Allegations About Architect of Massive Fraud Privileged

Thursday, January 12, 2017

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Court of Appeal Says:

Allegations About Architect of Massive Fraud Privileged

Upholds Dismissal of Defamation Action Against Lawyers Who Recited Allegations

Contained in Their Client’s Complaint; Declares Litigation Privilege Applies

By a MetNews Staff Writer

Allegations by two prominent Los Angeles attorneys to the news media concerning a man who orchestrated what was dubbed by the FBI “Operation Spinal Cap”—a $600 million fraudulent billing scheme entailing fabrication of costs, bribery and kickbacks—came under the litigation privilege, shielding them from liability even if their allegations were false, the Court of Appeal for this district has held.

The decision by Div. One affirms a dismissal by Los Angeles Superior Court Judge Richard E. Rico of a defamation action brought by Michael D. Drobot, who was CEO of Pacific Hospital of Long Beach. Rico granted an anti-SLAPP motion in April, 2015, declaring that the defendants engaged in protected speech and had a “slam dunk” defense.

Drobot admitted bribing former state Sen. Ronald Calderon, D-Montebello, who pled guilty last year to accepting $100,000 in bribes from Drobot and is now serving a 42-month sentence. He acknowledged in a plea agreement in federal court that he “provided a stream of financial benefits” to Calderon, gaining his support for legislation allowing hospitals “to ‘pass through’ to workers’ compensation insurance carriers the cost of medical hardware used in spinal surgeries.”

He also admitted paying illegal kickbacks to dozens of referring physicians. Drobot insisted, however, that he was wrongfully defamed by the lawyers’ allegations that he supplied prostitutes in connection with the bribery and the kickbacks.

Also suing was Drobot’s corporation, Healthsmart Pacific Inc., which owned the hospital. The attorneys falsely accused the hospital, at which back surgeries were performed, of using non-FDA approved metal screws, the complaint alleged.

Defendants in the case were attorney Brian S. Kabateck, a former president of the Consumer Attorneys of California who frequently appears as a legal analyst on nationally televised news programs; his law firm, Kabateck Brown Kellner LLP; attorney Robert B. Hutchinson, a veteran personal injury trial attorney; the firm he heads, Cotchett, Pitre & McCarthy LLP; and the law firm of Knox Ricksen.

Underlying Litigation

Kabateck and Hutchinson represented Mary Cavalieri who, in 2010 underwent two spinal surgeries at Pacific Hospital. They filed a complaint on her behalf on July 17, 2014, containing allegations that kickbacks Drobot made included providing “prostitutes or other ‘adult entertainers,’ ” and that Drobot and other defendants used “counterfeit, non-FDA approved, ‘knock‑off’ ” implants.

Kabateck recited the allegations in an interview with a Fox 11 News reporter and Hutchinson spoke with a reporter for CBS radio news.

Drobot and his corporation sued for slander and libel, seeking a minimum of $50 million in general and compensatory damages and at least $10,000 in punitive damages.

Two Prongs

Writing for Div. One of the appeals court, Presiding Justice Frances Rothschild said the statements by the lawyers were protected speech, satisfying the second prong of the anti-SLAPP statute, and Drobot cannot show a probability of prevailing—the second prong—because Kabateck and Hutchinson are shielded by the litigation privilege.

She wrote:

“Plaintiffs address this issue by comparing what the attorneys said in the television and radio reports with what Drobot admitted in his federal plea bargain. They argue, for example, that Drobot ‘admitted only to participating in a scheme to inflate the cost of medical hardware used in spinal surgeries at [Pacific Hospital] that was charged to insurance companies,’ not to ‘using counterfeit, unclean, unsafe, or non-FDA-approved hardware in spinal surgeries.’ Plaintiffs also compare Drobot’s admission that he bribed Senator Calderon in various ways that did not involve prostitutes with the suggestion that Drobot was involved in supplying prostitutes as bribes or kickbacks. These are the wrong comparisons. The issue is not whether Kabateck’s and Hutchinson’s statements were fair and true communications about Drobot’s federal plea agreement, but whether they were fair and true communications about the allegations in the Cavalieri complaint.

“There is no dispute that the statements Kabateck and Hutchinson made in their television and radio appearances were substantially similar to the allegedly defamatory statements made in the Cavalieri complaint.”

Privilege Is Absolute

She went on to say:

“When, as here, the fair report privilege applies, it is absolute, and we have no occasion to consider the attorney defendants’ motives or whether the statements were uttered with malice….We do not, therefore, address the parties’ arguments concerning these issues or have reason to consider whether Drobot is a public figure or limited purpose public figure.

“Plaintiffs contend that this result would allow an attorney who has filed a complaint in court to repeat false and defamatory allegations from the complaint to the media and thereby ‘effectively immunize the sort of litigation through the press that cases applying the litigation privilege have condemned.’ This concern, while valid, is offset by the policy reasons for the privilege.”

Drobot’s sentencing is set for Feb. 10 in U.S. District Court for the Central District of California. He has cooperated with federal authorities, including testifying against Calderon.

The case is Healthsmart Pacific Inc. v. Kabateck, 20017 S.O.S. 127.

The opinion was filed Dec. 19 and certified for publication on Tuesday.

Jeremy B. Rosen and John F. Querio of Horvitz & Levy, along with Keith A. Fink and Olaf J. Muller of Keith A. Fink & Associates, represented Drobot and his corporation. Harry W.R. Chamberlain II, Robert M. Dato, and Efrat M. Cogan of Buchalter Nemer acted for the defendants.