227 Cal. App. 4th 579
Cal. Ct. App.2014Background
- Relators (former BMS sales reps) filed a qui tam action under Insurance Code §1871.7 alleging Bristol‑Myers Squibb (BMS) employed "runners/cappers" and paid doctors benefits to induce prescriptions that generated insurance claims. The California Insurance Commissioner intervened.
- Section 1871.7(a) prohibits employing runners/cappers to procure clients/patients for services or benefits that will be the basis of insurance claims; §1871.7(b) prescribes civil penalties and states penalties "shall be assessed for each fraudulent claim presented to an insurance company and not for each violation."
- Parties stipulated hypothetical facts for a summary‑adjudication motion: BMS gave/promised value to a physician to influence prescriptions; the physician thereafter prescribed a medically appropriate BMS drug; claims did not disclose the inducement and contained no express misstatements.
- Trial court held: (1) §1871.7(b) penalties require a fraudulent claim that contains an express misstatement of fact; (2) claim‑by‑claim but‑for causation is required (prescription would not have been written but for the unlawful conduct); (3) therefore penalties could not be assessed under the stipulated hypotheticals.
- Court of Appeal granted writ, concluding monetary penalties under §1871.7(b) require proof of claims that are deceitful but not necessarily containing express misstatements, and causation may be shown under the substantial‑factor test rather than strict but‑for causation. The trial court’s order was reversed and remanded for modification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1871.7(a) can be violated without proof that the inducement caused a particular prescription | Yes — employment of runners/cappers is unlawful regardless of proof a particular prescription resulted | No explicit counter on this narrow point; BMS argued causation is required for penalties | Held: §1871.7(a) can be violated without proof that a specific prescription resulted from the inducement (literal answer: yes) |
| Whether §1871.7(b) monetary penalties apply absent a fraudulent claim presented to an insurer | Penalties are measured by fraudulent claims; plaintiffs urge fraudulent claims need not show express misstatements and causation can be inferred | BMS: penalties require each claim be facially false or fraudulent (express misstatement) and proved on a but‑for, claim‑by‑claim basis | Held: Penalties under §1871.7(b) require fraudulent claims but "fraudulent" is broad (deceit/not limited to express misstatements); trial court erred in narrowing it to express misstatements |
| Standard of causation required to tie unlawful conduct to resulting claims (but‑for vs substantial factor; claim‑by‑claim) | Causation may be shown by substantial‑factor proof and need not be proved on a strict but‑for or individual claim‑by‑claim basis; group/statistical proof may suffice | BMS: requires but‑for causation for each prescription/claim (would not have occurred but for the benefit) | Held: Causation requires that unlawful conduct be a substantial factor in producing the claims; but‑for and rigid claim‑by‑claim proof is not required in all cases |
| Whether equitable remedies under §1871.7(b) also require fraudulent claims/resulting claims | Plaintiffs: monetary penalties require fraudulent claims but equitable relief may be available without that showing | BMS: conflated requirements such that no penalties absent express fraudulent claims; position would also limit remedies | Held: The statutory language limits the monetary penalty assessment to fraudulent claims, but equitable and other remedies under §1871.7(b) are not subject to the same fraudulent‑claim requirement |
Key Cases Cited
- Viner v. Sweet, 30 Cal.4th 1232 (reaffirming substantial‑factor causation approach and Restatement (Second) of Torts §432 principles)
- Rutherford v. Owens‑Illinois, 16 Cal.4th 953 (adoption of substantial‑factor test for cause‑in‑fact)
- In re Tobacco II Cases, 46 Cal.4th 298 (causation in fraud/consumer cases can be shown when misrepresentation was a substantial factor)
- Engalla v. Permanente Medical Group, 15 Cal.4th 951 (reliance/causation in misrepresentation contexts need not be sole or predominant factor)
- People ex rel. Harris v. PricewaterhouseCoopers, LLP, 39 Cal.4th 1220 (describing qui tam enforcement and public‑interest incentives)
- In re Vioxx Class Cases, 180 Cal.App.4th 116 (group/statistical evidence may support causation where individual proof is impractical)