Tag Archives: w.c.a.b.

Blockbuster Opinion on Apportionment

The Court of Appeals in the 3rd District has issued a blockbuster opinion on apportionment in City of Jackson v W.C.A.B. (Rice) regarding the requirements for substantial medical evidence in worker’ compensation cases. In reversing the W.C.A.B., the court laid out its analysis of why a QME’s apportionment to genetic factors was well supported and legally sufficient.

The applicant in this case was a 29-year-old, police officer who developed cervical spine pain, resulting in the need for surgery. He was evaluated by QME Sloan Blair MD on multiple occasions. Dr. Blair apportioned applicant’s disability to multiple factors, including 17% each to his employment with the city, to prior employment and to personal activities. The remaining 49% was apportioned to his personal history, including “genetic issues.” In response to a request for supplemental report from the applicant attorney, Dr. Blair further clarified the basis for her opinion:

“…“to a reasonable degree of medical probability that genetics has played a role in Mr. Rice’s injury,” despite the fact that there is no way to test for genetic factors. Citing the referenced medical studies, Dr. Blair stated that one of them said “heritability was . . . 73 percent in the cervical spine. . . . [S]moking, age, and work are only a small percentage of disc disease and most of it is familial.” Another source cited the role of heritability in disc degeneration as 75 percent, and the other stated it was 73 percent. Dr. Blair cited a fourth article that claimed, “ ‘[t]win studies demonstrate that degeneration in adults may be explained up to 75 percent by genes alone.’ ” The same study found environmental factors to contribute little or not at all. Dr. Blair stated that while these studies supported an apportionment of 75 percent to personal history, she decided to err on the side of the patient in case there was some unknown “inherent weakness” in the study, and decided that 49 percent was the “lowest level that could reasonably be stated…”

The WCJ accepted Dr. Blair’s apportionment to genetic factors but rejected the other apportionment awarding PD based on 51% industrial causation. On reconsideration, the W.C.A.B. reversed, asserting Dr. Blair’s apportionment to genetic factors resulted in an allocation of disability to impermissible immutable factors and not to “specific identifiable factors” and was therefore not substantial evidence.

See also: 3rd District Upholds Validity of IMR  

The 3rd District took issue with the W.C.A.B.’s entire analysis of this apportionment issue. Noting the specific intent of SB 899 to allow apportionment to “other factors,” the court went through multiple W.C.A.B. and appellate court decisions on apportionment and could find little to distinguish apportionment on the basis of degenerative joint disease, asymptomatic prior conditions etc. The court specifically rejected the W.C.A.B.’s reference to “impermissible immutable factors,”  commenting as follows:

“…Precluding apportionment based on “impermissible immutable factors” would preclude apportionment based on the very factors that the legislation now permits, i.e., apportionment based on pathology and asymptomatic prior conditions for which the worker has an inherited predisposition. 

The Court pointed to several instances where medical evidence relied on apportionment to genetic dispositions to develop medical conditions, citing the Kos v W.C.A.B., Escobedo and Acme Steel cases and further noting:

“…We perceive no relevant distinction between allowing apportionment based on a preexisting congenital or pathological condition and allowing apportionment based on a preexisting degenerative condition caused by heredity or genetics.”

The court also rejected the W.C.A.B.’s analysis that Dr. Blair’s reliance on the applicant’s genetic makeup resulted in apportionment to the causation of injury rather than the causation of disability. The court pointed out the cause of the injury was repetitive motion, not genetics. Rather, Dr. Blair commented that the applicant’s disability was caused by a combination of factors, including a significant contribution from his genetic makeup..

The court was also not put off by the QME’s reliance on medical literature to support her conclusion rather than on a specific history from the applicant of his genetic makeup or background. As noted by the court, the doctor’s conclusion was supported by significant, unrebutted medical literature that found degenerative disc disease was influenced significantly by genetic factors and only minimally to environmental factors such as work activity. The court points out that the research relied upon by Dr. Blair supported the conclusion that as much as 75% of all DDD was related to genetics, and the issue was not whether one could prove that the genetic factor existed; the existence of significant DDD established the genetic factor as present.

