Judicial Council of California Issues Opinion in Calif. Medical Association Vs. Aetna Health of Calif. Case

SACRAMENTO, California, July 18 -- The Judicial Council of California issued the following opinion (No. S269212) on July 17, 2023:

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In the Supreme Court of California, Second Appellate District, Division Eight

CALIFORNIA MEDICAL ASSOCIATION, Plaintiff and Appellant, v. AETNA HEALTH OF CALIFORNIA INC., Defendant and Respondent.

Justice Evans authored the opinion of the Court, in which Chief Justice Guerrero and Justices Corrigan, Liu, Kruger, Groban, and Jenkins concurred.

Opinion of the Court by Evans, J.

The California Medical Association, a professional association representing California physicians, has sued a health insurance company, alleging the company violated the unfair competition law (UCL; Bus. & Prof. Code, Sec. 17200 et seq.) by engaging in unlawful business practices. The UCL confers standing on a private plaintiff to seek relief under the statute only if that plaintiff has "suffered injury in fact" and "lost money or property as a result of the unfair competition" at issue. (Bus. & Prof. Code, Sec. 17204.)/1 This case presents the question whether an organization can satisfy these two related standing requirements by diverting its own resources to combat allegedly unfair competition.

The issue arises here because, under the UCL as it was amended in 2004 by Proposition 64, a membership organization such as the California Medical Association may not base standing to sue on injuries to its members, but only on those to the organization itself. (Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003- 1004 (Amalgamated Transit).) And, while an organization would clearly have standing under the UCL if it were, for example, fraudulently induced to buy a product from a deceptive seller (see Sec. 17201 [broadly defining "person[s]" who can sue under the UCL]), this case presents us with a more difficult question: whether resources that an organization has spent to counter an unfair or unlawful practice constitute "money or property" that has been "lost . . . as a result of the unfair competition." (Sec. 17204.)

We hold that the UCL's standing requirements are satisfied when an organization, in furtherance of a bona fide, preexisting mission, incurs costs to respond to perceived unfair competition that threatens that mission, so long as those expenditures are independent of costs incurred in UCL litigation or preparations for such litigation. When an organization has incurred such expenditures, it has "suffered injury in fact" and "lost money or property as a result of the unfair competition." (Sec. 17204.) In this case, which arises on appeal from summary judgment for the defense, the record discloses a triable issue of fact as to whether the plaintiff association expended resources in response to the perceived threat the health insurer's allegedly unlawful practices posed to plaintiff's mission of supporting its member physicians and advancing public health. The evidence was also sufficient to create a triable issue of fact as to whether those expenses were incurred independent of this litigation. For these reasons, the trial court erred in granting summary judgment for the defense. We therefore reverse the judgment of the Court of Appeal, which affirmed the grant of summary judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

Defendant Aetna Health of California Inc. (Aetna) provides health insurance. For its preferred provider plans, Aetna contracts with a network of physicians and other medical providers who offer care to insured individuals at an agreed rate. Member patients can also see providers outside the network on referral from in-network physicians, but may bear a greater share of the cost. Effective in 2009, Aetna adopted a "Network Intervention Policy" designed, according to its terms, to "reduce the number of non par [i.e., nonparticipating, or out-of-network] referrals by par providers and if necessary take further action against participating providers who refuse, after warning and education to comply with the terms of their contract." (See California Medical Assn. v. Aetna Health of California Inc. (2021) 63 Cal.App.5th 660, 662-664 (California Medical).)/2

The California Medical Association (CMA) is a nonprofit professional organization, founded in 1856, that advocates on behalf of California physicians. By CMA's count, it has more than 37,000 physician members. CMA's established mission, which it carries out through " 'legislative, legal, regulatory, economic, and social advocacy' " (California Medical, supra, 63 Cal.App.5th at p. 664), includes "the protection of the public health and the betterment of the medical profession." According to its vice-president and general counsel, CMA "has been especially active in advocacy and education on issues involving health insurance companies' interference with the sound medical judgment of physicians providing care to enrollees."

In 2010, at least two years before it filed suit, CMA learned of Aetna's Network Intervention Policy from its members 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. Aetna maintains that its policy, rather than interfering in medical judgments, was designed simply to encourage participating physicians, consistent with their judgment, to use in-network care providers, such as ambulatory surgery centers, and was adopted in part in response to physicians referring patients to facilities in which they had financial interests. The merits of the parties' dispute are not before us, and we express no views on them.

CMA's general counsel estimated that the organization diverted 200-250 hours of staff time to respond to the policy. That time was spent on activities including: (i) "investigat[ion]" for the purpose of "advis[ing] physicians and the public regarding how to address Aetna's . . . interference with the physician-patient relationship in an effort to avoid litigation over this issue"; (ii) "prepar[ing] a 3-page document entitled the 'Aetna Termination Resource Guide,' which [CMA] publicized, advising . . . members about Aetna's new policy . . . , including ways to proactively address and counteract Aetna's policies"; (iii) engaging with physicians affected by Aetna's policy and interacting with Aetna on physicians' behalf; and (iv) "prepar[ing] a letter to California's Department of Insurance and California's Department of Managed Health Care requesting that they take action to address" Aetna's change in policy. According to the general counsel, at least some of this diverted time "would otherwise have been devoted to serving [CMA's] membership" in other respects.

In July 2012, CMA sued Aetna, alleging Aetna's implementation of the Network Intervention Policy violated the UCL both because it was unfairly oppressive and injurious and because it violated specified sections of the Insurance Code, Business and Professions Code, and Health and Safety Code. CMA sought to enjoin Aetna from enforcing the policy. Aetna moved for summary judgment. It argued that CMA lacked UCL standing because CMA had not lost money or property as a result of the policy. Aetna emphasized that the policy applied to individual physicians -- not to CMA. CMA countered that it had diverted resources in response to the policy.

The trial court granted Aetna's motion for summary judgment on standing grounds. Relying on Amalgamated Transit, supra, 46 Cal.4th 993, the court concluded that an organization's diversion of resources is not "sufficient to establish standing under the UCL." CMA appealed.

The Court of Appeal affirmed. (California Medical, supra, 63 Cal.App.5th 660.) First, the court held that CMA could seek an injunction against Aetna only if CMA had individually suffered injury in fact and lost money or property; injury to CMA's members did not suffice. That conclusion is not disputed here. Second, the court addressed whether CMA's evidence that it diverted substantial resources to investigate and oppose Aetna's actions showed that CMA itself suffered injury in fact and lost money or property. (Id. at p. 667.) The court held that the evidence did not create a material dispute of fact on this point, because CMA had merely expended resources for its members' benefit: CMA "was founded to advocate on behalf of its physician members. The staff time spent here in response to Aetna's termination and threats to terminate physicians was typical of the support CMA provides its members in furtherance of CMA's mission." (Id. at p. 668.) If CMA's expenditure of resources in this manner sufficed to establish standing, the appellate court reasoned, "then any organization acting consistently with its mission to help its members through legislative, legal and regulatory advocacy could claim standing based on its efforts to address its members' injuries. The 2004 amendments to the UCL eliminated such representational standing." (California Medical, at p. 668.)

We granted CMA's petition for review.

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Footnotes:

1/ Unless otherwise specified, statutory references are to the Business and Professions Code.

2/ We have drawn some factual background (unchallenged by either party through a petition for rehearing) from the opinion of the Court of Appeal below. (See Cal. Rules of Court, rule 8.500(c)(2).)

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Original text here: https://www.courts.ca.gov/opinions/documents/S269212.PDF