McMeans v. Scripps Health Inc.

Filed 7/24/02 (opn. on rehearing)

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

PAUL E. MCMEANS et al.,

D035486

Plaintiffs and Appellants,

(Super. Ct. No. 722004)

SCRIPPS HEALTH,

Defendant and Respondent.

APPEAL from a judgment of the Superior Court of San Diego County, Thomas R.

Murphy, Judge. Affirmed in part and reversed in part.

Blumenthal, Ostroff & Markham, Sheldon A. Ostroff, David R. Markham and

Michael D. Marchesini for Plaintiffs and Appellants.

Friestad & Giles and Deborah Giles for Defendant and Respondent.

Manatt, Phelps & Phillips, Barry S. Landsberg and Harvey L. Rochman for

Catholic Healthcare West as Amicus Curiae on behalf of Defendant and Respondent.

Paul E. McMeans, Joseph P. Denny, and Mary Ann Shaul, as class representatives

(Class members), appeal from a judgment granting summary judgment in favor of

Scripps Health, Inc. (Scripps) and Medical Liability Recoveries, Inc. (MLR) and denying

their motion for summary adjudication. 1 The Class members are patients who were

treated at hospitals operated by Scripps for injuries caused by third parties, who the Class

members had sued. The Class members were insured by medical insurance carriers,

some of whom had entered into contracts with Scripps that specified fixed charges agreed

to in advance for covered services. Class members and/or their medical insurance

carriers paid Scripps for services provided to Class members. MLR on behalf of Scripps

then placed liens on the judgments or settlements Class members received from the third

parties or their liability insurance carriers under California’s Hospital Lien Act (HLA),

Civil Code sections 3045.1 through 3045.6.2 In each case, the liens were greater than the

amounts Scripps had been paid by the Class members or their medical insurance carriers.

Class members filed this class action against Scripps on July 1, 1998. The

operative complaint is the third amended complaint, filed on October 18, 1999, which

contains causes of action for unfair business practices, violation of the consumer legal

remedies act, trespass to chattels, breach of contract, negligence, accounting, unjust

enrichment, declaratory relief, mandatory injunction and prohibitory injunction.

1
MLR is in bankruptcy. In accordance with the court’s orders of June 11, 2001 and
July 24, 2002, the appeal is stayed as to MLR under section 362 of the Bankruptcy Code
(11 U.S.C. § 362) and we sever MLR from the appeal.

All further statutory references are to the Civil Code unless otherwise specified.

Class members contend the court erred in granting summary judgment for Scripps

because Scripps placed section 3045.1 liens on Class members’ recovery although Class

members owed no debts to Scripps. Class members also contend the court should have

granted their motion for summary adjudication of Scripps’s affirmative defense that it

was privileged to assert the HLA liens under section 47, subdivision (b)(2) and of their

cause of action for declaratory relief. We reverse the order granting summary judgment

in favor of Scripps. We affirm the court’s denial of Class members’ motion for summary

adjudication of Scripps affirmative defense of the section 47, subdivision (b)(2) privilege.

We affirm in part and reverse in part the court’s denial of Class members’ motion for

summary adjudication of their cause of action for declaratory relief.

FACTUAL AND PROCEDURAL HISTORY

In November 1996 McMeans was injured in an automobile accident caused by an

uninsured third party and was treated at Scripps Mercy Hospital. As a result of his

accident, McMeans suffered pain in his ribs that interrupted his sleep and prevented him

from sitting, standing, driving and bending. Because he could not work for a period, he

sustained lost income of $6,250. McMeans settled his claim for $35,500, the uninsured

motorist limits of the Farmers Insurance policy that covered the car in which McMeans

was a passenger.

At that time of his treatment, McMeans was insured under a preferred medical

provider insurance plan issued by Aetna Life Insurance Company (Aetna) and Scripps

Mercy Hospital was a participating health provider under the Aetna plan. Although

Aetna paid Scripps Aetna’s share of the contract rate for McMeans’s treatment and

Farmers Insurance paid McMeans’s share of the contract rate, MLR asserted a lien on

behalf of Scripps in the amount of $4,298.86 against McMeans’s settlement.