“Dr. Blair’s reports meet all of the requirements of Escobedo. Dr. Blair expressly stated that confidence in her opinion was predicated on reasonable degree of medical probability. Dr. Blair gave the reasoning behind her opinion–the published medical studies–and even named the studies and the pages relied upon. Her opinion disclosed familiarity with the concept of apportionment. Labor Code section 4663 states that apportionment is based on causation, and that “[a] physician shall make an apportionment determination by finding what approximate percentage of the permanent disability was caused by the direct result of injury arising out of and occurring in the course of employment and what approximate percentage of the permanent disability was caused by other factors . . . .”  (Lab. Code, § 4663, subd. (c).)”

The case was remanded to the W.C.A.B. to issue an opinion based upon the QME’s conclusions.

Comments and Conclusions:

Assuming this decision holds up — it is certainly likely to be appealed further — it dramatically reinforces the rules on apportionment to any relevant factors that a physician can identify with reasonable medical probability.

There are some unusual circumstances in this case that may have played a role in the ultimate outcome. First, the applicant was relatively young to have significant DDD, only 29 years old. That fact probably tipped Dr. Blair off that there was something about the condition that could not be attributed to environmental factors, including work. Second, the length of employment as a peace office was not lengthy; the applicant had worked less than five years in a full-time capacity. There had not been a lot of time to attribute causation to work activity.

There is also fairly strong support in the medical literature that DDD is not really activity-related. Other than studies that suggest whole body vibration is a significant factor, there is little to suggest that bending, lifting and stooping, without significant trauma, plays any role in the development of disc disease.

The situation is much like carpal tunnel syndrome, where the medical literature overwhelming fails to demonstrate a relationship between computer usage and the disease process, and yet we still routinely get compensable reports without any real support in the medical literature. Spine pain is constantly related to even relatively benign work activities as a matter of course.

Clearly, defense attorneys need to start appearing at doctor depos armed with the literature cited by Dr. Blair and challenge physicians to provide a basis for their unapportioned or minimally apportionment spine CT claims, especially in younger individuals.

See also: Intelligent WC Medical Management  

This decision may have even broader applications in non-orthopedic cases. We have a wealth of literature about causation of various internal medicine conditions and even psychiatric conditions attributable to genetic, historical and environmental factors that now can more carefully be considered to support apportionment where previously the W.C.A.B. had been rejecting such opinions. The issue of whether there can be apportionment to genetic factors or predispositions would appear to be resolved in the affirmative in this case.

3rd District Upholds Validity of IMR

The Third District Court of Appeals has issued its decision in Ramirez v W.C.A.B., again upholding the constitutionality of the independent medical review (IMR) process for review UR determinations and providing, perhaps, some additional nuggets for potential challenges on the W.C.A.B. decision in Dubon II that concerns the authority of the W.C.A.B. to review medical decisions.

Ramirez is the third in a series of cases where applicant attorneys have attempted to challenge the constitutionality of the IMR process on various ground. In two prior decisions (Stevens v W.C.A.B. and Margaris v W.C.A.B.), different districts of the Courts of Appeal had rejected constitutional challenges to the IMR process based on similar arguments presented by the applicant in this case.

See also: Appellate Court Rules on IMR Timeframes  

While the applicant’s arguments in this appeal were somewhat broader than either of the prior appeals, the court’s rejection was just as emphatic. Ramirez’ challenge to IMR was based on multiple arguments:

