ARASH ALBORZI et al., Plaintiffs and Appellants, v. UNIVERSITY OF SOUTHERN CALIFORNIA et al., Defendants and Respondents.
B299067
Court of Appeal of the State of California, Second Appellate District, Division Four
September 29, 2020
Los Angeles County Super. Ct. No. 18STCV09716, Yolanda Orozco, Judge.
Filed 9/29/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
APPEAL from a judgment of the Superior Court of Los Angeles County, Yolanda Orozco, Judge. Reversed and remanded with instructions.
Fenton Law Group, Henry R. Fenton, Dennis E. Lee and Summer Main for Plaintiffs and Appellants Arash Alborzi, M.D. and Arash Alborzi, M.D., Inc.
Nelson Hardiman, Mark S. Hardiman, John A. Mills, Salvatore J. Zimmitti and Jonathan W. Radke for Defendants and Respondents University of Southern California, Keck School of Medicine of USC and USC Verdugo Hills Hospital.
Hooper, Lundy & Bookman, Devin M. Senelick, Annalee M. Clubb and Bridget A. Gordon for Defendants and Respondents Concord Hospitalist Group and Elevate Health
INTRODUCTION
Plaintiffs Arash Alborzi, M.D., and Arash Alborzi, M.D., Inc. sued defendants University of Southern California, Keck School of Medicine of USC, and USC Verdugo Hills Hospital (collectively, USC); as well as Concord Hospitalist Group and Elevate Health Group. Alborzi and his corporation were part of a panel of on-call physicians at Verdugo Hills Hospital. Plaintiffs
USC demurred to plaintiffs’ complaint, asserting that plaintiffs were required to exhaust all judicial remedies by filing a petition for writ of mandamus under
USC asserted in the alternative that plaintiffs’ complaint failed to allege facts sufficient to state a cause of action. On appeal, plaintiffs argue that three of their six causes of action were sufficiently alleged. We find plaintiffs’ complaint alleged sufficient facts to support causes of action for violations of
FACTUAL AND PROCEDURAL BACKGROUND
A. Plaintiffs’ allegations
Plaintiffs filed their initial complaint on December 26, 2018. USC filed a demurrer and motion to strike. Before the scheduled hearing, plaintiffs filed a first amended complaint (FAC) alleging the same six causes of action. The FAC is the operative complaint for purposes of appeal, and we focus on the allegations in that version.
Plaintiffs alleged that Alborzi is a physician specializing in infectious disease, and he owns Arash Alborzi, M.D., Inc., which “is comprised of other
Plaintiffs alleged on information and belief that in July 2017, “Defendant[] Concord entered into an exclusive contract with Defendant VHH to provide hospitalist services to every patient who presented to VHH without an assigned primary care provider.” They alleged that the contract was “below market value for comparable hospitalist services.” Plaintiffs alleged that Concord was owned by three physicians: Dr. Narbeh Tovmassian, Dr. Garen Derhartunian, and Dr. Devinder Ghandi. Tovmassian and Derhartunian also owned defendant Elevate, which “provides medical services including, but not limited to, primary care and nursing home services.” Plaintiffs alleged that Concord referred VHH patients to Elevate, and that “Defendant Concord benefits financially from self-referring Defendant VHH patients to Defendant Elevate because the same physicians own Defendant entities Concord and Elevate.” Plaintiffs alleged that this constituted an improper kickback arrangement in violation of the federal anti-kickback statute (
According to plaintiffs, beginning in August 2017 the number of patients assigned to them via the I.D. call panel “slowed significantly,” and “an unusual number of patient consultations began to be referred to two specific infectious disease specialists, Dr. Hun and Dr. Maslow.” Plaintiffs аlleged on information and belief that “Dr. Maslow entered into a financial arrangement with Dr. Hun wherein Dr. Maslow receives a percentage of Dr. Hun‘s
Plaintiffs alleged that beginning in December 2017, Alborzi became concerned about the “increasingly slowing patient assignments” from the I.D. call panel, since “December is the beginning of flu season, and yet patient assignments from the I.D. call panel were suspiciously low. This is when Dr. Alborzi first became aware” of the defendants’ financial arrangements. Between December 2017 and June 2018, Alborzi “expressed concerns regarding patient safety, the presence of illegally incentivized decisions about patient care by and among defendants, and the inability to practice medicine” resulting from defendants’ “financial arrangements” and “the non-use, or misuse, of the on-call panel system.” Alborzi reported his concerns to Keith Hobbs, Chief Executive Officer of VHH, in February and April 2018. He also reported his concerns to Dr. Armand Dorian, Chief Medical Officer of VHH, in May 2018. In July 2018, plaintiffs received notice that the I.D. call panel had been terminated entirely. Plaintiffs alleged that termination of the on-call panel “was a retaliatory act” by defendants because Alborzi had reported his concerns about the “illegal financial arrangements” among defendants.
