JAMES LEONARD KNUDSON, D.P.M., ET AL. VS JOEL A. ARONOWITZ, M.D., ET AL.

Tentative Rulings

Case Number: *******4846 Hearing Date: January 6, 2022 Dept: 30

Dept. 30

Calendar No.

Knudson, D.P.M., et al. vs. Aronowitz, M.D., et al., Case No. *******4846

Tentative Ruling re: Plaintiff’s Motion to Compel Production of Documents

Plaintiff James Leonard Knudson, D.P.M. (Plaintiff) propounded the Requests for Production (Set One) on Defendant Joel A. Aronowitz M.D., A Medical Corporation (Defendant) on April 13, 2021. (Dohadwala Decl. 3.) Request No. 18 seeks a copy of each contract between Defendant and any health care plan or insurer, from January 1, 2017 to the present. Request No. 19 seeks a copy of each of Defendant’s applications for contracts with a health care plan or insurer, from January 1, 2017 to the present. (Id. at 3, Ex. 4 [23].)

Defendant served verified responses to the Requests for Production (Set One) on June 14, 2021. (Dohadwala Decl. 4, Ex. 5 [31].) Defendant objected to Requests Nos. 18 and 19 on the grounds that the requests are overbroad and not reasonably calculated to lead to the discovery of admissible evidence. (Ibid.)

Counsel for the parties met and conferred over email regarding Request Nos. 18 and 19, ultimately leading to an Informal Discovery Conference with the Court on November 8, 2021. (Dohadwala Decl. 5-6, Exs. 6-10.) The Court found that the requests were reasonably calculated to lead to relevant evidence and authorized the current motion to compel.

Following the November 8 IDC, the parties met and conferred regarding narrowing the requests. On November 19, 2021, counsel for Defendant stated that they intended to make a proposal to counsel for Plaintiff, whereby Defendant would produce some, but not all of the requested contracts. (Dohadwala Decl. 2, Ex. 2 [12].) However, no proposal was ever given, and in a subsequent email on December 8, 2021, counsel for Defendant stated that Defendant’s production of documents was already complete. (Dohadwala Decl. , Ex. 14 [92].)

As the Court found at the November 8, 2021 IDC, the requested documents are reasonably calculated to lead to relevant evidence. Accordingly, the motion to compel is granted.

Defendant states in the Opposition that it has offered to produce a subset of the requested contracts. (Opposition p. 2:15-17.) However, the attached correspondence does not show that Defendant ever made this offer.

If a motion to compel is filed, the court “shall” impose a monetary sanction against the losing party unless it finds that party made or opposed the motion “with substantial justification” or other reasons make the sanctions “unjust.” (Code Civ. Proc., 2030.290, 2031.300.) “The court may award sanctions under the Discovery Act in favor of a party who files a motion to compel discovery, even though . . . the requested discovery was provided to the moving party after the motion was filed.” (Rules of Court, Rule 3.1348.)

Plaintiff requests sanctions in the amount of $19,137.50. This amount is based on billing by counsel Tasneem Dohadwala, at an hourly rate of $450, with 23.75 hours spent on this motion and 4 hours for the reply ($12,487.50); by counsel Nick Erzumyan, at an hourly rate of $300, with 13 hours on the motion and 5 hours on reply ($5,400); and by counsel Steven Goldsobel, at an hourly rate of $625, with 1 hour on this motion and 2 hours on the reply ($1,250). (Dohadwala Decl. 16.) This is grossly excessive. The Court sees no reason why three attorneys were involved and almost 50 hours claimed for this limited and straightforward motion. Accordingly, the Court will order sanctions in the reduced amount of $4,500.

Defendant is ordered to produce documents within ten (10) days of today’s date. Defendant and Defendant’s counsel are ordered to pay Plaintiff’s counsel sanctions in the amount of $4,500 within thirty (30) days of today’s date.

b"

Case Number: *******4846 Hearing Date: July 12, 2021 Dept: 30

Dept. 30

Calendar No.

