Agarwal v. Pomona Valley Medical Group, Inc. , 476 F.3d 665 ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: POMONA VALLEY MEDICAL 
GROUP, INC.,
Debtor,
CHANDRAHAS AGARWAL, M.D., No. 04-56334
Appellant,
 D.C. No.
CV-01-10027-CBM
v.
POMONA VALLEY MEDICAL GROUP, OPINION
INC., a California professional
corporation, d/b/a PROMED HEALTH
NETWORK,
Appellee.

Appeal from the United States District Court
for the Central District of California
Consuelo B. Marshall, Chief Judge, Presiding
Argued and Submitted
June 8, 2006—Pasadena, California
Filed January 17, 2007
Before: Dorothy W. Nelson, Johnnie B. Rawlinson, and
Carlos T. Bea, Circuit Judges.
Opinion by Judge D.W. Nelson;
Dissent by Judge Rawlinson
667
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 671
COUNSEL
Henry R. Fenton, Law Offices of Henry R. Fenton, Los Ange-
les, California, briefed and argued for the appellant.
Randall J. Sherman, Stradling Yocca Carlson & Rauth, New-
port Beach, California; and Garrick A. Hollander, Winthrop
Couchot, Newport Beach, California, briefed for the appellee.
Marc J. Winthrop, Winthrop Couchot, Newport Beach, Cali-
fornia, briefed and argued for the appellee. Paul L. Gale,
Stradling Yocca Carlson & Rauth, Newport Beach, Califor-
nia, argued for the appellee.
OPINION
D.W. NELSON, Senior Circuit Judge:
Chandrahas Agarwal (“Agarwal”) appeals the district
court’s decision affirming (1) the bankruptcy court’s order
672 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
rejecting his contract with Pomona Valley Medical Group,
Inc., dba ProMed Health Network (“ProMed”) and (2) the
bankruptcy court’s subsequent order dismissing Agarwal’s
complaint in an adversary proceeding against ProMed. We
have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm,
in part, and reverse, in part.
BACKGROUND1
On May 14, 1999, Chandrahas Agarwal, a primary care
physician and certified cardiologist, entered into a provider
agreement (the “Agreement”) with ProMed, an “independent
practice association”2 in Southern California. Pursuant to the
Agreement, Agarwal provided primary or basic medical ser-
vices to patients in ProMed’s network. When a patient
required specialty medical services, such as cardiology tests,
Agarwal was required to seek authorization from ProMed’s
medical director.
Under the Agreement, the twelve-month contract was
extended automatically for an unlimited number of additional
twelve-month periods, unless ProMed provided written notice
of non-renewal.3 At the end of its first term, the Agreement
was extended to June 1, 2000, by the automatic renewal pro-
1
As Agarwal is appealing the district court’s order dismissing his com-
plaint for failure to state a claim, we accept as true the factual allegations
in Agarwal’s Second Amended Complaint.
2
An independent practice association (IPA) is an organization that con-
tracts with individual physicians to provide services to the enrollees of
managed health care plans (i.e., preferred provider organizations (PPOs)
and health maintenance organizations (HMOs)). The physician members
maintain their own private practices and may see patients not enrolled in
the health care plans with which the IPA has agreements. Carl H. Hitch-
ner, et al., Integrated Delivery Systems: A Survey of Organizational Mod-
els, 29 WAKE FOREST L. REV. 273, 275 (1994).
3
The Agreement also provided other options for severing the parties’
relationship, including termination with or without cause. Each form of
termination provided different notice and process requirements.
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 673
vision. Shortly after, on June 29, 2000, ProMed voluntarily
filed for bankruptcy under Chapter 11.
Approximately six months later, ProMed began routinely
denying initial authorization for cardiology tests Agarwal
requested for his patients. After Agarwal protested, ProMed
eventually authorized most of the procedures he requested. In
April 2001, ProMed warned Agarwal that if he disagreed with
or continued to protest ProMed’s authorization policies he
would be terminated. A month later, the company sent Agar-
wal written notice that it would not be retaining his services
after the expiration of the second year of the Agreement.
Although the Agreement’s non-renewal provision did not
require justification, the notice stated that Agarwal’s frequent
ordering of “unnecessary tests for patients simply to increase
[his] compensation at ProMed’s expense” justified termina-
tion with cause.