In June 1998 Shaul was injured in an automobile accident and underwent surgery

at Scripps Memorial Hospital, consisting of open reduction internal fixation of her medial

malleolus and right talus, and bone grafting of her right talus. As a result, she was totally

disabled for about six months and lost income of about $60,000. She continues to have

chronic right leg and ankle pain, which may require additional medical treatment. Shaul

has incurred out-of-pocket expenses of about $5,000 for therapy, orthotic devices, and

chiropractic treatment.

In June 1998 Shaul was insured under Sharp Health Plan, a managed care plan,

which had no contract with Scripps Memorial Hospital. Sharp Health Plan paid Scripps

for Shaul’s treatment and Shaul paid a $100 copayment. Shaul settled with the third party

tortfeasor for $100,000, the liability insurance policy limits of the tortfeasor. MLR filed

a lien on behalf of Scripps in the amount of $6,168.17 “upon any damages which a claim

of action has been brought or will be brought.”

In April 1996 Denny was injured in an automobile accident and sustained multiple

head, neck, shoulder and knee injuries. He later had neck surgery at Scripps Memorial

Hospital, which consisted of an anterior cervical discectomy and fusion. Denny was

disabled for several months, resulting in net lost wages in excess of $4,000. As a result

of his injuries, Denny continues to suffer limited movement in his neck and chronic pain.

He can no longer participate in activities he used to enjoy, such as hiking, bicycling, and

physical education with his students. Denny received $100,000 in settlement.

At the time of surgery, Denny was insured under the CaliforniaCare HMO plan of

Blue Cross of California and Scripps Memorial Hospital was a participating health

provider under that plan. Blue Cross paid Scripps for its services and Denny paid the

applicable copayments or deductibles. Nine days after Denny’s settlement, MLR filed a

lien on behalf of Scripps for $13,790.38 on Denny’s recovery from the tortfeasor.

In April 1999 the trial court certified Class members’ lawsuit against Scripps as a

class action “to include as class plaintiffs all persons who: [1] were injured in accidents

and thereafter treated at hospitals operated by ScrippsHealth (‘Scripps’); [2] were insured

under individual or group medical insurance plans, including but not limited to Health

Maintenance Organization plans, Preferred Provider Organization plans and /or Managed

Care plans; [3] whose medical insurers have contracted with Scripps in which Scripps

agreed to provide covered services for the insurer’s policyholders/beneficiaries at

negotiated discounted rates; or alternatively, pursuant to the Knox-Keene Health Care

Service Plan Act of 1975, the payments received by Scripps based on pre-determined

rates from the patient’s insurer (plus any applicable co-pay or deductible) constitute full

payment; [4] whose bills at such negotiated discounted rates or pre-determined rates have

been paid; and [5] against whom Scripps within the last four years either directly, or

through the action of Medical Liability Recoveries, Inc. or any other agent of Scripps, has

asserted a lien under Civil Code section 3045.1 demanding payment of the difference

between the negotiated discounted rate or pre-determined rate and Scripps’ ordinary full

charge for the covered service.”

On May 21, the court denied Scripps’s motion for judgment on the pleadings,

which asserted that each cause of action was barred by the litigation privilege. (§ 47,

subd. (b)(2).) On September 2, the court denied a renewed motion for judgment on the

pleadings.

The parties then agreed to file cross-motions for summary adjudication and

summary judgment. Class members filed a motion for summary adjudication of Scripps’s

thirteenth affirmative defense, the privilege conferred under section 47, subdivision

(b)(2), and the eighth cause of action for declaratory relief. Scripps filed a motion for

summary judgment. On February 23, 2000, the court granted Scripps’s motion for

summary judgment and denied Class members’ motion for summary adjudication.

DISCUSSION

I. Summary Judgment and Summary Adjudication

Summary judgment is granted when there is no triable issue as to any material fact

and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,

§ 437c, subd. c.) We review de novo the trial court’s decision to grant summary

judgment and are not bound by the trial court’s stated reasons or rationales. (Hersant v.

