Judge: Mitchell L. Beckloff, Case: 21STCP03633, Date: 2024-01-12 Tentative Ruling

Case Number: 21STCP03633    Hearing Date: January 12, 2024    Dept: 86

RIFAT v. CALIFORNIA BOARD OF PHARMACY

Case Number: 21STCP03633

Hearing Date: January 12, 2024 

[Tentative]       ORDER DENYING PETITION FOR WRIT OF MANDATE 

Petitioner, Matthew D. Rifat, seeks a writ of administrative mandate directing Respondent, California Board of Pharmacy (Board), to set aside its September 7, 2021 decision prohibiting Petitioner from serving as a manager, administrator, owner, member, officer, associate, or partner of a Board licensee until Wholesaler Permits Numbers WLS 7048 and WLS 7179 are reinstated. 

BACKGROUND

The Wholesale Permits and the First Amended Accusation

On January 16, 2017, the Board issued Wholesale Permit Number WLS 7048 to Spider LLC, doing business as California Pharmaceuticals, LLC (CP1). (AR 373, 1109.) On November 17, 2017, the Board issued Wholesale Permit Number WLS 7179 to Spider LLC, doing business as California Pharmaceuticals, LLC (CP2). (AR 375,[1] 1099.)

On October 8, 2019, the Executive Officer of the Board (Complainant) issued an accusation in this matter. Subsequently, Complainant issued the First Amended Accusation (FAA)[2] against several persons and entities, including Petitioner. As relevant here, the FAA included causes for discipline against Petitioner (and others) alleging Petitioner violated Business and Professions Code section 4307[3] by filing applications for wholesale permits for CP1 and CP2 that were false and misleading. (AR 1099-1100, 36-61.)

The FAA also alleged CP1 “was subject to disciplinary action for: a) failing to complete a self-assessment of its compliance with federal and state pharmacy law; b) failing to maintain records of disposition of dangerous drugs and devices; c) failing to maintain records of receiving dangerous drugs and devices; d) engaging in unprofessional conduct by procuring a license by fraud or misrepresentation and committing an act involving moral turpitude, dishonesty, fraud, deceit, or corruption by reformulating commercially available products under a proprietary name and selling them for large profit margins to a single client; and e) failing to obtain an off-site storage waiver for records.” (AR 1101.)

The FAA further alleged CP2: “a) failed to complete a self-assessment; b) failed to store dangerous drugs in a proper manner; c) failed to maintain records of acquisition of dangerous and devices; d) failed to maintain records of receiving dangerous drugs and disposition of dangerous drugs and devices; e) engaged in unprofessional conduct by procuring a license by fraud or misrepresentation and committed acts involving moral turpitude, dishonesty, fraud, deceit, or corruption by reformulating commercially available products under a proprietary name and selling them for large profit margins to a single client.” (AR 1101-1102.)

The FAA also alleged Brianna Courtney Bertrand, the designated representative of CP1 and CP2, “was subject to disciplinary action because she: a) failed have a signed and dated self-assessment for CP1 and CP2 at the time of the inspection; b) failed have records of disposition for the manufactured prescription drug kits for CP1 or CP2 at the facility at the time of the inspection; c) failed to produce records of acquisition and disposition of dangerous drugs signed for and received by an authorized designated representative when prescription drug inventory was moved between CP1 and CP2; d) failed to restrict access to the secure and lockable area where prescription drugs were kept; and e) engaged in unprofessional conduct by procuring a license by fraud or misrepresentation and engaging in any act involving moral turpitude, dishonesty, fraud, deceit, or corruption.” (AR 1100-1101.)

In response to the FAA, the current owner and manager of Spider LLC stipulated to surrender Wholesale Permits Nos. WLS 7048 and 7179. (AR 443, 1102.) Also in response to the FAA, Bertrand stipulated to surrender Pharmacy Technician Registration Number TCH 146875 and Certificate Number EXC 23938. (AR 1100-1101.)

Administrative Hearing and Decision

An administrative law judge (ALJ) conducted the administrative hearing on the FAA against Petitioner on May 17, 18 and 26, 2021. (AR 1098.) On June 25, 2021, the ALJ issued a proposed decision concluding, among other things, there was cause for discipline against Petitioner under section 4307[4] because Petitioner had been “a Member of CP1 and CP2 and knowingly participated in the conduct for which the licenses were disciplined, namely submitting false and misleading information in CP1 and CP2’s applications for wholesaler permits.” (AR 1121.) The ALJ recommended the Board revoke Wholesaler Permits Numbers WLS 7048 and WLS 7179 and prohibit Petitioner from serving as a manager, administrator, owner, member, officer, associate, or partner of a Board licensee until reinstatement of Wholesaler Permits Numbers WLS 7048 and WLS 7179. (AR 1122.) On September 7, 2021, the Board adopted the proposed decision as its final decision. (Opening Brief 1:14-15.) 

