By: Bonnie Eslinger

September 21, 2016

Law360, Los Angeles (September 21, 2016, 11:10 PM EDT) — A former hospital CEO at the center of a health care fraud urged a California appeals court Wednesday to revive his $60 million defamation suit against three law firms, saying the attorneys falsely told the press that he’d procured prostitutes for others as part of a kickback scheme.

Michael Drobot and Healthsmart Pacific Inc. appealed a trial court’s dismissal of his claims under California’s law barring suits that restrict free speech, known as the anti-SLAPP statute. An attorney for the hospital and the executive, Jeremy B. Rosen of Horvitz & Levy LLP, argued to the appellate court that the statute didn’t apply for numerous reasons, including that there was proof to suggest the statements were not true.

“The defendants have no evidence of prostitutes whatsoever,” Rosen told the three-judge panel.

Healthsmart and Drobot sued Kabateck Brown Kellner LLP, Cotchett Pitre & McCarthy LLP and Knox Ricksen LLP and attorneys Brian S. Kabateck and Robert Hutchinson in December, alleging the attorneys lied in interviews, saying the hospital had used fake medical screws that weren’t approved by the U.S. Food and Drug Administration on their client’s spine and that Drobot supplied prostitutes to have sex with legislators and doctors as bribes. His suit called for $60 million in damages.

On Wednesday, Rosen also maintained to the court that statements about legal action made to the press by attorneys are not entitled to the type of immunity from defamation claims given during litigation.

“Lawyers litigating their case in the press is not subject to litigation privilege,” the attorney said.

Rosen also argued that the fact that Drobot pled guilty to a crime did not make the matter a public issue that would provide the extra protection provided by the anti-SLAPP statute to the attorneys’ statements.

“The fact that the public is interested in his plea does not make him a public figure,” Rosen said.

Judge Jeffrey W. Johnson asked the attorney if he had a “real problem” with that point, because the news that “thousands of Californians” probably received counterfeit implants was an issue of public interest.

Rosen said with those numbers, it would only matter to a “very small group.”

Judge Elwood Lui countered that others might also be interested. Judge Johnson added that even though the number of Zika virus cases in the U.S. was still relatively small, the public was giving the health concern significant attention.

“To say that it has to be widespread to be of public interest is a little disingenuous,” Judge Johnson said.

During his oral arguments, Rosen noted that a court determines an anti-SLAPP motion on two prongs — if the claims arise from acts in furtherance of the right of free speech or petition, and the probability a plaintiff will prevail on the claim — but focused on the second concern.

“The defendants here made statements that were false,” Rosen said. “They should not be able to hide behind privilege.”

Counsel for the law firms, Harry Chamberlain of Buchalter Nemer PC, argued to the court that the statements the attorneys made to the press were protected, but also that Drobot had not met his burden of providing a probability of prevailing on his complaint.

In his plea agreement, Drobot admitted that he paid kickbacks and bribes, including lavish trips to politicians and surgeons who were recruited into the scam. But Kabateck or Hutchinson never actually told the press that he personally procured prostitutes, Chamberlain said.

The one television interview in which Kabateck mentions prostitution, the allegation was directed toward the scam’s “co-conspirators,” a statement made later in the interview, after he identified Drobot as a central figure in the conspiracy, the law firms’ attorney told the court.

Drobot’s defamation suit was shut down in April 2015 by a trial court judge who said the three law firms and individual attorneys the CEO sued had a “slam dunk” anti-SLAPP defense.

Los Angeles Superior Court Judge Richard E. Rico said at the time that “the whole purpose of the anti-SLAPP statute [was] to protect people who are talking to reporters, particularly in connection with lawsuits.”

Kabateck and the three law firms had sued Healthsmart and Drobot on behalf of Mary Cavalieri, alleging the hospital had used cheap, nonsterile screws in her surgeries to support Cavalieri’s fraud and battery claims.

Drobot told the court that while he pled guilty to paying kickbacks for spinal surgery referrals and to inflating the costs of medical implants, he was not charged with using counterfeit or unsafe hardware, and he has not admitted to any such activity.

In November 2015, Drobot and three other people at the center of the health care fraud admitted to being involved in the nearly $600 million billing scheme over spinal surgeries, federal prosecutors announced.

Others caught in the health care scam’s net include former California state Sen. Ronald S. Calderon, who in June agreed to plead guilty to fraud in connection with allegations he accepted $100,000 in bribes from Drobot in exchange for favorable legislation.

Justices Frances Rothschild, Jeffrey W. Johnson and Elwood Lui sat on the panel that heard Wednesday’s arguments.

Healthsmart Pacific Inc. and Michael D. Drobot are represented by Keith A. Fink of Fink & Steinberg and Jeremy Brooks Rosen of Horvitz & Levy.

The Kabateck Brown Kellner LLP defendants are represented by Harry W.R. Chamberlain II of Buchalter Nemer PC.

The case is Healthsmart Pacific Inc. et al. v. Kabateck Brown Kellner LLP et al., case number B264300, in the Court of Appeal of the State of California, Second Appellate District, Division One.

–Additional reporting by Kat Greene. Editing by Catherine Sum.