IN THE COURT OF APPEAL OF CALIFORNIA
THIRD APPELLATE DISTRICT
CALIFORNIA CONSUMER HEALTH CARE COUNCIL, INC.,
CALIFORNIA DEPARTMENT OF MANAGED HEALTH CARE
APPELLANTS’ OPENING BRIEF
Appeal from the Superior Court for Sacramento County
HARVEY S. FREY, ESQ.
1 - Introduction
1 - INTRODUCTION
1.1 - Statement of the Case
Patient/appellants were denied needed medical care by their health care service plans (plans). They applied to the Department of Managed Health Care (DMHC) for assistance, and there were improperly denied the fair adjudication the Legislature created DMHC to provide. A writ of mandate was erroneously denied on demurrer.
Since the facts concerning each of the nine patient appellants have not been disputed, and would be accepted as true for purposes of reviewing the demurrer in any case, they are omitted from this brief. Some of the specific allegations from the record are included in the attachment, simply to provide context.
This case is not about the individual patients, but about DMHC's failure to follow proper procedure in dealing with patient complaints.
A major purpose of the Knox-Keene Act (KKA) (Health and Safety Code (HSC) §1340 et seq)) is "Ensuring that ... enrollees have their grievances expeditiously and thoroughly reviewed by the Department [of Managed Health Care]." (HSC §1342(h)) The Act specifies, in unambiguously mandatory language, that the department shall obtain enrollee records from health care service plans, adjudicate the disputes, either directly or with the aid of independent medical reviewers, and write a final report specifying its findings and reasons therefor. The Information Practices Act (Civil Code §1798 et seq) and the Public Records Act ( Government Code §6250 et seq) establish the right of citizens to obtain and correct all records relating to them held by any state agency (with exceptions which are irrelevant here). The U.S. and California Constitutions guarantee citizens a minimal level of due process in state adjudications affecting their life and property rights.
Yet, In dealing with grievances of appellants and others, DMHC has subverted the Legislature's carefully constructed system for handling enrollee complaints. DMHC has not denied that it accepts ex parte information from plans, refuses to give enrollees an opportunity to see or rebut it, uses it to make their decisions, issues final opinions totally devoid of statutorily required substantive content, and then refuses to release the contents of its files.
Where the issue involves medical opinion, DMHC allows the plan's uncorrected submissions to be sent to Independent Medical Review Organizations (IMROs), and then adopts, as its own final decision, the decisions the IMROs made on the basis of that unscreened and unrebutted information. DMHC's indifference to falsification of data by plans may be the very reason that plaintiffs' complaints are upheld in only 1/3 of California IMR cases, whereas the ratio is 1/2 nationwide. (Report of Office of the Legislative Analyst,12/5/2001, www.lao.ca.gov/2001/12-5-02_DMHC_review.pdf;www.dfw.com/mld/startelegram/3219733.htm)
When asked to obey the relevant statutes, DMHC states to patients that it simply does not obey them, thus establishing that the above derelictions are official department policy, but they have not complied with the rulemaking requirements of the Administrative Procedures Act (Government Code (GC) §11340 et seq. )
DMHC gives no justification for these derelictions, but asserts only that it has unlimited discretion to construe the mandatory statutory language of the law, even in direct contradiction to its plain meaning and the purposes for which the agency was created. Appellants allege that these actions are arbitrary and capricious, and that they have been harmed thereby.
Appellants petitioned the Superior Court for either a writ of mandate, an injunction, or declaratory relief (as the court might deem best) to require DMHC to perform its mandatory statutory duties and/or to properly exercise its discretion when dealing with patient complaints, in particular: 1) to allow patients to obtain and rebut evidence presented against them by the plans (as mandated by Civil Code (CC) §1798 et seq, GC §6250 et seq, and HSC §§1374.30, 1374.31, and 123100 et seq), and 2) to provide a reasoned explanation of their final decision (as mandated by HSC §1368(b)(5)). At no time have appellants attempted to direct DMHC's discretion to decide cases for or against complainants.
These modest requests were rejected by the court below, which sustained DMHC's demurrers without leave to amend, on the sole theory that, even though the acts whose omission was complained of are mandated in the statutes with unequivocal "shalls", DMHC had the discretion to ignore them. Even if this were true, which appellants dispute, the dismissal would have been improper, since the court made no findings concerning appellants' material allegations of failure to exercise discretion and abuse of discretion, claims which would be viable even if the theory of the demurrers was correct. The specific points of error in the demurrer are discussed in Section 7, below.
"If there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend."
MacLeod v. Tribune Publishing Co. (1959) 52 Cal.2d 536
There has been an order sustaining a partial demurrer, but the final order of dismissal with prejudice was signed by Judge Talmadge R. Jones of Dept. 31 of the Sacramento Superior Court on April 5, 2002, and the final judgment, from which this appeal is taken, was entered on April 18, 2002, and is attached, on p.119 of Appellants' Appendix. Declaring it moot, the court also refused to consider a motion for further amendments to the petition (App. p.78), which were otherwise allowable and stated viable causes of action based on Due Process and the Information Practices Act, and which appellants also ask this court to approve. It was improper for the court to conclude that the petition could not be corrected by amendment, while refusing to even consider amendments which were before it!
Since this case comes to this court on demurrer without leave to amend, appellants ask that factual allegations be accepted as true, and that legal issues be reviewed de novo. (Aubry v. Tri-Cities Hosp. Dist. (1992) 2 Cal 4th 962, 966-967)
A prime issue in this case is DMHC's informal decision that it need not obey its authorizing statutes. Appellants will argue that:
1) An agency decision not the result of formal "notice and comment" rule-making is entitled to no special deference by the court, but must stand on its merits. DMHC's decisions were not formal, so are entitled to no deference.
2) Even a formal decision is void if it is inconsistent with the terms or intent of the authorizing statute, i.e.: alters or amends the statute or enlarges or impairs its scope. DMHC's procedural decisions contradict the mandatory language and expressed intent of the statute, so they should be declared void.
3) A decision, even on an issue on which the authorizing statute is silent or ambiguous, which is not reasonably necessary to effectuate the statutory purpose of its authorizing legislation, is invalid. DMHC's decisions contradict the expressed words and intent of the statutes, so are invalid a fortiori.
4) An agency does not have discretion to ignore statutes of general applicability, such as the Information Practices Act, the Public Records Act, or the Administrative Procedures Act.
DMHC's procedural decisions complained of herein appear to be the ad hoc result solely of negligence, incompetence, indolence, and/or arrogance, and directly contradict the express mandatory language of the law. Far from advancing the procedures and purposes for which DMHC was created, i.e.: "Ensuring that subscribers and enrollees have their grievances expeditiously and thoroughly reviewed by the department." (HSC §1342(h)), they undermine and subvert them. Appellants ask this court to overturn the demurrers and grant the requested writ of mandate or equivalent relief.
1.2 - Issues Presented
1.1.1 - First Issue Presented - Does an agency have such complete discretion to ignore the laws governing its procedures, that a party may not even be heard to argue that the agency should obey the laws?
1.1.2 - Second Issue Presented - Does an agency, acting in its quasi-judicial capacity, have the discretion to ignore a party's statutory and due process rights?
1.1.3 - Third issue presented - If the agency has discretion to ignore these legislative rules, may the omissions be reviewed for abuse of discretion?
1.1.4 - Fourth Issue Presented - If the agency has such discretion to nullify legislative rules and due process rights, may the nullification be done without formal rulemaking?
1.1.5 - Fifth Issue Presented - If abuse of discretion is a possible cause of action, is demurrer proper on the sole theory that the acts were discretionary?
1.1.6 - Sixth Issue Presented - Is it proper to sustain a demurrer, without leave to amend, while refusing to even consider simultaneously proffered amendments with potentially viable causes of action?
