The opinion
Filed 6/26/17
IN THE SUPREME COURT OF CALIFORNIA
THE PEOPLE, )
)
Petitioner, )
) S232639
v. )
) Ct.App. 4/2 E062380
THE SUPERIOR COURT OF )
RIVERSIDE COUNTY, )
) Riverside County
Respondent; ) Super. Ct. No. INF1302523
)
HOSSAIN SAHLOLBEI, )
)
Real Party in Interest. )
____________________________________)
Government Code section 1090 prohibits public officers and employees
from making contracts in which they have a financial interest when they act in
their official capacities. Knowing and willful self-dealing can result in criminal
liability. In this case, the District Attorney of Riverside County seeks to prosecute
Dr. Hossain Sahlolbei under section 1090 for allegedly influencing the public
hospital where he worked to hire another doctor and then profiting from that
doctor‘s contract. The Court of Appeal held that because Sahlolbei was an
independent contractor and not an employee of the hospital, section 1090 does not
apply to Sahlolbei. We conclude that independent contractors are not
categorically excluded from section 1090. Liability under the statute can extend to
independent contractors who have duties to engage in or advise on public
contracting. Because Sahlolbei‘s duties brought him within the scope of the
statute, we reverse.
I.
Sahlolbei was a surgeon at Palo Verde Hospital (the Hospital) in Blythe,
Riverside County. The Hospital is a public entity under California law. It is
undisputed that Sahlolbei was an independent contractor and never an employee of
the Hospital. In addition to providing medical services as the Hospital‘s
codirector of surgery, Sahlolbei served on the Hospital‘s medical executive
committee (the Committee). The Committee, comprised of members of the
medical staff, is independent of the Hospital and advises the board of governors of
the Hospital (the Board) on the Hospital‘s operations, including physician hiring.
Sahlolbei was at times the chief of staff or the vice-chief of staff of the Committee,
and he is alleged to have had considerable influence over the Board‘s decisions in
those roles.
The prosecution alleges that Sahlolbei in 2009 recruited an anesthesiologist,
Dr. Brad Barth, to work at the Hospital. Sahlolbei negotiated a contract with
Barth under which Barth would receive $36,000 a month with a one-time
relocation fee of $10,000. But Sahlolbei pressured the Board into hiring Barth for
$48,000 a month with a one-time relocation fee of $40,000 as well as a
directorship position of $3,000 a month. Sahlolbei allegedly threatened to have
the medical staff stop admitting patients to the Hospital if the Board did not agree
to his terms. Sahlolbei instructed Barth to have Barth‘s paychecks deposited
directly into Sahlolbei‘s account, out of which Sahlolbei remitted to Barth the
$36,000 a month on which they had agreed. The Board was not aware that
Sahlolbei was profiting from Barth‘s contract. When this was brought to the
Board‘s attention, the Hospital renegotiated Barth‘s contract to pay Barth directly.
2
The Riverside County District Attorney charged Sahlolbei with grand theft
and violation of Government Code section 1090, which provides in relevant part:
―Members of the Legislature, state, county, district, judicial district, and city
officers or employees shall not be financially interested in any contract made by
them in their official capacity, or by any body or board of which they are
members.‖ (Gov. Code, § 1090, subd. (a); all undesignated statutory references
are to this code.) A willful and knowing violation of section 1090 is punishable by
a fine of up to $1,000 or imprisonment, and disqualification ―from holding any
office in this state.‖ (§ 1097, subd. (a); People v. Honig (1996) 48 Cal.App.4th
289, 333–336 (Honig).)
The trial court dismissed the section 1090 count. It considered itself bound
by People v. Christiansen (2013) 216 Cal.App.4th 1181 (Christiansen), which
held that independent contractors cannot be held criminally liable under section
1090. A divided panel of the Court of Appeal agreed with Christiansen and
upheld the dismissal. The court also held that there was no evidence Sahlolbei
was acting in an official capacity or performing an authorized public function.
Justice Hollenhorst dissented, arguing that Christiansen was wrongly decided. He
would have found that independent contractors can be criminally liable under
section 1090 where the contractor exerts ―considerable‖ influence over the
contract decisions of a public entity. We granted review.
II.
Whether section 1090 applies to independent contractors is a question of
statutory construction that we review de novo. (Lexin v. Superior Court (2010) 47
Cal.4th 1050, 1072 (Lexin).) Section 1090 does not define ―officer‖ or
―employee.‖ In Reynolds v. Bement (2005) 36 Cal.4th 1075 (Reynolds), we
observed that where ― ‗a statute refer[s] to employees without defining the term[,]
courts have generally applied the common law test of employment.‘ ‖ (Id. at
3
p. 1087, quoting Metropolitan Water Dist. v. Superior Court (2004) 32 Cal.4th
491, 500.) Sahlolbei argues that because it is undisputed Sahlolbei was not an
employee of the Hospital under the common law test, Reynolds disposes of this
case.
