Dual Diagnosis Treatment Center v. Health Net CA2/3 filed 7/16/26

Filed 7/16/26 Dual Diagnosis Treatment Center v. Health Net CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

DUAL DIAGNOSIS TREATMENT CENTER, INC., et al.,

Plaintiffs, Cross-defendants and Appellants,

v.

HEALTH NET, INC., et al.,

Defendants and Respondents;

HEALTH NET LIFE INSURANCE COMPANY,

Defendant, Cross-complainant and Respondent.

B331260

(Los Angeles County
Super. Ct. No.LC104357)

APPEAL from a judgment of the Superior Court of LosAngeles County, Virginia C. Keeny, Judge. Affirmed.
Kantor & Kantor, Lisa S. Kantor, J. David Oswalt and Timothy J. Rozelle; Dawson & Rosenthal, Steven C. Dawson, Anita Rosenthal and Alexandra O. Dawsonfor Plaintiffs, Cross-defendants and Appellants.
Manatt, Phelps & Phillips, Gregory N. Pimstone and Joanna S. McCallum for Defendant, Cross-complainant and Respondent and for Defendants and Respondents.
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This appeal arises out of a dispute between Sovereign, a network of mental health and substance use disorder treatment centers, and Health Net, Inc., Health Net of California, Inc., Health Net Life Insurance Company, and Managed Health Network, Inc. (collectively, Health Net).Between 2014 and 2016,Sovereign submitted claims toHealthNetfor medical care provided to more than 400 patients. Health Net paid some claims but rejected many others. Sovereign, as the patients’ assignee, sued Health Net for breach of contract, insurance bad faith,and breach of the Employee Retirement Income Security Act of 1974 (ERISA). Health Net cross-claimed for fraud, intentional interference with contractual relations, and unfair competition, among other things.
Prior to trial, the court found that Sovereign had paid illegalreferral fees for more than 300 of Health Net’sinsureds in violation of Insurance Code section 750. The court thus granted Health Net’s motions for summary adjudication ofHealth Net’s unfair competition claim and several affirmative defenses. A jury then heard the parties’ legal claims during a seven-week trial, after which the court determined the parties’ equitable claims. The jury and the court found for Health Net and against Sovereign on all causes of action, and the trial court entered judgment against Sovereign and its owner, Dr. Tonmoy Sharma (Dr. Sharma),jointly and severally, for more than $24 million, and against Dr. Sharma individually for more than $31million. Sovereign and Dr. Sharma appealed.
As we discuss, Sovereign’s appellate briefs do not discuss the extensive trial testimony, and thus many of the issues Sovereign raises are not properly before us. As to other issues, Sovereign fails to show prejudicial error. We therefore affirm the judgment in full.
FACTUAL AND PROCEDURAL BACKGROUND
I.The parties and claims.
Plaintiffs and cross-defendants are ninemental health and substance-use disorder treatment centers and affiliated entitiesoperated by Sovereign Health Group (collectively, Sovereign) and its owner and chief executive officer, Dr. Sharma. Defendants and cross-complainants are health insurers.
Between 2014 and 2016, more than 400 patients insured by Health Net received services at Sovereign’s treatment centers. Each of those patients assigned to Sovereign their rights under their Health Net policies to “benefits, insurance proceeds or other monies . . . due to me for services rendered by [Sovereign],”as well as “judicial or other rights Imay have relating to the recovery of Benefits.” Pursuant to those assignments, Sovereign billed Health Net approximately$76 million. Health Net paid some of the amounts billed, but refused to pay substantial portions of the bills.
Sovereign filed the present action against Health Net in 2016 as the assignee of the more than 400 Health Net insureds. In substance, the operative fourth amended complaint (complaint) alleged that Health Net arbitrarily and in bad faith failed to reimburse Sovereign approximately $55 million for services rendered to patients covered by Health Net policies. The complaint asserted causes of action for breach of contract, insurance bad faith, and ERISA violations.
Health Net filed an answer generally denying the complaint’s allegationsand asserting 14 affirmative defenses, including fraudand unclean hands. Health Net also filed a cross-complaint alleging thatit had been the victim of a massive insurance fraud scheme carried out by Sovereignwhich involved recruiting out-of-state patients, unlawfully paying “body brokers” to obtain patients, fraudulently obtaining insurance policies for those patients, and submitting thousands of false and fraudulent insurance claims to Health Net. The operative second amended cross-complaint alleged claims for fraud, intentional interference with contractual relations, violations of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.), and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO; 18U.S.C. §1962(c)).
II.Pretrial rulings.
A.Health Net’s motion for summary adjudication of the “unlawful” prong of the UCL.
In April 2020, Health Net sought summary adjudication of its claim that Sovereign violated the “unlawful” prong of the UCL.In support, Health Net asserted that Sovereign procured more than 300Health Net insured patients through referrals from “body brokers” to whom Sovereign paid substantial referral fees.Health Net asserted that paying for patient referrals violated section 750, which provides that except in circumstances not relevant here, “any person acting individually or through his or her employees or agents, who engages in the practice of processing, presenting, or negotiating claims, including claims under policies of insurance, and who offers, delivers, receives, or accepts any rebate, refund, commission, or other consideration, whether in the form of money or otherwise, as compensation or inducement to orfrom any person for the referral or procurement of clients, cases, patients, or customers, is guiltyof a crime.”Health Net further contended that violations of section 750 are actionable under the UCL, which borrowsviolations of other laws under its“unlawful” prong.(Korea Supply Co. v. Lockheed Martin Corp. (2003) 29Cal.4th 1134, 1143.)
Sovereign opposed Health Net’s motion for summary adjudication. Itadmitted that it paid consultants for patient referrals, but contended that the practice was lawful and known to Health Net. Sovereign also asserted that Health Net lacked standing to pursue the UCL claims because it was not injured by Sovereign’s payment of referral fees. Specifically, Sovereign urged that Health Net did not allege or prove that Sovereign billed Health Net for referral fees or forany treatment that was not provided or medically necessary. Sovereign thus urged that Health Net was not harmed by the payment of referral fees because it would have been responsible for claims in the same amounts even if treatment had been rendered by other providers.
The trial court granted Health Net’s motion for summary adjudication. The court found it uncontroverted that Sovereignpaid third parties referral fees of $2,500 to $7,000 per patient; that Sovereign submitted claims to Health Net for approximately 300 of these patients; and that Health Net paid substantial sums to Sovereign for care provided to these patients.The court further found that Sovereign’s conduct was unlawful under section 750. Finally, the court found that Health Net had standing to bring a claim under the UCL because it suffered injury in fact as a result of Sovereign’s unlawful practices. The court thus held that Health Net was “entitled to summary adjudication that Sovereign engaged in unlawful practices through repeated violations of . . . Section 750, causing injury in fact to Health Net.” The court reserved for trial what the appropriate remedy was for Sovereign’s unlawful conduct, noting that “[t]he scale of the injury and the equitable remedy appropriate under the UCL remain to be decided after trial.”
B.Health Net’s motion for summary adjudication of Health Net’s affirmative defenses of unclean hands and fraud.
In March 2021, Health Net moved for summary adjudication of its affirmative defenses of unclean hands and fraud, specifically with regard to Sovereign’s breach of contract and insurance bad faith claims related to the approximately 300 insuredsfor whom Sovereign paid referral fees (the referred patients). Health Net asserted that Sovereign acquired the referred patients by paying unlawful referral fees, and further that the referral fees “necessarily render[ed] fraudulent every claim that Sovereign submitted to Health Net for payment for services relat[ed] to any of th[ese] patients.”Thus, Health Net urged, Sovereignshould be barred from recovering on its claims for breach of contract and insurance bad faith in connection with the referred patients.
