Judge: Mary H. Strobel, Case: 22STCP00383, Date: 2023-04-18 Tentative Ruling

Case Number: 22STCP00383    Hearing Date: April 18, 2023    Dept: 82

            Petitioner Developmental Pathways, Inc. (“Petitioner” or “DPI”) petitions for a writ of mandate directing Respondent Local Initiative Health Care Authority of Los Angeles dba L.A. Care Health Plan (“Respondent” or “L.A. Care”) to admit Petitioner into its provider network.  

Factual and Procedural Background

The Parties

Petitioner is a corporation headquartered in the city of Van Nuys which provides behavioral health treatment (“BHT”) to individuals in the autism spectrum and other special needs in Southern California, including Los Angeles County. (AR 63-66, 121-122.) Respondent is a local public agency created by the State of California to provide health care coverage to low-income Los Angeles County residents. (Welf. & Inst. Code §§ 14087.38(j), 14087.9605(b)(1), 14087.96(c), 14087.97.)

Respondent Gives Notice of Intent to Deny Petitioner’s Request to Participate in its Provider Network

            On July 19, 2019, and October, 2019, Petitioner sent Letters of Interest (“LOI”) to Respondent requesting “to be in network” with Respondent.  (AR 33, 35.) 

On November 22, 2019, Respondent sent a letter to Petitioner, notifying Petitioner that its LOI had been reviewed, but that no services contract would be offered because Respondent’s provider network adequately met the needs of Respondent’s members at that time. (AR 38.) 

On April 21, 2020, Petitioner sent a third LOI to Respondent expressing its interest in joining Respondent’s network.  (AR 49.)  Respondent requested that Petitioner complete screening questions, to which Petitioner responded.  (AR 56-79.) 

On May 6, 2020, a meeting was held between Petitioner and Respondent.  (AR 81.)

On May 20-22, 2020, representatives of Petitioner and Respondent exchanged emails.  Respondent’s representative wrote: “As we stated during the meeting, L.A. Care’s only immediate need is for psychologists to conduct comprehensive diagnostic evaluations.”  (AR 86-87.)  Petitioner’s representative responded that Petitioner does not currently employ psychologists, but that Petitioner could explore hiring psychologists to conduct comprehensive diagnostic evaluations if Respondent would be able to accelerate the process for Petitioner being an in-network provider.  (AR 86.)  Petitioner also noted that it continued to receive requests for Applied Behavioral Analysis (“ABA”) services from Respondent’s members.  (AR 86.)

On July 9, 2020, Respondent issued to Petitioner a Notice of Intent to Deny Participation, which notified Petitioner of its decision not to offer Petitioner a services contract to become in network. Respondent informed Petitioner that Respondent’s provider network was sufficient and adequate to meet members’ needs and Petitioner did not offer the type of specialized services that Respondent was seeking.  (AR 98.)    This notice included a Notice of Review Rights and a copy of Respondent’s Policy and Procedure LS-011.  (AR 97-108.)

Petitioner’s Appeal and the Plan Reviewer’s Decision

            On July 17, 2020, Petitioner requested a review of Respondent’s July 2020 Notice of Intent to Deny Participation.  (AR 110-115.)  In a notice dated November 20, 2020, Respondent granted a review pursuant to its Policy and Procedure LS-011.  (AR 117-119.)  This notice further stated the reasons for Respondent’s denial of Petitioner’s application to join the network.  (Ibid.)

Pursuant to LS-011, the parties submitted written briefs, declarations, and exhibits.  (See AR 2-3, 104-105; AR 24-143 [Petitioner’s brief, 22 exhibits, and Arius Decl.]; and AR 144-170 [Respondent’s brief, exhibits, and Lehman Decl.].) 

