Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_12-cv-05847/USCOURTS-cand-3_12-cv-05847-15/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

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Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

RHEUMATOLOGY DIAGNOSTICS 

LABORATORY, INC, et al.,

Plaintiffs,

v.

AETNA, INC., et al.,

Defendants.

Case No. 12-cv-05847-WHO 

ORDER GRANTING IN PART AND 

DENYING IN PART DEFENDANT’S 

MOTION FOR SUMMARY JUDGMENT

Re: Dkt. Nos. 216, 252, 258, 259, 260

INTRODUCTION

Plaintiffs in this case, four California-based providers of clinical laboratory services, 

accuse defendants Quest Diagnostics Incorporated and Quest Diagnostics Clinical Laboratories 

Incorporated (collectively, “Quest”) of selling lab tests at below-cost prices in violation of 

California’s Unfair Practices Act (“UPA”). There are material factual disputes over plaintiff 

Hunter Laboratories, Inc.’s (“Hunter’s”) claim that it was harmed by Quest’s below-cost sales of 

individual tests to Aetna. Inc., and over plaintiff Surgical Pathology Associates’ (SPA’s”) claim 

that it was harmed by Quest’s below-cost capitated contract with Partnership Health Plan. Those 

claims may proceed. The rest of plaintiffs’ claims, however, are either barred by the settlement 

agreement that Hunter entered into with Quest in a prior case in 2011, or based on damages 

theories that plaintiffs have failed to show are more than speculation and guesswork. Quest is 

entitled to summary judgment on those claims. Accordingly, Quest’s motion for summary 

judgment is GRANTED IN PART and DENIED IN PART. 

BACKGROUND

I. FACTUAL BACKGROUND

The parties are all providers of clinical laboratory services. Quest is a national laboratory

with operations in California. Moverley Decl. ¶ 4. Plaintiffs Hunter, Surgical Pathology 

Associates (“SPA”), Rheumatology Diagnostics Laboratory, Inc. (“RDL”), and Pacific Breast 

Pathology Medical Corp. (“PBP”) are smaller, California-based laboratories. Plaintiffs describe

themselves as “regional” laboratories. Plaintiffs accuse Quest of violating California’s Unfair 

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Practices Act (“UPA”) and Unfair Competition Law (“UCL”) by selling its laboratory services 

below-cost “for the purpose of injuring plaintiffs and destroying competition.” SAC ¶¶ 151-52. 

Plaintiffs allege that as a result of Quest’s below-cost sales, they have been “deprived of . . . a 

large number of their actual and potential customers.” SAC ¶ 153. 

Plaintiffs charge Quest with three particular methods of below-cost pricing: (i) entering

below-cost capitated contracts with Independent Physician Associations (“IPAs”)

1 for the purpose 

of securing lucrative fee-for-service business from physicians belonging to the IPAs; 

(ii) undercutting plaintiffs in the general fee-for-service market by selling lab tests at below-cost 

prices; and (iii) using below-cost sales to secure “network narrowing” contracts with major health 

insurance providers, such as Aetna, Inc. (“Aetna”) and California Physicians’ Services, Inc. dba 

Blue Shield of California (“Blue Shield”). Opp. 5. 

The parties made voluminous evidentiary submissions in connection with this motion. The 

following is a summary.

A. Moverley Declaration

Quest submits a declaration by Robert Moverley, Quest’s Regional Vice President of 

Operations for the West Region, stating the following: The clinical laboratory market in California 

is “highly competitive.” Moverley Decl. ¶ 4. Laboratory Corporation of America (“LabCorp”), 

another national laboratory, is Quest’s biggest competitor, at least in the market for capitated 

business. Id. at ¶¶ 4, 10. Quest also competes with BioReference Laboratories, which purchased 

Hunter’s assets in 2013, as well as with other California-based independent laboratories, out-ofstate laboratories, and in-hospital laboratories. Id. 

There are four “elements of competition” in the market for laboratory services: price, 

 1 IPAs are “large groups of independent physicians who practice medicine in separate medical 

groups [but] come together to share financial risk under HMO contracts.” Moverley Decl. ¶ 15. 

IPAs are generally paid by insurance providers on a “capitated” basis. Id. This means that instead 

of receiving fee-for-service payments from an insurance provider, an IPA generally accepts a per- member, per-month payment from in exchange for providing or arranging all medical services 

needed by the insurance provider’s members. Id. IPAs in turn generally seek out labs that will 

accept payment on a capitated basis themselves. Id. It is undisputed that plaintiffs do not 

currently offer their services on a capitated basis and do not currently compete for capitated 

contracts. See, e.g., id. at ¶¶ 16, 23.

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quality, ease of access to “draw facilities,” and participation in the networks of insurance 

providers. Id. at ¶¶ 4-8. Quest is in-network with a number of major insurers, including Aetna 

and Blue Shield. Id. at ¶ 8. Regional laboratories like plaintiffs “struggle to compete” with 

laboratories that are in-network with major insurers. Id. 

Quest’s “strategy [is not] to price below cost to any customer,” and its purpose in pricing 

its tests in California “has never been to target competitors or destroy competition.” Id. at ¶¶ 10, 

13. Further, Quest’s pricing strategy has been focused on competition with LabCorp, not 

plaintiffs. Id. With the exception of Hunter, Moverley had never heard of plaintiffs until this 

litigation. Id. at ¶ 12. 

Capitated business usually generates lower profit margins2 than fee-for-service business. 

Id. at ¶ 19. In addition, profit margins on capitated business are uncertain because payments do 

not adjust according to fluctuations in testing volume. Id. Certain of Quest’s accounts with IPAs 

have yielded negative contribution margins on some occasions. Id. But negative contribution 

margins on capitated business are not a “deliberate strategy.” Id. When they have occurred, Quest 

has “strived to bring the account into the black as quickly as practicable.” Id. Quest’s current

policy is to obtain at least a percent contribution margin on all capitated accounts, and it has 

 

Capitated contracts “give a laboratory the opportunity to display the quality and reliability 

 

2

 Quest uses three different measures of profit margins relevant to this motion. First, net revenue 

minus “cost of testing” equals the “gross margin.” Lambrinos Decl. Ex. 9 at 1512. Quest defines 

“cost of testing” to include the “direct costs” related to performing a test, such as lab supplies and 

direct labor. Lambrinos Decl. Ex. 11 at 1558. Second, the gross margin minus “other variable 

costs” equals the “contribution margin.” Lambrinos Decl. Ex. 9 at 1512. Third, the contribution 

margin minus fixed costs equals the operating margin. Id. The UPA employs a “fully allocated 

cost approach” to determine whether a sale is below-cost, “an approach which reflects that portion 

of the [defendant’s] total costs attributable on an average basis to each unit of output.” W. Union 

Fin. Servs., Inc. v. First Data Corp., 20 Cal. App. 4th 1530, 1537 (1993) (internal quotation marks 

omitted). 

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of its work to the IPA’s physician members, some of whom may be able to refer other business . . . 

to the laboratory.” Id. at ¶ 18. 

Apart from its business with IPAs, Quest offers discounted pricing to certain physicians 

and hospitals. Id. at ¶ 24. These arrangements are governed by Quest’s “Client Pricing Policy,” 

which requires 

B. Quest’s Capitated Contracts with IPAs

Plaintiffs assert that according to Quest’s own internal financial statements, sixty percent 

of its capitated IPA contracts in California generated negative contribution margins “throughout 

the relevant period.” Opp. 7; Plandowski Decl. ¶ 14. Plaintiffs base this figure on an expert 

analysis of data showing the performance of Quest’s Southern California IPA accounts in 2008. 

Plandowski Decl. ¶¶ 14-16. Plaintiffs’ expert, Joseph Plandowski, states that it is reasonable to 

assume that a similar percentage of Quest’s Northern California IPA accounts operated with a 

negative contribution margin. Plandowski also states that with the exception of one account (of 

Quest’s 121 accounts in Southern California), each of the accounts with a negative contribution 

margin in 2008 maintained a negative contribution margin into 2014. Id. at ¶ 16. In other words, 

“the losers remained losers and the winners remained winners.” Id. In addition to Plandowski’s 

testimony, plaintiffs emphasize that Quest admits (in Moverley’s declaration) that at least some of 

its capitated contracts with IPAs have resulted in negative contribution margins. Opp. 6; 

Moverley Decl. ¶ 19 (“On some occasions, [Quest’s] profit margins on particular IPA accounts 

have yielded negative profit margins.”). 

In response to Moverley’s statement that Quest has tried to bring IPA accounts with 

negative contribution margins “into the black as quickly as practicable,” plaintiffs note that 

Moverley admitted at his deposition that one of Quest’s IPA accounts maintained a negative 

contribution margin for approximately seven years. Moverley Dep. 185 (Lambrinos Decl. Ex. 1). 

The deposition excerpt does not make clear when that seven year period occurred. See id. In 

response to Moverley’s statement that Quest has not approved any new capitated contracts with 

negative contribution margins since at least 2006, plaintiffs assert that many of the capitated 

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contracts that were approved before 2006 continued to generate negative contribution margins 

“well after 2006.” Opp. 7. 

To show that Quest has entered below-cost capitated IPA contracts, plaintiffs also point to 

Quest’s SEC filings. Plaintiffs contend the filings disclose sufficient information to conduct a 

“simple calculation of fully-allocated costs per requisition.”3 Opp. 7. Plaintiffs assert that 

according to the filings, Quest’s average fully-allocated costs per capitated requisition exceeded its 

average revenue per capitated requisition in each year from 2008 to 2013. Opp. 7-8; Plandowski 

Decl. Ex. 16. According to plaintiffs, this national data indicates the existence of an “even greater 

disparity” between fully-allocated costs and revenue in California, “where costs for labor, real 

estate, and other items . . . are generally higher than the national average.” Opp. 7. 

Plaintiffs allege that Quest’s purpose in underpricing its capitated contracts with IPAs is to 

obtain lucrative fee-for-service business from physicians belonging to the IPAs. Quest’s “IPA 

Capitated Pricing Guidelines” (effective July 1, 2006) state that 

 Lambrinos Decl. Ex. 7. 

 

 

Plandowski states that “[u]sing below-cost capitated contracts to obtain [fee-for-service] 

work from referring physicians is damaging to competition because it artificially deprives smaller 

 

3 Plaintiffs state that a “requisition” is a group of tests ordered at the same time for a single patient, 

usually two or three tests. SAC ¶ 61. 

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independent laboratories access to this [fee-for-service] revenue stream.” Plandowski Decl. ¶ 24. 

Mike Armstrong of Sharp Health Care, another regional laboratory, testified at his deposition that 

once a physician does a “significant volume” of capitated business with a particular laboratory, 

“the office staff are going to start wanting to have one-stop shopping. They are not going to want 

to have a bunch of different systems.” Armstrong Dep. 21 (Lambrinos Decl. Ex. 23). 

On the basis of this evidence, plaintiffs claim that Quest knew that its capitated IPA 

contracts resulted in significant amounts of fee-for-service revenues, and that Quest “used belowcost pricing in its capitated IPA contracts for the purpose of injuring competitors and destroying 

competition in both the capitated and fee-for-service markets.” Opp. 9. 

C. General Fee-For-Service Market

Plaintiffs assert that Quest sells its tests below-cost in the general fee-for-service market as 

well. Plaintiffs point to the following data regarding the revenue generated by Quest’s top 100 

tests by volume in California for the years 2008 to 2014, excluding revenue from government 

payors: 

Year 2008 2009 2010 2011 2012 2013 2014

Percent of revenue

(generated by top 

100 tests) with 

negative gross 

margin

Percent of revenue 

(generated by top 

100 tests) with 

negative 

contribution 

margin

Percent of revenue 

(generated by top 

100 tests) with 

negative operating 

margin

Opp. 10; Regan Rpt. 7-8, Ex. 2.6.1 (Lambrinos Decl. Ex. 46). 

