STATE OF CALIFORNIA ex rel. AETNA HEALTH OF CALIFORNIA, INC. et al., Plaintiffs and Respondents, v. PAIN MANAGEMENT SPECIALIST MEDICAL GROUP et al., Defendants and Appellants.
2d Crim. No. B299025 (Super. Ct. No. 17CV-0362)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX
Filed 12/21/20
CERTIFIED FOR PUBLICATION. San Luis Obispo County.
Here we decide the qui tam action is not subject to arbitration because it is brought on behalf of the state which is not a party to the contract between the insurance company and the surgical center.
Pain Management Specialist Medical Group, Cypress Ambulatory Surgery Center, and Doctors Boris Pilch, Jashvant Patel, and Marc Wolfsohn (collectively Pain Management) appeal the trial court’s order denying their petition to compel arbitration of a qui tam action filed by relators Aetna Health of California, Inc. and Aetna Health Management, LLC (collectively Aetna) on behalf of the State of California (State).
This appeal concerns Aetna’s claims of fraudulent insurance billing practices by Pain Management and its healthcare billing services in violation of the IFPA. (
FACTUAL AND PROCEDURAL HISTORY2
On July 28, 2017, Aetna filed a complaint against Pain Management and other defendants, alleging a qui tam cause of action on behalf of the People of the State of California as well as individual claims of fraud, among other causes of action. The complaint alleges that Pain Management performed surgeries at its in-network-contracted ambulatory surgery centers but billed Aetna as though the surgeries had been performed at its out-of-network-non-contracted surgery centers. As a result, Aetna paid Pain Management higher fees.
The qui tam cause of action alleges that Pain Management violated IFPA, by creating an unlawful insurance fraud billing scheme in violation of
On April 2, 2019, Pain Management moved to compel arbitration of the qui tam cause of action. To support its motion, Pain Management relied upon arbitration clauses contained in its contracts with Aetna. Although the clauses differed slightly from contract to contract, generally they provided for mandatory binding arbitration administered by the American Arbitration Association and application of the Federal Arbitration Act,
Following written and oral argument by the parties, the trial court denied the motion to compel arbitration. In a reasoned and thoughtful written ruling, the court ruled that “the state, as owner of the IFPA claim, is not a party to the contracts containing the arbitration provisions.”
Pain Management appeals and contends that Aetna, not the State, is the real party in interest who suffered harm by the alleged fraudulent billing practices.
DISCUSSION
Pain Management asserts that Aetna should be bound by the arbitration provisions that it drafted and required medical providers to execute. Pain Management relies upon an unpublished federal case, Deck v. Miami Jacobs Bus. Coll. Co. (S.D. Ohio, Jan. 31, 2013, No. 3:12-cv-63) 2013 U.S. Dist. Lexis 14845, holding that a federal False Claims Act claim may be subject to arbitration.
Pain Management points out that the qui tam cause of action rests upon the same allegations as Aetna’s individual causes of action. It adds that Aetna dismissed the individual causes of action without prejudice after receiving the demand to arbitrate.
Standard of Review
The party seeking arbitration bears the burden of proving the existence of an arbitration agreement; the party opposing arbitration bears the
IFPA Provisions
The Legislature enacted the IFPA to combat insurance fraud committed against insurers by individuals, organizations, and companies. (Weitzman, supra, 107 Cal.App.4th 534, 548-549.) Insurers are the direct victims of the fraud; insureds are the indirect victims who pay higher premiums due to insurance fraud. (Id. at p. 562.) “It is in the government’s interest to have insurers investigate and prosecute [qui tam] proceedings. The government serves to gain both in terms of fraud prevention and financially from such actions, especially given limited investigative and prosecutorial resources available to it.” (Ibid.)
Generally, a qui tam action is one brought pursuant to a statute allowing a private person to sue as a private attorney general to recover damages or penalties, all or part of which is paid to the government. (People ex rel. Strathmann v. Acacia Research Corp. (2012) 210 Cal.App.4th 487, 491-492 (Strathmann); Weitzman, 107 Cal.App.4th 534, 538.) Pursuant to the IFPA, a qui tam action is brought on behalf of the People of the State of California, and the People are the real party in interest. (
The person bringing the qui tam action, the relator, stands in the shoes of the People of the State of California, who are deemed to be the real
The procedural requirements of IFPA reflect that the State retains primacy of a qui tam action. The State can dismiss the action, intervene in the action, or permit the relator to continue. (
Here the State cannot be compelled to arbitrate this qui tam IFPA action because it is not a signatory to the contracts. (Pinnacle, supra, 55 Cal.4th 223, 240.) “[I]t is a cardinal principle that arbitration under the FAA ‘is a matter of consent, not coercion.’ ” (Ibid., citing Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 478.) Thus, a party cannot be required to submit to arbitration a dispute that he has not agreed to submit. (Ibid.)
In California, general principles of contract law determine whether the parties have a binding agreement to arbitrate. (Pinnacle, supra, 55 Cal.4th 223, 236.) “In determining the rights of parties to enforce an arbitration agreement within the FAA’s scope, courts apply state contract law while giving due regard to the federal policy favoring arbitration.” (Ibid.)
In the related context of the California Private Attorney General Act, Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 386-387, concluded that a private attorney general claim is not a dispute between an employee and an employer, but is a dispute between the employer and the State. A private attorney general claim is a type of qui tam action. (Id., at p. 382.) The government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit. (Ibid.; Tanguilig v. Bloomingdale’s, Inc. (2016) 5 Cal.App.5th 665, 671.) Thus, the State is the owner of the qui tam action, the real party in interest, and cannot be compelled to arbitrate without its consent. (Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 622.)
The reasoning of Deck v. Miami Jacobs Bus. College Co., supra, 2013 U.S. Dist. Lexis 14845, is not persuasive. Deck concerned the federal False Claims Act, a different statutory scheme from the IFPA in its purpose, scope of liability, victims, and recoveries. (Weitzman, supra, 107 Cal.App.4th 534, 561 [the only direct victim of the federal False Claims Act is the government].) “The purpose of section 1871.7, on the other hand, is to
The order denying the motion to compel arbitration is affirmed. Costs are awarded to respondents.
CERTIFIED FOR PUBLICATION.
GILBERT, P. J.
We concur:
PERREN, J.
TANGEMAN, J.
Ginger E. Garrett, Judge
Superior Court County of San Luis Obispo
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Buchalter, Andrew H. Selesnick, Robert M. Dato and Christopher L. Dacus for Defendants and Appellants.
Kennaday Leavitt, Curtis S. Leavitt and Lance M. Martin for Plaintiffs and Respondents.