Among other findings discussed below, relevant factual findings from the administrative decision include the following:

12. On November 7, 2016, CP1 located at 768 Calle Plano, Camarillo, California 93012 applied for a wholesaler permit listing [Petitioner][5] as Director and 100 percent owner of the business. . . . The permit application lists Spider, LLC as the parent company owning California Pharmaceuticals, LLC and Bertrand as the designated-representative-in-charge. The application indicates the permit is for a “New Wholesaler.” In its Amendment to Articles of Organization of a Limited Liability Company (LLC) (Amendment) filed with the Secretary of State filing October 15, 2015, California Pharmaceuticals, LLC lists ‘Fusion Pharmaceuticals, LLC’ as the ‘LLC’s Exact Name’ and proposes a new name for the LLC of ‘California Pharmaceuticals, LLC.’ (Ex. 10, p. AGO 322.) The Amendment is signed by [Edgar Gonzalez] Lozano as manager.  [AR 1102.]

13. . . . The location of CP1 is the same location as previously used by Golden State Pharmaceuticals, LLC (Golden State), an entity that had surrendered its Pharmacy Permit effective September 18, 2015, pursuant to a Stipulated Surrender of License and Order in Board Case No. 4801, OAH No. 2014080123. [AR 1103.]

14. On November 7, 2016, CP2 located at 754 Calle Plano, Camarillo, California 93012 applied for a wholesaler permit listing [Petitioner] as Director and 100 percent owner of the business. This application was approved and permit number WLS 7179 was issued by the Board on November 17, 2017. The application duplicates the information provided for CP1 and lists that the permit application is for a “New Wholesaler.” It includes a letter from [Edgar Gonzalez] Lozano signed on September 11, 2017, stating that California Pharmaceuticals, LLC had two physical locations and that 768 Calle Plano (CP1) was licensed by the [California Department of Public Health] as a manufacturing facility and the Board as a wholesaler. [Edgar Gonzalez] Lozano further stated that the application for 754 Calle Plano (CP2) was the location California Pharmaceuticals, LLC intended on conducting its wholesaling activity. [AR 1103.]

Board Supervising Inspector Manisha Shafir, a licensed pharmacist, conducted an investigation into allegations “drugs were being wholesaled by CP1 and CP2 and dispensed by Talca [Pharmaceuticals Inc.] as part of potential billing fraud scheme.”  [AR 1103-1109, ¶¶ 15-34.] 

Among other findings, the decision summarizes the results of Shafir’s investigation:   

35. Based upon her investigation, Investigator Shafir concluded Golden State and Fusion continued to operate from their same locations, but under new names of Talca, CP1 and CP2. She explained that Talca mimicked the business activities of Golden State, while Fusion changed its name to CP1/CP2 and then applied for the wholesaler licenses without disclosing its existing wholesaling business activities that it was engaged in, namely selling products to Golden State without a license. Investigator Shafir also noted that the ownership information provided to the [California Department of Public Health] for a manufacturing license was different than what was provided to the Board. She also noted that [Petitioner] could have and should have checked the “Change of Ownership” box and completed section IV of the applications entitled “Change of Ownership or Location” to note that it formerly operated as Fusion. Thus, while the wholesaler permit applications for CP1 and CP2 were technically new applications since neither they nor Fusion were previously licensed by the Board as wholesalers, the applications submitted by CP1 and CP2 were inaccurate and misleading with respect to ownership and operations information. [AR 1110.]

In a section entitled “Analysis,” the ALJ concluded:

44. Here, [Petitioner] completed the wholesaler permit applications, representing himself as a 100 percent owner, President, and Director of CP1 and Corporate Counsel for CP2. [Petitioner] completed Business Background Affidavits, forms that must be completed by the owner, officer, or member of the business, indicating that he was the President of CP1 and Counsel for CP2, and he completed Personal Background Affidavits indicating that he was an Officer of both CP1 and CP2. As such, wholesaler permit numbers WLS 7048 and WLS 7170 were issued to CP1 and CP2 with [Petitioner] as a Member of both entities subjecting [Petitioner] to sections 4301 and 4307. [AR 1113-1114.] 

45. Complainant established that Fusion was an unlicensed wholesaler that manufactured and sold pharmaceutical kits to Golden State, Fusion changed its name to CP1/CP2 and continued its operations, and Fusion sold pharmaceutical kits to pharmacists and pharmacies throughout the state including Talca, which mimicked Golden State’s operations. [AR 1114.]

46. Complainant established that Respondent represented Fusion in the civil action for damages filed in 2015, he filed an amended complainant in the matter in 2016 notifying the court and parties of Fusion’s name change to California Pharmaceuticals, and Respondent indicated in the Statement of the Case filed in 2017 that Fusion, then known as California Pharmaceuticals, LLC ‘was and is’ engaged in the business of manufacturing, selling and distributing of pharmaceutical kits. Accordingly, Complainant established that Respondent, as counsel for Fusion/California Pharmaceuticals, and 100 percent Owner, President and Director of CP1 and Counsel for CP2, was aware that CP1 and CP2 were was [sic] merely a continuation of Fusion using another business name. Moreover, since Fusion was already in the business of drug manufacturing and selling kits, Respondent’s failure to indicate the name change and provide information for Fusion was false and misleading. Investigator Shafir’s testimony established that under these circumstances, Respondent should have indicated that a name change had occurred, and that Fusion had been in the practice of manufacturing and selling pharmaceutical kits. [AR 1114.]

