LA judge: Stay tolled five-year statute to bring suit to trial

LOS ANGELES -- A superior court judge denied a motion to dismiss a long-running whistleblower lawsuit against hospitals accused of insurance fraud Wednesday, ruling a stay tolled the five-year statute on bringing the case to trial.

The matter has spawned 25 defendants, a criminal investigation and imprisoned a state senator, but injured parties have not made it to trial in the over five years it has been tied up in court.

Plaintiffs consist of whistleblowers who alleged Long Beach hospital executive Michael Drobot and three hospitals -- Tri-City Regional Medical Center in Hawaiian Gardens, Riverside Community Hospital and Bernardine Medical Center in San Bernardino -- paid kickbacks to doctors to steer spinal tap patients to the facilities. The lawsuit, filed by Cotchett, Pitre & McCarthy LLP, argued the hospitals overcharged the State Compensation Insurance Fund for fraudulent surgeries.

The firm filed a qui tam, or whistleblower lawsuit, which allows for a complaint seeking damages under the California False Claims Act to be filed under seal while the state attorney general's office performs an investigation to decide whether it should intervene. Because the case was under seal, plaintiffs said it was stayed as a result of them not being able to perform discovery or depositions.

"As the court previously found, the time during which a qui tam complaint is sealed must be excluded when calculating the time for the purposes of the five-year rule since, during the seal period, it is impossible, impractical, and futile to bring the action to trial," wrote Justin T. Berger, a principal at Cotchett, Pitre & McCarthy specializing in qui tam actions.

He said sealing the complaint was beyond the plaintiffs' control as it was required by statute. State of California v. Gardens Regional Hospital Medical Center, BC534466 (Jan. 29, 2014).

"Alternatively, though the court previously did not reach this issue, the motion to dismiss would be properly denied on the grounds that the case was stayed during the seal period," Berger wrote.

Attorneys defending Riverside Healthcare Systems and doctors sought to persuade Los Angeles County Superior Court Judge Elihu M. Berle that plaintiffs could have but did not move the case along with due diligence, citing a case Berle himself decided, although it was overturned by the 2nd District Court of Appeal last year. Warner Bros. Entertainment v. Superior Court (2018) 29 Cal. App. 5th 243 (Warner Bros).

"Relators are wrong: As Warner Brothers makes clear, the court analyzed diligence for 'both' the five-year ilmit and trial preference in the same section, since the diligence analysis is -- according to Warner Brothers -- identical for both doctrines," wrote defense attorneys Walton & Walton LLP, Barnhill & Vaynerov LLP, and Hooper, Lundy & Bookman PC.

The appellate court said Berle erred when he concluded the five-year period was tolled because of a stay. The court ordered Berle to dismiss the lawsuit, holding that an order staying pleadings and discovery while also requiring parties to agree on case management doesn't effect a complete stay of the case's prosecution.

The defense further argued plaintiffs mischaracterized the seal as a stay and could have shortened the seal period.

"Three status reports over 3.6 years do no equate to diligence -- especially when all but one of them proposed trial dates after the five-year limit expired," the defense wrote.

Plaintiffs said defendants did not argue against a seal extension. The plaintiffs said defendants misconstrued the Warner Bros. decision, saying it was a narrow ruling related to whether class action plaintiffs showed due diligence in their motion for trial preference.

Plaintiffs said the five-year period wasn't triggered until the case was unsealed in July 2013, bringing the five-year deadline to July of 2018. The government ultimately declined to intervene.

In court, defense attorney Maxim Vaynerov of Burnhill & Vaynerov, asked Berle to dismiss the case, but Berle declined. "The purpose of the stay was to avoid the five-year statute," said Berle. "Any action that the court would take would undermine the complete stay."

Former state Sen. Ronald Calderon served three years in federal prison after admitting he accepted thousands of dollars in bribes from Drobot and undercover FBI agents. Drobot was sentenced to 63 months for his part in overseeing the fraud scheme, including paying Calderon to help pass legislation favorable to spinal tap surgeries. Drobot set up a scheme that exploited a now-repealed California law known as the spinal "pass-through" legislation, which permitted hospitals to pass on to workers' compensation insurers the full cost of medical devices implanted in spinal surgery patients, according to the U.S. attorney's office.