Quest tracks the profitability of its tests through a system called “e-account.” Opp. 10; 

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Miller Dep. 109 (Lambrinos Decl. Ex. 6). According to e-account, Quest has approved the sales 

of tests with negative gross margins, meaning that these sales also had negative contribution and 

operating margins. See Plandowski Decl. ¶ 28, Ex. 18. 

D. Quest’s “Network Narrowing” Contracts

Plaintiffs identify three “network narrowing” contracts secured by Quest through the use of 

below-cost pricing: one with Aetna, one with Blue Shield, and one with Partnership Health Plan. 

1. Aetna

Plaintiffs assert that Quest caused Aetna to exclude Hunter from its network by offering 

Aetna a discounted fee schedule that included tests priced below-cost. Opp. 11. Plaintiffs do not 

assert that any of the other plaintiffs were injured in this way, although plaintiffs do claim that 

PBP was prevented from ever attaining in-network status as a result of Quest’s contract with

Aetna. See id. 

Effective April 1, 2012, the Seventeenth Amendment to Quest’s contract with Aetna 

includes a provision requiring Aetna to 

 Lambrinos Decl. Ex. 29 at 8. To comply with this provision, 

 Gentleman Dep. 68-69 (Lambrinos Decl. 

Ex. 30). Richard Gentleman5 stated at his deposition that Aetna 

 Id. at 194. 

Plaintiffs acknowledge that Quest’s contract with Aetna was profitable overall6 but 

contend that a careful analysis of the associated fee schedule reveals that the contract includes 

 

5 Gentleman is the head of “National Ancillary Contracting” at Aetna. Dkt. No. 123-1. 

6 Quest’s Executive Director of Health Plans, Gary McCabe, submitted a declaration stating that 

the overall contribution margin on Quest’s contract with Aetna has ranged from percent, 

while the operating margin has ranged from percent. McCabe Decl. ¶ 8. He states that 

Quest has earned over dollars on the contract each year. Id. 

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numerous below-cost prices for individual tests. Opp. 11. Plaintiffs’ expert, Greg Regan, states 

that the evidence indicates that Quest offered Aetna prices on certain tests that were below-cost 

even according to the gross margin measure. Regan Rpt. 8-9 (Lambrinos Decl. Ex. 46). Regan 

specifically identifies several tests with costs of testing significantly higher than the prices offered 

to Aetna. Id. For example, Quest test code had a cost of testing of in Q1 2012 but 

was offered to Aetna for ; likewise, Quest test code had a cost of testing of 

in Q1 2012 but was offered to Aetna for Id. Plaintiffs contend that in light of this 

evidence of below-cost pricing, the Seventeenth Amendment “represents a purposeful act by 

Quest to use below-cost prices to injure competitors by having them excluded from Aetna’s 

network.” Opp. 11. 

2. Blue Shield 

Plaintiffs assert that Quest also induced Blue Shield to terminate Hunter from its network 

by offering a fee schedule with below-cost test pricing. Opp. 11-12. Plaintiffs again do not assert 

that any of the other three plaintiffs were injured in this way, except to claim that PBP was 

prevented from ever attaining in-network status as a result of Quest’s contract with Blue Shield. 

See id. 

In April 2009, Quest and Blue Shield entered an amendment to their contract. See

Lambrinos Decl. Ex. 31. The amendment provides that Blue Shield will 

 

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Regan states that the evidence indicates that Quest offered Blue Shield prices on certain 

tests that were below-cost even according to the gross margin measure.7 Regan Rpt. 8. Regan 

specifically identifies several tests with costs of testing significantly higher than the prices offered 

to Blue Shield. Id. Plaintiffs contend that in light of this evidence of below-cost sales, the 2009 

amendment to the Blue Shield contract “represents a purposeful act by Quest to use below-cost 

pricing to injure competition.” Opp. 12. 

3. Partnership Health Plan

Plaintiffs claim that Hunter and SPA lost business from four existing accounts as a result 

of a capitated contract that Quest entered with Partnership Health Plan in 2009. Opp. 14; 

Laboratory Services Agreement at 1 (Sandrock Decl. Ex. 6); C. Reidel Dep. 268-69 (Sandrock 

Decl. Ex. 3). The accounts are Alexander Valley, Chanate Health Center, Petaluma Health Center, 

and Southwest Community Clinic. Opp. 14; C. Reidel Dep. 268-69 (Sandrock Decl. Ex. 3). 

Hunter lost its business with each of these accounts shortly after the contract took effect on 

October 1, 2009. See Opp. 14; Fuchs Decl. ¶¶ 2-3 (Sandrock Decl. Ex. 35); C. Reidel Dep. 268-

69 (Sandrock Decl. Ex. 3); Prendergast Dep. 50-51 (Lambrinos Decl. Ex. 42). SPA likely lost its 

business with the accounts at or around the same time, although this is not clear from the record.8

 

Naomi Fuchs, CEO of Santa Rosa Community Health Centers, of which Chanate Health 

 

7 Plaintiffs concede that Quest’s contract with Blue Shield, like its contract with Aetna, was 

profitable overall. McCabe states in his declaration that the contribution margin on the Blue 

Shield contract has ranged from to percent, and the operating margin has ranged from 

 to percent. McCabe Decl. ¶ 7. He states that Quest has earned over on the 

contract each year. Id. 

8

 At oral argument, when asked to identify evidence in the record indicating when SPA lost its 

business with the four accounts allegedly lost as a result of Quest’s capitated contract with 

Partnership Health Plan, Quest pointed to its contract with Partnership Health Plan, attached as 

Exhibit 6 to the Declaration of Ryan Sandrock in Support of Quest’s Motion for Summary 

Judgment, Dkt. No. 217-1. See Tr. 28, 51 (Dkt. No 266). Quest did identify any evidence 

showing when SPA actually lost its business with the four accounts. See id. 

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Center and Southwest Community Clinic are now a part, states in a declaration that Quest’s 

contract with Partnership Health Plan required Chanate Health Center and Southwest Community 

Clinic to use Quest for diagnostic testing services for Partnership Health Plan’s members. Fuchs 

Decl. ¶ 4 (Sandrock Decl. Ex. 35). Fuchs also states that “if not for [Quest’s contract with 

Partnership Health Plan] and had Hunter continued to offer competitive pricing and services, 

[Chanate Health Center and Southwest Community Clinic] would . . . probably have continued to 

use Hunter for diagnostic testing services.” Id. at ¶ 5.

E. Damages Allegedly Caused by Quest’s Below-Cost Pricing

Plaintiffs claim that Quest’s below-cost pricing caused Hunter and SPA to lose business 

from a number of existing accounts. Opp. 12; Regan Rpt. 14-18; 35-37. Plaintiffs also claim that 

Quest’s below-cost pricing has caused each of them to lose business from potential accounts. 

Opp. 12; Regan Rpt. 18-23; 34-38. Because Quest’s summary judgment motion is largely focused 

on causation and damages issues, I review the damages alleged by each of the four plaintiffs. 

1. Hunter

Hunter was founded in 2003. As of November 14, 2012, the date this case was filed, 

Hunter offered “Routine Clinical Laboratory Testing” in Northern California and “Advanced 

Lipid Testing” throughout the country. SAC ¶ 13. On August 7, 2013, Hunter finalized a sale of 

80 percent of its assets to BioReference, which plaintiffs describe as the largest privately owned 

clinical laboratory in Northern California. SAC ¶¶ 7, 13; Regan Rpt. 23. 

Hunter claims that it lost business from sixty-three accounts due to the termination of its 

in-network status with Aetna and Blue Shield following execution of the Seventeenth Amendment 

to the Aetna contract and the 2009 amendment to the Blue Shield contract. See Opp. 12-15; 

Quest’s Appendix A (Dkt. No. 216-3). As noted above, Hunter claims that it lost business from 

four accounts as a result of Quest’s contract with Partnership Health Plan. Opp. 14; C. Reidel 

Dep. 268-69 (Sandrock Decl. Ex. 3). Hunter also claims that it lost business from at least the 

following seven accounts as a result of Quest’s below-cost capitated IPA contracts: Alta Bates 

Medical Group, Bolinas Community Health Center, Diagnostic Labs, Elsie Allen Health Center, 

Lombardi Medical, Point Reyes Community Health Center, Stinson Beach Medical Center. Opp. 

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12-15; Regan Rpt. Ex. 2.1.2.

Regan states that Hunter began to lose business from existing accounts in September 2012 

as a result of the termination of its in-network status with Aetna, and in May 2010 as a result of 

the termination of its in-network status with Blue Shield. Regan Rpt. 17. Regan also states that 

Hunter lost business from existing accounts when it was precluded from obtaining the fee-forservice business associated with Quest’s below-cost capitated IPA contracts. Regan Rpt. 14-16. 

Regan emphasizes that his calculations regarding this lost fee-for-service business do not assume 

that Hunter, or any other plaintiff, would have obtained capitated business from the IPAs that 

contracted with Quest. Id. 

In addition to these damages, Regan opines that Hunter suffered damages in the form of 

“lost opportunity revenue.” Regan Rpt. 18-23. Regan attributes Hunter’s lost opportunity revenue 

to Quest’s below-cost capitated IPA contracts, and to its below-cost sales in the general fee-forservice market. Id. 

Regan calculates Hunter’s overall damages from lost profits at between $3.4 million and 

$6.9 million, depending on what measure of profit margins (i.e., gross margins, contribution 

margins, or operating margins) is applied to Quest’s below-cost sales. Regan Rpt. at 23. Regan 

also finds that Quest’s below-cost sales caused Hunter several million dollars in damages from 

“lost business value.” Id. at 23-33.

Declarations from three physician members of the IPA, “Physicians Medical Group,” state 

that absent the capitated contract between Quest and Physicians Medical Group, they would send 

more of their non-capitated business to Hunter and SPA. Lambrinos Decl. Exs. 37-39. Each 

declaration uses the same language: “I have never considered using [Hunter] or [SPA], or have 

offered these entities only limited business, because [Physicians Medical Group] has a capitated 

contract with Quest. If not for this contract, I would send a greater amount of my non-capitated 

business” to Hunter and SPA. Id. at ¶ 1.9

 

 9 Quest points out that the wording of the Physicians Medical Group declarations is odd given that 

the declarations were signed in fall 2014, well after Hunter had finalized the sale of the majority of 

its assets to BioReference. Reply 9 n.13.

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2. SPA

SPA provided pathological testing services for a number of entities, in particular Hunter, 

from which SPA procured approximately fifty percent of its business. Weiss Dep. 42-43 

(Sandrock Decl. Ex. 12); Regan Rpt. 35. SPA did not operate its own laboratories, instead relying 

on Hunter’s infrastructure. Id. SPA claims to have lost business from four existing accounts as a 

result of Quest’s below-cost pricing: (i) Alexander Valley Health Center Diagnostic Labs; (ii) 

Chanate Health Center; (iii) Petaluma Health Center; (iv) Southwest Community Clinic. Sandrock 

Decl. Ex. 13 at 5-6. These are the same four accounts that Hunter claims to have lost as a result of 

Quest’s contract with Partnership Health Plan.

Regan states that given the close relationship between Hunter and SPA, any economic 

damages suffered by Hunter had a “corollary impact” on SPA. Regan Rpt. 35. Regan also states

that it is reasonable to expect that SPA’s performance absent Quest’s below-cost sales would have 

“mirrored” Hunter’s performance in that scenario. Id. at 36. Regan calculates SPA’s damages at 

between $0.3 million and $0.9 million, depending on what measure of profit margins is applied to 

Quest’s below-cost sales. Id. at 37 n.177.