By written decision dated May 6, 2021, Respondent’s Plan Reviewer, Bill Bittner, affirmed the denial of Petitioner’s request to join Respondent’s provider network (“Decision” or “Plan Reviewer’s Decision”).  (AR 2-6.)  The Plan Reviewer concluded that “L.A. Care’s decision is both substantively rational and procedurally fair, because L.A. Care’s reasoning for the denial was based on rational evidence, and because L.A. Care both communicated the reasons for the denial to DPI and provided DPI a fair process by which to obtain a review of the decision.”  (AR 4.) 

Writ Proceedings

            On February 2, 2022, Petitioner filed this petition for writ of mandate and complaint.  The petition and complaint include the following causes of action: (1) writ of mandate pursuant to CCP section 1085; (2) writ of mandate pursuant to CCP section 1094.5; and (3) intentional interference with economic advantage.  Respondent has answered the petition. 

On May 19, 2022, the court held a trial setting conference.  At the TSC, the court stayed all non-writ causes of action until resolution of the writ claims. 

            On February 21, 2023, Petitioner filed its opening brief in support of the petition (“OB”).  The court has received Respondent’s opposition, Petitioner’s reply, and the administrative record.

Standard of Review

The parties dispute whether the petition is governed by CCP section 1094.5 or section 1085.  (OB 8-9; Oppo. 10; but see Reply 3 and 6 [asserting that either standard could apply].)  “[J]udicial review via administrative mandate is available ‘only if the decision[] resulted from a 'proceeding in which by law: 1) a hearing is required to be given, 2) evidence is required to be taken, and 3) discretion in the determination of facts is vested in the agency.’ Thus, ordinary mandate is used to review adjudicatory actions or decisions when the agency was not required to hold an evidentiary hearing.”  (Bunnett v. Regents of University of California (1995) 35 Cal.App.4th 843, 848.)  Administrative mandate “is available if a hearing is required by statute, an organization's internal rules and regulations, or due process.”  (Pomona College v. Sup.Ct. (1996) 45 Cal.App.4th 1716, 1727, fn. 10.) Also, “administrative mandamus under section 1094.5 applies to ‘quasi-judicial’ decisions, which involve ‘the actual application of such a rule to a specific set of existing facts.’”  (Beach & Bluff Conservancy v. City of Solana Beach (2018) 28 Cal. App. 5th 244, 259.) 

Here, Petitioner admits that the Decision “was a ‘quasi-judicial’ decision rather than a ‘quasi-legislative’ one, in that it involved exclusion of a particular corporate individual, DPI, from L.A. Care’s provider network, rather than promulgation of a general policy rule by L.A. Care.”  (OB 9.)  Further, while a live evidentiary hearing was not held, Petitioner was permitted to submit written argument and evidence, which was considered by the Plan Reviewer.  (See AR 2-6.)  “The review was conducted pursuant to L.A. Care Health Plan’s … Policy and Procedure LS-011.”  (AR 2.)  That policy and procedure requires Respondent to select a neutral Plan Reviewer and to afford the provider notice and opportunity to respond in writing to the “adverse action” at issue.  (AR 100-106.) A “hearing” for the purposes of administrative mandamus can be satisfied by written submission of evidence.  (See Pomona College, supra, 45 Cap.App.4th at 1730; see also Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1105 [under California law, a “hearing” does not necessarily require live testimony or cross-examination].)  The court concludes that this action is governed by CCP section 1094.5.

Under CCP section 1094.5(b), the pertinent issues are whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion.  An abuse of discretion is established if the agency has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence.  (CCP § 1094.5(b).)

Because the Decision does not implicate a fundamental vested right of Petitioner, the court applies the substantial evidence standard of review to Respondent’s fact findings.  (Bixby v. Pierno (1971) 4 Cal.3d 130, 144.)  Substantial evidence is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Board (2002) 104 Cal. App. 4th 575, 584-85), or evidence of ponderable legal significance which is reasonable in nature, credible and of solid value. (Mohilef v. Janovici (1996) 51 Cal. App. 4th 267, 305 n. 28.)  “Courts may reverse an [administrative] decision only if, based on the evidence …, a reasonable person could not reach the conclusion reached by the agency.”  (Sierra Club v. California Coastal Com. (1993) 12 Cal.App.4th 602, 610.)   

