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August 2015

Gordon & Rees Los Angeles Team Secures California Court of Appeal Affirmance of Decision in Favor of Prominent Third Party Health Benefits and Claims Administrator

Los Angeles partner Gary Lorch with the assistance of senior associate Elizabeth Vanalek obtained a decision from the California Court of Appeal, Fifth Appellate District, affirming the granting of a special motion to strike under Code of Civil Procedure section 425.16 (“anti-SLAPP”) in favor of Gordon & Rees’s client, a well-respected third party administrator of health benefits and claims processing.

The client serves as a third party claims administrator for a city employee medical benefits plan for a city within California. The plan is operated via a Trust, and the Trust’s Board includes city officials and representatives of various bargaining units comprised of city employees.

The Trust had requested that Gordon & Rees’s client conduct an audit of the plan, During that audit, it was found that several city employees had not accurately reported qualifying spouses and dependents, including at least one city employee who failed to report that her husband no longer qualified because they had divorced. After our client reported its findings to the Trust, the Trust instructed our client to informally seek restitution from those individual members who had inappropriately received benefits. One city employee refused to reimburse the Trust and her appeal disputing that she owed plan benefits was denied. The Trust then sued that employee to recover the improperly paid benefits paid out by the Trust, and included in its lawsuit allegations of fraud. At trial, the employee prevailed.

The city employee thereafter sued not only the Trust, but Gordon & Rees’s client, for malicious prosecution. The city employee alleged our client was actively instrumental in bringing about the underlying action because it had garnered the information for the Trust to file the underlying action, and was protecting its own interests when it allegedly did not inform the Trust that the city employee had previously updated our client, prior to plan benefits being paid on behalf of her ex-husband, that she had divorced her husband. In April 2014, Mr. Lorch and Ms. Vanalek, on behalf of the firm’s client, filed an anti-SLAPP motion pursuant to Code of Civil Procedure section 425.16, on the grounds, inter alia, that our client was acting as an agent for the Trust and could not be found to have conspired with the Trust. Based on the evidence presented, the Court granted the anti-SLAPP motion, and entered judgment in favor of Gordon & Rees's client.

On appeal, the city employee alleged the Superior Court erred in how it handled the evidence when ruling on our client’s anti-SLAPP motion, and further argued that there was sufficient evidence to demonstrate that the city employee would prevail on her malicious prosecution action against Gordon & Rees’s client. The Fifth Appellate District disagreed, and affirmed the judgment in favor of Gordon & Rees’s client, finding that our client was acting in the course and scope of its agency, and that there was insufficient evidence to establish that our client was actively instrumental in causing the prosecution by the Trust of the action against the city employee. Accordingly, the Appellate Court found that the city employee had not satisfied her burden of establishing a probability of prevailing on the merits.

Gary J. Lorch
Elizabeth B. Vanalek



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