1.3 - Parties
Appellants are 1) enrollees of various California health care service plans ("plans"), who have filed complaints against their plans with the California Department of Managed Health Care, and 2) the California Consumer Health Care Council, Inc., a non-profit patient advocacy organization of which the other plaintiffs are members, which has been assisting them in their dealings with respondent.
Respondents are the California Department of Managed Health Care and its director, Daniel Zingale.
2-DUTIES OF THE DEPARTMENT OF MANAGED HEALTH CARE
The California Department of Managed Health Care is the Department that:
"has charge of the execution of the laws of this state relating to ... the health care service plan business including, but not limited to, those laws directing the department to ensure that health care service plans provide enrollees with access to quality health care services and protect and promote the interests of enrollees."
(HSC §1341(a), underlining added for emphasis)
Thus the laws "direct" the department to ensure that plans promote the interests of health plan enrollees, of whom there are currently approximately 25,000,000 in California. The verb "direct", indicating a command, is clearly mandatory.
The purposes for which the Department was created are further specified by the legislature in HSC §1342:
"It is the intent and purpose of the Legislature to promote the delivery of ... medical care to the people ... who enroll in ... a health care service plan ... by ... :
(a) Ensuring the continued role of the professional as the determiner of the patient's health needs ...
(e) Promoting effective representation of the interests of ... enrollees...
(h) Ensuring that ... enrollees have their grievances expeditiously and thoroughly reviewed by the department."
(HSC §1342, underlining added for emphasis)
Thus DMHC is to "ensure" (another word of mandatory intent) proper review of enrollee grievances. No other department of government shares that responsibility, nor are there private rights of action in the Act. If the intent of the legislature is to be carried out, it must be carried out by DMHC. If DMHC doesn't do it, it won't be done, and the intent of the legislature will be frustrated. The decision in the court below that DMHC need not obey nor enforce the law, renders the entire act simply aspirational, and its commands directed to DMHC mere surplusage. But this is an impermissible construction:
"'In analyzing statutory language, we seek to give meaning to every word and phrase in the statute to accomplish a result consistent with the legislative purpose ....' " [Citation.]'" (underlining added)
Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 778
In addition, the Legislature so earnestly intended that enrollees could depend on the text of the KKA to provide an accurate understanding of what the department would actually do, that they ordered that the full text of HSC Chapter 2.2 be published annually, further manifesting that they did not intend that DMHC could arbitrarily decide to nullify portions of the text:
"The Legislature finds and declares ... :
(3) That the public ... will benefit from having the text of the act available to them, affording a greater understanding of what the act does ...
(b) The director shall annually publish this chapter and make it available for sale to the public."
(HSC §1346.4(a), underlining added for emphasis)
2.1 - The Legislature explicitly mandated a patient Grievance System in minute detail
This appeal concerns that portion of the KKA relating to DMHC's handling of patient grievances. The system prescribed by the statute will be detailed below, but can be summarized as follows:
After exhausting the plan's grievance system, the patient may complain to DMHC (HSC §1368(b)). The plan must then send patient records to DMHC, and DMHC must first decide whether the issue is a medical one, such as denial of care on the basis that the care is medically unnecessary or experimental. If it decides that the issue is medical, it refers the complaint to an Independent Medical Review Organization ("IMRO"), (HSC §1374.30) and assists the patient to obtain the review. The plan must forward records to the IMRO with copies to the patient, and DMHC adopts and enforces the ultimate decision of the IMRO.
If DMHC decides that the issue is not medical, but one of coverage, it must make the final decision itself (HSC §1368(b)), and send the patient a written notice of final disposition, whose minimum content is explicitly detailed in the statute. (HSC §1368(b)(5)).
3 - DMHC HAS FAILED AND REFUSED TO OBEY THE LAWS WHICH REQUIRE IT:
3.1 - To allow complainants to see and rebut evidence submitted to it by plans
The Legislature established DMHC's adjudication procedure for the express purpose of protecting patients from improper denials of care by plans. The procedure is inevitably adversarial, and depends on DMHC receiving accurate records from plans to review. Appellants have alleged that plans have been submitting self-serving, biased, false, and incomplete records and statements, thereby corrupting the review process, and denying patients the fair hearing the Legislature intended. The Legislature foresaw this possibility, and enacted laws to enable complainants to see and rebut submitted records before they are used as the basis of DMHC's decision.
The Legislature intended the records submitted to be accurate and materially complete, to wit:
HSC §1396. "It is unlawful for any person willfully to make any untrue statement of material fact in any application, notice, amendment, report, or other submission filed with the commissioner under this chapter or the regulations adopted thereunder, or willfully to omit to state in any application, notice, or report any material fact which is required to be stated therein." (underlining added for emphasis)
The legislature even made it a crime for the HMO to make misleading statements or omissions in connection with a claim for payment or other benefit pursuant to an insurance policy:
Penal Code §550(b). "It is unlawful to ... :
(1) Present ... any ... statement ... in ... opposition to a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(2) ... make any ... statement that is intended to be presented to any insurer or any insurance claimant in connection with ... or opposition to, any ... benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(3) Conceal, or knowingly fail to disclose the occurrence of, an event that affects any person's...right ... to any insurance benefit ..."
Yet DMHC has made no effort to insure the accuracy of the records it obtains, and has obstructed patient efforts to do so.
The general rights of a patient to have access to his/her medical records are expressed in HSC §§123100-123149.5 .
HSC § 123100. "The Legislature finds and declares that every person ... possesses a ... right of access to complete information respecting his or her condition and care provided ..."
In addition, DMHC, like every state agency, is required by the Information Practices Act of 1977 (Civil Code §1798 et seq) to allow individuals to see, copy and correct their records. Even if a claimant doesn't know enough to invoke the act by name when requesting his records, "Agencies shall take reasonable steps to assist individuals in making their requests sufficiently specific" (CC §1798.32). We quote at length from this act, to demonstrate that the Legislature had no intention that compliance with it be discretionary, and intended that the agency should be subject to the oversight of the courts (Underlining added) :
"The agency shall permit the individual ... to inspect all the personal information in the record and have an exact copy made ..."
"Each agency shall permit an individual to request ... an amendment of a record and shall within 30 days ...:
(a) Make each correction in accordance with the individual's request ... , or
(b) Inform the individual of its ... reason for [a] refusal, the procedures ... to request a review, ... and the ... reviewing official."
"... If ... the reviewing official refuses to amend the record ... the agency shall permit the individual to file ... a statement ... setting forth the reasons for the individual's disagreement."
"The agency ... shall clearly note any portion of the record which is disputed and make available copies of such individual's statement and ... the reasons of the agency for not making the amendment to any person or agency to whom the disputed record ... is disclosed."
"An individual may bring a civil action against an agency [if it]:
(a) Refuses to comply with a ... request to inspect pursuant to CC §1798.34(a)
(b) Fails to maintain any record ... with such accuracy ... and completeness as is necessary to assure fairness in any determination relating to the ... rights, opportunities of, or benefits to the individual ...
(c) Fails to comply with any other provision of this chapter ... in such a way as to have an adverse effect on the individual."
[For suits under CC § 1798.45(a)]
"(a) The court may enjoin the agency from withholding the records ...
(b) The court shall assess against the agency reasonable attorney's fees and other litigation costs ..."
[For suits under CC § 1798.45(b) and (c)]
" ... the agency shall be liable to the individual [for]
(a) Actual damages ..., including mental suffering.
(b) The costs of the action [plus] reasonable attorney's fees ..."
"The intentional violation of any provision of this chapter ... by an officer or employee of any agency shall constitute a cause for discipline, including termination of employment"
The law says agency employees can be fired for violating this law, yet DMHC claims it has the right to declare it a nullity!