STANDARD OF REVIEW 

Petitioner seeks relief pursuant Code of Civil Procedure section 1094.5.

Under Code of Civil Procedure section 1094.5, subdivision (b), the issues for review of an administrative decision 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 respondent 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. (Code Civ. Proc., § 1094.5, subd. (b).)

The administrative decision here concerns a fundamental vested right of Petitioner to serve as a manager, administrator, owner, member, officer, associate, or partner of a Board licensee.   Accordingly, as conceded by the Board, judicial review of the Board’s factual findings is by independent judgment. (Cipriotti v. Board of Directors (1983) 147 Cal.App.3d 144, 154; Sandarg v. Dental Bd. of California (2010) 184 Cal.App.4th 1434, 1440; Code Civ. Proc., § 1094.5, subd. (b).) (Opposition 7:14-28 [noting independent judgment/weight of the evidence applies].)[6] 

Under the independent judgment test, “the trial court not only examines the administrative record for errors of law, but also exercises its independent judgment upon the evidence disclosed in a limited trial de novo.” (Bixby v. Pierno, supra, 4 Cal. 3d at 143.) The court may draw its own reasonable inferences from the evidence and makes its own determinations as to the credibility of witnesses. (Morrison v. Housing Authority of the City of Los Angeles Board of Commissioners (2003) 107 Cal. App. 4th 860, 868.) Exercise of independent judgment “does permit (indeed, [] requires) the trial court to reweigh the evidence by examining the credibility of witnesses.” (Barber v. Long Beach Civil Service Com. (1996) 45 Cal.App.4th 652, 658.) Under independent judgment, “abuse of discretion is established if the court determines that the findings are not supported by the weight of the evidence.” (Code Civ. Proc., § 1094.5, subd. (b).)

“In exercising its independent judgment, a trial court must afford a strong presumption of correctness concerning the administrative findings, and the party challenging the administrative decision bears the burden of convincing the court that the administrative findings are contrary to the weight of the evidence.” (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.) When there is a challenge to “the sufficiency of the evidence, all material evidence on the point must be set forth and not merely [the challenger’s] own evidence.” (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 317.)  “And in doing so, the challenger cannot simply ignore the evidence in the record that was relied upon by the board . . . . Rather, the challenger must explain why that evidence is insufficient to support that finding.” (Shenouda v. Veterinary Medical Bd. (2018) 27 Cal.App.5th 500, 513.)  A reviewing court “will not act as counsel for either party to an appeal 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.) 

Finally, “[o]n questions of law arising in mandate proceedings, [the court] exercise[s] independent judgment.” (Christensen v. Lightbourne (2017) 15 Cal.App.5th 1239, 1251.) The interpretation of statute or regulation is a question of law.  (See State Farm Mutual Automobile Ins. Co. v. Quackenbush (1999) 77 Cal.App.4th 65, 77.)

ANALYSIS 

Petitioner argues the Board erred in four ways. (Opening Brief 1:6-11.) First, Petitioner contends the Board misinterpreted section 4307, subdivision (a). If properly interpreted and according to its plain language, the statute does not apply under the facts of this case. Second, Petitioner asserts even if the statute is applicable, there is no evidence to support a finding he was or had been an owner, officer and/or director of a licensee whose license the Board revoked. Relatedly, the Board did not produced evidence Petitioner—even if an owner, officer  and/or director—had management and/or control of the licensee. Third, Petitioner contends the Board’s decision “invades the exclusive province of the State Bar” by purported to regulate whether and how Petitioner might practice law. Finally, Petitioner argues the Board has no jurisdiction to make any orders affecting him because he is not licensed by the Board.

Independent Judgment and the Weight of the Evidence Analysis

Petitioner contends the Board erred when it applied section 4307, subdivision (a) given the underlying facts. Petitioner attacks the Board’s decision in two ways. First, Petitioner raises issues of statutory construction. Second, Petitioner challenges the sufficiency of the evidence as to certain findings and conclusions by the Board.

As discussed below, section 4307, subdivision (a) requires certain findings:

·       revocation of a pharmacy license or permit issued to any partnership, corporation, trust, firm or association, including a limited liability company (LLC);[7]

·       evidence Petitioner was a manager, administrator, owner, member, officer, director, associate, partner, or any other person with management or control of the LLC; and

·       evidence that while acting in such capacity Petitioner had knowledge of or knowingly participated in any conduct for which the license was revoked.

The Board Revoked the Wholesale Permits of California Pharmaceuticals, LLC and Triggered Section 4307

Petitioner argues “[f]or purposes of barring the Petitioner from serving Board licensees, the statute requires something that does not exist here: revocation of an application for a license, rather than the revocation of a license which is, curiously, also required by the statute.” (Opening Brief 9:7-10.)

Thus, Petitioner raises an issue of statutory construction. 

