Cal-Medicon v. Los Angeles County Medical Assn., CAL-MEDICON

• Decision Date: 20 September 1971
• Docket Number: CAL-MEDICON
• Parties: , a California corporation, and Malcolm F. Dorfman, M.D., Plaintiffs and Appellants, v. The LOS ANGELES COUNTY MEDICAL ASSOCIATION, a non-profit corporation, Defendant and Respondent. Civ. 37694.
• Court: California Court of Appeals Court of Appeals

Page 530

97 Cal.Rptr. 530

20 Cal.App.3d 148

CAL-MEDICON, a California corporation, and Malcolm F. Dorfman, M.D., Plaintiffs and Appellants, v. The LOS ANGELES COUNTY MEDICAL ASSOCIATION, a non-profit corporation, Defendant and Respondent.

Civ. 37694.

Court of Appeal, Second District, Division 2, California.

Sept. 20, 1971.

Rehearing Denied Oct. 19, 1971.

Hearing Denied Dec. 2, 1971.

Gelfand, Berggreen & Feinberg, Beverly Hills, Marvyn L. Hecht by Roger Jon Diamond, Pacific Palisades, for appellants.

Kirtland & Packard, by Austin C. Smith, Jr., Los Angeles, for respondent.

FLEMING, Associate Justice.

Cal-Medicon, a corporation, and Malcolm F. Dorfman, M.D., appeal an order dismissing their action for injunctive relief against the Los Angeles County Medical Association (LACMA). The trial court sustained LACMA's demurrer to the first amended complaint without leave to amend on the ground that the complaint failed to state a cause of action.

The Complaint

Cal-Medicon assists the Los Angeles County Department of Public Social Services in obtaining medical examinations for recipients of the County's Aid to Totally Disabled program. At the County's request, Cal-Medicon transports persons for medical examination from their homes to the offices of doctors who are designated by the County or who list themselves with Cal-Medicon. Cal-Medicon also transcribes the doctor's examination report and does the doctor's billing and record keeping. Cal-Medicon receives a portion of the fees paid by the County to the doctors.

Dr. Dorfman participates in Cal-Medicon's program. On 22 May 1970 he and other participating doctors received a letter from LACMA:

'It has come to the attention, Doctor Dorfman, of the Committee on Ethics that you have become associated with an organization called Cal-Medicon, Inc., a California corporation. Copies of the files indicate that you have provided a curriculum vitae to that organization and offered your services to patients provided by Cal-Medicon. It is our understanding that you have entered into a contract agreement with Cal-Medicon, Inc.

'It is the opinion of the Committee on Ethics that, by such agreement, you have been in violation of the Code of Ethics of the American Medical Association and the Los Angeles County Medical Association by engaging in the solicitation of patients. In addition, it is the opinion of the Committee on Ethics that there may be a violation of Section 2399 of the Business and Professions Code of the State of California which covers 'cappers and steerers'.

'The Committee on Ethics, therefore, would appreciate receiving from you an explanation of your relationship with Cal-Medicon, Inc. and the activities in which you are engaged in connection with this corporation. Thank you for your cooperation.'

The complaint alleges that doctors now fear participating in Cal-Medicon's program because of LACMA's letter, and that Cal-Medicon will become insolvent. Plaintiffs allege they are entitled to a full and impartial hearing with LACMA, and they seek an order restraining LACMA 'from making, publishing, issuing, writing, or distributing any communication which states or implies or tends to state or imply that any determination has been made as to whether or not (plaintiff's conduct) is ethical or not (sic) until a fair hearing has been granted.'

Issues

Cal-Medicon and Dr. Dorfman contend that the complaint states a cause of action based on 'business interference' and on a denial of due process of law; and that in any event they should have been permitted to further amend.

Business Interference

One may not intentionally interfere with the contractual relations of another without justification. (Restatement of Torts, sec. 766; Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 112 P.2d 631.) Whether an interference is justified 'depends on a balancing of the importance, social and private, of the objective advanced by the interference against the importance of the interest interfered with, considering all circumstances, among which the methods and means used and the relation of the parties are important.' (Masoni v. Board of Trade of San Francisco, 119 Cal.App.2d 738, 742, 260 P.2d 205, 208; Restatement of Torts, secs. 767--774.) Although justification is usually a matter of affirmative defense, the complaint may reveal justification on its face. (Greenberg v. Hollywood Turf Club, 7 Cal.App.3d 968, 86 Cal.Rptr. 885.)

Assuming that LACMA's action is sufficient to constitute an interference with Cal-Medicon's business, justification appears on the face of the complaint. LACMA is an organization of medical doctors formed to protect and advance the interests of both its member doctors and the public. A special relationship exists between the Association and its members concerning conduct of the member within the Association's ambit. Analogous relationships were recognized in Speegle v. Board of Fire Underwriters, 29 Cal.2d 34, 39--40, 172 P.2d 867 (association of insurance companies) and Masoni v. Board of Trade of San Francisco, 119 Cal.App.2d 738, 742--743, 260 P.2d 205 (association of merchants). That special relationship justifies the association's interference in the conduct of its members. Those who suffer adverse economic effects from the association's actions incidental to its special relationship with its members have no standing to complain.

Other jurisdictions are in accord. In Porter v. King County Med. Soc., 186 Wash....