By refusing access to records, DMHC has also violated the open record policy of the Public Records Act, Gov. Code §6250 et seq.
"... each state or local agency, upon a request for a copy of records that reasonably describes an identifiable record or records, shall make the records promptly available to any person ..."(underline added)
"When a member of the public requests ... a copy of a public record, the public agency, in order to assist the member of the public make a focused and effective request ... shall do all of the following, to the extent reasonable ...:
(1) Assist the member of the public to identify records and information that are responsive to the request or to the purpose of the request, if stated.
(3) Provide suggestions for overcoming any practical basis for denying access to the records or information sought."
GC §6253.1(a) (underline added)
Thus, DMHC has not obeyed the laws requiring it to provide the records to complainants, nor enforced those laws requiring plans to provide them. Complainants, including some of the appellants, have discovered falsifications in records, and complained of them to DMHC, and even then, were not afforded the opportunity to rebut the falsifications. DMHC and its contracted IMROs have instead routinely allowed ex parte contacts by plans, adopted and acted on false records submitted by the plan, to the detriment of the patients' health, finances, and potentially, even lives. It is necessary that the Court direct DMHC to obey and enforce these laws by allowing complainants to timely see and rebut records submitted in evidence against their claims, and to set aside decisions which are based on such false or unexamined ex parte submissions.
3.2 - To require plans to provide patients with copies of documents submitted to IMROs
Additional statutes relate to record disclosures by plans in connection with the Independent Medical Review process:
HSC §1374.30 provides (underlining added for emphasis):
(n) Upon notice ... that the enrollee has applied for an independent medical review, the plan or its contracting providers shall provide to the independent medical review organization ... a copy of all of the following documents within three business days of the plan's receipt of the ... notice of a request ... :
(1) (A) A copy of all of the enrollee's medical records in the possession of the plan or its contracting providers relevant to each of the following:
(i) The enrollee's medical condition.
(ii) The health care services being provided ...
(iii) The disputed health care services requested ...
(B) ... The plan shall concurrently provide a copy of medical records required by this subparagraph to the enrollee ...
(2) A copy of all information provided to the enrollee ... concerning ... decisions regarding the enrollee's condition and care ... and a copy of any materials the enrollee ... submitted ... in support of the enrollee's request for disputed health care services. This documentation shall include the written response to the enrollee's grievance, required by paragraph (4) of subdivision (a) of Section 1368...
(3) A copy of any other relevant documents or information used by the plan or its contracting providers in determining whether disputed health care services should have been provided, and any statements by the plan and its contracting providers explaining the reasons for the decision to deny, modify, or delay disputed health care services on the basis of medical necessity.
The plan shall concurrently provide a copy of documents required by this paragraph, except for any information found by the director to be legally privileged information, to the enrollee and the enrollee's provider... .
HSC §1374.31 (underlining added for emphasis)
(b) The department shall expeditiously review requests and immediately notify the enrollee in writing as to whether the request for an independent medical review has been approved, in whole or in part, and, if not approved, the reasons therefor. The plan shall promptly issue a notification to the enrollee, after submitting all of the required material to the independent medical review organization, that includes an annotated list of documents submitted and offer the enrollee the opportunity to request copies of those documents from the plan. ...
Plans have not been complying with these laws. As noted above, it is mandatory that the records submitted to IMR be correct, as the patients' solvency, health, and life may depend on the outcome of the IMR decision adopted by DMHC.
Nevertheless, DMHC has taken a cramped view of its responsibilities, holding that it has discretion to allow plans to ignore the statute, and it has chosen to allow them to do so. The court below has upheld them in this decision.
DMHC has even argued, in a statement reminiscent of "Let them eat cake.", that rather than have DMHC enforce the law, the enrollee should sue the plan to get the records, ignoring the facts that: there is no private cause of action provided in the act (See Samura v. Kaiser (1993) 17 Cal.App. 4th 1284), patients are sick and often broke, lawyers are unlikely to take such a case, that even if successful, the records would be provided much too late to affect the decision of the IMRO, that the patient's health could be drastically affected by the delay, that the legislature has placed the responsibility for enforcing the law on DMHC, that it is supposed to enforce the law for the benefit of the enrollees, that DMHC has the responsibility for seeing that due process is observed, and that it has given no rational reason for refusing to enforce the law.
In rejecting a similar suggestion, our Supreme Court said:
"To approve such a practice would mean that an administrative body could base a finding and order on information or reports secretly received without the knowledge of the parties, and successfully defend that action by answering that the remedy of the one aggrieved by the decision is to challenge the data or evidence in a later judicial proceeding. That is not the procedure provided for by the statute."
(Olive Proration Prog. v. Agric. Prorate Com. (1941) 17 Cal 2d 204
And that's not the procedure provided for by the statute here, either. The legislature set up this IMR procedure to avoid litigation, not to spawn it.
Even if one were to agree with DMHC and the court below that the courts may not require DMHC to enforce the law against the plans, DMHC does not have the discretion to base its decision on unexamined ex parte evidence. If it chooses not to require the plans to send copies of the evidence to the enrollee, DMHC must do so itself, and in time to affect the outcome of the deliberative process. Even if DMHC should be determined to have the discretion to refuse to enforce the law, appellants should be given the opportunity to show that it is an abuse of discretion to knowingly adjudicate on the basis of incomplete or tainted evidence.
"To require claimants to commence an action in superior court ... would defeat the statutory objective of providing ... an informal process of resolving their claims ..."
Cuadra v. Millon (1998) 17 Cal 4th 855, 870
3.3 - To provide legally obligatory final notices of cases
DMHC has a statutory duty to provide complainants with written notice of final disposition, to wit:
Health & Safety Code §1368(b) (underlining added for emphasis) ...
(5) The department shall send a written notice of the final disposition of the grievance, and the reasons therefor, to the subscriber ... within 30 calendar days of receipt of the request for review unless the director, in his or her discretion, determines that additional time is reasonably necessary to fully and fairly evaluate the relevant grievance.
In any case not eligible for the independent medical review system ... the department's written notice shall include, at a minimum, the following:
(A) A summary of its findings and the reasons why the department found the plan to be, or not to be, in compliance with any applicable laws, regulations, or orders of the director.
(B) A discussion of the department's contact with any medical provider, or any other independent expert relied on by the department, along with a summary of the views and qualifications of that provider or expert.
(C) If the enrollee's grievance is sustained in whole or part, information about any corrective action taken.
It is important for complainants and the public at large that DMHC complies with this duty, since it:
(a) encourages [DMHC] to draw legally relevant sub-conclusions supportive of its ultimate decision;
(b) facilitates orderly analysis and minimizes the likelihood that the agency will prematurely leap from evidence to conclusions; and
(c) enables a complainant or a reviewing court to trace [DMHC's] analysis, avoiding the necessity of unguided and resource-consuming explorations of the record to determine whether some combination of credible evidence and factual and legal conclusions supported the ultimate decision.
Properly documented findings enable the parties to determine whether and on what basis they should seek review. They also serve a public relations function by helping to persuade the parties and the public that administrative decision-making is careful, reasoned, and equitable.
(liberally edited from Topanga Assoc. v. Cty. of Los Angeles (1974) 11 Cal 3d 506, 516)
These requirements of Topanga had previously been intended by the Judicial Council, in its report (10th Biennial Rept. (1944) pp. 26, 45) which led to the passage of Gov. Code §1094.5, to apply to all agencies, state or local, regardless of whether they are subject to the Administrative Procedures Act, in order to facilitate judicial review.