Like the Court of Appeal, Sahlolbei relies primarily on Christiansen. In
that case, the defendant Karen Christiansen, as Director of Planning and Facilities
of the Beverly Hills Unified School District, advised the district to enter into
contracts with Johnson Controls. (Christiansen, supra, 216 Cal.App.4th at
pp. 1184–1187.) At the same time, Christiansen‘s consulting business — of which
she was the sole proprietor — was advising Johnson Controls on how to win
business at another school district. (Id. at pp. 1185, 1187.) Separately,
Christiansen advised the district on a bond measure to raise funds to pay for
seismic retrofits of school buildings, among other things. (Id. at p. 1187.)
Christiansen also advised the district to retain her consulting company for project
management services for various projects funded by the bond, which the district
did. (Ibid.) Christiansen was convicted on four counts of violating section 1090
for these actions. (Id. at p. 1183.) The Court of Appeal reversed, reasoning that
section 1090 does not define ―employee‖ and therefore Reynolds ties the definition
to the common law test of employment. (Christiansen, at pp. 1188–1189.) The
court held that because Christiansen was an independent contractor and not an
employee of the district under the common law test, section 1090 did not apply to
her actions. (Christiansen, at p. 1190.)
But the Court of Appeal in Christiansen misconstrued Reynolds. As
Reynolds makes clear, its rule regarding the interpretation of ―employees‖ was a
specific application of the general rule that we do not presume the Legislature
intends to abrogate the common law unless it ― ‗ ― ‗clearly and
unequivocally‘ ‖ ‘ ‖ says so. (Reynolds, supra, 36 Cal.4th at p. 1086.) The
4
Reynolds rule therefore applies when the common law test of employment would
have been appropriate in the same context at common law. But as we explained in
S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d
341, the common law test of employment is not always appropriate beyond the tort
context in which it was originally developed. (Id. at pp. 350–351.) Outside of
tort, rather than ―rigidly‖ applying the common law test, we look to the ― ‗history
and fundamental purposes‘ ‖ of the statute at issue to determine whether the
Legislature intended the test to apply. (Ibid. [declining to apply the common law
test in light of the history and purposes of the workers‘ compensation statute at
issue]; Martinez v. Combs (2010) 49 Cal.4th 35, 64 [declining to apply the
common law test in light of the ―full historical and statutory context‖ of the statute
at issue].) In Reynolds itself, we observed that the plaintiff in that case ―ha[d] not
persuaded us that one may infer from the history and purposes of [the statute at
issue] a clear legislative intent to depart . . . from the common law‖ as to the
question at issue. (Reynolds, at p. 1087, fn. 8.) Here, the history and purposes of
section 1090 convince us that the Legislature, rather than intending to limit section
1090 in accordance with the common law test of employment, intended the statute
to cover certain independent contractors.
We start with the legislative history of the 1963 revisions to section 1090.
Prior to those revisions, section 1090 extended only to ―officers.‖ (Former § 1090,
as amended by Stats. 1961, ch. 381, § 1, p. 1435.) As now, a ―public officer‖ was
generally understood to be one who satisfied two criteria: ―First, a tenure of office
‗which is not transient, occasional or incidental,‘ but is of such a nature that the
office itself is an entity in which incumbents succeed one another . . . , and,
second, the delegation to the officer of some portion of the sovereign functions of
government, either legislative, executive, or judicial.‖ (Spreckels v. Graham
5
(1924) 194 Cal. 516, 530 (Spreckels), quoting Coulter v. Pool (1921) 187 Cal.
181, 187; see Dibb v. County of San Diego (1994) 8 Cal.4th 1200, 1211.)
In Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, 291 (Schaefer) and
Terry v. Bender (1956) 143 Cal.App.2d 198, 211, the courts concluded that an
outside attorney hired by a city could be liable under section 1090. Neither
decision cited Spreckels or related cases, and it does not appear that the attorney,
who was hired ―as special attorney for the city to clear the title to tax-deeded land
situated within the jurisdiction of the city‖ (Schaefer, at p. 284), occupied an office
― ‗which [was] not transient, occasional, or incidental‘ ‖ or was delegated ―some
portion of the sovereign functions‖ of the city (Spreckels, supra, 195 Cal. at
p. 530). Instead, Schaefer said that ―[s]tatutes prohibiting personal interests of
public officers in public contracts are strictly enforced‖ and that what mattered
was that the attorney was hired to advise on city contracting. (Schaefer, at p. 291
[―A person merely in an advisory position to a city is affected by the conflicts . . .
rule.‖].)
Although Schaefer was seemingly in tension with Spreckels‘s longstanding
understanding of ―public officer‖ as that term had generally been used in other
statutory provisions, the Legislature endorsed Schaefer‘s holding and reasoning
when it amended section 1090 in 1963 to include ―employees.‖ We ordinarily
presume the Legislature to ―have enacted and amended statutes ‗ ― ‗in the light of
such decisions as have a direct bearing upon them‘ ‖ ‘ ‖ (Viking Pools, Inc. v.