Following the expiration of the Agreement, Agarwal com-
menced adversary proceedings in bankruptcy court, alleging
various California statutory and common law causes of
action. Thereafter, ProMed moved to “reject” its executory
contract with Agarwal and to dismiss his complaint for failure
to state a claim. The bankruptcy court granted both motions
but permitted Agarwal to file an amended complaint.4 Agar-
4
We note that the contract at issue here was, indeed, executory on June
29, 2000, which was the date ProMed filed its bankruptcy petition. To
determine whether a contract may be rejected under 11 U.S.C. § 365(a),
we look to whether the contract was executory at the time of the filing of
the bankruptcy petition. See, e.g., In re Robert L. Helms Constr. & Dev.
Co., 139 F.3d 702, 706 (9th Cir. 1998) (en banc) (holding that to deter-
mine whether a contract is executory, “we look to outstanding obligations
at the time the petition for relief is filed and ask whether both sides must
still perform”); In re Coast Trading Co., 744 F.2d 686, 692-93 (9th Cir.
1984) (holding that a contract is executory if at the time of the bankruptcy
petition filing, the contract is not yet fully performed on both sides). Agar-
wal concedes that his contract with ProMed was executory when the bank-
ruptcy petition was filed in this case; thus, ProMed could move to reject
the contract under 11 U.S.C. § 365(a).
674 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
wal, instead, appealed to the district court, which affirmed the
bankruptcy court’s decisions. This timely appeal followed.
DISCUSSION
We review de novo the district court’s decision in a bank-
ruptcy appeal. In re Onecast Media, Inc., 439 F.3d 558, 561
(9th Cir. 2006). Therefore, we must consider independently
the bankruptcy court’s underlying ruling, applying the same
standard of review as the district court. Id.
I. Rejection of the Executory Contract and the Business
Judgment Rule
[1] As a preliminary matter, we hold that the bankruptcy
court did not err in approving ProMed’s rejection of its execu-
tory contract with Agarwal.5 Under 11 U.S.C. § 365(a), a
Chapter 11 debtor-in-possession, “subject to the court’s
approval, may . . . reject any executory contract.” See also In
re Robert L. Helms Constr. & Dev. Co., Inc., 139 F.3d 702
(9th Cir. 1998) (en banc). In making its determination, a
bankruptcy court need engage in “only a cursory review of a
[debtor-in-possession]’s decision to reject the contract. Spe-
cifically, a bankruptcy court applies the business judgment
rule to evaluate a [debtor-in-possession]’s rejection decision
. . . .” Durkin v. Benedor Corp. (In re G.I. Indust., Inc.), 204
F.3d 1276, 1282 (9th Cir. 2000) (citing NLRB v. Bildisco &
Bildisco, 465 U.S. 513, 523 (1984)); see also In re Chi-Feng
Huang, 23 B.R. 798, 800 (9th Cir. BAP 1982) (citing cases).
5
As explained supra, the contract was executory. See In re Robert L.
Helms, 139 F.3d at 706. We need not determine whether we are persuaded
that “events after the filing may cause the contract to be regarded as not
executory when the motion to assume or reject was made, such as con-
tracts which expired post-petition by their own terms after the date of fil-
ing but before the motion was heard.” In re Spectrum Info. Tech., Inc., 193
B.R. 400, 404 (E.D.N.Y. 1996) (internal alterations omitted) (citing
cases). Assuming the allegations in Agarwal’s complaint are true, his con-
tract with ProMed did not expire by its own terms; it was terminated in
violation of them.
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 675
[2] We have never had the occasion to define the contours
of the business judgment rule in the bankruptcy context. How-
ever, courts are no more equipped to make subjective business
decisions for insolvent business than they are for solvent busi-
nesses, so we have no difficulty concluding that its formula-
tion in corporate litigation is also appropriate here. See
Lubrizol Enter. v. Richmond Metal Finishers, 756 F.2d 1043,
1047 (4th Cir. 1985) (adopting the corporate business judg-
ment rule for bankruptcy proceedings).