Plaintiffs alleged six causes of action in the FAC. In their first cause of action against USC, plaintiffs alleged violations of
In their second cause of action against USC, plaintiffs alleged violations of
In plaintiffs’ fourth cause of action for intentional interference with prospective economic advantage, plaintiffs alleged that all defendants “intentionally interfered with Plaintiffs[‘] ability to practice medicine and Plaintiffs’ ability to provide services to patients at Verdugо Hills Hospital by entering into illegal financial arrangements and dissolving the infectious disease specialist on-call panel.”
Plaintiffs’ fifth cause of action was for unfair business practices under the unfair competition law (UCL),
In their sixth cause of action for negligence against all defendants, plaintiffs alleged that a hospital and its medical staff have a duty to “provide patients safe and competent clinical care.” A hospital and medical staff rely on each other to accomplish this purpose, therefore “Defendants owed a duty of care to Plaintiffs because Plaintiffs are physicians on the medical staff at VHH.” Defendants breached that duty by participating in the “untoward financial arrangements,” interfering with Alborzi‘s “right to practice medicine.”
Plaintiffs sought compensatory damages, including mental and emotional distress; double back pay plus interest; punitive damages; civil penalties; injunctive relief; costs; and attorney fees.
B. USC‘s demurrer
USC filed a demurrer to the FAC, asserting that each claim failed to allege facts sufficient to state a cause of action, and each was unintelligible. (
confirmed over decades of unbroken California case law, to contract exclusively with a physician group to staff a particular hospital service.” USC asserted that VHH‘s “decision to contract with Concord and to dissolve the on-call panel were quasi-legislative rules because their application was not limited to Dr. Alborzi or his group‘s physicians.” Because this decision “would be applicable to any physician who practiced at VHH,” it was a quasi-legislative decision, as opposed to a quasi-judicial action impacting a particular doctor. USC argued that quasi-legislative actions must be challenged by a writ of mandate, and could not be challenged in an action for damages.
USC relied on cases such as Lewin v. St. Joseph Hospital of Orange (1978) 82 Cal.App.3d 368 (Lewin), which we discuss in more detail below. Briefly, in Lewin a physician challenged the manner in which a nonprofit hospital staffed its chronic renal hemodialysis facility. The hospital argued that its staffing deсision was “quasi-legislative” in nature, and therefore it could only be challenged in a proceeding for traditional mandate under
USC also argued that the individual causes of action in the FAC failed. For the first cause of action, USC argued that because it did not have a duty to maintain an infectious disease on-call panel, the decision to end the on-call panel could not support a cause of action under
C. Opposition and reply
In their opposition, plaintiffs argued that
In reply, USC argued that plaintiffs ignored the settled law of Lewin and similar cases, and although plaintiffs characterized their claims as involving “patient safety,” they were actually only personal claims. USC asserted that “section 1278.5 is concerned with—and only applies to prohibit—retaliatory action,” and “[q]uasi-legislative [action] is by definition not retaliatory.” USC also argued that plaintiffs “give little to no effort [to address] any of the arguments raised in the Demurrer with respect to the second through sixth causes of action.” USC further argued that leave to amend should be denied, because plaintiffs had already attempted and failed to remedy the defects in their pleadings.