Maloney (1989) 48 Cal.3d 602, 609), and that presumption is bolstered here by
legislative history demonstrating that members of the Legislature were aware of
Schaefer. In an appendix to its report on the 1963 amendments, the Assembly
Interim Committee on Government Organization cited Schaefer for its view that
―[s]tatutes prohibiting personal interest of public officers in public contracts are
strictly enforced. (Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, 291.)‖
6
(Assem. Interim Com. on Government Organization, Rep. on Conflict of Interest
(Jan. 1963) p. 32 (Assembly Report).) Then, in a subsection titled Advisory
Position, the committee repeated verbatim Schaefer‘s holding that ―[a] contract
may be contrary to public policy where an official in a position to advise or
influence officials making the contract has a personal interest in the contract. A
person in an advisory position to a city is affected by the conflicts of interest
rule. . . . (Special Counsel) Schaefer v. Berinstein, [at p.] 291.‖ (Assem. Rep., at
p. 37, italics added.)
In light of this history, we conclude that the Legislature understood section
1090‘s reference to ―officers‖ to apply to outside advisors with responsibilities for
public contracting similar to those belonging to formal officers, notwithstanding
Spreckels‘s definition of ―public officer‖ for other statutes. It stands to reason that
when the Legislature added the term ―employees‖ to section 1090, it similarly
intended to include outside advisors with responsibilities for public contracting
similar to those belonging to formal employees, notwithstanding the common law
distinction between employees and independent contractors. (See Assem. Rep.,
supra, at p. 32 [recognizing that the ―tendency of the law is to widen rather than
circumscribe the scope of ‗conflict of interest‘ statutes such as Section 1090‖].)
At the very least, it does not seem plausible to believe that the Legislature, in
―widen[ing]‖ section 1090 to include ―employees,‖ meant in the same breath to
also ―circumscribe‖ section 1090 by categorically excluding outside advisors
previously understood to be within the statute‘s scope. (Assem. Rep., supra, at
p. 32.)
This understanding of the 1963 amendments to section 1090 is almost as
old as the amendments themselves. Writing two years after the amendments, the
Attorney General observed that Schaefer and Terry had applied ―the policy, if not
the letter, of section 1090‖ to include outside advisors. (46 Ops.Cal.Atty.Gen. 74,
7
79 (1965).) The Attorney General concluded that ―the Legislature in . . .
amending section 1090 to include ‗employees‘ intended to apply the policy of the
conflicts of interest law, as set out in the Schaefer and Terry cases, to independent
contractors who perform a public function and to require of those who serve the
public temporarily the same fealty expected from permanent officers and
employees.‖ (Ibid.) The Attorney General reasoned that ―a statute . . . is
presumed to have been enacted or amended in the light of such existing judicial
decisions as have a direct bearing upon it.‖ (Ibid.)
The Courts of Appeal have generally agreed with the Attorney General.
(See Campagna v. City of Sanger (1996) 42 Cal.App.4th 533, 541–542
(Campagna) [outside attorney was covered by section 1090]; People v. Gnass
(2002) 101 Cal.App.4th 1271, 1287, fn. 3, 1302, fn. 10 (Gnass) [accepting that an
outside attorney could be covered by section 1090, though the parties did not
litigate the question]; California Housing Finance Agency v. Hanover/California
Management and Accounting Center, Inc. (2007) 148 Cal.App.4th 682, 693
(California Housing) [outside attorney, though an independent contractor, was
covered by section 1090]; Hub City Solid Waste Services, Inc. v. City of Compton
(2010) 186 Cal.App.4th 1114, 1125 (Hub City) [independent contractor who
provided waste management services came within section 1090]; Davis v. Fresno
Unified School District (2015) 237 Cal.App.4th 261, 300 [extending section 1090
to corporate consultants].) Only the courts in Christiansen and in this case have
found that section 1090 categorically excludes independent contractors. We find
that Campagna, California Housing, Hub City, Davis, and the Attorney General‘s
opinion more accurately reflect the Legislature‘s intent than does Christiansen,
which did not consider the legislative history or the purposes of section 1090.
Other conflicts statutes confirm that the Legislature did not intend to
categorically exclude independent contractors from the scope of section 1090.
8
Section 87100 of the Political Reform Act of 1974 (§ 81000 et seq.; the Act)
addresses conflicts in government decisionmaking. We have said that section
1090 and section 87100 ― ‗are two of the most important statutes in California
addressing the problem of conflict of interest by public officials and employees.
They both deal with a relatively small class of people, public officers and
employees, and share the same purpose or objective, the prevention of conflicts of
interests, and hence can fairly be said to be in pari materia.‘ [Citations.]‖ (Lexin,
supra, 47 Cal.4th at p. 1091.) ―Accordingly, to the extent their language permits,
we will read section 1090 et seq. and the Political Reform Act as consistent‖
(ibid.) and will ―incorporat[e] congruent principles‖ so as to ―render the laws
governing government contracts consistent with those governing government
decisions more generally‖ (id. at p. 1092).