3. RDL

RDL offers “Specialty Rheumatological Diagnostic Testing” across the country, with the 

majority of its business coming from Southern California. SAC ¶ 12; Morris Dep. 117 (Sandrock 

Decl. Ex. 15). RDL asserts that it lost business from twelve potential accounts as a result of 

Quest’s below-cost sales: (i) Amin Attia; (ii) Andre Babajanians; (iii) Michael Fabricant / Michael 

Sugarman; (iv) Kenneth Hsu; (v) Sam Metyas; (vi) Bruce Dreyfus; (vii) Elyse Rubenstein; 

(viii) Barry Shibuya; (ix) Marilyn Solsky; (x) Boniske / Watrous; (xi) Christian Dequet; and 

(xii) Neville Udwadia. Quest’s Appendix A at 6-7.

Regan states that RDL was damaged by Quest’s below-cost sales in the form of lost 

opportunity revenue. Regan Rpt. 34-35. Regan attributes RDL’s lost opportunity revenue both to 

Quest’s capitated contracts with IPAs, and to Quest’s other below-cost sales in the general fee-for 

service market. Id. Regan calculates RDL’s damages at between approximately $2.9 and $6.3 

million, depending on what measure of profit margins is applied to Quest’s below-cost sales. Id.

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at 35 n.167. 

4. PBP

PBP offers “Specialty Breast Pathology Testing” throughout California. SAC ¶ 12. PBP 

has never had more two employees. Dutt Dep. 16 (Sandrock Decl. Ex. 18). Dr. Philip Dutt is 

PBP’s only current employee and conducts the business out of his home. Dutt Dep. 96. Since its 

formation, PBP has generated a total of $7,800 in revenue. Id. at 54. Plaintiffs assert that PBP 

lost business from two accounts as a result of Quest’s below-cost sales: (ii) RadNet and 

(ii) Imaging Healthcare Specialists (“Imaging Healthcare”). Sandrock Decl. Ex. 19. Dutt stated at 

his deposition that the extent of PBP’s attempts to obtain business from Imaging Healthcare was 

three approximately five-minute conversations with Imaging Healthcare’s chief financial officer. 

Dutt Dep. 104-05 (Sandrock Decl. Ex. 18). 

Regan calculated PBP’s damages based on the assumptions that PBP was unable to obtain 

fee-for-service sales due to Quest’s capitated contracts with IPAs, and that Quest’s below-cost 

sales precluded PBP from obtaining in-network status with either Aetna and Blue Shield. Regan 

Rpt. 37-38. Regan bases these assumptions on various excerpts from Dutt’s deposition transcript. 

See id. at 38 n.178-79. In one excerpt, Dutt states that Quest’s “capitated contracts inhibit doctors 

from sending specimens to us.” Dutt Dep. 25 (Lambrinos Decl. Ex. 45). In another excerpt, after 

being asked why PBP was unable to secure business with Radnet, Dutt states, “I think it primarily 

had to do with the lack of being in the big insurance networks.” Dutt Dep. 40 (Sandrock Decl. Ex. 

18). Neither Regan nor Dutt provide additional details regarding how or why PBP’s damages are 

attributable to Quest’s below-cost sales. Regan states that PBP’s damages are between 

approximately $0.01 and $.20 million, depending on what measure of profit margins is applied to 

Quest’s below-cost sales. Id. at 38 n.187. 

F. Evidence of Quest’s Improper Purpose

Plaintiffs submit a number of documents in support of their claim that Quest considered 

them a competitive threat in California and thus perpetrated its below-cost sales with the improper 

purpose of injuring competitors or destroying competition. See Opp. 5. The documents include: 

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None of the documents submitted by plaintiffs as evidence of Quest’s improper purpose 

specifically refer to any plaintiff other than Hunter.

II. PROCEDURAL BACKGROUND

Plaintiffs filed this action on November 14, 2012, asserting claims for violations of federal 

and California antitrust laws, interference with prospective economic advantage, and violations of 

the UPA and UCL. Dkt. No. 1. In addition to Quest, the initial complaint named Aetna, Blue 

Shield, and the Blue Cross and Blue Shield Association as defendants. Id. After several iterations 

of the complaint and several rulings on motions to dismiss, all but the UPA and certain UCL 

claims against Quest were dismissed with prejudice. 

The UPA claims are brought under California Business & Professions Code sections 

17043 and 17044. SAC ¶ 151. The remaining UCL claims are brought under the statute’s 

unlawful and unfair prongs and are derivative of the UPA claims. See Dkt. No. 147 at 27-28. 

Under the UPA cause of action, plaintiffs seek compensatory and trebled damages and an 

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injunction against Quest. SAC at 51. Under the UCL cause of action, plaintiffs seek restitutionary 

damages and an injunction against Quest. Id.

Quest filed this motion for summary judgment on January 16, 2015. Dkt. No. 216. I heard 

argument from the parties on March 11, 2015. Dkt. Nos. 264, 266.

LEGAL STANDARD

A party is entitled to summary judgment where it “shows that there is no genuine dispute 

as to any material fact and [it] is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A 

dispute is genuine if it could reasonably be resolved in favor of the nonmoving party. Anderson v. 

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material where it could affect the 

outcome of the case. Id.

The moving party has the initial burden of informing the court of the basis for its motion 

and identifying those portions of the record that demonstrate the absence of a genuine dispute of 

material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Once the movant has 

made this showing, the burden shifts to the nonmoving party to identify specific evidence showing 

that a material factual issue remains for trial. Id. The nonmoving party may not rest on mere 

allegations or denials from its pleadings, but must “cit[e] to particular parts of materials in the 

record” demonstrating the presence of a material factual dispute. Fed. R. Civ. P. 56(c)(1)(A); see 

also Liberty Lobby, 477 U.S. at 248. The nonmoving party need not show that the issue will be 

conclusively resolved in its favor. Id. at 248-49. All that is required is the identification of 

sufficient evidence to create a genuine dispute of material fact, thereby “requir[ing] a jury or judge 

to resolve the parties’ differing versions of the truth at trial.” Id. (internal quotation marks 

omitted). If the nonmoving party cannot produce such evidence, the movant “is entitled to . . . 

judgment as a matter of law because the nonmoving party has failed to make a sufficient showing 

on an essential element of her case.” Celotex, 477 U.S. at 323.

On summary judgment, the court draws all reasonable factual inferences in favor of the 

nonmoving party. Liberty Lobby, 477 U.S. at 255. “Credibility determinations, the weighing of 

the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those 

of a judge.” Id. However, conclusory and speculative testimony does not raise a genuine factual 

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dispute and is insufficient to defeat summary judgment. See Thornhill Publ’g Co., Inc. v. GTE 

Corp., 594 F.2d 730, 738-39 (9th Cir. 1979).

DISCUSSION

California Business & Professions Code section 17043 makes it “unlawful for any person 

engaged in business within [California] to sell any article or product at less than the cost thereof to 

such vendor, or to give away any article or product, for the purpose of injuring competitors or 

destroying competition.” Cal. Bus. & Prof. Code § 17043. Section 17044 makes it “unlawful for 

any person engaged in business within [California] to sell or use any article or product as a ‘loss 

leader’ as defined in section 17030.” Cal. Bus. & Prof. Code § 17044. 

Section 17030 defines “loss leader” to mean “any article or product sold at less than 

cost . . . [w]here the purpose is to induce, promote, or encourage the purchase of other 

merchandise; or . . . [w]here the effect is to divert trade from or otherwise injure competitors.” 

Cal. Bus. & Prof. Code § 17030. “Article” and “product,” as used in both section 17043 and 

section 17044, are defined by section 17024 to include “any article, product, commodity, thing of 

value, service or output of a service trade.” Cal. Bus. & Prof. Code § 17024; see also W. Union 

Fin. Servs., Inc. v. First Data Corp., 20 Cal. App. 4th 1530, 1536 (1993). 

“[T]he prohibitions in the UPA on below-cost sales are designed to protect a competitor 

whose more powerful neighbor is attempting to drive him out of business.” Fisherman’s Wharf 

Bay Cruise Corp. v. Superior Court, 114 Cal. App. 4th 309, 322 (2003) (internal quotation marks, 

citations, and modifications omitted). 

Quest makes five principle arguments in connection with its motion for summary 

judgment: (1) that plaintiffs violated the protective order in this case by disclosing Quest’s 

confidential information to one of their experts; (2) that plaintiffs cannot establish a causal 

connection between Quest’s alleged below-cost pricing and most, if not all, of their claimed 

harms; (3) that plaintiffs’ cannot establish that Quest’s alleged below-cost pricing was done with 

an improper purpose, as required to impose liability under sections 17043 and 17044; (4) that the 

majority of Hunter’s claims are barred by a May 19, 2011 settlement agreement between Hunter 

and Quest; and (5) that the majority of plaintiffs’ claims are barred by the statute of limitations. I 

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address each argument in turn.

I. ALLEGED PROTECTIVE ORDER VIOLATION

On March 4, 2015, the parties submitted a joint letter regarding a dispute over plaintiffs’

alleged violation of the protective order in this case. Ltr. 1 (Dkt. No. 260). Quest accuses 

plaintiffs of violating the protective order by disclosing Quest’s “highly confidential – attorney’s 

eyes only” information to their expert, Joseph Plandowski. Id.

The protective order sets out specific restrictions on which experts may be given access to 

another party’s highly confidential information. See Dkt. No. 101 at § 7.4. Section 7.4(a)(3) of 

the protective order prohibits the disclosure of “highly confidential – attorney’s eyes only”

information to any expert (i) who either is or is anticipated to become a current officer, director, or 

employee of a party or competitor of a party; or (ii) who is involved in “competitive 

decisionmaking,” as defined in U.S. Steel v. United States, 730 F.2d 1465, 1468 n.3 (Fed. Cir. 

1984), on behalf of a party or competitor of a party. Id. at § 7.4(a)(3). 

Quest asserts that Plandowski’s business, In-Office Pathology LLC (“IOP”), and the 

“physicians’ office laboratories” (“POLs”) that IOP helps to install and operate are competitors of 

Quest. Ltr. 2-5. Quest requests an order (i) striking Plandowski’s declaration; (ii) prohibiting 

plaintiffs from any further disclosure of Quest’s highly confidential information to Plandowski; 

(iii) requiring Plandowski to return to Quest within three days all of Quest’s highly confidential 

information in his possession, as well as “all documents derived therefrom;” (iv) prohibiting 

Plandowski from providing “advice, analysis, or recommendations” to any competitor of Quest

concerning the matters at issue in this litigation while it remains pending; and (v) awarding Quest 

its attorney’s fees and costs expended in preparing and filing the parties’ joint letter. Ltr. 5. 

Plaintiffs counter that neither IOP nor its POL clients compete with Quest, and that even if 

POLs do qualify as Quest’s competitors, Plandowski is not involved in competitive 

decisionmaking on their behalf. Ltr. 6-10.

“[T]o determine whether or not a protective order has been violated, courts focus on the 

terms of the order itself.” Apple, Inc. v. Samsung Elecs. Co., Ltd., 2014 U.S. Dist. LEXIS 11778, 

33 (N.D. Cal. Jan. 29, 2014); see also Biovail Labs., Inc. v. Anchen Pharm., Inc., 463 F. Supp. 2d 

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1073, 1080-81 (C.D. Cal. 2006). “A protective order should be read in a reasonable and common 

sense manner so that its prohibitions are connected to its purpose.” On Command Video Corp. v. 

LodgeNet Entm’t Corp., 976 F. Supp. 917, 921 (N.D. Cal. 1997).

The protective order in this case does not define “competitor.” One court in this circuit has 

explained that, “in the traditional sense,” competitors are “persons endeavoring to do the same 

thing and each offering to perform the act, furnish the merchandise, or render the service better or 

cheaper than his rival.” Summit Tech., Inc. v. High-Line Med. Instruments, Co., 933 F. Supp. 918, 

939 n.14 (C.D. Cal. 1996) (internal quotation marks and modifications omitted). Another court in 

this circuit has similarly defined “competitor” to mean “a rival” or “one selling or buying goods or 

services in the same market as another.” New.Net, Inc. v. Lavasoft, 356 F. Supp. 2d 1090, 1104 

(C.D. Cal. 2004). Both parties rely on these definitions and appear to agree they accurately 

convey the meaning of “competitor” for the purposes of the protective order. See, e.g., Ltr. 2, 7.

