Judge Bruce G. Iwasaki

Department 58

Hearing Date: October 30, 2024

Case Name: People of the State of California ex rel. Allstate Insurance Company, v.

Encino Open MRI Inc., et al.

Case No.: 23STCV19039

Motion: Motion to Quash Allstate’s Third-Party Subpoena (Wells Fargo Bank)

Moving Party: Defendants LA MRI Center, Inc., Burbank Imaging & Open MRI Inc.,

Total MRI, LLC d/b/a Santa Clarita MRI, Akhtar Golbahar, and Nicky

Golbahar (sued as Nick Golbahar)

Responding Party: Plaintiffs People of the State of California and Relator Allstate Insurance

Company

Tentative Ruling:

The Court DENIES the Motion to Quash Allstate’s Subpoena on Wells Fargo.

Background

On August 9, 2023, Relator Allstate Insurance Company (“Allstate”), on behalf of itself and on behalf of the People of the State of California (the “State”) (collectively, “Plaintiffs”), filed this action against Encino Open MRI, Inc., Burbank Imaging & Open MRI, Inc., Southern California Medical Imaging & Open MRI, Inc. d/b/a SoCal Imaging and Open MRI, SoCal MRI Centers LLC d/b/a Montclair Open MRI, Total MRI, LLC dba Santa Clarita MRI, LA MRI Center, Inc. (collectively “Entity Defendants”), Harry Golbahar, Akhtar Golbahar, Nick Golbahar, Bobak Kardan, (collectively “Owner Defendants”), Stanton Kremsky, M.D., Alexander Grimm, M.D., Ranon Udkoff, M. (collectively “Professional Defendants”), and Does 1 to 200. The Complaint alleges that, as early as 2016, Owner and Entity Defendants defrauded Allstate by presenting more than $5 million in false bills for sham diagnostic radiology services they provided but were not licensed to render.

The alleged scheme is as follows: Owner and Entity Defendants hired “sham” medical directors who appeared to be supervising the imaging services, yet in reality, the non-physician Owner Defendants exercised complete control. Owner Defendants would obtain patient referrals from providers, personal injury attorneys, or others. Non-physician radiologic technologists would perform the MRI imaging on patients. Then, independent licensed teleradiologists, the Professional Defendants, would review the images and provide their professional opinion to help legitimize the claim. Owner Defendants paid Professional Defendants on a discounted basis in exchange for patient referrals—the practice is called patient “steering.” Owner Defendants were then able to inflate the bill price and collect the bulk of the insurance claim payments. Such payments are referred to as “kickbacks.” The Complaint alleges Owner and Entity Defendants’ fraudulent scheme has allowed them to pocket extraordinary sums. The Complaint alleges two causes of action: (1) Violations of the California Insurance Fraud Prevention Act (IFPA) (Insurance Code Section 1871.7) and (2) Violations of the Unfair Competition Law (UCL) (Business and Professions Code Section 17200 et seq.).

On August 1, 2024, the parties filed a Stipulation and Protective Order to allow the parties to designate confidential documents, testimony, or information that each party believes in good faith to contain information entitled to confidential treatment.

On August 8, 2024, Allstate issued a deposition subpoena (“Subpoena”) to Wells Fargo Bank (“Wells Fargo”), which requested all documents related to accounts owned by Burbank Imaging and Open MRI, Inc. (“Burbank Imaging”) from January 1, 2026 to present (“Account Records”). (Kohli Decl., ¶ 2, Exh. A; Steele Decl., ¶ 3.)

On August 29, 2024, Defendants LA MRI Center, Inc., Burbank Imaging, Total MRI, LLC d/b/a Santa Clarita MRI, Akhtar Golbahar, and Nicky Golbahar (sued as Nick Golbahar) (“Movants”) filed this Motion to Quash Allstate’s Subpoena served on Wells Fargo (“Motion”).

On October 17, 2024, Allstate filed the opposition.

No reply has been filed as of October 24, 2024.

Legal Standard

Code of Civil Procedure section 1987.1 states the following:

“(a) If a subpoena requires the attendance of a witness or the production of books, documents, electronically stored information, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by any person described in subdivision (b), or upon the court’s own motion after giving counsel notice and an opportunity to be heard, may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders. In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.”

Subdivision (b)(1) permits a party to seek relief.

Discussion

The parties dispute issues regarding (1) the Subpoena’s relevance, breadth, and burden on Wells Fargo, (2) Burbank Imaging’s privacy interests in the Account Information, (3) whether the Subpoena seeks privileged information, and (4) the Subpoena’s procedural deficiencies.