Section 82048, part of the Act, defines ― ‗public official‘ ‖ to include any
―officer, employee, or consultant of a state or local government agency.‖
(§ 82048, subd. (a).) Sahlolbei argues that this shows that the Legislature knows
how to include independent contractors when it wants to. But if we read the two
statutes ―to the extent their language permits‖ ―as incorporating congruent
principles‖ (Lexin, supra, 47 Cal.4th at pp. 1091, 1092), section 82048‘s
clarification that contractors are included among ―public official[s] at any level of
state or local government‖ under section 87100 is reasonably understood to mean
that independent contractors are also included among ―[m]embers of the
Legislature, state, county, district, judicial district, and city officers or employees‖
under section 1090. We conclude that the Legislature did not intend to exclude
from the scope of section 1090 outside advisors to public entities solely because
they are independent contractors at common law.
This conclusion is consistent with, and helps give effect to, the purposes of
section 1090. Section 1090 ―codifies the long-standing common law rule that
9
barred public officials from being personally financially interested in the contracts
they formed in their official capacities.‖ (Lexin, supra, 47 Cal.4th at p. 1072;
accord, Stockton Plumbing & Supply Co. v. Wheeler (1924) 68 Cal.App. 592,
597.) The common law rule, like section 1090, protects the actual and perceived
integrity of the public fisc. As a result, liability — even criminal liability — can
accrue without ―actual fraud, dishonesty, unfairness or loss to the governmental
entity.‖ (Honig, supra, 48 Cal.App.4th at p. 314.) As the United States Supreme
Court explained in the context of a federal conflict of interest statute, this is
because such rules are ―directed not only at dishonor, but also at conduct that
tempts dishonor. This broad proscription embodies a recognition of the fact that
an impairment of impartial judgment can occur in even the most well-meaning
men when their personal economic interests are affected by the business they
transact on behalf of the Government.‖ (United States v. Mississippi Valley Co.
(1961) 364 U.S. 520, 549.)
Recognizing the prophylactic purposes of conflicts statutes, the case law
makes clear that section 1090 should be construed broadly to ensure that the
public has the official‘s ―absolute loyalty and undivided allegiance.‖ (Stigall v.
City of Taft (1962) 58 Cal.2d 565, 569 (Stigall).) The focus is on the substance,
not the form, of the challenged transaction, ―disregard[ing] the technical
relationships of the parties and look[ing] behind the veil which enshrouds their
activities.‖ (People v. Watson (1971) 15 Cal.App.3d 28, 37.) To that end, we
have held that the ―making‖ of a contract for the purposes of section 1090 includes
―planning, preliminary discussions, compromises, drawing of plans and
specifications and solicitation of bids,‖ and not just the moment of signing.
(Stigall, at p. 571.) Building on Stigall, the Courts of Appeal have explained that
officials can be liable if they ―had the opportunity to, and did, influence execution
[of the contract] directly or indirectly to promote [their] personal interests.‖
10
(People v. Sobel (1974) 40 Cal.App.3d 1046, 1052 (Sobel).) We have similarly
interpreted ―financial interest‖ broadly so as to include indirect interests and future
expectations of profit or loss. (Thomson v. Call (1985) 38 Cal.3d 633, 645–646
(Thomson).) Indeed, any financial interest not explicitly excluded by the
Legislature in sections 1091 and 1091.5 as too ― ‗remote or minimal‘ ‖ is
sufficient to incur criminal liability under section 1090. (Honig, supra, 48
Cal.App.4th at p. 317, quoting Stigall, at p. 569; see People v. Wong (2010) 186
Cal.App.4th 1433, 1450 (Wong); People v. Vallerga (1977) 67 Cal.App.3d 847,
865; People v. Darby (1952) 114 Cal.App.2d 412, 425.) The same principles
underlying these cases compel us to give a similarly broad construction as to
which persons are covered by section 1090.
That said, we do not hold that all independent contractors are covered by
section 1090. As the case law makes clear, section 1090 liability extends only to
independent contractors who can be said to have been entrusted with
― ‗transact[ing] on behalf of the Government‘ ‖ (Stigall, supra, 58 Cal.2d at
p. 570). (See Hub City, supra, 186 Cal.App.4th at p. 1125 [―An individual‘s status
as an official under [section 1090] turns on the extent to which the person
influences an agency‘s contracting decisions or otherwise acts in a capacity that
demands the public trust.‖]; Schaefer, supra, 140 Cal.App.2d at p. 291 [―[The
special attorney] was an officer and agent of the city.‖]; see also Thomson, supra,
38 Cal.3d at pp. 647–648 [― ‗The law . . . will not permit one who acts in a
fiduciary capacity to deal with himself in his individual capacity.‘ ‖].) So, for
example, a stationery supplier that sells paper to a public entity would ordinarily
not be liable under section 1090 if it advised the entity to buy pens from its
subsidiary because there is no sense in which the supplier, in advising on the
purchase of pens, was transacting on behalf of the government.