  • He argued the underlying UR was based on an incorrect standard, in effect appealing the UR determination itself to the court. This argument was rejected by the court on the grounds that the attack was at the heart of the determination of medical necessity, a determination that Labor Code  4610.6(c) prohibits the court from making. The court noted the applicant attorney did not argue that the IMR reviewer used in improper standard and that was the only one the court could only review for nonsubstantive reasons as set out in Labor Code  4610.6(h).
  • Ramirez also challenged the constitutionality of the IMR process arguing that it violates the separation of powers clause as well as state and federal principles of due process. Both of these arguments were rejected in much the same manner as the court in Stevens rejected a similar argument.
  • Ramirez argued that the W.C.A.B. decision in Dubon II, which limited the W.C.A.B.’s authority to review UR determinations to the timeliness of the decisions, was incorrectly decided and that other flaws in the UR process should allow the W.C.A.B. to assume jurisdiction over medical treatment issues. The court specifically rejected the argument that the W.C.A.B. had jurisdiction to review an IMR determination on the ground that the UR determination did not use the Medical treatment utilization schedule (MTUS).

It is on this last point the court’s language becomes interesting. The court reviewed the history of the Dubon decisions and the progression from an expansive view of the W.C.A.B.’s authority to the much narrower result in Dubon II that limits the W.C.A.B.’s authority to review only timeliness. The court does note that in Dubon II, where a UR determination is late, the W.C.A.B. could determine the medical necessity for the proposed treatment.  After review the W.C.A.B.’s decision and Cal Code Regs Tit 8 §10451.2 the Court goes on to state:

“To the extent the Board has any jurisdiction to review a utilization review as provided by this regulation, it has jurisdiction only over nonmedical issues such as timeliness of the utilization review as stated in the Final Statement of Reasons and Dubon II. We are not presented with a nonmedical issue. Any question that has the effect of assessing medical necessity is a medical question to be conducted by a qualified medical professional by way of independent medical review.  (§ 4610.6, subd. (i) [“In no event shall a workers’ compensation administrative law judge, the appeals board, or any higher court make a determination of medical necessity contrary to the determination of the independent medical review organization.”].) Whether the utilization reviewer correctly followed the medical treatment utilization schedule is a question directly related to medical necessity, and is reviewable only by independent medical review.”

While the court does not specifically indicate the W.C.A.B. was incorrect in Dubon II in its ruling that an untimely UR determination vests jurisdiction with the W.C.A.B. on medical issues; the above language certainly (at least) infers that any medical determination is beyond the W.C.A.B.’s authority. In the instant case, the court held there was not a basis to challenge the UR decision as it was timely and the other issues were not subject to W.C.A.B. review. The bolded language in the above quote certainly provides food for thought and perhaps some additional basis to challenge the W.C.A.B.’s holding in Dubon II, which, so far, has not been given a serious challenge at the appellate level.

See also: IMR Practices May Be Legal, Yet…  

Comments and Conclusions:

That this court essentially followed the logic and reasoning of the prior appellate cases on this issue certainly suggests the options for challenging the IMR process are rapidly closing. While there are still a couple of additional challenges pending in the appellate courts (Zuniga in the first district challenging on one of the issues raised here — that the limitation on disclosure of the IMR doctor prohibited the applicant’s ability to challenge the doctor on bias, conflict of interest, etc. — and the Southard and Baker cases addressing the issue of late IMR as valid IMR as previously addressed in the negative in Margaris), so far the appellate courts have shown little interest in challenging the legislature’s authority to create and mold the workers’ compensation system.

As one who has consistently believed the W.C.A.B. exceeded its jurisdiction in deciding it could address medical issues in Dubon II in spite of the strongly stated legislative purpose prohibiting exactly that conduct, I am cautiously optimistic that someone will challenge that decision; even the W.C.A.B. might have second thoughts about maintaining its ability to decide medical issues.

Appellate Court Rules on IMR Timeframes

The 2nd Appellate District has issued the first of what should prove to be several appellate decisions on the timeliness of independent medical review (IMR) decisions. The court was considering the assertion by a W.C.A.B. panel that IMR timelines are mandatory and that late IMR means the W.C.A.B. — and not doctors — will determine whether treatment is medically necessary.

In SCIF v W.C.A.B. (Margaris), the court annulled the W.C.A.B. decision and remanded with instructions to issue a new decision. The court’s reason for accepting this case was set out early in the decision:

“…We issued a writ of review because this case presents an important issue of first impression regarding the interpretation of section 4610.6, and because it relates to an issue upon which the appeals board has rendered conflicting decisions.”