Department of Social Services (1997) 57 Cal.App.4th 997, 1001.) Further, we review

issues of statutory interpretation de novo. (Heavenly Valley v. El Dorado County Bd. of

Equalization (2000) 84 Cal.App.4th 1323, 1334.) The appellate rules applicable to

review of summary adjudication are the same as applicable to summary judgment.

II. Hospital Lien Act (HLA)

Section 3045.1 provides: “Every person, partnership, association, corporation,

public entity, or other institution or body maintaining a hospital licensed under the laws

of this state which furnishes emergency and ongoing medical or other services to any

person injured by reason of an accident or negligent or other wrongful act . . . , shall, if

the person has a claim against another for damages on account of his or her injuries, have

a lien upon the damages recovered, or to be recovered, by the person . . . to the extent of

the amount of the reasonable and necessary charges of the hospital . . . , in which services

are provided for the treatment, care, and maintenance of the person in the hospital or

health facility affiliated with the hospital resulting from that accident or negligent or

other wrongful act.” Section 3045.1 creates a “statutory nonpossessory lien . . . in favor

of a hospital against third persons liable for the patient’s injuries.” ( Mercy Hospital &

Medical Center v. Farmers Ins. Group of Companies (1997) 15 Cal.4th 213, 217

(Mercy ).) The lien “compensates a hospital for providing medical services to an injured

person by giving the hospital a direct right to a certain percentage of specific property,

i.e., a judgment, compromise, or settlement, otherwise accruing to that person .” ( Ibid.,

italics added.)

Scripps contends section 3045.1 creates a direct obligation between the tortfeasor

and the hospital in the amount of the hospital’s reasonable charges and the amount of its

lien is not based on or limited by the injured patient’s debt to the hospital. Scripps bases

its contention on section 3045.3, which requires the hospital to give notice of its lien to

only the tortfeasor and the tortfeasor’s insurer; section 3045.4, which requires the

tortfeasor to pay the hospital directly; and section 3045.5, which gives the hospital a

cause of action to enforce its lien against the tortfeasor, not against the injured patient.

However, these provisions define who shall pay the hospital, but do not define from

whose property the payment is made.

Class members contend they and/or t heir medical insurance carriers have paid

Scripps in full for its services and, by placing a lien on their recoveries, Scripps seeks

amounts greater than the amounts Scripps agreed to accept for its services. In addressing

issues raised by Class members, we initially note, notwithstanding the class certification,

the contracts between Class members and their medical insurance carriers and between

Scripps and the medical insurance carriers differ substantially. Because of the different

contract provisions we conclude Scripps wrongfully placed a lien on the recovery of one

of the class representatives but rightfully placed a lien on the recovery of the other two

class representatives.

The issues raised in this appeal were recently addressed in Nishihama v. City &

County of San Francisco (2001) 93 Cal.App.4th 298, 306-309 ( Nishihama ). We find the

reasoning of Nishihama compelling and elect to follow it:

“Even if the HLA contemplated an independent right in the hospital, the extent of

that right would be defined by any contract between the injured party or her insurer and

the health care provider. Civil Code section 3045.4 accordingly provides that the third

party ‘shall be liable to the [health care provider] for the amount of its lien claimed in the

notice which the hospital was entitled to receive as payment for the medical care and

services rendered to the injured person.’ (Italics added.) The amount that a hospital is

entitled to receive as payment necessarily turns on any agreement it has with the injured

person or the injured person’s insurer.” (Nishihama, supra, 93 Cal.App.4th at pp. 307-

308.)

The patient’s debt to the hospital is the foundation for the hospital’s right to a lien.

(Nishihama, supra, 93 Cal.App.4th at p. 308.) The “reasonable and necessary charges,”

then, are the amounts charged to the patient or the patient’s insurance carrier. The HLA

does not give hospitals a cause of action against tortfeasors; it allows hospitals to place a

lien on the patient’s recovery from the tortfeasor. The amount of the lien is the

“reasonable and necessary charges” for the patient’s treatment. (§ 3045.1.) However, if

the agreed charges have been paid, the hospital has no amount, reasonable or otherwise, it

may seek from a third-party tortfeasor.