Plaintiffs assert that IOP does not compete with Quest because it is not a lab and does not 

perform or sell lab tests. Ltr. 6. Rather, IOP is in the business of installing “anatomic pathology 

laboratories into specialty physicians’ offices.” Id. This means that IOP helps physicians hire 

their own pathologists and set up their own laboratories so that they can perform their own lab 

work. Ltr. 1, 6. These physicians’ office laboratories (“POLs”) are legally prohibited (under 42 

U.S.C. § 1395nn(b)(1) and 42 C.F.R. § 411.355) from seeking referrals from doctors other than 

those belonging to the particular physicians’ practice group. Ltr. 6. Thus, plaintiffs assert, the 

POLs that IOP works with do not compete with Quest either. POLs “run lab tests strictly for their 

own patients . . . They have simply internalized a process that Quest used to perform.” Ltr. 6-7. 

Plaintiffs further assert that even if the POLs do qualify as competitors of Quest, IOP

merely acts as a “consultant” for its POL clients and is not involved in competitive 

decisionmaking on their behalf. In U.S. Steel, the Federal Circuit used the term “competitive 

decisionmaking” to describe a situation where an in-house counsel participates in decisions 

regarding matters, such as pricing and product design, “made in light of similar or corresponding 

information about a competitor.” 730 F.2d at 1468 n.3; see also Brown Bag Software v. Symantec 

Corp., 960 F.2d 1465, 1470 (9th Cir. 1992) (“A crucial factor in the U.S. Steel case was whether 

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in-house counsel was involved in competitive decisionmaking; that is, advising on decisions about 

pricing or design made in light of similar or corresponding information about a competitor.”) 

(internal quotation marks omitted). Plaintiffs state that once IOP has helped a physicians’ office 

set up a POL, “the physicians are in charge of operating the lab and making decisions about the 

lab . . . IOP provides general advice concerning reimbursement [from managed care plans], but 

does not make strategic decisions for the [POL], does not set [its] prices . . . , and does not dictate 

product design.” Ltr. 9. 

Quest does not dispute plaintiffs’ general descriptions of IOP’s business model and the 

operation of POLs but contends that both IOP and POLs compete with Quest. Quest emphasizes 

that the creation of a POL “allows [a physicians’ practice group] to stop referring [its laboratory

tests] to Quest and similar labs, and instead to self-refer those services to the pathologist hired by 

the practice.” Ltr. 1. The managed care plans that previously reimbursed Quest for laboratory 

services for the physicians’ practice group’s patients then begin reimbursing the practice instead. 

In this way, Quest contends, POLs compete with (and take business from) Quest. 

Quest points to its SEC filings, which cite POLs as a significant threat to its bottom line. 

Ltr. 3.10 For example, Quest’s 2013 annual report states, “If our customers continue to internalize 

testing that we currently perform, the demand for our testing services may be reduced and our 

revenues may be materially adversely impacted.” Id. Quest also notes that in a July 2010 

interview, Plandowski stated that the entities “hur[t] the most” by the growth of POLs are 

“national pathology labs.” Ltr. 3. A posting on IOP’s website regarding lobbying efforts “to kill 

off” POLs likewise describes a zero-sum relationship between POLs and large-scale clinical 

laboratories like Quest:

Remember, the stakeholders spreading the word of our demise are the following:

hospital-based pathologists, private pathology laboratories, specialty pathology

laboratories, and the very large commercial laboratories. They would all benefit 

from the demise of our business model.

 10 Neither party objects to any of the materials submitted by the other in connection with the joint 

letter.

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Ltr. 3. Quests asserts that in light of this relationship between POLs and Quest, the fact that POLs 

cannot seek referrals from doctors outside the particular physicians’ practice group is irrelevant. 

Ltr. 4. According to Quest, “the competition at issue” is the competition to provide testing 

services to the patients of physicians’ practice group’s that create POLs; that is enough to make 

both IOP and POLs competitors of Quest. 

Quest further asserts that, contrary to plaintiffs’ claim, IOP is involved in “competitive 

decisionmaking” on behalf of its POL clients. Quest quotes IOP’s website, which states that IOP 

provides its clients with, among other things, (i) “[c]redentialing and reimbursement services so 

you get paid by managed care plans;” and (ii) “[o]ngoing advice on legal, reimbursement, 

operations, technology transfer, and business issues.” Ltr. 2. Quest also notes that IOP’s revenues 

are directly linked to those of its clients; IOP’s website states that “[a]ll IOP agreements are ‘at 

risk’ – if you do not get paid neither does IOP.” Id.

Plaintiffs have the better of these arguments. IOP’s business model is too distinct from 

Quest’s for the entities to qualify as competitors within the meaning of the protective order. IOP 

helps physicians install and operate their own clinical laboratories; Quest provides physicians with 

clinical laboratory services. While these endeavors are similar, they are not “the same thing.” 

Summit Tech., 933 F. Supp. at 939 n.14; see also Fuller Bros. v. Int’l Mktg., Inc., 870 F. Supp. 299, 

302-03 (D. Or. 1994) (parties were not “endeavoring to do the same thing,” despite plaintiff’s 

allegation that sales of defendant’s product, EQUAL, reduced demand for its product, TIRE LIFE, 

where “EQUAL is a tire balancing product[;] TIRE LIFE is not a tire balancing product”). 

I am also unconvinced that the evidence indicating that IOP’s business model may

adversely impact Quest’s bottom line is enough to make IOP and Quest “rival[s] . . . selling or 

buying goods or services in the same market as another.” New.Net, 356 F. Supp. 2d at 1104. 

Characterizing every entity whose activities have an economic effect on Quest as a competitor

goes far beyond what is necessary to serve the purposes of the protective order. Such a broad 

definition of competitor would threaten to capture, at the very least, every entity that participates in 

some way in the clinical laboratory industry, ensnaring plaintiffs in a Catch-22 wherein anyone 

“qualified to offer an expert opinion [would be] disqualified from reviewing the confidential 

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information necessary to form that opinion.” Frazier v. Layne Christensen Co., No. 04-cv-00315, 

2005 WL 372253, at *3 (W.D. Wis. Feb. 11, 2005). That would not be a sensible reading of a 

protective order designed to allow the parties to obtain and rely on expert testimony.

Whether POLs qualify as Quest’s competitors is a closer question. But even if they do,

Quest has not shown that Plandowski is involved in “competitive decisionmaking” on their behalf. 

A “competitive decisionmaker”11 is one who “advis[es] on decisions about pricing or design made 

in light of similar or corresponding information about a competitor.” Brown Bag, 960 F.2d at 1470

(internal quotation marks omitted). It is a shorthand label for a person who, because of her 

position and the particular decisions in which she is involved, cannot help but inadvertently rely on 

the confidential information at issue in discussing or reaching those decisions. See Santella v. 

Grizzly Indus., Inc., No. 12-cv-00013, 2012 WL 5399970, at *6 (D. Or. Nov. 5, 2012) (competitive 

decisionmaker is someone “in a position to effectuate or direct decisions made using knowledge 

that is tainted by . . . confidential information”); accord Isis Pharm., Inc. v. Santaris Pharma A/S 

Corp., No. 11-cv-02214, 2013 WL 3367575, at *5-6 (S.D. Cal. July 5, 2013). Prohibitions on 

disclosure to persons involved in competitive decisionmaking recognize that it “is very difficult for 

the human mind to compartmentalize and selectively suppress information once learned, no matter 

how well-intentioned the effort may be to do so.” F.T.C. v. Exxon Corp., 636 F.2d 1336, 1350 

(D.C. Cir. 1980); see also Brown Bag, 960 F.2d at 1471 (inquiring into whether in-house counsel 

“could lock-up [the confidential information] in his mind, safe from inadvertent disclosure to his 

employer, once he had read the documents”). “In the classic scenario, a decisionmaker may learn 

how a competitor prices its product and despite the decisionmaker’s best conscious effort his or her 

future pricing decisions may be made in partial reliance on that information.” Santella, 2012 WL 

5399970, at *5.

 11 Courts construing “competitive decisionmaking” as used in U.S. Steel generally do not 

distinguish between a “person involved in competitive decisionmaking” and a “competitive 

decisionmaker.” See, e.g., Isis, 2013 WL 3367575, at *5-6; Santella, 2012 WL 5399970, at *5-6; 

Applied Signal Tech., Inc. v. Emerging Markets Commc'ns, Inc., No. 09-cv-02180-DMR, 2011 

WL 197811, at *4-5 (N.D. Cal. Jan. 20, 2011); Nazomi Commc'ns, Inc. v. Arm Holdings PLC, No. 

02-cv-02521-JF, 2002 WL 32831822, at *2-3 (N.D. Cal. Oct. 11, 2002).

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The record here does not indicate that Plandowski is likely to inadvertently disclose 

Quest’s information to his POL clients. Even assuming that POLs qualify as Quest’s competitors, 

“[a] competitive relationship alone . . . is not sufficient to find that [Plandowski] will inadvertently 

disclose [Quest’s] confidential information.” Santella, 2012 WL 5399970, at *6. 

The relevant question remains whether Plandowski is “in a position to effectuate or direct 

decisions made using knowledge that is tainted by [Quest’s] confidential information.” Id. The 

record does not indicate that he is. The only information that Quest is concerned about being 

inadvertently disclosed is information regarding its pricing and costs. Quest asserts this 

information will give IOP and its POL clients a “competitive advantage against Quest.” Ltr. 4. 

But Quest has been unable to articulate a concrete scenario in which information regarding its

pricing and costs would be useful to POLs, much less one in which such information would give 

POLs a competitive advantage.12 Because POLs cannot seek referrals from doctors other than 

those belonging to the particular physicians’ practice group, POLs do not compete for referrals 

with clinical laboratories like Quest, and thus have little reason to attempt to underprice such 

entities. It is conceivable that POLs would rely on information about Quest’s pricing and costs in 

negotiating reimbursement rates with the insurance providers that pay them. However, given that 

these reimbursement rates are generally set according to pre-established fee schedules, it is not 

clear how such information would benefit POLs even in this context. See Ltr. 9-10. That the

confidential information at issue is not directly relevant to the regular operations of POLs weighs

heavily against a finding that Plandowski will be unable to “lock-up [that information] in his 

mind” in advising his POL clients. See Brown Bag, 960 F.2d at 1471.

Moreover, there is no indication that Plandowski makes pricing or other decisions on 

behalf of the POLs he works with. At most, Plandowski advises POLs regarding such decisions. 

This makes inadvertent disclosure even less likely. If Plandowski were empowered to make

 12 In the joint letter, Quest provided no explanation of how its pricing and cost information would 

be useful to POLs. At oral argument, counsel for Quest vaguely asserted that Plandowski and IOP 

“can help physicians undercut Quest’s pricing. They can help them deal with their future 

strategies. They can help them with how to . . . negotiate with third party payers about 

reimbursement.” Tr. 52 (Dkt. No. 266). 

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decisions on behalf of his POL clients, “then he could, perhaps, be in a position to inadvertently 

use [Quest’s confidential information] in reaching a decision because it would be irrevocably 

present in his mind.” Santella, 2012 WL 5399970, at *6. But as a third-party consultant, 

Plandowski “may only communicate, or in any other way use, that information through an 

affirmative act.” Id. I am satisfied that Plandowski will be able to prevent himself from taking 

any affirmative act which inadvertently discloses Quest’s confidential information to a POL.

Quest’s request for relief on the protective order issue is DENIED.

