State Compensation Ins. Fund v. Sana Khan

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 27 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

STATE COMPENSATION INSURANCE No. 16-55501 FUND, a Public Enterprise Fund and Independent Agency of the State of California, D.C. No.

8:12-cv-01072-CJC-JCG

Plaintiff-Appellant, Central District of California, Santa Ana

v.

SANA ULLAH KHAN, an individual; ORDER ALEXANDER ZAKS, an individual; DAVID M. HOLMES, an individual; DANIEL A. REYES, an individual; BRUCE MCINTYRE ROTH, an individual; ACCIDENT HELP LINE MEDICAL GROUP, INC., a California corporation; ALEXANDER ZAKS, M.D., DBA Millcreek Surgery Center Medical Group, a California corporation; ALTA SURGERY CENTER MEDICAL CLINIC, INC., a California corporation; TECHNICAL SURGERY SUPPORT MEDICAL CLINIC SERVICES, INC., a California corporation; RELIABLE MEDICAL SUPPLY LLC, a California limited liability company; VALLEY INTERPRETING SERVICES, LLC, a California limited liability company; COMPREHENSIVE OUTPATIENT SURGERY CENTER, LLC, a California limited liability company; PHYSICIANS MOBILE MEDICAL GROUP, INC., DBA TVN Medical Group and Excell Comprehensive Diagnostics, a California

2

corporation; PRECISION CARE MEDICAL GROUP, a California corporation; TRUE IMAGING MEDICAL GROUP, DBA True View Radiology Medical Group, a California professional corporation; WINDSTAR MEDICAL ASSOCIATES, DBA True Neurology Medical Centers, a California professional corporation; CRESCENT DIAGNOSTIC MEDICAL GROUP, INC., a California corporation; CRESCENT COMPREHENSIVE MANAGEMENT, INC., DBA Excell Diagnostic and Mobile Medical Imaging Xperts, a California corporation,

Defendants-Appellees.

Before: M. SMITH and FRIEDLAND, Circuit Judges, and RAKOFF,* District Judge.

The memorandum disposition filed on January 17, 2018, is amended as

follows: The paragraph running from page 5, line 19 to page 6, line 6, beginning

with <Finally, State Fund> and ending with <See id. § 1693.>, is deleted.

Judge M. Smith and Judge Friedland vote to deny the petition for rehearing

en banc, and Judge Rakoff so recommends. The full court has been advised of the

petition for rehearing en banc, and no judge requested a vote on whether to rehear

the matter en banc. Fed. R. App. P. 35. The petition for rehearing en banc filed on

January 31, 2018, is DENIED. No further petitions for panel rehearing or

*

The Honorable Jed S. Rakoff, Senior United States District Judge for the Southern District of New York, sitting by designation.

3

rehearing en banc will be entertained.

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 27 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

STATE COMPENSATION INSURANCE No. 16-55501 FUND, a Public Enterprise Fund and Independent Agency of the State of California,

Plaintiff-Appellant, D.C. No.

8:12-cv-01072-CJC-JCG

v.

SANA ULLAH KHAN, an individual; AMENDED ALEXANDER ZAKS, an individual; MEMORANDUM* DAVID M. HOLMES, an individual; DANIEL A. REYES, an individual; BRUCE MCINTYRE ROTH, an individual; ACCIDENT HELP LINE MEDICAL GROUP, INC., a California corporation; ALEXANDER ZAKS, M.D., DBA Millcreek Surgery Center Medical Group, a California corporation; ALTA SURGERY CENTER MEDICAL CLINIC, INC., a California corporation; TECHNICAL SURGERY SUPPORT MEDICAL CLINIC SERVICES, INC., a California corporation; RELIABLE MEDICAL SUPPLY LLC, a California limited liability company; VALLEY INTERPRETING SERVICES, LLC, a California limited liability company; COMPREHENSIVE OUTPATIENT SURGERY CENTER, LLC, a California limited liability company; PHYSICIANS

*

This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

MOBILE MEDICAL GROUP, INC., DBA TVN Medical Group and Excell Comprehensive Diagnostics, a California corporation; PRECISION CARE MEDICAL GROUP, a California corporation; TRUE IMAGING MEDICAL GROUP, DBA True View Radiology Medical Group, a California professional corporation; WINDSTAR MEDICAL ASSOCIATES, DBA True Neurology Medical Centers, a California professional corporation; CRESCENT DIAGNOSTIC MEDICAL GROUP, INC., a California corporation; CRESCENT COMPREHENSIVE MANAGEMENT, INC., DBA Excell Diagnostic and Mobile Medical Imaging Xperts, a California corporation,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Cormac J. Carney, District Judge, Presiding

Argued and Submitted January 8, 2018 Pasadena, California

Before: M. SMITH and FRIEDLAND, Circuit Judges, and RAKOFF,** District Judge.

Plaintiff-Appellant State Compensation Insurance Fund (State Fund) appeals

the district court’s grant of summary judgment to Defendants-Appellees. We have

**

The Honorable Jed S. Rakoff, Senior United States District Judge for the Southern District of New York, sitting by designation.

jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

As the facts and procedural history are familiar to the parties, we do not

recite them here.