In those cases where "final disposition notices" have been supplied by DMHC, they have been almost entirely conclusory, failing to satisfy any of the specificity requirements of HSC §1368(b)(5), largely ignoring plaintiffs’ allegations, uncritically accepting the plans' blanket denials, and often consisting of no more than the bald statements "no violations were found", or "... no formal enforcement action will be taken at this time.", and stating that the entire file has been labeled "confidential", and therefore would not be released to the complainant. They have contained nothing that could even arguably be construed as the slightest attempt to comply with the requirements of the statute.
Each of the appellants has asked DMHC for proper summaries as described above. DMHC has explicitly refused to comply with the statute, as expressed, for example, in a letter of August 2, 2001 from DMHC’s Director of Enforcement, Joan Cavanagh, saying that DMHC "does not provide that information", thus establishing the refusal to comply with the statute as official departmental policy, but without benefit of proper rule-making procedures.
Especially at a time when elected members of the executive branch accept millions of dollars in campaign funds from regulated industries, the existence of an absolute and uncontrolled discretion in a regulatory agency of that branch would be an intolerable invitation to abuse. This alone would require that adjudications be carefully explained and justified based on ascertainable standards.
"The public has a right to ... have officials articulate fully the basis on which they act. To the extent officials seek to evade public scrutiny ... to avoid public discussions, ... or to hide improper influences ... public opprobrium is appropriate."
Regents of U. of Calif. v. Sup. Ct. (1999) 20 Cal 4th 509, 541-2
The recent Quackenbush episode is a cautionary example of the effect of unconstrained agency discretion.
4 - DMHC'S PROCEDURES VIOLATE APPELLANTS' BASIC DUE PROCESS RIGHTS
DMHC is directed by the legislature to perform the quasi-judicial function of adjudicating disputes between plans and their members. Though the adjudication is a "paper hearing", not requiring oral presentations, it does affect the members' access to medical care, and thus his life and property interests, thereby triggering the 'due process' protections of the 5th and 14th Amendments of the United States Constitution, and Article 1 Section 7 of the California Constitution.
The plan member denied possibly life-saving medical care has a need at least as "brutal" as a welfare recipient denied aid (Goldberg v. Kelly (1970) 397 US 254, 262), and his "overpowering need in this unique situation not to be deprived of assistance" similarly triggers a pre-decision due process requirement.
The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be "condemned to suffer grievous loss" [citation], and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication.
(Goldberg v. Kelly (1970) 397 US 254, 262-263)
DMHC's refusal to provide, or to require plans to provide, complainants with copies of evidence submitted, means that DMHC, or its contracted IMRO, makes its administrative decisions on the basis of unexamined, unrebutted ex parte contacts with the plans.
"The determination cannot be based on confidential reports or independent information received by the administrative board and not known to the aggrieved party. He has a right to ... produce evidence in refutation."
Witkin, 7 Summary (9th), Constitutional Law, §518
"There is considerable difference ... between the alleged improper admission of evidence ... and the consideration of and reliance upon information received without the knowledge of the parties and at a time and place other than that appointed for the hearing. In the former class of cases, the parties are informed of the evidence to be used against them, they may object to it, explain it, or test it and introduce countervailing evidence. None of these safeguards are available, however, when the board secretly obtains information and bases its determination thereon."
English v. Long Beach (1950) 35 Cal 2d 155, 159 (emphasis added)
The parties ... were denied all right of cross-examination ... and also of an opportunity to make a counter showing in rebuttal. Under such circumstances, the statutory requirement of a hearing was not met. (Morgan v. United States, 304 US 1; Interstate Commerce Com. v. Louisville & N. R. Co., 227 US 88; see 52 Harv. L. Rev. 509.) Only evidence which the opposite party has an opportunity to refute at the hearing may be relied upon as the basis of a finding. (United States v. Abilene & So. Ry. Co., 265 US 274.)
Olive Proration Prog. Com. v. Agricult. Prorate Com. (1941) 17 Cal 2d 204, 210 (emphasis added)
DMHC's refusal to allow the information it uses in decision-making to be corrected, demonstrates its systematic indifference to the accuracy of its decisions. But -
"[t]he function of legal process ... is to minimize the risk of erroneous decisions"
(Memphis Light v. Craft (1978) 436 US 1, 14)
In addition to the these Constitutional requirements, the specific statutes cited above indicate the legislature's explicit intent to require a minimal level of due process at the agency level, to include at least:
1) disclosure of opposing party's documentary evidence,
2) opportunity to comment on and rebut the same in writing, and
3) a written decision, outlining the facts, findings, and reasons for the decision, and that is all that appellants are seeking by this action!
These basic elements of due process have been denied claimants by DMHC, whether DMHC is making the decision itself, or adopting the decision of an IMRO. Their decisions, based on ex parte communications and supported by no written justification whatsoever, define the very outer limits of "arbitrary and capricious".
Dealing with government agencies "activates the special concern about being talked to about the decision rather than simply being dealt with."(O'Bannon v. Town Court Nursing Center (1980) 447 U.S. 773, 801)
5 - NO DEFERENCE IS DUE DMHC'S DECISION TO IGNORE THE LAW, BECAUSE:
5.1 - Syntactically, the codes are unambiguously mandatory
The unquestioned default presumption in the law is that "shall" is mandatory. It is true in general that:
"["shall" is] the equivalent of "must", where appearing in a statute"
53 ALR2d 925, Ballentine's Law Dictionary, 3d Ed. p.1171
This default presumption is reasserted at the beginning of most State Codes, including Health and Safety Code §16, Government Code §14, and Evidence Code §11, as well as in the Calif. Rules of Court §1401(b)(1) and §40(d) that:
"Shall is mandatory, may is permissive."
Cases holding the contrary generally involve codes without such a definition, such as the Penal Code, which unlike most of the others, provides only that:
"[w]ords and phrases must be construed according to the context and the approved usage of the language ...."
Penal Code §16 (See People v. Ledesma (1997) 16 Cal4th 90)
Other cases holding the contrary have depended on conflict with express Constitutional imperatives, as in People v. Zamudio (2000) 23 Cal. 4th 183, in which the mandatory language of Penal Code §1016.5 was in conflict with Calif. Constitution Article VI, section 13. Obviously there are no such overriding Constitutional issues here.
Given this universal presumption, the contrary presumption of the court below is clearly improper.
The plain language of the statutory text should be accepted without creating artificial ambiguity:
We first look at the actual words of the statute, "giving them a plain and commonsense meaning." ... "If there is no ambiguity in the language of the statute, 'then the Legislature is presumed to have meant what it said, and the plain meaning of the language governs.' [Citation.] 'Where the statute is clear, courts will not "interpret away clear language in favor of an ambiguity that does not exist." ' "(Lennane v. Franchise Tax Bd. (1994) 9 Cal.4th 263, 268 (underlining added)
People v. Tindall (2000) 24 Cal4th 767, 772
5.1.1 - Women Organized for Employment is irrelevant
Flying in the face of this default presumption, the court below, at the hearing of 11/26/01, raised sua sponte the single case, Women Organized for Employment v. Stein (1980) 114 Cal.App.3d 133, 139 (hereinafter "WOE") to deny Appellants' claim that the "shalls" in the statutes are enforceable by writ of mandate or indeed at all. This case has been the keystone of all the orders rejecting Appellants' petition, so it must be addressed at length.
WOE is completely distinguishable from the case at bar, and should not be interpreted, as the court below did, as holding that "shall", as applied to duties of state agencies, is so universally permissive that no writ may ever issue to compel an agency to perform acts the law says they "shall" do.
The first distinction is that the definition of "shall" in the Insurance code (applicable to WOE) is contingent, whereas the HSC (applicable to this case) prescribes a much stricter interpretation:
Insurance Code §16: "... the word "shall" is mandatory and the word "may" is permissive, unless otherwise apparent from the context. " (underlining added for emphasis)
HSC §16: ""Shall" is mandatory and "may" is permissive." [period!]