Sovereign opposed Health Net’s motion. It contended that Health Net could prevail on its motion only by submitting evidence relevant toeach element of its defenses, which it urgedHealth Net had not done and could not do.
The trial court granted Health Net’s summary adjudication motion.With regard to the affirmative defense of fraud, the court explained:“It is correct that this court has previously determined that Sovereign paid referral fees for[the approximately 300] patients[] at issue in this case in violation of Section 750 of the Insurance Code . . . . The question presented then is whether the criminal payment of referral fees constitutes ‘fraud’. . . so as to present an absolute bar to theplaintiff recovering any further payment for services rendered to these patients. . . .
“The court starts with the understanding that California has a profound and long standing public interest in defeating insurance fraud. [Citation.] As part of its efforts to root out insurance fraud, the legislature has clearly expressed its disapproval of kickback payments by medical providers to those who refer patients. Section 750 of the Insurance Code criminalizes payments by medical providers to those who procure patients for them. Section 1871.7 of the Insurance Code makes it unlawful to knowingly employ runners, cappers, steerers, and other persons to procure patients that will be the basis for a claim against an insurer. The Federal Anti-Kickback Statute prohibits the payment of referral fees for patients whoare covered by Medicare or Medicaid, making violation of the law punishable by up toten years in prison.. . .
“The cases are legion imposing significant penalties on anyone who pays or receives kickbacks for referring a patient to a medical provider. [Citations.] [¶] It is against this backdrop that the court must evaluate [Health Net’s] assertion that theviolation of Section 750 constitutes fraud or unclean hands.
“Ultimately, the court has little difficulty concluding that the conduct Sovereign engaged in was ‘fraudulent’ for purposes of the affirmative defense of fraud, in that it was deceptive about how the patients were securing services from Sovereign and it was based on conduct expressly made illegal by the California legislature. Even if the ultimate claim presented to the insurance company was based on services actually rendered, theclaim has as its foundation a fraudulent act, infecting the entire claim. . . .
“Moreover, the public policy underlying the prohibition on payment of kickbacks in this context would be defeated if a medical provider could obtain its patients through prohibited means, but then expect to receive full payment for the claims submitted for those patients. Unless the claims themselves are disallowed, the evils which the anti-kickback statutes seek to prevent would continue: the billing for unnecessary or excessiveservices and the anti-competitive effect of steering patients for a fee to one medical provider rather than another one who does not pay a referral fee. . . .
“In sum, the court finds that all claims submitted on behalf of patients for whom referral fees were paid are fraudulent in the inception and so cannot be recovered in this action.”
The court also found that Health Net was entitled to summary adjudication of its affirmative defense of unclean hands. The court explained: “The doctrine of unclean hands is a defense to both legal and equitable actions. [Citation.] ‘The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim.’ [Citation.] Whether the doctrine of unclean hands applies is a question of fact. [Citation.] It may be decided by the court as with most equitable defenses, or it may be submitted to the jury if it issufficiently intertwined with other legal issues before the jury. [Citation.]
“Not all wrongful conduct constitutes unclean hands. Only if the misconduct is directlyrelated to the cause at issue can a defendant invoke the doctrine. [Citations.] The misconduct, however, ‘need not be a crime or an actionable tort. Any conduct that violates conscience, or goodfaith, or other equitable standards of conduct is sufficient cause to invoke the doctrine.’ [Citations.] ‘Whether the defense applies in particular circumstancesdepends on the analogous case law, the nature of the misconduct, and the relationship ofthe misconduct to the claimed injuries.’ [Citation.]
“In the instant case, the court finds that the conduct is directly related to the issues in thiscase, that it constitutes conduct as to which the State of California has expressed strongapprobation[,] and that it would be contrary to public policy to allow [Sovereign] to recover forservices rendered to patients for whom it paid a substantial referral fee. Accordingly, thecourt grants summary adjudication to [Health Net] of its affirmative defense of uncleanhands as to the . . .[referred] patients.”
C.Health Net’s motion for judgment on the pleadings as to Sovereign’s cause of action for insurance bad faith.
Health Net filed a motion for judgment on the pleadings as to Sovereign’s second cause of action for insurance bad faith as to the patients for whom Sovereign had not paid referral fees.Health Net urged that a claim for insurance bad faith is assignable only after the alleged bad faith has occurred. In the present case, however, Sovereign alleged that its former patients assigned their claims to Sovereign at the time of admission, before any alleged bad faith could have occurred. Health Net thus urged that the patients’ assignments of hypothetical bad faith claims did not give Sovereign standing to sue on the claims.
The trial court granted Health Net’s motion for judgment on the pleadings in part, ruling that Sovereign could proceed on its insurance bad faith claim, but could recover only contract damages if it established the claim at trial. The court explained that Sovereign “lack[s] standing to assert a tort claim for . . . insurance bad faith . . . based on its insureds’ assignment,because the alleged bad faith conduct did not occur until after the assignment. Accordingly, while [Sovereign] can proceed to seek contract damages for breach of the implied covenant of good[-]faith and fair dealing, [it] cannot seek emotional distress, punitive damages or attorneys’ fees under Brandt [v. Superior Court (1985) 37 Cal.3d 813].”
III.Trial and judgment.
The court ordered that trial would proceed in two phases. In phase 1, a jury would decide the parties’ legal claims—namely,Sovereign’s claims for breach of contract and insurance bad faith, and Health Net’s cross-claims for fraud, intentional interference with contractual relations, and RICO violations. In phase 2, the court would determine the parties’ equitable claims—that is, Sovereign’sclaims for unpaid or underpaid claims based on treatment of patients covered by ERISA, and Health Net’s claim for violations of the UCL.
A.Jury verdict on legal claims.
The parties’ legal claims were tried to a jury over seven weeks in June and July 2022.Sovereign sought payment for care provided to the approximately 100 non-ERISA patients for whom referral fees had not been paid, and Health Net sought reimbursement for payments made to Sovereign for all patients treated at Sovereign’s facilities.
The jury returned a special verdict in Health Net’s favor on all issues. Specifically, the jury found that (1) Health Net did not breach its contracts or engage in bad faith with regard to any of the insureds for whom Sovereign had an assignment;(2)Sovereign and Dr.Sharma were liable for fraud and intentional interference with contract, and acted with malice, oppression, or fraud;and (3) Dr.Sharma violated RICO.The jury awarded Health Net damages of $15.82 million for fraud and/or intentional interference, $13.31million in interest, and $15.82million for RICO violations.
B.Court trial of equitable claims.
After the jury entered its verdict, the court conducted a bench trial ofthe parties’ equitable claims—namely, Sovereign’s cause of action to recover unpaid or underpaid claims based on treatment provided tothe 11 ERISA patients, and Health Net’s claim for violations of the UCL. At the conclusion of the bench trial, the trial court found for Health Net on both issues, explaining in its statement of decision as follows.
Fraud as an affirmative defense to Sovereign’s ERISA claims. “The jury sitting as the trier of fact on Sovereign’s claims for breach of contract for thenon-ERISA patients and on the issue of Health Net’s cross-claim for fraud rendered a verdict in Health Net’s favor . . . .The jury determined that Sovereign engaged in fraud, and that it acted with malice, oppression or fraud. It awarded Health Net the entire amount it sought in damages, indicating that the jury concluded that all of the money paid by Health Net had been procured through fraud. In other words, the jury found that fraudulent conduct pervaded the provision of medical services for the 434 non-ERISA patients, making none of the services properly reimbursable to Sovereign.
