STARBUCK v. KAISER FOUNDATION HEALTH PLAN INC

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

John STARBUCK, et al., Plaintiffs and Appellants, v. KAISER FOUNDATION HEALTH PLAN, INC., et al., Defendants and Respondents.

No. A045954.

Decided: November 15, 1990

Manuel Glenn Abascal, Kathy Shull Abascal, Law Offices of Manuel Glenn Abascal, Berkeley, and John Starbuck, pro se, and Law Offices of John Starbuck, Oakland, for plaintiffs and appellants. Kennedy P. Richardson, Oakland, for defendants and respondents.

John Starbuck and Ryan Dill (hereafter appellants) brought this action against Kaiser Foundation Health Plan, Inc., Permanente Medical Group, Inc., and Kaiser Foundation Hospitals, Inc. (hereafter Kaiser) to challenge Kaiser's methods of providing copies of medical records as an illegal business practice within the meaning of Business and Professions Code section 17200.   The first amended complaint alleges that Kaiser's practices violate four specific statutes:  Health and Safety Code section 1795 et seq., Evidence Code section 1563, Evidence Code section 1158, and Civil Code section 56 et seq.   The complaint seeks an injunction against the illegal practices, “disgorgement” of improperly collected fees, damages, attorney's fees, and costs of suit.   Appellant Starbuck is an attorney and appellant Dill is a member of a Kaiser health plan who has requested copies of records through Starbuck.

In a general demurrer to the first amended complaint, Kaiser contended inter alia that its methods of supplying copies of medical records did not constitute a business practice within the meaning of Business and Professions Code section 17200.   By an order filed April 27, 1989, the demurrer was sustained without leave to amend and the action was dismissed.   Appellant filed a timely notice of appeal.

In reviewing the sufficiency of appellants' complaint against Kaiser's demurrer, this court must inquire whether the complaint, liberally construed, failed on any theory to state a cause of action under Business and Professions Code section 17200 (formerly codified as Civil Code section 3369).  (5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 942, p. 377.)   In the past 30 years, the definition of “unfair competition” in section 17200 has been progressively enlarged by a process of judicial interpretation and legislative amendment.   Drawing on the statute's analogy to the Federal Trade Commission Act (15 U.S.C. § 45), People ex rel. Mosk v. National Research Co. of Cal. (1962) 201 Cal.App.2d 765, 20 Cal.Rptr. 516 first held that the statutory definition applies not only to practices harmful to private business competition but to practices that are unfair or deceptive to the public generally.   In 1963, the statute was amended to embrace “unlawful” business practices.   With this amendment, the statutory definition of “unfair competition” assumed a legal meaning quite distinct from ordinary usage of the term:  “As used in this chapter, unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.”  (See Bondanza v. Peninsula Hospital & Medical Center (1979) 23 Cal.3d 260, 152 Cal.Rptr. 446, 590 P.2d 22.)

 The first amended complaint properly pleads practices violating Health and Safety Code section 1795.12 and Evidence Code section 1563.   Section 1795.12, concerns a patient's right to request and copy medical records.   Subdivision (a), provides:  “any ․ patient of a health care provider ․ shall be entitled to inspect patient records upon presenting to the health care provider a written request for those records and upon payment of reasonable clerical costs incurred in locating and making the records available.”   Subdivision (b) provides:  “any patient or patient's representative shall be entitled to copies of all or any portion of the patient records which he or she has a right to inspect, upon presenting a written request to the health care provider specifying the records to be copied, together with a fee to defray the cost of copying, which shall not exceed twenty-five cents ($0.25) per page or fifty cents ($0.50) per page for records that are copied from microfilm and any additional reasonable clerical costs incurred in making the records available.   The health care provider shall ensure that the copies are transmitted within 15 days after receiving the written request.”

Evidence Code section 1563, subdivision (b), concerns a litigant's right to subpoena medical records:  “All reasonable costs incurred in a civil proceeding by any witness which is not a party with respect to the production of all or any part of business records the production of which is requested pursuant to a subpoena duces tecum may be charged against the party serving the subpoena duces tecum.  [¶] (1) ‘Reasonable cost,’ as used in this section, shall include, but not be limited to, the following specific costs:  ten cents ($0.10) per page for standard reproduction of documents of a size 81/212 by 14 inches or less;  twenty cents ($0.20) per page for copying of documents from microfilm;  actual costs for the reproduction of oversize documents or the reproduction of documents requiring special processing which are made in response to a subpoena;  reasonable clerical costs incurred in locating and making the records available to be billed at the maximum rate of sixteen dollars ($16) per hour per person, computed on the basis of four ($4) per quarter hour or fraction thereof;  actual postage charges;  and actual costs, if any, charged to the witness by a third person for the retrieval and return of records held by that third person.”

