Daily Blast February 5, 2014

The Court of Appeal, Second Appellate District, Division Three (Los Angeles), issued an opinion in Dodd v. Cruz (Feb. 5, 2014, B247493) __ Cal.App.4th __, analyzing whether the defendant is entitled to obtain documents relating to the contractual relationship between a health care provider and a third party who purchases a medical lien from the health care provider on the plaintiff’s recovery against the defendant, including documents disclosing what the third party paid for the lien. (Slip opn., p. 2.) The court held that the defendant is entitled to obtain documents relating to the third party’s collection activity and policies and procedures because they may support the defendant’s position that the plaintiff is not actually responsible for the full amount billed. (Id. at p. 9.)

The case arose out of an automobile accident between plaintiff Dodd and defendant Cruz. (Slip opn., p. 2.) Dodd was treated for a shoulder injury at Coast Surgery Center of South Bay (“Coast”). On the same day as Dodd’s surgery, Coast sold to Medical Finance LLC (“MedFi”) its account receivable and lien against Dodd for payment of its charges. (Id. at pp. 2-3.) After litigation commenced, Cruz’s attorney served MedFi with a deposition subpoena for production of business records. The dispute was narrowed to three documents identified in MedFi’s log of withheld documents: (1) a contract between MedFi and Coast dated about four years before Dodd’s surgery, (2) a redacted “Creditor’s Assignment of Claim,” and (3) “MedFi’s Open Lien Detail.” MedFi conceded that these documents related to its “lien contracts” with Coast and included evidence of the amount MedFi paid for its lien on Dodd’s recovery, if any, against Cruz. MedFi objected to the production of these documents, however, on the grounds that they were confidential and irrelevant. (Id. at p. 3.) MedFi moved to quash Cruz’s subpoena. The trial court granted the motion to quash and imposed monetary sanctions on Cruz. (Id. at p. 4.)

The Court of Appeal reversed and held that the subpoena was reasonably calculated to lead to the discovery of admissible evidence relating to the reasonable value of Coast’s services. (Slip opn., p. 9.) The court noted the general rule that “may recover as economic damages no more than the reasonable value of the medical services rendered and is not entitled to recover the reasonable value if his or her actual loss was less.” (Id. at p. 7, italics in original, quoting Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 555.) According to the court, the subpoenaed documents could reveal what Coast believed was the reasonable value of its services, apart from its calculation of the expense and risk of collection. This would be at least some evidence of the reasonable value of Coast’s services. (Slip opn., p. 9.) Further, an expert retained by Cruz could base his or her opinion about the reasonable value of Coast’s medical services, at least in part, on the amount Coast accepted from MedFi as full payment for its services.  In addition, the subpoena was also reasonably calculated to lead to the discovery of admissible evidence relating to the amount of medical expenses Dodd actually incurred. Cruz was entitled to obtain documents relating to MedFi’s collection activity and policies and procedures because they may support Cruz’s position that Dodd is not actually responsible for the full amount billed. (Ibid.)

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