "[U]nder Fed. R. Evid. 201, a court may take judicial notice of 'matters [*26]  of public record,'" Lee, 250 F.3d at 688-89 (citation omitted)), such as "information . . . made publicly available by government entities," Daniels-Hall, 629 F.3d at 998-99 (citing cases), and "records and reports of administrative bodies," Ritchie, 342 F.3d at 909. It follows, accordingly, that "disputed matters of fact"—or, phrased differently, facts "subject to reasonable dispute," Fed. R. Evid. 201(b)—are not properly subject to judicial notice, even if they are stated in public records. Lee, 250 F.3d at 690. On the other hand, courts "are not . . . required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice, or allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Daniels-Hall, 629 F.3d at 998.

1. Defendants' RJN (Dkt. No. 64)

a. Exhibits 1-6, 9-30

Exhibits 1-6 and 9-30 consist of Harris's decisions regarding healthcare facility transactions, healthcare impact reports prepared by her consultant, and a 2007 decision by former Attorney General Edmund G. Brown, Jr. concerning Prime's acquisition of Anaheim Memorial Medical Center. (Dkt. No. 64 at 2.) The Court GRANTS Defendants' RJN with respect to these exhibits because Exhibits 1-30 consist of matters of public record, and because Prime's SAC refers to [*27]  the transactions detailed in Exhibits 1-29. The Court SUSTAINS Plaintiffs' objections insofar as Defendants seek judicial notice of disputed matters of fact.

b. Exhibits 7, 7.1, and 7.2

Exhibits 7, 7.1, and 7.2 consist of the agreement between DCHS and BlueMountain. (Dkt. No. 64 at 2-3.) The Court GRANTS Defendants' RJN with respect to these exhibits because Exhibits 7, 7.1, and 7.2 consist of matters of public record. The Court SUSTAINS Plaintiffs' objections insofar as Defendants seek judicial notice of disputed matters of fact.

c. Exhibit 8

Exhibit 8 is an email dated September 3, 2015 from the Office of the Attorney General distributing the DCHS mitigation plan to interested parties, including Prime. (Dkt. No. 64 at 3.) The Court DENIES Defendants' RJN with respect to this exhibit. Although Plaintiffs reference in their SAC the mitigation plan distributed by the email, the email itself is not incorporated by reference, is not "generally known within the trial court's territorial jurisdiction," and does not appear to "be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).

d. Exhibits 31, 32, 35

Exhibits 31, 32, and 35 consist of (1) Harris's [*28]  memorandum of points and authorities in opposition to a motion for peremptory writ of mandate filed in Victor Valley Community Hospital v. Kamala D. Harris, et al. in the Superior Court of California, County of San Bernardino County (case no. CIV VS 11055565); (2) the petitioner Victor Valley Community Hospital's request for dismissal of the petition filed in the same action; and (3) the complaint in intervention filed June 2016 in United States of America ex rel. Karin Berntsen v. Prime Healthcare Services Inc., et al. in the United States District Court for the Central District of California (case no. CV-11-08214). (Dkt. No. 64 at 3-4.) The Court GRANTS Defendants' RJN with respect to these exhibits because Exhibits 31, 32, and 35 are state and federal court documents not subject to reasonable dispute. The Court SUSTAINS Plaintiffs' objections insofar as Defendants seek judicial notice of disputed matters of fact.

e. Exhibits 33 and 34

Exhibits 33 and 34 are press articles reporting United States Senator Barbara Boxer's announcement that she would not seek reelection and Harris's announcement that she would run for election to Senator Boxer's seat. (Dkt. No. 64 at 4.) The Court GRANTS [*29]  Defendants' RJN with respect to the dates of the two announcements, as they are facts not subject to reasonable dispute. The Court SUSTAINS Plaintiffs' objections insofar as Defendants seek judicial notice of disputed matters of fact.