The complaint alleges generally that “Kaiser does not confine the amount of its fees for copies of records to the fee guidelines set out in the Evidence Code or the Health and Safety Code but instead arbitrarily assesses fees for copies of medical records completely independently of the actual amount of time expended, the number of pages to be delivered to the person requesting the copies, or the actual costs incurred in responding to the request or subpena.”   More specifically, it alleges that Kaiser responds to patient's request for medical records by charging “30 cents per page and a clerical fee of $30.00 per request.”

 Without contesting the adequacy of these allegations charging it with violations of Health and Safety Code 1795.12 and Evidence Code section 1563, Kaiser argues that the alleged violations do not constitute a “business practice” that may be enjoined under Business and Professions Code section 17200.   The contention is based on a close reading of Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 101 Cal.Rptr. 745, 496 P.2d 817, the leading case construing the statute.

The defendant in Barquis, a collection agency, was alleged to engage in the practice of filing actions in improper counties “for the purpose of impairing its adversaries' ability to defend these actions, and with the intent, and effect, of obtaining an increased number of default judgments.”  (Id. at p. 98, 101 Cal.Rptr. 745, 496 P.2d 817.)   The court found that this practice constituted a tortious “abuse of process” that could be enjoined on alternative grounds.   Holding that the practice could be enjoined as an “ ‘unlawful ․ business practice’ ” under Civil Code section 3369 (now Bus. & Prof.Code, § 17200), the court twice noted that litigation was a “primary” business activity of the defendant:  “Moreover, we also find that this behavior, when utilized as a general practice by a collection agency whose primary business is litigation, additionally constitutes an ‘unlawful ․ business practice,’ and thus that the conduct may alternatively be enjoined under Civil Code section 3369․   We additionally conclude that inasmuch as the alleged repeated violation of statutory requirements has been adopted as a ‘pattern’ or ‘practice’ of conduct by a collection agency, for whom the filing of litigation is a primary part of its business activity, this ‘pattern’ of misfiling complaints amounts to an ‘unlawful ․ business practice,’ which may be enjoined under section 3369 of the Civil Code.”  (Id. at p. 103 and 108–109, 101 Cal.Rptr. 745, 496 P.2d 817, emphasis added.)

The opinion later observed that the challenged conduct “directly related” to the collection agency's business:  “Defendant agency does not, and could not, claim that under the allegations of the complaint the challenged conduct is not a ‘business practice.’   The complaint specifically alleges that the agency undertakes its alleged misfiling ‘as a pattern and practice’ and obviously such practice, if in fact conducted, directly relates to the defendant collection agency's conduct of its ‘business.’ ”  (Id. at p. 113, 101 Cal.Rptr. 745, 496 P.2d 817, emphasis added.)

Kaiser construes the quoted language as a limitation on the scope of Business and Professions Code section 17200:  unlawful conduct may be enjoined only if it directly relates to a primary part of the defendant's business.   Appellants argue that the language was merely descriptive of the particular defendant in Barquis who in fact engaged in the challenged practices as a primary part of its business.

The language has never before been urged as a limitation on the application of the Barquis decision and, in fact, has appeared only once in subsequent decisions.   In People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 206 Cal.Rptr. 164, the court described the Barquis decision as holding that “repeated violations of statute by acts which constituted a principal part of its business constituted an unlawful business practice․”   (Id. at p. 526, 206 Cal.Rptr. 164, emphasis added.)