In its analysis, the court provided an extensive discussion of the history of authorization for medical treatment, the implementation of utilization review (UR) for treatment requests and the enactment of the statutory scheme for IMR.  As noted by the court in SB 228 and 899, the legislature changed both the standards and process used by an employer to evaluate a request for medical treatment. The legislature adopted the medical treatment utilization schedule (MTUS). The legislature then removed the existing process for resolving medical disputes using dueling doctors and required the use of utilization review, which required review of treatment requests in light of the MTUS.

In 2012, the legislature enacted another set of reforms to address disputes over UR determinations. As noted by the court, a UR determination authorizing medical treatment was binding on the employer but became subject to further review through IMR — but only for the employee. The court further observed that even where an IMR determination is ultimately reversed by the W.C.A.B., the issue of medical appropriateness was to be returned to IMR for further review, not decided by the W.C.A.B.

See also: IMR Practices May Be Legal, Yet…  

Turning to the specific issue before it, the court determined the use of “shall” in Labor Code 4610.6 was directive, not mandatory:

“…The appeals board concluded that section 4610.6, subdivision (d), is clear and unambiguous.  According to the appeals board, “shall” is mandatory, and any IMR determination issued after the 30-day time frame is necessarily invalid. In support of this interpretation, the appeals board cited section 15, which provides “‘[s]hall’ is mandatory and ‘may’ is permissive” (§ 15.). Thus, the appeals board concluded that construing “shall” as mandatory, such that an untimely IMR determination is invalid, comports with both the ordinary meaning and the statutory definition of “shall.” As we explain, however, the issue is more nuanced than the appeals board recognized.

We note that section 15, upon which the appeals board relied in this case to support its interpretation of section 4610.6, subdivision (d), juxtaposes “mandatory” against “permissive,” which arguably suggests the legislature used “shall” in the obligatory permissive sense rather than in the mandatory-directory sense, as the appeals board concluded. (See McGee, supra, 19 Cal.3d at p. 960 [discussing section 15 and concluding that “on its face, the statutory language suggests that the legislature intended the present provision to be mandatory (i.e., obligatory), rather than permissive.”]) However, given the difference in meaning given to “shall” in the statutory context, we conclude section 4610.6, subdivision (d), is ambiguous. Accordingly, we move beyond the plain language of that section and consider its meaning with reference to the rest of the statutory scheme and the intent of the legislature.”

The court commented further on this issue:

“Generally, time limits applicable to government action are deemed to be directory, unless the legislature clearly expresses a contrary intent.  (Edwards, supra, 25 Cal.3d at p. 410.) “‘In ascertaining probable intent, California courts have expressed a variety of tests. In some cases, focus has been directed at the likely consequences of holding a particular time limitation mandatory, in an attempt to ascertain whether those consequences would defeat or promote the purpose of the enactment.  [Citations.] Other cases have suggested that a time limitation is deemed merely directory ‘unless a consequence or penalty is provided for failure to do the act within the time commanded.’”

The court also found the lack of a penalty or consequence for noncompliance to be significant. Citing similar language in actions by the state personnel board, which had been held to be directive rather than mandatory, the court suggested a failure to meet the statutory time frame did not result in a loss of jurisdiction. The court also indicates in its review of the mandatory vs. directory dichotomy that statutes that set time frames for government actions that do not include a self-executing consequence are almost universally construed as directory.

The court also noted that construing the 30-day time frame as directory furthers the legislative objective of SB 863.

“We conclude from these findings that the legislature intended to remove the authority to make decisions about medical necessity of proposed treatment for injured workers from the appeals board and place it in the hands of independent, unbiased medical professionals. Construing section 4610.6, subdivision (d), as directory best furthers the legislature’s intent in this regard. The appeals board’s conclusion in this case — that an untimely IMR determination terminates the IMR process and vests jurisdiction in the appeals board to determine medical necessity — is wholly inconsistent with the legislature’s stated goals and their evident intent.