“The question remains what weight to give the jury’s findings as they relate to the eleven ERISA patients. No evidence about the ERISA patients’ circumstances, treatment,reimbursement claims, or medical records was presented to the jury. Some of the evidence presented to the jury does not directly relate to the ERISA patients. . . .Because the evidence presented at trial includes evidence that has no direct bearingon the treatment received by the ERISA patients, the court concludes that it is not bound by thejury’s decision on the affirmative defense of fraud.
“Nonetheless, the court finds that Health Net has presented substantial evidence offraudulent practices underlying Sovereign’s entire business model and provision of services . . . .
In order to obtain patients (and thereby expand its operations and increase profits), Sovereign paid referral fees for 324 of the patients at issue in this case, over $1.67 million to one referral source alone. . . .Because of California residencyrequirements, Sovereign at Dr. Sharma’s instruction created applications with false California addresses and instructed employees in Sovereign’s call center to teach patients either not to respond to Health Net’s calls for address confirmation or to lie to them. Defendant Sharma set up a foundation . . . to pay referral fees for patients and to pay the patients’ insurance premiums, including to Health Net, while concealing this fact from Health Net. The Foundation used false addresses for patients and did not disclose its true purpose to patients or employees. . . .
“Sovereign entities promised patients free treatment, even though Health Net’s insurance plans required that patients remain financially responsible for aspects of the treatment. Sovereign did not collect cost-sharing for 398 out of 434 patientsaccording to . . . uncontradicted testimony . . . . Although it did not happen with every patient who testified, there was evidence that Sovereign required patients to stay a certain number of days so as to exploit all insurance benefits andwould not release them earlier than that, even if medically appropriate, or conversely, kicked patients out of the program once their benefits ran out. There was evidence of repeated patient dumping, whereby Sovereign would deposit a vulnerablepatient far from home without money for travel. Some of those patients had been lured thousands of miles from their homes to come to Sovereign facilities in California, with promisesof return travel fare which never materialized. Patients and staff attested to these practices at trial.
“There was also substantial evidence presented that Sovereign engaged in repeated instances of billing fraud, including billing for unnecessary urine tests at exorbitant rates; making patients look sicker than they actually were; requiring doctors to pre-sign medical authorization slips or falsifying standing orders; requiring doctors to sign fake medical records; and overwriting a doctor’s diagnoses to make it moresevere (justifying longer or additional treatment).
“In addition, there was evidence of the regular falsification of medical records, primarily by the Sovereign billing team in India.
“While Health Net did not establish that all of these practices occurred with respect to all of the patients at issue in this case, Health Net presented substantial evidence of a pattern of fraudulent practices by Sovereign designed to attract patients with false promises; mislead Health Net about whether the patients qualified by concealing their out-of-state addresses or that Sovereign was paying their insurance premiums; inflated bills by ordering unnecessary andrepetitive urine tests for patients regardless of need and billing them at exorbitant rates; andsubmitting claims without supporting medical records to Health Net. By this overarchingscheme, Sovereign sought to obtain large sums of money from Health Net to which Sovereignwas not entitled. This fraudulent scheme infected all aspects of Sovereign’s business, includingthe provision of services to the eleven ERISA patients.”
Unclean hands as an affirmative defense to Sovereign’s ERISA claims. “Health Net also claims that it is entitled to judgment on the ERISA claims because of the evidence supporting its ‘unclean hands’ defense. . . . The doctrine of unclean hands ensures that ‘[n]o one can take advantageof his own wrong.’ (Civ. Code Section 3517.) The doctrine is an equitable defense, to be decided by the court, ‘where principles of fairness dictate that the plaintiff should not recoverregardless of the merits of the claim.’ (Kendall-Jackson Winery, Ltd. v.Superior Court (1999) 76 Cal.App.4th 970, 985 [(Kendall-Jackson)].) While the court has broad discretion to apply the doctrine in appropriate circumstances, ‘the misconduct that brings the unclean hands doctrine into play must relate directly [to] the cause at issue.’ [Citation.] Health Net contends that the evidence of unclean hands here is directly related to the ERISA claims. It argues that the jury’s finding of fraud was based on evidence that impacted every aspect of Sovereign’s business—from recruitment of patients on false pretenses, fabricated medical ordersfor drug testing, altered medical records, inflated billing, and filing of false claims. Having created a business model based on fraudulent practices, Health Net contends, Sovereign hascome into court with unclean hands.
“Sovereign counters that the only evidence of fraud or unclean hands before the court related to the 324 [referred patients], and that neither the court nor the jury has found thatSovereign engaged in either unfair or fraudulent conduct as to the other patients. Sovereign makes no other argument against application of the doctrine. Sovereign does not give properweight to the jury’s verdict which found fraud and awarded damages to Health Net for fraud for every patient, not just the 324 who had been purchased. Therefore, there has been a finding offraud infecting services to all patients at issue in the trial (in other words, all patients except theERISA patients whose claims had been reserved for later bench trial).
“The court agrees that the overall evidence of fraudulent practices reveals that Sovereign came to court with unclean hands, barring all recovery, even for the ERISA patients. The same evidence set forth above supports this court’s finding of unclean hands. This would be a more difficult case if the patients themselves were seeking to recover for services those same patients had actually been billed and paid for. There is no evidence here that the patients or the insureds have any exposure for any of these unpaid bills. While it is true that as theassignee, Sovereign stands in the shoes of the assignor andordinarily would only have to answer to defenses raisedagainst the assignor, the court sees no reason why the unclean hands defense cannot be invoked in this unusual situation where the assignor is blameless, but the assignee comes to court withunclean hands. This case is no different than if an assignee in pursuing claims in litigation had willfully destroyed documents; made serious misrepresentations to the court or intimidatedwitnesses. Obviously, such conduct has nothing to do with the assignor, but would be a basis for the court to invoke the unclean hands doctrine against the assignee. Assignees do not get a freeride to engage in improper conduct based on their status as assignee. Thus, the court concludes that fraudulent conduct engaged in by Sovereign (assignee) in its dealings with Health Net before and during litigation may be considered for purposes of applying the unclean hands doctrine.”
Based on the foregoing, the trial court found that Sovereign could not recover on its ERISA claims.
Health Net’s UCL cross-claims. “Health Net claims that it is entitled to further equitable relief on its cross-claims forviolations of the [UCL]. . . .Itargues that based on this court’s pre-trial ruling that Sovereign violated Section 750 of theInsurance Code when it paid referral fees for patients, Health Net is entitled to judgment on itsclaim that Sovereign violated the ‘unlawful’ prong of the UCL as to all ‘purchased patients.’ Health Net argues it should recover as restitution all payments it made to Sovereign with respectto the 324 ‘purchased patients,’ or a total of $12.36 million.[¶] Health Net also seeks further restitution under the UCL for all patients at issue in thislawsuit, including those for whom referral fees were not paid, and the . . . ERISA patients whoseclaims were segregated and set aside for final determination. Health Net argues that the provenacts of insurance fraud by Sovereign, committed with malice, oppression or fraud, constituteunfair and anti-competitive business practices for allpatients, warranting restitution to HealthNet of all amounts paid for 464 patients, or a total of $16.99 million. In addition, Health Netrequests that the court calculate and award prejudgment interest based on this amount, for anadditional $14.39 million. . . .