The cases applying section 17200 have generally concerned practices that obviously relate to the defendant's primary business.  (E.g., Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 197 Cal.Rptr. 783, 673 P.2d 660 [misleading advertisements of breakfast cereals];  Bondanza v. Peninsula Hospital & Medical Center, supra, (1979) 23 Cal.3d 260, 152 Cal.Rptr. 446, 590 P.2d 22 [collection of delinquent accounts];  People v. Dollar Rent–A–Car Systems, Inc. (1989) 211 Cal.App.3d 119, 259 Cal.Rptr. 191 [collision damages insurance in rental agreements];  Consumers Union of United States, Inc. v. Fisher Development, Inc. (1989) 208 Cal.App.3d 1433, 257 Cal.Rptr. 151 [age discrimination by housing development];  Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 249 Cal.Rptr. 872 [practice of downgrading grapes to pay lower purchase price];  People v. National Association of Realtors (1981) 120 Cal.App.3d 459, 174 Cal.Rptr. 728 [unfair practice in setting membership dues];  People v. E.W.A.P., Inc. (1980) 106 Cal.App.3d 315, 165 Cal.Rptr. 73 [commercial distribution of obscene materials];  Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 162 Cal.Rptr. 543 [discrimination in advertising prices];  Hobby Industry Assn. of America, Inc. v. Younger (1980) 101 Cal.App.3d 358, 161 Cal.Rptr. 601 [marketing of products in violation of California Fair Packaging and Labeling Act].)  In two cases, the relationship is less clear (People v. McKale (1979) 25 Cal.3d 626, 159 Cal.Rptr. 811, 602 P.2d 731;  People v. James (1981) 122 Cal.App.3d 25, 177 Cal.Rptr. 110), but these decisions offer little authoritative guidance;  they do not discuss or cite the language in Barquis at issue here and concern practices that are susceptible to differing interpretations regarding their connection with the defendant's primary business.1

Despite this paucity in precedent, the context of the Barquis opinion does indeed tend to support Kaiser's interpretation.   The terms “primary business” and “primary part of its business activities” do not occur incidentally in a description of the defendant but rather in formal statements of the court's holding, found at the beginning of the opinion and again at the end of the relevant analysis.   The prominence of the language in the organizational structure of the opinion suggests that it was carefully crafted to denote the precise scope of the decision.

A similar conclusion is suggested by the broader legal context of the Barquis decision itself.  (Cf., Select Base Materials v. Board of Equal. (1959) 51 Cal.2d 640, 645, 335 P.2d 672 [“ ‘every statute should be construed with reference to the whole system of law of which it is a part․’ ”].)  Business and Professions Code section 17200 is an extraordinary remedy that dispenses with traditional procedural limitations on equity powers or class actions.2  As the Barquis decision sanctioned an unprecedented use of the remedy (authorized by the 1963 amendment) to enjoin unlawful business practices, the court had good cause to avoid an overly broad interpretation that would unnecessarily encroach on established procedures.   The language at issue here can best be read as reflecting such a concern to limit the breadth of the holding.

Finally, it is most plausible to regard the 1963 amendment, adding “unlawful” business practices to the definition of unfair competition, as having a regulatory purpose consistent with the original statute.   As enacted in 1933, the objects of the statute—unfair competition and unfair or fradulent practices—necessarily related to products and services sold to the public, that is, to a primary part of the defendant's business activities.   The mere insertion of the word “unlawful” in the statutory definition does not suggest any departure from this regulatory purpose of prohibiting unlawful practices in the primary activities of a business.

 While accepting Kaiser's interpretation of the Barquis decision, we reach a different conclusion regarding its application to the alleged violations of Health and Safety Code section 1795.12.   The service that patients contract to receive from a health care provider can most reasonably be construed to include an opportunity to inspect and copy their own medical records.   Quite apart from the possible use of medical records in litigation, patients may find the records helpful in understanding their state of health and in arranging for future medical consultation.   As Health and Safety Code section 1795 states in pertinent part:  “[E]very person having ultimate responsibility for decisions respecting his or her own health care also possesses a concomitant right of access to complete information respecting his or her condition and care provided.”   The alleged violations of section 1795.12 therefore directly relate to a primary part of Kaiser's business activities.

 The manner of responding to a subpoena duces tecum pursuant to Evidence Code section 1563, however, presents a distinct issue.   Although a large health care provider may inevitably be engaged in litigation, the defense of adverse claims does not directly relate to the health care provided to patients or even to the organization of business activities, such as labor relations 3 or record keeping 4 , that make it possible to provide this health care.   The defense of litigation is more closely analogous to lobbying activities on behalf of business interests that have been held to fall outside the reach of Business and Professions Code section 17200.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 216 Cal.Rptr. 718, 703 P.2d 58;  cf. O'Connor v. Superior Court (1986) 177 Cal.App.3d 1013, 223 Cal.Rptr. 357.)

 Our analysis of Evidence Code section 1563 fully applies to the alleged violations of Evidence Code section 1158.   An attorney's right of access to medical records under that section relates to the representation of the client's legal interests, not to the actual provision of health care.   The manner in which the health care provider gives the attorney access to the records therefore has no direct relationship to the health care it provides to patients.   Since the alleged violations of Evidence Code section 1158 cannot under any interpretation of the section involve a business practice within the meaning of Business and Professions Code section 17200, we do not reach the question whether the complaint reflects a proper interpretation of the statute.