WOE quotes six code sections as examples of those which contain the word "shall", but should be interpreted as discretionary, yet not one of them is actually grammatically mandatory, as is "apparent from the context", to wit:
IC §790.04: "[Insurance Commissioner] shall have power to examine and investigate..."
"Having the power" is not the same as having the Duty. This rule does not mandate any actions.
IC §790.05: he "shall" charge a person, and order a hearing, when he has reason to believe [Obviously Discretionary, depending on judgment] that the person is so engaged; and that he "shall" order the person to "cease and desist" if the charges or any of them are found to be justified"... [Obviously Discretionary, depending on judgment]
Here the discretionary clauses modifying "shall" make the entire duty discretionary.
IC §790.06: he may initiate [Obviously Discretionary] a similar proceeding against a person in the insurance business if he has reason to believe the person has been or is engaged in unfair practices not defined in Section 790.03 and that the proceeding would be in the interest of the public.
This section is unambiguously discretionary throughout.
IC §790.10: Insurance Commissioner "shall ... promulgate reasonable rules and regulations [Obviously Discretionary]... as are necessary to administer" [the provisions which precede it].
Here the terms "reasonable" and "necessary" make the entire duty subject to the commissioner's judgment, and therefore discretionary.
IC §1852: he "shall" take an insurer's "expenses" into consideration in discharging his statutory duty.
"Consideration" is obviously innately discretionary.
GC §13979: [The Secretary] "shall" advise the Governor on various programs.
"Advise" is obviously discretionary. It means to tell what you think is best. This is like saying "He SHALL do as he pleases".
Thus in every example cited by the WOE court, the word "shall" either applies to verbs of discretion, or is immediately vitiated by expressions of discretion. These examples are actually clearly discretionary in context, so it can hardly be surprising that the Court declared them to be so.
Thus WOE can not be taken as precedent for the proposition that "shall" is always merely permissive for a state agency, but only for such cases as those above, where it is embedded in indicia of discretion, and where the code definition is similarly contingent on context. Indeed, it is not controlling precedent in any case, being from a sister appellate district.
Let us compare the above wimpy "shalls" from WOE, with the muscular ones cited in appellants' petition:
"The agency shall permit the individual ... to inspect all the personal information in the record and have an exact copy made ..."
"Each agency shall permit an individual to request ... an amendment of a record and shall within 30 days ..."
"... the agency shall permit the individual to file ... a statement [of]... disagreement."
" The agency ... shall clearly note any portion of the record which is disputed ... "
"The intentional violation of any provision of this chapter ... by an officer or employee of any agency shall constitute a cause for discipline, including termination of employment"
... the plan ... shall provide to the independent medical review organization ... a copy of all of the following documents ...
(1)(B) ... The plan shall concurrently provide a copy of medical records required by this subparagraph to the enrollee ...
(3) ... The plan shall concurrently provide a copy of documents required by this paragraph ... to the enrollee.
The department shall expeditiously review requests ... The plan shall promptly ... offer the enrollee the opportunity to request copies of those documents from the plan. ...
The department shall send a written notice of the final disposition of the grievance, and the reasons therefor, to the subscriber ...
... the department's written notice shall include, at a minimum, the following: ...
HSC §1368 (b)(5)
Not a weasel word in the lot. The Legislature could not have made these commands more mandatory, except perhaps by saying "Simple Simon Says the director shall ...".
WOE is the sole statutory support relied on by the demurrers, and since they were based on an incorrect interpretation of it, they should be reversed.
If the lower courts' interpretation of WOE were upheld, state agencies would be free to ignore the most explicit commands of the legislature, the judicial system would be impotent to control their most misguided misinterpretations of statute, and the writ of mandate would be a dead relic.
However, writs of mandate have continued to issue in the 21 years since WOE. Indeed, only two cases have cited it over that entire period, until it was disinterred by the court below. In the last such case, Sklar v. FTB (1986) 185 Cal.App.3d 616, the court pointed out that if the Legislature had specified explicit procedures in the statute, that would have been an indication of the Legislature's mandatory intent. But, the statutes at issue in this case, DO specify explicit procedures, e.g., as to when documents must be provided, penalties for failure to do so, when the final notice must be provided, what it must contain, etc. This specificity can hardly be understood if the Legislature intended that the duty could be dispensed with altogether. So even the court in the last case to interpret WOE would have held the statutes in this case to be mandatory.
Appellants submit that the plain language of the statutes is unambiguously mandatory, and that it should be presumed to mean what it says. The legislature left no room for discretion in the acts in question - it provided no legal alternatives. HSC §§1374.30 & 1374.31 unequivocally require HMOs to provide copies of submitted records to complainants, and CC §1798 et seq unequivocally require DMHC to provide and correct agency records. Similarly, HSC §1368(b)(5) unequivocally requires DMHC to submit a final summary with prescribed elements. There is NO element of discretion in these statutes. There is no justification for refusal to obey them.
5.2 - It is the Court's constitutional duty to interpret statutes, not the agency's
DMHC has argued that, as the agency designated to execute the statutes, it should be the one to interpret them as well.
The Knox-Keene Act, however, explicitly decreed otherwise:
"Every final order, decision, license, or other official act of
the director under this chapter is subject to judicial review in
accordance with the law."
DMHC's argument was also definitively rejected in Bodinson Mfg. Co. v. California Empl. Com. (1941) 17 Cal.2d 321, 326:
"... it is the duty of this court, when such a question of law is properly presented, to state the true meaning of the statute finally and conclusively, even though this requires the overthrow of an earlier erroneous administrative construction. [citations]"
"The ultimate interpretation of a statute is an exercise of the judicial power. [citations]
The judicial power is conferred upon the courts by the Constitution and, in the absence of a constitutional provision, cannot be exercised by any other body. [citations]"
"Thus, if it were held that the statute was intended to vest final authority in the [state agency] to pass upon questions of law, the act would clearly be unconstitutional. Any such construction is to be avoided if possible. [citations]"
Thus it is evident that the Courts should decide the meaning of the statute, not the agency. If the agency's interpretation was made on the basis of its peculiar expertise, as for instance a substantive decision on safety of radioisotopes by CalOSHA, the court might well defer to the agency. But, where the question is how to interpret the language of a statute, surely it is the Court which has the superior expertise, and no deference is due to the agency's interpretation.
5.3 - DMHC's case adjudications are quasi-judicial and therefore subject to GC §1094.5 and the rules of Topanga
When a patient complains to DMHC about a plan, DMHC is in the position of a neutral adjudicator, and its decisions are therefore quasi-judicial. The degree of judicial oversight to be applied to such quasi-judicial determinations by state agencies is addressed by Gov. Code §1094.5, which applies to all agencies, state or local.
These rules were restated by our Supreme Court in Topanga v. Los Angeles (1974) 11 Cal 3d 506, 516, in the context of a zoning commission decision, but again, applicable to all state or local agencies. They made it clear that, not only were such decisions subject to judicial review, but that it was the obligation of the agency to facilitate such review by providing an adequately detailed written decision, setting forth findings of fact and showing the support of substantial evidence. HSC §1368(b)(5) is thus an application of a general rule of law to this particular situation, and can not be nullified by agency action.
5.4 - DMHC's interpretations subvert the Purposes of the statute
The Supreme Court quoted its Chevron standard in INS v. Cardoza-Fonseca (1987) 480 U.S. 421: (underlining added)
"The judiciary is the final authority of statutory construction and must reject administrative constructions which are contrary to clear congressional intent."
Our California Supreme Court has adopted essentially this same position.