Although Scripps contends it seeks payment from tortfeasors, the payments

ultimately come from the Class members. Under California law, the amount a personal

injury plaintiff can recover for medical services is limited to the amount that has been

paid or incurred for those services, even if that amount is less than the market rate or

reasonable value of the services. (Hanif v. Housing Authority (1988) 200 Cal.App.3d

635, 641.)

In the cases involved in Class members’ class action, the amounts Class members

can recover from the tortfeasors are based on Class members’ medical insurance contracts

and the contracts those insurance carriers negotiated with Scripps. If Scripps’s liens

exceed these amounts, then Scripps collects more from the Class members’ judgments or

settlements than the Class members are legally entitled to recover from the tortfeasor for

medical expenses. In effect, the amount Scripps collects in excess of its agreed rate is

funded by a portion of Class members’ judgments or settlements attributable to lost wages

or to pain and suffering. We conclude Scripps’s “lien rights do not extend beyond the

amount it agreed to receive from [Class members’ medical insurance carriers] as payment

in full for services provided to [Class members].” (Nishihama, supra, 93 Cal.App.4th at

p. 307.)

We also reject Scripps’s contention that the legislative history of section 3040,

enacted in September 2000, authorizes it to place a section 3045.1 lien for its usual and

customary charges regardless of its contractual arrangements. Section 3040 limits the

lien rights of medical providers to the amount they actually paid for the health care, but

specifically exempts hospitals pursuing section 3045.1 liens. (§ 3040, subd. (g)(3).) The

Consumer Attorneys of California argued to the Legislature that section 3040 should

apply to hospital liens and provided the Legislature with a copy of Satsky v. United States

of America (S.D.Texas 1998) 993 F.Supp. 1027, 1029 (holding that a hospital could not

place a lien on a patient’s recovery under a Texas statute similar to section 3045.1

because the statute “was clearly not intended to overcompensate hospitals that accept

patients who do have the ability to pay, nor to provide a windfall for hospitals who feel

aggrieved by the circumscription of hospital charges by insurance plans”).

The fact that section 3040 places no express limit on a hospital’s lien rights is not

determinative of whether those lien rights were already limited under the HLA. Further,

subsequent legislation is, at best, an unreliable gauge of legislative intent. (United States

v. Price (1960) 361 U.S. 304, 312 [recognizing that “the views of a subsequent Congress

form a hazardous basis for inferring the intent of an earlier one”].) For similar reasons,

we do not place much weight on other statutory liens that purportedly exist in the absence

of an underlying debt. The unique nature of a hospital lien under the HLA makes those

comparisons questionable. We conclude the amount of an HLA lien may not exceed the

amount the patient is indebted to the hospital.

III. Insurance Contracts

The provisions of Class members’ medical insurance contracts and the contracts

Scripps entered into with those medical insurance carriers determine whether the HLA

liens are authorized. Based on the contracts of the three class representatives, we

conclude Scripps was not entitled to place a lien on McMeans’s recovery, but was entitled

to place liens on the recoveries of Shaul and Denny.

A. McMeans

The Aetna insurance plan that cove red McMeans provides that if a third party is

liable for a patient’s injury, Aetna shall be subrogated to the patient’s recovery to the

extent of the benefits Aetna paid. McMeans was treated at Scripps Mercy Hospital. The

contract between Scripps Mercy Hospital and Aetna provides in part: “In no event . . .

shall any Member be liable to Hospital for any sums owed to Hospital by the applicable

Payor. In addition, neither Hospital nor its agents, trustees, or assignees shall maintain

any action at law against a Member to collect sums owed by the applicable Payor;

provided, however, that Hospital may collect from Members co-payments, coinsurance or

deductibles for Covered Services, or amounts due for non-Covered Services. Amounts

for non-Covered Services may be charged at Hospital’s usual and customary charges.”

