Tuesday, November 5, 2013

Wu Decision Could Force Renegotiations

Probably some of the biggest news this year in California workers' compensation is Judge Wu's tentative indication that he is inclined to stay enforcement of SB 863's lien fee collections pending a constitutional challenge.

Judge George H. Wu of the U.S. District Court for Central California is presiding over the case of Angelotti Chiropractic v. Baker, No. 8:13-cv-01139-GW-JEM which is challenging SB 863's lien fees.

Though the judge has issued his tentative ruling he has directed the parties to return to his courtroom on Thursday for further argument on whether his tentative decision should be made final into a preliminary injunction which would temporarily halt enforcement of lien fees.

While the lien claimant plaintiffs are tentatively going to be denied their arguments of a taking of property because liens aren't a property right, the judge was persuaded that SB 863's discrimination against only certain classes of lien claimants may be violative of equal protection values.

Judge Wu wasn't persuaded that the imposition of filing and activation fees bore a rational relationship to the alleged back log of liens as argued by the government when discriminating between the types of liens.

"The backlog is the backlog, and if clearing it is your purpose, then you attempt to clear it," he wrote. "It makes little sense to clear only part of it." And if the exempted types of lien claimants are not major contributors to the alleged backlog, Wu questioned that other lien claimants who might also not be major contributors to the backlog were not similarly exempted from the lien-activation fee.

In other words, the law does not provide any rational means for determining whether one lien is more burdensome than another.

Wu also noted that the plaintiffs' business "are likely to suffer grievous harm, if not outright elimination" if they are forced to pay the activation fees, but the comp system "will proceed as it has been" if the state were enjoined from collecting the fees. For that reason, he said he was inclined to issue a preliminary injunction to stop the state from continuing to collect the activation fees from lien claimants until he could rule on the merits of the plaintiffs' equal protection claim.

Well, Wu is partially correct - yes, the work comp system will continue to function. But the chaos that will result during the interim for lien claimants, payers and the government will be substantial. And if a permanent injunction follows there's going to be some significant difficulty a) processing reimbursements of lien fees, b) reinstating liens previously dismissed for failure to pay fees, c) reconfiguration of EAMS to permit filing without payment, d) increased pressure on payers to deal with newly invigorated claimants.

From what I understand, if the judge's tentative ruling stands, then the advocates for the lien fee are going to have a very difficult time - the percentage of preliminary injunctions maturing into permanent injunctions is very, very high - like over 90% - when constitutional challenges are asserted against legislation.

The "lien problem" has never been about DWC's inability to process liens. Lien FILING isn't the problem. It's only paper, or in the post EAMS era, it's only digits. The filing of liens bears no additional administrative burden on the government.

But when cases get resolved and lien claimants come out of the wood works to collect their claims there can be unruliness and unreasonable pressure on the system as payers attempt to close their files without having to pay additional amounts that may cause re-reserving and lien claimants force the issue by taking everything to court in anticipation that the additional expense would extract a few more pennies.

The "lien problem" stems from reconfiguration of the law a long time ago when someone had the bright idea to declare that lien claimants were not parties to a case until it settled. This part of the law was implemented because of a different lien problem at that time - lien claimants were taking up too much claim adjustment time because of incessant calling and dunning letters depriving adjusters the ability to pay attention to the case in chief, i.e. re the injured worker.

The thought at that time was that if a lien claimant wasn't a party then they could not force the case to a hearing for collections before the injured worker's medical status was stabilized and the case was ready for resolution.

Some argue that California's unique lien system is itself the problem - that there should be no liens and that if a vendor provided services that were warranted then they should be paid per schedule and that's it.

But not all claims are that straight forward and the lawmakers (and enforcers) long ago determined that just because an insurer doesn't believe in the validity of a claim, that the injured worker should not get the services needed. So provisions were made to ensure that an injured worker got services pending acceptance by the payer.

And of course that liberality got abused by the nefarious who saw an opportunity to use the system to generate undeserved revenues.

So long as workers' compensation is compulsory and there is no risk to anyone to participate in the system there are going to be abuses. Penalties and fines are too random and inconsequential to alter this behavior.

The fundamental concepts of workers' compensation need to be reexamined in light of these competing interests.

In the meantime my guess is that some new negotiations are going to happen in the near future regarding liens if a preliminary injunction in fact issues from Wu's desk.

1 comment:

  1. David, Thank you for your great article. The preliminary injunction against the imposition of Lien Activation Fee situation is mind boggling (for me) for all the reasons you stated: what will happen to all the monies we've already paid, what about liens that weren't pursued, how do we now navigate through EAMS... and how do we compensate ourselves for the literally hundreds of employee hours we have spent trying to identify "valid" liens for our clients which require the $100 fee prior to 1-1-14. I guess that was just another completely useless waste of our time. As a representative of lien claimants, this is the one aspect of SB863 that has felt entirely unfair and predatory. The problem of massive, unwarranted lien filings and litigation might be better addressed with more uniform and consistent WCAB rules. The various boards differ so much in their application of rules to lien claimants that we virtually have to treat each board as its own separate monarchy, and each judge's idiosyncrasies as unique game changers. However, when the boards uniformly started awarding costs and sanctions for bad behavior, we all took notice and made every effort to comply with those clear directives. It's the wiggle room from board to board, judge to judge, that creates the game plan for some providers to "throw it out there and see if it sticks".