Procedural Deficiencies

In the opposition, Allstate argues that Movants failed to serve the California Department of Insurance (CDI), in violation of Insurance Code Section 1871, subdivision (f)(3). CDI requested to receive notice of all pleadings when it declined to intervene in the suit. (See January 3, 2024 CDI Notice of Non-Intervention, p. 3.)

Insurance Code Section 1871, subdivision (f)(3) states that “[i]f the district attorney or commissioner elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the district attorney or commissioner so requests, he or she shall be served with copies of all pleadings filed in the action. . .”

The Court finds Movants failed to serve CDI as requested. (Proof of Service, at p.3)

Further, Allstate argues Movants failed to meet and confer before filing this Motion. California Code of Civil Procedure section¿2025.410(c) provides that a motion to quash a deposition notice must be accompanied by a meet and confer declaration. Movants did not meet and confer with Plaintiffs’ counsel’s office. (Steele Decl., ¶ 6.) The Court thus finds Movants have not met the meet and confer requirement. Nevertheless, the Court will continue to analyze the Motion on the merits.

Relevance, Breadth, and Burden

Movants argues the Subpoena is overbroad and seeks information outside the scope of information relating to services Movants submitted as claims to Allstate. Movants also argue the request is overly burdensome on Wells Fargo. In opposition, Allstate argues the Subpoena seeks relevant evidence of Movants’ unlawful medical practice and billing, appointment and compensation of “sham” medical directors, unlawful kickbacks and patient referrals, and false bills to insurers. (Compl., ¶¶ 2-3, 12, 102, 119, 123, 141.) Further, Allstate argues the Subpoena will provide information regarding Owner Defendants’ (1) alter ego status, (2) fraudulent intent, and (3) relationships with potential witnesses that shared in the fraudulent scheme. The Subpoena will also aid Allstate in determining its monetary remedies under IFPA.

For discovery purposes, information is relevant if it might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement.¿¿(Gonzalez v. Superior Court¿(1995) 33 Cal.App.4th 1539, 1546.)¿¿Generally, all unprivileged information that is relevant to the subject matter of the action is discoverable if it would itself be admissible evidence at trial or if it appears reasonably calculated to lead to the discovery of admissible evidence.¿¿(Code Civ. Proc., § 2017.010;¿Schnabel v. Superior Court¿(1993) 5 Cal.4th 704, 711.)¿¿

The Court finds that the Account Records the Subpoena seeks are relevant. The Account Records will reveal essential information as to whether Burbank Imaging engaged in illegal kickbacks and how much Owner Defendant benefitted from such practices. (See Compl., ¶¶ 11, 64, 102-104.) Such information is relevant to determine Allstate’s remedies under IFPA. The Account Records may also reveal how much Burbank Imaging paid its Medical Director, Dr. Harris Newark III, and whether the compensation supports the contention that he was hired as a “sham” medical director to help conceal Burbank Imaging’s unlicensed status. (See Compl., ¶¶ 7, 99-101.) In sum, the Account Records contain information essential to proving Allstate’s claims.

The Court finds the Subpoena is not overly broad. The Subpoena seeks Burbank Imaging’s Account Records from January 1, 2026 to present. The Complaint alleges all Defendants were engaged in the fraudulent scheme as early as 2016. (Compl., ¶¶ 56, 120, 123). The Court thus finds the length of time covered by the Subpoena is directly related to Defendants’ alleged misconduct in the Complaint. As to the burden on Wells Fargo, Wells Fargo has not objected to the Subpoena. (Steele Decl., ¶ 5.) Therefore, the Subpoena is neither overly broad nor burdensome.

Privacy

Movants argue the Subpoena seeks financial information that would violate Burbank Imaging’s financial privacy rights and the rights of third parties Burbank Imaging has transacted with. Allstate argues that the disclosure of Burbank Imaging’s Account Records does not invade privacy rights related to an individual’s personal autonomy, so Allstate need not have a compelling interest in disclosure. Nevertheless, Allstate interest in combatting alleged insurance fraud via this qui tam lawsuit, on behalf of all Californians, is compelling. Lastly, Burbank Imaging has no legitimate expectation of privacy in property gained through a fraudulent scheme.