This agreement provides that Scripps may not collect payment from patients insured by

Aetna, other than copayments or deductibles, unless the service provided to the patient is

not covered under the insurance agreement. This agreement allows Scripps to bill at its

usual and customary rate only for services not covered under the patient’s insurance

agreement. Because the services Scripps provided to McMeans were covered under

McMeans’ medical insurance policy with Aetna, Scripps was not entitled to place a lien

for its reasonable and necessary charges on McMeans’s recovery in excess of the agreed

amount.

We are not persuaded by Scripps’s contention the services McMeans received

were not covered because the Aetna insurance policy provides that Aetna has the right to

recover the benefits Aetna paid from third party tortfeasors. This portion of the policy

does not provide that those services are not covered by the agreement; it merely provides

that Aetna will be reimbursed from any future recovery.

Scripps also contends it may collect its reasonable and necessary fees from a third

party tortfeasor under the “Coordination of Benefits” (COB) section of its agreement with

Aetna, which provides: “Hospital shall be entitled to all COB recoveries relating to

Covered Hospital Services. Hospital shall make a reasonable effort to seek

reimbursement for Covered Hospital Services under other third party coverages when

applicable. . . . For per diem or discount off charges payments, in the event that Payor is

the secondary carrier under the coordination of benefits rules, Payor shall be required to

pay Hospital the difference between Hospital’s full customary charges and the amount

collected by Hospital from third party payors, but in no event to exceed the amount the

Payor is required to pay if it were the primary carrier.”

We are not persuaded by this contention. Coordination of benefits is a term used

when there is duplicate medical insurance coverage. ( Kaiser Foundation Health Plan,

Inc. v. Lifeguard, Inc. (1993) 18 Cal.App.4th 1753, 1757.) The term “coverage” is

normally used to refer to insurance coverage. For instance, Insurance Code section

10270.98 states in part: “Group disability policies may provide, among other things, that

the benefits payable thereunder are subject to reduction if the individual insured has any

other coverage (other than individual policies or contracts) providing hospital, surgical or

medical benefits, whether on an indemnity basis or a provision of service basis, resulting

in such insured being eligible for more than 100 percent of the covered expenses.”

(Italics added.) The reference to “coverage” is a reference to other insurance coverage.

A tort obligor does not provide insurance coverage. Additionally, although the contract

does not expressly define the term “third party payor,” it reasonably contemplates an

institutional payer, such as another insurance company or Medicare. (See Palumbo v.

Myers (1983) 149 Cal.App.3d 1020, 1030-1034 [a settling third party tortfeasor is not a

“third party payer” as the term is used in Welfare and Institutions Code section 14019.4].)

Therefore, this contract provision does not change our analysis.

Scripps relies on Swanson v. St. John’s Regional Medical Center (2002) 97

Cal.App.4th 245 ( Swanson). The court in Swanson held a hospital’s filing of liens is not

an unfair business practice, an issue not raised in this appeal. The Swanson court did not

address contracts between hospitals and insurers that might prohibit a lien. ( Id. at p. 251,

fn. 5.) Further, to the extent the analysis of the HLA in Swanson differs from the analysis

in Nishihama , we find the reasoning of Nishihama more compelling.

B. Shaul and Denny

Shaul was enrolled in the Sharp Choice plan, which had no contract with Scripps

Memorial Hospital. Therefore, Scripps may place an HLA lien on Shaul’s recovery for

the “reasonable cash value of the benefits” it provided to Shaul.

Denny’s CaliforniaCare contract with Blue Cross does not provide benefits for the

medical treatment of injuries caused by third parties. Under the heading

“Reimbursement for Acts of Third Parties,” the CaliforniaCare disclosure form states in

part: “No benefits will be provided under this plan for medical care for, or received in

connection with, any illness, injury, or condition for which a third party may be liable or

legally responsible by reasons of negligence, an intentional act or breach of any legal

obligation. But benefits will be provided under this plan subject to the following: [¶] 1.

