People v. Cole

• Decision Date: 12 June 2006
• Docket Number: No. S121724.,S121724.
• Citation: 44 Cal.Rptr.3d 261,135 P.3d 669,38 Cal.4th 964
• Court: California Supreme Court
• Parties: The PEOPLE, Plaintiff and Appellant, v. Jeffrey A. COLE et al., Defendants and Respondents.

44 Cal.Rptr.3d 261

38 Cal.4th 964

135 P.3d 669

The PEOPLE, Plaintiff and Appellant, v. Jeffrey A. COLE et al., Defendants and Respondents.

No. S121724.

Supreme Court of California.

June 12, 2006.

Bill Lockyer, Attorney General, Manuel M. Medeiros, State Solicitor General, Andrea Lynn Hoch and James Humes, Chief Assistant Attorney General, Albert Norman Shelden, Acting Assistant Attorney General, Robert M. Foster, Susan A. Ruff, Linda K. Schneider, Sherry L. Ledakis, Antoinette Cincotta, Jennifer L. Weck and Diane de Kervor, Deputy Attorneys General, for Plaintiff and Appellant.

Catherine I. Hanson and Astrid G. Meghrigian, San Francisco, for California Medical Association as Amicus Curiae on behalf of Plaintiff and Appellant.

Wilke, Fleury, Hoffelt, Gould & Birney, William A. Gould, Jr., Alan G. Perkins and Megan Lewis, Sacramento, for California Optometric Association as Amicus Curiae on behalf of Plaintiff and Appellant.

Walkup, Melodia, Kelly & Echeverria and Matthew D. Davis, San Francisco, for Melvin Snow and Sabrina Hughes as Amici Curiae on behalf of Plaintiff and Appellant.

Robert E. Moss, Jr., Loomis, and Stuart Thompson, Rancho Cordova, for Vision Services Plan as Amicus Curiae on behalf of Plaintiff and Appellant.

Jones, Day, Reavis & Pogue, Jones Day, Thomas R. Malcolm, Richard J. Grabowski, Irvine, Daniel H. Bromberg, Washington, DC, Amar D. Sarwal, Dominick V. Freda and Elwood Lui, Los Angeles, for Defendants and Respondents.

Timothy J. Murris, Arlington, VA, and Robert Pitofsky, Washington, DC, as Amici Curiae on behalf of Defendants and Respondents.

Charles D. Conner for National Optometric Association as Amicus Curiae on behalf of Defendants and Respondents.

John T. Knox, San Francisco, as Amicus Curiae on behalf of Defendants and Appellants.

K & R Law Group, Peter Roan, Los Angeles, and James F. Novello, Sacramento, for California Association of Health Plans as Amicus Curiae on behalf of Defendants and Appellants.

Morrison & Foerster, Michael M. Carlson, Lori A. Schechter and Tiffany Cheung, San Francisco, for National Association of Optometrists and Opticians as Amicus Curiae on behalf of Defendants and Appellants.

No appearance for Defendants and Respondents.

CHIN, J.

[135 P.3d 969]

Sections 655 and 2556 of the Business and Professions Code prohibit certain business and financial relationships between registered dispensing opticians and licensed optometrists. We granted review in this case to consider whether the Knox-Keene Health Care Service Plan Act of 1975 (Health & Saf.Code, § 1340 et seq.¹) (Knox-Keene Act) creates an exemption to these prohibitions when a licensed specialized health care service plan sublets space within the retail stores of a registered dispensing optician and employs optometrists to provide professional optometric services to plan subscribers at those locations. The Court of Appeal held that although the provisions of the Knox-Keene Act establish an exemption to the rule against the corporate practice of optometry, they do not affect the statutory prohibitions on the relationships between registered dispensing opticians and licensed optometrists. On the facts of this case, we agree with the Court of Appeal's conclusion. We therefore affirm the Court of Appeal's judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

California law authorizes optometrists licensed by the California Board of Optometry and physicians licensed by the Medical Board of California (Medical Board) to perform eye examinations and write prescriptions for contacts and eyeglasses. (See Bus. & Prof.Code, §§ 2003, 2050, 3010.1, 3041, 3041.2, 3042, 3055.) After receiving a prescription, a consumer may get the prescription filled not only by optometrists and physicians who sell eyewear as part of their practice, but also by registered dispensing opticians

[135 P.3d 970]

(RDO's), i.e., dispensing opticians registered with the Division of Licensing of the Medical Board. (See Bus. & Prof.Code, §§ 2543, 2550, 2553, 3041, 3042.)