“The rules governing statutory construction are well settled. We begin with the fundamental premise that the objective of statutory interpretation is to ascertain and effectuate legislative intent. [Citations.] To determine legislative intent, we turn first to the words of the statute, giving them their usual and ordinary meaning. [Citations.] When the language of a statute is clear, we need go no further. However, when the language is susceptible of more than one reasonable interpretation, we look to a variety of extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied, the legislative history, public policy, contemporaneous administrative construction, and the statutory scheme of which the statute is a part.” (Nolan v. City of Anaheim (2004) 33 Cal.4th 335, 340.)   

As noted earlier, to the extent “purely legal issues involve the interpretation of a statute an administrative agency is responsible for enforcing, [the court] exercise[s] [its] independent judgment, ‘taking into account and respecting the agency's interpretation of its meaning.’ ” (Housing Partners I, Inc. v. Duncan (2012) 206 Cal.App.4th 1335, 1343; see also Yamaha Corp. of America v. State Bd. Of Equalization (1998) 19 Cal.4th 1, 11.) 

In response to Petitioner’s interpretation of section 4307, subdivision (a), the Board argues the statute applies to “any person denoted in the statute who knowingly participated in any conduct for which the license was revoked . . . .” (Opposition 11:1-2.) Respondent also points out the wholesale permits at issue here were first surrendered and then revoked as part of the Board’s decision. (Ibid.) 

As noted by Petitioner, the statute is hardly a model of clarity. Nonetheless, the court finds the Board’s construction of section 4307, subdivision (a) persuasive and supported by several rules of statutory construction.

Petitioner reads section 4307, subdivision (a) as applicable only where an “application for a license has been denied or revoked, . . . .” (§ 4307, subd. (a) [emphasis added].) The court acknowledges the precise language of the statute supports Petitioner’s position when read in isolation. Nonetheless, when the statute is read and considered in whole, it appears clear the Legislature intended to include a pharmacy license or permit that has been revoked within the scope of the statute.[8] 

The court interprets section 4307, subdivision (a) to apply to any person who “while acting as the manager, administrator, owner, member, officer, director, associate, partner, or any other person with management or control had knowledge of or knowingly participated in any conduct for which the license was denied [or] revoked . . . .” (Emphasis added.) Reading it as Petitioner suggests conflicts with rules of statutory construction because Petitioner’s interpretation does not give effect to all statutory language. “When interpreting statutory language, we may neither insert language which has been omitted nor ignore language which has been inserted.” (See People v. National Auto. and Cas. Ins. Co. (2002) 98 Cal.App.4th 277, 282.) Further, “interpretations which render any part of a statute superfluous are to be avoided.” (Young v. McCoy (2007) 147 Cal.App.4th 1078, 1083.) 

Petitioner’s interpretation of section 4307, subdivision (a) tying its application to circumstances only where an application for a license is at issue leads to absurd results. Petitioner avoids any explanation for how an application can be revoked or “under suspension” or “placed on probation, . . . .” (§ 4307, subd. (a).) Petitioner’s interpretation also does not address the remedial nature of the statute.

Under Petitioner’s construction of section 4307, subdivision (a), a person who knowingly participated in wrongful conduct that led to denial of an application could be disciplined, while a person who knowingly participated in similarly wrongful conduct that led to revocation of a license would not be subject to discipline. Petitioner fails to show that the legislature intended such an odd result. (See People v. Jenkins (1995) 10 Cal.4th 234, 246 [courts seek to “avoid an interpretation that would lead to absurd consequences.”]; Takiguchi v. Venetian Condominiums Maintenance Corp. (2023) 90 Cal.App.5th 880, 895. [“A remedial statute should be liberally construed to effectuate its object and purpose, and to suppress the mischief at which it is directed.”])

Finally, Petitioner has not cited any legislative history or other extrinsic aids to support his construction of the statute. 

As the plain language of the statute and rules of statutory interpretation support the Board’s position, any ambiguity in the statute must be resolved in favor of the Board.[9]

The Board revoked Wholesaler Permits Numbers WLS 7048 and WLS 7179. (AR 1122.) Because section 4307, subdivision (a) is reasonably interpreted to apply when a pharmacy license or permit is “denied, revoked, suspended, or placed on probation,” the weight of the evidence supports the Board’s finding Complainant established this threshold element of section 4307, subdivision (a). (See AR 1121.) 

