Reich filed a special motion to strike the complaint under Code of Civil Procedure section 425.16, the anti-SLAPP (strategic lawsuit against public participation) statute.
The following facts are taken from the complaint, declarations, and evidence submitted in connection with the special motion to strike.
The Earlier Lawsuits
MMM and its subsidiary, MSO, are Puerto Rico corporations. MMM Healthcare, LLC and PMC Medicare Choice, LLC (collectively, the plans) are wholly owned subsidiaries of MMM that operate Medicare Advantage plans in Puerto Rico
Valdez served as president of MSO from April 2010 until his termination in December 2010. According to Reich, Valdez contends he was terminated in retaliation for his vocal opposition to plaintiffs' fraudulent practices. Plaintiffs contend Valdez was terminated because he was incompetent and failed to perform his job duties.
While employed by MSO, Valdez possessed a company laptop and two personal laptops that contained electronic data including emails and attachments he had sent or received in the course of his employment; he also had a personal computer tablet that contained notes he had taken during the course of his employment (collectively the computers). When he was terminated, Valdez kept the computers and the electronic files and notes they contained.
Reich has represented Valdez and his family since approximately 1997. After he was terminated, Valdez provided the computers to Reich's law firm. According to Reich, he and his firm segregated all the files potentially subject to the attorney-client privilege. Reich's handling and later dissemination of the documents is the subject of alleged wrongdoing in this case.
Following Valdez's termination in December 2010, plaintiffs sought return of all company documents and property. MSO contends a clause in Valdez's
Within five months of Valdez's termination, Valdez's attorneys, including Reich, filed under seal a qui tam action in the United States District Court for the Central District of California entitled United States of America ex rel. Jose R. Valdez v. Aveta, Inc., et al. , case No. CV11-03343 GAF(JCx) (the qui tam action).
The qui tam action alleges plaintiffs overcharged Medicare by more than $1 billion dollars between 2007 and 2010 by manipulating Medicare Part C. The operative first amended complaint alleges a violation of the False Claims Act ( 31 U.S.C., § 3729 et seq. ) and Valdez's retaliatory discharge. The gist of the qui tam action is that plaintiffs knowingly submitted inaccurate, incomplete, and misleading data to the government in order to increase payments made to the plans and that plaintiffs retaliated against Valdez for his speaking out about plaintiffs' overbilling practices.
It appears not much occurred between April 2011 and January 2014. Plaintiffs apparently stopped demanding documents and were unaware of the qui tam action. In January 2014, the United States declined
With the qui tam action now underway, in August 2014 plaintiffs' counsel sent a letter to Valdez's attorney, Thomas H. Bienert, Jr., (with a copy to Reich) inquiring as to whether Valdez or his counsel had any company documents. In September 2014, Bienert responded yes, and in October 2014, another attorney from Reich's firm sent plaintiffs an external hard drive that contained over 26,000 emails and other documents of plaintiffs and/or their affiliates.
Plaintiffs allege that in or about December 2014, MMM first learned that in October 2014 Reich converted for his own use and then e-mailed a digital copy of some of the documents to another attorney, Freddie Perez of Puerto Rico. Plaintiffs' attorney, Christopher Joyce, declared this revelation occurred during the deposition of plaintiffs' CEO Richard Shinto in an action filed by plaintiffs and their affiliates against a terminated medical provider seeking
Plaintiffs allege Reich intentionally sought out Perez for his own purposes and without direction from Valdez (whom plaintiffs allege was incapacitated) in violation of Reich's "ethical duties and California law" and that he provided Perez with copies of plaintiffs' documents having no connection or relation to the qui tam action for Perez's potential use in unrelated litigation. Reich declared the documents are related to both the qui tam action and the Marini action "because both actions involve [p]laintiffs' retaliation against providers for providing expensive, but necessary, care and the failure to pay non-network providers for emergency services." Thus, Reich contends he provided documents to Perez to help prove the common issue of plaintiffs' failure to pay non-plan providers for emergency services provided to plaintiffs' insureds.
