Judge: Robert B. Broadbelt, Case: BC649353, Date: 2023-11-30 Tentative Ruling

Case Number: BC649353    Hearing Date: February 29, 2024    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                 Plaintiff CEP America-California, f/k/a California Emergency Physicians Medical Group, d/b/a Vituity

RESPONDING PARTIES:    Defendants Heritage Provider Network, Regal Medical Group, Inc., Oasis Independent Medical Associates, Inc., Desert Medical Group, Inc., High Desert Medical Corporation, Affiliated Doctors of Orange County Medical Group, Bakersfield Family Medical Group, Inc., Sierra Medical Group, Inc., and Coastal Communities Medical Group, Inc.

Motion for Sanctions (Code Civ. Proc., § 128.7)

The court considered the moving, opposition, and reply papers filed in connection with this motion.

EVIDENTIARY OBJECTIONS

The court overrules plaintiff CEP America-California, f/k/a California Emergency Physicians Medical Group, d/b/a Vituity’s evidentiary objections, filed on February 22, 2024, to the declaration of Jan Lambert.

DISCUSSION

Plaintiff CEP America-California, f/k/a California Emergency Physicians Medical Group, d/b/a Vituity (“Plaintiff”) moves the court for an order imposing sanctions against defendants Heritage Provider Network, Regal Medical Group, Inc., Oasis Independent Medical Associates, Inc., Desert Medical Group, Inc., High Desert Medical Corporation, Affiliated Doctors of Orange County Medical Group, Bakersfield Family Medical Group, Inc., Sierra Medical Group, Inc., and Coastal Communities Medical Group, Inc. (“Defendants”) pursuant to Code of Civil Procedure section 128.7 on the ground that Defendants have asserted unclean hands and fraud-based defenses without an adequate legal or factual basis.  (Mot., p. 2:2-3.)

Code of Civil Procedure “[s]ection 128.7 applies only in limited circumstances.  It ‘authorizes trial courts to impose sanctions to check abuses in the filing of pleadings, petitions, written notices of motions or similar papers.’”  (Kumar v. Ramsey (2021) 71 Cal.App.5th 1110, 1120.)  “Under that authority, trial courts may issue sanctions, including monetary and terminating sanctions, against a party for filing a complaint [or pleading] that is legally or factually frivolous.”  (Ibid.; Code Civ. Proc., § 128.7, subd. (d).)  “A claim is factually frivolous if it is ‘ “not well grounded in fact” ’ and it is legally frivolous if it is ‘ “not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law.”  [Citation.]’”  (McCluskey v. Henry (2020) 56 Cal.App.5th 1197, 1205.)  “‘In either case, to obtain sanctions, the moving party must show the party’s conduct in asserting the claim was objectively unreasonable.  [Citation.]  A claim is objectively unreasonable if “any reasonable attorney would agree that [it] is totally and completely without merit.”  [Citation.]’”  (Ibid.)  

The court finds that Plaintiff has not met its burden to show that Defendants’ conduct in asserting the unclean hands and fraud-based defenses in the First Amended Answer was objectively unreasonable or that Defendants have presented those defenses for an improper purpose.  (Code Civ. Proc., § 128.7, subds. (b)(1), (b)(2), (b)(3); McCluskey, supra, 56 Cal.App.5th at p. 1205.)

First, Plaintiff contends that, in response to various of its discovery requests, Defendants “could provide no evidence to support [their] new allegations” and “could not identify even the most basic facts in support of their allegations.”  (Mot., p. 4:14-15, 4:27-28.)  The court notes that some of Defendants’ discovery responses state that their investigation had just begun and do not appear to set forth many facts.  (Shin Decl., Ex. F, pp. 10:9-11:9 [response to Special Interrogatory No. 16].)  However, some of Defendants’ discovery responses appear to be responsive.  For example, in response to the special interrogatory requesting that Defendants state all facts in support of their contention that Plaintiff violated Penal Code section 550 and/or submitted false claims for payment, Defendants set forth five assertions of fact.  (Shin Decl., Ex. F, pp. 6:20-8:6 [response to Special Interrogatory No. 13].)  The court finds that Defendants’ discovery responses, taken together, do not support Plaintiff’s contention that Defendants “were and are aware that their fraud-based affirmative defenses are not supported by facts” or that Defendants’ assertion of these affirmative defenses is objectively unreasonable.  (Mot., p. 5:21-23.)