II. PLAINTIFFS’ UPA CLAIMS: CAUSATION

Quest argues that it is entitled to summary judgment on plaintiffs’ UPA claims because 

plaintiffs cannot establish that their alleged injuries were caused by any actionable below-cost 

pricing by Quest. Mot. 17-22; Reply 6-11. Quest contends that, at best, plaintiffs’ alleged injuries 

are traceable to underpricing that is nonactionable pursuant either to the May 19, 2011 settlement 

agreement between Hunter and Quest, or to the statute of limitations. 

A plaintiff must show a causal connection between its harms and the defendant’s belowcost sales to recover damages under sections 17043 and 17044.

13 See Fisherman’s Wharf, 114 

Cal. App. 4th at 330 (noting that “for [plaintiff] to maintain its price predation claim [under section 

17043], it must be able to link [defendant’s] below-cost pricing to a competitive injury”); Dealers 

Wholesale Supply, Inc. v. Pac. Steel & Supply Co., 6 ITRD 1563, at *8-9 (N.D. Cal. 1984) 

(granting summary judgment for defendants on section 17043 claims where plaintiff “failed to 

establish the existence of any causal link between actions taken by the defendants and harm caused 

to the plaintiff”); Judicial Council of California Civil Jury Instruction 3301, “Below Cost Sales –

Essential Factual Elements” (requiring plaintiff to prove “[t]hat it was harmed” and “[t]hat 

 13 The UPA does not require a showing of “actual injury” to obtain injunctive relief under sections 

17043 and 17044. See Cal. Bus. & Prof. Code § 17082 (“In any action under this chapter, it is not 

necessary to allege or prove actual damages or the threat thereof, or actual injury or the threat 

thereof, to the plaintiff. But, in addition to injunctive relief, any plaintiff in any such action shall 

be entitled to recover three times the amount of the actual damages, if any, sustained by the 

plaintiff.”). In federal court, however, the Article III standing requirement precludes an uninjured 

plaintiff from maintaining a UPA action, whether for damages or for injunctive relief alone. See 

Solinger v. A&M Records, Inc., 586 F.2d 1304, 1309 (9th Cir. 1978).

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[defendant’s] conduct was a substantial factor in causing [plaintiff’s] harm”); Judicial Council Of 

California Civil Jury Instruction 3302, “Loss Leader Sales – Essential Factual Elements” (same). 

California courts have warned against imposing an “unduly rigorous standard of proving 

antitrust injury.” Diesel Elec. Sales & Serv., Inc. v. Marco Marine San Diego, Inc., 16 Cal. App. 

4th 202, 219-20 (1993) (holding that plaintiff bringing claims under Cal. Bus. & Prof. Code § 

17045, the UPA’s secret discount provision, produced sufficient evidence of causation to justify 

presentation of expert testimony on damages at trial). An antitrust plaintiff “seeking damages for 

loss of profits is required to establish only with reasonable probability the existence of some causal 

connection between defendant’s wrongful act and some loss of . . . anticipated revenue.” 

Suburban Mobile Homes, Inc. v. Amfac Communities, Inc., 101 Cal. App. 3d 532, 545 (1980). 

“Once that has been accomplished, the jury will be permitted to act upon probable and inferential 

proof . . . and render its verdict accordingly.” In re Wholesale Elec. Anti-Trust Cases I & II, 147 

Cal. App. 4th 1293, 1309 (2007) (internal quotation marks and citations omitted). Evidence 

demonstrating “a reasonable probability that there was some causal connection between 

defendant’s wrongful act and the damages alleged” is thus generally sufficient to withstand a 

motion for summary judgment. Id. That said, “damages cannot be awarded in antitrust cases upon 

sheer guesswork or speculation.” Diesel, 16 Cal. App. 4th at 219 (internal quotation marks 

omitted). “[T]he plaintiff must show with reasonable certainty that he has suffered damages by 

reason of the wrongful act of the defendant.” Suburban, 101 Cal. App. 3d at 545.

Two cases help illustrate a plaintiff’s evidentiary burden in this context. In Diesel, the 

California Court of Appeal found that the trial court had erred in excluding, for failure to show 

causation, the testimony of the UPA plaintiff’s damages expert. 16 Cal. App. 4th at 218-20. The 

court stated: “[Plaintiff] showed its gross sales drastically declined and profits fell after [defendant] 

entered the market and received secret, unearned discounts. Further, [plaintiff] introduced the 

testimony of two customers who chose to do business with [defendant] rather than [plaintiff] due 

to [defendant’s] lower pricing. Such evidence is sufficient to show causation of antitrust injury.” 

Id. at 219.

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In contrast, in Dealers Wholesale, the court granted summary judgment for the defendants 

on the plaintiff’s section 17043 claims where the plaintiff submitted no testimony from former 

customers “indicating that defendants’ conduct caused them to cease patronizing” the plaintiff’s 

business, and no statistics, expert analysis, or other evidence “linking defendants’ actions to [the 

plaintiff’s] lost sales.” 6 ITRD 1563, at *5. The plaintiff did submit its own financial statements, 

several excerpts from the deposition of its former president, and a declaration by the former 

president. Id. at *3. However, the plaintiff made “no attempt to explain the financial statements” 

through expert testimony and made “no effort to break down any of the statements to show . . . 

figures attributable to [the particular products at issue].” Id. The court found that this failure 

rendered the statements “virtually meaningless” because the plaintiff also sold a large variety of 

other products. Id. The court stated: “At most [the] statements establish that [the plaintiff] became 

less profitable and went out of business. They do not show how any of [defendants’] actions 

caused this decline.” Id. at *5. 

The former president’s deposition testimony was likewise inadequate because, while he

asserted that defendant’s conduct had caused the plaintiff to lose two accounts and had adversely 

impacted the vast majority of its other accounts, he made this assertion “without presenting any 

analysis of the comparative prices offered by [defendants] and [the plaintiff], and without 

presenting any statements or documentary evidence . . . to the effect that actions taken by 

[defendants] caused [customers] to cease doing business with [the plaintiff].” 6 ITRD 1563, at *5. 

Similarly, the former president’s declaration failed to create a genuine dispute of fact on causation 

because it “d[id] not explain how [defendant’s alleged misconduct] caused the loss . . . , or how he 

k[new] other factors were not responsible.” Id. at *4. The court concluded that the plaintiff’s 

evidence in support of causation “fail[ed] to connect particular actions with particular effects” and 

was thus insufficient to withstand summary judgment. Id. at *3, *8-9.

Quest contends that plaintiffs have not produced sufficient evidence to establish a 

reasonable probability of some causal connection between Quest’s below-cost pricing (to the 

extent that below-cost pricing is actionable) and their claimed harms. I address each plaintiff in 

turn.

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A. Hunter

Quest identifies four deficiencies in Hunter’s alleged injuries. 

 1. Overall Profitability of the Aetna and Blue Shield Contracts 

First, Quest observes that Hunter traces the bulk of its alleged injuries back to its loss of innetwork status with Aetna and Blue Shield. The record shows, however, that Quest’s contracts 

with Aetna and Blue Shield both generated positive margins overall. According to Quest, this 

evidence of overall profitability precludes Hunter from showing that its claimed harms resulting 

from its loss of in-network status are attributable to Quest’s below-cost sales. Mot. 19. 

 The problem with this argument is that plaintiffs have produced evidence indicating that 

while the Aetna and Blue Shield contracts generated positive margins overall, each contract 

included a number of tests that were priced below-cost, even according to the gross margin 

measure. See Regan Rpt. 8. Regan identifies several tests from both contracts with mere costs of 

testing significantly higher than the prices offered to either Aetna and Blue Shield. The obvious 

inference is that once fully-allocated costs are considered, as they must be under the UPA, see 

First Data, 20 Cal. App. 4th at 1537, the extent of below-cost sales involved in the Aetna and 

Blue Shield contracts will only increase. 

In addition, Quest’s head of compliance, Timothy Sharpe, confirmed at his deposition that 

Quest 

 

 

Sharpe Dep. 26-27. 

Under the UPA, whether the defendant’s “overall price structure [is] predatory” is not 

dispositive. Fisherman’s Wharf, 114 Cal. App. 4th at 324. Indeed, it is not even relevant. 

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“[C]ourts in state predatory price cases brought under the UPA focus literally on whether the 

defendant sold ‘any article or product’ at less than cost.” Id. at 326. Under this “individual item 

approach,” courts analyze the sales at issue based on the “actual below-cost prices charged for a 

product or service, without regard to whether other above-cost sales . . . made the overall 

enterprise profitable.” Id. (internal emphasis omitted). 

Quest does not challenge this general rule but argues that plaintiffs have failed to produce 

sufficient evidence of any individual tests that were part of the Aetna or Blue Shield contracts

being priced below-cost. Reply 7-8. Quest points to excerpts from the deposition testimony of 

McCabe, in which he states that he has never heard of a Quest pricing strategy according to which

certain tests are priced below-cost for the purpose of harming regional labs. See McCabe Dep. 

304, 326 (Sandrock Decl. Exs. 25, 33). McCabe’s testimony certainly favors Quest, but in light of 

Regan’s expert report and Sharpe’s deposition testimony, it is hardly enough to establish as a 

matter of law that the Aetna and Blue Shield contracts did not include individual tests priced 

below-cost. 

Quest emphasizes that the only relevant evidence on file indicates that the Aetna and Blue 

Shield contracts were not negotiated 

 But Quest 

does not explain why this matters. The analysis in a UPA action for below-cost pricing “focus[es] 

literally on whether the defendant sold ‘any article or product’ at less than cost.” Fisherman’s 

Wharf, 114 Cal. App. 4th at 324. Quest offers no authority for the proposition that, in this case, 

the analysis should instead focus on the particular manner in which the Aetna and Blue Shield 

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contracts were negotiated. 

Finally, Quest attempts to distinguish Fisherman’s Wharf on the ground that the products 

at issue in that case were two separate types of tickets (wholesale and retail) for which there were

two separate groups of customers. See 114 Cal. App. 4th at 323. Quest contends this case is 

distinguishable because its position on the overall profitability of the Aetna and Blue Shield 

contracts “does not involve any price averaging across separate products, but instead looks at a 

single product (laboratory tests) purchased by a single customer,” i.e., either Aetna or Blue Shield. 

Reply 8. Even assuming this distinction exists, it appears to be one without a difference. Quest 

offers no explanation as to why “price averaging” across a single product sold to a single customer 

should be legal under the UPA, when “price averaging” across different products sold to different 

customers is not. In any event, Quest’s attempt to characterize all laboratory tests sold to Aetna 

and Blue Shield as a single “product” is unconvincing. Quest’s business with both insurance 

providers involved the sale of dozens, if not hundreds, of different tests. Quest does not explain 

why the different types of tickets in Fisherman’s Wharf are properly characterized as different 

products, but the different types of tests at issue here are not.

In sum, the fact that Quest’s contracts with Aetna and Blue Shield were profitable overall 

does not preclude Hunter’s theory that it was harmed as a result of Quest’s below-cost pricing of 

individual tests to Aetna and Blue Shield. Quest is not entitled to summary judgment on this 

ground. 

2. Harms Barred by the May 19, 2011 Settlement Agreement 

As discussed in Section IV below, on May 19, 2011, Hunter and Quest settled a prior 

lawsuit brought by Hunter. In the settlement agreement, Hunter agreed to a broad release of “any 

and all claims, . . . whether known or unknown,” against Quest. The second flaw Quest identifies 

in Hunter’s claimed harms in the present case is that Hunter asserts it lost business from four 

accounts – Alexander Valley, Chanate Health Center, Petaluma Health Center, and Southwest 

Community Clinic – as a result of Quest’s contract with Partnership Health Plan. Hunter lost each 

of these accounts in or around October 2009, long before the May 19, 2011 settlement agreement

in which Hunter released “any and all claims” against Quest arising from conduct occurring before 

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that date. Accordingly, Quest argues, claims arising from a loss of business from the four 

accounts are barred. Mot. 19.