Aside from Perez, plaintiffs also allege Reich provided documents to "numerous other individuals throughout the United States" including attorneys not associated with Valdez or the qui tam action. Based on evidence submitted in connection with the anti-SLAPP motion, this allegation appears to relate in part to a 2012 class arbitration filed by medical health service providers alleging plaintiffs and their affiliates underpaid medical specialists under the terms of their contracts in 2010 (the Vazquez arbitration). Attorney Alan Plutzik represented the claimants. According to Attorney Joyce, all the claims in the Vazquez arbitration relate to alleged breach of provider contracts, not fraud.
Plaintiffs' evidence includes a so-called "Dissemination Chart" identifying certain of plaintiffs' documents that Reich admits he provided to Plutzik in 2011, 2013, and 2014.
Joyce also declared another document that lists the names, specialties, and 2010 bonus payments of specialist medical providers was also disseminated to Plutzik, and he states this document contains highly confidential and proprietary information akin to a customer list. Klausner also declared another document, an October 27, 2010 e-mail from Shinto to Valdez was privileged. Reich denied any documents he provided Plutzik were privileged.
Reich justified providing documents to Plutzik by declaring Plutzik was one of the attorneys who considered representing Valdez in the qui tam action. Further, Reich declared Plutzik was attempting to prove in the Vazquez arbitration that plaintiffs underpaid fee-for-service medical providers, and that was one of the facts Valdez was trying to prove in the qui tam action. Reich reasoned the documents could assist Plutzik in his proof, which would collaterally estop plaintiffs from denying the fact in the qui tam action, and therefore sharing of documents served their common interest. Reich pointed out that in both the Vazquez arbitration and the qui tam action, it was alleged plaintiffs underpaid providers by failing to pass on Medicare fee increases. According to Reich, this was the basis for liability under the False Claims Act.
Plaintiffs allege the computers have not been provided to them, and, to their dismay, Reich has not retrieved or attempted to retrieve documents that remain in the hands of others. Even so, Reich points out in addition to the hard drive given to plaintiffs in October 2014, in October 2015, Reich's counsel provided plaintiffs' counsel with all the electronic handwritten notes Valdez provided to Reich's firm. Therefore, according to Reich, plaintiffs have had a complete set of all disputed documents since October 2015.
The Current Case
Plaintiffs filed their complaint in November 2015. They alleged causes of action for claim and delivery, conversion, civil theft (receipt of stolen property-violation of Pen. Code, § 496 ), restitution/unjust enrichment, and unfair competition (violation of Bus. & Prof. Code, § 17200 et seq. ). All the causes of action revolve around plaintiffs' basic contention Reich wrongfully took possession of documents, wrongfully disclosed the documents to third parties, and wrongfully refuses to return them. Plaintiffs request, inter alia, damages of at least $100,000, punitive and exemplary damages, disgorgement
Plaintiffs timely appealed. The order granting the special motion to strike is appealable. ( § 425.16, subd. (i).)
DISCUSSION
General Principles of Applicable Law
"A SLAPP suit-a strategic lawsuit against public participation-seeks to chill or punish a party's exercise of constitutional rights to free speech and to petition the government for redress of grievances." ( Rusheen v. Cohen (2006)
"Resolution of an anti-SLAPP motion involves two steps. First, the defendant must establish that the challenged claim arises from activity protected by section 425.16. [Citation.] If the defendant makes the required showing, the burden shifts to the plaintiff to demonstrate the merit of the claim by establishing a probability of success. [The Supreme Court has] described this second step as a 'summary-judgment-like procedure.' [Citation.] The court does not weigh evidence or resolve conflicting factual claims. Its inquiry is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment. It accepts the plaintiff's evidence as true, and evaluates the defendant's showing only to determine if it defeats the plaintiff's claim as a matter of law. [Citation.] '[C]laims with the requisite minimal merit may proceed.' " (
We engage in the same analysis in our de novo review. ( Oasis West Realty, LLC v. Goldman (2011)
Reich's Conduct Arises from Protected Activity
"At the first step of the anti-SLAPP analysis, a court considers 'whether the challenged claims arise from acts in furtherance of the defendants' right of free speech or right of petition under one of the categories set forth in section 425.16, subdivision (e). [Citation.] In doing so, "[w]e examine the principal thrust or gravamen of a plaintiff's cause of action to determine whether the anti-SLAPP statute applies ...." [Citation.]' [Citation.] The 'gravamen is defined by the acts on which liability is based , not some philosophical thrust or legal essence of the cause of action.' " ( Contreras v. Dowling (2016)
Section 425.16, subdivision (e), sets forth four categories of protected activity. Relevant here, section 425.16, subdivision (e)(4), defines protected activity to include
Plaintiffs allege five causes of action, all of which arise from Reich's use of the documents he received from Valdez. The gravamen of plaintiffs' causes of action is that Reich improperly distributed documents beyond what was permissible in his position as Valdez's counsel in the qui tam action. We begin by recognizing plaintiffs have conceded, as they must, Reich's use of documents received from Valdez in connection with the qui tam action
What is clear, however, is that the distribution of documents for either purpose was done "in furtherance of the exercise of the constitutional right of petition" with respect to the Perez documents and "in furtherance of the exercise of the constitutional right ... of free speech" with respect to the Plutzik documents.