D. Court ruling
The court issuеd a tentative ruling sustaining the demurrer because plaintiffs failed to bring a mandamus action. At the hearing, plaintiffs’ counsel asserted that although USC argued its decision to dissolve the I.D. call panel
In the tentative ruling the court adopted as its final order, the court recounted the parties’ arguments and stated, “The Court finds Defendants’ arguments persuasive and finds that Plaintiffs have failed to and cannot allege that they have successfully challenged Defendants’ decision under the mandamus procedure. The cases cited by Plaintiffs are all distinguishable in that they hold that quasi-judicial decisions need not be successfully challenged prior to bringing a suit for retaliation. As noted by Defendants, however, a quasi-legislative decision is not targeted at a particular individual, but rather is a rule made applicable to all relevant parties and to all future situations. Thus, the reasoning in the cases cited by Plaintiff[s] is inapplicable here.” The court sustained USC‘s demurrer without leave to amend and dismissed the case with prejudice as to all defendants.
The court entered judgment in favor of all defendants on June 24, 2019. Plaintiffs timely appealed.
DISCUSSION
Plaintiffs contend on appeal that the trial court erred by holding that VHH‘s decision to disband the I.D. call panel was quasi-legislative based on the facts alleged in the FAC, and by holding that plaintiffs were barred from bringing this action due to their failure to file a petition for writ of mandamus under
On appeal after a demurrer has been sustained, we determine de novo whether the complaint states facts sufficient to constitute a cause of action. (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100.) We “assume the truth of the complaint‘s рroperly pleaded or implied factual allegations.” (Ibid.) “It is plaintiffs’ burden to show either that the demurrer was sustained erroneously or that the trial court‘s denial of
A. Quasi-legislative action
The trial court impliedly found that USC‘s actions were quasi-legislative, and that as a result, plaintiffs were required to exhaust judicial remedies by bringing a petition for writ of mandamus rather than filing a civil action. The court embraced USC‘s reasoning that staffing decisions affecting an entire department—such as dissolving the I.D. call panel—are quasi-legislative. However, USC‘s attempts to cast VHH‘s decision as a run-of-the-mill staffing decision contradict the facts alleged in the FAC. Plaintiffs alleged that VHH‘s action was targeted at plaintiffs and was retaliatory, and we “take the allegations of the operative complaint as true.” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.) Because USC‘s arguments rely on factual conclusions unsupported by the record, the demurrer should have been overruled.
1. Hospital staffing policies can be quasi-legislative
“[T]he terms ‘quasi-legislative’ and ‘quasi-judicial’ are used to denote ... differing types of action. Quasi-legislative acts involve the adoption of rules of general application on the basis of broad public policy, while quasi-judicial acts involve the determination and application of facts peculiar to an individual сase.” (Beck Development Co. v. Southern Pacific Transportation Co. (1996) 44 Cal.App.4th 1160, 1188.) “Generally speaking, a legislative action is the formulation of a rule to be applied to all future cases, while an adjudicatory act involves the actual application of such a rule to a specific set of existing facts.” (Major v. Memorial Hospitals Assn. (1999) 71 Cal.App.4th 1380, 1398 (Major).)
In a hospital setting, if a physician‘s individual medical staff privileges have been denied, suspended, or terminated because the physician failed to comply with established standards, “that administrative decision is classified as ‘quasi-judicial’ and review is by administrative mandamus.” (Hay v. Scripps Memorial Hospital (1986) 183 Cal.App.3d 753, 758 (Hay).) “However, where the physician has had privileges denied or curtailed because of the implementation of a ‘policy’ of the hospital, the administrative action is classified as ‘quasi-legislative’ and reviewable by traditional mandamus.” (Ibid.) When quasi-legislative acts are reviewed by traditional or ordinary mandamus under
In Lewin, supra, the Court of Appeal found that “the limited judicial review” applicable to traditional mandamus is appropriate for the “judicial review of rule-making or policy-making actions of a nonprofit hospital corporation.” (82 Cal.App.3d at p. 384.) The court explained, “The operation and administration of a hospital involves a great deal of technical and specialized knowledge and experience, and the governing board of a hospital must be presumed to have at least as great an expertise in matters relating to operation and administration of the hospital as any governmental administrative agency with respect to matters committed to its authority.” (Ibid.) Thus, “[a] managerial decision concerning operation of the hospital made rationally and in good faith by the board to which operation of the hospital is committed by law should not be countermanded by the courts unless it clearly appears it is unlawful or will seriously injure a significant public interest.” (Id. at p. 385.)