[3] Thus, in evaluating the rejection decision, the bank-
ruptcy court should presume that the debtor-in-possession
acted prudently, on an informed basis, in good faith, and in
the honest belief that the action taken was in the best interests
of the bankruptcy estate. See Navellier v. Sletten, 262 F.3d
923, 946 n.12 (9th Cir. 2001); FDIC v. Castetter, 184 F.3d
1040, 1043 (9th Cir. 1999); see also In re Chi-Feng Huang,
23 B.R. at 801 (“The primary issue is whether rejection would
benefit the general unsecured creditors.”). It should approve
the rejection of an executory contract under § 365(a) unless it
finds that the debtor-in-possession’s conclusion that rejection
would be “advantageous is so manifestly unreasonable that it
could not be based on sound business judgment, but only on
bad faith, or whim or caprice.” Lubrizol, 756 F.2d at 1047.
Such determinations, clearly, involve questions of fact, see
Richmond Leasing Co. v. Capital Bank, 762 F.2d 1303, 1307-
08 (5th Cir. 1985); Lubrizol, 756 F.2d at 1047, which we
review for clear error. In re Rains, 428 F.3d 893, 900 (9th Cir.
2005).
Turning to the instant case, ProMed justified its business
decision, explaining, inter alia, that its Chapter 11 reorganiza-
tion strategy included efforts to reduce costs by limiting the
number of physicians in its network and severing relation-
ships with physicians, like Agarwal, who created financial
burdens by ordering treatment and tests ProMed considered
unnecessary.
676 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
[4] We can discern no reason that ProMed’s stated reorga-
nization strategy was so unreasonable as to indicate it acted
in bad faith or on whim or caprice in rejecting the Agreement.
Nor has Agarwal offered any. He merely countered that, in
making its determination to reject an executory contract, a
debtor-in-possession must abide by state law health and safety
regulations. We do not quarrel with this position. See, e.g.,
Hillis Motors, Inc. v. Hawaii Auto Dealers’ Ass’n, 997 F.2d
581, 592 (9th Cir. 1993) (citation omitted) (holding that a
bankruptcy trustee must “manage a business in accordance
with state law, as any other person must”). However, Agarwal
has failed to explain how ProMed’s rejection of the Agree-
ment violates California health and safety laws.
Agarwal also argued that in approving the decision to reject
an executory contract the bankruptcy court must weigh equi-
table concerns. He urges us that “it is proper for the court to
refuse to authorize rejection of a lease or executory contract
where the party whose contract is to be rejected would be
damaged disproportionately to any benefit to be derived by
the general creditors of the estate . . . .” In re Chi-Feng
Huang, 23 B.R. at 801. Again, we do not disagree. There may
be cases where the disproportionate damage to the party
whose contract is to be rejected demonstrates that the debtor-
in-possession’s decision could not be based on sound business
judgment. Here, however, there is no such indication.
[5] We find it somewhat suspect that ProMed did not seek
to reject the Agreement until Agarwal filed an adversary
claim in the bankruptcy court, more than a year after ProMed
filed its bankruptcy petition. However, after a hearing in
which both Agarwal and ProMed presented their arguments
and representations, the bankruptcy court found that the rejec-
tion of the Agreement was in the best interests of the bank-
ruptcy estate and its creditors. That finding of fact necessarily
indicates that the bankruptcy court believed ProMed’s justifi-
cations for its actions. The bankruptcy court approval of
ProMed’s decision, which stated the decision was “within the
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 677
sound ‘business judgment’ of the [d]ebtor,” also constitutes
an implicit finding that ProMed did not act in bad faith or on
whim or caprice. On appeal, Agarwal does not challenge
these findings.6
[6] On the record before us, we do not have “the definite
and firm conviction that a mistake has been committed by the
bankruptcy judge.” In re Rains, 428 F.3d at 900 (requiring the
reviewing court to accept findings of fact unless it is defi-
nitely and firmly convinced that the finding was erroneous).
Therefore, rejection of the Agreement was proper.