“[T]he court finds that as for the 324 purchased patients, there is undisputed evidence that Sovereign paid substantial referral fees for these patients, in violation of state law. This court has already found that such conduct violates Insurance Code Section 750, as well as the ‘unlawful prong’ of the UCL.
In addition, this court has found that ‘but for the referral, Health Net wouldnot have paid money to Sovereign on behalf of its insureds.’TheUCL provides that the court may make an order or judgment that restores ‘to any person aninterest in any money or property, real or personal, which may have been acquired by means ofsuch unfair competition.’
“This court has no difficulty determining that Sovereign’s unlawful referral fees constituteunfair competition, since but for these referral fees, these patients would not have learned aboutSovereign or they might have selected an in-network provider. By paying illegal referral fees, Sovereign gained an unfair advantage over its competitors, who did not have patients steered tothem unlawfully.
“State law in related areas prohibits professionals from keeping moneys obtained for clients for whom they paid illegal referral fees. [Citations.] [¶] The court finds that Health Net is entitled to have restored to it under the UCL those moneys it paid for services provided to these purchased patients, or $12.36million. . . .
“With respect to the amounts paid for the patients for whom no referral fee was paid (which includes the ERISA patients), the court has set forth above its findings that Sovereignengaged in an overarching fraudulent scheme in the manner in which it operated its treatment centers, which pervaded all aspects of its business. The court finds that such conduct alsoconstitutes an unfair business practice, separate and apart from the unlawful payment of referral fees, which gave it an unfair advantage against its competitors in attracting patients and billing insurance companies, such as Health Net, for their care. These fraudulent business practices violated long-standing California public policy against insurance fraud. [Citation.] As part of its equitable powers under the UCL, this court may order restitution for all amounts obtained by a defendant who constructs a fraudulent scheme in order to gain an unfair advantage over other businesses, including, in this case, an insurance company facing claims presented as part of that fraudulent scheme.
“On the issue of reliance, the court further finds that Health Net presented evidence that it paid the claims submitted to it by Sovereign on behalf of these patients, because of Sovereign’s omission of essential facts or materialmisrepresentations about its operations. Specifically, Sovereign omitted to inform Health Net that it was paying the premiums for many of its patients and waiving any co-pay or co-insurance requirement in order to induce them into out-of-network treatment; that it recruited patients from other states and hid their true addresses to make them appear to be California residents in order to qualify for Health Net policies; that it had nonmedical providers altering records; that it at times required doctors to make patients look sicker than they actually were; that it regularly used falsified doctor’s notes to justify urinalysis tests;that it required patients to stay for the full period covered by Health Net even if not medically advised or against the best interest of the patient; that it was dumping Health Net’s insureds in unsafe areas, without the financial means to return to their homes, when their insurance ran out, jeopardizing their health and safety; that it was billing for services not actually provided; that the quality of care was substandard at certain of its facilities; and that it was advertising amenities that did not exist to try to recruit Health Net patients away from in-network treatment for moreexpensive out-of-network care. The court finds that had this information been provided toHealth Net for any one of these patients, Health Net would not have continued to pay claims forthat patient or other patients seeking treatment from Sovereign. . . . Thus, Health Net has established detrimental reliance based on these material omissions and misrepresentations.
“The court further finds that Health Net has established that it is entitled to the full amount it paid on behalf of all patients as restitution with few exceptions. The court finds that the calculation by [a Health Net expert witness] accurately describe the total amount to be restored as follows: For the 434non-ERlSA patients the total damages based on patient level fraud, billing fraud andlaboratory fraud is $15.82 million . . ..This is the same amount found by thejury. In addition, the court finds that [Health Net’s expert] calculation of damages for the . . .ERISApatients [isaccurate] . . . . The total amount for theERISA patients under this analysis is $1.17 million. The total restitution amount for all patientsis $16.99 million.”
The trial court entered judgment for Health Net and against Sovereign and Dr. Sharma, jointly and severally, in the amount of $24,125,800, and against Dr. Sharma individually in the amount of $31,640,000. Sovereign andDr. Sharma timely appealed.
DISCUSSION
Sovereign makes six claims of error on appeal, asserting that the trial court erred by (1) granting summary adjudication of the unlawful prong of Health Net’s UCL claim; (2) granting summary adjudication of Health Net’s fraud and unclean hands defenses with regard to the referred patients; (3)misinstructing the jury; (4) excluding evidence ofcorrespondence and other documents exchanged between Health Net and the California Department of Insurance (CDI); (5) precluding Sovereign from recovering attorney fees as damages for insurance bad faith; and (6) granting judgment for Health Net on Sovereign’s ERISA claim.
Before addressing Sovereign’s specific claims of error, we note that “[i]n every appeal, the appellant has the duty to fairly summarize all of the facts in the light most favorable to the judgment. [Citations.] ‘Further, the burden to provide a fair summary of the evidence “grows with the complexity of the record.” ’ ” (Slone v. El Centro Regional Medical Center (2024) 106 Cal.App.5th 1160, 1173.)Thus, appellants “cannot recite only evidence in their favor, but must ‘“set forth in their brief all the material evidence on the point and not merely their own evidence.” ’ ”(Ibid.) If an appellant fails to provide a fair and accurate summary of the trial evidence, error may be deemed forfeited. (Estes v. Eaton Corp. (2020) 51 Cal.App.5th 636, 650.)
The record in this case is lengthy. The evidence presented at the seven-week trial is contained in a 67-volume reporter’s transcript, supplemented by a 15-volume appellant’s appendix. Sovereign’s opening brief does notfairly summarize the trial testimony, but instead sets forthin a lengthy introduction only Sovereign’s version of the evidence.Although we will not deem Sovereign’s appellate arguments forfeited, Sovereign’s failure to adequately summarize the trial testimony significantly constrains our appellate review, as we discuss more fully below.
I.Sovereign was not prejudiced by the grant of summary adjudication of the unlawful prong of the UCL.
Sovereign challenges the trial court’s grant of summary adjudication of the unlawful prong of Health Net’s UCL claim, urging that Health Net lacked standing to pursue the claim because it did not suffer economic injury within the meaning of the UCL. For the reasons that follow, Sovereign’s contention lacks merit.
A.Legal standards.
A party is entitled to summary adjudication of a cause of action or affirmative defense if no genuine issue of material fact exists and the party is entitled to judgment as a matter of law. (Bradsbery v. Vicar Operating, Inc. (2025) 110 Cal.App.5th 899, 906–907; Kendall-Jackson, supra, 76Cal.App.4th at pp. 977–978.) Our review is de novo. (Kendal-Jackson,at p. 978.)