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Petitioner Was an Owner, Member, or Officer of California Pharmaceuticals, LLC[10]

In summarizing its decision, the Board explains “Complainant established by a preponderance of the evidence that [Petitioner] was a Member and Officer of Spider LLC.” (AR 1099 [Summary].) In its formal factual findings, the Board notes it issued two wholesale permits to Spider LLC, doing business as California Pharmaceuticals LLC, referred to by the ALJ as CP1 and CP2. (AR 1099-1100 [¶¶ 1-2]. AR 373, 375 [license history certification].) Investigator Shafir concluded Petitioner “was the owner and 100 percent member of CP1 and CP2 based upon the information contained in the permit applications.” (AR 1110, ¶ 36.) Based on this and other evidence, the Board made the following finding as to Petitioner’s liability under section 4307, subdivision (a):

44. Here, [Petitioner] completed the wholesaler permit applications, representing himself as a 100 percent owner, President, and Director of CP1 and Corporate Counsel for CP2. [Petitioner] completed Business Background Affidavits, forms that must be completed by the owner, officer, or member of the business, indicating that he was the President of CP1 and Counsel for CP2, and he completed Personal Background Affidavits indicating that he was an Officer of both CP1 and CP2. As such, wholesaler permit numbers WLS 7048 and WLS 7170 were issued to CP1 and CP2 with [Petitioner] as a Member of both entities subjecting [Petitioner] to sections 4301 and 4307. (AR 1113-1114; see also AR 1121 ¶ 17.) 

Petitioner challenges the Board’s findings. He contends:

There is no evidence whatsoever contained in the applications that the Petitioner was a Member of California Pharmaceuticals. The applications make it clear that the 100% owner of and sole Member of licensee California Pharmaceuticals, LLC was non-licensee Spider, LLC. While various iterations of the applications may have listed Petitioner in a variety of roles, those relate to non-licensee Spider and not the licensee. (Opening Brief 10:20-24.) 

Exercising its independent judgment on the record, the court concludes that the weight of the evidence supports the findings that Petitioner was an owner, member, officer or director of California Pharmaceuticals, LLC[11] at the time the CP1 and CP2 Applications were submitted to the Board. 

The “corrected” application for Wholesale Permit Number WLS 7048 (the CP1 Application), and/or documents submitted with the CP1 Application, report Petitioner as the “authorized agent” (AR 540), “owner” (AR 541, 564), “officer” (AR 546, 571), “director” (AR 547), “springing member” of the 100 percent owner of Spider, LLC, the 100 percent owner of CP1[12] (AR 551, 559 [signed by Petitioner]) and “president” (AR 565) of the “applicant business” (AR 541) which was CP1. (AR  539-573, 588.) Petitioner also submitted, as “applicant,” a request for live scan service in support of the CP1 Application. (AR 574.)

Petitioner also signed, under penalty of perjury, a Personal Background Affidavit and Business Background Affidavit in support of the CP1 Application and in which Petitioner represented he was an owner (AR 564), officer (AR 590), authorized agent (AR 540), director (AR 592, 594) and President (AR 565) of the business applicant, CP1. (AR 590-594.) Notably, the Business Background Affidavit stated: “The information on this form is specific to the business applicant. . . . This form is to be completed by an individual authorized to act for or bind the corporation.” (AR 593.) The Business Background Affidavit referred to CP1 as the “applicant.”  (Ibid.) 

Similarly, the application for Wholesale Permit Number WLS 7179 (hereafter “CP2 Application”), and/or documents submitted with the application are similar. The documents stated reported Petitioner as the 100 percent “owner” of Spider LLC, the owner of CP2 (AR 617-619), “officer” (AR 625), “counsel” (AR 626), and “sole member” and “Springing Member” of Spider LLC. (AR 638.) Petitioner submitted a request for live scan service as an “applicant” in support of the CP2 Application. (AR 664.) Petitioner also signed, under penalty of perjury, a Business Background Affidavit in support of the CP2 Application and that referred to Petitioner as an officer and counsel for the business applicant. (AR 643-644.) 

Petitioner contends “the Board uses sleight of hand to substitute the name of non-licensee Spider for that of the licensee as if Spider is the licensee.” (Opening Brief 10:24-26.) Relatedly, Petitioner asserts that “other than entries on a form, the Board presented no evidence that Petitioner exercised the functions or had the power vested in membership in or officer of a limited liability company.” (Opening Brief 11:4-9 [citing Corp. Code, §§ 17704.07, 17704.10].) 

The Board found it issued the wholesale permits to Spider LLC “doing business as California Pharmaceuticals LLC”—no evidence suggesting otherwise has been cited. (AR 373, 375, 1099-1100.) Petitioner has not challenged that finding. Further, as shown by the evidence summarized above, Petitioner repeatedly represented he was an authorized agent (AR 586), owner (AR 586), officer (AR 587) and director (AR 547) of the business applicant, CP1. Importantly, Petitioner’s representations followed the following admonition with a warning in boldface type to “[p]lease read carefully and sign below”:

Under penalty of perjury, under the laws of the State of California, I certify and affirm that: (1) I am a person authorized to act for and bind the applicant and I am at least 18 years of age; (2) I have read the foregoing background certification and know the contents thereof and each and every statement therein made is true; . . . . (AR 547.)

The Board, and this court in reviewing the Board’s decision, may reasonably rely on Petitioner’s sworn representations in finding Petitioner subject to discipline under section 4307.[13] 

Petitioner contends that “the Decision omits any consideration of the testimony provided by the Petitioner, namely, that he was instructed by the Board to make the entries replacing his name for the name of the owner of Spider who resided outside of the United States and whose Live Scan could therefore not be obtained.”[14] (Opening Brief 10:27-28.) Petitioner has not cited the administrative record to support his contention. For that reason alone, the court finds the contention unpersuasive.