2. Plaintiffs' RJN (Dkt. No. 71)

a. Exhibits A, C, D, and E

Exhibit A is purportedly a copy of Centinela Hospital Medical Center's website as it appeared on February 6, 2015. (Dkt. No. 71 at 2.) Exhibit C is purportedly a copy of PIH Health Hospital Downey's website as it appeared on or about February 2015. (Id.) Exhibit D is purportedly a copy of Whittier Hospital Medical Center's website as it appeared on or about March 2016. (Id.) Exhibit E is purportedly a copy of Kaiser Permanente Downey Medical Center's website as it appeared on March 13, 2017. (Id.)

Plaintiffs assert that each of the exhibits are copies of webpages taken from the Internet Archive, and are thus not subject to reasonable dispute. See Erickson v. Nebraska Mach. Co., No. 15-CV-01147-JD, 2015 U.S. Dist. LEXIS 87417, 2015 WL 4089849, at *1 (N.D. Cal. July 6, 2015) ("Courts have taken judicial notice of the contents of web pages available through the [Internet Archive's] Wayback Machine as facts that can be accurately and readily determined from sources whose accuracy [*30]  cannot reasonably be questioned." (citing Pond Guy, Inc. v. Aquascape Designs, Inc., No. 13-13229, 2014 U.S. Dist. LEXIS 85504, 2014 WL 2863871, at *4 (E.D. Mich. Jun. 24, 2014); In re Methyl Tertiary Butyl Ether (MTBE) Products Liab. Litig., 2013 U.S. Dist. LEXIS 181837, 2013 WL 6869410 (S.D.N.Y. Dec. 30, 2013)).

This assertion is not clear, however, with respect to Exhibit E, which does not bear the Internet Archive Wayback Machine watermark on the top of the exhibit. (See Dkt. No. 71-1 at 33-34.) With respect to Exhibit A, the date listed in the Internet Archive Wayback Machine watermark, although unclear, appears to indicate February 12, 2015, rather than February 6, 2015, as Plaintiffs suggest. (See Dkt. No. 71-1 at 2.) With respect to Exhibit C, the first page reflects February 15, 2015, but the second through fourth pages reflect dates in March 2015, contrary to Plaintiffs' representation that the exhibit reflects the website as it appeared on or about February 2015. (See Dkt. No. 71-1 at 19-22.) Finally, with respect to Exhibit D, the first page does not bear the Internet Archive Wayback Machine watermark, and the year of the date is obscured for the remaining pages. (See Dkt. No. 71-1 at 24-31.) These exhibits are in fact subject to reasonable dispute. The Court DENIES Plaintiffs' RJN with respect to Exhibits A, C, D, and E.

b. Exhibit B

Exhibit B is a copy of the Office of Statewide Health Planning and Development 2015 Financial and Utilization [*31]  Data Report. (Dkt. No. 71 at 2.) The Court GRANTS Plaintiffs' RJN with respect to Exhibit B because it is a public government report from a governmental website. However, the Court observes that the Court's ability to make use of this document is limited. The excerpt Plaintiffs provide to the Court is incomplete and largely consists of data and figures which are difficult to comprehend without explanation.

c. Exhibit F

Exhibit F consists of a copy of the docket in United States of America, ex rel. Marc Osheroff v. Tenet HealthCare Corporation, et al. (case no. CV22253-PCH); the docket in United States of America ex rel. Ralph Williams v. Health Management Associates, Inc., et al. (case no. CV-00130-CDL); and the docket in United States of America ex rel. Leatrice Ford v. Abbot Northwestern Hospital, et al. (case no. CV-20071-PCH). (Dkt. No. 71 at 3.) The Court GRANTS Plaintiffs' RJN with respect to Exhibit F, as the dockets are judicial records not subject to reasonable dispute.

d. Exhibits G, H, and I

Exhibit G is a copy of a letter dated January 2, 2015 from Robert Issai, former CEO of DCHS, to Deputy Attorney General Wendi A. Horwitz. (Dkt. No. 71 at 3.) Exhibit H is a copy of a letter [*32]  dated February 9, 2015 from Troy Schell, Plaintiffs' General Counsel, to the Attorney General's Chief of Staff, Nathan Barankin. (Id.) Exhibit I is a copy of a letter dated February 27, 2015 from Troy Schell to Nathan Barankin. (Id.) The Court GRANTS Plaintiffs' RJN with respect to Exhibits G, H, and I, as they are matters of public record not subject to reasonable dispute.

e. Exhibit J

Exhibit J is a copy of a report prepared by Verite Healthcare Consulting, LLC for the Office of the Attorney General regarding the University of Southern California's acquisition of Verdugo Hills Hospital. (Dkt. No. 71 at 3.) The Court GRANTS Plaintiffs' RJN with respect to Exhibit J, as it is a matter of public record not subject to reasonable dispute.

