LOS ANGELES (CN) - Los Angeles County "merely speculated" that it suffered damages to support its claim that AIDS Healthcare Foundation overbilled it $5.2 million for HIV/AIDS services, a Superior Court judge ruled Monday.
AIDS Healthcare Foundation and its president Michael Weinstein sued Los Angeles County in 2013 , claiming county officials falsely accused it of inflating charges to punish the group for its support of the Safer Sex in the Adult Film Industry Act. Approved by voters in 2012, the law requires porn actors in the county to wear condoms while performing. That law was upheld by the 9 th Circuit in December 2014.
The foundation claimed that the county retaliated against it for blowing the whistle on county mismanagement of AIDS funding by directing "frequent and invasive" audits of the organization.
In a complaint for violations of the California Constitution and the California Whistleblower Act, the foundation claimed the county misused money, cut off vital services to patients and favored healthcare providers who made campaign contributions to county officials.
The county field a cross-complaint against the foundation in 2014 for breach of contract, seeking damages of $5.2 million for federal money provided under the Ryan White Comprehensive AIDS Resource Emergency (CARE) Act.
The AIDS Healthcare Foundation has contracted with the county since the late 1990s to provide patient services under the Act.
A 2009 county audit found the foundation had billed the county for living costs, salaries and other expenses that could have come from other funding sources, according to the county.
At a Monday morning hearing, Judge Michael P. Linfield granted AIDS Healthcare's motion for judgment on the pleadings, after finding that the county merely speculated that the federal government could ask the county to repay the $5.2 million in CARE Act funds.
"At most, defendant has suggested that if it is found that plaintiff improperly received CARE Act funds, the County would be responsible for repaying such funds to the federal government," Judge Linfield wrote in a 4-page tentative order. "There is no showing that the federal government has sought or that defendant has repaid any of the funds."
Glaser Weil attorney Joel N. Klevens argued the case for the county during the hearing at the Stanley Mosk Courthouse.
AIDS Healthcare Foundation was responsible for repaying the CARE Act funds, Klevens said, and it was the county's responsibility to collect the money.
If the foundation does not repay the money, the county would be on the hook to the federal government for the $5.2 million, according to the attorney.
"I think the court with AHF's help has lost its way a little bit," Klevens said.
The federal government did not "want to have anything to do with it," Klevens said. "This is not their deal."
He claimed that AIDS Healthcare Foundation breached the contract by overcharging $5.2 million for its services, drawing on funds that could have been allocated to other providers.
He called the court's tentative order if "not a license to steal" then a "license to overbill."
But AIDS Healthcare Foundation attorney Arti Bhimani "vehemently" disagreed, arguing that it was federal government that had provided the funds, not the county.
"The heart of the issue, which the court recognized, is that there are no damages as long as the county has not suffered any out-of-pocket losses," Bhimani said.
Judge Linfield granted AIDS Healthcare's motion, and gave the county 20 days to file a second amended complaint.
"We'll amend the complaint in a way that states a legitimate claim for the county to recover the $5.2 million that AHF has overcharged," Klevens told Courthouse News after the hearing.
Weinstein said he was "pleased with the court's ruling."
"We're interested in finding a mutually agreeable solution that will allow us to focus on caring for the 61,000 people with HIV in Los Angeles County, 24,000 of whom are not receiving care," Weinstein added.
Weinstein said it was costing the county "millions of dollars" to litigate the case. He said the foundation had made several settlement offers to the county before Linfield's decision.
"We hope to get a positive response to that, especially now that the county's claim that we owe them money has been thrown out," Weinstein said during a telephone interview.
Weinstein made similar retaliation claims against the county in a 2012 federal lawsuit. U.S. District Judge Percy Anderson rejected that claim last year. The foundation has appealed to the 9 th Circuit .
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