The UCL prohibits “unfair competition,” which includes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200; see also Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 320 (Kwikset).) The UCL“ ‘does not proscribe specific practices’ ” (Capito v. San Jose Healthcare System, LP (2024) 17 Cal.5th 273, 283), but instead “‘borrows’ violations from other laws by making them independently actionable as unfair competitive practices” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p.1143).“ ‘However, the law does more than just borrow. The statutory language referring to “any unlawful, unfair or fraudulent” practice ... makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law.’ ” (Capito, at p. 284.) Thus, “ ‘ “[b]ecause Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. ‘In other words, a practice is prohibited as “unfair” or “deceptive” even if not “unlawful” and vice versa.’ ” ’ ” (Ibid.)
As originally enacted, a suit under the UCL could be brought by any member of the general public. (Kwikset, supra,51 Cal.4th at p. 320.) In 2004, UCL’s standing requirements were revised to grant standing to only those private individuals who “ha[ve] suffered injury in fact and ha[ve] lost money or property as a result of the unfair competition.” (Bus. & Prof. Code, § 17204; Kwikset, at p. 320.) In other words, a private plaintiff “must demonstrate some form of economic injury.” (Kwikset, at p. 323.) A plaintiff may demonstrate economic injury in “innumerable ways”: Aplaintiff “may (1)surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.” (Ibid.)
Importantly, to establish standing under the UCL, a plaintiff need not establish “a specific measure of the amount of [its] loss.” (Kwikset, supra, 51 Cal.4th at p. 330, fn. 15.) Instead, “[i]t suffices that a plaintiff can allege an ‘ “identifiable trifle.” ’ ” (Ibid.) If a party has alleged or proven a personal, individualized loss of money or property in any “nontrivial amount,” that party “has also alleged or proven injury in fact.” (Id. at p. 325.)
B.Sovereign has not demonstrated prejudice.
Below, the trial court granted Health Net’s motion for summary adjudication of the unlawful prong of the UCL after finding that Sovereign’s payment of referral fees violated section750. Sovereign contends this ruling was error because its payment of referral fees did not cause Health Net any economic injury. Specifically, Sovereign contends thatHealth Net did not provide any evidence in connection with its summary adjudication motion that Sovereign billed Health Net for the referral feesor that the care Sovereign provided to Health Net’s patients was not medically necessary or reasonably priced. As such, Sovereign urges that Health Net did no more than pay for medically necessary treatment for its insureds, which it would have been contractually required to do whether the insureds obtained treatment at Sovereign’s facilities or elsewhere,and thus Health Net’s payment of Sovereign’s claims was insufficient to confer standing.
We need not decide whether the trial court erred in granting summary adjudicationof the unlawful prong of Health Net’s UCL claim because any error unquestionably was not prejudicial. “When the trial court commits error in ruling on matters relating to pleadings, procedures, or other preliminary matters, reversal can generally be predicated thereon only if the appellant can show resulting prejudice, and the probability of a more favorable outcome, at trial.” (Waller v. TJD, Inc. (1993) 12Cal.App.4th 830, 833.) Thus, error in overruling a demurrer cannot be relied on to overturn a judgment where the matter proceeded to trial and the evidence supports the judgment. (Id. at pp. 833–834, and cases cited therein.) Similarly, error in denying a motion for summary judgment on the ground that there are no triable issues of material fact is nonprejudicial if the same questions raised by the motion are decided adversely to the moving party after a trial on the merits. (Id. at p. 836; Medina v. St. George Auto Sales, Inc. (2024) 103 Cal.App.5th 1194, 1207; Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 343.) And, any error in granting summary adjudication for defendant of some causes of action is not prejudicial if a jury later returns a verdict for defendant on overlapping causes of action. (Wentworth v. Regents of University of California (2024) 105Cal.App.5th 580, 600 [plaintiff “cannot prove prejudice from any error in summarily adjudicating [plaintiff’s] claim on theories that overlap with the theories rejected in the jury’s verdict, which [plaintiff]does not challenge”].) This is so, courts have explained, because “ ‘ “[a] decision based on less evidence (i.e., the evidence presented on the summary judgment motion) should not prevail over a decision based on more evidence (i.e., the evidence presented at trial).” ’ ” (Buckner v. Milwaukee Electric Tool Corp. (2013) 222 Cal.App.4th 522, 539–540.)
In the present case, Sovereign complains that the trial court should not have granted Health Net’s motion for summary adjudication because there was no evidence offered in support of the motion that Health Net would not have been liable for insurance claims in the same amounts, albeit to other providers, if Sovereign had not paid the unlawful referral fees. The trial court acknowledged that possibility when it granted the summary adjudication motion, but concluded that the uncertainty was relevant to remedy, not to injury in fact or causation. The court explained: “The evidence establishes that [the referred patients] obtained services from Sovereign based on theinitial unlawful referral; but for the referral, Health Net would not have paid money toSovereign on behalf of its insureds. While it is true that the same insureds might haveobtained treatment elsewhere and might have submitted even larger bills forreimbursement, it cannot be [denied] that the payments made by Health Net to Sovereignwould not have occurred but for the unlawful referral. It will be for the court todetermine upon presentation of evidence what the appropriate equitable remedy is for this conduct. It is unlikely to be restitution to Health Net of all amounts paid, especially if Sovereign establishes that the services complied with industry standards.”
After hearing all the evidence presented at trial, the court concluded that Sovereign had not complied with industry standards, but instead had engaged in a variety of unlawful or fraudulent practices, including submitting claims for out-of-state residents using false California addresses, requiring patients to stay at Sovereign facilities longer than was medically appropriate to exploit all insurance benefits,engaging inrepeated instances of billing fraud, including billing forunnecessary urine tests, falsifying medical records to make patients look sicker than they actually were, and advertising amenities that did not exist in order to recruit Health Net patients away from in-network treatment for more expensive out-of-network care. Based on these factors, the court found that Health Net was entitled to restitution under the “unlawful” prong of the UCL of all the payments it made on behalf of the referred patients, in the amount of $12.36 million. In light of this finding, it is apparent that even if the trial court had not granted summary adjudication on the unlawful prong of the UCL prior to trial, it would have entered judgment against Sovereign on that prong after trial. Any error in granting the summaryadjudication motion, therefore, manifestly did not prejudice Sovereign.
Sovereign was not prejudiced by the grant of summary adjudication for another, independent reason. At the conclusion of the bench trial, the court not only awarded Health Net restitution of all payments made in connection with the referred patients under the unlawful prong of the UCL, it also awarded Health Net restitution of all amounts paid for all patients—referred and otherwise—under the “unfair” or “fraudulent” prongs of the UCL. The court explained that Sovereign had “engaged in an overarching fraudulent scheme in the manner in which it operated its treatmentcenters, which pervaded all aspects of its business,” and “such conduct . . . constitutes an unfair business practice, separate and apart from the unlawful payment of referralfees.” (Italics added.) The court further concluded that it had equitable powers under the UCL to order restitution “for all amounts obtained by a defendant whoconstructs a fraudulent scheme in order to gain anunfair advantage over other businesses.” The court exercised its equitable power in this case to awardHealth Net restitution in “the full amount it paid on behalf of all patients.”Thus, even were we to reverse the grant of summary adjudication, the judgment entered after trial would be the same. For this reason, also, Sovereign cannot demonstrate that any error ingranting the motion for summary adjudication on the unlawful prong of the UCL was prejudicial.