Knudson, D.P.M., et. al. vs. Aronowitz, M.D, et. al., Case No. *******4846

Tentative Ruling re: Plaintiffs’ Motion for Leave to Amend

Plaintiffs seek leave to add two causes of action to the Second Amended Complaint (SAC). Plaintiffs also request that the SAC as filed on June 11, 2021, be deemed the operative complaint as of today’s date. The motion is granted.

The court may, in its discretion and after notice to the adverse party, allow, upon any terms as may be just, an amendment to any pleading, including adding or striking out the name of any party, or correcting a mistake in the name of a party, or a mistake in any other respect. (Code Civ. Proc., ; 473, subd. (a)(1).)

California courts are required to permit liberal amendment of pleadings in the interest of justice between the parties to an action. (Code Civ. Proc., ; 473, subd. (a); Dieckmann v. Superior Court (1985) 175 Cal.App.3d 345, 352.) “Public policy dictates that leave to amend be liberally granted.” (Centex Homes v. St. Paul Fire & Marine Ins. Co. (2015) 237 Cal.App.4th 23, 32.)

The policy in favor of allowing amendments is also so strong that “courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial.” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761.) “The law is well settled that a long-deferred presentation of the proposed amendment without a showing of excuse for the delay is itself a significant factor to uphold the trial court's denial of the amendment.” (Leader v. Health Ind. of America, Inc. (2001) 89 Cal.App.4th 603, 613.) However, while unwarranted delay in requesting leave to amend is one factor, courts will only deny leave if there if there has also been prejudice to the other side. (Higgins v. Del Faro (1981) 123 Cal.App.3d 558, 564-565.)

Under California Rules of Court, rule 3.1324(a):

(a) A motion to amend a pleading before trial must:

(1) Include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments;

(2) State what allegations in the previous pleading are proposed to be deleted if any, and where, by page, paragraph, and line number, the deleted allegations are located; and

(3) State what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.

Subdivision (b) of rule 3.1324 requires the motion be accompanied by a separate, supporting declaration, specifying:

(1) the amendment’s effect;

(2) why the amendment is necessary and proper;

(3) when the facts giving rise to the amended allegations were discovered; and

(4) the reasons why the request for amendment was not made earlier.

Defendants argue in the opposition that the proposed amendments are meritless and legally insufficient. (Opposition at p. 4.) This is not relevant to the motion. The Court does not consider the merits of the proposed amendment, because “the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.” (Kittredge Sports Co. v. Superior Court (1989) 213 Cal.App.3d 1045, 1048.)

As an initial matter, while it is true that the Court did not grant leave to add two new causes of action within the May 28, 2021, order sustaining the demurrer in part and granting leave to amend, the issue is moot because Plaintiffs have brought this motion.

Plaintiff has attached a copy of the proposed SAC. (Dohadala Decl., Ex. A.) Plaintiff has also filed the required declaration under subdivision (b) of California Rules of Court, rule 3.1324. Plaintiff’s counsel states that the SAC will add two new cause of action for breach of fiduciary duty and aiding and abetting breach of fiduciary duty. The amendment is necessary and proper to adequately correct the deficiencies identified in the demurrer. (Dohadala Decl. ¶¶ 4, 9.)

Plaintiffs represent that these revisions came about to address the Court’s reasoning on the demurrer, and that these causes of action arise from the same general set of facts as alleged in the FAC. While Plaintiffs were adding allegations to show that Defendants other than Aronowitz Corp. owed a duty to Plaintiffs, they determined that the duty could also be expressed as a fiduciary duty.

Finally, there is no evidence of prejudice. No trial date has been set. There is no prejudice to Defendants since they are already named parties and have notice of the general set of facts. Further, no depositions have been taken and Defendants have not yet propounded any written discovery.

Case Number: *******4846    Hearing Date: May 28, 2021    Dept: 30

Dept. 30

Calendar No.