Finally, and perhaps most tellingly, the legislature provided that, “[i]n no event shall a workers’ compensation administrative law judge, the appeals board, or any higher court make a determination of medical necessity contrary to the determination of the independent medical review organization” (Stats. 2012, ch. 363, § 45, codified at § 4610.6, subd. (i)). We find this portion of the statute — particularly the use of the phrase “in no event” — to be a frank expression of the legislature’s desire to remove the issue of medical necessity of proposed treatment from the jurisdiction of the appeals board in all cases subject to IMR. The legislature’s intent would be defeated by giving section 4610.6, subdivision (d), mandatory effect, as the appeals board did in the present case.”

See also: 20 Work Comp Issues to Watch in 2016

Additionally, the applicant attorney argued that the W.C.A.B.’s holding in the Dubon case (Dubon 2) supported the W.C.A.B’s usurpation of authority to decide medical treatment. The court noted the holding in Dubon 2 is supported by the AD’s regulations providing that IMR applies solely to timely and procedurally proper UR but that no similar regulation existed for IMR. The court declined to comment on the W.C.A.B.’s decision in Dubon 2 as the issue was not before it.

Comments and Conclusions:

There are currently two other cases pending in the appellate courts, both in the 3rd appellate district — on this same issue and, interestingly, this case was not the first grant on the issue. However, the court set a very aggressive briefing schedule and, even with multiple amicus briefs it heard, considered and decided this case in, what is by appellate standards, a very short time (less than six months). Clearly the court was very interested in this issue, which had multiple W.C.A.B. panel decisions with conflicting holdings.

The court, in its decision, also rejected arguments offered by both the applicant and the W.C.A.B. that untimely IMR resulted in unnecessary delays — a rationale offered by the majority panel in both Dubon and Margaris. The court, very astutely, noted this argument made no sense given the time frame for obtaining QME opinions or litigating medical treatment issues before the W.C.A.B.  The court pointed out that, even with the delays in completing IMR, the W.C.A.B. decision was more than 13 months after the initial decision in UR and more than 10 months after Maximus rendered its decision. The court was clearly, and properly, skeptical of the argument that letting the W.C.A.B. decide medical issues would result in a more prompt disposition.

The court did offer an option to applicants to challenge untimely UR through the ability to file a petition for writ of mandate to compel a decision. While a statutorily viable option, this is impractical, especially in light of the current timeliness of most IMR determinations. Further, the issue here has never really been the timeliness of IMR. The goal for the applicant attorney bar, and apparently some of the commissioners, has been to usurp the medical decision making process from being medically driven to being litigation-based.

The decision does not provide a lot of nourishment for those who are waiting for some sliver of light on the Dubon 2 issue. The court, in its footnote, declined to really comment on Dubon 2, but it did note there was some basis for the W.C.A.B.’s decision. However, the very strong language of the court emphasizing the public and legislative policy behind having medical decisions made by physicians, and the much greater speed and certainty of the UR/IMR process over the legislatively disfavored litigation process, may provide some hope that, given a chance, the appellate court would also reject the W.C.A.B.’s arguments in support of Dubon 2.

Court Reverses Award of Psychiatric Injury

The First Appellate District Court of Appeal has closed what could have turned into a significant expansion of the concept of “sudden and extraordinary employment condition” contained in Labor Code § 3208.3(d) with a reversal of a W.C.A.B. decision awarding benefits for a psychiatric injury in Travelers Casualty and Surety Co v W.C.A.B. (Dreher).

The applicant was employed as a live-in maintenance supervisor for an apartment complex and had been employed for only 74 days at the time of his injury on Oct. 19, 2009. He was walking in the rain from one building to another in the complex, when he slipped and fell on a slippery concrete sidewalk sustaining multiple significant injuries, including fractured pelvis, injuries to his neck, right shoulder, right leg and knee. He also suffered gait derangement, a sleep disorder and headaches. As a result of those injuries, he developed psychiatric complaints as a consequence of his multiple surgeries and continuing issues. A medical report supported a relationship between his injury and a psychiatric disorder.