CaliforniaCare and your medical group will automatically have a lien to the extent of

benefits provided, upon any recovery, whether by settlement, judgment or otherwise, that

you receive from the third party, the third party’s insurer, or the third party’s guarantor.

The lien will be for the reasonable cash value of the benefits provided by your medical

group or by us under this plan for the treatment of the illness disease, injury or condition

for which the third party is liable. . . .” (Original italics omitted; italics added.)

The Ninth Circuit interpreted a similar provision in another Blue Cross contract3

and held the following: “The contract excludes Blue Cross from liability for injuries

tortiously caused by third parties, and provides an exception for benefits which will be

advanced in anticipation of possible future recovery. Once recovery has been made, the

conditions of the exception no longer exist and the exclusion remains.” (Qualls v. Blue

Cross of California, supra, 22 F.3d at p. 845, original italics.) Under the CaliforniaCare

plan, Blue Cross does not provide benefits for medical care for injuries caused by a third

party tortfeasor; it merely advances money.

Because Denny was injured by a third party tortfeasor, his medical services were

not covered under the CaliforniaCare plan. Blue Cross merely advanced payment to

Scripps on Denny’s behalf. The contract between Scripps and Blue Cross does not limit

the amount Scripps may charge for the medical services it provided to Denny. Instead,

under the CaliforniaCare plan, Scripps may place a lien for the “reasonable cash value of

the benefits” it provided.

Although Scripps has shown it has a contractual right to place a lien on the

recoveries of Shaul and Denny, Scripps has not met its burden of proof that the liens are

3
“Blue Cross relied on Section Seven AA of the policy which excluded coverage
for ‘[a]ny illness, injury or other condition for which a third party may be liable or legally
responsible by reason of negligence, an intentional act or breach of any legal obligation
on the part of such third party. Nevertheless, Blue Cross will advance the benefits of this
Agreement to the Member subject to the following: . . . Blue Cross will automatically
have a lien, to the extent of benefits advanced, upon any recovery, whether by settlement,
judgment or otherwise, that the Member receives from the third party . . . .’ ” (Qualls v.
Blue Cross of California (9th Cir. 1994) 22 F.3d 839, 842.)

for “reasonable and necessary charges.” (§ 3045.1.) The reasonable value and necessity

of Scripps’s services are questions of fact. Although the amount paid or incurred for

hospital services is some evidence as to its value, we also require evidence of the value

and necessity of the professional services of the physicians and the hospital. (Guerra v.

Balestrieri (1954) 127 Cal.App.2d 511, 520; Harris v. Los Angeles Transit Lines (1952)

111 Cal.App.2d 593, 598 (Harris).) Typically, a physician testifies as to these issues.

(See Harris, supra, 111 Cal.App.2d at p. 598.) Scripps produced a declaration by Clelia

Ki-Ki Barbeau, president and CEO of MLS. She declared, “The lien asserted . . . is the

difference between the payment from the insurer and the actual reasonable and

customary charges incurred by the patient.” (Italics added.) Class members objected to

this evidence under Evidence Code section 702. The court did not rule on the objection.

Under Biljac Associates v. First Interstate Bank (1990) 218 Cal.App.3d 1410, 1420, we

“presume[] on appeal that a judge has not relied on irrelevant or incompetent evidence.”

Accordingly, we presume the court sustained the objection as to Barbeau’s use of the

word “reasonable.” Barbeau had no personal knowledge of the reasonable value of the

medical services Scripps provided to Shaul or to Denny. Further, Scripps introduced no

evidence that its services were necessary. Accordingly, Scripps has produced no

admissible evidence that the amount of the liens on the recoveries of Shaul and Denny

were reasonable. Therefore, summary adjudication of the amount of the debts of Shaul

and Denny to Scripps is inappropriate.

Because Scripps was not entitled to place a lien on McMeans’s recovery and

because there are triable issues of fact as to the reasonable value of the services Scripps

provided to Shaul and Denny, the court erred by granting summary judgment.

