The California Supreme Court has ruled lower courts were wrong to block the California Medical Association from suing Aetna on behalf of medical providers over claims the health insurer’s efforts to intervene in the state’s market violated a state law.
In July 2012, the CMA sued Aetna Health of California in Los Angeles County Superior Court, alleging it violated California's unfair competition law. But it lost at that level and the Second Appellate District, where judges found the association didn’t have standing because it neither suffered a factual legal injury nor lost money or property.
Justice Kelli Evans wrote the unanimous opinion, filed July 17. The justices said the issue falls under a 2004 amendment to the unfair competition law, through state Proposition 64, establishing an organization must demonstrate its own injuries and cannot sue based on the legal damage its members have incurred.
According to court records, the underlying dispute dates to 2009, when Aetna adopted a so-called Network Intervention Policy in hopes of reducing the number of referrals doctors in its network made to other medical practices that didn’t participate in Aetna’s programs. CMA learned of the policy in 2010 “and became concerned that in threatening termination or actually terminating participating physicians for their referrals to out-of-network providers, the policy’s implementation interfered with physicians’ exercise of their sound medical judgment,” Evans wrote.
Aetna maintained it adopted the policy in part because some doctors in its network referred patients to facilities in which they were financially involved. But the Supreme Court said it wasn’t considering the merits of the dispute, only whether the CMA could demonstrate an ability to sue.
Los Angeles County Superior Court Judge Elihu Berle granted summary judgment to Aetna, saying 200 to 250 hours CMA staff spent responding to the policy — a diversion of resources — didn’t sufficiently establish standing. The appeals court agreed, and CMA did not dispute that panel’s holding that it “could seek an injunction against Aetna only if CMA had individually suffered injury in fact and lost money or property,” Evans wrote.
The appeals panel also said CMA’s evidence of substantially diverting resources wasn’t a factual dispute, finding it was “typical of the support CMA provides its members in furtherance of CMA’s mission” to advocate for tens of thousands of the state’s doctors.
Evans explained a 2011 California Supreme Court opinion, Kwikset v. Superior Court, established “there are innumerable ways in which economic injury from unfair competition may be shown,” and agreed with CMA’s position that “diversion of salaried staff time and other office resources can constitute the loss of ‘money or property’ within the” relevant legal context. Evans further explained the belief the appeals court conflated CMA’s alleged injuries with those of the doctors it represents while also confusing associational standing with organizational standing.
Aetna argued CMA chose to oppose its policy, and said it can’t be liable for that choice, but the panel agreed with the association that the response — a diversion of resources — “derived foreseeably from Aetna’s conduct” and thus enables a lawsuit. CMA further said the policy affected both the medical independence of doctors and, as a consequence, public health, both issues incorporated in the association’s mission.
No one can file a lawsuit and then claim the expense of the lawsuit established a legal injury, Evans wrote, but the court agreed CMA should’ve been able to defeat a summary judgment motion with its allegations concerning a perceived threat. One key factor is the two years CMA spent opposing the policy before initiating litigation.
“The expenditures included efforts to counsel CMA’s members on how to deal with Aetna’s implementation of the Network Intervention Policy, provision of public information for the use of patients, and interactions with regulatory agencies with the goal of stopping Aetna’s policy implementation, or alleviating its effects, by means other than private litigation under the UCL,” Evans wrote. “This is not a case of an organization attempting to manufacture standing and insert itself into a dispute in which it had no natural stake.”
Regarding the 2004 unfair competition law amendment, the court said “CMA is far from the type of disinterested plaintiff Proposition 64 sought to bar from suing under the UCL.” Although Aetna and groups that filed supportive briefs, like the U.S. Chamber of Commerce, argued CMA’s theory would create a legal path for abusive lawsuits from entities formed specifically to challenge corporate practices, the court disagreed because “CMA is an organization with a bona fide mission of promoting the medical profession and the public health, not one formed for the purpose of UCL litigation.”
The court reversed the appellate ruling and said the issue of CMA’s standing is “a triable issue of fact” not suitable for summary judgment.
CMA is represented by attorneys Alan M. Mansfield, Edith M. Kallas and Deborah J. Winegard, of Whatley Kallas; and Michael Rubin and Stacey M. Leyton, of Altshuler Berzon.
The California Attorney General’s Office and city attorneys for San Francisco, Oakland, Dan Diego and San Jose filed amicus briefs for CMA, as did the American Medical Association through Michael J. Strumwasser, Bryce A. Gee and Salvador Perez, of Strumwasser & Woocher.
Consumer Watchdog also filed a brief, through Jerry Flanagan and Ryan Mellino, as did the AIDS Healthcare Foundation, through Thomas A. Myers, Jonathan M. Eisenberg and Kirra N. Jones, and Animal Legal Defense Fund, through Cristina Kladis and Christopher Berry. Other supportive briefs came through the Law Office of Jonathan Weissglass for Service Employees International Union California State Council, International Brotherhood of Teamsters Joint Council 7, Writers Guild of America, West, United Food and Commercial Workers Western States Council and United Farm Workers of America.
Aetna is represented by Matthew Umhofer and Elizabeth Mitchell, of Spertus, Landes & Umhofer; and Enu Mainigi, Craig Singer, Grant Geyerman and Benjamin Hazelwood, of Williams & Connolly.
Sarah Weiner and Henry Weissmann, of Munger, Tolles & Olson, filed a brief on behalf of the U.S. Chamber of Commerce. Michael J. Daponde and Darcy Muilenburg, of Daponde Simpson Rowe, did the same for the California Association of Health Plans and Association of California Life and Health Insurance Companies.