1. The district court properly granted summary judgment to Defendants-

Appellees Alexander Zaks; David M. Holmes; Daniel A. Reyes (together with

Zaks and Holmes, the Individual Zaks Defendants); Accident Help Line Medical

Group, Inc.; Alexander Zaks, M.D., Inc.; Alta Surgery Center Medical Clinic, Inc.;

Technical Surgery Support Medical Clinic Services, Inc.; Reliable Medical Supply

LLC; Valley Interpreting Services, LLC; and Comprehensive Outpatient Surgery

Center, LLC, because State Fund’s claims against these Defendants-Appellees

were precluded by the broad liability releases contained in the 2010 Settlement

Agreements. The district court correctly determined that the releases protected all

of these Defendants-Appellees because even State Fund’s claims against the

Individual Zaks Defendants were premised on acts within the scope of their agency

relationships with lien claimants, such that liability was precluded by the releases’

plain terms.

The court also correctly held that there were no grounds for rescinding the

2010 Settlement Agreements. California Civil Code § 1689 provides that “[a]

party to a contract may rescind the contract” if his consent thereto was “obtained

through duress, menace, fraud, or undue influence, exercised by or with the

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connivance of the party as to whom he rescinds.” Id. § 1689(b)(1). For fraud to

justify rescission, however, it must be extrinsic. California “will not relieve a party

from the effect of a judgment claimed to have been obtained by fraud” if the fraud

charged “relates to matters upon which the judgment was regularly obtained and

where an opportunity was given to the party against whom it was entered to contest

the matters in issue, or present any defense which was available,” or if the fraud

“was directed to or bore upon the claim or issue which was before the court for

determination, as when a judgment is entered upon a fraudulent claim, or is

procured by false testimony, where the party had an opportunity to be heard as to

these matters.” Flood v. Templeton, 92 P. 78, 81 (Cal. 1907); see also La Salle v.

Peterson, 32 P.2d 612, 612-13 (Cal. 1934).

Here, there was no extrinsic fraud to justify rescission. All of the allegations

of fraud relate to the negotiation of the 2009 Settlement Agreement, so it is almost

a logical impossibility that such fraud would be extrinsic to the 2010 Settlement

Agreements. Specifically, State Fund had the opportunity to be heard regarding

the validity of the 2009 Settlement before the arbitrator and decided to negotiate

the superseding 2010 Settlements instead. State Fund had the opportunity to

investigate the fraudulence of the Zaks Entities’ billings before entering into the

2010 Settlements and did so in depth, with the help of outside counsel. State Fund

then had the opportunity to contest the fairness of the 2010 Settlements before the

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arbitrator as well, and did not. These facts decide the issue. The inclusion of a

conspiracy allegation does not “operate to change what would otherwise be

intrinsic fraud into extrinsic fraud.” Tracy v. Muir, 90 P. 832, 835 (Cal. 1907).

There was also no connivance. For connivance to justify rescission, a

contracting party who enters into a contract under duress must show that another

contracting party, although not responsible for the duress, “knows that it has taken

place and takes advantage of it by enforcing the contract, particularly a contract

made with inadequate consideration.” Chan v. Lund, 116 Cal. Rptr. 3d 122, 134

(Ct. App. 2010) (citing Leeper v. Beltrami, 347 P.2d 12 (Cal. 1959) (en banc), as

modified on denial of reh’g (Dec. 30, 1989)), as modified on denial of reh’g (Oct.

28, 2010). State Fund cannot make such a showing. The 2010 Settlement

Agreements all contained a provision that stated that “[n]o party executed [the]

Agreement under duress, economic or otherwise.” Because any assertion that the

Zaks Defendants connived with respect to the 2010 Settlement Agreements

depends on the notion that Roth’s entry into the 2009 Agreement and Defendants’

attempt to enforce the 2009 Agreement coerced State Fund into entering the 2010

Agreements, this provision waives and thus forecloses State Fund’s connivance

argument.

2. The district court properly granted summary judgment to Defendant-

Appellee Bruce Roth because there was insufficient evidence of concerted action

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between Roth and any other Defendant-Appellee. State Fund has failed to

establish essential elements of its RICO and RICO conspiracy claims: State Fund

has not introduced evidence to show that Roth was associated together with any

other Defendants-Appellees for a common purpose of engaging in a course of

conduct, and intended to participate in the association in fact.

3. The district court properly granted summary judgment to Defendants-

Appellees Sana Ullah Khan; Physicians Mobile Medical Group, Inc.; Precision

Care Medical Group; True Imaging Medical Group; Windstar Medical Associates;

Crescent Diagnostic Medical Group, Inc.; and Crescent Comprehensive

Management, Inc. because State Fund’s claims against them were barred by the

four-year statute of limitations for civil RICO actions. See, e.g., Pincay v.

Andrews, 238 F.3d 1106, 1108 (9th Cir. 2001). State Fund has not introduced

evidence of new acts or injuries within the four years preceding this suit; a third-

party’s collection of claims no longer owned by these Defendants-Appellees does

not restart the statute of limitations with regard to State Fund’s claims against

them. Cf. Grimmett v. Brown, 75 F.3d 506, 509-14 (9th Cir. 1996) (concluding

that statute of limitations began to run when plaintiff filed an adversary complaint

in a related bankruptcy proceeding and rejecting notion that more recent acts

inflicted any new injury).

For the foregoing reasons, the district court’s grant of summary judgment to

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all Defendants-Appellees is AFFIRMED.