“[A] trial court must afford a strong presumption of correctness concerning the administrative findings.”  (Fukuda v. City of Angels (1999) 20 Cal. 4th 805, 817; see also Evid. Code § 664.)  Petitioner bears the burden of proof to demonstrate, by citation to the administrative record, that substantial evidence does not support the administrative findings.  (Strumsky v. San Diego County Employees Retirement Assn. (1974) 11 Cal.3d 28, 32; Steele v. Los Angeles County Civil Service Commission (1958) 166 Cal. App. 2d 129, 137; see Local Rule 3.231(i)(2).) A reviewing court “will not act as counsel for either party … and will not assume the task of initiating and prosecuting a search of the record for any purpose of discovering errors not pointed out in the briefs.” (Fox v. Erickson (1950) 99 Cal.App.2d 740, 742.)

Even if this action is governed by CCP section 1085, the court would apply a deferential abuse of discretion standard of review to Respondent’s fact findings.  “In determining whether a public agency has abused its discretion, the court may not substitute its judgment for that of the agency, and if reasonable minds may disagree as to the wisdom of the agency's action, its determination must be upheld. A court must ask whether the public agency's action was arbitrary, capricious, or entirely lacking in evidentiary support, or whether the agency failed to follow the procedure and give the notices the law requires.”  (County of Los Angeles v. City of Los Angeles (2013) 214 Cal.App.4th 643, 654.)  “Courts … may not reweigh the evidence or substitute their judgment for that of the agency.”  (Ridgecrest Charter School v. Sierra Sands Unified School Dist. (2005) 130 Cal.App.4th 986, 1002-03.)  Because this standard of review is more deferential than the substantial evidence standard under section 1094.5, the court reaches the same result in its review of Respondent’s factual findings even if this petition is governed by section 1085.

“‘On questions of law arising in mandate proceedings, [the court] exercise[s] independent judgment.’”  (Christensen v. Lightbourne (2017) 15 Cal.App.5th 1239, 1251.)  “A challenge to the procedural fairness of the administrative hearing is reviewed de novo on appeal because the ultimate determination of procedural fairness amounts to a question of law.”  (Nasha L.L.C. v. City of Los Angeles (2004) 125 Cal.App.4th 470, 482.)  Because Petitioner’s arguments about procedural fairness are decided de novo under both section 1085 and section 1094.5, the court reaches the same result on the fairness issues even if the petition is governed by section 1085.  

Analysis

The Common Law Right to Fair Procedure

            The parties agree that the common law doctrine of fair procedure applies to the Plan Reviewer’s Decision.  (OB 9-13; Oppo. 11-12.)  “The common law doctrine of fair procedure protects against arbitrary decisions by private organizations under certain circumstances. [Citation.] When the doctrine applies, private entities may not expel or exclude qualified persons without acting in a manner that is substantively rational and procedurally fair. [Citation.] The doctrine applies primarily to decisions affecting membership in private organizations that affect the public interest [citation], particularly when there are ‘substantial economic ramifications’ from exclusion.”  (Palm Medical Group, Inc. v. State Comp. Ins. Fund (2008) 161 Cal.App.4th 206, 215.)  “The right to fair procedure extends to a medical corporation as well as to an individual physician.”  (Id. at 217.)

“[T]he common law doctrine of fair procedure has both a substantive and procedural component. The decision must be substantively rational. [Citations.] A decision violates this requirement when it is arbitrary, capricious, discriminatory, irrational or contrary to public policy. [Citations.] The decision also must be reached in a manner that is procedurally fair.  [Citations.] At a minimum, procedural fairness requires notice and an opportunity to be heard.”  (Palm, supra, 161 Cal.App.4th at 222.)