II.Sovereign has not demonstrated that the trial court erred by granting summary adjudication of Health Net’s unclean hands defense.
As noted above, Health Net sought summary adjudication of its affirmative defenses of fraud and unclean hands with regard to Sovereign’s claims that it was entitled to be paid for medical care provided to the approximately 300referred patients. Health Net urged that it was undisputed that Sovereign had paid referral fees for these patients, and the unlawful payment of referral fees constituted fraud and unclean hands as a matter of law. The trial court agreed with Health Net on both counts, finding that Sovereign’s payment of referral fees constituted fraud in the inducementandunclean hands, andthat each affirmative defense separately precluded Sovereign from recovering on claims submitted on behalf of referred patients as a matter of law.
On appeal, Sovereign challenges the trial court’s summary adjudication ruling on both grounds, asserting that Health Net did not establish either fraud in the inducement or unclean hands.For the reasons discussed below, Sovereign has not demonstrated error with regard to the grant of summary adjudication of Health Net’s unclean hands defense. Because unclean hands was an independent basis for the trial court’s determination that Sovereign could not recover for claims submitted on behalf of the referred patients, we need not decide whether fraud in the inducement also supports that ruling.
A.Legal standards.
The defense of unclean hands arises from the maxim, “ ‘ “ ‘He who comes into Equity must come with clean hands.’ ” ’” (Kendall-Jackson, supra,76 Cal.App.4th at p. 978, quoting Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1059 (Blain).) “The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. [Citations.] The defense is available in legal as well as equitable actions.” (Kendall-Jackson, at p. 978.)
The wrongful conduct alleged to invoke the unclean hands doctrine need not be a crime or an actionable tort; instead, “[a]ny conduct that violates conscience, or good faith, or other equitable standards of conduct is sufficient cause to invoke the doctrine.” (Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) However, the conduct must relate directly to the cause at issue. (Ibid.) As Kendall-Jackson explained: “Courts have expressed this relationship requirement in various ways. The misconduct ‘must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants.’ [Citation.] ‘[T]here must be a direct relationship between the misconduct and the claimed injuries “ ‘. . . so that it would be inequitable to grant [the requested] relief.’ ” ’ [Citation.] ‘The issue is not that the plaintiff’s hands are dirty, but rather “ ‘ “that the manner of dirtying renders inequitable the assertion of such rights against the defendant.” ’ ” ’ [Citation.] The misconduct must ‘ “ ‘prejudicially affect . . . the rights of the person against whom the relief is sought so that it would be inequitable to grant such relief.’ ” ’ ” (Ibid.)
The unclean hands doctrine “is not a legal or technical defense to be used as a shield against a particular element of a cause of action. Rather, it is an equitable rationale for refusing a plaintiff relief where principles of fairness dictate that the plaintiff should not recover, regardless of the merits of his claim. It is available to protect the court from having its powers used to bring about an inequitable result in the litigation before it. [Citations.] Thus, any evidence of a plaintiff’s unclean hands in relation to the transaction before the court or which affects the equitable relations between the litigants in the matter before the court should be available to enable the court to effect a fair result in the litigation.” (Kendall-Jackson, supra, 76 Cal.App.4th at p.985.)
Whether the doctrine of unclean hands applies generally is a question of fact. (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 681 (Peregrine Funding); CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 639.) However, where the facts are undisputed,a party can prevail on the defense as a matter of law. (See Peregrine Funding, at pp. 680–681 [where plaintiff’s pleadings contain factual admissions that establish the basis of an unclean hands defense, “the defense may be applied without a further evidentiary hearing”]; see also Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th 564, 567[trial court properly granted summary adjudication of unclean hands defense].)
B.Sovereign has not demonstrated reversible error as to the unclean hands defense.
Although our review of the summary adjudication ruling is de novo, the appellant nonetheless has the burden of showing error, even if it did not bear the burden in the trial court. (Claudio v. Regents ofUniversity of California (2005) 134Cal.App.4th 224, 230.) In other words, “ ‘[d]e novo review does not obligate us to cull the record for the benefit of the appellant in order to attempt to uncover the requisite triable issues. As with an appeal from any judgment, it is the appellant’s responsibility to affirmatively demonstrate error and, therefore, to point out the triable issues the appellant claims are present by citation to the record and any supporting authority.... [R]eview is limited to issues which have been adequately raised and briefed.’ (Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 116.)” (Ibid.)
Sovereign’s opening brief on appeal is virtually silent on the defense of unclean hands. It sets out the elements of unclean hands in a single sentence, and then asserts without analysis that the trial court failed to address the elements or equities required for a finding of unclean hands. Sovereign then concludes: “Not a single court (other than the trial court here) has excused a defendant from proving the elements of the affirmative defense of . . . unclean hands, or barred a plaintiff from pursuing legitimate claims, based on a finding that the plaintiff violated Ins. Code, § 750. The statute nowhere states that a violation constitutes fraud or unclean hands. It simply cannot be the law that if a provider paid a marketer for a patient, that patient is not entitled to coverage under her health insurance policy.”
Sovereign’s cursory analysis is inadequate to meet its appellate burden of demonstrating error. To establish that the trial court erred by granting summary adjudication on Health Net’s unclean hands defense, Sovereign has to demonstrate either that there are triable issues of material fact or that Health Net was not entitled to summary adjudication as a matter of law. Sovereign does not contend that there are triable issues of material fact; to the contrary, it appears to concede that itviolated section 750 by paying substantial referral fees for approximately 300 patients insured by Health Net. Sovereign doescontend that the undisputed facts did not entitle Health Net to summary adjudication of its unclean hands defense, but it focuses almost entirely on supposed flaws in the trial court’s reasoning. Because our review is de novo, we are concerned with the correctness of the trial court’s result, not its reasoning, and will not disturb on appeal “ ‘ “ ‘a ruling or decision, itself correct in law . . . merely because given for a wrong reason.’ ” ’ ” (People v. Chism (2014) 58Cal.4th 1266, 1307, fn.13; see also A.L. v. Harbor Developmental Disabilities Foundation (2024) 102Cal.App.5th 477, 485.) We therefore will address Sovereign’s contentions only insofar as they suggest an error in the trial court’s result, not its reasoning.
Sovereign suggests that the trial court “concluded that it did not have to analyze the elements of the . . . unclean hands affirmative defense[], and admitted that it did not do so.” But the portion of the record Sovereign cites does not support this assertion. And, indeed, the trial court’s order granting summary adjudication makes clear that the trial court did consider the elements of unclean hands.
Sovereign also asserts that the trial court’s unclean hands finding was in error because, as explained inBlain,supra, 222Cal.App.3d at page 1060, “ ‘One is not barred from recovery for an interference with his legally protected interests merely because at the time of the interference he was committing a tort or a crime ....’” While this is a correct statement of law, Sovereign does not explain how the principle applies in this case, thus failing to carry its appellate burden. (See, e.g., Hodjat v. State Farm Mutual Automobile Ins. Co. (2012) 211 Cal.App.4th 1, 10 [“an appellant is required to not only cite to valid legal authority, but also explain how it applies in his case”], italics added; Benach v. County of Los Angeles (2007) 149Cal.App.4th 836, 852 [“When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived”].) In any event, subsequent cases have expanded on Blain’s analysis, explaining that “[i]t has long been held that the misconduct asserted in an unclean hands defense must be sufficiently related to the matter currently before the court.” (Peregrine Funding, supra, 133Cal.App.4th at p. 680.) Thus, “[t]he question is whether the unclean conduct relates directly ‘to thetransaction concerning which the complaint is made,’ i.e., to the ‘subject matter involved’ [citation], and not whether it is part of the basis upon which liability is being asserted.” (Id. at p.681.)