Moreover, contrary to Petitioner’s assertion, the Board considered the weight to be afforded Petitioner’s testimony.  In a section of the Board’s decision entitled “Credibility Findings,” the Board made the following finding about Petitioner’s testimony: 

43. Respondent’s testimony was afforded little weight. Respondent’s contentions that he was unaware of the connection between Fusion and CP1 and CP2 were not credible in light of his representation of Fusion and ownership of CP1 and CP2, as CP1 and CP2 essentially continued Fusion’s business practices. It is also not credible that Respondent, a licensed attorney, would not do his due diligence to determine the history and activities of a company that he owns and services as the companies’ Director, President and Counsel.  (AR 1113.)

Petitioner has not discussed or challenged the Board’s specific credibility finding.  Accordingly, he has not shown a prejudicial abuse of discretion. (See Shenouda v. Veterinary Medical Bd. (2018) 27 Cal.App.5th 500, 513.) Exercising its independent judgment on the record, and for the reasons stated in the Board’s decision, the court also concludes that Board’s credibility finding in paragraph 43 is supported by the weight of the evidence. (See generally Volumes II and III of Hearing Transcript.) In light of that credibility determination, Petitioner does not show the Board prejudicially abused its discretion by failing to discuss other aspects of Petitioner’s testimony, including with regard to any purported instructions from the Board’s staff.

Based on the foregoing, the court finds the weight of the evidence supports the Board’s findings Petitioner was an owner, member, or officer of California Pharmaceuticals, LLC at the time the CP1 and CP2 Applications were submitted to Board. (See AR 1113-1114 ¶ 44.)

Did Petitioner Exercise Management and Control Over California Pharmaceuticals, LLC?

Petitioner contends an “essential element of section 4307” is lacking because the Board acknowledged that Investigator Shafir found a “lack of evidence from the investigation that Respondent had management or control of CP1 and CP2, that he fired or hired staff, or identified the drugs that CP1 and CP2 ought to manufacture.” (See Opening Brief 11:10-16; AR 1110.) Rather, Investigator Shafir found Petitioner “was the owner and 100 percent member of CP1 and CP2 based upon the information contained in the permit applications.” (AR 1110.) Petitioner suggests the Board is required to prove he had management or control of CP1 and CP2. (Opening Brief 11:12-16.)

The Board persuasive notes section 4307, subdivision (a)’s focus on management and control is for those persons who have not been “been a manager, administrator, owner, member, officer, director, associate, [or] partner,” but otherwise have management and control of an entity.

(§ 4307, subd. (a).) Section 4307, subdivision (a) applies to “the manager, administrator, owner, member, officer, director, associate, partner, or any other person with management or control had knowledge of or knowingly participated in any conduct for which the license was denied.” (Emphasis added.) The statute thus reasonably presumes a manager, administrator, owner, member, officer, or director of a business entity, including an LLC, may have some degree of management or control over the business. For persons not otherwise enumerated in the statute, the Board must demonstrate management and control. The statute does not require such a showing where the person is a manager, owner, officer and/or director of an entity.

Did Petitioner Have Knowledge of or Knowingly Participate in Conduct for Which California Pharmaceuticals, LLC’s Wholesale Permits were Revoked? 

In the administrative decision, the Board made numerous and detailed administrative findings that CP1 and CP2 submitted false and misleading information in their applications for wholesale permits and, as a result, the wholesale permits were subject to discipline pursuant to section 4301, subdivisions (a) and (f). (See AR 1100-1119.) Based on such findings, Board concluded as follows:

10. Cause exists to discipline California Pharmaceuticals LLC (WLS 7048) (CP1)’s license pursuant to section 4301, subdivisions (a) and (f). It was established by clear and convincing evidence that CP1 submitted false and misleading information in its November 7, 2016 application for a wholesaler permit with the Board. The old businesses (Golden State and Fusion) continued to operate their same or similar businesses, from the same location, but under new names of CP1, CP2, and Talca.

11. Cause exists to discipline California Pharmaceuticals LLC (WLS 7179) (CP2)'s license pursuant to section 4301, subdivisions (a) and (f). It was established by clear and convincing evidence that CP2 submitted false and misleading information in its September 11, 2017 application for a wholesaler permit with the Board. The old businesses (Golden State and Fusion) continued to operate their same or similar businesses, from the same location, but under new names of CP1, CP2, and Talca Pharmaceuticals. (AR 1119.)

The Board also made detailed factual findings in support of the conclusion that Petitioner “knowingly participated in the conduct for which the licenses were disciplined, namely submitting false and misleading information in CP1 and CP2’s applications for wholesaler permits.” (AR 1121, ¶ 17.) As examples, the Board made the following findings:

36. Further, Investigator Shafir concluded . . . that [Petitioner] was the owner and 100 percent member of CP1 and CP2 based upon the information contained in the permit applications. In addition, although the applications name Spider LLC as CP1 and CP2’s parent company and that that CP1 and CP2 are “100% Owned by Parent” (Ex. 10, p. AGO 319, Ex. 11, p. AGO 398), [Petitioner] is alternately named the 100 percent Owner, Director, and President in the application for CP1 and Counsel and Corporate Counsel for CP2. Investigator Shafir also noted that [Petitioner] requested and submitted to Live Scan and fingerprinting in support of the permit applications.  (AR 1110.) 