2. Plaintiffs did not allege quasi-legislative action
USC asserts that dissolution of the on-call panel at VHH was a quasi-legislative policy decision that could be challenged only by ordinary mandamus under
Plaintiffs alleged that defendants entered into an illegal kickback scheme, Alborzi complаined about it, and USC dissolved the on-call panel in retaliation, thus blocking plaintiffs from receiving further referrals. USC cites to “settled law” that hospital decisions affecting staffing—compared to quasi-judicial decisions that affect individuals—are quasi-legislative. It argues that “courts have uniformly determined that hospital operational decisions of general application are quasi-legislative as a matter of law.” USC cites five cases in support, none of which supports such a finding under circumstances similar to those in this case. To the contrary, the cases USC cites involve trials or other proceedings in which courts considered evidence before determining that the hospitals’ staffing decisions were quasi-legislative.
USC relies on Lewin, supra, 82 Cal.App.3d 368. In that case, the respondent hospital, St. Joseph Hospital of Orange, operated renal hemodialysis
The issue proceeded to a trial. Evidence discussed in the Court of Appeal‘s opinion includes the history of the hemodialysis unit (Lewin, supra, 82 Cal.App.3d at p. 376); information about the operation of the unit, including its billing practices, staffing, and daily operations (id. at pp. 377-378); the number of chronic patients treated in the unit (id. at p. 378); information about Dr. Lewin‘s education, medical practice, and privileges at various hospitals (ibid.); detailed descriptions about Dr. Lewin‘s communications with St. Joseph Hospital‘s executive committee about his request to use the hemodialysis unit (id. at pp. 378-380); the recommendation by the hospital‘s medical committee, which was reviewed and approved by the executive committee, whose recommendation was then approved by the board of trustees (id. at p. 379); and records of two separate hearings on the issue in which relevant parties debated whether the units should continue to be operated on a “closed staff” basis (id. at pp. 379-380.)
The Court of Appeal in Lewin considered this evidence in finding that “The hearing held by the Executive Committee on October 16, 1975 and the resulting decision of the Executive Committee and the Board of Trustees to continue operating the chronic hemodialysis unit on a ‘closed-staff’ basis were clearly ‘quasi-legislative’ in nature.” (Lewin, supra, 82 Cal.App.3d at p. 383.) The court gave several reasons for this finding, including that “[t]he operation and administration of a hospital involves a great deal of technical and specialized knowledge and experience” (id. at p. 384), so courts “must guard against unduly interfering with the board‘s autonomy by substituting judicial judgment for that of the board.” (Id. at p. 385.)
USC also relies on Mateo-Woodburn v. Fresno Community Hospital & Medical Center (1990) 221 Cal.App.3d 1169 (Mateo-Woodburn), in which several anesthesiologists challenged a decision by the Fresno Community Hospital (FCH) board of trustees “to alter the system of delivery of anesthesia services at the hospital from a rotating ‘open staff’ to a ‘closed’ system.” (Id. at pp. 1174-1175.) Following a trial, the superior court denied the physicians’ request for a permanent injunction, dissolved a preliminary injunction, denied the physicians’ request for a writ of mandate,
In the opinion affirming the judgment, the Court of Appeal discussed the bylaws governing the medical staff at FCH, including the formulation and approval of the bylaws (Mateo-Woodburn, supra, 221 Cal.App.3d at p. 1175); the manner in which the executive committee coordinated the medical staff departments (id. at p. 1176); how the anesthesiologists were scheduled for surgeries, including problems with the scheduling (id. at pp. 1176-1178); and the medical staff‘s request to change anesthesiology from an open to a closed staffing system (id. at p. 1187). The court further discussed the hospital board‘s procedure in considering and approving the change, including implementation of a task force to study the proposal (id. at p. 1178); board meetings and administrative hearings considering the changes, including transcripts from those meetings and hearings (id. at pp. 1178-1180); and communication regarding the hospital‘s contract with a new entity to manage the department of anesthesia and the terms of the contract itself (id. at pp. 1180-1181). The court found that based on the evidence, “the policy decision by FCH to go from an open to a closed system of delivery of anesthesia services was not irrational, arbitrary, contrary to public policy or procedurally unfair.” (Id. at p. 1184.)