IV. Section 47, Subdivision (b)(2)

Class members contend the court erred by denying their motion for summary

adjudication of Scripps’s thirteenth affirmative defense, the privilege conferred by section

47, subdivision (b)(2). Class members contend this privilege does not apply because

Scripps’s actions were not communicative and were not connected to litigation.

The privilege conferred by section 47, subdivision (b)(2), bars all tort causes of

action, other than malicious prosecution, based on conduct protected by the privilege.

(Silberg v. Anderson (1990) 50 Cal.3d 205, 215-216.) The principal purpose of the

privilege is to afford litigants and witnesses freedom of access to the courts without fear

of being subsequently harassed by derivative tort actions. ( Id. at p. 213.) “[T]he

privilege applies to any communication (1) made in judicial or quasi-judicial

proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the

objects of the litigation; and (4) that has some connection or logical relation to the

action.” ( Id. at 212.) “Further, it applies to any publication required or permitted by law

in the course of a judicial proceeding to achieve the objects of the litigation, even though

the publication is made outside the courtroom and no function of the court or its officers

is involved.” ( Ibid.)

We are not persuaded by Class members’ contention that the filing of liens on

behalf of Scripps was not connected with any litigation. “If the publication has a

reasonable relation to the action and is permitted by law, the absolute privilege attaches.”

(Albertson v. Raboff (1956) 46 Cal.2d 375, 381.) A federal court held that a lien for the

treatment of a Medi-Cal patient filed under Welfare and Institutions Code section

14124.791 was sufficiently related to the claims in the Medi-Cal patient’s personal injury

action to support intervention as of right. ( Ghazarian v. Wheeler (C.D.Cal. 1997) 177

F.R.D. 482, 486-487.) The court relied upon two cases that allow intervention by the

holder of a protectable statutory lien interest because, in part, “this interest relates to a

cognizable legal interest in any monetary proceeds resulting from a settlement or

judgment in the action.” ( Id. at p. 487, relying upon Diaz v. Southern Drilling Corp (5th

Cir. 1970) 427 F.2d 1118, 1124 [tax lien] & McDonald v. E.J. Lavino Co., (5th Cir.

1970) 430 F.2d 1065, 1071 [insurance provider’s lien under workers compensation

law].) Similarly, a hospital filing a section 3045.1 lien has an interest to be adjudicated in

an injured person’s personal injury lawsuit because if the injured person does not prove

the third party’s liability, the hospital’s lien loses all value. The publication of the notice

of lien is reasonably related to the personal injury action because it informs the tortfeasor

and/or the tortfeasor’s insurance provider that the amount of the lien, unless a smaller

amount is prescribed by section 3045.4, must be paid directly to the hospital. Therefore,

Scripps’s liens were filed in connection with the tort actions brought by Class members.

We also are not persuaded by Class members’ contention that Scripps’s lien filings

are not protected by the privilege because Scripps engaged in a tortious course of conduct

that incidentally included the publication of the lien. Class members claim their injuries

are caused, not by the imposition of the lien, but by the wrongful collection process.

Class members rely upon LiMandri v . Judkins (1997) 52 Cal.App.4th 326, 345

(LiMandri), in which we held a privileged communication does not shield a defendant

from liability for a wrongful course of conduct that incidentally includes the

communication. In LiMandri, an attorney had a fee agreement granting him a portion of

the clients’ recovery. ( Id. at p. 334.) The defendant allegedly interfered with that

contractual relationship by arranging a loan to the clients secured by the same recovery

and filing a notice of lien in the lawsuit asserting the lender’s security interest in the

recovery. ( Id. at p. 345.)

This case is distinguishable from LiMandri. The security interest in LiMandri was

created by executing documents; filing the notice of lien was merely incidental to the

creation of the security interest. ( Id. at pp. 342, 346.) In contrast, the HLA requires a

hospital to send notice of the HLA lien to the third party and his liability insurance

carrier. (§ 3045.3.4) Further, the course of tortious conduct in LiMandri included

executing the security interest, refusing to concede the superiority of the attorney’s lien,

and inducing the clients to breach their fee agreement with the attorney. ( Id. at p. 345.)