The Decision Was Substantively Rational

In the July 2020 Notice and November 2020 Notice, Respondent stated that it did not offer Petitioner a services contract to become in network because: (1) Respondent’s provider network was sufficient to meet members’ needs with respect to Behavioral Health Treatment (“BHT”); and (2) Petitioner did not offer the type of specialized services that Respondent was seeking, specifically psychologists who could provide in-person diagnostic assessments.  (AR 98, 119.)   

The Plan Reviewer found that these reasons for the denial were substantively rational, stating: “L.A. Care’s decision is supported by credible evidence and is therefore not arbitrary. L.A. Care’s reason for denying DPI’s request was that its network was sufficient and the services it needed were not provided by DPI, (DPI Exhibit 19 at 2,) and there is evidence to support this reasoning. First, L.A. Care’s assessment that its network was sufficient was based on the fact that members who are eligible for BHT services are able to receive appointments within 10 business days or less of requesting an appointment, which is the regulatory standard for timely access. (LAC Exhibit E at ¶ 2-3; Cal. Code Regs., tit. 28, § 1300.67.2.2 subd. (c)(5)(E).) Second, L.A. Care’s assessment that DPI did not provided services that it needed, was based on DPI’s admission that it did not currently provide licensed psychologists who were able to conduct in-home comprehensive diagnostic evaluations. (DPI Exhibit 16 at 1.)”  (AR 4-5.)

            To support its decision to deny Petitioner’s application, Respondent relied primarily on the declaration of Nicole Lehman, the Behavioral Health Director at L.A. Care.  Lehman declared, under penalty of perjury, that “[f]or the time period of January 2019 to present, L.A. Care’s data shows that it is in compliance with the Knox-Keene Act’s timeframe requirement for non-urgent/mental health appointments with a non-physician (e.g., Behavioral Health Treatment services), requiring health plans to offer its members appointments within 10 business days of requesting an appointment (‘10-Day Requirement’).”  (Lehman Decl. ¶ 2.)  She further declared that “[f]rom the time period of January 2019 to present, L.A. Care has not received any notifications from California Department of Managed Health Care stating that L.A. Care has not been in compliance with the 10-Day Requirement.”  (Id. ¶ 3.)

            As noted in the Decision, a health plan such as Respondent must comply with the Knox-Keene Act and related regulations.  (See AR 4-5; see also Reply 4-5.)  Among other requirements, the health plan “shall provide or arrange for the provision of covered health care services in a timely manner appropriate for the nature of the enrollee's condition consistent with good professional practice.”  (Health & Safety Code § 1367.03(a)(1).)  Health plans must “ensure that its network has adequate capacity and availability of licensed health care providers to offer enrollees appointments” within certain timeframes.  (Id. § 1367.03(a)(5).)  As relevant to this case, for non-urgent appointments with a non-physician mental health care provider (e.g., for BHT services), a health plan must be able to offer its enrollees such appointments within 10 business days of a request for appointment (“10-Day Requirement”). (§ 1367.03(a)(5)(E); 28 CCR § 1300.67.2.2(c)(5)(E).)

            As the Behavioral Health Director at L.A. Care, Lehman showed personal knowledge to testify to the health plan’s compliance with the 10-Day Requirement for the BHT Services that Petitioner sought to provide in network.  The Lehman declaration provides substantial evidence that Respondent’s network complied with this 10-Day Requirement in the period of January 2019 to March 2021, which corresponds to the time Petitioner made its application to join the network.  Respondent and the Plan Reviewer could rationally conclude from such evidence that Respondent’s provider network did not require an additional provider of BHT services, such as Petitioner. 