II. Dismissal of Agarwal’s Complaint
[7] Our conclusion that rejection was proper does not end
our inquiry. ProMed’s rejection of the Agreement constituted
a breach of that contract effective immediately before ProMed
filed for bankruptcy on June 29, 2000. 11 U.S.C. § 365(g). As
of that date, ProMed was relieved of its performance obliga-
tions under the Agreement, and Agarwal was permitted to file
an unsecured claim for breach of contract. In re Onecast
Media, Inc., 439 F.3d at 563 (citing cases); In re Pacific
Express, Inc., 780 F.2d 1482, 1486 & n.3 (9th Cir. 1986).7
6
As we discuss below, Agarwal does contend that ProMed’s reasons for
not renewing the Agreement were pretextual and that the real reason was
retaliation. Clearly, retaliation may constitute bad faith. Agarwal raises
this argument, however, not with respect to ProMed’s decision to reject
the contract but in relation to his substantive causes of action. Even if we
borrowed Agarwal’s retaliatory termination arguments in evaluating
ProMed’s decision under § 365(a), the bankruptcy court’s implicit finding
that ProMed did not act in bad faith necessarily belies Agarwal’s argument
that it did. Under the clear error standard of review, we are not persuaded
that this finding was incorrect. In re Rains, 428 F.3d at 900.
7
The dissent’s assertions to the contrary notwithstanding, that ProMed’s
rejection of the Agreement was cautionary, and perhaps even superfluous,
does not mean the rejection had no legal effect. Indeed, the rejection was
intended to retroactively relieve the bankruptcy estate of obligations to
perform under the contract. Such relief became effective immediately
678 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
Thus, accepting Agarwal’s allegations as true, we must con-
sider whether it appears beyond doubt that he can prove no set
of facts in support of his claims that would entitle him to
relief. Zimmer v. PSB Lending Corp., 313 F.3d 1220, 1222
(9th Cir. 2002); see also Fed. R. Bankr. P. 7012(b) (incorpo-
rating Fed. R. Civ. P. 12(b)(6)).8
In his complaint, Agarwal asserts that ProMed’s termina-
tion of the Agreement supported six causes of action:
(1) Retaliatory termination in violation of Cal.
Bus. & Prof. Code § 2056;
(2) Violation of the notice and hearing require-
ments of Cal. Bus. & Prof. Code § 809, et seq.
before the petition for bankruptcy was filed on June 29, 2000. See In re
Rega Props., Ltd., 894 F.2d 1136, 1140 (9th Cir. 1990). Under 11 U.S.C.
§ 365(g)(1), the contract is deemed breached one day prior to the date on
which the bankruptcy petition was filed, even if the term of the contract
had expired.
Thus, by operation of law, ProMed’s rejection of the contract, while
retroactively effective to discharge its obligation to perform, created sec-
ondary rights of compensation in Agarwal, including rights for breach of
contract. Although liability for breach of contract may have been an
unforeseen consequence of ProMed’s decision, a consequence it remains.
8
In dismissing Agarwal’s earlier complaints, the bankruptcy court
explained,
I really believe . . . that you can come up with a complaint that’s
going to survive a motion to dismiss. But . . . it will not be a com-
plaint in the normal easy pleading ways of the initial parts of the
Federal Rules of Civil Procedure. Instead, it will be [a] very spe-
cific, very carefully drafted complaint.
This requirement was patently improper. The pleading requirements in an
adversary proceeding require only notice pleading—“a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed.
R. Civ. P. 8(a)(2). See Fed. R. Bankr. P. 7008 (incorporating Rule 8’s
pleading rules).
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 679
(3) Violation of California’s common law right
to fair procedure;
(4) Breach of the notice requirements of the
Agreement;
(5) Unfair competition in violation of Cal. Bus.
& Prof. Code § 17200, et seq.; and
(6) Interference with prospective business advan-
tage.9
[8] It immediately should be obvious that Agarwal’s fourth
cause of action, challenging as insufficient the notice pro-
vided in ProMed’s letter, cannot survive a motion to dismiss
for failure to state a claim. Because of its valid rejection of the
contract, ProMed was relieved of its obligations under the
notice provisions of the agreement. In re Pacific Express,
Inc., 780 F.2d at 1486 n.3 (noting that rejection allows the
bankrupt’s estate to avoid the requirements of the contract).