Second, the court finds that Defendants have submitted evidence, in their opposition, to show that the challenged defenses are not objectively unreasonable.

“[T]he evidentiary burden to escape sanctions under section 128.7 is light.”  (Kumar, supra, 71 Cal.App.5th at p. 1126.)  “[W]hen determining whether sanctions should be imposed, the issue is not merely whether the party would prevail on the underlying factual or legal argument.”  (Peake v. Underwood (2014) 227 Cal.App.4th 428, 448.)  Instead, the court must determine whether a claim is objectively unreasonable.  (Ibid.)  “Thus, the fact that a [party] fails to provide a sufficient showing to overcome a demurrer or to survive summary judgment is not, in itself, enough to warrant the imposition of sanctions.”  (Ibid.)

In support of their opposition, Defendants have submitted, inter alia, the declaration of Jan Lambert, a managing director with Ankura Consulting, Inc., in which Lambert attests that  (1) Ankura was asked to review 20 claims for E/M services submitted by Plaintiff to Defendants for reimbursement; (2) of those 20 claims, all were billed with the highest E/M level (99285); and (3) of those 20 claims, (i) four supported a 99285 level of care, (ii) 13 supported a 99284 level of care, (iii) one supported a 99283 level of care, (iv) one supported a 99282 level of care, and (v) one did not support any level of care.  (Lambert Decl., ¶¶ 1, 6-7.)  Thus, Defendants have presented evidence in support of their contention that Plaintiff engaged in “upcoding,” and therefore has presented evidence in support of the factual assertion on which the challenged affirmative defenses are based.  The court finds that this evidence shows that “‘any reasonable attorney’” would not agree that Defendants’ affirmative defenses are “‘totally and completely without merit.’”  (Peake, supra, 227 Cal.App.4th at p. 448.)

The court notes that, in reply, Plaintiff takes issue with the credibility and sufficiency of Defendants’ evidence.  However, as set forth above, the inquiry on a motion for sanctions “is not merely whether the party would prevail on the underlying factual or legal argument.”  (Peake, supra, 227 Cal.App.4th at p. 448; Kumar, supra, 71 Cal.App.5th at p. 1126.)  The inquiry is instead whether the claim is objectively unreasonable.  (Ibid.)  As set forth above, the court finds that Defendants’ assertion of their fraud-based and unclean hands affirmative defenses is not objectively unreasonable.

Third, Plaintiff has not presented evidence or argument showing that Defendants have asserted the challenged affirmative defenses for an improper purpose, such as to harass Plaintiff.  (Code Civ. Proc., § 128.7, subd. (b)(1).)

Finally, the court acknowledges and expresses that “Code of Civil Procedure section 128.7 should be utilized only in ‘the rare and exceptional case where the action is clearly frivolous, legally unreasonable or without legal foundation, or brought for an improper purpose.’”  (Kumar, supra, 71 Cal.App.5th at p. 1121 [emphasis added].)

            Thus, based on the evidence and arguments presented by the parties in connection with this motion, the court finds that Plaintiff has not met its burden to show that Defendants’ conduct in asserting the unclean hands and fraud-based affirmative defenses is legally or factually frivolous, or that the challenged defenses have been asserted for an improper purpose.  The court therefore denies Plaintiff’s motion.  (Code Civ. Proc., § 128.7, subd. (b).)

            The court exercises its discretion to deny Defendants’ request for an award of monetary sanctions in their favor and against Plaintiff.  (Code Civ. Proc., § 128.7, subd. (c)(1).)

ORDER

            The court denies plaintiff CEP America-California, f/k/a California Emergency Physicians Medical Group, d/b/a Vituity’s motion for sanctions.

            The court orders defendants Heritage Provider Network, Regal Medical Group, Inc., Oasis Independent Medical Associates, Inc., Desert Medical Group, Inc., High Desert Medical Corporation, Affiliated Doctors of Orange County Medical Group, Bakersfield Family Medical Group, Inc., Sierra Medical Group, Inc., and Coastal Communities Medical Group, Inc. to give notice of this ruling.

IT IS SO ORDERED.

DATED:  February 29, 2024

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court