USC also cites Hay, supra, 183 Cal.App.3d 753, in which “Dr. Hay requested clinical privileges to perform dilation and curettage (D & C) procedures” at a local hospital, and his request was denied due to a “policy that a physician must satisfy a minimum requirement of completion of a residency in obstetrics and gynecology (OB-GYN) in order to receive D & C privileges” at the hospital. (Id. at pp. 755-756.) Hay petitioned for a writ of mandamus, which was denied. The Court of Appeal‘s opinion affirming the judgment does not make clear whether the superior court held a full trial. Nevertheless, the Court of Appeal discussed Dr. Hay‘s background and qualifications (id. at p. 756); his privileges at other hospitals (ibid.); the procedure followed after Dr. Hay requested privileges at the hospital, including the recommendations of the family practice supervisory committee and the OB-GYN supervisory committee (id. at p. 757); the votes of the executive medical committee and surgery supervisory committee (ibid.); Dr. Hay‘s appeal to a judicial review hearing committee and its report (id. at pp. 757-758); and Dr. Hay‘s appeal to the hospital‘s board of trustees (id. at p. 758.).
Citing Lewin, the court in Hay stated, “[W]here the physician has had privileges denied or curtailed because of the implementation of a ‘policy’ of the hospital, the administrative action is classified as ‘quasi-legislative’ and reviewable by traditional mandamus.” (Hay, supra, 183 Cal.App.3d at p. 758.) The court discussed the reasoning behind the hospital‘s requirement for specific qualifications, and found that it was “not irrational for a hospital to require [certain] training as a minimum qualification for all obstetrical-gynecological surgeries.” (Id. at p. 761.) The court concluded that the hospital‘s policy “does not violate public policy and is not substantively irrational or unlawful.” (Id. at p. 762.)
USC also relies on Major, supra, 71 Cal.App.4th 1380, which followed what the Court of Appeal characterized as a “lengthy court trial.” In that case, the defendant hospital group changed its anesthesiology departments from an open staff system to a closed system with an exclusive provider. The new provider did not offer subcontracts to several physicians who formerly practiced as part of the hospital‘s open staff, and the physicians sued “based on multiple theories, including alleged violations of the Unruh Civil Rights Act (
In an extensive fact section, the Court of Appeal discussed the hospital‘s medical staff bylaws (Major, supra, 71 Cal.App.4th at pp. 1386-1387); staffing and staffing problems within the anesthesiology department (id. at pp 1387-1392); investigation of the department‘s issues by a medical executive committee and development of a subcommittee to consider potential solutions (id. at pp. 1392-1395); adoption of the contract with the exclusive anesthesiology provider (id. at pp. 1395-1396); and communication to the plaintiff physicians that they had not been selected as subcontractors (id. at p. 1397). After discussing the evidence and applicable legal authority, the court stated, “We conclude that Memorial Hospitals’ decision to close the anesthesiology department was quasi-legislative, since it was not directed at any specific physician or group of physicians. Rather, it was based on a genuine concern about the overall function of the anesthesiology department and directed at improving the quality of patient care provided by that department.” (Id. at pp. 1410-1411.)