37. [Petitioner], who is an attorney, represented Fusion in a civil action in the Superior Court of California County of Los Angeles case entitled Fusion Pharmaceuticals, LLC v. CDS Corporation, et al., Case No. BC59339 filed on September 2, 2015. The complaint for damages states that Fusion was a manufacturer of pharmaceutical kits for sale and distribution to pharmacies and pharmacists. The First Amended Complaint for Damages filed by Respondent’s firm on January 22, 2016, and signed by [Petitioner] on January 21, 2016, states that Fusion changed its name to California Pharmaceuticals, LLC by way of the October 15, 2015 “Amendment to Articles of Organization of a Limited Liability Company (LLC,” (Ex. 23, pp. 2-3), and that California Pharmaceuticals is Fusion’s successor in interest. Respondent attached a copy of the Amendment and the Secretary of State’s Business Entity Detail form to the First Amended Complaint. The Business Entity Detail form lists California Pharmaceutical LLC’s address as 768 Calle Plano, Camarillo, California. Moreover, in a Statement of the Case to be read to the jury signed by Respondent on February 6, 2017, [Petitioner] acknowledged that California Pharmaceuticals, LLC was formerly known as Fusion, Fusion’s principal place of business was in Camarillo, California, and that it was “principally engaged in the business of . . . manufacture, sale and distribution of . . . pharmaceutical kits for sale and distribution to pharmacies and pharmacists throughout California.”  (AR 1111.) 

40. [Petitioner] asserted [in his testimony at the administrative hearing] that he could not recall how long he represented Spider LLC, nor how long he served as the attorney for California Pharmaceuticals, LLC. He also asserted that he was only engaged by CP1 and CP2 to file the applications and to engage with discussions with Board representatives to ensure the applications were properly submitted. [Petitioner] never visited the site of CP1 and CP2, he did not research who shared commercial space with them, and his understanding was that Fusion was defunct and that California Pharmaceuticals, LLC was the new entity. He denied knowing Fusion’s business address when drafting the complaints in the civil action when [he] represented Fusion and stated that [t]he allegations in those pleadings were based on information received from his client based on good faith and belief. 

43. [Petitioner’s] testimony was afforded little weight. [Petitioner’s] contentions that he was unaware of the connection between Fusion and CP1 and CP2 were not credible in light of his representation of Fusion and ownership of CP1 and CP2, as CP1 and CP2 essentially continued Fusion’s business practices. It is also not credible that [Petitioner], a licensed attorney, would not do his due diligence to determine the history and activities of a company that he owns and services as the companies’ Director, President and Counsel. (AR 1110-1113.) 

As discussed earlier, the court concludes the Board’s credibility finding is supported by the weight of the evidence. Petitioner has not shown any prejudicial abuse of discretion in such finding. (See Shenouda v. Veterinary Medical Bd., supra, 27 Cal.App.5th at 513.)

Petitioner also argues “California Pharmaceuticals wholesale permit was not revoked, it was surrendered.” (Opening Brief 11:19-27.) Petitioner then asserts:

[T]he license surrender was the result of an agreement between California Pharmaceuticals and the Pharmacy Board in which Petitioner did not participate. . . . In other words, there was no revocation of California Pharmaceuticals license because of particular conduct which Petitioner had knowledge of or in which he knowingly participated. Whether the conduct occurred did not result in action on California Pharmaceuticals’ permits. That action was the result of an agreement between the entity and the Board. (Opening Brief 11:23-12:4.)

The court is not persuaded. After a three-day administrative hearing, the ALJ found California Pharmaceuticals, LLC engaged in unprofessional conduct when it submitted false and misleading information in its applications for wholesale permits. Based on such findings, the ALJ recommended the Board revoke the surrendered permits, as the Board is permitted to do pursuant to section 4300.1.[15]  The Board adopted the ALJ’s recommendation and revoked the wholesale permits. Thus, contrary to Petitioner’s assertion, the revocation of the wholesale permits occurred because of unprofessional conduct of the licensees, not because of the agreement to surrender the permits. In light of this conclusion, the court need not address Petitioner’s contentions regarding the language used in the stipulated surrenders.

Petitioner also asserts “California Pharmaceuticals, not Petitioner, had to be adjudicated to have engaged in the misconduct alleged in the Amended Accusation resulting in the entity’s license discipline as a condition precedent to imposing any penalty on Petitioner.” (Opening Brief 12:28-13:3.) The argument is not fully developed and lacks discussion of relevant authorities. As just noted, the Board revoked the wholesale permits issued to California Pharmaceuticals, LLC as a result of unprofessional conduct of the licensees. (See AR 1122.)  The Board adjudicated the issue. Petitioner ultimately appears to acknowledge the Board “revoked” the wholesale permits. (Reply 1, fn 1.)  Petitioner has not argued, or demonstrated, the Board lacked jurisdiction to adjudicate whether California Pharmaceuticals, LLC engaged in unprofessional conduct and revoke the permits of California Pharmaceuticals, LLC in this administrative action. 