Quest is right. As discussed in Section IV below, to the extent that Hunter’s claims are 

founded on a loss of business from Alexander Valley, Chanate Health Center, Petaluma Health 

Center, and Southwest Community Clinic, they are barred by the settlement agreement and are 

nonactionable. Quest’s motion for summary judgment on these claims is GRANTED.

The same is true of Hunter’s claims arising from the 2009 amendment to Quest’s contract 

with Blue Shield. It is undisputed that the amendment was executed in 2009, and that Hunter 

began to suffer damages at least by May 2010 as a result of losing its in-network status with Blue 

Shield. See Regan Rpt. 17. Accordingly, to the extent that Hunter’s claims are founded on the 

Blue Shield contract, they are also barred by the settlement agreement. Quest’s motion for 

summary judgment on these claims is also GRANTED.

3. Damages Caused by Quest’s Capitated IPA Contracts

The third flaw Quest identifies in Hunter’s alleged injuries is that Hunter asserts it has 

suffered damages as a result of Quest’s capitated IPA contracts. Mot. 21-22. Quest contends this 

theory fails as a matter of law because Hunter did not compete for capitated business. Id. Quest 

states that Hunter thus has no basis for asserting it was harmed by Quest’s capitated IPA contracts, 

even assuming the contracts were below-cost. Id.

Hunter responds that it does not trace its injuries to lost capitated business. See, e.g., 

Regan Rpt. at 14 (“My calculations do not assume that Hunter, or any other plaintiff, would have 

obtained revenue from those tests subject to the capitation portion of [Quest’s capitated IPA 

contracts].”). Rather, Hunter’s theory is that “the existence of capitated contracts between Quest 

and IPAs requires individual physicians who are members of [the] IPAs to send their [fee-forservice] work to Quest.” Opp. 22. Thus, according to Hunter, in the “but-for world” where Quest 

does not enter below-cost capitated contracts with IPAs, “the discretionary [fee-for-service] work 

associated with those contracts is open for competition.” Id. Quest counters that, whether or not 

this theory makes sense in the abstract, Hunter has failed to produce sufficient evidence in support 

of it to withstand summary judgment. See Reply 8-11.

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I agree with Quest. Contrary to Hunter’s assertion, there is no evidence on file indicating 

that Quest “requires” individual physicians belonging to IPAs that enter capitated contracts with 

Quest to send their discretionary fee-for-service business to Quest. Opp. 22. The only 

declarations on file submitted by IPA members are those from the Physicians Medical Group 

doctors. None of them state they are contractually required or have in any way been pressured to 

use Quest for their fee-for-service testing. See Lambrinos Decl. Exs. 37-39. It is true that Fuchs 

states that Quest’s contract with Partnership Health Plan required Chanate Health Center and 

Southwest Community Clinic to use Quest for diagnostic testing services for Partnership Health 

Plan’s members. Fuchs Decl. ¶ 4. But neither Partnership Health Plan nor Chanate Health Center 

nor Southwest Community Clinic is an IPA. And, in any event, the harms that Hunter traces to the 

Partnership Health Plan are barred by the May 19, 2011 settlement agreement.

Plaintiffs’ experts also fail to demonstrate a causal connection between Quest’s capitated 

IPA contracts and Hunter’s claimed damages. Plandowski opines that “[u]sing below-cost 

capitated contracts to obtain [fee-for-service] work from referring physicians is damaging to 

competition because it artificially deprives smaller independent laboratories access to this [fee-forservice] revenue stream.” Plandowski Decl. ¶ 24. Plandowski cites no authority for this 

proposition, however, and he makes no attempt to explain how it applies to Hunter or the other 

plaintiffs. See id. Regan calculates the amount of revenue lost by Hunter “when it was foreclosed 

from obtaining fee-for-service testing associated with Quest’s capitated accounts.” Regan Rpt. 14. 

But Regan, like Plandowski, offers no explanation as to why it is appropriate to assume that 

Quest’s capitated IPA contracts, whether below-cost or not, have deprived Hunter of fee-forservice business. See id. at 14-23. His report is completely silent on the subject of causation, with 

one exception: he states that he was “asked to assume” that PBP suffered damages as a result of 

Quest’s underpricing. Regan Rpt. 37. While Regan does not make the same statement with 

respect to Hunter’s alleged injuries resulting from Quest’s capitated IPA contracts, there is nothing 

in his report to indicate that his “finding” of causation on this theory is anything more than another

unsupported assumption he was asked to make in conducting his analysis. 

Plaintiffs’ opposition does not help substantiate a causal link between Quest’s capitated 

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IPA contracts theory and Hunter’s alleged injuries either. The brief’s half-page discussion of this 

issue admits that plaintiffs’ “current damages calculations assume that absent Quest’s below-cost 

sales, each plaintiff would have had greater access to the [fee-for-service] market.” Opp. 22 

(emphasis added). Plaintiffs then make their assertion that “the existence of capitated contracts 

between Quest and IPAs requires individual physicians who are members of [the] IPAs to send 

their [fee-for-service] work to Quest.” Id. But plaintiffs cite no evidence to support this claim,14

and as stated above, there is none in the record. Quest accurately observes that the bulk of 

plaintiffs’ opposition is devoted to addressing an issue that Quest does not dispute for the purposes 

of this motion – namely, whether Quest sold any of its tests below-cost. Reply 1. The minimal 

portion of the opposition focused on causation does not meaningfully contribute to creating a 

genuine dispute on whether Quest’s alleged below-cost capitated IPA contracts in fact caused 

Hunter harm.

While Hunter’s burden to show causation at this juncture is not “unduly rigorous,” it must 

produce sufficient evidence to show that its damages theories are more than “sheer guesswork or 

speculation.” Diesel, 16 Cal. App. 4th at 219 (internal quotation marks omitted). The near total 

absence of evidence of a causal connection between Quest’s capitated IPA contracts and Hunter’s 

alleged injuries does not satisfy this standard. To the extent Quest’s motion for summary 

judgment is aimed at Hunter’s claims arising from Quest’s alleged below-cost capitated IPA 

contracts, the motion is GRANTED. 

4. Damages Caused by Below-Cost Sales in the General Fee-For Service 

Market

Quest contends that Hunter has also failed to establish causation with respect to its claimed 

harms arising from Quest’s alleged below-cost sales in the general fee-for service market. Reply 

11. I agree. Hunter’s theory that it lost business as a result of Quest’s below-cost sales in the 

general fee-for-service market is no better supported than Hunter’s capitated IPA contracts theory. 

 14 In fact, plaintiffs cite nothing at all in support of this claim. Following the quoted statement, 

plaintiffs insert an “Id.” cite. Opp. 22. However, the “id.” cite is preceded by an unaccompanied “Supra” cite that contains no reference to a particular source or page number. Nothing in the 

preceding pages supports the quoted statement. 

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If anything, it is supported by even less evidence. Hunter submits no declarations in support of the

theory, instead relying exclusively on the Plandowski and Regan opinions. The Plandowski and 

Regan opinions, however, make no attempt to link Quest’s below cost sales in the general fee-forservice market with Hunter’s injuries. Plandowski opines extensively on Quest’s alleged belowcost pricing, including in the general fee-for-service market, but provides no opinion regarding a 

causal connection between such underpricing and Hunter’s (or any other plaintiff’s) claimed 

damages.15 Similarly, Regan calculates Hunter’s “lost opportunity revenue” attributable to 

Quest’s underpricing in the general fee-for-service market, but does not explain why it is 

appropriate to assume that such underpricing caused the damages he calculates. See Regan Rpt. 

21. The closest Regan comes to doing so is to observe that Hunter performed many of the same 

tests that are among Quest’s “top 100 tests.” See id. But the mere fact that Quest offered the same 

services as Hunter, standing alone, does not establish a genuine dispute of material fact on 

causation. To the extent that Quest’s motion for summary judgment is aimed at Hunter’s claims 

arising from Quest’s alleged below-cost sales in the general fee-for-service market, the motion is 

GRANTED.

B. SPA

The parties agree that “SPA’s claims are derivative of Hunter’s claims.” Mot. 20; see also

Regan Rpt. 35-36. Accordingly, SPA’s claims based on Quest’s alleged underpricing in 

connection with its capitated IPA contracts, and in the general fee-for-service market, fail for the 

reasons discussed above with respect to Hunter’s claims based on these theories. Quest’s motion 

for summary judgment on these claims is GRANTED.

Quest also moves for summary judgment on SPA’s claims arising from the Partnership 

Health Plan contract. Mot. 20. While Hunter’s claims arising from the Partnership Health Plan

 15 Indeed, Plandowski explains at the outset of his declaration that he was retained to determine 

whether Quest has sold tests at below-cost, while Regan was tasked with delivering an opinion on 

causation and injury. Plandowski Decl. ¶ 8. He states: “I was retained by plaintiffs to review 

[Quest’s] lab data from their California operations. The scope of my work included an 

examination [of] Quest’s pricing to its [IPAs] as well as to its fee-for-service clients to determine 

if those prices and corresponding sales were below-cost. [Regan] has done a detailed quantitative 

assessment of the ‘but for’ world, the market foreclosure resulting from Quest’s below-cost sales, 

and the resulting damages.” Id.

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contract are barred by the May 19, 2011 settlement agreement, SPA was not a party to that 

agreement. See Settlement Agreement and Release at 1-2 (Sandrock Decl. Ex. 1). Quest argues

that SPA’s claims arising from the Partnership Health Plan contract are nonetheless barred by the 

UPA’s three-year statute of limitations. Id. Quest has not established as a matter of law, however, 

that the four lost accounts that SPA attributes to the Partnership Health Plan contract were lost 

before November 14, 2009, the cutoff date for the three-year limitations period. See G.H.I.I., 147 

Cal. App. 3d at 279 n.16 (“When applying the one and three year periods of limitation for any 

continuing violations of the Unfair Practice Act, damages accrue from the date they are suffered 

and certain.”). Accordingly, Quest is not entitled to summary judgment on this ground. SPA’s 

claims based on the Partnership Health Plan contract may proceed. 

C. RDL

RDL does not identify any existing accounts from which it lost business as a result of 

Quest’s alleged underpricing but asserts that it lost business from the following potential accounts: 

(1) Amin Attia; (2) Andre Babajanians; (3) Michael Fabricant / Michael Sugarman; (4) Kenneth 

Hsu; (5) Sam Metyas; (6) Bruce Dreyfus; (7) Elyse Rubenstein; (8) Barry Shibuya; (9) Marilyn 

Solsky; (10) Boniske / Watrous; (11) Christian Dequet; (12) Neville Udwadia. Quest’s Appendix 

A at 6-7 (Dkt. No. 216-3). Regan attributes RDL’s loss of potential business from these accounts 

both to Quest’s capitated contracts with IPAs and to Quest’s other below-cost sales in the general

fee-for-service market. Id. Quest contends that RDL has not presented any evidence linking these 

claimed injuries to the alleged misconduct. Mot. 20.

Quest is right. RDL submits even less evidence than Hunter in support of its theory that it 

was harmed by Quest’s below-cost sales. RDL submits no declarations from any former or 

potential customers, IPA members or otherwise, and instead relies exclusively on the Plandowski 

and Regan opinions. Plandowski and Regan offer no more guidance regarding RDL’s damages in 

connection with Quest’s alleged underpricing than they do regarding Hunter’s. Quest’s motion for 

summary judgment on RDL’s claims under the UPA is GRANTED. 

D. PBP

Plaintiffs assert that PBP lost business from two accounts as a result of Quest’s below-cost 

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sales: (1) RadNet and (2) Imaging Healthcare. Sandrock Decl. Ex. 19. Regan calculated PBP’s 

damages based on the assumptions that PBP was unable to obtain fee-for-service sales due to 

Quest’s capitated contracts with IPAs, and that Quest’s below-cost sales precluded PBP from 

obtaining in-network status with either Aetna or Blue Shield. Regan Rpt. 37-38. Quest contends 

that PBP has failed to produce sufficient evidence in support of these assumptions to create a 

genuine issue of material fact regarding causation. 