However, at trial, the WCJ denied his claim for his psychiatric condition on the basis that his employment failed to meet the minimum six-month requirement for employment under Labor Code § 3208.3(d) and further determined the exception for a “sudden and extraordinary employment condition” had not been met. On reconsideration, a split panel reversed the WCJ holding and determined that the applicant’s fall on slippery concrete met the sudden and extraordinary requirement of the statute. The Court of Appeal granted Travelers’ petition for writ of review.

After dealing with some procedural issues, the court got to the heart of the matter. Reviewing the multiple cases outlining the criterion for applying the sudden and extraordinary employment condition, the court refused to find that a slip and fall on a sidewalk met the criterion. Citing the landmark decision in Wal-mart v W.C.A.B., the court noted that the mere fact the injury was accidental did not meet the statutory exception:

“If the argument were made that an accidental injury constitutes a ‘sudden and extraordinary employment condition,’ we would reject it. For one thing, such an interpretation would mean that psychological injuries resulting from accidents would not be subject to the six-month rule, but such injuries arising from cumulative physical injury would be governed by that limitation; this distinction would make no sense, and we are reluctant to attribute irrational intentions to the Legislature.”

See Also: Appeals Court Settles Key Work Comp Issue

The court also rejected the argument advanced by applicant that the unexpectedly catastrophic nature of the injury served as a basis for an extraordinary employment condition.

“Here, the statute provides that the six-month limitation does not apply if the psychiatric condition is caused by a ;sudden and extraordinary employment condition.’ (§ 3208.3, subd. (d).) The statute does not include the nature of the injuries resulting from an incident as a basis for the exception. Had the Legislature intended to include the nature of the injury as a factor in the definition of a sudden and extraordinary employment condition, it knew how to do so….

“Accordingly, although Dreher’s injury was more serious than might be expected, it did not constitute, nor was it caused by, a sudden and extraordinary employment event within the meaning of section 3208.3, subdivision (d). The evidence showed that Dreher routinely walked between buildings on concrete walkways at the work site and that he slipped and fell while walking on rain-slicked pavement.”

The court further noted the burden was on the employee to prove the sudden and extraordinary employment condition, and the applicant’s testimony that he was “surprised” by the slick surface did not demonstrate that his injury was caused by an uncommon, unusual or totally unexpected event.

The matter was remanded to the W.C.A.B. with instructions to deny the claim for psychiatric injury.

Comments and Conclusions:

This is a relatively short appellate decision but with a firm result. The court was clearly of a mind that the W.C.A.B.’s interpretation of what constituted a sudden and extraordinary employment condition did not meet the common sense test for legislative interpretation. Commissioner Caplane, in her dissent in the W.C.A.B. decision, had noted that the majority’s opinion on what constituted a sudden and extraordinary event could be applied to virtually every claim because injuries were almost always unexpected when they occurred. While the court did not make a specific comment, the idea that an employee slipping on a wet sidewalk was in any way shape or form “extraordinary” simply did not pass the smell test.

The court’s holding that the nature of the injuries sustained did not figure into the equation is also of considerable help in defining application of the rule under Labor Code § 3208.3(d).

While the court’s interpretation of Labor Code § 3208.3(d) is helpful for that section, I do not think this decision is going to have any impact on our understanding of the language in Labor Code § 4660.1(c)(2)(B), with the exception created for “catastrophic injuries.” That section clearly intends there be consideration of the nature of an injury in the determination of whether additional psychiatric sequelae is to be included in the calculation of PD.

Appeals Court Settles Key Work Comp Issue

The U.S. Court of Appeals for the 9th Circuit has issued its long-awaited decision in the Angelotti Chiropractic Inc. v Baker case. In what can only be considered a resounding win for both the legislature’s power to create the workers’ compensation system and the Department of Industrial Relation’s authority to enforce the provisions of SB 863, the appeals court has, in its 32-page decision, upheld the portions of the lower court’s decision that were favorable to the DIR and reversed the portion that had challenged the validity of the statutory scheme. The result is a knockout, but not necessarily final, victory for the legislature and employer community’s efforts to rein in lien litigation madness.