We first explore the nature of qui tam litigation, which unquestionably involves a public issue or a matter of public interest. A qui tam action is one brought under a statute that allows a private person to sue as a private
In Strathmann, the relator sought recovery under Insurance Code section 1871.7, subdivision (g)(2)(A), concerning false or fraudulent insurance claims. ( Strathmann, supra,
Outside the qui tam context, in Healthsmart , the court concluded statements during a news report and radio program about a "massive medical fraud lawsuit" filed against hospitals and doctors alleging kickbacks paid to doctors were made in connection with a public issue or an issue of public interest. ( Healthsmart, supra, 7 Cal.App.5th at pp. 424-427,
As in Healthsmart, we conclude Reich's conduct is protected under section 425.16, subdivision (e)(4). Reich's distribution of documents to others was done in connection with the qui tam action and issues related to it , all of which concern a public issue or an issue of public interest.
Reich shared documents with Attorney Plutzik, who represented claimants in the Vazquez arbitration. Aside from the Vazquez arbitration, Reich declared Plutzik was one of the attorneys who considered representing Valdez in the qui tam action. He also declared the other attorneys listed in the so-called dissemination chart were contacted to consider whether to represent Valdez in the qui tam action. Plaintiffs do not dispute Reich's declaration. Plaintiffs did not, for example, obtain a contrary declaration from Plutzik.
Reich also shared documents with attorney Perez, who represented defendants in the Marini action, a case filed by plaintiffs against a terminated medical provider in which the defendants filed counterclaims alleging improper contract termination and inappropriate claim denials. Reich declared the documents he shared were related to both the qui tam action and the Marini action because both actions involved plaintiffs' retaliation against providers for providing expensive, but necessary, care and the failure to pay non-network providers for emergency services. Reich thus contends he provided documents to Perez to prove up a common issue. Plaintiffs dispute Reich's characterization of the Marini action, but even though they and their affiliates were the plaintiffs in the Marini action, they did not provide us with pleadings. Moreover, they did not obtain a contrary declaration from Perez.
Plaintiffs concede all three matters-the qui tam action, the Vazquez arbitration, and the Marini action-involve medical services and billing, but nevertheless they contend the issues do not overlap. We are not persuaded.
In the qui tam action, Valdez alleged MMM is the largest of two Medicare plans owned by MMM's then parent company, serving 130,000 members in Puerto Rico. It also alleges in 2010, plaintiffs knew they were overcharging the government based on diagnosis codes that were not supported by medical records. And in the first amended complaint in the qui tam action, Valdez further alleged plaintiffs failed to pay doctors for emergency-related services and retaliated against providers for providing expensive medical care. In the Vazquez arbitration, claimants alleged that in 2010, the government adjusted
The overall picture that emerges from the three actions is this: plaintiffs allegedly overbilled the government and underpaid their medical providers, a legal double whammy that, because it involves taxpayer
Plaintiffs contend litigation over the business relationships of doctors and hospitals and HMOs are not matters of public interest. We disagree to the extent plaintiffs are alleged to be engaged in widespread overbilling of Medicare and underpaying of Medicare providers.