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Pursuant to Federal Rule of Civil Procedure 25(d), Attorney General Becerra is automatically substituted as a party for former Attorney General Harris.

Citations are based upon CM/ECF pagination.

Prime Healthcare Services, Inc. and Prime Healthcare Foundation, Inc. will hereinafter be referred to collectively as "Plaintiffs" or "Prime."

Supervisory and enforcement authority is granted to the Attorney General under the Supervision of Trustees and Fundraisers for Charitable Purposes Act, Cal. Gov't Code §§ 12580-12599.8; the Nonprofit Corporation Law, Cal. Corp. Code §§ 5000-6216; the Solicitations for Charitable Purposes Law, Cal. Bus. & Prof. Code §§ 17510-17510.95; and provisions of the California Business and Professions Code that prohibit unlawful, unfair, or fraudulent business acts or practices within California, id. §§ 17200-17210.

Cal. Corp. Code §§ 5914-5919 govern transactions from nonprofit entities to for-profit entities. Cal. Corp. Code §§ 5920-5923 govern transactions between nonprofit entities.

In 2011, Prime Healthcare Services, Inc. filed suit alleging that SEIU, UHW, Kaiser Permanente, and several Kaiser-related entities engaged in an antitrust conspiracy to eliminate Prime from the healthcare market and increase healthcare workers' wages. Prime Healthcare Servs., Inc. v. Serv. Employees Int'l Union, No. 11-CV-2652-GPC-RBB, 2013 U.S. Dist. LEXIS 104511, 2013 WL 3873074, at *1 (S.D. Cal. July 25, 2013), aff'd, 642 F. App'x 665 (9th Cir. 2016). In 2014, Prime filed suit alleging that the SEIU, UHW, and other related entities and individuals engaged in a Racketeering Influenced and Corrupt Organization Act conspiracy to unionize Prime or force Prime out of the healthcare market. Prime Healthcare Servs., Inc. v. Servs. Employees Int'l Union, 147 F. Supp. 3d 1094, 1097 (S.D. Cal. 2015).

Prime maintains its stance that Harris formed a quid pro quo agreement with SEIU-UHW, despite the Court's previous finding that the quid pro quo allegations failed to pass muster under Federal Rule of Civil Procedure 12(b)(6). (SAC at 2 n.1.) The Court reiterates its conclusion that its dismissal of Prime's FAC did not depend on the plausibility of Prime's quid pro quo allegations. (See Dkt. No. 54 at 16 n.14.)

The hospitals are (1) Seton Medical Center in Daly City, California, (2) O'Connor Hospital in San Jose, California, (3) Saint Louise Regional Hospital in Gilroy, California, (4) St. Francis Medical Center in Lynwood, California, and (5) St. Vincent Medical Center in Los Angeles, California. (SAC ¶ 3.) The skilled nursing facility is Seton Coastside in Moss Beach, California. (Id.)

Prime alleges that DCHS filed a lawsuit against SEIU-UHW and Blue Wolf in state court. (SAC 81.) In the state lawsuit, DCHS alleged that SEIU-UHW represented to DCHS and Prime that it could "exert influence over the California Attorney General," that "[t]he SEIU Defendants . . . openly and explicitly threatened administrative action by the Attorney General against DCHS and Prime unless Prime agreed to provide unrelated benefits to these Defendants relating to non-DCHS hospitals," and that "[s]tatements and actions by the Attorney General confirm that the SEIU Defendants' extortionate scheme caused a delay in the [Attorney General's] approval process." (Id. (alterations in original).)

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