Abraham v. Lancaster Community Hospital

• Decision Date: 30 January 1990
• Docket Number: No. B038456,B038456
• Citation: 266 Cal.Rptr. 360,217 Cal.App.3d 796
• Court: California Court of Appeals Court of Appeals
• Parties: , 1990-1 Trade Cases P 68,964 Mathew ABRAHAM, Plaintiff and Appellant, v. LANCASTER COMMUNITY HOSPITAL, Paracelsus Healthcare Corporation, and Sierra Primary Care Associates, Defendants and Respondents.

Page 360

266 Cal.Rptr. 360

217 Cal.App.3d 796, 1990-1 Trade Cases P 68,964

Mathew ABRAHAM, Plaintiff and Appellant, v. LANCASTER COMMUNITY HOSPITAL, Paracelsus Healthcare Corporation, and Sierra Primary Care Associates, Defendants and Respondents.

No. B038456.

Court of Appeal, Second District, Division 7, California.

Jan. 30, 1990.

Sheppard, Mullin, Richter & Hampton, Richard P. Sybert, Kent R. Raygor, Perry J. Viscounty and Polly Towill Dennis, Los Angeles, for plaintiff and appellant.

Coppo & Cosgrove, Delmar, Horvitz & Levy, David M. Axelrad, Encino, and Rosalyn S. Zakheim, Los Angeles, for defendants and respondents Lancaster Community Hosp. and Paracelsus Healthcare Corp.

Vogt, Sanchez & Meadville, Encino, and Carole S. Khan, for defendant and respondent Sierra Primary Care Associates.

FRED WOODS, Associate Justice.

I. INTRODUCTION

Appellant, Mathew Abraham, hereafter "Abraham," appeals from an order of dismissal following the sustaining of respondents' demurrer without leave to amend. Abraham's action in the superior court emanates from allegations made about him by the respondents in a lawsuit in the United States District Court. We conclude that the allegations complained of are protected by the absolute privilege found in Civil Code section 47, subdivision (2) and affirm the judgment of dismissal.

II. PROCEDURAL AND FACTUAL SYNOPSIS

A. The Underlying Federal Action.

1. Original Complaint in Federal Court

On February 3, 1987, Lancaster Community Hospital, hereafter "LCH," filed a complaint in the United States District Court for the Central District of California. Damages, as well as declaratory and injunctive relief were sought based upon causes of action on the following legal theories: antitrust violations, interference with contractual relationships, and interference with prospective economic advantage. ¹ The named defendants in the initial complaint of the underlying federal action were Antelope Valley Hospital Medical Center, hereafter "Antelope"; Maxicare Health Plan; Blue Cross of California; and Sierra Primary Care Associates, hereafter "Sierra."

2. Proposed First Amended Complaint in Federal Court

LCH subsequently moved for leave to amend its complaint in the United States District Court in November of 1987. LCH's proposed first amended complaint in the federal action sought damages and injunctive relief arising from alleged violations of California and United States antitrust laws, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and the common law. Named defendants included Abraham; the Antelope Valley Hospital District, hereafter "AVHD"; Antelope Valley Medical Group, Inc., hereafter "Medical Group"; John H. Lynn; Antelope Valley Health Ventures; Antelope Valley Dialysis Center; and Blue Cross of California. Maxicare Health Plan and Sierra Primary Care Associates, another respondent in this appeal, were mentioned in the body of the proposed first amended complaint as co-conspirators.

3. Relevant Allegations against Abraham in the Proposed First Amended Complaint

It is alleged that Abraham's responsibilities as assistant administrator of Antelope include oversight of the hospital's contracting with alternate delivery systems and third party payors. "Abraham is also responsible for overseeing [Antelope's] relationships with defendants [Medical Group] and Antelope Valley Dialysis Center, and for overseeing the activities of defendant Antelope Valley Health Ventures."

Antelope is alleged to be the only hospital in a certain area providing perinatal services, but is one of four hospitals, including LCH, providing inpatient medical/surgical services.

It is alleged that "Abraham and [Antelope] have exploited [Antelope's] market power and monopoly power over perinatal services to coerce private payors to purchase inpatient medical/surgical services from [Antelope] and to inflict competitive injury upon [LCH]."

According to LCH's proposed first amended complaint, during the year 1985, Abraham, Antelope, and AVHD caused the Similarly, Abraham, AVHD and Antelope were alleged to have exerted pressure on Blue Cross to divert its enrollees from LCH to Antelope; as a result, Blue Cross terminated its agreement with LCH and entered into an exclusive contract with Antelope. The defendants are further alleged to have insisted other private payors wishing to use Antelope's perinatal services must "guarantee that all or most of their medical/surgical patients be directed to [Antelope] as well."