"The definition of 'public interest' within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity." ( Damon v. Ocean Hills Journalism Club (2000)
We also note that to the extent plaintiffs stand firm that Reich's conduct was improper, they are not left without a remedy and have suffered no prejudice. ( Cal. Const., art. VI, § 13.) The issue was placed before the district court in Puerto Rico. Plaintiffs insist Reich disseminated privileged communications, and Reich insists he did not. That issue is more appropriately dealt with by the Puerto Rico district court or by the tribunals hearing the Marini action and Vasquez arbitration, rather than in a tort action against Reich.
Plaintiffs Have Not Demonstrated the Probability of Prevailing on Their Claims
Under the second prong of the anti-SLAPP analysis, plaintiffs have the burden of establishing a probability of prevailing on their claims. ( Jarrow Formulas, Inc. v. LaMarche (2003)
A plaintiff cannot establish a probability of prevailing if the litigation privilege precludes the defendant's liability on the claim. ( Flatley v. Mauro (2006)
"Because the litigation privilege protects only publications and communications, a 'threshold issue in determining the applicability' of the privilege is whether the defendant's conduct was communicative or noncommunicative. [Citation.] The distinction between communicative and noncommunicative conduct hinges on the gravamen of the action. [Citations.] That is,
The definition of the word "communicate" virtually describes the conduct here at issue. "Communicate" means "to convey knowledge of or information about." (Merriam-Webster's Collegiate Dict. (10th ed. 2001) p. 232.) Disseminating the documents to Plutzik and Perez communicated knowledge and information about plaintiffs' acts and thus was "communicative in its essential nature." ( Rusheen , supra ,
But plaintiffs contend the litigation privilege does not insulate Reich from liability because: (1) the duty breached by Reich arises from a contract; (2) Reich's activities were unlawful; or (3) Reich owed plaintiffs an independent duty. We are not persuaded.
Plaintiffs argue that Valdez breached his contractual duty to return the documents upon his termination, but they have not cited any apt authority that would bind Reich to that alleged contractual duty, much less make the litigation privilege unavailable. Valdez is not a party to this case, and plaintiffs have not alleged breach of contract as a cause of action against Reich.
The argument Reich's activities were unlawful is also a nonstarter. California courts consistently hold that defendants may satisfy their burden to show that they were engaged in conduct in furtherance of their right of free speech under the anti-SLAPP statute, even when their conduct was allegedly unlawful. ( Taus v. Loftus (2007)
To the extent a distinction can be made, plaintiffs also seem to argue Reich's conduct was criminal. They point out the alleged violation of Penal Code section 496, which provides in part, "Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or
Even if plaintiffs were correct that the litigation privilege does not apply to conduct proscribed by Penal Code section 496, plaintiffs have not established, as an evidentiary matter, that Reich's conduct was criminal in nature. Penal Code section 496 requires a showing that the property received was, in fact, stolen, i.e., that Valdez's conduct in retaining the documents satisfied each of the elements of at least one of the several varieties of theft offenses defined in Penal Code section 494, subdivision (a), and was not merely a breach of contract. ( People v. Moses (1990)
Plaintiffs' evidence consists of four declarations and several exhibits. In the trial court, plaintiffs made no effort to recite the required elements of any cause of action pleaded in the complaint, and instead concluded with amorphous phrases such as "[t]he evidence of [i]mproper [u]se here is almost entirely undisputed." Plaintiffs emphasized their contention Reich shared
Finally, we are at a loss to understand the argument that Reich owed plaintiffs-his client's adversaries-any legally recognizable duty. Perhaps most importantly, plaintiffs do not allege negligence or breach of any duty in their complaint. Plaintiffs' reliance on Fremont Reorganizing Corp. v. Faigin (2011)
Plaintiffs also suggest Civil Code section 1714.10, entitled "Attorney client civil conspiracy; proof and court determination prior to pleading; defense; limitations; appeal," has some application. We disagree. The statute requires a litigant to obtain court approval to file a complaint containing conspiracy allegations between an attorney and his or her client. ( Civ. Code, § 1714.10, subd. (a).) The purpose of the statute is to "discourage frivolous claims that an attorney conspired with his or her client to harm another. Therefore, rather than requiring the attorney to defeat the claim by showing it is legally meritless, the plaintiff must make a prima facie showing before being allowed to assert the claim." ( Klotz v. Milbank, Tweed, Hadley & McCloy (2015)
All the conduct alleged against Reich is protected by the litigation privilege, or, alternatively, with respect to the civil receiving stolen property cause of action, unsupported by a prima facie evidentiary showing. We have already determined all five causes of action arise from Reich's use of the documents he received from Valdez in connection with the qui tam action Reich filed. Reich's conduct in sharing documents with Plutzik and Perez is also protected because both Plutzik and Perez were involved in litigation-the qui tam action, the Vazquez arbitration, and the Marini action. The documents were "reasonably relevant" to pending or contemplated litigation and thus protected by the litigation privilege.