Finally, USC cites Abrams v. St. John‘s Hospital & Health Center (1994) 25 Cal.App.4th 628 (Abrams), which considered “the enforceability of an agreement between a hospital and a member of its medical staff where the member has contracted
away due process hearing rights otherwise afforded him or her by existing hospital and medical staff bylaws.” (Id. at p. 631.) The plaintiff filed a complaint alleging causes of action for breach of contract, slander, negligent misrepresentation, and other causes of action, and in connection with the breach of contract causes of action, requested preliminary and permanent injunctions. (Id. at p. 635.) The trial court denied the
Although USC is correct that these cases hold that a hospital‘s wеll-reasoned decision to change staffing in an entire department may be deemed quasi-legislative, none of these cases decided such issues at the pleadings stage or without consideration of the manner in which the hospital reached its decision. To the contrary, each case considered extensive evidence demonstrating the hospitals’ staffing issues, the procedures employed in changing the staffing plan or implementing physician requirements, and the hospitals’ reasons for establishing the standards or scheduling it did. As noted above, the court in Lewin stated that it was reasonable to treat hospital boards’ staffing decisions as quasi-legislative because of the technical and specialized knowledge and experience required for operating a hospital. (Lewin, supra, 82 Cal.App.3d at p. 384.) Here, by contrast, there is no indication that VHH‘s staffing decisions were even made by a board, or that the decision involved legitimate considerations about the operation or administration of VHH. In fact, plaintiffs have alleged that the decision did not involve legitimate concerns about the need for infectious disease specialists, that it undermined patient care, and it was done to cover up an illegal kickback scheme. The trial court erred in ignoring plaintiffs’ factual allegations in deciding the demurrer.
B. Plaintiffs’ claims were not barred by their failure to exhaust judicial remedies.
USC also argues that there is a “longstanding rule requiring exhaustion of judicial remedies” regarding hospitals’ quasi-legislative actions. The trial court agreed, holding that plaintiffs “cannot allege that they have successfully challenged Defendants’ decision under the mandamus procedure.” Even assuming for the sake of argument that the defendants’ actions could be deemed quasi-legislative, this position is not supported by the authorities USC cites. The doctrine of exhaustion of judicial remedies does not apply under the facts alleged in the FAC, nor were plaintiffs required to exhaust judicial remedies on their whistleblower causes of action.
“Under the doctrine of exhaustion of judicial remedies, ‘[o]nce a[n administrative] decision has been issued, provided that decision is of a sufficiently judicial character to support collateral estoppel, respect for the administrative decisionmaking process requires that the prospective plaintiff continue that process to completion, including exhausting any available judicial avenues for reversal of adverse findings. [Citation.] Failure to do so will result in any quasi-judicial administrative findings achieving binding,
The doctrine of exhaustion of judicial remedies does not apply under the circumstances alleged by plaintiffs. First, “an employee seeking relief under
Second, the exhaustion of judicial remedies doctrine does not apply under either party‘s theory of the case. Plaintiffs have not contended that any administrative procedure was followed. Thus, based on the facts alleged, there was no “administrative decisionmaking process” requiring plaintiffs to “continue that process to completion.” (Runyon, supra, 48 Cal.4th at p. 773.) Moreover, USC insists that any staffing decision at VHH was quasi-legislative, not quasi-judicial, so there is no indication that there were “prior administrative proceedings” that possessed “judicial character.” (Y.K.A. Industries, supra, 174 Cal.App.4th at p. 361.)
Nevertheless, USC argues, “As it relates to quasi-legislative action, courts are clear that a physician must first set aside the hospital‘s decision through ordinary mandamus, despite any disparate impact on that particular physician.” In support of this statement, USC string-cites eight cases, including Lewin, Mateo-Woodburn, Hay, and Abrams, discussed above, none of which discusses exhaustion of other remedies or requires a plaintiff‘s challenge to take a particular form.