11
In the ordinary case, a contractor who has been retained or appointed by a
public entity and whose actual duties include engaging in or advising on public
contracting is charged with acting on the government‘s behalf. Such a person
would therefore be expected to subordinate his or her personal financial interests
to those of the public in the same manner as a permanent officer or common law
employee tasked with the same duties. (See 46 Ops.Cal.Atty.Gen., supra, at p. 79
[―[Section 1090] require[s] of those who serve the public temporarily the same
fealty expected from permanent officers and employees.‖].) Thus, for instance, a
person who was initially hired as an officer or employee with responsibilities for
contracting and then rehired as an independent contractor to perform the same
duties and functions would be expected to continue to serve the public faithfully.
Such a contractor would be subject to section 1090. This general rule might give
way in circumstances where a contractor reasonably believed he or she was not
expected to subordinate his or her financial interests to the public‘s. But we are
not faced with any such circumstances here.
Sahlolbei argues that all independent contractors are exempt from section
1090 liability, but we do not find his arguments persuasive. It is true that in
describing the conflicts statutes, we have never explicitly said they apply to
independent contractors. We have characterized the statutes as ―barr[ing] public
officials from being personally financially interested in the contracts they formed
in their official capacities.‖ (Lexin, supra, 47 Cal.4th at p. 1072, italics added.)
But we and other courts have repeatedly held that conflicts statutes look past
―[l]abels and titles and fictional divides.‖ (Wong, supra, 186 Cal.App.4th at
p. 1451.) Our past cases have used the term ―public officials‖ because the precise
title of the person was never at issue. What mattered was that he or she was in a
position to influence how a public entity spends the public‘s money, and ―public
official‖ was a convenient way to designate such a person. That is how section
12
87100 uses the term. (§ 87100 [applying to any ―public official at any level of
state or local government.‖].) As an historical matter, it is likely that only
―officers‖ occupied such a position; today, with the expansion of government and
public contracting, regular employees and even consultants can have control over
the public purse. The history and purposes of section 1090 indicate that the
Legislature did not intend liability to turn on the form of an official‘s employment.
Sahlolbei cites People v. Lofchie (2014) 229 Cal.App.4th 240 for the
proposition that courts interpret the ―what‖ of section 1090 broadly but not the
―who.‖ (Id. at p. 252.) But Lofchie dealt with whether employees of the
University of California were subject to section 1090, which in turn depended on
whether the university is a public entity within the meaning of the statute. (Ibid.)
In light of the ―unique constitutional status of the University of California‖
(Miklosy v. Regents of the University of California (2008) 44 Cal.4th 876, 889) —
one which guarantees that the university is ―entirely independent of all political or
sectarian influence‖ (Cal. Const., art. IX, § 9, subd. (f)) — the court decided that
section 1090 does not cover the university. (Lofchie, at p. 254.) There are no
constitutional considerations here that warrant a departure from the general
principles of the conflicts rules. It is undisputed that the Hospital is a public entity
within the meaning of section 1090.
Sahlolbei also cites Klistoff v. Superior Court (2007) 157 Cal.App.4th 469,
but that case is also inapposite. The alleged misconduct there was a conspiracy
between the former Treasurer of the City of South Gate and Klistoff, among
others, to ensure that Klistoff‘s company would receive a waste collection contract
from the city. (Id. at p. 474.) The prosecution sought to hold Klistoff liable as a
coconspirator under section 1090, even though Klistoff was not employed by the
city and had no official position with the city or any other public entity at the time
of the alleged misconduct. (Id. at pp. 478–480.) The court held that since Klistoff
13
could not himself violate section 1090, he could not be charged as a conspirator
under the statute either. (Ibid.) It is undisputed here that Sahlolbei did have an
official position at the Hospital, albeit one as an independent contractor and not as
a common law employee.
The California Medical Association (CMA), as amicus curiae, argues that
physicians should not be subject to section 1090 because of the nature of their
relationships with their hospitals. CMA observes that physicians serve as
independent contractors of hospitals and, in that capacity, often play major roles in
running hospitals. Expanding section 1090 to cover physicians, CMA argues, has
the potential to criminalize much of what those physicians currently do. For
example, a physician who advises a hospital about the effectiveness of certain
drugs could be deemed to have participated in the making of a contract if the
hospital enters into a contract with the supplier of those drugs. And, CMA
contends, if the physician also has a relationship with the supplier, even if only to
keep informed of new developments, the physician could be deemed financially
interested in the contract. But CMA overlooks sections 1091 and 1091.5, which
exempt interests that are remote or minute. At the same time, if the physician
owned more than 3 percent of the drug supplier or derived more than 5 percent of
his or her income from the supplier (see § 1091.5, subd. (a)(1)), we see nothing
unreasonable about subjecting the physician to potential liability under section
1090 if the physician chooses to advise the hospital.