Having failed to demonstrate their complaint is legally sufficient and supported by a prima facie factual showing, plaintiffs have not established the probability of prevailing on their claims. Therefore, they did not meet their burden on prong two of the anti-SLAPP analysis.
Request for Judicial Notice
Both parties request we take judicial notice of documents attached as exhibits to motions filed in an action pending in Puerto Rico and of the ruling on plaintiffs' motion in the qui tam action for return of the subject documents.
The order is affirmed. Reich shall recover his costs on appeal.
WE CONCUR:
O'LEARY, P.J.
THOMPSON, J.
Notes
"A qui tam action has been defined as follows, 'An action brought under a statute that allows a private person to sue for a penalty, part of which the government or some specified public institution will receive.' [Citations.] The term 'qui tam' comes from the Latin expression 'qui tam pro domino rege quam pro se ipso in hac parte sequitur,' which means, ' "who pursues this action on our Lord the King's behalf as well as his own".' " (People ex rel. Allstate Ins. Co. v. Weitzman (2003)
All further statutory references are to the Code of Civil Procedure unless otherwise stated.
We limit our recitation to facts we deem legally significant.
"The Centers for Medicare & Medicaid Services, CMS, is part of the Department of Health and Human Services." (< https: www.cms.gov="" about-cms="" about-cms.html=""> [as of Jan. 22, 2018].) It administers programs including Medicare, Medicaid, the Children's Health Insurance Program, and the Health Insurance marketplace.
In February 2015, the district court granted a motion to transfer the qui tam action to the District of Puerto Rico.
Plaintiffs characterize the drive as a thumb drive.
The demand for arbitration alleges counts for breach of contract, breach of implied duty and covenants to exercise good faith and fair dealing, and restitution/unjust enrichment.
Reich also provided documents to Richard Graffam, Gary Lincenberg, Matt Smith, Kyle Eisenmann, Scott Bursor, Justin Berger, Jim Spertus, Robert Nelson, Kevin Budner, Carlos A. Del Valle Cruz, and Armando Lamourt. He declares these individuals are attorneys, each of whom (except Graffam) he contacted to consider whether to represent Valdez in the qui tam action. Plaintiffs do not elaborate on any of these individuals.
Reich offered to provide the document to the trial court for an in camera review. Apparently, the trial court declined, as we have not seen the document.
The trial court relied principally on Finton Construction, Inc. v. Bidna & Keys (2015)
In their opposition filed in the trial court, plaintiffs stated they do not dispute Reich's initial receipt and "privilege screen," as well as use of nonprivileged documents in the qui tam action, are protected activity under prong one. In their reply brief in this court, plaintiffs state they "did not sue Reich because he received the [documents]. Nor did they sue him for using them to prosecute a lawsuit on behalf of his client." This, of course, is contrary to their pleaded causes of action for conversion and civil theft based on receiving stolen property.
We acknowledge that an arbitrator is not a "judicial body" and an arbitration proceeding is not an "official proceeding" within the meaning of section 425.16, subdivisions (e)(1) and (e)(2). (See Century 21 Chamberlain & Associates v. Haberman (2009)
"Not all public interest or class actions are intended to be exempt from the anti-SLAPP law. [Citation.] To be exempt, the action must be 'brought solely in the public interest or on behalf of the general public' and meet the three conditions set forth in section 425.17(b)." (Strathmann, supra,
The Healthsmart court did not analyze whether the statements were protected under section 425.16, subdivision (e)(2), choosing instead to analyze the case under the "catchall definition under subdivision (e)(4)." (Healthsmart , at p. 427, fn. 7,
The motions are in Spanish, but the attachments are in English.