            Respondent also denied Petitioner’s application on the grounds that Petitioner did not offer the type of specialized services that Respondent was seeking, specifically psychologists who could provide in-person diagnostic assessments.  (AR 98, 119.)  The Plan Reviewer found this basis for the denial was also substantively rational.  (AR 4.)  Substantial evidence supports that finding.  Specifically, in an exchange of emails in May 2020,  Respondent’s representative wrote: “As we stated during the meeting, L.A. Care’s only immediate need is for psychologists to conduct comprehensive diagnostic evaluations.”  (AR 86-87.)  Petitioner’s representative responded that Petitioner does not currently employ psychologists.  (AR 86.)  In its writ briefing, Petitioner does not dispute that Respondent had a need for psychologists and that Petitioner did not offer that specialized service.  (OB 9-11.)  Respondent could rationally deny Petitioner’s application for a services contract, in part, on the grounds that Petitioner did not provide specialized services that Respondent needed.  For this additional reason, the Plan Reviewer’s Decision is substantively rational and is supported by substantial evidence. 

Petitioner contends that the Plan Reviewer’s Decision is not substantively rational and not supported by substantial evidence because: (1) “L.A. Care’s only evidence was a declaration of Nicole Lehman, Behavioral Health Director at L.A. Care”; (2) Petitioner submitted evidence that it “has 73 patient referrals, all ready to commence BHT with DPI but unable to do so because of L.A. Care’s refusal to admit DPI to its provider network”; and (3) Petitioner’s Exhibit 22 showed that some of the 73 patients had been “telehealth denied” or placed on a “wait list” to get a provider from Respondent.  (OB 9-11.)  Under substantial evidence review, none of these arguments is persuasive.

Respondent could reasonably rely only on the Lehman declaration to deny Petitioner’s application to join the provider network.  ““[T]he focus is on the quality, not the quantity of the evidence.”  (See Mohilef v. Janovici (1996) 51 Cal. App. 4th 267, 305 n. 28.) 

Petitioner’s arguments concerning the “73 patient referrals” are, in effect, a challenge to the adequacy of Respondent’s network with respect to BHT services.  However, Petitioner does not articulate or discuss the relevant statutes and regulations that govern the adequacy of a health care plan.  (See OB 10-11; Reply 3-5.)  Without that analysis, Petitioner cannot prove that the Decision was arbitrary, capricious, or unsupported by substantial evidence.  Significantly, Petitioner acknowledges that “L.A. Care provided evidence that it meets the ‘ten-day’ provider requirement in general for members seeking [BHT] care.”  (OB 11.)  Petitioner does not identify any other regulatory requirement that was not met for BHT services in Respondent’s provider network. 

The Plan Reviewer also addressed the “73 patient referrals,” stating: “DPI’s evidence that L.A. Care’s network is actually insufficient is not convincing. First, even if DPI had 73 patient referrals it could not accept due to L.A. Care’s denial, the fact that DPI received referrals does not alone establish that L.A. Care’s network is insufficient. As L.A. Care described in its review brief, it is not uncommon for health plan members to request referrals to out-of-network providers, and this does not mean they cannot receive the care they need in-network.”  (AR 4-5.)

This finding in the Decision is substantively rational and supported by substantial evidence.  To support its claim that Petitioner obtained referrals from 73 L.A. Care members, Petitioner cites a letter from Petitioner’s accountant, George Ghazarian, to Fenton Law Group, LLP, Petitioner’s current attorney.  That letter was submitted in the administrative proceedings as Exhibit 22.  (OB 10, citing AR 121-125.)  Petitioner also cites the following statement in the declaration of Erica Arius, Petitioner’s CEO: “DPI currently has 73 patient referrals, all of whom are ready to commence ABA services with us, but have been unable to thanks to LA Care’s refusal to authorize DPI. See EXHIBIT 22 prepared by DPI’s certified public accountant.”  (OB 10, citing AR 142.)