More fundamentally, we are not convinced that the practice of medicine
cannot bear the weight of conflicts of interest statutes. Contrary to CMA‘s claim,
section 1090 does not require public officials to have sole or undivided loyalty to
the public entity. Section 1090 seeks to ensure that, to the extent the official has
any responsibility to advise on how the public‘s money should be spent, the
official‘s advice is independent of the official‘s own financial interests. Applied
14
to physicians, the statute would not disturb their existing duties to the medical staff
or their patients. It would simply require physicians, to the extent they spend
taxpayer money in the exercise of their duties, not to spend that money in their
own financial interest. As CMA notes, despite the general corporate bar on the
practice of medicine, between 2004 and 2011 the Legislature temporarily
exempted certain rural health care districts from the bar, allowing them to employ
physicians directly. (Bus. & Prof. Code, former § 2401.1, added by Stats. 2003, ch.
411, § 2, p. 3058 and repealed by its own terms eff. Jan. 1, 2011.) Physicians who
were employed by public hospitals pursuant to this exemption were indisputably
subject to section 1090. Yet CMA does not contend that those physicians were
impaired in the performance of their duties as a result.
Sahlolbei also notes that the Legislature considered, but did not pass, a bill
amending section 1090 to explicitly include independent contractors shortly after
Christiansen was decided. (See Assem. Bill No. 1059 (2013–2014 Reg. Sess.),
§ 1.) The Legislature did pass Senate Bill No. 952 (2013–2014 Reg. Sess.) that
same session, amending section 1090 to include aider and abettor liability. (Stats.
2014, ch. 483, § 1.) This, Sahlolbei argues, indicates that the Legislature ratified
Christiansen. But Assembly Bill No. 1059 was introduced three months before
Christiansen was decided; the bill could not have been intended as a response to
Christiansen and does not indicate that the Legislature was even aware of
Christiansen. Moreover, inferences from legislative inaction are necessarily
speculative, and we are especially wary of using unpassed legislation as evidence
of what the Legislature that enacted the original statute intended. (See People v.
Mendoza (2000) 23 Cal.4th 896, 921 [―[T]he Legislature‘s failure to enact a
proposed statutory amendment may indicate many things other than approval of a
statute‘s judicial construction . . . .‖].) Because Christiansen is in serious tension
with a long line of other Court of Appeal cases (ante, at p. 8), it seems especially
15
tenuous to suggest that the Legislature endorsed Christiansen by inaction. (See
Baral v. Schnitt (2016) 1 Cal.5th 376, 395, fn. 9 [observing that the ―[t]he weak
reed of legislative inaction provides little support‖ for a rule ―that has not been
widely accepted‖].)
The perverse consequences of exempting independent contractors from
section 1090 provide another reason against ascribing to the Legislature such an
intent. An official ―could manipulate the employment relationship to retain
‗official capacity‘ influence, yet avoid liability under section 1090‖ (California
Housing, supra, 148 Cal.App.4th at p. 693), a scenario illustrated by the facts of
Christiansen. Christiansen was initially employed directly by the school district.
(Christiansen, supra, 216 Cal.App.4th at p. 1184.) Two years later, she entered
into a new contract with the district under which she was treated as an independent
contractor, although she continued to perform the same duties. (Ibid.) Her alleged
malfeasance occurred during the new contract. (Id. at pp. 1187–1188.) As a
result, she was able to escape liability for misspending the public‘s money in large
part because at the time of her misconduct, she provided her own insurance (see
id. at p. 1185); if the exact same conduct had occurred under the old contract, she
could have been liable. The Christiansen court did not explain why the
Legislature would have intended this result.
In declining to follow California Housing and Hub City, the Christiansen
court observed that those cases, like the ones they built on, involved only civil
liability under section 1090, whereas Christiansen‘s case involved criminal
liability. (Christiansen, supra, 216 Cal.App.4th at pp. 1189–1190.) But we are
not persuaded the Legislature intended any part of section 1090 to mean one thing
in a civil case and another in a criminal case. There is no statutory basis for
interpreting section 1090 differently in the criminal context. As we observed in
Lexin, section 1097 criminalizes any knowing and willful violation of section 1090
16
without otherwise modifying any elements of section 1090. (Lexin, supra, 47
Cal.4th at p. 1074.) And no court prior to Christiansen appears to have suggested
that decisions involving section 1090 in civil contexts were inapposite in criminal
cases. To the contrary, our decisions and those of the Courts of Appeal involving
criminal prosecutions under section 1090 have consistently relied on civil
precedent. (See Lexin, at p. 1075 [criminal case relying on civil cases]; Gnass,
supra, 101 Cal.App.4th at pp. 1290–1291 [same]; Honig, supra, 48 Cal.App.4th at
p. 313 [same].)
The rule of lenity does not require a stricter interpretation of section 1090.
