Reflections on the Pending Supreme Court Challenge to the Affordable Care Act in California v. Texas: Part One in a Series

VIKRAM DAVID AMAR, EVAN CAMINKER, JASON MAZZONE

In this first of a series of columns on the latest prominent challenge to the Affordable Care Act (ACA), Illinois law dean Vikram David Amar, Michigan Law dean emeritus Evan Caminker, and Illinois law professor Jason Mazzone examine the stare decisis effects of the Supreme Court’s initial blockbuster decision involving the ACA. The authors demonstrate several, perhaps surprising, ways that the earlier decision should shape how the Court views the present challenge.

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Alborzi v. University of Southern California

Court: California Courts of Appeal

Docket: B299067(Second Appellate District)

Opinion Date: September 29, 2020

Judge: Audrey B. Collins

Areas of Law: Business Law, Health Law

Plaintiffs filed suit alleging that defendants entered into an illegal referral and kickback scheme in which USC paid below-market rates for hospitalist services from Concord, and Concord self-referred patients to Elevate, which shared ownership with Concord. Plaintiffs further alleged that when Plaintiff Alborzi complained to management at Verdugo Hills Hospital about the illegal scheme, the hospital stopped referring patients to him and eventually dissolved the on-call panel in retaliation. The Court of Appeal held that the trial court erred by sustaining the demurrer because plaintiffs were not required to exhaust judicial remedies before asserting the causes of action they have alleged here. The court also found that plaintiffs' complaint alleged sufficient facts to support causes of action for violations of Health and Safety Code section 1278.5 and Business and Professions Code section 17200, et seq., and therefore the demurrer should have been overruled as to those claims. The court further found that plaintiffs' cause of action for violation of Government Code section 12653 failed to allege sufficient facts to state a cause of action, but leave to amend was warranted. Finally, the court found that plaintiffs have abandoned the three causes of action they did not address on appeal. Accordingly, the court reversed the judgment and remanded the action with directions.

Butler America v. Aviation Assurance Co., LLC

Court: California Courts of Appeal

Docket: B298696(Second Appellate District)

Opinion Date: September 29, 2020

Judge: Arthur Gilbert

Areas of Law: Business Law

The Court of Appeal affirmed the trial court's order amending the judgment to add alter egos as judgment debtors. In this case, the trial court ordered that Craig Garrick individually and the Garrick entities be added to a judgment Butler America has against AFS. The court held that the release clause in the settlement agreement does not release Garrick and the Garrick entities because the express terms of the release clause excludes the release of any action to enforce the settlement agreement; AFS's breach of the settlement agreement terminated the agreement, including the releases; when the stipulated judgment was entered on the settlement agreement, it terminated all of AFS's and its third party beneficiaries' rights in the agreement, including the releases; and the trial court's finding of fraud are supported by substantial evidence. The court also held that the trial court did not err in finding that Garrick and the Garrick entities are alter egos of AFS. In this case, AFS was nothing but a shell; it had no substantial business activity and no income with which to pay its debts; and its only function was to act as a screen for Garrick and the Garrick entities. Finally, Butler is not equitably estopped from denying the separate existence of AFS and the Garrick entities, and the authority of the trial court to add alter egos as judgment debtors has long been recognized.

Hooked Media Group, Inc. v. Apple Inc.

Court: California Courts of Appeal

Docket: H044395(Sixth Appellate District)

Opinion Date: October 1, 2020

Judge: Grover

Areas of Law: Business Law, Labor & Employment Law

Hooked developed an app for mobile devices. Hooked’s CEO and investors later wanted to sell the business. Apple showed interest. After two meetings, it was clear that Apple was not interested in buying Hooked for its technology or market share but might want to acquire Hooked so certain engineers would become Apple employees. Hooked declined but, short on cash, suggested to Apple that it “sell” three engineers to Apple and continue operating the less technical advertising aspect of its business, and provided the engineers’ resumes. Apple responded that it might consider paying a “finder’s fee” but instead contacted the engineers directly and hired them. Hooked demanded that its chief technical officer (CTO) return all Hooked confidential technical information. Hooked emailed Apple’s general counsel. Apple responded that it had no desire to use another company’s trade secrets and would facilitate the return of all confidential information. Hooked sued, alleging fraud, misappropriation of trade secrets, interference with contract and prospective economic advantage, aiding and abetting breach of fiduciary duty, unfair business practices, and unjust enrichment. The court of appeal affirmed summary judgment for Apple. No legal wrong is committed when a company solicits and hires away its competitor’s employees; absent some independent illegal act, the interests of the employee in his own mobility and betterment are paramount to the competitive business interests of the employers. Hooked cannot show Apple did something that transformed ordinary free-market competition into an actionable legal wrong.

Toch, LLC v. City of Tulsa

Court: Oklahoma Supreme Court

Citation: 2020 OK 81

Opinion Date: September 29, 2020

Judge: Darby

Areas of Law: Business Law, Civil Procedure, Constitutional Law, Government & Administrative Law, Zoning, Planning & Land Use

Defendant the City of Tulsa (City), passed an ordinance creating a tourism improvement district that encompassed all properties within City which had hotels or motels with 110 or more rooms available for occupancy. Plaintiff-appellee Toch, LLC owned Aloft Downtown Tulsa (Aloft) with 180 rooms. Toch petitioned for a declaratory judgment that the ordinance was invalid for a variety of reasons, including that the district did not include all hotels with at least 50 rooms available. The court granted summary judgment to Toch based on its determination that City exceeded the authority granted in title 11, section 39-103.1. The question before Oklahoma Supreme Court was whether section 39-103.1 granted authority to municipalities to limit a tourism improvement district to a minimum room-count of a number larger than 50. To this, the Court answered in the affirmative, reversed the trial court, and remanded for further proceedings.