Knudson, D.P.M., et. al. vs. Aronowitz, M.D, et. al., Case No.*******4846

Tentative Ruling re: Defendants’ Demurrer to First Amended Complaint

Defendants Joel A. Aronowitz, M.D. a Medical Corporation (J.A. Corp), Joel A. Aronowitz, M.D., (Dr. Aronowitz), Tower Wound Care Center of Santa Monica, Inc. (Tower Wound Care), Tower Medical Billing Solutions (Tower Billing), and Daniel Aronowitz (Daniel) (collectively, Defendants) demur to the First Amended Complaint (FAC) and the second, third, sixth, seventh, eighth, and ninth causes of action. As discussed herein, the demurrer is sustained to the eighth and ninth causes of action and overruled as to the second, third, sixth, and seventh causes of action.

In reviewing the legal sufficiency of a complaint against a demurrer, a court will treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, or conclusions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062.) It is well settled that a “demurrer lies only for defects appearing on the face of the complaint[.]” (Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) “The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Guclimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes omitted).) For purposes of ruling on a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)

When ruling on a demurrer, the Court may only consider the complaint’s allegations or matters which may be judicially noticed. (Blank, supra, 39 Cal.3d at p. 318.) The Court may not consider any other extrinsic evidence or judge the credibility of the allegations plead or the difficulty a plaintiff may have in proving his allegations. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) A demurrer is properly sustained only when the complaint, liberally construed, fails to state facts sufficient to constitute any cause of action. (Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574, 578.)

Second Cause of Action for Fraud by Concealment

The required elements for fraudulent concealment are: “(1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606 (Graham.)

Fraud claims based on omissions, concealment, or suppression of facts must also allege that the defendant was under a legal duty to disclose the allegedly concealed facts. (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186 (Hoffman); LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336–337.) Typically, a duty to disclose arises when a defendant owes a fiduciary duty to the plaintiff. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199.) However, a duty may also arise when “a defendant possesses or exerts control over material facts not readily available to the plaintiff.” (Ibid.) Absent a fiduciary relationship, the other circumstances giving rise to a duty to disclose “presuppose[ ] the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise.” (Hoffman, supra, 228 Cal.App.4th at p. 1187.)

The rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (See Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384; Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200 (Jones) [concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the claims against the defendants].)

Here, Plaintiffs allege that after the contract was executed Defendants fraudulently began billing third party insurance companies. (FAC ¶ 46.) Defendants argue that Plaintiffs do not allege that the Defendants’ fraudulent concealment induced them to enter into the Independent Contractor Agreement (the IC Agreement). However, Plaintiffs’ concealment claim is based on acts that occurred after the IC Agreement was executed.

Plaintiffs allege that the Defendants engaged in a scheme where they charged third party insurance companies for services that Plaintiffs never provided. Plaintiffs allege that Defendants concealed these facts by changing the address for the billing to Defendants’ office so that Plaintiffs could not receive the bills, and that Defendants concealed Plaintiffs’ mail. (See FAC ¶¶ 25-29; 72.) Plaintiffs allege that had they known of these facts they would have prevented the fraudulent billings. (FAC ¶ 44.) Plaintiffs allege that they have suffered damages because of this concealment. (FAC ¶¶ 28-29, 42.)

Plaintiffs have alleged that they were induced into inaction by Defendants’ concealment. This is sufficient at the pleading stage. In the context of a concealment claim, an intent to deceive is an intent to induce “action or inaction” that differs from what the plaintiff would have done if informed of the concealed fact. (Blickman Turkus, LP v. MP Downtown Sunnvale, LLC (2008) 162 Cal.App.4th 858, 869.)

Therefore, the demurrer is overruled as to the second cause of action.

Third Cause of Action for Violation of the UCL

The Unfair Competition Law (UCL) applies to acts that are either “unlawful, or unfair, or fraudulent.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [“a practice is prohibited as ‘unfair’ or ‘deceptive’ even if it is not ‘unlawful’ and vice versa”].) To prevail on a claim for unfair business practices, a plaintiff must allege that he “suffered injury in fact and has lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, ; 17204.)

“A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive, or unscrupulous and causes injury to consumers which outweighs its benefit.” (McKell, supra, 142 Cal.App.4th at p. 1473.) To allege an “unlawful” business practice, a plaintiff must allege a practice that is “forbidden by law,” such that the business practice “violates any law, civil or criminal, statutorily or judicially made.” (Id. at pp. 1473-1474.)

