Alborzi v. University of Southern California (Sept. 29, 2020, B299067) __ Cal.App.5th __ [2020 WL 5792911]

Physician may pursue whistleblower suit—alleging hospital’s exclusive staffing agreement was retaliatory—without first seeking writ relief.

Dr. Arash Alborzi, who had been on the infectious disease call panel at Verdugo Hills Hospital, sued the hospital and related USC entities (collectively VHH) for violating (among others) a healthcare whistleblower statute (Health & Saf. Code, § 1278.5), the false claims act (Gov. Code, § 12653), and the unfair competition law (Bus. & Prof. Code, § 17200 et seq.). Dr. Alborzi’s complaint alleged that, after experiencing a significant reduction in patient assignments, he complained to VHH’s chief executive and medical officers that patient safety was being compromised by an illegal referral and kickback scheme engineered by other infectious disease physicians and their affiliated medical groups. He further alleged that, after lodging that complaint, VHH retaliated by no longer referring patients to him and dissolving the on-call infectious disease panel. The trial court sustained VHH’s demurer with prejudice on the ground Dr. Alborzi had failed to exhaust judicial remedies. Specifically, he had not first sought a writ of mandate challenging VHH’s quasi-legislative decision to dissolve the call panel. Dr. Alborzi appealed.

The Court of Appeal reversed, directing the trial court to sustain the demurrer in part and overrule it in part. The court agreed that quasi-legislative hospital decisions must be challenged by writ of mandate, but here the complaint alleged that VHH’s dissolution of the call panel was not a quasi-legislative decision, but instead an act of retaliation to cover up an illegal kick-back scheme. Accordingly, the trial court erred by sustaining a demurrer on that ground. Moreover, even if VHH’s decision was quasi-legislative, the doctrine of exhaustion of judicial remedies did not apply under either party’s theory of the case. There was no “administrative decisionmaking process” to complete, nor did exhaustion doctrine apply to the false claims act and whistleblower causes of action in any event. 

Addressing the merits of the individual claims, the court first held that Dr. Alborzi had adequately pleaded his section 1278.5 claim. He had complained about patient safety being jeopardized by illegally incentivized patient care decisions and VHH’s retaliation, causing his loss of income. The court held that Dr. Alborzi had not adequately pleaded his false claims act claim because he failed to allege that any false claims were filed with Medicare, but the trial court should have given him leave to amend. Finally, the court rejected VHH’s argument that the UCL was pleaded imprecisely, since particularized fact pleading is not required to assert a UCL claim.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.