One of the hallmarks of the most recent reforms to the worker’s compensation system in SB 863 was the adoption of both lien filing and lien activation fees. The intent of the fees was to filter out some of the less valid liens, encourage realistic settlement of liens before litigation and ultimately reduce the backlog of pending liens. Under the structure legislatively created, liens filed before Jan. 1, 2013, (the effective date of the statute) would be subject to an “activation fee” of $100 to actively pursue the lien before the W.C.A.B. Additionally, all pending liens as of Jan. 1, 2013, were required to have paid an activation fee by Jan. 1, 2014, or else be dismissed by operation of law. The second prong of the effort to reduce the backlog was to require lien claimants filing after Jan. 1, 2013, to pay a $150 filing fee. The challenge in this case was to the lien activation fee only, but the case has been watched carefully as similar arguments have been made in opposition to the lien filing fee. For many, Angelotti was considered a bellwether case on the lien fee validity.

Not surprising, shortly after its passage, the issue of the validity of the lien fee provisions in SB 863 was attacked in court with various challenges. In a ruling with what appeared to have the most potential for the challengers, a lower court had previously ruled that the plaintiffs in the Angelotti litigation had demonstrated a substantial likelihood of prevailing in their efforts to have the lien activation fee provisions declared unconstitutional. While by no means final, the resulting decision was accompanied by a temporary restraining order prohibiting the DIR from enforcing the lien activation fee provision. In its decision, the lower court rejected some of the plaintiff’s arguments that the lien activation fee violated constitutional prohibitions under the takings clause and the due process clauses of the U.S. Constitution. That part of the claim was dismissed. The lower court, however, was much more impressed with the equal protection arguments advanced by the plaintiffs, finding that the different treatment of institutional lien claimants vs. direct medical providers did not constitute a rational distinction. As a result of the temporary injunction, the DWC suspended its enforcement of the lien activation fee provisions but appealed the ruling.

In its decision, the appeals court upheld the district court’s rulings dismissing the plaintiff’s causes of action based on the takings and due process arguments, finding that the lower court’s rationale was well-founded. (The dismissal of those issues had been sought by the Angelotti plaintiffs.) However, in response to the defendant’s appeal of the restraining order and the failure to dismiss the equal protection claim, the court soundly rejected the lower court’s ruling that plaintiffs had established a probability of prevailing on an equal protection argument, reversing that holding and vacating the existing restraining order prohibiting the DIR from enforcing the lien activation fee provisions. That argument was based on the different treatment between institutional lien claimants (such as insurance companies) and private lien claimants (such as individual practitioners).

In reversing the lower court, the circuit court found the distinctions created by the legislature were both rational and within the wide latitude of the legislature to create:

“The legislature’s approach also is consistent with the principle that ‘the legislature must be allowed leeway to approach a perceived problem incrementally.’ Beach Commc’ns, 508 U.S. at 316; see also Silver v. Silver, 280 U.S. 117, 124 (1929) (stating that ‘[i]t is enough that the present statute strikes at the evil where it is felt and reaches the class of cases where it most frequently occurs.’). Targeting the biggest contributors to the backlog-an approach that is both incremental, see Beach Commc’ns, 508 U.S. at 316, and focused on the group that “most frequently” files liens, see Silver, 280 U.S. at 124,-is certainly rationally related to a legitimate policy goal. Therefore, on this record, ‘the relationship of the classification to [the Legislature’s] goal is not so attenuated as to render the distinction arbitrary or irrational.'”

