Healthsmart Pac., Inc. v. Kabateck

• Decision Date: 19 December 2016
• Docket Number: B264300
• Court: California Court of Appeals Court of Appeals
• Parties: HEALTHSMART PACIFIC, INC. et al., Plaintiffs and Appellants, v. Brian S. KABATECK et al., Defendants and Respondents.

7 Cal.App.5th 416

212 Cal.Rptr.3d 589

HEALTHSMART PACIFIC, INC. et al., Plaintiffs and Appellants,

v.Brian S. KABATECK et al., Defendants and Respondents.

B264300

Court of Appeal, Second District, Division 1, California.

Filed December 19, 2016

As Modified January 10, 2017

Horvitz & Levy, Jeremy B. Rosen, John F. Querio, Burbank; Keith A. Fink & Associates, Keith A. Fink, and Olaf J. Muller, Los Angeles, for Plaintiffs and Appellants.

Buchalter Nemer, Harry W.R. Chamberlain II, Los Angeles, Robert M. Dato, Irvine, and Efrat M. Cogan, Los Angeles, for Defendants and Respondents.

ROTHSCHILD, P. J.

Plaintiffs Michael D. Drobot and Healthsmart Pacific, Inc. sued certain lawyers and their law firms for defamation and other causes of action arising from statements two of the lawyers made on television and radio programs about a pending lawsuit. The attorney defendants filed a special motion to strike the complaint as a strategic lawsuit against public participation, or SLAPP. (Code Civ. Proc., § 425.16.) The court granted the motion and awarded the attorney defendants their fees and costs. Plaintiffs appealed. Reviewing the matter de novo, we conclude that the action arises out of activity protected under the anti-SLAPP statute and, because the challenged statements are protected under the fair report privilege, plaintiffs have not established a probability of success on the merits of their claims. We therefore affirm the trial court's order.

FACTUAL AND PROCEDURAL SUMMARY

A. Background; Drobot's Plea Agreement

Drobot owns and operates Healthsmart Pacific Inc. (Healthsmart), which owned and operated Pacific Hospital of Long Beach (Pacific Hospital) from approximately 1995 until October 2013. Pacific Hospital specialized in performing spinal surgeries.

In February 2014, Drobot pled guilty in federal court to charges of conspiracy to violate certain federal statutes (18 U.S.C. § 371 )¹ and paying kickbacks in connection with a federal health care program (42 U.S.C. § 1320a–7b(b)(2)(A).)² According to his plea agreement, Drobot "provided a stream of financial benefits to California State Senator Ronald S. Calderon" to influence Senator Calderon to support legislation and regulations that allowed hospitals "to ‘pass through’ to workers' compensation insurance carriers the cost of medical hardware used in spinal surgeries."³ These financial benefits included payments to Senator Calderon's son for work as a summer file clerk, taking Senator Calderon to "exclusive, high-end golf resorts" and "expensive dinners," and providing the senator with "free flights on a private plane." Drobot took advantage of the legislation Senator Calderon supported by having Pacific Hospital purchase medical hardware from Drobot's company, International Implants, LLC, at "fraudulently inflate[d]" prices, then passing the cost on to insurance carriers. Although International Implants did not manufacture the hardware, its invoices for the hardware included a stamp indicating that it "was an ‘FDA Registered Manufacturer.’ "

Drobot further admitted that for approximately 15 years he participated in a conspiracy involving "kickbacks" to "dozens of doctors, chiropractors, marketers, and others ... in return for those persons to refer thousands of patients to Pacific Hospital for spinal surgeries and other medical services." The kickbacks to surgeons were larger if the surgeon used the hardware supplied by International Implants. From 2008 to 2013, Drobot paid between $20 million and $50 million in kickbacks, resulting in "several thousand spinal surgeries" at Pacific Hospital.

Neither the charging pleading in the federal criminal case nor Drobot's plea agreement referred to anyone making, purchasing, or using any counterfeit or non-FDA approved medical hardware. Nor did any documents refer to anyone supplying prostitutes or adult entertainers to anyone.