California law contains restrictions on the relationships that licensed optometrists and physicians may have with others involved in providing optical services, including RDO's. At issue here are the restrictions contained in Business and Professions Code sections 655 and 2556. The former prohibits: (1) licensed optometrists from having "any membership, proprietary interest, coownership, landlord-tenant relationship, or any profit-sharing arrangement in any form, directly or indirectly," with an RDO or "with any person who is engaged in the manufacture, sale, or distribution to physicians and surgeons, optometrists, or dispensing opticians of lenses, frames, optical supplies, optometric appliances or devices or kindred products;" and (2) RDO's from having any such arrangement with a licensed optometrist. (Bus. & Prof.Code, § 655, subds. (a), (b), (c).) "Any violation of this section constitutes a misdemeanor as to" the licensed optometrist involved in the violation "and as to any and all persons ... who participate with" the optometrist "in [the] violation." (Bus. & Prof.Code, § 655.) Business and Professions Code section 2556, as here relevant makes it "unlawful" for RDO's "to advertise the furnishing of, or to furnish, the services of ... an optometrist," or "to directly or indirectly employ or maintain on or near the premises used for optical dispensing, ... an optometrist." "Any person who violates" this section "is guilty of a misdemeanor." (Bus. & Prof.Code, § 2558.) Courts have described the "basic aim" of these statutes as being "the elimination of the chance of dominion of the professional decisions of the practitioner by commercial interest."² (Drucker v. State Bd. of Med. Examiners (1956) 143 Cal.App.2d 702, 712, 300 P.2d 197.)

California law also restricts the relationships that optometrists may have with corporations. In general, under California's long-standing "policy ... against [the] corporate practice of the learned professions," for-profit corporations "may not engage in the practice of ... medicine." (People v. Pacific Health Corp. (1938) 12 Cal.2d 156, 158-159, 82 P.2d 429 (Pacific Health).) The ban on the corporate practice of medicine generally precludes for-profit corporations—other than licensed medical corporations—from providing medical care through either salaried employees or independent contractors. (Ibid.; Conrad v. Medical Bd. of California (1996) 48

[135 P.3d 971]

Cal.App.4th 1038, 1047-1048, 55 Cal.Rptr.2d 901 [discussing exceptions].) It has been held applicable with respect to optometrists. (California Assn. of Dispensing Opticians v. Pearle Vision Center, Inc. (1983) 143 Cal.App.3d 419, 427, 191 Cal.Rptr. 762 (CADO).) Courts have said that the ban on the corporate practice of medicine "is intended to ameliorate `the evils of divided loyalty and impaired confidence' which are thought to be created when a corporation solicits medical business from the general public and turns it over to a special group of doctors, who are thus under lay control." (Conrad v. Medical Bd. of California, supra, 48 Cal. App.4th at pp. 1042-1043, 55 Cal.Rptr.2d 901.)

Defendant Pearle, Inc., operates optical stores across the country where, in a single location, consumers may obtain not only frames and contact lenses, but also eye examinations and other treatment from licensed optometrists. In the late 1970's and early 1980's, Pearle Vision Centers, Inc., which was the operating subsidiary of Pearle, Inc.'s corporate predecessor, attempted to bring this business model to California, by selling franchises to optometrists licensed in California. The California Association of Dispensing Opticians sued Pearle Vision Centers, Inc., arguing that its franchise program violated California law. The superior court issued both a temporary restraining order and preliminary injunction prohibiting Pearle Vision Centers, Inc., from offering franchises to optometrists in California. (CADO, supra, 143 Cal.App.3d at pp. 422-423, 191 Cal.Rptr. 762.) In 1983, a Court of Appeal upheld the superior court's order, finding in part that by virtue of the control Pearle Vision Centers, Inc., retained under the franchise agreement, it was engaging in the illegal corporate practice of optometry.³ (CADO, supra, 143 Cal.App.3d at pp. 426-428, 191 Cal.Rptr. 762.)

In 1986, with the case against Pearle Vision Centers, Inc., still pending, the Pearle entities adopted a new strategy for bringing their operations to California; as defendants here explained in the Court of Appeal, "[i]nstead of franchising its stores to [licensed] optometrists," the Pearle entities "divided [their] operations in California in two, with" defendant Pearle Vision, Inc., "providing the services of opticians and a separate corporation," defendant Pearle VisionCare, "employing optometrists and providing their services under the Knox-Keene Act." Pearle Vision, Inc. (Pearle RDO) is an RDO; as such, it provides eyeglasses, contacts, and related fitting services using prescriptions written by licensed optometrists and ophthalmologists. (Bus. & Prof.Code, § 2550.) Pearle VisionCare (VisionCare) is a licensed "specialized health care service plan" under the Knox-Keene Act, which means that it "undertakes to arrange for the provision of health care services [in a single

[135 P.3d 972]

specialized area] to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees." (§ 1345, subd. (f)(1).) Operating under a license issued by the director of the Department of Managed Health Care (DMHC) (see §§ 1341, 1349), VisionCare provides, through licensed optometrists it employs or contracts with, eye examinations to individuals who pay a set enrollment fee. VisionCare's optometrists provide these examinations inside Pearle RDO's retail stores, in distinct areas set off from the rest of the...