                Medical Group to be organized and to affiliate with Antelope and no other hospital. 2  Various defendants, including Abraham, agreed Antelope should not contract with Maxicare unless Maxicare entered into a business relationship with the Medical Group.  Through these and other devices, defendants forced Maxicare into an agreement whereby at least 51 percent of Maxicare's medical/surgical patients would be admitted to Antelope or Maxicare's contract with Antelope would "automatically terminate."   Maxicare in turn notified Sierra that Sierra was to refer Maxicare enrollees to Antelope whenever possible;  Sierra did so.  The overall effect was to dissuade medical/surgical patients from patronizing LCH
                

The proposed LCH complaint alleged Antelope has thus been able to pressure others to use its medical/surgical services over those of LCH even though Antelope's charges for perinatal service "are now and have been substantially above levels charged for such services in markets where competition exists." When questioned about recent increased charges, Mr. Abraham allegedly responded "that the rate is 'not negotiable' and that 'if you don't like the rates, take your babies by helicopter somewhere else.' " Other alleged statements by Abraham further demonstrate Antelope's "predatory, anticompetitive and monopolistic intent": " 'You have to deal with me to practice [medicine] here' "; " 'I will bring Maxicare to their knees just like I brought Kaiser [Kaiser Permanente--another health maintenance organization] to their knees' "; " 'I control health care in the [Antelope] Valley' "; and " 'If you don't want to use Antelope Valley's [perinatal services], drop a few babies along the freeway--like Kaiser--and see what that does to your reputation.' " ³

The proposed LCH complaint alleged further that Antelope has attempted to acquire LCH and Palmdale Community Hospital, "the only hospitals in the relevant geographic market which pose substantial competition to [Antelope] in the market for inpatient medical/surgical services for private pay patients." The complaint alleged AVHD and Abraham used a pattern of fraudulent schemes, including misappropriation of public funds, violations of federal and state anti-kickback statutes, and violations of state law prohibiting the making of false entries in the records of a corporation, as a part of establishing relationships with organized medical groups.

The proposed LCH complaint also alleged the above acts and practices have injured competition and that LCH has been placed at a substantial competitive disadvantage. The prayer requested (1) defendants be adjudged to have violated the relevant statutes and to have committed the alleged torts; (2) treble damages be assessed for violations of the Sherman Act, the Cartwright Act, and RICO; (3) AVHD be enjoined from owning or operating any health care facilities or financing organization except Antelope for a period of ten years; (4) the Medical Group be required to repay to AVHD all public monies and the value of

all goods and services unlawfully granted or transferred by AVHD and Antelope; (5) the Medical Group be required to be dissolved; and (6) "AVHD terminate the employment of [Abraham] and all other AVHD employees who participated in the unlawful conduct...."

B. Exchange of Letters by Counsel Pertaining to the Proposed First Amended Complaint in Federal Court

Attached to Abraham's complaint in this state court action is a letter dated February 22, 1988, from Abraham's counsel, Richard P. Sybert of Sheppard, Mullin, Richter & Hampton, to trial counsel for LCH in the federal lawsuit, Mr. Robert Fabrikant of McKenna, Conner & Cuneo. Mr. Sybert wrote "to state in the strongest possible terms that I see no grounds for naming [Abraham] as a defendant, and that I believe to do so would constitute a clear abuse of the legal process." Mr. Sybert found no evidence his client was "acting other than in his capacity as an employee and agent of Antelope Valley Hospital."

In addition, in disparaging LCH's complaint, Mr. Sybert asserted LCH's principal problem was that it "may be facing effective competition. Sybert also asserted that LCH is "improperly using litigation to further anti-competitive business ends." Sybert wrote LCH that "we are investigating the possibility of bringing claims for, inter alia, abuse of process and malicious prosecution. Although I do not mean to exclude this possibility even if the complaint is not amended, this investigation obviously will intensify if, in fact, amended claims are brought against Mr. Abraham personally."

The concluding paragraph urged LCH to reconsider, whether or not the federal court granted leave to file the proposed First Amended Complaint, to dismiss Abraham voluntarily as a defendant.

Attached to Abraham's complaint as exhibit D in this state court action is a letter dated February 22, 1988, from Mr. Fabrikant to Mr. Sybert. There is no indication Mr. Fabrikant had received Mr. Sybert's letter of the same date or that Mr. Fabrikant was responding to it.

Mr. Fabrikant thanked Mr. Sybert for a letter of January 26 and agreed the litigation is primarily a fight between corporate entities. Nevertheless, regarding Abraham, Mr. Fabrikant stated: "His deposition testimony reveals significant and ongoing involvement in the conduct underlying the First Amended Complaint. If Mr. Abraham is prepared to terminate his employment within the Antelope Valley, we...