In his letter, Ghazarian states that Petitioner “has obtained 73 LA Care patient referrals, all of whom have been ready to commence with ABA services provided by DPI, but were unable to due to LA Care’s inability to process our application in a reasonable and timely manner.”  (AR 122.)  He also attaches a list of what appear to be 73 patient names, along with information under columns titled “NPA Status” and “Used Referral Date.”   (AR 123-125.)  Ghazarian’s letter is unsworn and lacks foundation for how the list of patients was created  or the meaning of the terms “NPA Status” and “Used Referral Date.”  Further, in his letter, Ghazarian does not describe the circumstances of the 73 referrals or provide any meaningful information about whether these individuals were able to obtain BHT services through in-network providers.  (AR 121-125.)  In her declaration, CEO Arius also does not provide that information, but rather simply cites to Exhibit 22.  (AR 142.)  The Plan Reviewer could rationally find, as he did, that this evidence did not prove that “L.A. Care’s network is insufficient.” 

Petitioner suggests that the references to “Telehealth Denied” and “Waitlist” in the list attached to Ghazarian’s letter prove that certain patients were denied BHT care altogether and therefore Respondent’s network is inadequate.  (OB 10.)  However, a reasonable person could find Ghazarian’s letter insufficient to make any conclusions about whether the patients were unable to obtain BHT services from in-network providers.  Thus, under substantial evidence review, Petitioner’s argument is not persuasive. 

Petitioner also cites to “L.A. Care’s briefing [before the Plan Reviewer] which states, without admissible evidence in support, that L.A. Care performed a ‘cursory search’ of the 73 names and could only identify 8 who even tried to go to L.A. Care directly for a provider.”  (OB 11, citing AR 149.)  Contrary to Petitioner’s suggestion, the cited brief did not admit that eight individuals “tried” to obtain a BHT provider through Respondent’s network but failed to do so.  Rather, the brief admitted that four individuals already had a provider; three “had no record of contacting L.A. Care to request DPI’s services”; and one “was outside of the eligible age range.”  (AR 149.)  A reasonable decisionmaker could conclude that these admissions did not prove any inadequacy in Respondent’s network of BHT providers. 

Based on the administrative record, Respondent’s denial of Petitioner’s application for a services contract and the Plan Reviewer’s Decision were substantively rational.  The Decision is supported by substantial evidence. 

The Decision Was Reached in a Manner That Is Procedurally Fair

            Petitioner contends that “L.A. Care violated the procedural fairness aspect of common law fair procedure by failing to offer or provide DPI with an actual hearing, instead proceeding on paper review.”  (OB 12.)  The court reviews the fairness of the proceedings de novo. 

            The parties agree that Petitioner was entitled to a “hearing” to challenge the denial of its application to become part of Respondent’s network of providers.  The issue is whether fairness required an oral hearing and live testimony.  

The common law doctrine of fair procedure “may be satisfied by any one of a variety of procedures which afford a fair opportunity for an applicant to present his position.”  (El-Attar v. Hollywood Presbyterian Medical Center (2013) 56 Cal.4th 976, 987.)  “[C]ourt[s] should not attempt to fix a rigid procedure that must invariably be observed. Instead, the associations themselves should retain the initial and primary responsibility for devising a method which provides an applicant adequate notice of the ‘charges' against him and a reasonable opportunity to respond.... Although the association retains discretion in formalizing such procedures, the courts remain available to afford relief in the event of the abuse of such discretion.”  (El-Attar, supra, at 987, quoting Pinsker v. Pacific Coast Society of Orthodontists (1969) 12 Cal.3d 541, 555-556.)

Here, Respondent exercised its discretion in Policy and Procedure LS-011 to provide an appeal hearing based on the written submission of arguments and evidence.  Petitioner does not show that this procedure was an abuse of discretion as applied to this case.  

            Petitioner has not cited any case law holding that an oral hearing is required to satisfy the common law doctrine of fair procedure.  Three of Petitioner’s cases involved a hospital’s suspension or denial of a physician’s clinical privileges, see Ascherman v. San Francisco Med. Soc'y (1974) 39 Cal. App. 3d 623; Anton v. San Antonio Cmty. Hosp. (1977) 19 Cal. 3d 802, or a hospital’s dismissal of a physician from its surgical residency program, Ezekiel v. Winkley (1977) 20 Cal.3d 267.  (OB 12-13.)  Disciplinary actions against physicians, which have implications for the physicians’ licensure, are not directly comparable to the exclusion of a health care provider from a health care plan’s network.  Indeed, California has since enacted a statutory scheme that entitles a health care practitioner to a live hearing with witnesses concerning peer review disciplinary actions against him or her.  (See Bus. & Prof. Code §§ 809–809.9.)  Petitioner does not show any similar statutory scheme that applies to the exclusion of corporate health care providers from a provider network.  Further, none of these three cases states that an oral hearing is required in all circumstances to satisfy the common law fairness doctrine. 

