Court Opinion

ID: 9726086
Source: CourtListenerOpinion
Date Created: 2023-08-26 12:30:15.237224+00
Date Added: 2024-06-11T18:25:23.416260
License: Public Domain

JOHNSON, J
I concur in the judgment. I write separately because, although I agree the compensation arrangement between Beck and American Health Group, Inc., violates Business and Professions Code section 650, I respectfully disagree with the majority’s conclusion the agreement, if there were an agreement, is unenforceable in toto.
The majority apparently assumes the agreement is void in its entirety because it unlawfully permits Beck to receive an indirect referral fee for each of his own patients he refers to the health care facility. This assumption is incorrect.
“[I]f the court can, consistent with the intent of the parties, reasonably relate the illegal consideration on one side to some specified or determinable portion of the consideration on the other side,” the contract will be deemed severable and the illegal portion severed from the contract. (Keene v. Harling (1964) 61 Cal.2d 318, 321 [38 Cal.Rptr. 513, 392 P.2d 273]; accord Ryan v. Mike-Ron Corp. (1968) 259 Cal.App.2d 91, 95-96 [66 Cal.Rptr. 224]; Lawn v. Camino Heights, Inc. (1971) 15 Cal.App.3d 973, 980 [93 Cal.Rptr. 621]; see Marvin v. Marvin (1976) 18 Cal.3d 660, 672 [134 Cal.Rptr. 815, 557 P.2d 106].) It is only where the court cannot distinguish between the lawful and unlawful portions of the agreement, and the illegality taints the entire agreement, that the entire agreement will be illegal and unenforceable. (Keene v. Harling, supra, 61 Cal.2d at p. 321; Weber v. Tonini (1957) 151 Cal.App.2d 168, 171 [311 P.2d 132].)
Here, the illegal portions of the compensation agreement are clearly severable. Beck’s compensation, although described in terms of a percentage of the revenues for room and board, is essentially calculated on a per capita basis. Thus, his compensation varies with the addition or subtraction of patients.
*1568The illegal compensation arises when Beck admits one of his own patients to the health care facility for treatment. At that time, Beck would receive an indirect referral fee calculated as a percentage of his patient’s fees for room and board. If the contractual provision permitting Beck to admit his own patients to the health care facility is severed, so too is the illegality. The remainder of the agreement, whereby Beck provides services to all other patients in exchange for a per capita fee, would be free of any illegal taint and therefore enforceable.
The majority argues the issue of severability is not within the scope of review because it involves matters extraneous to the complaint. In contrast, the majority contends the issue of illegality is properly before it because the illegality appears on the face of the complaint. So too does the severability of the fee arrangement. As I explained above, the terms of the contract, as they were presented in the complaint, demonstrate the illegal portion of the contract is severable from other, valid consideration.
However, even assuming the majority’s argument is correct, the action would not be barred merely because additional allegations are required to state a viable claim. If there is a reasonable possibility a defect in the complaint can be cured by amendment, the plaintiff should be given the opportunity to amend. (Minsky v. City of Los Angeles (1974) 11 Cal.3d 113, 118 [113 Cal.Rptr. 102, 520 P.2d 726]; Call v. Kezirian (1982) 135 Cal.App.3d 189, 195 [185 Cal.Rptr. 103].)
The majority apparently concedes Beck could amend his complaint to allege severability. Therefore, had there otherwise been an agreement between Beck and the defendant Health Group, at the least Beck should be permitted to amend his complaint to allege severability.
Appellant’s petition for review by the Supreme Court was denied October 11, 1989.