California court rules on case regarding Rosenthal Act
Generally, a hirer wouldn’t be vicariously liable for the conduct of an independent contractor that it employed, even when the independent contractor was acting within the scope of its employment, a recent ruling noted.
The distinction between independent contractors and employees arose to limit the hirer’s vicarious liability for the misconduct of a person rendering service to him, the decision added.
In the case of Olson v. La Jolla Neurological Associates et al., the California Court of Appeal said that the Rosenthal Fair Debt Collection Practices Act didn’t impose vicarious liability on a creditor for the actions of an independent contractor who wasn’t the creditor’s agent.
The case arose after a doctor provided emergency neurosurgical services to a patient for a hemorrhagic stroke in 2017. La Jolla Neurological Associates (LJNA), the doctor’s solely owned professional corporation, was using McKesson as its third-party billing service at the time. It later retained WRS, another billing service, to take over.
In March 2018, WRS generated an invoice seeking payment of $1,713.54 for the medical services that the patient received and sent it to his home address. The next month, LJNA received from “The Olson Family” unsigned correspondence calling the invoice “harassment” and stating that payment inquiries should be submitted through Medicare and the VA Medical Center.
Over the next few months, LJNA received copies of similar correspondence from the same sender, who never gave any identification number, social security number, or policy number. WRS asked LJNA for assistance in obtaining insurance information from the patient.
An employee of LJNA left a voicemail requesting the patient’s insurance information. The patient’s wife returned the call to say that her husband died and that she presumed that the VA Medical Center paid for the bill. In September 2018, the insurer paid LJNA the amount owed for the patient’s bill.
In October 2018, the patient’s widow filed against the doctor and LJNA a complaint for unfair debt collection under the Rosenthal Act. The lawsuit alleged that the doctor was LJNA’s president, owner, and sole treatment provider and was actively involved in LJNA’s business affairs, including its collection of accounts receivable.
The widow claimed that the doctor and LJNA were both debt collectors within the meaning of the Rosenthal Act. They allegedly violated the Rosenthal Act by sending multiple bills and by making numerous phone calls seeking payment even though the widow told them to stop contacting her and to seek payment through Medicare and the VA Medical Center.
The doctor and LJNA filed a summary judgment motion arguing that they were not debt collectors under the Rosenthal Act and that they never made any attempt at debt collection as defined by that statute.
The widow opposed the motion by claiming that LJNA was vicariously liable for its own employees’ conduct and for WRS’s actions since the third-party billing company was acting under its direction and control as its agent.
The California Court of Appeal for the Fourth District, First Division affirmed the trial court’s judgment in favor of the doctor and LJNA.
The appellate court ruled that a medical service provider that exclusively used an unaffiliated, third-party billing service to collect payment for services rendered to patients was not considered a debt collector under the Rosenthal Act.
A debt collector, as defined by the Rosenthal Act, should personally participate in consumer debt collection either on behalf of itself or of others. The debt collector should regularly engage in debt collection in the ordinary course of business, the appellate court said. Engaging in an activity meant taking part in doing it oneself and did not ordinarily mean hiring someone else to do it, the appellate court explained.