Applying this analysis, the Peregrine Funding court held that the doctrine of unclean hands barred a bankruptcy trustee’s claims on behalf of an entity used to perpetrate a Ponzi scheme against a law firm alleged to have helped the scheme’s perpetrators avoid detection. The court found that although the entity’s alleged misconduct did not “‘directly relate’ ” to its causes of action against the law firm for breaches of the duties of care and loyalty, the case nonetheless “present[ed] a classic case for the unclean hands defense.” (Peregrine Funding, supra, 133Cal.App.4th at p. 681.) The court explained: “In this case, [the entity and its principal’s] orchestration of the Ponzi scheme that defrauded investors is intimately related to the professional malpractice claims before the court. These claims are based entirely on the assertion that [the law firm’s] professional advice and tactics enabled [the entity and principal] to perpetuate their fraud on investors. Moreover, [the entity’s] participation in the fraud affects the equities between itself and [the law firm]. For [the entity]—the company plaintiffs allege was controlled by [the principal] and used by him to operate the Ponzi scheme—to now complain of [the law firm’s] role in enabling it to commit the fraud is unfair, and it is precisely this sort of unfairness the unclean hands doctrine seeks to address.(See Kendall–Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th at p. 985 [explaining the doctrine ‘is an equitable rationale for refusing a plaintiff relief where principles of fairness dictate that the plaintiff should not recover, regardless of the merits of his claim’].)”(Ibid.)
In the present case, Sovereign does not suggest that unlawful payments of referral fees did not relate to the “transaction[s]” that formed the basis of its breach of contract and insurance bad faith claims. Nor could it do so, asthe trial court granted summary adjudication only as to Sovereign’s claims relating to treatment of the approximately 300 patients for whom it paid referral fees. As in Peregrine Funding, therefore, Sovereign’s unlawful payments of referral fees to acquire the referred patients related directly “ ‘to the transaction concerning which the complaint is made’ ”—that is, to Sovereign’s claims for payment in connection with medical services rendered to these same patients. The trial court did not err in so concluding.
Sovereign also suggeststhat the trial court erred in granting summary adjudication of Health Net’s unclean hands defense because Sovereignsued as the assignee of its patients, who “were not involved in the payment of the referral fees and did not benefit from those payments.” It therefore argues that the unclean hands doctrine did not apply because the patients who had assigned their claims to Health Net did not act wrongfully. But the patients were not the plaintiffs in this case—Sovereign was. We echo the trial court’s observation that this would be a more difficult case if the patients themselves were seeking to recover for services they had actually been billed and paid for. Sovereign has not pointed us to any evidence that the patients have any exposure for any of these unpaid bills, nor has it cited any authority for the proposition that an unclean hands defense cannot be asserted against an assignee based on the assignee’s own unclean hands. Thus, like the trial court, we see no reason why the unclean hands defense cannot be invoked here, where the assignors—the patients—are blameless, but the assignee—Sovereign—comes to court withunclean hands.
For all the foregoing reasons, Sovereign has failed to demonstrate error with regard to the trial court’s grant of summary adjudication of Health Net’s affirmative defense of unclean hands.
III.Sovereign has failed to demonstrate prejudicial instructional error.
Sovereign next claims that the trial court made several instructional errors. Specifically, Sovereign urges that the trial court erred by (1) failing to instruct the jury regarding waiver, (2) instructing the jury that Sovereign violated section 750 by paying referral fees, (3) instructing the jury that paying consideration to or on behalf of a patient was a defense to Sovereign’s breach of contract and insurance bad faith claims, and (4) instructing the jury that the “maximum allowable amount” provisionsof the insurance policies were ambiguous.
We need not decide whether the trial court’s instructions were erroneous because Sovereign has failed to demonstrate any prejudice resulting from the asserted instructional errors. “‘Aparty is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence.’ ” (I.C. v. Compton Unified School Dist. (2025) 108 Cal.App.5th 688, 702.)However, “ ‘there is no rule of automatic reversal or “inherent” prejudice applicable to any category of civil instructional error.’ ” (McDoniel v. Kavry Management, LLC (2025) 114 Cal.App.5th 949, 969.) Instead,a judgment may be reversed based on instructional error only if “there is a reasonable probability the appealing party would have obtained a better result absent the error.” (Safeway Wage & Hour Cases (2019) 43 Cal.App.5th 665, 681; Drury v. Ryan (2025) 109Cal.App.5th 1102, 1112 [same].)
Prejudice “ ‘must be assessed in the context of the individual trial record.’ ” (I.C. v. Compton Unified School Dist., supra, 108 Cal.App.5th 702.) In Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580–581(Soule), the Supreme Court identified the factors a reviewing court must consider to evaluate prejudice in light of the record—namely, “ ‘(1) the state of the evidence, (2)the effect of other instructions, (3) the effect of counsel’s arguments, and (4) any indications by the jury itself that it was misled.’ ” (See also I.C., at p. 702.)Where there “seems little chance the jury was actually misled,”any error is harmless. (Soule, at pp. 582–583.)
The burden of establishing prejudice as a result of instructional error lies with the party assertingthe error. “An appellate court’s responsibility to conduct ‘an examination of the entire cause’ (Cal. Const., art. VI, § 13) is triggered ‘when and only when the appellant has fulfilled his duty to tender a proper prejudice argument. Because of the need to consider the particulars of the given case, rather than the type of error, the appellant bears the duty of spelling out in his brief exactly how the error caused a miscarriage of justice.’ [Citation.] These principles are derived from the axiom that prejudice is not presumed and the burden is on the appealing party to demonstrate that prejudice has occurred.” (Adams v. MHC Colony Park, L.P. (2014) 224 Cal.App.4th 601, 614, italics added.)
In the present case,Sovereign urges that the trial court erred bygiving and failing to give the instructions identified above, but itdoes notdiscuss any of the factors relevant to prejudice. Specifically, its appellate briefs do not fairly or adequately discuss the evidence presented at trial, the other instructions given, or counsels’ arguments. Instead, Sovereign merely asserts that the damage to its credibility and its case “is obvious.”
Because Sovereign has not demonstrated prejudice with regard to the trial record, this court could determine whether there is a reasonable probability that any instructional error affected the jury’s verdict only by undertaking an independent review of the record. We decline to do so. (See, e.g.,De Meo v. Cooley LLP, supra, 115 Cal.App.5th at p. 41 [appellate court need not “ ‘scour the record unguided’ ”]; Morales v. 22nd Dist. Agricultural Assn. (2016) 1 Cal.App.5th 504, 529 [appellants failed to demonstrate prejudice where they “provided no argument concerning” the Soule factors].) We therefore conclude that Sovereign failed to demonstrate prejudicial instructional error.
IV.Sovereign has failed to demonstrate that the trial court prejudicially erred by excluding evidence.
