55 Cal.App.5th 155
Cal. Ct. App.2020Background
- Dr. Arash Alborzi (and his professional corporation) were members of the infectious-disease on-call panel at USC Verdugo Hills Hospital (VHH).
- Plaintiffs alleged defendants (USC, Concord Hospitalist Group, Elevate Health) entered an illegal below-market/kickback referral scheme: VHH contracted Concord for hospitalist services; Concord referred patients to Elevate (common ownership alleged).
- After Alborzi complained to VHH leadership (CEO and CMO) about patient-safety concerns and allegedly illegal financial arrangements, his panel referrals dropped and VHH dissolved the I.D. on-call panel. Plaintiffs claimed the dissolution was retaliatory.
- Plaintiffs sued for: violation of Health & Safety Code §1278.5 (health-care whistleblower), Government Code §12653 (CFCA anti-retaliation), UCL (Bus. & Prof. Code §17200), wrongful discipline, tortious interference with prospective economic advantage, and negligence.
- Trial court sustained defendants’ demurrer on the ground plaintiffs should have sought a writ of mandamus (Code Civ. Proc. §1085) before suing for damages and dismissed with prejudice.
- Court of Appeal reversed in part: held plaintiffs were not required to exhaust mandamus remedies for their §1278.5 claim; overruled the demurrer as to §1278.5 and the UCL claim; sustained with leave to amend the CFCA claim; and affirmed dismissal (without leave) of three other claims as abandoned on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs were required to seek a writ of mandamus (exhaust judicial remedies) before bringing damages claims | Fahlen and §1278.5 allow a whistleblower to sue without first obtaining mandamus; exhaustion would undermine whistleblower protections | Hospital staffing decisions are quasi-legislative (Lewin, Major, etc.) so the exclusive remedy is an ordinary mandamus challenge under §1085 | Reversed trial court: plaintiffs were not required to file mandamus before bringing §1278.5 and related statutory claims; exhaustion doctrine did not bar the suit here |
| Whether dissolution of the I.D. panel is a quasi-legislative act as a matter of law | The FAC alleges the dissolution was targeted and retaliatory (pretextual); this is a factual dispute not resolvable on demurrer | Dissolving a panel is a department-wide staffing/policy decision and therefore quasi-legislative | Court: cannot treat dissolution as quasi-legislative at pleading stage given allegations of targeted retaliation; trial court erred to resolve this on demurrer |
| Sufficiency of §1278.5 (health-care whistleblower) claim | Alborzi alleged reporting patient-safety concerns to CEO/CMO and adverse consequences (loss of referrals, panel dissolution) — protected activity and retaliation | Defendants: no specific patient-harm alleged; no adverse employment action (no loss of privileges) | FAC sufficiently pleaded a §1278.5 claim: allegations of protected reports and retaliatory adverse action were adequate; demurrer overruled |
| Sufficiency of Government Code §12653 (CFCA anti-retaliation) claim | Plaintiffs say their complaints were in furtherance of exposing false-claims-related fraud | Defendants: plaintiffs lack standing because they did not allege they were employees/contractors/agents and did not allege a connection to false claims | Claim deficient: FAC failed to plead plaintiffs’ status (employee/contractor/agent) or a reasonable nexus to false claims; demurrer sustained with leave to amend |
| Sufficiency of UCL (Bus. & Prof. Code §17200) claim | Alleged unlawful business practices (kickbacks, self-referrals, below-market contract) supporting an unlawful/unfair practice theory | Defendants: allegations are conclusory; plaintiffs failed to plead how contract produced improper referrals/kickbacks | FAC allegations were sufficient to state a UCL claim (particularized proof not required at pleading stage); demurrer overruled |
Key Cases Cited
- Lewin v. St. Joseph Hospital of Orange, 82 Cal.App.3d 368 (1978) (hospital staffing/policy decisions treated as quasi-legislative in context of full record)
- Fahlen v. Sutter Central Valley Hospitals, 58 Cal.4th 655 (2014) (physician need not obtain mandamus victory before suing under §1278.5 for retaliatory termination of privileges)
- Runyon v. Board of Trustees of California State University, 48 Cal.4th 760 (2010) (doctrine of exhaustion of judicial remedies applies only where prior administrative proceedings had requisite judicial character)
- Major v. Memorial Hospitals Assn., 71 Cal.App.4th 1380 (1999) (extensive trial evidence treating department-wide staffing change as quasi-legislative)
- Mateo-Woodburn v. Fresno Community Hosp. & Med. Ctr., 221 Cal.App.3d 1169 (1990) (board decision to change staffing system reviewed on record; quasi-legislative characterization supported by trial evidence)
- Hay v. Scripps Memorial Hospital, 183 Cal.App.3d 753 (1986) (distinguishing quasi-judicial denial of individual privileges from policy-based staffing decisions)