B. The Cavalieri Complaint

In 2010, Mary Cavalieri underwent two spinal surgeries at Pacific Hospital. On July 17, 2014, the attorney defendants filed a complaint in the superior court on Cavalieri's behalf against Drobot, Healthsmart, and others (the Cavalieri complaint).⁴ The Cavalieri complaint alleged the following: Drobot "bribed and influenced legislators in Sacramento to pass ... legislation" that allowed him and other defendants "to force [insurance] carriers and others to pay whatever artificial fraudulent sum was listed on the bills" for spinal surgeries. Drobot used International Implants, which was a " ‘sham’ distributorship" of spinal surgery hardware, to "artificially and falsely increase the cost of the ... hardware." Drobot conspired with others to pay "illegal kickbacks" to induce referrals for surgery at various hospitals. The kickbacks—which included cash, air travel, "and prostitutes or other ‘adult entertainers' "—"ensure[d] the flow of spinal fusion surgery patients, all in furtherance of the conspiracy to defraud insurance carriers." The scheme was "publicly exposed" when Drobot entered into his plea agreement in federal court and admitted to bribing politicians, paying kickbacks for referrals, and using International Implants to inflate the price of medical hardware to support fraudulent claims to insurers.

The Cavalieri complaint further alleged that, in addition to bribing legislators, inflating medical hardware prices, and paying illegal kickbacks, Drobot and other conspirators used "counterfeit, non-FDA approved, ‘knock-off’ " medical hardware, which they "implanted into thousands of patients, including [Cavalieri]," with "conscious disregard for the health, safety and well-being of the patients." The allegedly counterfeit hardware was produced by Crowder Machine & Tool Shop in Temecula, California. Cavalieri alleged that she "now suffers from having foreign objects in her spine, the origin or provenance of which cannot be identified and the safety and efficacy of which cannot be measured due to the extremely egregious conduct of the [d]efendants." She asserted numerous causes of action, including battery, fraud, breach of fiduciary duty, strict products liability, breach of express and implied warranties, unjust enrichment, negligent and intentional infliction of emotional distress, and negligence.⁵

C. Kabateck's Statements On Fox 11 News

On July 24, 2014, one week after the Cavalieri complaint was filed, Fox 11 television news aired a report that included excerpts of an interview with one of Cavalieri's lawyers, defendant Brian Kabateck. Fox 11 posted the report on its website. In the approximately four and one-half minute report, the Fox 11 reporter identifies Kabateck as Cavalieri's attorney in a lawsuit, which alleges that medical devices were "implanted in [Cavalieri's] body as part of a scam to illegally profit from insurance companies [and] California taxpayers." The report alternates between scenes of Kabateck speaking to a person off-camera, images of the complaint, video of persons and places referred to in the story (such as Senator Calderon and Pacific Hospital's former facility), and the reporter speaking to the camera.

Kabateck begins by stating: "Basically what was happening here was, the hospitals we alleged in the complaint and the doctors were conspiring together to install effectively counterfeit hardware in people's backs." The reporter continues: "According to the complaint, Cavalieri was told she needed a spinal fusion, and had the surgery in 2010." Kabateck then states, "[i]t didn't work and she went and had to have another surgery and finally ended up with a legitimate, genuine doctor who was trying to help her[,] and this doctor found out that she had counterfeit hardware installed in her back."

"At the center of this," Kabateck continues, "is an individual named Michael Drobot who has already pled guilty to a number of counts of insurance fraud." At this point, the reporter states, "you may recognize the name. In February Drobot admitted to bribing California State Senator Ron Calderon." In addition to such bribes, the reporter discussed Drobot's admission to "paying kickbacks to doctors who funneled patients to his hospital." Kabateck then states: "There's evidence here that there were lavish trips on private jets, that there were prostitutes, that there were large amounts of kickbacks that were going on all to drive patients in the doors."

An image of the caption of the Cavalieri complaint then fills the television screen as the reporter states: "In this civil lawsuit, Mary Cavalieri claims she was a victim of the alleged scheme, and adds the explosive allegation that knock-off devices were implanted in her spine." Kabateck adds: "These parts were being made in a machine shop in Temecula. They weren't FDA supervised, they weren't necessarily clean, and they may not even be the right material." The reporter identifies Crowder Machine & Tool as the Temecula machine shop named "in the lawsuit as the maker of the devices." The reporter continues: "Here's the allegation: Crowder would make a $65 screw in the machine shop. Keep in mind an FDA-approved screw wholesales for about $400. But by the time the same screw was used in a hospital, insurers were billed over $12,000." Kabateck adds: "They were fabricating the costs, they were billing the insurance companies and as a result of it, they were receiving millions of dollars."

The reporter states that she contacted Drobot's attorney, who said that "the lawsuit is completely unfounded, that the hardware was purchased from an FDA-approved manufacturer, and that they have the documentation. But Cavalieri's attorneys say in the complaint that the defendants lied to the FDA and used the political system to benefit." Kabateck adds that "there's certainly connections here between legislation that had been passed, legislation that had been authored or championed by Senator Calderon and Michael Drobot. But what we know is that this legislation was the vehicle, it was the mechanism by which they were able to perpetuate the...