California Medical Association v. Aetna Health of California Inc. (July 17, 2023) _ Cal.5th _ [2023 WL 4553703]

CMA’s standing to sue health insurer under the UCL based on diverting resources to oppose a business practice presents a triable issue.

Insurer Aetna Health of California implemented a policy that threatened to terminate in-network providers’ contracts for referring patients to out-of-network providers. The California Medical Association (CMA) sued Aetna, alleging it violated the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) by unlawfully interfering with the medical judgment of physicians. The UCL permits a claim by a private plaintiff who “suffered injury in fact and has lost money or property” that was “a result of the unfair competition.” (Bus. & Prof. Code, § 17204.) Aetna moved for summary judgment, arguing that CMA lacked UCL standing because it had not lost money or property as a result of Aetna’s policy, and the policy applied to physicians, not to CMA. CMA opposed summary judgment, arguing that it diverted resources (primarily staff time) in response to the policy. The trial court granted Aetna’s summary judgment motion on standing grounds, ruling that CMA’s diversion of resources was not a sufficient “injury in fact.” The Court of Appeal affirmed, and the Supreme Court granted review.

The Supreme Court reversed, holding that CMA raised triable issues as to the UCL standing requirements. The Court explained that an organization’s diversion of paid staff time and other resources may result in lost “money or property” and thus satisfy the UCL’s “injury in fact” requirement. The Court concluded that CMA used staff time to respond to Aetna’s policy when it could have used that time for other projects. The Court also held that an organization claiming injury for diverting resources must show that the defendant’s actions threatened the organization’s preexisting mission, causing it to use resources to address the threat before preparing for litigation. Here, there was a triable issue whether CMA diverted resources in response to a perceived interference with physicians’ medical independence and thus public health (both objects of CMA’s mission).  The Court reasoned that allowing CMA to sue based on its diversion of resources did not subvert the injury requirement or risk abuse of the UCL because CMA is a bona fide organization with an interest in public health, not an organization created for the purpose of litigation.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson, Peder K. Batalden, and Lacey Estudillo at the appellate firm 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.

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