By proscribing “any unlawful” business practice, “the UCL borrows violations of other laws and treats them as unlawful practices that the UCL makes independently actionable.” (Gutierrez, supra, at p. 1265.) “[V]irtually any law or regulation—federal or state, statutory or common law—can serve as [a] predicate for a ... [section] 17200 ‘unlawful’ violation. [Citations].” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383 (Klein).)

Here, as stated above, Plaintiffs have sufficiently pled that Defendants engaged in fraudulent concealment. In addition, Plaintiffs allege that “each of the Defendants” pursued a “conspiracy, common enterprise, and common course of conduct” to defraud health insurers with whom Plaintiffs had provider contracts while shifting responsibility for the fraud to Plaintiffs.” (FAC ¶ 16.) Defendants also fraudulently billed for services at locations other than Culver City and for services other than podiatric care to the insurance companies. (FAC ¶¶ 25-26, Ex. B.) Plaintiffs also allege that Defendants would “cull” Plaintiffs’ mail so that “Dr. Knudson would not receive any mail related to the fraudulent claims and would remain in the dark about them,” in violation of Title 18 U.S.C. sections 1341, 1343, and 1871, which prohibits, respectively, mail, wire, and insurance fraud. (See FAC ¶¶ 26, 47.)

Therefore, the demurrer is overruled as to the third cause of action.

Sixth Cause of Action for Declaratory Relief

With respect to declaratory relief, all that is required is that an actual controversy is alleged; the pleader need not establish it is also entitled to a favorable judgment. (Ludgate Ins. Co. v. Lockheed Martin Corp (2000) 82 Cal.App.4th 592, 605.) In a declaratory relief action, the ultimate facts that must be pled are those facts establishing the existence of an actual controversy. (Market Lofts Community Association v. 9th Street Market Lofts, LLC (2014) 222 Cal.App.4th 924, 930-931.) “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court.” (Id. at p. 931.)

Declaratory relief operates prospectively, serving to set live controversies at rest. There is no basis for declaratory relief where only past wrongs are involved. Accordingly, where there is an accrued cause of action for an actual breach of contract or other wrongful act, declaratory relief may be denied. (See Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1403 (Gafcon).)

Here, the IC Agreement attached as Exhibit A to the FAC shows only that Plaintiffs agreed that the rights to the proceeds from Dr. Knudson’s services belonged to J.A. Corp. (FAC, Ex. A at ¶ 7.) Contrary to the Defendants’ argument in the demurrer, the IC Agreement does not say that Plaintiffs disclaim their ownership of the bank account itself. This is consistent with the allegations that, pursuant to the IC Agreement, Dr. Knudson agreed to provide J.A. Corp with access to the bank account that received deposits of payments from Dr. Knudson’s insurance contracts, with the understanding that J.A. Corp would pay a percentage of these deposits to Dr. Knudson. (FAC ¶ 21.) The IC Agreement is silent as to amounts collected for the services of other providers that could be deposited into the same bank account.

Plaintiffs argue that they own title to the bank account, and Defendants argue that J.A. Corp owns the bank account based on their own interpretation of the IC Agreement. (FAC ¶¶ 64-65.)

Since an actual controversy exists the demurrer is overruled as to the sixth cause of action.

Seventh Cause of Action for Implied Indemnity

“Parties to a contract . . . may define therein their duties toward one another in the event of a third-party claim against one or both arising out of their relationship. Terms of this kind may require one party to indemnify the other, under specified circumstances, for moneys paid or expenses incurred by the latter as a result of such claims.” (See Civ. Code ; 2772 [“Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one parties, or of some other person”].) Parties to an indemnity contract have great freedom of action in allocating risk, subject to limitations of public policy. (See Peter Culley & Associates v. Superior Court (1992) 10 Cal.App.4th 1484, 1492 [parties may require negligence by the indemnitor as a condition to indemnification]; Continental Heller Corp. v. Amtech Mechanical Services, Inc. (1997) 53 Cal.App.4th 500, 505 [parties may establish a duty in the indemnitor to save the indemnitee harmless even if the indemnitor is not negligent].)