Quest is correct again. PBP’s evidence regarding causation is more or less identical to 

RDL’s. PBP relies exclusively on the Plandowski and Regan opinions to show causation, neither 

of which provide any meaningful analysis of the issue. The only evidence cited by Regan in 

support of his assumption that PBP was harmed by Quest’s capitated IPA contracts is an excerpt 

from Dutt’s deposition transcript in which he asserts that Quest’s “capitated contracts inhibit 

doctors from sending specimens to us.” Dutt Dep. 25 (Lambrinos Decl. Ex. 45). This 

unsupported assertion by PBP’s own employee is not enough to create a genuine issue of material 

fact on whether Quest’s capitated IPA contracts caused PBP’s alleged injuries.

With regard to the theory that Quest’s below-cost sales precluded PBP from obtaining innetwork status with either Aetna or Blue Shield, Regan explicitly states that he was “asked to 

assume” that PBP suffered damages due to Quest’s contracts with insurance providers. Regan 

Rpt. 37. Following the “asked to assume” sentence, Regan cites the Seventeenth Amendment to 

Quest’s contract with Aetna and two excerpts from Dutt’s deposition transcript. Id. at 37 n.179. 

In the first excerpt, when asked what Quest did to damage PBP, Dutt vaguely refers to the Aetna 

contract, stating that Quest “apparently” has a contract with Aetna according to which Aetna does 

not allow “small labs” into its network. Dutt Dep. 25 (Lambrinos Decl. Ex. 45). The second 

excerpt from Dutt’s deposition transcript was not submitted by either party as an exhibit and is not 

in the record. Neither the mere existence of the Aetna contract nor Dutt’s vague reference to it 

during his deposition is sufficient to satisfy PBP’s burden on causation at this juncture. Quest’s 

motion for summary judgment on PBP’s claims under the UPA is GRANTED.

III. PLAINTIFFS’ UPA CLAIMS: IMPROPER PURPOSE

The UPA does not make all below-cost and loss-leader sales illegal. To commit a UPA 

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violation under sections 17043 and 17044, a defendant “must act with the purpose, i.e., the desire, 

of injuring competitors or destroying competition.” Cel-Tech, 20 Cal.4th at 169; see also Bay 

Guardian Co. v. New Times Media LLC, 187 Cal. App. 4th 438, 456-57 (2010) (“[T]he very 

gravamen of the [section 17043] offense is the purpose underlying the anticompetitive act, rather 

than the actual or threatened harm to competition. The . . . purpose of the below-cost sale is at the 

heart of the statute and distinguishes the violation from a below-cost pricing strategy undertaken 

for legitimate, nonpredatory business reasons.”). “Mere knowledge that . . . below-cost or lossleader sales will injure competitors or destroy competition is not sufficient.” Sub Corp., Ltd. v. 

Best Buy Co., 365 F. Appx. 767, 768 (9th Cir. 2010). The defendant must have acted with the 

“conscious object” or “positive desire” of injuring competitors or destroying competition. CelTech, 20 Cal.4th at 173.

Under California Business & Professions Code section 17071, improper purpose is 

presumed where there is “proof of one or more acts of selling or giving away any article or 

product below cost . . . , together with proof of the injurious effect of such acts.” Cal. Bus. & Prof. 

Code § 17071. “[T]his presumption may be rebutted . . . by showing that the sales were made in 

good faith and not for the purpose of injuring competitors or destroying competition.” William 

Inglis & Sons Baking Co. v. ITT Cont’l Baking Co., 668 F.2d 1014, 1049 (9th Cir. 1981). A

plaintiff may also prove improper purpose independently without the aid of the statutory 

presumption. Bay Guardian, 187 Cal. App. 4th at 457. Under this approach, improper purpose 

“may be proved the same way as any other fact, by direct or circumstantial evidence.” Id. at 466. 

Quest argues that plaintiffs cannot show improper purpose. Mot. 14-17. Quest contends 

that because plaintiffs have not produced evidence of injurious effect resulting from the alleged 

below-cost pricing, the section 17071 presumption does not apply, and even if it did, Quest has

rebutted it. According to Quest, plaintiffs cannot prove improper purpose independently either. 

The improper purpose issue is vastly simplified in light of plaintiffs’ failure to establish

either viability under the May 19, 2011 settlement agreement or causation with respect to the 

following of plaintiffs’ UPA claims: (i) Hunter’s claims arising from Quest’s contract with 

Partnership Health Plan; (ii) Hunter’s claims arising from the 2009 amendment to Quest’s contract

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with Blue Shield; (iii) Hunter’s claims arising from Quest’s alleged below-cost capitated IPA 

contracts; (iv) Hunter’s claims arising from Quest’s alleged below-cost sales in the general feefor-service market; (v) SPA’s claims arising from Quest’s contract with Partnership Health Plan; 

(vi) SPA’s claims arising from Quest’s alleged below-cost sales in the general fee-for-service 

market; (vii) all of RDL’s claims; and (viii) all of PBP’s claims. 

Without establishing causation, RDL and PBP cannot establish improper purpose either. 

The section 17071 presumption arises only upon proof of an “injurious effect” that is caused by 

the defendant’s underpriced sales. See Sub Corp., 365 F. Appx. at 768-69 (“Injurious effect 

cannot be established from the mere fact that the plaintiff claims to have lost business without a 

showing that plaintiff’s lost sales are attributable to the defendant’s actions.”). RDL and PBP’s 

failure to show causation thus precludes them from relying on section 17071. 

RDL and PBP could still prove improper purpose independently, but they have not 

produced sufficient evidence to create a genuine dispute on this issue. Plaintiffs’ only evidence 

regarding improper purpose is a series of documents indicating that Quest views Hunter as a 

competitor. See Opp. 5. To a lesser extent, the same documents also indicate that Quest views 

other, unidentified regional labs as competitors. See, e.g., Lambrinos Decl. Exs. 49-51. Whether 

or not RDL and PBP are included in this group, however, evidence that Quest views such 

laboratories as competitors is not equal to evidence that Quest acted with the intent to injure or 

destroy them. See Cel-Tech, 20 Cal.4th at 168-70 (affirming finding that defendant lacked 

improper purpose where it “intended merely to compete”); Fisherman’s Wharf, 114 Cal. App. 4th 

at 330 n.6 (noting that loss-leader sales expose businesses to liability under section 17044 only 

where they are “undertaken with an intent to injure competitors or to destroy competition, and not 

simply to increase sales”); First Data Corp., 20 Cal. App. 4th at 1540 (reading sections 17043 and 

17044 “to require an injurious intent (a specific intent to injure or destroy) and not just an intent to 

divert customers from a competitor”). RDL and PBP’s failure to demonstrate a genuine dispute as 

to improper purpose provides additional grounds for granting Quest’s summary judgment motion 

on their UPA claims. 

On the other hand, because Hunter and SPA have established a causal connection between 

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Quest’s alleged underpricing and at least some of their claims, they may rely on the section 17071 

presumption as to those claims. Quest does not contest Hunter’s claim that it lost a number of 

existing accounts as a result of the Seventeenth Amendment to the Aetna contract. Nor does 

Quest contest SPA’s claim that it lost four existing accounts as a result of Quest’s contract with 

Partnership Health Plan. Even if Quest did dispute these causal connections, plaintiffs’ causation 

evidence with respect to these claims is far stronger than their causation evidence with respect to 

the claims discussed above. Richard Gentleman, Aetna’s head of “National Ancillary 

Contracting,” stated at his deposition that 

 Gentleman Dep. 164, 194 (Lambrinos Decl. Ex. 30). Naomi Fuchs, CEO 

of Santa Rosa Community Health Centers, states in her declaration that Quest’s contract with 

Partnership Health Plan required Chanate Health Center and Southwest Community Clinic to use 

Quest for diagnostic testing services for Partnership Health Plan’s members. Fuchs Decl. ¶ 4. 

This evidence of the “injurious effect” of Quest’s alleged underpricing is sufficient to trigger the 

section 17071 presumption. 

Quest argues it is nonetheless entitled to summary judgment on these claims because it has 

rebutted the section 17071 presumption. Quest points to Moverley’s statement that Quest has 

made an effort since 2009 to increase the pricing and profitability of its capitated IPA contracts. 

Mot. 15; Moverley Decl. ¶ 21. Quest also points to various deposition excerpts in which 

Moverley and other Quest employees state that Quest focuses primarily on competition with 

LabCorp, not with regional labs like plaintiffs. See, e.g., Moverley Dep. 229, 244-45 (Sandrock 

Decl. Ex. 21); Farley Dep. 290 (Sandrock Decl. Ex. 29); Funk Dep. 76 (Sandrock Decl. Ex. 30). 

Quest argues this testimony is sufficient to conclusively rebut the section 17071 presumption. 

See, e.g., Reply 4-5. 

I disagree. The section 17071 presumption is one affecting the burden of proof. Bay 

Guardian, 187 Cal. App. 4th at 462-63. “Once a presumption affecting the burden of proof comes 

into play, that is an issue which must be presented to the trier of fact.” Id. at 463 (internal

quotation marks and modifications omitted). “If contrary evidence is introduced, the jury has the 

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right to weigh the evidence and determine whether it sufficiently contradicts the presumption.” Id.

(internal quotation marks omitted). The section 17071 presumption may be contradicted by a 

showing that the underpriced sales “were made in good faith and not for the purpose of injuring 

competitors or destroying competition,” or by establishing one of the UPA’s affirmative defenses. 

Id. at 465. However, unless the defendant is able to produce “conclusive proof that negate[s] 

unlawful purpose as a matter of law,” a plaintiff who triggers the section 17071 presumption is 

entitled to a corresponding jury instruction at trial. Id.

In light of these principles, the fact that Quest denies any purpose to injure competitors and 

has produced some evidence of good faith efforts to compete in the marketplace does not deprive 

Hunter and SPA of their right to rely on the statutory presumption. “Quest may have offered 

rebuttal evidence, but [it] did not negate the presumption by conclusive proof.” Id. at 465.16

IV. HUNTER’S UPA AND UCL CLAIMS: SETTLEMENT AGREEMENT AND 

RELEASE

Quest asserts that Hunter previously released all claims against Quest arising from conduct 

occurring before May 19, 2011. Mot. 22. On November 7, 2005, Hunter filed a qui tam action 

against Quest in the Superior Court of California for the County of San Mateo, alleging among 

other things that Quest had submitted false claims to Medi-Cal. Settlement Agreement and 

Release at 1-2 (Sandrock Decl. Ex. 1). In a settlement agreement dated May 19, 2011, Quest 

agreed to the release of

any and all claims, rights, demands, suits, matters, issues, actions or causes of 

action, liabilities, damages, losses, obligations, and judgments of any kind or

 16 Quest’s reliance on Sub Corp. v. Best Buy Co., 2008 U.S. Dist. LEXIS 75080 (C.D. Cal. Aug. 5, 

2008), is not persuasive. See Reply 4-5. The court in Sub Corp. granted summary judgment for 

the defendant upon finding that the plaintiff was not entitled to the section 17071 presumption, 

and that even if the plaintiff were entitled to the section 17071 presumption, the defendant had 

rebutted it through various declarations by its employees professing their good faith. Id. at *9-12. 

The court stated: “A qualified employee’s declaration concerning the [defendant’s] intent is 

adequate to conclusively rebut a presumption of injurious intent.” Id. at *11. While this statement 

does support Quest’s position, it does not appear to be an accurate description of the law. The 

case cited in Sub Corp. in support of the statement holds that a qualified employee’s testimony at 

trial may support a finding of no improper purpose; it does not hold that such testimony is 

sufficient at summary judgment to negate the section 17071 presumption. See Tri-Q, Inc. v. StaHi Corp., 63 Cal.2d 199, 207-209 (1965). 