USC also cites Centeno v. Roseville Community Hospital (1979) 107 Cal.App.3d 62, in which the defendant hospital barred the
It is well established that “a case is authority only for a proposition actually considered and decided therein.” (In re Chavez (2003) 30 Cal.4th 643, 656.) The cases USC cites do not support the position that, under the circumstances alleged in the FAC, plaintiffs were required to file a petition for writ of mandate rather than a complaint for damages. To the contrary, many of these cases addressed the plaintiffs’ various causes of action, such as Major, in which the court addressed the plaintiffs’ multiple theories, including violation of the
The parties disagree about the significаnce of the Supreme Court‘s opinion in Fahlen v. Sutter Central Valley Hospitals (2014) 58 Cal.4th 655 (Fahlen), especially in the context of plaintiffs’ first cause of action under
The physician plaintiff in Fahlen filed a complaint against the defendant hospital and others alleging that “defendants had caused his medical group (Gould) to fire him, had tried to run him out of Modesto, and had terminated
The Supreme Court‘s review was limited to the following issue: “[W]hether, before a physician may commence a civil suit alleging that a hospital‘s quasi-judicial decision to terminate the physician‘s staff privileges was wrongfully retaliatory under
In reaching its conclusion, the court stated that in a whistleblower action, a “requirement that [a] plaintiff succeed in overturning an allegedly retaliatory, as opposed to remedial, administrative decision before filing a statutory action would very seriously compromise the legislative purpose to encourage and protect whistleblowers.” (Fahlen, supra, 58 Cal.4th at p. 678.) The court noted that
We find that plaintiffs have the better argument here. Fahlen reasoned that the purposes of
Thus, we find no support for USC‘s contention that plaintiffs were required to bring their claims in a writ of mandate under
C. Individual causes of action
The trial court did not address USC‘s alternative argument that the FAC did not state facts sufficient to constitute the individual causes of action plaintiffs alleged. USC contends on appeal that even if plaintiffs were not otherwise barred from asserting their claims, the demurrer nonetheless should have been sustained because the FAC “fails to state a claim under аny theory and cannot be cured by amendment.” Plaintiffs contend that the FAC alleged sufficient facts to state causes of action under
1. Section 1278.5
Here, plaintiffs alleged that Alborzi complained about the defendants’ financial arrangements between December 2017 and June 2018 by expressing “concerns regarding patient safety [and] the presence of illegally incentivized decisions about patient care by and among defendants.” Plaintiffs alleged that Alborzi reported his concerns to VHH‘s chief executive officer in February and April 2018, and VHH‘s chief medical officer in May 2018. Plaintiffs alleged that in retaliation, defendants “stopped providing Plaintiffs with on-call panel consultations and eventually terminated the infectious disease on-call panel.” In July 2018, the chief medical officer informed plaintiffs that the on-call panel had been dissolved. Plaintiffs alleged that defendants’ actions “resulted in loss of income to Plaintiffs.” These facts are sufficient to support a cause of action under
USC argues that plaintiffs “did not engage in any form of protected activity which could have triggered the statute,” because the FAC does not include “allegations of any actual or threatened harm to any patient,” and “the rеal, actual purpose for Dr. Alborzi‘s ‘complaints’ to [VHH] was merely to protect [plaintiffs‘] bottom line.” Plaintiffs assert that Alborzi‘s complaints constituted protected activity because the “improper referral of patients . . . directly impacts quality of patient care.”
Although plaintiffs’ allegations regarding the impact of the alleged wrongdoing on patient care are not particularly robust, we find they are sufficient to meet the requirements of
USC also asserts that
The Supreme Court in Shaw v. Superior Court (2017) 2 Cal.5th 983 (Shaw) noted that the Legislature considered a variety of ways discriminatory action against a physician may occur, in light of the fact that physicians and hospitals do not always have employer/employee relationships. The court noted that a bill to amend
USC also argues that plaintiffs failed “to establish causation between any alleged adverse employment action and Dr. Alborzi‘s complaints.” This argument is specious. Plaintiffs clearly alleged that dissolution of the on-call panel was retaliatory. Moreover,
Plaintiffs therefore stated sufficient facts to support a cause of action for violation of
2. California False Claims Act
“The CFCA permits the recovery of civil penalties and treble damages from any person who knowingly presents a false claim for payment to the state or a political subdivision.” (State of California ex rel. Standard Elevator Co., Inc. v. West Bay Builders, Inc. (2011) 197 Cal.App.4th 963, 973.) “The Legislature designed the CFCA ‘to prevent fraud on the public treasury,’ and it ‘should be given the broadest possible construction consistent with that purpose.‘” (San Francisco Unified School Dist. ex rel. Contreras v. Laidlaw Transit, Inc. (2010) 182 Cal.App.4th 438, 446.)