We have held that lenity applies only when ― ‗two reasonable interpretations of the
same provision stand in relative equipoise, i.e., that resolution of the statute‘s
ambiguities in a convincing manner is impracticable.‘ ‖ (People v. Avery (2002)
27 Cal.4th 49, 58; see Pen. Code, § 4 [―The rule of the common law, that penal
statutes are to be strictly construed, has no application to this Code. All its
provisions are to be construed according to the fair import of their terms, with a
view to effect its objects and to promote justice.‖].) Here, we can do ― ‗more than
guess‘ ‖ at the Legislature‘s intentions regarding section 1090. (Avery, at p. 58.)
We are mindful that a criminal defendant must have fair notice as to what
conduct is prohibited. (Williams v. Garcetti (1993) 5 Cal.4th 561, 567.) But this
does not mean that it is ―necessary that [the statute] furnish detailed plans and
specifications of the acts or conduct prohibited.‖ (Lorenson v. Superior Court
(1950) 35 Cal.2d 49, 60.) Rather, ―we ‗require citizens to apprise themselves not
only of statutory language, but also of legislative history, subsequent judicial
construction, and underlying legislative purposes.‘ ‖ (People v. Heitzman (1994) 9
Cal.4th 189, 200.) In light of the unbroken line of cases holding that independent
contractors can be liable under section 1090 and the consistent cross-pollination
between criminal and civil cases interpreting section 1090, we find it was
17
sufficiently clear at the time of Sahlolbei‘s alleged misconduct in 2009 — after
Hub City and before Christiansen — that independent contractors could be held
criminally liable under section 1090. We express no view on whether an
independent contractor can be held criminally liable under section 1097 for
conduct occurring between Christiansen and this decision.
Sahlolbei‘s broader objection is that the standard advanced by the dissent in
the Court of Appeal — that independent contractors come within the scope of
section 1090 when they occupy positions ―that carry the potential to exert
‗considerable‘ influence‖ over public contracting‖ (see California Housing, supra,
148 Cal.App.4th at p. 693) — is impermissibly vague in the criminal context. The
California Housing court derived this ―considerable influence‖ formulation from
cases concerning when officials can be said to have ―made‖ contracts in their
official capacities. (See Gnass, supra, 101 Cal.App.4th at p. 1298 [finding that the
defendant made a contract in his official capacity within the meaning of section
1090 because he ―was in a position to exert considerable influence over the
decisions [of the public agency], and probably did‖], quoted by California
Housing, at p. 691.) We express no view as to the correctness of Gnass‘s
―considerable influence‖ inquiry when it comes to the making of contracts. But
we decline to adopt the ―considerable influence‖ standard when it comes to
defining who is covered by section 1090 in the first instance. As we have
explained, independent contractors come within the scope of section 1090 when
they have duties to engage in or advise on public contracting that they are
expected to carry out on the government‘s behalf.
In this case, the Hospital‘s former CEO testified that Sahlolbei was asked
around 2006 ―to try to bring physician services to the hospital because [Sahlolbei]
had better connections than [the Hospital] did.‖ The record does not specify
whether Sahlolbei was asked because of his roles on the medical staff of the
18
Hospital or his positions on the Committee, or both, but the distinction is
immaterial. A physician who was an officer or a common law employee of the
Hospital who was similarly tasked with engaging in and advising on physician
recruitment would have been expected to be faithful to the public in perfoming
those duties and would have come within the scope of section 1090. Sahlolbei is
not exempt from section 1090 liability merely because he was an independent
contractor.
III.
Sahlolbei contends that even if section 1090 can apply to some independent
contractors, the Court of Appeal correctly held there is no evidence that he was
acting in an official capacity when he negotiated Barth‘s contract with the Board.
The Court of Appeal agreed with Sahlolbei that during the negotiations he was
acting solely as Barth‘s representative, a fact the Board was well aware of given
the antagonistic nature of the proceedings.
The Court of Appeal in this case appears to have construed section 1090
too narrowly. On a motion to dismiss a count under Penal Code section 995, we
ask only ―whether the evidence is such that ‗a reasonable person could harbor a
strong suspicion of the defendant‘s guilt.‘ ‖ (Lexin, supra, 47 Cal.4th at p. 1072.)
This is an ―exceedingly low‖ standard (Salazar v. Superior Court (2000) 83
Cal.App.4th 840, 846), and we conclude it is satisfied here.
As explained, section 1090 prohibits officials from being ―financially
interested in any contract made by them in their official capacity.‖ Officials make
contracts in their official capacities within the meaning of section 1090 if their
positions afford them ―the opportunity to . . . influence execution [of the contracts]
directly or indirectly to promote [their] personal interests‖ and they exploit those
opportunities. (Sobel, supra, 40 Cal.App.3d at p. 1052.) And officials cannot hide
behind ―[l]abels and titles‖ (Wong, supra, 186 Cal.App.4th at p. 1451) or
19
― ‗change hats‘ ‖ (Campagna, supra, 42 Cal.App.4th at p. 542) to obscure the
substance of their actions. Similarly, the fact that an official‘s written duties do
not extend to contracting is irrelevant if the official was actually involved in the
making of any public contracts and, in doing so, exploited an official position.