"In California, administrative agencies routinely adopt quasi-legislative regulations under express statutory authority. For such regulations to be valid in this state, they must be consistent "with the terms or intent of the authorizing statute." (California Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d 1, 11) A valid regulation must also be "reasonably necessary to effectuate the statutory purpose" of its authorizing legislation. (Ibid.) Federal law is similar. (See Chevron U.S.A. v. Natural Res. Def. Council (1984) 467 U.S. 837, 842-845) "
Green v. Ralee, (1998) 19 Cal 4th 66, 82 (underlining added)
"Thus, Morris v. Williams (1967) 67 Cal.2d 733, in finding that the challenged regulations contravened legislative intent, rejected the agency's claim that the only issue for review was whether the regulations were arbitrary or capricious. Our opinion explained that "... Administrative regulations that alter or amend the statute or enlarge or impair its scope are void and courts not only may, but it is their obligation to strike down such regulations." (P. 748; see Dyna-med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1388-1389; Hittle v. Santa Barbara County Employees Retirement Assn. (1985) 39 Cal.3d 374, 387) "
"The applicable principles of statutory construction are well settled. 'In construing statutes, we must determine and effectuate legislative intent.' (underlining added)
(Woods v. Young (1991) 53 Cal.3d 315, 323.)
"'To ascertain intent, we look first to the words of the statutes', 'giving them their usual and ordinary meaning.' (DaFonte v. Up-Right, Inc. (1992) 2 Cal.4th 593, 601 .)"(underlining added)
(Lennane v. Franchise Tax Bd. (1994) 9 Cal.4th 263, 268 .) "
As cited above, the reason that DMHC was created was to protect plan enrollees. This purpose is better served by requiring the agency to obey and enforce those sections of the statute which protect plan enrollees, than by letting them ignore them.
In this case, the agency has consciously adopted a general policy that is so extreme as to amount to an abdication of its statutory responsibilities. By denying claimants elementary due process it has subverted the basic purpose of the act.
"The commissioner contends his policy ... is an administrative construction that is entitled to great weight... . The policy ... frustrates the evident remedial purpose of the legislation. The policy is therefore an abuse of discretion and not entitled to deference." (underlining added)
Cuadra v. Millon (1998) 17 Cal 4th 855, 870 (unanimous decision)
A section of an act with a similar purpose is instructive, to wit: the Consumers Legal Remedies Act, CC §1781(b) which reads:
"The court shall permit the suit to be maintained on behalf of all members of the represented class if all of the following conditions exist: ..."
In interpreting this section, the court said:
Contextual examination of section 1781(b), reveals that "shall" must be given such mandatory meaning to promote the act's purposes and effectiveness. The self-declared purposes of the act are "to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection." (Civ. Code, section 1760; ...) Even on the most fundamental level, it is plain the construction ... which would permit trial courts to deny certification based upon nonenumerated criteria, would counteract the legislation's underlying purposes because it would make it more difficult for consumers to secure the protection intended by the act.
Moreover, the effectiveness of the act would be significantly diminished by a permissive construction of the word "shall" in section 1781.
Hogya v. Sup.Ct. (1977) 75 Cal.App.3d 122, 135 (emphasis added)
"In interpreting any statute, "[t]he object to be achieved and the evil to be prevented are prime considerations in determining legislative intent." (People v. Jeffers, supra, 43 Cal.3d 984 , 997, citing Judson Steel Corp. v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 658, 669 ) A court should arrive at an interpretation that promotes the general purpose and policy of the law, not one that defeats it." (Harry Carian Sales v. Agricultural Labor Relations Bd. (1985) 39 Cal.3d 209, 223 , quoting People v. Centr-O-Mart (1950) 34 Cal.2d 702, 704 )
Walnut Creek Manor v. FEHC (1991) 54 Cal.3d 245, 285 (underlining added)
From this we learn first that a court makes the interpretation, not the agency, and that the interpretation should be such as to promote the purposes of the act, not defeat them, as DMHC's actions have done. The purpose of enforcing the rules allowing patients to see the records adduced against their claims, and to require DMHC to justify its decisions, is to assure that patients obtain a fair hearing from DMHC and IMR. To state that such enforcement is optional is to destroy the very purpose of the Act and of DMHC itself, and is an abuse of discretion.
5.5 - There are NO "gaps" in the statute to be filled by agency "interpretation"
In Chevron v. NRDC (1984) 467 U.S. 837, 842 the U.S. Supreme Court described a two-step procedure for analyzing such questions. First, the court determines whether the Legislative branch "has spoken to the precise question at issue". If this is the case, neither the agency nor the courts can alter this pronouncement. However, if the legislative branch was silent or ambiguous on the issue, then the court will uphold the agency's decision, but only if it is reasonable in light of its statutory mandate.
Thus, courts have allowed agencies to promulgate necessary policies where the relevant statutes had "gaps", i.e., failed to address some issue. But, that is certainly not the case here, where the Legislature has unambiguously and elaborately commanded certain actions, and DMHC has disobeyed, repudiated, and nullified those commands. There is no "gap", except in compliance with the clearly expressed desire of the Legislature.
5.6 - The Public Duty involved makes compliance Mandatory
When a public duty is involved, even "may" may be mandatory. A 1978 Act of Congress said "the Secretary [of Agriculture] may permit" deferral of farm loans, but he took no steps to initiate such a program. In Allison v. Block (1983) 723 F.2d 631, the 8th Circuit held that his failure to formally establish a debt relief program violated the statute.
[W]here the purpose of the law is to cloth [sic] public officers with power to be exercised for the benefit of third persons, or for the public at large--that is, where the public interest or private right requires that a thing should be done--then the language, though permissive in form, is peremptory." (underlining added)
(County of Los Angeles v. State, 64 Cal.App. 290, 295 )
"Words permissive in form, when a public duty is involved, are considered as mandatory."(underlining added)
(Uhl v. Badaracco, 199 Cal. 270, 282 )
"Where persons or the public have an interest in having an act done by a public body 'may' in a statute means 'must.' "
(Harless v. Carter (1954) 42 Cal.2d 352, 356)(underlining added)
"Power and authority conferred upon a public officer to perform an act not discretionary, in which the public or third parties have an interest, make the exercise of the power obligatory whenever a proper case for its exercise is presented, and mandamus will issue even to the chief executive of the state to compel the exercise of a ministerial function defined by statute." Elliott v. Pardee, 149 Cal. 516, 520
(Holman v. Warren (1948) 32 Cal.2d 351, 354)(underlining added)
If a public duty, such as DMHC's duty to enforce the KKA for the benefit of aggrieved enrollees, makes even grammatically permissive language mandatory, how much stronger must be the presumption that in such cases, clearly grammatically mandatory commands must be interpreted as mandatory?
5.7 - The possibly of "grievous loss" from erroneous decisions makes careful adjudication mandatory
As pointed out by Justice Brenner:
"The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be "condemned to suffer grievous loss" [citation], and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication."
(Goldberg v. Kelly (1970) 397 US 254, 262-263)
DMHC's refusal to implement the safeguards of the KKA enables health plans to avoid providing needed treatment to their enrollees, to the detriment of their health, and therefore possibly leading to great medical expense or death. These are far more grievous losses than even that considered in Goldberg, and should trigger the highest level of care, rather than DMHC's arbitrary, capricious, callous, and careless procedure, for which it has presented no countervailing governmental interest.
5.8 - DMHC has no particular "Agency Expertise" that would conduce a Court to afford them deference
The issues in this case are purely matters of statutory interpretation, in which DMHC is certainly less expert than the courts. Indeed, it is not clear what expertise DMHC possesses at all. They have no particular expertise based on technical knowledge or experience to which a court should defer. Medical matters are referred out, and its staff is largely composed of members of that agency whose handling of patient complaints was so intolerable, that the Legislature took the responsibility away from it, and created DMHC. The decisions complained of herein owe far more to the anti-consumer "corporate culture" of the old Dept. of Corporations than they do to the new KKA provisions designed to exorcise that culture. DMHC has been operating for less than two years, and is far more in need of direction from this court, than deference to its immature stumbling errors and the bad old habits of its discredited predecessor.