We decline to address these legal issues in a vacuum. Plaintiffs failed to allege whether they were employees, contractors, or agents of any of the defendants. Without such an allegation, plaintiffs have failed to allege facts sufficient to show that they have standing to assert a cause of action under
USC also contends that plaintiffs failed to allege facts to show any protected activity under the CFCA. USC asserts that plaintiffs’ claims are insufficient because they “do not allege [plaintiffs] ever investigated alleged false claims or reported to anyone that [VHH] had allegedly submitted a false or fraudulent claim for payment.”
“[T]o constitute protected activity under the CFCA, the employee‘s conduct must be in furtherance of a false claims action. [Citation.] The employee does not have to file a false claims action or show a false claim was actually made; however, the employee must have reasonably based suspicions of a false claim and it must be reasonably possible for the employee‘s conduct to lead to a false claims action.” (Kaye v. Board of Trustees of San Diego County Public Law Library (2009) 179 Cal.App.4th 48, 60; see also Mendiondo v. Centinela Hosp. Medical Center (9th Cir. 2008) 521 F.3d 1097, 1104 [the plaintiff was “engaged in protected activity if she reasonably believed that [the defendant] was possibly committing fraud against the government, and she investigated the possible fraud.“].)
Here, plaintiffs alleged in the FAC that the defendants’ financial arrangements violated state and federal law. In their briefing on appeal, they assert that such allegations are sufficient because “[v]iolation of either the Stark Law [
3. Unfair Competition Law
The UCL prohibits unfair competition, defined as “any unlawful, unfair, or fraudulent business act or practice.” (
In their UCL cause of action in the FAC, plaintiffs referred to their general allegations that VHH and Concord entered into a below-market contract for hospitalist services, Concord shared ownership with Elevate, and Conсord self-referred patients to Elevate. Plaintiffs alleged that these actions violated four laws:
USC asserts that plaintiffs’ “sole allegation that these statutes were violated by the Hospital is that it benefited from the financial arrangements by saving money on hospitalist services.” It argues that plaintiffs’ “conclusory allegations” do not “support any claim that the Hospital improperly referred patients to a physician.”
4. Causes of action not addressed in plaintiffs’ briefs
Plaintiffs’ opening brief does not address their third cause of action for wrongful discipline, fourth cause of action for intentional interference with prospective economic advantage, or sixth cause of action for negligence. Plaintiffs state in a footnote in their opening brief, “Because the trial court‘s ruling requires reversal as a matter of law, and that the trial court be ordered to instead deny the demurrer to the FAC in its entirety, this Court need not reach the issue of whether Dr. Alborzi‘s [sic] other claims for wrongful discipline, interference with prospective economic advantage, and negligence adequately state a claim.” They assert in a footnote in their reply brief that “[r]esolution of the sufficiency of the third, fourth, and sixth claims, which were never reached or discussed by the trial court, could be left for the trial court in the first instance if subsequently challenged by [defendants].”
USC asserts that plaintiffs have abandoned these causes of action by not addressing them on appeal. We agree. Although our review of a demurrer ruling is de novo, our review “is limited to issues which have been adequately raised and supported in [appellants’ opening] brief.” (WA Southwest 2, LLC v. First American Title Ins. Co. (2015) 240 Cal.App.4th 148, 155.) Thus, where a demurrer is sustained without leave to amend, the appellant‘s failure to address certain causes of action in the complaint is deemed an abandonment of those causes of action. (Ram v. OneWest Bank, FSB (2015) 234 Cal.App.4th 1, 9 fn. 2.) We therefore find that plaintiffs have abandoned their causes of action for wrongful discipline, intentional interference with prospective economic advantage, and negligence.3
The judgment is reversed, and the cause is remanded with directions to enter a new order as follows: The demurrer is sustained without leave to amend as to plaintiffs’ third cause of action for wrongful discipline, fourth cause of action for intentional interference with prospective economic advantage, and sixth cause of action for negligence. The demurrer is sustained with leave to amend as to plaintiffs’ second cause of action for violation of
CERTIFIED FOR PUBLICATION
COLLINS, J.
We concur:
WILLHITE, ACTING P.J.
CURREY, J.