58 Cal.App.5th 1064
Cal. Ct. App.2020Background
- Aetna (relator) sued Pain Management under the Insurance Fraud Protection Act (IFPA) in a qui tam action, alleging defendants billed surgeries as out-of-network to obtain higher payments.
- Aetna filed the qui tam complaint under seal, served the Department of Insurance and county DA; neither intervened, and the complaint was unsealed.
- Aetna had contractual in-network agreements with Pain Management that contained mandatory arbitration clauses (AAA procedures, invoking the FAA) which Aetna drafted and required providers to sign.
- Pain Management moved to compel arbitration of the qui tam claim (and related individual claims); Aetna dismissed its individual claims and proceeded only with the qui tam cause of action.
- The trial court denied the motion, ruling the State of California is the real party in interest in an IFPA qui tam action and, because the State is not a signatory, cannot be compelled to arbitrate without its consent.
- Pain Management appealed; the Court of Appeal affirmed, applying de novo review and distinguishing federal False Claims Act authorities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an IFPA qui tam action is subject to arbitration when the relator (insurer) is party to an arbitration clause | The State is the real party in interest under IFPA and did not consent to arbitration, so the claim cannot be compelled to arbitration | Aetna (the relator) drafted and agreed to arbitration clauses; the relator stands in the State's shoes and thus arbitration should govern | The court held the State is the real party in interest and, not being a contracting party, cannot be compelled to arbitrate without its consent; denial of arbitration affirmed |
| Whether the relator can bind the State to arbitration by virtue of contractual agreements the relator signed | The relator cannot bind the State; IFPA vests ownership of the claim in the State | Relator/insurer’s contractual assent to arbitration should govern disputes arising from the same conduct | The court rejected binding the State to arbitration where the State is not a signatory; arbitration requires mutual consent |
| Whether Deck (FCA decision holding arbitration may apply) controls or is persuasive | IFPA differs materially from the federal False Claims Act (different victims, purposes, recoveries); Deck is not persuasive | Deck supports arbitration of qui tam claims under a different statutory scheme | The court found Deck unpersuasive and distinguished FCA precedent from IFPA because insurers, not the State, are the direct victims under IFPA |
Key Cases Cited
- Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC, 55 Cal.4th 223 (arbitration is based on consent; state contract principles apply)
- People ex rel. Allstate Ins. Co. v. Weitzman, 107 Cal.App.4th 534 (interpreting IFPA and noting insurers are direct victims of insurance fraud)
- People ex rel. Strathmann v. Acacia Research Corp., 210 Cal.App.4th 487 (qui tam relator sues on behalf of the state; state is real party in interest)
- Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (private attorney general claims are disputes between employer and the State; government is real party in interest)
- Correia v. NB Baker Electric, Inc., 32 Cal.App.5th 602 (relator cannot compel the State to arbitrate where the State is the real party in interest)
- Volt Info. Sciences, Inc. v. Leland Stanford Jr. Univ., 489 U.S. 468 (arbitration is a matter of consent, not coercion)
- People ex rel. Alzayat v. Hebb, 18 Cal.App.5th 801 (reiterating that a qui tam action vindicates an injury to the government)