The appellate court further noted it was the plaintiff’s burden to negate “every conceivable basis” that might have supported the distinction between exempt and non-exempt entities. The circuit (appellate) court said the district court did not put the plaintiffs to the proper test in this regard, instead rejecting the argument made by the defendants (DIR) that the activation fee was aimed at clearing up a backlog of liens. The circuit court found multiple flaws with the lower court’s analysis on this argument, including that it failed to give proper deference to the legislature’s fact finding. Instead, the court held the proper application of correct legal principles demonstrated the plaintiffs, rather than showing a likelihood of success, actually showed no chance of success:

“…that plaintiffs have no chance of success on the merits because, regardless of what facts plaintiffs might prove during the course of litigation, ‘a legislative choice is not subject to courtroom fact-finding and may be based on rational speculation unsupported by evidence or empirical data.’ See Beach Commc’ns, 508 U.S. at 315. Thus, the presence in the commission report of evidence suggesting that non-exempt entities are the biggest contributors to the backlog is sufficient to eliminate any chance of plaintiffs succeeding on the merits.”

While the plaintiffs in this matter have further appeal rights, it does not appear that under this decision the plaintiffs will be entitled to a trial at the lower court. The court not only vacated the injunction but took the unusual step of reversing the trial court’s denial of defendant’s petition to dismiss the equal protection cause of action. As noted in the above quote, the legislative authority to fashion a remedy effectively eliminated any chance of plaintiff’s prevailing.

Comments and Conclusions:

While the decision in this appeal took some time to come, the finality of the decision, and the tenor of the court’s ruling, will undoubtedly be considered well worth the wait. By reversing the lower court’s failure to dismiss the equal protection clause, the appellate court left very little opening for preservation of this lawsuit. While the plaintiffs can both ask for a rehearing and appeal to the U.S. Supreme Court, those levels of appeal come with rapidly diminishing probability of success.

With the DIR no longer hamstrung by the restraining order, we can anticipate a rapid enforcement of the lien regulations requiring activation fees. What will be a fascinating sideshow to this will be what happens to the provisions of Labor Code § 4903.06(a)(5), the requirement to pay the activation fee on any pre-1/1/13 lien claim on or before 1/1/14, a date long since passed. The DWC stopped collecting activation fees pursuant to the now vacated restraining order shortly after the TRO issued. Interestingly the language on the W.C.A.B.’s website indicated lien claimants were not obligated to pay the activation fee to appear at a hearing or file a DOR. However, it makes no mention of the dismissal language in 4903.06.

It is highly likely that few if any lien claimants paid activation fees by 1/1/14. It also seems unlikely, though not necessarily impossible, that the DIR or W.C.A.B. will be able to enforce the dismissal by operation by law provisions without allowing some kind of grace period for lien claimants to comply with the activation fee requirement before lowering the boom on liens without such fees. Lien claimants are now in something of a no man’s land with the faint hope that a further appeal may save them from the lien activation cost, but the compliance clock will probably be ticking, and once it stops the jig will be up on their liens.

It would certainly make sense for any current lien claimants, especially those who are set for hearings, to start looking into complying with the activation fee requirements. Showing up at the W.C.A.B. on a pre- 1/1/13 lien claim without having paid the activation fee may very well result in dismissal in the very near future. For defendants, with the TRO no longer in force, it is game on as far as activation fees are concerned. I intend to start raising the issue tomorrow…(or at least at my next hearing with a pre-1/1/13 lien claim).

On a side note, a similar case in state court, Chorn v Brown, was also recently decided in an unpublished decision. In that case, a lien claimant had challenged the lien statutes on both activation and lien filing fees. The case has been dismissed for lack of subject matter jurisdiction in the superior court. As a practical matter, the dismissal is really more of a procedural issue than a substantive one. The court of appeal noted the proper remedy for Chorn was to pursue a petition for writ of mandamus in the court of appeal, a step Chorn has actually initiated. However, a petition for writ of mandamus requires an appellate court to decide the issue has merit, a rather dubious proposition at this point. However, it is one more step to finally clearing up the DIR/DWC/W.C.A.B.’s authority to deal with the lien morass that, while somewhat abated in the past couple of years, continues to plague the system.