This week, the California Supreme Court ruled that organizations may have standing to sue under California’s Unfair Competition Law. The decision re-opened a lawsuit brought by the California Medical Association against Aetna for alleged anti-competitive conduct.
The case titled California Medical Association v. Aetna Health of California, Inc. concerned the insurance provider’s “Network Intervention Policy.” According to the California Medical Association (CMA), a professional association that advocates on behalf of physicians in the state, Aetna’s policy limited the ability of in-network doctors to refer patients to out-of-network providers. Physicians who determined that an out-of-network provider was medically necessary to better serve the patient would be threatened or outright fired by the insurance company.
The CMA sued Aetna, alleging that Aetna’s policy violated California’s Unfair Competition Law (UCL). Aetna sought to dismiss the lawsuit, arguing that the CMA does not have standing to sue. According to the insurance provider, the policy affects individual plaintiffs and has no direct impact on the CMA as an organization. The intermediate court of appeals agreed and threw out the case on summary judgment. The California Supreme Court reversed and held CMA could, in fact, sue Aetna for the wrongs alleged.
“Standing” refers to a plaintiff’s right to bring a lawsuit, generally based on having a direct and immediate stake in the matter being litigated. The UCL grants a private plaintiff the right to sue only if the plaintiff suffered an actual injury and “lost money or property as a result of the unfair competition” at issue. In its current iteration, the UCL does not confer standing on a membership organization to sue on behalf of its members based on injuries to those members. An association like the CMA must allege that the organization itself suffered harm.
The CMA did not argue that it was directly deceived or otherwise subjected to the alleged non-competitive conduct. Instead, the medical association argued that it had to expend significant resources to counter Aetna’s unlawful practices. The CMA claims it spent hundreds of staff hours investigating Aetna’s policy, advising physicians and the public, and engaging in other education and advocacy efforts.
The court of appeals found that expending resources to benefit members in furtherance of CMA’s mission did not constitute an actual “injury in fact” or “lost money or property.” The court expressed concern that, if merely spending resources to aid members was sufficient to support standing, “then any organization acting consistently with its mission to help its members through legislative, legal and regulatory advocacy could claim standing based on its efforts to address its members’ injuries.” The 2004 amendments to the UCL explicitly eliminated such organizational standing.
The state’s highest court did not share those concerns. In a unanimous opinion, the Court held that CMA had standing because, as alleged, it was forced to spend its own resources fighting Aetna’s policy in order to further its core mission. Those resources could and would otherwise have been spent elsewhere. Such an injury directly affects the CMA, not just its members.
As explained by the Court: “The perceived threat to CMA’s mission went beyond injury to physician members of CMA. By imposing unwarranted restrictions on network physicians’ medical referrals, in CMA’s view, Aetna’s policy impaired CMA’s efforts to protect the public health.” The Court’s ruling allows the case to proceed on the merits. It will ultimately be up to the trier of fact to determine whether Aetna’s conduct was unlawful and whether the CMA was actually harmed as a result.
The Court’s decision may have a much larger impact than the specific matter in dispute. The Court ruled unanimously that an organization can sue for alleged unfair competition based on the expenditure of resources in furtherance of its core mission. The opinion opens the door for claims that would have previously been thrown out as attempting to assert associational standing on behalf of injured members. Trade groups, labor unions, and other associations may rely on this case to combat perceived evils committed by powerful anti-competitive organizations.
