Filed 8/19/26 Kurwa v. Physician Associates etc. CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
BADRUDIN KURWA, B341588
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No.
v. KC045216)
PHYSICIAN ASSOCIATES OF
THE GREATER SAN GABRIEL
VALLEY et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Christian R. Gullon, Judge. Affirmed.
Law Office of Robert S. Gerstein and Robert S. Gerstein;
Ferguson Case Orr Paterson, Wendy C. Lascher and John A.
Hribar for Plaintiff and Appellant.
Harrington, Foxx, Dubrow & Canter and Daniel E. Kenney
for Defendants and Respondents.
________________________
Plaintiff and appellant Badrudin Kurwa, on behalf of
himself and derivatively on behalf of Trans Valley Eye
Associates, Inc. (Trans Valley), appeals from a judgment
following a bench trial in favor of defendants and respondents
Mark Kislinger, Mark B. Kislinger, Ph.D., M.D., Inc., and Mark
Kislinger, M.D., Inc. (collectively Kislinger), in this action for
breach of fiduciary duty. On appeal, Kurwa contends several of
the trial court’s findings are not supported by substantial
evidence. We conclude substantial evidence supports the trial
court’s findings in connection with the issue of unclean hands,
and therefore, we affirm.
FACTS
Prior to 1992, Kurwa and Kislinger had separate
ophthalmology practices. In late 1991 or early 1992, Dr. Reginald
Friesen introduced Kurwa and Kislinger and suggested they form
a corporation to enter into “capitation agreements” with
physician associations. The corporation would receive a monthly
per capita fee, based on the number of participating members, in
exchange for ophthalmology and optometry services.
Kislinger found an attorney to put together documents to
incorporate Trans Valley. Kurwa and Kislinger each owned 50
percent of the shares of Trans Valley and were the sole directors.
Both were also named as officers of the corporation. Trans Valley
filed tax returns as a corporation, never as a partnership or joint
venture. Trans Valley was successful and profitable.
Between 1990 and 1995, Kurwa used a Medicare billing
code for approximately 49 patients that he saw in his
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independent medical practice, not Trans Valley patients, which
did not accurately describe the service performed. When a
patient needs cataract surgery, the ophthalmologist conducts a
test to ensure the operation will be safe. The test can be
performed with equipment that includes photography, or it can
be performed with a different device that does not include
photography. Kurwa did not own the equipment that provides a
photograph; he used a device that was not equipped for
photographs. The Medicare billing code that Kurwa used
explicitly referred to photography. Kurwa’s office administrator
reported the billing issue to Medicare under a whistleblower
program. Kurwa did not notify Kislinger that he was being
investigated, although the matter was reported in several
newspapers. Kurwa had employees create new chart notes for
certain patients. Medicare resolved the matter in 1997, requiring
a payment from Kurwa of $375,000.
In 2000, Physician Associates purchased a provider group
that contracted with Trans Valley. Trans Valley entered into
new capitation agreement with Physician Associates.
In 2000 or 2001, the Medical Board of California filed an
accusation against Kurwa based on the events in the Medicare
investigation. Kurwa did not inform Kislinger that the Medical
Board was investigating him, or that the result could have an
impact on Kurwa’s ability to see patients.
In September 2002, two Trans Valley employees accused
Kurwa of sexual assault. He was charged with two misdemeanor
counts of sexual battery. He entered into a civil compromise with
the employees under which he paid a sum of money, which
resolved the criminal matter in August 2003.
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On August 12, 2003, the Medical Board issued a decision
containing the following findings. When Kurwa realized the
Medicare auditors were investigating his use of the billing code at
issue, he directed employees to create a new form and he rewrote
the charts for 49 patients. He did not inform the auditors that
the records were rewritten or created after Kurwa became aware
of the audit. The Medical Board found it was not established,
however, that Kurwa did not perform the underlying test or that
the findings summarized on the new forms were false. The forms
were created to look like original chart pages, however, and
portrayed the patients to be in greater need of cataract surgery
than the original notes.
The Board concluded Kurwa’s creation and use of the new
form, and his revision of patient charts, constituted acts of
dishonesty. Further, the Board concluded cause existed to
discipline Kurwa’s medical license for acts involving dishonesty
and unprofessional conduct, which were substantially related to
the qualifications, duties, and functions of a physician and
surgeon. The Medical Board considered evidence in mitigation
and rehabilitation, but concluded that Kurwa engaged in
multiple acts of dishonesty over an extended time, his intentional
misconduct was serious, and he had not displayed any contrition.