            Petitioner also cites to Potvin v. Metropolitan Life Insurance Co. (2000) 22 Cal.4th 1060, which applied the common law fairness doctrine to a health insurer’s removal of a physician from its list of preferred providers.  The health insurer failed to respond to the physician’s request for a hearing to challenge the decision.  (Id. 1065.)  The trial court granted the insurer’s motion for summary judgment, finding that the physician did not allege a claim for violation of the common law right to a fair procedure.  The Court of Appeal reversed and held the insurer should have given the physician notice and a reasonable opportunity to be heard.  The Supreme Court affirmed reversal of the trial court’s grant of summary judgment, but “disagree[d] with the Court of Appeal that MetLife necessarily must comply with the common law doctrine of fair procedure before removing physicians from its preferred provider lists.” (Id. at 1066.)  The Supreme Court stated “that issue needs to be resolved by further proceedings in the trial court under the standards set forth below.”  (Ibid.)  The Court did not consider or decide whether the common law doctrine of fair procedure requires an oral hearing.  “An opinion is not authority for propositions not considered.’”  (People v. Knoller (2007) 41 Cal.4th 139, 154-55.)

            While not dispositive, Cumbre, Inc. v. State Compensation Insurance Fund (2010) 189 Cal.App.4th 1381 provides some support for a conclusion that oral testimony is not required to satisfy the common law doctrine.  In Cumbre, the Court considered whether a jury instruction adequately described the duty of fair procedure.  The jury instruction stated, in pertinent part: “To meet its duty of fair procedure, should you find such a duty applies, SCIF must have provided Cumbre with notice of the reasons for SCIF's decision and an opportunity to be heard. [¶] The opportunity to be heard does not require an in-person hearing.”  (Cumbre, supra at 1389.)  The Court of Appeal found the jury instruction complied with the common law doctrine. 

More generally, “California courts have concluded that use of the terms ‘heard’ or ‘hearing’ does not require an opportunity for an oral presentation, unless the context or other language indicates a contrary intent.”  (Lewis v. Sup.Ct. (1999) 19 Cal.4th 1232, 1247; see In re Marriage of Spector (2018) 24 Cal.App.5th 201, 218 [same].)  Rather, under California law, “legal hearing” means “an opportunity to present one’s side of a case.”  (Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1105.) 

The court concludes that the common law fairness doctrine did not entitle Petitioner to an oral hearing, including cross-examination of witnesses, to challenge the denial of its application for a services contract.  The case law supports that a “hearing” does not always require oral argument, oral testimony, or cross-examination. 

Further, Petitioner has not identified any reason why fairness principles would require an oral hearing in this case.  Pursuant to LS-011, Petitioner was permitted to and did submit “statements, documents, or other materials in support of its position” to the Plan Reviewer.  (AR 104-105.)  Petitioner does not show that it ever asked Respondent for a live hearing or an opportunity to submit additional written evidence in response to Respondent’s submissions.  Nor does Petitioner show that the evidentiary issues could not be fairly decided based on written evidence. 

Based on the foregoing, Petitioner received sufficient notice and an opportunity to be heard.  The Decision was reached in a manner that is procedurally fair.

Petitioner’s New Reply Evidence

In reply, Petitioner moves to augment the administrative record with a press release issued by the California Department of Managed Health Care in March 2022.  (Reply 4-5; Lee Decl. ¶ 2, Exh. 1.) 