 Finally, we conclude that appellants have not pled a violation of Civil Code section 56 et seq.   The complaint alleges:  “Kaiser, in response to requests and subpoenas for copies of medical records, routinely makes the records available to third party professional photocopiers who copy the confidential medical information contained in the patients' files.”   This alleged disclosure falls within an exemption of the Confidentiality of Medical Information Act.  Civil Code section 56.10, subdivision (c)(3), provides that a provider of health care may disclose medical information to “any person or entity that provides billing, claims management, medical data processing, or other administrative services for providers ․”  (Emphasis added.)   The service of professional photocopiers falls within the category of “other administrative services.”   Appellants argue that the exemption applies only if the photocopiers are agents of the health provider, but we see nothing in the statutory language that makes the scope of the exemption depend on the agent/independent contractor distinction.

We conclude that the trial court erred in sustaining Kaiser's demurrer as the first amended complaint properly alleged an illegal business practice with respect only to violations of Health and Safety Code section 1795 et seq.

The judgment is reversed.   Costs to appellant.

FOOTNOTES

1.   Kaiser argues with some plausibility that the challenged conduct in both cases related to a primary part of the defendant's business activity.   In People v. McKale, supra, 25 Cal.3d 626, 159 Cal.Rptr. 811, 602 P.2d 731, an injunction against violations of safety and sanitary regulations in a mobilehome park was affirmed against Wells Fargo Bank, which was alleged “to have been in possession and control of the park during a portion of the time when asserted violations occurred.”  (Id. at p. 631, 159 Cal.Rptr. 811, 602 P.2d 731.)   Kaiser argues that, as a primary part of the banking business, the bank engaged in the temporary management of foreclosed businesses, such as the mobilehome park;  the violations directly related to the foreclosed business.   In People v. James, supra, 122 Cal.App.3d 25, 177 Cal.Rptr. 110, the owner of a liquor store on beachfront property entered into a mutually profitable arrangement with a towing company whereby he neglected to warn the public not to park in the store lot, authorized numerous impounds of cars, and then received kickbacks from the towing company.   The management of the stores' real property, including the parking lot, could be regarded as a primary part of its business activity.With respect to other cases cited by appellants, we find that the challenged practices plainly related to the defendant's primary business.   In the cases of People v. Los Angeles Palm, Inc. (1981) 121 Cal.App.3d 25, 175 Cal.Rptr. 257 and Diaz v. Kay–Dix Ranch (1970) 9 Cal.App.3d 588, 88 Cal.Rptr. 443, labor relations was a primary part of the business enterprise.   In the case of People ex rel. Van de Kamp v. Cappuccio, Inc. (1988) 204 Cal.App.3d 750, 251 Cal.Rptr. 657, the method of weighing fish was a primary part of the business of operating a fish processing plant.

2.   Suits under Business and Professions Code section 17200 differ from those in traditional equity jurisdiction in that (1) an adequate remedy at law will not bar an injunction under Business and Professions Code section 17200 (6 Witkin, Cal. Procedure (3d ed. 1985) Provisional Remedies, § 253, p. 220;  People v. Los Angeles Palm, Inc., supra, 121 Cal.App.3d 25, 32–33, 175 Cal.Rptr. 257.), (2) an injunction under section 17200 may be employed to enjoin criminal acts (6 Witkin, Cal. Procedure, supra, § 275, p. 236;  Bus. & Prof.Code § 17202) and (3) the plaintiff does not have to show injury from the challenged practice as standing to bring suit.  (Hernandez v. Atlantic Finance Co. (1980) 105 Cal.App.3d 65, 164 Cal.Rptr. 279.   As in class actions, the court in a suit under section 17200 may order “restitution in favor of absent persons.”  (Dean Witter Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 259 Cal.Rptr. 789) But unlike class actions, the plaintiff in such a suit does not have to be an adequate representative of the class awarded restitution.  (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 463, 115 Cal.Rptr. 797, 525 P.2d 701;  cf. Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 452–453, 153 Cal.Rptr. 28, 591 P.2d 51.)

3.   Cf. Diaz v. Kay–Dix Ranch, supra, 9 Cal.App.3d 588, 88 Cal.Rptr. 443;  People v. Los Angeles Palm, Inc., supra, 121 Cal.App.3d 25, 175 Cal.Rptr. 257.

4.   Cf. People v. Casa Blanca Convalescent Homes, supra, 159 Cal.App.3d 509, 206 Cal.Rptr. 164.

NEWSOM, Associate Justice.

RACANELLI, P.J., and STEIN, J., concur.