The Medical Board ordered Kurwa’s medical license revoked, but
the revocation was stayed and he was placed on probation for five
years under certain conditions, including that he was suspended
from the practice of medicine for 60 days, effective September 10,
2003.
On September 5, 2003, one of the female employees
involved in the criminal case filed a civil action for sexual battery
against Kurwa, Trans Valley, and Kislinger. Kislinger was
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eventually dismissed from the lawsuit, and after a few years of
litigation, the plaintiff dismissed the entire lawsuit without
receiving any payment.
On September 11, 2003, Kurwa notified Physician
Associates that he would be suspended for 60 days beginning on
September 26, 2003, but had hired a new doctor who could see
patients of Physician Associates and other Trans Valley patients.
Kislinger contacted attorney Dale Goldfarb for advice.
Goldfarb, through his review, learned Trans Valley had not been
incorporated as a professional medical corporation. To continue
as a properly constituted entity, Trans Valley would have needed
to become a professional corporation. Nondoctors cannot share in
profits from a medical corporation. On October 1, 2003, Goldfarb
sent a letter on Kislinger’s behalf to Physician Associates as
follows:
“This office represents Mark Kislinger, M.D. We are
writing to you on his behalf on a matter that involves the
continuity of patient care.
“At the present time, there exists a provider agreement
between Physician Associates and Trans Valle[y] Eye Associates.
As you know, one of the two co-owners of Trans Valley, Dr.
[Badrudin] Kurwa has had his license to practice medicine
suspended in the State of California. Pursuant to the agreement
between you and that entity, his participation in the provider
agreement is automatically terminated. Moreover, we believe the
corporate status of Trans Valley is inappropriate for the practice
of medicine.
“To solve these problems, we have formed a new
appropriate medical corporation for Dr. Kislinger. This new
corporation will hire substantially all of the employees and
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contract physicians of the previous entity, so there will be no
interruption of services to patients or any noticeable change to
anyone. To facilitate this transfer, we would request that
[Physician Associates] transfer its provider agreement from
Trans Valley to Mark Kislinger, M.D., Inc. Dr. Kurwa, because of
his suspension, will not be a part of the new corporation.
“We would appreciate having the transfer take place as
soon as possible to maintain continuity and quality of patient
care, and to avoid any improper entanglement with Dr. Kurwa,
whose license is suspended at the present time.
“I would appreciate discussing this matter with you to
effectuate this change as smoothly as possible. Your cooperation
is appreciated.”
Kislinger’s October 1, 2003 letter caused Physician
Associates to investigate, seek legal advice, and terminate its
contract with Trans Valley. On October 31, 2003, Physician
Associates provided notice to Trans Valley that it was
terminating the capitation agreement effective November 30,
2003, on the ground that Trans Valley could not perform because
it was not organized as a professional medical corporation or
registered with the Medical Board of California. If Trans Valley
had reconstituted as a professional medical corporation,
Physician Associates would have considered rescinding its
termination of the agreement. If Physician Associates had
known of the criminal claims against Kurwa, however, even if
Trans Valley had reformed as a medical corporation, Physician
Associates would very likely have ended its association with
Trans Valley.
Physician Associates solicited proposals for a new provider.
Several proposals were received and considered. Physician
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Associates awarded the contract to the new professional
corporation that Kislinger formed. Physician Associates would
not have accepted a proposal or awarded a contract to someone
with significant sexual battery or assault claims made against
him. Physician Associates could also terminate a doctor as a
provider for engaging in Medicare billing irregularities,
dishonesty, and corruption.
After Kurwa’s suspension ended on November 24, 2003, it
was between two and six months before he regained his hospital
privileges at certain hospitals. Trans Valley had two remaining
capitation agreements, one of which was terminated by the
provider in January 2004 and one of which was transferred to
Kislinger’s new professional corporation in May 2004.
PROCEDURAL HISTORY
Kurwa filed his original complaint in 2004. On April 7,
2005, he filed the operative second amended complaint against
several defendants, including Kislinger. After a lengthy
litigation odyssey,1 the causes of action remaining for trial
against Kislinger were a derivative cause of action for breach of
fiduciary duty owed to Trans Valley, breach of fiduciary duty
1 The litigation history stemming from the second amended
complaint includes defendants who are not before us on this
appeal, causes of action which are no longer at issue, and the
resolution of procedural issues. (Kurwa v. Harrington, Foxx,
Dubrow & Canter, LLP (2007) 146 Cal.App.4th 841; Kurwa v.