(See Sobel, at p. 1052 [rejecting the contention that section 1090 ―only applies to
those persons who actually have the legal authority to execute contracts, and do
so‖]; id. at p. 1053 [―[T]he evidence was ample to support the conclusion that the
defendant had the opportunity, whatever his job classification, to direct a steady
flow of [public money] to a concern in which he was interested, personally, and
that he did so.‖].)
We do not mean to suggest that the requirement that the contract have been
made in the defendant‘s ―official capacity‖ is an empty one. There may be
instances where officials subject to section 1090 will be involved in the making of
public contracts in which they benefit, but will not be liable because they were not
acting in their official capacities. (See, e.g., Campagna, supra, 42 Cal.App.4th at
pp. 539–540 [holding that an outside attorney acted outside of his official capacity
when directly renegotiating his own contract with the agency]; 80
Ops.Cal.Atty.Gen. 41, 41 (1997) [―[C]ity firefighters who have developed a
firefighting protective device may sell the device to the city‘s fire department
without violating . . . section 1090 if they contract with the city solely in their
private capacities.‖].) But this is not such an instance.
Sahlolbei contends that he did not act in an official capacity because his
written duties did not include finding doctors to serve on the hospital‘s staff. But
this is immaterial because there is evidence that Sahlolbei was actually asked by
Hospital leadership to assist in identifying physicians to recruit to the Hospital and
that he did so. Moreover, even if the Board thought that Sahlolbei was acting
20
exclusively as Barth‘s representative, a reasonable person could harbor a strong
suspicion that Sahlolbei was only able to make the threats he allegedly made to
secure Barth‘s contract — ordering the medical staff to stop admitting patients —
because he occupied official positions on the Committee and on the medical staff.
We therefore conclude that under Penal Code section 995, the evidence is
sufficient for Sahlolbei to be held to account for making Barth‘s contract with the
Hospital in Sahlolbei‘s official capacity at the Hospital. (Lexin, supra, 47 Cal.4th
at p. 1072.)
Finally, Sahlolbei argues that because his own contract with the Hospital
had lapsed between April and December of 2009, he was not even an independent
contractor — and thus had no official position whatsoever — when the Hospital
signed Barth‘s contracts in October 2009. The prosecution argues there is
evidence that Barth‘s contracts were actually signed at a later date and backdated
to October and notes that the making of a contract encompasses more than just the
moment of signing. (Stigall, supra, 58 Cal.2d at p. 571.) The Court of Appeal did
not address this contention, and we do not address it here. On remand, the Court
of Appeal may determine whether ―a reasonable person could harbor a ‗strong
suspicion‘ ‖ that Sahlolbei was, in fact, affiliated with the Hospital during the
making of Barth‘s contracts. (Lexin, supra, 47 Cal.4th at p. 1077.) If so, the
section 1090 charge against Sahlolbei should be reinstated. (See id. at pp. 1071–
1072.)
21
CONCLUSION
We reverse the judgment of the Court of Appeal and remand for
proceedings consistent with this opinion. We disapprove People v. Christiansen
(2013) 216 Cal.App.4th 1181 to the extent it is inconsistent with this opinion.
LIU, J.
WE CONCUR:
CANTIL-SAKAUYE, C. J.
WERDEGAR, J.
CHIN, J.
CORRIGAN, J.
CUÉLLAR, J.
KRUGER, J.
22
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion People v. Superior Court
__________________________________________________________________________________
Unpublished Opinion XXX NP opn. filed 1/20/16 – 4th Dist., Div. 2
Original Appeal
Original Proceeding
Review Granted
Rehearing Granted
__________________________________________________________________________________
Opinion No. S232639
Date Filed: June 26, 2017
__________________________________________________________________________________
Court: Superior
County: Riverside
Judge: Michael J. Naughton
__________________________________________________________________________________
Counsel:
Paul E. Zellerbach and Michael A. Hestrin, District Attorneys, Elaina Gambera Bentley, Assistant District
Attorney, Kelli M. Catlett and Emily R. Hanks, Deputy District Attorneys, for Petitioner.
No appearance for Respondent.
Brown White & Newhouse, Brown White & Osborn and Kenneth P. White for Real Party in Interest.
Francisco J. Silva and Long X. Do for California Medical Association as Amicus Curiae on behalf of Real
Party in Interest.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Emily R. Hanks
Deputy District Attorney
3960 Orange Street
Riverside, CA 92501
(951) 955-5400
Kenneth P. White
Brown White & Osborn
333 South Hope Street, 40th Floor
Los Angeles, CA 90071-1406
(213) 613-0500
Long X. Do
California Medical Association
1201 J. Street, Suite 200
Sacramento, CA 95814
(916) 444-5532