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nature whatsoever, from the beginning of time through the Effective Date of this 

Settlement Agreement, whether known or unknown, contingent or absolute, 

suspected or unsuspected, disclosed or undisclosed, matured or unmatured, for 

damages, injunctive relief, or any other remedy against [Quest].

Id. at 15. In the October 18, 2013 order on the multiple motions to dismiss the first amended 

complaint, I found this language broad enough to encompass claims brought in this action and 

dismissed with prejudice all claims barred by the settlement agreement. Dkt. No. 113 at 36. Quest 

asserts that in light of the settlement agreement and the October 18, 2013 order, Hunter may only 

rely on claims based on below-cost pricing occurring after May 19, 2011. According to Quest, this 

means that Hunter’s claims arising from the Partnership Health Plan contract and the 2009 

amendment to the Blue Shield contract are barred, as are Hunter’s claims arising from any 

capitated IPA contract that Quest entered into before May 19, 2011. Mot. 22. 

Hunter agrees that the May 19, 2011 settlement agreement bars all claims arising from 

conduct occurring before that date. Opp. 24-25. Hunter disagrees that this means that claims 

arising from contracts executed before May 29, 2011 are necessarily barred. Id. According to 

Hunter, the dates of execution of the underlying contracts are irrelevant; what matters is when the 

below-cost sales themselves occurred. See Opp. 24-25.

This issue is largely mooted by the rulings discussed above regarding causation. Because 

Hunter has failed to produce sufficient evidence of causation with respect to its claims arising from 

Quest’s capitated IPA contracts, Quest is entitled to summary judgment on those claims on the 

merits. The only other claims that Quest contends are barred by the settlement agreement are 

Hunter’s claims arising from the Partnership Health Plan and Blue Shield contracts. These claims 

are plainly barred. It is undisputed that Hunter began to suffer damages as a result of the 

Partnership Health Plan contract in or around October 2009, and as a result of the Blue Shield 

contract in or around May 2010. See Opp. 14; Fuchs Decl. ¶¶ 2-3 (Sandrock Decl. Ex. 35); C. 

Reidel Dep. 268-69 (Sandrock Decl. Ex. 3); Prendergast Dep. 50-51 (Lambrinos Decl. Ex. 42); 

Regan Rpt. 17. Given that by the date of the settlement agreement these contracts had already 

been executed and Hunter had already suffered damages as a result, Hunter’s argument that it did 

not forfeit these claims as part of the settlement agreement is unconvincing. Claims based on 

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alleged misconduct that had already occurred and that had already manifested itself in damages fall 

unambiguously within the scope of “any and all claims . . . from the beginning of time through the 

Effective Date of this Settlement Agreement, whether known or unknown, contingent or absolute, 

suspected or unsuspected, disclosed or undisclosed, matured or unmatured.” Settlement 

Agreement and Release at 15 (Sandrock Decl. Ex. 1). Quest’s motion for summary judgment on 

Hunter’s claims arising from the Partnership Health Plan and Blue Shield contracts is GRANTED. 

V. STATUTE OF LIMITATIONS

Quest argues that plaintiffs’ claims are time-barred to the extent they accrued more than 

three years before the filing of this action, or before November 14, 2009. Mot. 23. The general 

limitations period for UPA violations is three years; the limitations period for treble damages is 

one year. See Cal. Code Civ. P. §§ 338(a), 340(a); see also G.H.I.I. v. MTS, Inc., 147 Cal. App. 3d 

256, 279 (1983). 

The parties’ arguments regarding this issue mirror those regarding the settlement 

agreement. Quest contends that plaintiffs’ claims arising from Quest’s capitated IPA contracts are 

untimely, because plaintiffs have not identified any such contract that was executed after 

November 14, 2009. Quest contends that plaintiffs’ claims arising from the Partnership Health 

Plan and Blue Shield contracts are also untimely. According to Quest, plaintiffs’ only actionable

claims are those arising from alleged below-cost sales in the general fee-for-service market 

occurring after November 14, 2009, and those arising from the Seventeenth Amendment to the 

Aetna contract. Mot. 23. 

Plaintiffs challenge Quest’s position that conduct performed under a contract executed 

before the applicable limitations period is automatically immune from liability. Plaintiffs also 

point out that while the UPA has a three year statute of limitations, the limitations period for UCL 

violations is four years. See Cal. Bus. & Prof. Code § 17208 (“Any action to enforce any cause of 

action pursuant to this chapter shall be commenced within four years after the cause of action 

accrued.”).

The parties do not dispute the applicable limitations periods for UPA and UCL claims. 

Quest concedes in its reply that the limitations period for UCL violations is four years. Reply 14. 

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The California Supreme Court has recognized that even where a UCL claim is founded on conduct 

prohibited by another statute with a shorter limitations period, the four year limitations period still 

applies to the UCL claim. See Cortez v. Purolator Air Filtration Products Co., 23 Cal. 4th 163, 

178-79 (2000) (“[A]n action to recover wages that might be barred if brought pursuant to [the 

Labor Code] still may be pursued as a UCL action seeking restitution . . . if the failure to pay 

constitutes a business practice.”). Thus, the only dispute over the limitations period is whether 

plaintiffs’ UPA claims based on conduct performed under contracts executed before November 

14, 2009 – and their UCL claims based on conduct performed under contracts executed before 

November 14, 2008 – are time-barred. 

Like the settlement agreement issue, the statute of limitations issue is largely mooted by

the rulings discussed above on the merits of plaintiffs’ claims. The only claims that survive

Quest’s arguments on the settlement agreement and causation are Hunter’s claims based on the 

Aetna contract, and SPA’s claims based on the Partnership Health Plan contract. Quest does not 

dispute that claims arising from the Aetna contract are timely for the purposes of both the UPA 

and the UCL. See Mot. 23. Quest does contend that SPA’s claims based on the Partnership 

Health Plan contract are untimely. As noted above, however, Quest has not established as a matter 

of law when SPA lost the four accounts it attributes to the contract. Accordingly, I cannot say at 

this juncture that SPA’s claims arising from the contract are time-barred. To the extent Quest’s 

motion for summary judgment is aimed at those claims, the motion is DENIED.17

VI. UCL CLAIMS

Quest’s arguments regarding causation and the settlement agreement apply with equal 

force to plaintiffs’ UCL claims. Accordingly, Hunter’s UCL claims arising from the Aetna 

contract, and SPA’s claims arising from the Partnership Health Plan contract, may proceed. See 

Daugherty v. Am. Honda Motor Co., 144 Cal. App. 4th 824, 837 (2006) (UCL’s unlawful prong 

 17 On April 10, 2015, Quest filed a Statement of Recent Decision pursuant to Civil Local Rule 7- 3(d)(2) bringing to my attention Judge Koh’s recent decision in In re Animation Workers Antitrust 

Litig., No. 14-cv-04062-LHK, 2015 WL 1522368 (N.D. Cal. Apr. 3, 2015). Dkt. No. 280. The 

opinion includes a discussion of statute of limitations issues under the Sherman Act, the 

Cartwright Act, and the UCL. 2015 WL 1522368, at *9-17. Having read the opinion, I do not 

find that its analysis materially impacts the outcome in this case.

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“borrows violations of other laws and treats them as independently actionable”); Bardin v. 

Daimlerchrysler Corp., 136 Cal. App. 4th 1255, 1271 (2006) (UCL’s unfair prong applies to 

business practices which offend public policy, where the predicate public policy is “tethered to 

specific constitutional, statutory or regulatory provisions”) (internal quotation marks omitted). 

Quest’s motion for summary judgment on the rest of plaintiffs’ UCL claims is GRANTED. 

VII. ADMINISTRATIVE MOTIONS TO FILE UNDER SEAL

The parties filed a number of administrative motions to file under seal in connection with 

Quest’s summary judgment motion. 

On February 24, 2015, I denied without prejudice Quest’s motion to seal portions of its

summary judgment motion and associated materials. Dkt. No. 249. I gave Quest until March 3, 

2015 to file an amended motion, which Quest timely filed. Dkt. No. 258. The amended motion is 

GRANTED with respect to all materials that Quest seeks to seal on its own behalf, except for the 

following two items: (1) Moverley Decl. ¶ 19 (all); (2) Moverley Decl. ¶ 21 (from “Since 2009, 

QDI has made an effort” to “have been quite successful”). The amended motion is DENIED 

WITH PREJUDICE as to those items. 

The amended motion is DENIED WITHOUT PREJUDICE with respect to all materials 

that Quest seeks to seal on behalf of plaintiffs and third-party Diagnostic Laboratories. See Dkt. 

No. 258-1 at 11. Although plaintiffs submitted a declaration per Civil Local Rule 79-5(e), that 

declaration is not adequate to justify sealing. It relies primarily on the fact that plaintiffs 

designated the materials sought to be sealed as “confidential” or “highly confidential – attorneys’ 

eyes only” under the protective order. See Dkt. No. 262. That is not a proper basis for sealing 

under the “good cause” standard applicable to nondispositive motions, much less the “compelling 

reasons” standard that applies here. See Civil L.R. 79-5(d)(1)(A) (“Reference to a stipulation or 

protective order that allows a party to designate certain documents as confidential is not sufficient 

to establish that a document, or portions thereof, are sealable.”). Diagnostic Laboratories did not 

submit a declaration at all. If plaintiffs and/or Diagnostic Laboratories still want the relevant

portions of Quest’s summary judgment motion and associated materials to remain under seal, they 

shall file an amended declaration within seven days of the date of this order articulating 

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“compelling reasons supported by specific factual findings” to justify sealing. Kamakana v. City 

& Cnty. of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006) (internal quotation marks and 

modifications omitted). Quest need not refile its amended motion. As plaintiffs consider what 

portions of the materials sought to be sealed, if any, are in fact sealable, they are advised that none 

of the unredacted information referenced and/or quoted in this order is sufficiently sensitive to 

warrant sealing under the compelling reasons standard.

Also on February 24, 2015, I denied without prejudice Quest’s request for several portions 

of plaintiffs’ opposition and associated materials to be sealed. Dkt. No. 248. Quest submitted an 

amended declaration on March 3, 2015. Dkt. No. 259. The following materials identified in the 

amended declaration are not sealable: (1) Moverley Dep. 185 (Lambrinos Decl. Ex. 1) (all); (2) 

Lambrinos Decl. Ex. 9 at 1512 (all); (3) Lambrinos Decl. Ex. 11 at 1558 (from “Note: Cost of 

Testing” to “NTC 3529”); (4) Opp. 6 (all); (5) Opp. 7 (lines 7-12). The rest of the materials 

identified in the amended declaration shall remain sealed. 

Finally, on February 25, 2015, Quest moved to seal various portions of its reply brief and 

associated materials. Dkt. No. 252. That motion is GRANTED. 

CONCLUSION

For the foregoing reasons:

(i) Quest’s request for relief in connection with plaintiffs’ alleged violation of the 

protective order is DENIED. Dkt. No. 260.

(ii) Quest’s motion for summary judgment is GRANTED IN PART and DENIED IN 

PART. Dkt. No. 216.

(iii) Quest’s amended administrative motion to file under seal portions of its summary 

judgment motion and associated materials is GRANTED IN PART, DENIED WITH PREJUDICE 

IN PART, and DENIED WITHOUT PREJUDICE IN PART, as discussed above. Dkt. No. 258.

(iv) Quest’s amended declaration in support of sealing portions of plaintiffs’ opposition 

brief and associated materials is sufficient to justify sealing, except as to the materials discussed 

above. The rest of the materials identified in the amended declaration shall remain sealed. Dkt. 

No. 259.

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(v) Quest’s administrative motion to file under seal portions of its reply brief and 

associated materials is GRANTED. Dkt. No. 252. 

IT IS SO ORDERED.

Dated: Apri1 15, 2015

______________________________________

WILLIAM H. ORRICK

United States District Judge

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