Physician Associates of the Greater San Gabriel Valley (Jan. 14,
2009, B202301) [nonpub. opn.]; Kurwa v. Kislinger (2013) 57
Cal.4th 1097, 1100; Kurwa v. Kislinger (2017) 4 Cal.5th 109, 112;
Kurwa v. Kislinger (July 13, 2020, B298008) [nonpub. opn.].)
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owed to Kurwa individually based on an alleged partnership
agreement, and an accounting claim.
After a bench trial, the trial court issued a statement of
decision on August 9, 2024. First, the court found that no joint
venture was formed prior to the creation of the Trans Valley
corporation. The court’s finding was based on the following facts.
When Friesan sought local doctors to provide services under a
“capitation” agreement, Kurwa and Kislinger agreed to provide
services for fees on a trial basis to evaluate whether they could
manage the patient pool, but Kurwa and Kislinger were free to
decide not to proceed with the capitation agreement. After each
doctor individually determined that he wanted to proceed with
the capitation agreement, Friesan advised them that the first
step was to incorporate their business. There was no evidence
Kurwa and Kislinger reached any agreement with each other
prior to the advice to incorporate. From the inception of the
business, Kurwa was an officer, director, and shareholder of
Trans Valley. The parties took advantage of Trans Valley’s
corporate status in contracting with third parties, claiming
expenses on state and federal tax returns, hiring employees,
obtaining worker’s compensation insurance, and limiting the
corporation’s liability for the acts of other professionals rendering
services to patients. There was no evidence that either party
disregarded corporate formalities. No writing established a
partnership at any time. And Kurwa failed to show the parties
shared profits and losses, or shared equal control, in an alleged
joint venture.
With respect to the derivative cause of action for breach of
fiduciary duty owed to Trans Valley, the trial court concluded
Kislinger did not have a fiduciary duty to properly form a
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professional medical corporation when he learned Trans Valley
was improperly formed for the purpose of a capitation agreement,
because it was an impossibility to amend Trans Valley as a
properly formed medical corporation while Kurwa was still under
suspension. Kislinger’s duty was to the corporation, and altering
the corporate status to involve a non-licensed doctor would
improperly form a corporation and cause irreparable harm to the
corporation. The evidence also showed that Physician Associates
would not have awarded a contract to Kurwa, or to a corporation
in which Kurwa was involved, so the alleged breach of duty did
not cause Kurwa damages. Furthermore, Kurwa owed a
fiduciary duty not to tarnish the goodwill of Trans Valley, which
he breached through his fraudulent billing practices and alleged
sexual assault of employees. As a result, the court found “the
defense of unclean hands applies.”
As to the cause of action for breach of fiduciary duty owed
to Kurwa, Trans Valley could not contemporaneously operate as
both a corporation and a joint venture, and Kurwa did not prove
the elements of a joint venture. There was no enforceable writing
that created a joint venture and no evidence of who allegedly
formed the joint venture. Kurwa also failed to show that he and
Kislinger shared profits and losses, or shared joint control, of any
joint venture. Even if a joint venture had existed, there was no
breach of any fiduciary duty for the same reasons as in the
derivative action. As to an accounting, the court found that
without a medical corporation or a joint venture, there was no
basis for an accounting claim.
On September 4, 2024, the trial court entered judgment in
favor of Kislinger. Kurwa filed a timely notice of appeal.
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DISCUSSION
Kurwa contends there is no substantial evidence to support
the trial court’s findings in connection with the application of
unclean hands. We disagree.
“The defense of unclean hands arises from the maxim,
‘ “ ‘He who comes into Equity must come with clean hands.’ ” ’
[Citation.] The doctrine demands that a plaintiff act fairly in the
matter for which he seeks a remedy. He must come into court
with clean hands, and keep them clean, or he will be denied
relief, regardless of the merits of his claim. [Citations.] The
defense is available in legal as well as equitable actions.”
(Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76
Cal.App.4th 970, 978 (Kendall-Jackson).)
The unclean hands doctrine protects the integrity of the judicial
system by precluding recovery that would create doubts about
fairness, and it promotes justice by holding plaintiffs accountable
for their own misconduct in the action. (Ibid.)
“Not every wrongful act constitutes unclean hands. But,
the misconduct need not be a crime or an actionable tort. Any
conduct that violates conscience, or good faith, or other equitable
standards of conduct is sufficient cause to invoke the doctrine.”
(Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) “The
misconduct that brings the clean hands doctrine into play must
relate directly to the cause at issue. Past improper conduct or
prior misconduct that only indirectly affects the problem before
the court does not suffice. The determination of the unclean
hands defense cannot be distorted into a proceeding to try the
general morals of the parties. [Citation.] Courts have expressed
this relationship requirement in various ways. The misconduct
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‘must relate directly to the transaction concerning which the
complaint is made, i.e., it must pertain to the very subject matter
involved and affect the equitable relations between the litigants.’
[Citation.] ‘[T]here must be a direct relationship between the
misconduct and the claimed injuries . . . “ ‘ so that it would be
inequitable to grant [the requested] relief.’ ” ’ [Citation.] ‘The
issue is not that the plaintiff’s hands are dirty, but rather “ ‘ “that
the manner of dirtying renders inequitable the assertion of such
rights against the defendant.” ’ ” ’ [Citation.] The misconduct
must ‘ “ ‘prejudicially affect . . . the rights of the person against
whom the relief is sought so that it would be inequitable to grant
such relief.’ ” ’ [Citation.]” (Ibid.)
A three-pronged test derived from these principles is
applied to determine the effect of the plaintiff's conduct.
(Kendall-Jackson, supra, 76 Cal.App.4th at p. 979.) Whether the
misconduct at issue bars the relief being sought “depends on (1)
analogous case law, (2) the nature of the misconduct, and (3) the
relationship of the misconduct to the claimed injuries.” (Ibid.)
The standard of review has been expressed in various ways
depending on the procedural context on appeal. (Padideh v.
Moradi (2023) 89 Cal.App.5th 418, 437−438 (Padideh).) In this
case, in which the trial court exercised its equitable power to
determine the issue of unclean hands after a trial, the first prong
(i.e., analogous caselaw) presents a legal issue which is reviewed
independently on appeal. (Ibid.) The trial court’s rulings on the
remaining prongs are reviewed for an abuse-of-discretion, and in
that context, we apply the substantial evidence test to the court’s
resolution of factual issues. (Ibid.)
In this case, on the issue of analogous cases, Kurwa
concedes that the doctrine of unclean hands is applicable to a
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stockholder’s derivative action. (Rosenfeld v. Zimmer (1953) 116
Cal.App.2d 719, 722; DeGarmo v. Goldman (1942) 19 Cal.2d 755,
764−765.) He contends, however, that the trial court’s findings
with respect to the remaining prongs are not supported by
substantial evidence: although he admits that he engaged in
“billing fraud,” he asserts his misconduct was insufficiently
related to Kislinger’s “total abandonment of Trans Valley” and
caused no harm to Kislinger or Trans Valley
We conclude substantial evidence supports the trial court’s
findings based on the nature of the misconduct and the
relationship of the misconduct to the injuries. Kurwa engaged in
conduct that breached his own duties as a director and officer of
Trans Valley. While he was a director, officer, and provider for
Trans Valley, Kurwa engaged in acts involving dishonesty and
unprofessional conduct. Although Kurwa did so in connection
with his independent practice and patients who were not Trans
Valley patients, that misconduct adversely impacted his
qualifications, duties, and functions as a physician and surgeon.
Kurwa’s misconduct also had an impact on Kislinger and Trans
Valley. Kurwa did not inform Kislinger or Trans Valley of the
Medical Board’s investigation of his conduct, even though it could
potentially lead to suspension or revocation of his medical license,
which would have a dramatic impact on Trans Valley’s ability to
perform under the capitation agreements. Trans Valley had no
opportunity to plan for contingencies. When Kislinger learned
that Trans Valley had not been properly incorporated as a
professional medical corporation, he could not form a professional
medical corporation with Kurwa’s participation, because Kurwa’s
medical license had been suspended as a result of his dishonest
conduct. Kurwa’s own breach of his fiduciary duty to Trans
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Valley created the situation that he claims was a breach of
Kislinger’s fiduciary duty, namely, failing to amend Trans Valley
as a professional medical corporation. Substantial evidence
supports the trial court’s findings, and therefore, no abuse of
discretion has been shown in the court’s application of unclean
hands.
DISPOSITION
The judgment is affirmed. Respondents Mark Kislinger,
Mark B. Kislinger, Ph.D., M.D., Inc., and Mark Kislinger, M.D.,
Inc., are awarded their costs on appeal.
NOT TO BE PUBLISHED.
MOOR, J.
WE CONCUR:
BAKER, Acting P. J.
KIM (D.), J.
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