5.9 - DMHC has offered no independent justification of its nullification, beyond mere assertion of its discretion
DMHC has given no reasons, rational or otherwise, for its decision to ignore the cited code sections, much less any suggestion of how that decision advances the purpose of the Act, of "ensuring that ... enrollees have their grievances expeditiously and thoroughly reviewed by the department."
"requiring an administrative agency to articulate publicly its reasons for adopting a particular order, rule, regulation, or policy induces agency action that is reasonable, rather than arbitrary, capricious, or lacking in evidentiary support ... "
"requiring an agency to publicly justify its orders, rules, regulations, and policies stimulates public confidence in agency action by promoting both the reality and the appearance of rational decisionmaking in government." (underlining added)
California Hotel & Motel Assn. v. Industrial Welfare Com. (1979) 25 Cal. 3d 200, 210-211
"[the agency's] denial of a petition ... must be based on articulated reasons which have a rational connection to the purpose of the ... act, and ... supported by substantial evidence ..."
McBail v. Solano Cty. LAFC (1998) 62 Cal.4th 1223
In a case where "Counsel was unable to give a persuasive reason for the policy, and ultimately relied simply on the commissioner's discretionary powers", a unanimous Supreme Court recently held the decision to be an abuse of discretion. (Cuadra v. Millan (1998) 17 Cal.4th 855)
DMHC's stance rejects law, equity, and reason, and relies only on the pure assertion of arbitrary power.
5.10 - No one should be a judge in his own cause.
The code sections in question prescribe how DMHC itself must act, not how the regulated entities must act. While DMHC might have some discretion to interpret the latter sort of mandate, it certainly should not have the power to nullify the commands prescribing its own acts.
"... control may not be allocated to one of the very organs whose acts are to be controlled."
Hans Kelsen, "Wer soll der Hüter der Verfassung sein?", (1930/31) 6 Die Justiz 576, 577. [presciently commenting on Article 48 of the Weimar Constitution, ultimately used by Chancellor Hitler to gain total control of the state.]
While it may seem histrionic to compare DMHC with the Weimar Republic, politics is self-similar at all scales. The same indolence, incompetence, and abuse of power seen in national politics may be observed in a condominium owners association, and political structures of all sizes in between. DMHC is no exception. While these tendencies in DMHC pose no threat to state sovereignty, they can seriously injure those it was created to serve.
6 - DMHC HAS ENGAGED IN IMPROPER RULE-MAKING
DMHC claims that the courts should defer to its nullification of the statutes it has the responsibility for enforcing, but the department has not made a formal rule of nullification.
There has been no notice of rule-making, publication of proposed rules, public hearings, submission to the Office of Administrative Law, or publication of final rules as required by Gov. Code §§11340 et seq, to support these ad hoc rules against record disclosure and written decisions. It is unclear who made the decisions, or how, but they were disclosed only when appellants asked that the laws be enforced, and received letters stating that the department would not enforce them.
"[n]o state agency shall issue, utilize, enforce, or attempt to enforce any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a regulation ... , unless [it] has been adopted as a regulation and filed with the Secretary of State pursuant to this chapter."
Gov. Code §11340.5(a) (underlines added)
DMHC has argued, however, that its decisions to nullify sections of the Act are not regulations, so not subject to the APA. It would be an odd principle which would deny deference to a formal regulation, but afford it to an anonymous ad hoc fiat. However, GC §11342.600 demonstrates otherwise:
""Regulation" means every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of [same] adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure."
Gov. Code 11342.600 (underlining added)
See also Tidewater Marine Western v. Bradshaw (1996) 14 Cal. 4th 557, 575
Exemptions to formal rule-making are found only in "limited situations where substantial rights are not at stake."(American Hospital Ass'n v. Bowen (1987) 843 F.2d 1037, 1045. Here, not only the patient's loss of the right of due process, but massive medical costs, the patient's health, and even life itself are at stake, "substantial rights" indeed.
The U.S. Supreme Court has also determined that administrative opinions or interpretations that are not contained in formal regulations, or are otherwise not the product of a formal rule-making and notice and comment process, are not accorded Chevron-style deference, but are entitled to respect only on the basis of their merits. (Christensen v. Harris County (2000) 529 U.S. 576, 587 )
Our Supreme Court has reached the same conclusion:
"[the board's manual] does not govern or guide us here because it is an invalid rule ... because it was not duly promulgated and has not been duly published in compliance with chapter 4.5 of the California Administrative Practices Act." (underline added)
Armistead v. State Personnel Board (1978) 22 Cal 3d 198, 201
It is just because of the lack of public notice and comment that "interpretive rules" which have not gone through the formal rule-making process, are subject to full judicial scrutiny, without deference.
No person should be adversely affected by an unpublished ad hoc rule, applied or ignored at the whim of the department. That is the very definition of "arbitrary and capricious".
7 - EVERY REASON GIVEN FOR SUSTAINING THE FINAL DEMURRER WAS ERRONEOUS, SO IT SHOULD BE REVERSED
"On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled.
The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.
The judgment must be affirmed "if any one of the several grounds of demurrer is well taken."
However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory.
And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment." (underlining added)
Aubry v. Tri-Cities Hosp. Dist. (1992) 2 Cal 4th 962, 966-967 (citations omitted)
The petition was dismissed on demurrer without leave to amend, on the sole theory that the acts whose omission was complained of were discretionary. Even if this were true, which appellants dispute, the dismissal was reversible error, since the court failed to make any finding on the material issues of failure to exercise discretion and abuse of discretion, viable causes of action even on the theory that the acts were discretionary. Appellants thus ask that the demurrer and dismissal be reversed, as they constitute an abuse of discretion.
The arguments cited below are those upon which the order of April 5, 2002 sustaining the demurrer and dismissal was based. Appellant holds that they are all erroneous, but this could not be argued at the oral hearing, as there was no tentative order, and the court did not raise these or any other issues at the hearing.
The court below never discovered whether the defects it claimed to have found could have been cured by petitioners' proposed amendment (App. p. 78) which was calendared for the same hearing, because it held that, since it sustained the demurrer without leave to amend, the petition to amend was moot! Here are the arguments which were presented in the demurrer sustention order, slightly restated for clarity:
Re disclosure of Records:
7.1 - "HMO had the obligation to provide the records, not DMHC, and DMHC has no obligation to enforce the rule." (App. p.116, l.19))
The court here referred only to the requirements of HSC §1374.30 et seq. No mention was made of DMHC's obligations to provide its OWN records under the Public Records Act (GC §6250 et seq), or its constitutional due process obligation to allow parties to see and rebut adverse evidence. No consideration was given to the Public Duty or Grievous Need rules as a basis for DMHC's obligation.
7.2 - "Enrollee has numerous other statutory protections." (App. p.116, l.24)
There was no suggestion as to what these other "statutory protections" were, or how they would be helpful, since there is no private cause of action in the act and no other state agency has enforcement responsibility. The "other protections" listed in the act are those the court ruled that DMHC didn't have to enforce.
7.3 - "The Legislature didn't intend to disturb DMHC's discretionary enforcement powers, per WOE." (App. p.117, l.11)
The court gave no indication of why appellant's lengthy demonstration of the inapplicability of WOE was wrong, nor mentioned the multiple other reasons presented controverting DMHC's discretion in these matters. Appellants urge that this decision was simply wrong as a matter of law, and should be reviewed by this court de novo.