Petitioner raises entirely new arguments in reply. Specifically, in a lengthy footnote, Petitioner asserts:

While the Amended Accusation against California Pharmaceuticals alleged, among a number of other claims, that its wholesaler’s permit application submitted on November 7, 2016, contained false or misleading information (AR000027), i.e., that the application was submitted without disclosing prior wholesaling business activities at the location for which the application was made. Decision at 14. However, the Decision admits that the application was correctly completed since the applications ‘were technically new since neither’ the applicant (including under its prior name) ‘were previously licensed by the Board as wholesalers . . . .’ Id. Since California Pharmaceuticals had only changed its name from Fusion and made no other changes, it could not have truthfully ticked the box on the wholesaler’s license application reflecting a change in ownership since there had been none. There is no evidence that the applications were false or misleading.  (Reply 2, fn. 3.)

“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.) This matter has been pending for over two years. Petitioner did not seek leave to submit additional briefing on issues not otherwise raised. Respondent has not had a full and fair opportunity to respond to new arguments raised in a footnote in a reply brief. Petitioner has not shown good cause to raise entirely new arguments in reply.  On that procedural basis, the court rejects the new argument raised at footnote 3 of the reply brief.

The weight of the evidence supports the Board’s finding Petitioner “knowingly participated in the conduct for which the licenses were disciplined, namely submitting false and misleading information in CP1 and CP2’s applications for wholesaler permits.” (AR 1121, ¶ 17.) Finally, Petitioner also waived and forfeited the new arguments raised in reply, including at footnote 3.[16]

Petitioner’s Remaining Legal Contentions

Does the Decision Invade the Exclusive Province of the State Bar?

Petitioner contends “[t]he challenged Decision is so broad that it prohibits the undersigned from providing legal services to a Board licensee” and “[i]n this way, the Decision upends well-established separation of powers principles and must be set aside.” (Opening Brief 13:8-9.) To support his claims, Petitioner relies entirely on the California Supreme Court’s decision in Hustedt v. Workers’ Compensation Appeals Board (1981) 30 Cal. 3d 329 (Hustedt).

In Hustedt, the Workers' Compensation Appeals Board (Appeals Board) initiated administrative disciplinary proceedings against an attorney pursuant to authority vested in the Appeals Board by statute (Labor Code section 4907.) The Supreme Court issued a peremptory writ of prohibition restraining the Appeals Board from proceeding further in the pending disciplinary action. The Supreme Court held the disciplinary power pursuant to Labor Code section 4907, as applied to attorneys, violated the separate of powers doctrine and was unconstitutional because it restricted the Court’s “inherent power over the disciplining of attorneys.” (Hustedt, supra, 30 Cal. 3d at 336-346.) 

Petitioner’s reliance on Hustedt is misplaced. The Board’s decision under section 4307 narrowly affects Petitioner’s ability to serve as the manager, owner, or similar agent of a pharmacy licensee. Neither section 4307, nor the language of the Board’s decision (see AR 1122), restricts Petitioner from practicing law or representing a pharmacy licensee in a legal matter. While Petitioner is prohibited from serving in a managerial or ownership role with a pharmacy licensee, Hustedt does not apply to such circumstances. 

Accordingly, Petitioner does not show the Board’s decision invades the exclusive province of the State Bar or California Supreme Court with respect to attorney disciplinary matters or otherwise violates the separation of powers doctrine. 

Does the Decision Exceed the Board’s Jurisdiction? 

Finally, the court rejects Petitioner’s argument the “scope of the Board’s disciplinary power is limited to licensees of the Board or applicants for licenses.” (Opening Brief 14:15-16.) As discussed, section 4307 expressly applies to persons that acted as “manager, administrator, owner, member, officer, director, associate, partner, or any other person with management or control” of a business entity that has been licensed by the Board. The Legislature made clear that for section 4307 to apply, it is not necessary for such persons to also be licensed by the Board. Here, the Board acted within the scope of the authority and jurisdiction vested in it by section 4307.

CONCLUSION

Based on the foregoing, the petition for writ of administrative mandate pursuant to Code of Civil Procedure section 1094.5 is denied. Petitioner failed to develop any argument as to his second cause of action pursuant to Code of Civil Procedure section 1085 and the Administrative Procedures Act. Accordingly, Petitioner is not entitled to relief through his second cause of action. (Nelson v. Avondale HOA (2009) 172 Cal.App.4th 857, 862-863 [argument waived if not raised or adequately briefed]; Pfeifer v. Countrywide Home Loans, Inc. (2012) 211 Cal.App.4th 1250, 1282 [same].)

The petition is denied.

IT IS SO ORDERED. 

January 12, 2024                                                                                                                                                         

________________________________ 

Hon. Mitchell Beckloff  

Judge of the Superior Court