Judge: Jon R. Takasugi, Case: 24STCV26456, Date: 2025-03-17 Tentative Ruling

Case Number: 24STCV26456     Hearing Date: March 17, 2025    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Defendants’ demurrer to the first and second causes of action is SUSTAINED, WITH 15 DAYS LEAVE TO AMEND.

Accordingly, Defendants’ motion to strike is moot.

           On 10/11/2024, Plaintiff Jong Teh Huang (Plaintiff) filed suit against ELADH, L.P., CHHP Holdings II, LLC, Bryan Burklow, Analyn Librian, Tameem Alhayya, and Mehmet Demirozu (collectively, Defendants), alleging: (1) intentional interference with prospective economic advantage; (2) negligent interference with prospective economic advantage; (3) negligence; and (4) unfair business practices.

           On 1/22/2025, Defendants demurred to the first and section causes of action. Defendants also moved to strike portions of Plaintiff’s Complaint.

Discussion

           Defendants argue that Plaintiff’s first and second causes of action fail because the claims are insufficiently pled.

           After review, the Court agrees.

“[A]n essential element of the tort of intentional interference with prospective business advantage is the existence of a business relationship with which the tortfeasor interfered. Although this need not be a contractual relationship, an existing relationship is required.” (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 546.) Absent an underlying business relationship, a party is free to do business with whoever they so choose. (See ICA Enterprises, Inc. v. Palram Americas, Inc. (2015) 235 Cal.App.4th 257, 292-293.)

Here, Plaintiff does not allege the existence of a contractual relationship between the parties—express or implied. Rather, Plaintiff alleges that Defendants had a history of sending referrals to Plaintiff, but thereafter chose to make those referrals to another party. Plaintiff did not submit legal authority to show that the act of providing in a business exchange was sufficient to rise to the level of a business relationship. (See ICA, supra, 235 Cal.App. at p. 292-293.)

The competition privilege “protects one from liability for inducing a third person not to enter into a prospective contractual relation with a business competitor.” (Gemini Aluminum Corp. v. Cal. Custom Shapes, Inc. (2002) 95 Cal.App.4th 1249, 1256)

The privilege applies where (a) the relation [between the competitor and third person] concerns a matter involved in the competition between the actor and the competitor, and (b) the actor does not employ improper means, and (c) the actor does not intend thereby to create or continue an illegal restraint of competition, and (d) the actor’s purpose is at least in part to advance his interest in his competition with the other.” (Id.)

Here, Plaintiff alleges no obligation or contractual relationship between Plaintiff and Defendants obligating Defendants to refer patients to Plaintiffs. Moreover, the referrals were to Plaintiff’s “competitors” in the same practice area.

Moreover, [a] plaintiff seeking to recover for alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff's expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal. 4th 376, 393.)

Here, Plaintiff has not alleged an independent wrong because the mere business decision by Defendants to engage in business with plaintiff’s competition cannot support a claim. Plaintiff must allege facts which could show that Defendants’ decision to no longer make referrals to Plaintiff was an independent wrong sufficient to show interference. Plaintiff must also allege facts which could show beyond a speculative inference that but for the conduct of Defendants he would have received the same number of referrals as he previously did. (Westside Center Assocs. v. Safeway Stores, Inc. (1996) 42 Cal. App. 4th 507.)

As for the second cause of action, the elements of negligent interference with prospective economic relations are: (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship. (N. Am. Chem. Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786).

Here, the same deficiencies identified above apply. Namely, that Plaintiff has not alleged any underlying business relationship by which there was any obligation or relationship between plaintiff and Defendants regarding patient referrals. “Absent an underlying business relationship, a party is free to do business with whoever they so choose.” (See ICA, supra, 235 Cal.App. at p. 292-293.)

Moreover, the Court finds the case heavily cited by Plaintiff in opposition, People ex rel. Allstate Ins. Co. v. Discovery Radiology Physicians, P.C. (2023) 94 Cal.App.5th 521, to be distinguishable. There, as it related to referrals, the non-physician owner and his management corporation:

[E]nter[ed] into written contracts with diagnostic radiology facilities and radiologists to refer patients for radiology services. These contracts give [defendant] complete control over the selection of diagnostic radiology facilities to which patients are sent, the selection of physicians to read and interpret MRIs, the preparation of billing statements, including determining the amount billed for the services rendered and the billing codes used, and the distribution of profits.”

(Id. at pp. 529-530.)

As such, the Court of Appeals found the degree of control exercised by non-physicians over the selection of medical services to be tantamount to the corporate practice of medicine. Here, by contrast, Plaintiff does allege facts which show the same degree of control. There, defendants controlled nearly every aspect of the medical decision making process – including absolute authority when selecting physicians to provide medical services. Here, Plaintiff still receives referrals from Defendant; Plaintiff’s objection is to the fact that he is allegedly no longer being identified as a preferred provider, which opens up the referral process. As such, “Plaintiff admits that he still obtains referrals from the locations in which he has privileges, and does not identify any act he was able to do previously which he can no longer do.” (Reply, 4: 22-23.) This is materially distinguishable from the facts in Discovery Radiology Physicians, P.C.

Based on the foregoing, Defendants’ demurrer to the first and second causes of action is sustained, with 15 days leave to amend. Accordingly, Defendants’ motion to strike is moot.

It is so ordered.

Dated:  March    , 2025

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.