Sovereign contends that the trial court erred by excluding documents exchanged between Health Net and the CDI between 2017 and 2019. Those documents included correspondence between Health Net and the CDI, two orders to show cause (OSCs) issued by the CDI, and a settlement agreement resolving the orders to show cause. Sovereign urges that the excluded documents were relevant to issues before the jury—specifically, whether the reimbursement rate Health Net adopted in 2016 for out-of-network residential treatment was reasonable. Sovereign thus contends that the CDI documents should have been admitted, and the exclusion of the documents prevented Sovereign from fully and fairly presenting its case to the jury.
We need notdecide whether the trial court erred by excluding the CDI documents because, again,Sovereign has not met its appellate burden of demonstrating prejudice. “A judgment will not be set aside based on the erroneous [exclusion] of evidence unless ‘the reviewing court is convinced after an examination of the entire case, including the evidence, that it is reasonably probable a result more favorable to the appellant would have been reached absent the error.’ ” (Hernandez v. County of Los Angeles (2014) 226 Cal.App.4th 1599, 1616; Evid.Code, § 353, subd. (b).) Prejudice “is never presumed but must be affirmatively demonstrated by the appellant.” (Brokopp v. Ford Motor Co. (1977) 71 Cal.App.3d 841, 853–854.) To meet this burden, the appellant must show, considering the entire record, that it is reasonably probable the jury would have reached a result more favorable to the appellant absent the error. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800 (Cassim).)
Sovereign makes only the barest contention of prejudice, urging that the omission of the CDI documents prevented it from fully and fairly presenting its case to the jury. But it fails to demonstrate in light of the entire record—i.e., with reference to “the entire case, including the evidence adduced, theinstructions delivered to the jury, and the entirety of [counsels’] argument” (Cassim, supra, 33 Cal.4th at p. 802)—that a different result was reasonably probable if the alleged error had not occurred. We therefore cannot conclude any error was prejudicial.
V.Sovereign has failed to demonstrate prejudicial error with regard to Brandt fees.
Sovereign contends that the trial court erred by ruling that although Sovereign could pursue an insurance bad faith claim, it could not recover so-called Brandt fees. Brandt fees are attorney fees that an insured reasonably and necessarily incurs to obtain policy benefits that an insurer wrongfully denied. Brandtfees constitute an economic loss proximately caused by the insurer’s bad faith denial of insurance benefitsand are recoverable as tort damages, rather than costs. (See Brandt, supra, 37 Cal.3d at pp.817–819; Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38Cal.4th 1252, 1255.)Sovereign urges that the trial court’s ruling with regard to Brandt fees is “contrary to law and public policy” and should be reversed.
Again, any error is not prejudicial. As discussed above, the jury entered a verdict for Health Net on Sovereign’s bad faith claim—that is, it found that Sovereign did not prove that Health Net engaged in insurance bad faith.The trial court’s order limiting Sovereign’s recoverable damages for bad faith, therefore, did not affect the judgment. (Code Civ. Proc., § 475 [“[n]o judgment, decision, or decree shall be reversed or affected by reason of any error, ruling, instruction, or defect, unless it shall appear from the record that such error, ruling, instruction, or defect was prejudicial, and also that by reason of such error, ruling, instruction, or defect, the said party complaining or appealing sustained and suffered substantial injury, and that a different result would have been probable if such error, ruling, instruction, or defect had not occurred or existed”].)
VI.Sovereign has not demonstrated that the trial court prejudicially erred by granting judgment for Health Net on Sovereign’s ERISA claims.
Sovereign contends finally that the trial court erred by granting judgment for Health Net on Sovereign’s ERISA claims. The claim lacks merit.
As discussed above, the trial court found that Sovereign’s claims for payment for care rendered to the ERISA patients were barred by the affirmative defenses of fraud and unclean hands. Sovereign urges that both rationales “are flawed.” With regard to fraud, Sovereign contends that “it is a bedrock principle of ERISA law that a benefit claim administrator cannot deny a claim for one reason and then argue during litigation that there are other reasons to deny the claim as well. [Citation.] Likewise, a trial court is also prevented from using new reasons to uphold the denial of its claim.” Because Health Net did not inform its insureds that it suspected Sovereign of fraud, Sovereign urges that Health Net waived its fraud defense with regard to the ERISA patients.
In the trial court, Health Net asserted that Sovereign could not argue that Health Net waived its fraud defense because neither Sovereign nor the insuredshad exhausted the administrative appeal process. Health Net noted that some federal authoritieshold that a plan beneficiary (i.e., an insured) may, by failing to exhaust administrative remedies, waive an objection to a reason being advanced for the first time incourt for the denial of an ERISA claim. In the present case, it was undisputed that neither Sovereign nor any of the ERISA patients took advantage of Health Net’s administrative appeals process. Accordingly, Health Net urged, Sovereign and the ERISA patients did not exhaust their administrative remedies and therefore could not assert the defense of waiver.
Sovereign countered below that it was excused from any exhaustion requirement because exhaustion would have been futile. The trial court disagreed, concluding that Sovereign’s futility argument “founders for want of proof.” The court explained: “Counsel for Sovereign admittedthat the clinics involved here had not presented a declaration from any of the 11ERISA patients or from any of the Sovereign entities that they had considered appealing the denial of benefitsbut decided not to institute the process because it would be futile. This missing evidence is critical . . . . There is no orinsufficient evidence before the court of any effort to engage in the full administrative processwith these eleven patients or to even inquire about an appeal. Most of the denials orcommunications to Sovereign from Health Net regarding the 11 ERISA patients at issue herewere requests for supporting medical records, licensure documents, and treating physician’srecords reflecting need for treatment. Little of this information was ever provided to Health Net.It would be inequitable for Sovereign to refuse to participate in the administrative process itselfand then contend that an appeal would have been futile. Had Sovereign provided the informationrequested, the claim might have been paid in full, or a subsequent appeal might well have beengranted.” Thus, the court concluded, “Sovereign has waived the right to claim that Health Net mustrely only on the stated reasons set forth in its denial letters.”
On appeal, Sovereign again asserts that it was not required to exhaust its administrative remedies because exhaustion would have been futile. It asserts: “[A]s demonstrated at trial, Health Net argued throughout that it was not bound by the 75% reimbursement provision in its benefit plans, and instead it was allowed to apply a percentage of Medicare rates.. . . Under these circumstances, continued engagement in the claim and appeal process was clearly pointless because Health Net never had any intention, even through litigation, of paying the appropriate amount on any of the ERISA claims.” (Italics added.)
Sovereign’s exhaustion requirement expressly relies on Health Net’s trial evidence—specifically, on Health Net’s contention “throughout . . . trial”that its reimbursement rates were lawful. But as we have said, Sovereign’s appellate briefs do not discuss the evidence presented at trial. Sovereign therefore has not met its appellate burden to demonstrate error. (E.g., Julian v. Mission Community Hospital (2017) 11 Cal.App.5th 360, 390, fn. 12 [appellant’s burden to demonstrate errormust be“ ‘ “supported by appropriate citations to the material facts in the record” ’ ”].)
Alternatively, Sovereign contends the trial court erred by concluding that the doctrine of unclean hands barred Sovereign from recovering because “the only affirmative defenses [Health Net] could assert were those that defeated recovery bythe patients.” We have already rejected this argument. (See section II(B), ante.)
For both of these reasons, Sovereign therefore has failed to demonstrate that the trial court erred by granting judgment for Health Net on Sovereign’s ERISA claims.
DISPOSITION
The judgment is affirmed. Respondents are awarded their appellate costs.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

EGERTON, Acting P. J.

We concur:

HANASONO, J.

OCHOA,J.*