[9] We are convinced that ProMed’s valid rejection of the
Agreement also is fatal to Agarwal’s second cause of action,
alleging a violation of Cal. Bus. & Prof. Code § 809, and his
third cause of action, which alleges a violation of California’s
common law right to fair procedure. Like the notice provi-
sions of Agarwal’s contract, these causes of action concern
primarily the process by which a company decides to dis-
charge a physician, not whether a physician may be dis-
charged. See Potvin v. Metropolitan Life Ins. Co., 997 P.2d
1153, 1158 (Cal. 2000) (when it applies, the right to fair pro-
cedure ensures that a decision is “both substantively rational
and procedurally fair”) (quoting Pinsker v. Pac. Coast Soc’y
of Ortho., 526 P.2d 253, 260 (Cal. 1974); Cal. Bus. & Prof.
9
We do not consider the propriety of dismissing Agarwal’s sixth cause
of action, which was not discussed in Agarwal’s opening brief. Indep.
Towers of Wash. v. Washington, 350 F.3d 925, 929 (9th Cir. 2003).
680 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
Code § 809.1(a) & (c) (entitling certain physicians to written
notice and a hearing before they are terminated).
[10] Section 365(a) gives debtors wide latitude in deciding
whether to assume or reject a contract, which is inconsonant
with the supplementary procedures imposed under California
law. Moreover, it would be anomalous for § 365(a)—a provi-
sion aimed at relieving the debtor of burdensome performance
obligations while it is trying to recover financially, In re One-
cast Media, Inc., 439 F.3d at 563—to force ProMed to pro-
vide sham notices and hearings from which Agarwal could
expect no relief. Accordingly, we need not determine whether
Agarwal’s second, third, and fourth causes of action pass
muster under the Federal Rule of Bankruptcy Procedure. Even
assuming Agarwal’s allegations were sufficient, he can prove
no set of facts entitling him to the damages he seeks, so dis-
missal of these causes of action was proper.
[11] The rejection of an executory contract does not, how-
ever, otherwise affect the parties’ substantive rights under the
contract or state law. See In re Onecast Media, Inc., 439 F.3d
at 563 (citing 3 COLLIER ON BANKRUPTCY § 365.09[1] (Alan N.
Resnick & Henry J. Sommer eds., 15th rev. ed. 2005)).
Accordingly, ProMed’s rejection of the Agreement did not
automatically extinguish Agarwal’s other causes of action,
and it is possible that he has stated a claim that survives under
the Federal Rules of Bankruptcy Procedure. We examine each
in turn.
Agarwal’s first cause of action alleges retaliatory termina-
tion in violation of Cal. Bus. & Prof. Code § 2056, which pro-
vides that physicians cannot suffer “retaliation . . . [for]
advocat[ing] for medically appropriate health care for their
patients . . . .” Cal. Bus. & Prof. Code § 2056(a) & (c).
[12] In order to state a claim under § 2056, Agarwal must
first allege that ProMed’s “decision to terminate [his] employ-
ment or other contractual relationship . . . or otherwise penal-
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 681
ize [him was] principally for advocating for medically
appropriate health care . . . .” Cal. Bus. & Prof. Code § 2056(c).10
Agarwal’s complaint states, “The real reason for PROMED’s
termination of Dr. Agarwal is that PROMED . . . wish[es] to
maximize their profits at the patient’s expense . . . . PROMED
. . . perceive[s] Dr. Agarwal as ‘too expensive’ because Dr.
Agarwal does not hesitate to order necessary and entirely
proper medical tests for his patients, in the best interests of his
patients.” If proven, these allegations match precisely the first
element of a retaliatory termination claim: Agarwal was ter-
minated because his ordering medically appropriate health
care made him “too expensive.” Albeit unartful, these allega-
tions are sufficient under liberal notice pleading standards.
Under § 2056, Agarwal must also allege either that he
appealed ProMed’s decision to deny payment for a service or
that he protested a decision, policy, or practice that he “rea-
sonably believe[d] impair[ed his] ability to provide medically
appropriate health care to his . . . patients.” Cal. Bus. & Prof.
Code § 2056(b).11 Again, Agarwal’s allegations are sufficient.