In contrast, the wrongful conduct Class members have identified here is Scripps’s

overcharging them by noticing liens.5 The act of overcharging is the same act as the

4
Section 3045.3 provides in part: “A lien shall not be effective, however, unless a
written notice . . . is delivered . . . to each person, firm, or corporation known to the
hospital and alleged to be liable to the injured person for the injuries sustained . . . .
(Italics added.)

5
Class members appear to contend Scripps engaged in a tortious course of conduct
because Scripps published the liens in bad faith. There is no evidence Scripps published

assertion of the lien on Class members’ recoveries. Labeling the assertion of a lien as an

attempt to overcharge Class members does not change its nature as a communicative act.

The privilege conferred by Civil Code section 47, subdivision (b)(2), applies and

bars certain of Class members’ causes of action against Scripps. The privilege does not,

however, bar the eighth cause of action for declaratory relief. (Wilton v. Mountain Wood

Homeowners Assn. (1993) 18 Cal.App.4th 565, 571.)

Scripps contends the section 47(b)(2) privilege bars all of Class Members’ causes

of action except the action for declaratory relief. Because the issue of which causes of

action are barred by the privilege was not raised in the trial court and has not been

extensively briefed, we decline to address it. (See Cedars-Sinai Medical Center v.

Superior Court (1998) 18 Cal.4th 1, 5-6.)

V. Declaratory Relief

Class members contend the court erred by denying their motion for summary

adjudication of the cause of action for declaratory relief. In the motion for summary

adjudication of the eighth cause of action, Class members asked the court for a judicial

declaration that (1) Scripps’s collection practices and the assertion of liens in favor of

Scripps is unlawful and (2) Class members are not indebted to Scripps for the amounts

asserted in the liens.

the liens in bad faith. At the time Scripps filed the liens, no California appellate court
had decided the issue posed by this appeal, and several trial courts had enforced Scripps’s
liens.

A party may bring an action for declaratory relief under Code of Civil Procedure

section 1060, which provides in part: “Any person interested under a written instrument,

excluding a will or a trust, or under a contract, or who desires a declaration of his or her

rights or duties with respect to another, or in respect to, in, over or upon property, . . .

may, in cases of actual controversy relating to the legal rights and duties of the respective

parties, bring an original action . . . in the superior court . . . for a declaration of his or her

rights and duties in the premises, including a determination of any question of

construction or validity arising under the instrument or contract.” A declaratory relief

action may be brought on behalf of a class, Serrano v. Priest (1971) 5 Cal.3d 584, 618,

and may be used to determine the construction of a statute, Lane v. City of Redondo

Beach (1975) 49 Cal.App.3d 251, 255, as well as the rights and duties of the parties under

a contract.

As discussed above, the lien Scripps placed on McMeans’s recovery was not

authorized because McMeans owes no debt to Scripps. Therefore, we reverse the court’s

denial of Class members’ motion for summary adjudication of the declaratory relief cause

of action as to class representative McMeans. On the other hand, Scripps’s assertion of a

lien on the recoveries of Shaul and Denny was authorized. Accordingly, we affirm the

court’s denial of Class members’ motion for summary adjudication of the declaratory

relief cause of action as to class representatives Shaul and Denny.

DISPOSITION

In accordance with this court’s orders of June 11, 2001 and July 24, 2002, this

appeal is stayed as to MLR under title 11 United States Code section 362 and MLR’s

appeal is severed from that of Scripps.

The court’s grant of summary judgment in favor of Scripps is reversed. The

court’s denial of Class members’ motion for summary adjudication of Scripps’s defense of

privilege under section 47, subdivision (b)(2) is affirmed. The court’s denial of Class

members’ motion for summary adjudication of their eighth cause of action for declaratory

relief is reversed as to class representative McMeans, but affirmed as to class

representatives Shaul and Denny. Class members and Scripps to bear their own costs on

appeal.

CERTIFIED FOR PUBLICATION

O’ROURKE, J.

WE CONCUR:

BENKE, Acting P. J.

McDONALD, J.