“The salutary rule is that points raised in a reply brief for the first time will not be considered unless good cause is shown for the failure to present them before.”  (Balboa Ins. Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010; see also Regency Outdoor Advertising v. Carolina Lances, Inc. (1995) 31 Cal.App.4th 1323, 1333.) 

Petitioner does not show good cause to move to augment the record and to submit new evidence for the first time in reply.  In his declaration, Petitioner’s counsel gives no explanation why he could not have submitted the March 2022 press release with the opening brief, which was filed nearly a year after the press release was issued.  (See Lee Decl.)  The new evidence is intended to meet Petitioner’s initial burden of proof and is not rebuttal.  Respondent has not had the opportunity to address this evidence, or the request to augment the record, in its opposition. 

The court tentatively denies Petitioner’s motion to augment the administrative record with Exhibit 1 because the request was improperly made for the first time in reply.  However, if the court considered the motion to augment on the merits, the following analysis applies. 

In general, “a hearing on a writ of administrative mandamus is conducted solely on the record of the proceedings before the administrative agency.” (Toyota of Visalia, Inc. v. New Motor Vehicle Bd. (1987) 188 Cal.App.3d 872, 881.)  Extra-record evidence may be admitted only if, in the exercise of reasonable diligence, the relevant evidence could not have been produced or was improperly excluded at the hearing. (CCP § 1094.5(e).) The requirements to submit extra-record evidence are “stringent.”  (Pomona Valley Hosp. Med. Ctr. v. Superior Court (1997) 55 Cal.App.4th 93, 102.)  “If the moving party fails to make the required showing, it is an abuse of the court's discretion to … [augment the record].”  (Ibid.)  Similar rules apply in a petition for ordinary mandate brought pursuant to CCP section 1085.  (See Western States Petroleum Assn. v. Superior Court (1995) 9 Cal. 4th 559, 579.) 

Under CCP section 1094.5(e), the court may augment the record with evidence post-dating the administrative proceedings if the relevance and reasonable diligence requirements are met.  (See Windigo Mills v. Unemployment Ins. Appeals Bd. (1979) 92 Cal.App.3d 586, 596-97 [“We conclude that the superior court is authorized under section 1094.5, subdivision (e) to receive relevant evidence of events which transpired after the date of the agency's decision”].)  If the court augments the record in a case in which the substantial evidence test applies (as in this case), “it may enter judgment as provided in subdivision (f) remanding the case to be reconsidered in the light of that evidence.”  (§ 1094.5(e).) 

The March 2022 Press Release postdates the administrative proceedings and, therefore, the reasonable diligence requirement of section 1094.5(e) is arguably met. 

The relevance and impact of the press release on the Plan Reviewer’s Decision are not sufficiently developed in Petitioner’s reply brief.  (Reply 4-5.)  The press release states that Respondent was fined, in part, because it failed to authorize needed medical care in a timely manner.  However, Petitioner does not cite any statements from the press release showing that a failure to authorize BHT care in a timely manner was a basis for the fines at issue.  Further, the failure to provide care in a timely manner could have been caused by factors not related to the number of BHT providers.  Petitioner cites no evidence from the press release or attachment that an insufficient number of BHT providers caused the violations issue.  Thus, the press release is not necessarily relevant to the specific issues in this case and does not establish that the Plan Reviewer’s Decision is substantively irrational.

Because the issue was raised in reply, the court has not yet received any opposing argument from Respondent with respect to Exhibit 1.  Respondent may address the newly proffered evidence at the hearing.

Subject to oral argument, the court tentatively concludes that Petitioner’s Reply Exhibit 1 does not prove the Decision was substantively irrational.  Thus, even if admitted, this new evidence does not change the court’s tentative ruling to deny the petition. 

Conclusion

Subject to argument, the petition is DENIED.

The parties should address at the hearing whether this writ decision resolves the remaining cause of action for intentional interference with economic advantage, or whether the case should be transferred to an independent calendar court for that issue to be resolved.