Lee v. Blue Shield of California

Dr. Thomas T. Lee sued Blue Shield of California alleging that Blue Shield wrongfully suspended him from its network of medical providers for alleged medical incompetency, unlawfully denied him an administrative hearing on the issue of his competency and then illegally terminated his provider contract based on his alleged failure to cooperate in the administrative process. Lee seeks damages and declaratory relief but not reinstatement as a provider. The trial court sustained Blue Shield’s demurrer without leave to amend on the ground that Lee had not exhausted his administrative remedies. Lee filed a timely appeal from the judgment dismissing his action.

The trial court correctly sustained Blue Shield’s demurrer to Lee’s contract and tort causes of action. Exhaustion of the administrative remedy under Business and Professions Code sections 809 through 809.9 (commonly referred to as an “809 hearing”) is a prerequisite to Lee’s recovery of damages for wrongful suspension and termination as a Blue Shield physician, and Lee admits he has not exhausted that remedy. The trial court erred, however, in sustaining the demurrer to Lee’s cause of action for declaratory relief.…