An indemnity obligation may arise from “express contractual language establishing a duty in one party to save another upon the occurrence of specified circumstances” or “in equitable considerations brought into play either by contractual language not specifically dealing with indemnification or by the equities of the particular case.” (E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 506-507 (E.L. White).) Courts interpret indemnity agreements according to the language and contents of the contract as well as the intention of the parties as indicated by the contract. (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 968.)

Here, Plaintiffs admit that there is an express contractual indemnification provision in which Plaintiffs agreed to indemnify J.A. Corp. (FAC ¶ 68.) J.A. Corp argues that the provision does not go the other way and thus Plaintiffs cannot seek to have J.A. Corp indemnify Plaintiffs.

E.L. White is instructive. There, the City of Huntington Beach (the City) entered into an agreement with a contractor that contained an express indemnification clause that the contractor would indemnify the City from “any suits, claims, or actions brought by any person or persons for or on account of any injuries or damages sustained” because of or arising out of the work. (E.L. White, supra, 21 Cal.3d at p. 506.) The City unsuccessfully argued, just like Defendants argue here, that the parties, by agreeing to this provision, memorialized the entire agreement between them regarding indemnification, and by excluding language indicating a right of indemnity as to the contractor against the City, they expressed an intention that no such right existed or was implied in favor of the contractor. (Ibid.) Our Supreme Court rejected this argument and held that the presence of an express indemnity provision does not operate to preclude recourse by a party to the principles of implied or equitable indemnity. (Id. at p. 510.)

In the reply, J.A. Corp argues that E.L. White is inapposite because there was a prior litigation that already held the City liable to the contractor. However, E.L. White did not hold that the rule allowing equitable indemnity claims could only be applied in such situations, and our Supreme Court did not express such a limitation in its ruling.

The demurrer is overruled as to the seventh cause of action.

Eighth Cause of Action for Accounting

J.A. Corp does not demur to the eighth cause of action. The other Defendants, who did not sign the IC Agreement, argue that there are grounds for demurrer as to the eighth cause of action because only J.A. Corp had a duty to provide an accounting to Plaintiffs. The Court agrees.

A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting and that some balance is due to the plaintiff that can only be ascertained by an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.)

“Equitable principles govern, and the plaintiff must show the legal remedy is inadequate.... Generally, an underlying fiduciary relationship, such as a partnership, will support an accounting, but the action does not lie merely because the books and records are complex. Some underlying misconduct on the part of the defendant must be shown to invoke the right to this equitable remedy.” (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 442.)

Plaintiffs argue in opposition that there was a conspiracy between all of the Defendants and that this gives rise to the relationship necessary for an accounting cause of action against the Defendants other than J.A. Corp. Plaintiffs cite no authority to support the contention that a conspiracy can give rise to a relationship sufficient to maintain an accounting cause of action against non-contracting parties. The court in Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571 held that “[a] nonfiduciary cannot conspire to breach a duty owed only by a fiduciary.” (Id. at p. 1597.) The Court finds the reasoning in Kidron persuasive and applies it here. Thus, the Defendants who did not sign the IC Agreement do not have a duty to provide an accounting to Plaintiffs.

Accordingly, the demurrer is sustained as to the eighth cause of action.

Ninth Cause of Action for Declaratory Relief

All Defendants demur to the ninth cause of action. However, the ninth cause of action is alleged only against J.A. Corp.

In the ninth cause of action, Plaintiffs seek a determination that J.A. Corp is responsible for “any future obligations that Plaintiffs incur as a result of the improper billing practices, such as a determination by one or more insurance companies that amounts paid pursuant to Plaintiffs’ provider agreements must be refunded.” (FAC ¶ 78.)

As stated above, declaratory relief operates prospectively, serving to set live controversies at rest. There is no basis for declaratory relief where only past wrongs are involved. (See Gafcon, supra, 98 Cal.App.4th at p. 1403.)

Here, although Plaintiffs seek to hold Defendants responsible for potential future payment obligations that might arise, this cause of action is predicated on past wrongs. Specifically, this cause of action is based on Plaintiffs’ allegations that Defendants improperly billed the third-party insurance companies.

Accordingly, the demurrer is sustained as to the ninth cause of action.