10
Subsection (c) provides:
The application and rendering by any person of a decision to ter-
minate an employment or other contractual relationship with, or
otherwise penalize, a physician and surgeon principally for advo-
cating for medically appropriate health care consistent with that
degree of learning and skill ordinarily possessed by reputable
physicians practicing according to the applicable legal standard
of care violates the public policy of this state. No person shall ter-
minate, retaliate against, or otherwise penalize a physician and
surgeon for that advocacy, nor shall any person prohibit, restrict,
or in any way discourage a physician and surgeon from commu-
nicating to a patient information in furtherance of medically
appropriate health care.
Cal. Bus. & Prof. Code § 2056(c).
11
In relevant part, subsection (b) provides:
It is the public policy of the State of California that a physician
and surgeon be encouraged to advocate for medically appropriate
682 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
The complaint stated that Agarwal “advocat[ed] for patients
and protest[ed] the denials and delays in authorization.”
Although Agarwal conceded that payment was ultimately
authorized “[i]n most instances,” nothing in § 2056 requires
that a physician be prevented from providing medically
appropriate health care. Rather, Agarwal must reasonably
believe that ProMed’s initial denials impaired—i.e., damaged,
injured, lessened, see OXFORD ENGLISH DICTIONARY (2d ed.
1989)—his ability to treat his patients. We must broadly con-
strue his statements that he was required to provide “extensive
oral and written justification” for “entirely necessary medical
tests and procedures” and that authorization was delayed and
“nearly always initially denied” as alleging just that. See Kha-
javi v. Feather River Anesthesia Med. Group, 100 Cal. Rptr.
2d 627, 638 (Cal. Ct. App. 2000) (finding an “unambiguous
legislative intent to apply the statute broadly to protect physi-
cians’ exercise of their professional judgment in advocating
for medically appropriate health care”); id. at 640 (deciding
that there should be a “broad interpretation of the statute”).
[13] For these reasons, the bankruptcy court erred in dis-
missing Agarwal’s retaliation claim under Federal Rule of
Bankruptcy Procedure 7012.
The bankruptcy court also erred in dismissing Agarwal’s
fifth cause of action, alleging unfair competition. California’s
health care for his or her patients. For purposes of this section,
“to advocate for medically appropriate health care” means to
appeal a payor’s decision to deny payment for a service pursuant
to the reasonable grievance or appeal procedure established by
a[n] . . . independent practice association . . . or to protest a deci-
sion, policy, or practice that the physician, consistent with that
degree of learning and skill ordinarily possessed by reputable
physicians practicing according to the applicable legal standard
of care, reasonably believes impairs the physician’s ability to pro-
vide medically appropriate health care to his or her patients.
Cal. Bus. & Prof. Code § 2056(b).
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 683
unfair competition statute prohibits any unfair competition,
which means “any unlawful, unfair or fraudulent business act
or practice.” Cal. Bus. & Prof. Code §§ 17200, et seq.
[14] Thus, in order to state a claim for unfair competition,
Agarwal must first allege that ProMed’s termination of the
Agreement was unlawful, unfair or fraudulent. An unlawful
act is one “forbidden by law, be it civil or criminal, federal,
state, or municipal, statutory, regulatory, or court-made.”
Saunders v. Superior Court, 33 Cal. Rptr. 2d 438, 441 (Cal.
Ct. App. 1994). Thus, stating a claim for retaliatory
termination—an act forbidden by Cal. Bus. & Prof. Code
§ 2056—satisfies the requirement that Agarwal alleged an
unlawful business act or practice.
Agarwal also advances an alternate theory of unfair compe-
tition. He alleges that ProMed’s pretextual reason for termi-
nating the Agreement was “misleading to the public in
general” because, as a result, approximately fifty people
believe he is a bad doctor, which is “entirely false.” Although
such allegations do not state a claim in tort, as used in
§ 17200, “fraudulent” does not refer to the common law tort
of fraud. Bank of the W. v. Superior Court, 833 P.2d 545, 553
(Cal. 1992). Rather, Agarwal need allege only that “members
of the public are likely to be deceived” by ProMed’s business
act or practice. Id. (quoting Chern v. Bank of Am., 15 Cal. 3d
866, 876 (Cal. 1976) (quotation marks omitted)). Clearly, the
public is likely to be deceived by statements that are “entirely
false.”