7.4 - "The Information Practices Act doesn't apply, since DMHC is not the repository of the medical records." (App. p.117, l.15)
The IPA requires an agency to disclose ALL the records in its possession relating to the requestor, regardless of their origin. It says nothing about whether the entity is a "repository".
"The agency shall permit the individual ... to inspect
all the personal information in the record and have an exact copy made ..."
And in cases not going to IMR, the records have indeed been delivered to DMHC directly, not to an IMR organization, so DMHC is the "repository", for what it's worth. But disclosure of these records has also been consistently denied by DMHC.
7.5 - "DMHC is not statutorily mandated to ensure sharing or accuracy of records." (App. p.117, p.16)
Appellants refer once again to the due process obligations of an adjudicator, and the statutory mandates of the IPA and PRA. This decision is simply wrong as a matter of law.
Re §1368(b)(5) Final Notices:
7.6 - "Plaintiffs assert that DMHC must provide more than required by statute." (App. p.117, p.19)
This is completely factually false, as a simple reading of the prayer of the petitions will demonstrate. Indeed, it merely echoes a false assertion made in respondents' pleadings, which had been conclusively rebutted in appellants' responses. All appellants EVER asked for is that DMHC comply with the law AS WRITTEN!
7.7 - "Allegations fail to show violation of any mandatory duty by DMHC." (App. p.117, l.23)
This reflects the court's erroneous view that in spite of unambiguously mandatory statutory language, state agencies have no mandatory duties, and appellants ask this court to review that holding de novo.
7.8 - "HSC 1368(b)(5) requires notice of final disposition of initial complaint filed, not subsequent actions "tangentially related" to the initial complaint." (App. p.117, l.26)
This is another echoing of another of DMHC's egregious mischaracterizations of the law, which an independent reading of the statute will show to be entirely indefensible. Allow us to quote the statute once again:
"The department shall send a written notice of the final disposition of the grievance, and the reasons therefor, to the subscriber ... within 30 calendar days of receipt of the request for review unless the director, in his or her discretion, determines that additional time is reasonably necessary to fully and fairly evaluate the relevant grievance."
Nowhere in the law is there anything about "initial complaint", or "subsequent actions". DMHC is required to send a notice and explanation of the final disposition of the grievance, at a specified time and in a specified form, and it has not done so in any of appellants' cases. And DMHC has not complied with even this distorted interpretation of §1368(b)(5)!
Appellants submit that the demurrer order and the dismissal based upon it are factually and legally erroneous throughout, and must be reversed.
8 - CAUSES OF ACTION
In the court below Appellants asked for relief from the above noted violations by one of the following three remedies:
8.1 - Declarative Relief under CCP §1060
"Any person ... who desires a declaration of his or her rights or duties with respect to another ... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an ... action ... in the superior court ... for a declaration of his or her rights and duties ... either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time..." .
Code of Civil Procedure §1060.
The actual controversy here is clear. Appellants say that DMHC must adhere to statutes requiring it to ensure that complainants receive copies of adversarial filings and have an opportunity to rebut them, and to provide legally adequate final summaries of closed complaints. DMHC has established a policy that it doesn’t have to do these things, and it has acted on that policy to deny plaintiffs the protections and benefits intended for them by the Legislature.
In addition, these improper policies have been implemented by DMHC without satisfying the rules for regulatory rule-making laid out in Government Code §11340 et seq. This is precisely the sort of "overarching, quasi-legislative policy set by an administrative agency" which was held suitable for declaratory relief in Californians for Native Salmon & Steelhead Assn. v. Department of Forestry (1990) 221 Cal. App. 3d 1419. In the absence of such declaratory relief, every complainant who goes to DMHC for help in a dispute with an HMO, will be denied the benefits available under KKA and be compelled to sue DMHC or give up these benefits. These issues will have to be litigated over and over, resulting in a multiplicity of suits.
As DMHC fails to adequately implement the non-judicial remedies provided by the Knox-Keene Act, complainants will be forced more often to resort to lawsuits against their HMOs, further adding to the burden on the courts. Judicial efficiency therefore also requires that this court declare once and for all what DMHC’s legal responsibilities are with regard to these issues.
8.2 - Writ of Mandate under CCP §1085
CCP §1085. (a) A writ of mandate may be issued by any court ... to any ... board, or person, to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station ...
CCP §1086. The writ must be issued in all cases where there is not a plain, speedy, and adequate remedy, in the ordinary course of law...
The plaintiffs in this case are members of the class for whose benefit the Knox-Keene Act was passed, and they have verified the initial petition. DMHC is the agency created by that act for the only purpose of carrying out its mandates. By 1) accepting false, misleading, and/or materially incomplete statements from HMOs, as a basis for its determinations in complaints filed by health care consumers; 2) failing to provide complainants with an opportunity to rebut the material supplied by each plan, upon which DMHC and/or the IMRO relies in making its determinations; and 3) failing to give full, reasoned explanations for their refusal to help complainants, DMHC flouts the rule of law and deprives complainants of the ability to obtain needed medical benefits, subjecting them to pain, ill health, and shortened life expectancy, as well as significant financial loss. There is no remedy at law for this denial of their rights by a state agency. These duties required of DMHC by law are clear, present, ministerial, and non-discretionary.
If this court should find any of DMHC’s actions invested with discretion, appellants allege that, in failing to obey the indisputable instructions of the law, DMHC acted arbitrarily, capriciously, and without due regard for appellants’ clear, present, and beneficial rights and that these omissions prejudiced them. (Huntington Park Redevelopment Agency v. Duncan (1983) 142 Cal.App.3d 17, 25.)
"While ordinarily, mandamus may not be available to compel the exercise by a court or officer of the discretion possessed by them in a particular manner, or to reach a particular result, it does lie to command the exercise of discretion--to compel some action upon the subject involved.[citations]"
Holman v. Warren (1948) 32 Cal2d 351, 355
"... mandate ... will lie to correct abuses of discretion."
Helena F. v. West Contra Costa School Dist. (1996) 49 Cal.App.4th 1793, 1799
A recent case, Morris v. Harper (2001) 94 Cal.App.4th 52, is quite analogous to this one. There the court determined that the agency director had no intention of complying with the law and issued a writ of mandate. In this case, Cavanagh's letter, multiple other documents, and even DMHC's spirited opposition to this petition, all demonstrate that DMHC also has no intention of complying with the law voluntarily and, without action by this court, will proceed in the future as it has in the past. Morris held that, though the director had the discretion whether to operate treatment centers, having done so, he had to come into compliance with the laws covering treatment centers. In this case, once DMHC accepts a grievance, it must also come into compliance with the rules laid down by the legislature for handling such grievances.
8.3 - Injunctive Relief
DMHC’s refusal to implement the above-mentioned portions of the Knox-Keene Act has deprived and continues to deprive appellants of the protections and benefits the legislature intended for those in their situation. A suit at law for damages is incapable of remedying their injury. If a writ of mandate is not approved by this court, the only remedy available is an injunction directing DMHC to remedy the derelictions noted above.
In addition to these specific enforcement mechanisms, Appellants also asked the court to appoint CCHCC or another appropriate individual or entity, as a Special Master to monitor DMHC’s compliance with the Court’s orders and for costs of suit, and reasonable attorney fees as allowed by Code of Civil Procedure §1021.5.
Appellants ask this court to overturn the demurrer and dismissal of the court below, and order whichever of the three remedies it should determine to be best. Since there are no factual issues, no remand is necessary.
Just nine years ago, this very court had to remind the then State Controller (one Gray Davis) that he did not have the discretion to refuse to obey the law. (Tirapelle v. Davis (1993) 20 Cal.App.4th 1317) It is unfortunate that his then Deputy Controller (one Daniel Zingale) apparently did not learn from that experience. We ask this court to reinforce the lesson.
Harvey S. Frey M.D. Ph.D. Esq.