The state Constitution expressly grants Californians a right of privacy. (Cal. Const., art. I, § 1.) The California Supreme Court has “established a framework for evaluating potential invasions of privacy. The party asserting a privacy right must establish a legally protected privacy interest, an objectively reasonable expectation of privacy in the given circumstances, and a threatened intrusion that is serious. [Citation] The party seeking information may raise in response whatever legitimate and important countervailing interests disclosure serves, while the party seeking protection may identify feasible alternatives that serve the same interests or protective measures that would diminish the loss of privacy. A court must then balance these competing considerations.” (Williams, supra, 3 Cal.5th at 552.)

The California Supreme Court has recognized a privacy right for financial information, although it is not absolute. (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656.) In Valley Bank of Nevada, the California Supreme Court found that the following should be considered by the trial court in balancing the interests between the right of civil litigants to discover relevant facts and the right of bank customers to maintain reasonable privacy regarding their financial affairs: “. . . the purpose of the information sought, the effect that disclosure will have on the parties and on the trial, the nature of the objections urged by the party resisting disclosure, and ability of the court to make an alternative order which may grant partial disclosure, disclosure in another form, or disclosure only in the event that the party seeking the information undertakes certain specified burdens which appear just under the circumstances.” (Id. at 658.) The privacy right to protect financial information may only be overcome if a legislatively declared public policy applies. (Schnabel v. Superior Court (1993) 5 Cal.4th 704, 721 (finding an exception to privacy privilege for financial information in proceedings to enforce child support orders).)

In balancing Burbank Imaging’s interest in protecting its financial information against Allstate’ interests in discovery, the Court finds Allstate’ interests prevail. The Legislature, in enacting the Insurance Fraud Prevention Act, has identified a compelling interest in preventing insurance fraud. (Ins. Code § 1871; see also People ex rel. Allstate Ins. Co. v. Weitzman (2003) 107 Cal.App.4th 534, 548 (finding IFPA’s purpose is “to deter fraudulent automobile insurance claims and to facilitate the investigation and prosecution of insurance fraud”). Movants have not provided any evidence to support why Burbank Imaging’s financial privacy concerns outweigh this compelling interest. Further, the Court finds that the Stipulation and Protective Order will mitigate any privacy concerns by Burbank Imaging and third parties who transacted with Burbank Imaging.

Privilege

Movants argue the Subpoena requests information covered by the attorney-client privilege. Specifically, the Account Records encompass confidential payments and correspondence to counsel. Movants argue that Wells Fargo’s involvement does not destroy the privilege because any disclosures were necessary for Burbank to consult its counsel. In opposition, Plaintiffs argue the Account Records are not covered by attorney-client privilege because the bank statements showing payments to counsel are not “confidential communications.” Burbank Imaging waived its attorney-client privilege by giving Wells Fargo access to this information. Lastly, Burbank Imaging waived any privileged information to the extent Defendants rely on the advice of counsel defense—i.e., Movants’ defense that they relied on counsel’s representations to determine their scheme was legal waives their ability to assert attorney-client privilege as to the Account Records. (See Defendants’ 8/15/2024 Report Re: Proposal for Phasing Litigation, at p.3.)

“The party claiming the privilege has the burden of establishing the preliminary facts necessary to support its exercise, i.e., a communication made in the course of an attorney-client relationship.” (Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 733.) “Once that party establishes facts necessary to support a prima facie claim of privilege, the communication is presumed to have been made in confidence and the opponent of the claim of privilege has the burden of proof to establish the communication was not confidential or that the privilege does not for other reasons apply. (Ibid.)

The Court finds that the Account Records are not covered by the attorney-client privilege. Bank statements, like client invoices, are only privileged to the extent they contain communications “made for the purpose of seeking or delivering the attorney's legal advice or representation.” (See Los Angeles County Bd. of Supervisors v. Superior Court (2016) 2 Cal.5th 282, 293.) Movants have provided no evidence that Burbank Imaging’s account was used to correspond with counsel, or even to pay counsel. The Court finds that if there are any privileged communications contained in the Account Records, Movants can designate those communications in a privilege log. The Court need not address Allstate’s argument regarding the advice of counsel defense because the Account Records likely do not contain any communications in which counsel gave advice regarding the legality of Movants’ scheme. (See Transamerica Title Ins. Co. v. Superior Court (1987) 188 Cal.App.3d 1047, 1053 (“the deliberate injection of the advice of counsel into a case waives the attorney-client privilege as to communications and documents relating to the advice.”).)

Conclusion

The Court DENIES the Motion to Quash Allstate’s Subpoena on Wells Fargo.