On its face, the unfair competition statute also appears to
require that Agarwal allege that he was in competition with
ProMed. Agarwal does allege he was in competition with
ProMed, but as a matter of law, we are not convinced that a
member of an independent practice association may be con-
sidered to be in competition with that independent practice
association. We need not resolve our concern here because,
under the unfair competition statute, “competition between
684 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
the parties is not a prerequisite to relief. . . . Emphasis is . . .
placed upon the word ‘unfair’ rather than on ‘competition.’ ”
Ball v. Am. Trial Lawyers Ass’n, 92 Cal. Rptr. 228, 303 (Cal.
Ct. App. 1971) (internal citations omitted) (interpreting virtu-
ally identical definition of “unfair competition” in Cal. Civ.
Code § 3369).
As the California courts have explained, the unfair compe-
tition statute is not limited to “conduct that is unfair to com-
petitors.” People ex rel. Renne v. Servantes, 103 Cal. Rptr. 2d
870, 881 (Cal. Ct. App. 2001) (citing Barquis v. Merch. Col-
lection Ass’n, 496 P.2d 817 (Cal. 1972)). Indeed, in defining
unfair competition, § 17200 refers to only business acts and
practices, not competitive business acts or practices, and the
term “embrac[es] anything that can properly be called a busi-
ness practice.” Cel-Tech Comm., Inc. v. L.A. Cellular Tel.
Co., 973 P.2d 527, 539 (Cal. 1999) (emphasis added) (quoting
Rubin v. Green, 847 P.2d 1044, 1052 (Cal. 1993); cf. Khoury
v. Maly’s of Calif., 17 Cal. Rptr. 2d 708, 712 (Cal. Ct. App.
1993) (sustaining the trial court’s demurrer under Cal. Bus. &
Prof. Code § 17001 because “[t]he facts [did] not involve
[any] . . . anticompetitive practice . . . because appellant is not
in competition with respondent”).
Moreover, at the time Agarwal initiated his adversary pro-
ceeding, the statute gave the right to challenge the unfair busi-
ness practices to any citizen, even if he suffered no
individualized injury. See Cal. Bus. & Prof. Code § 17204
(2003) (authorizing civil action to enforce § 17200 by “any
person acting for the interests of itself, its members, or the
general public”); see also Californians for Disability Rights v.
Mervyn’s, LLC, 39 Cal. 4th 223, 227 (2006).12
12
As a result of an amendment, the statute now provides that “a private
person has standing to sue only if he or she ‘has suffered injury in fact and
has lost money or property as a result of such unfair competition.’ ” Cali-
fornians for Disability Rights v. Mervyn’s, 46 Cal. Rptr. 3d at 60 (quoting
Prop. 64, § 3).
IN RE: POMONA VALLEY MEDICAL GROUP, INC. 685
[15] In light of these policies, we are convinced that
competition—as that term is generally understood—is not an
element of a claim under the unfair competition statute. We
can, thus, discern no deficiency in Agarwal’s pleading,13 and
we reverse the bankruptcy court’s dismissal of Agarwal’s
unfair competition claim.
CONCLUSION
For the foregoing reasons, the district court’s decision is
AFFIRMED, in part, REVERSED, in part, and
REMANDED.
Each party shall bear their own costs.
RAWLINSON, Circuit Judge, dissenting in part:
I respectfully dissent from that portion of the majority opin-
ion holding that ProMed’s valid rejection of the Agreement
between ProMed and Chandrahas Agarwal constituted a
breach of that contract.
The contract between Agarwal and ProMed provided for
non-renewal of the contract if written notice of non-renewal
was given. ProMed complied with the non-renewal provision
of the contract, resulting in non-renewal of the contract.
ProMed only sought rejection of the contract as a cautionary
measure in response to the filing of an adversary proceeding
by Agarwal. The fact that ProMed filed a superfluous motion
13
California Business & Professional Code § 17203 allows a court to
enjoin a party from engaging in past behavior that amounted to unfair
competition. Because Agarwal has alleged that members of the public
have been deceived by ProMed’s unfair business act or practice, and he
seeks injunctive relief in his Fifth Cause of Action, Agarwal’s Fifth Cause
of Action states a claim as to which relief can be granted.
686 IN RE: POMONA VALLEY MEDICAL GROUP, INC.
to reject a contract that had not been renewed does not sup-
port a finding of breach.