Monday, January 7, 2013

Sick On Vacation

While I was on vacation I had a moment or three to think about this whole California reform agenda that was pushed through to the Governor's desk as SB 863 (I know I'm sick - there MUST be something better to think about during vacation).

There is one particular aspect of SB 863 that doesn't add up relative to the stated purpose of the bill ("to accomplish substantial justice in ALL cases expeditiously, inexpensively, and without encumbrance of any character" - Section 1, SB 863) and that is lien filing and activation fees.

Don't get me wrong - frankly I have no issue with any particular litigant paying some fee to underwrite the administrative expenses associated with processing the legal claim. This is routine in civil courts - if you have a beef with someone that you think either caused you damage or cost you money then you can have the courts adjudicate the issue but you have to pay first for that service.

I get that. It makes sense in my mind. It helps keep spurious litigation to a minimum.

And technically that is what the lien filing/activation fee is all about. That part of the analysis I don't argue with - if a peripheral player, the vendor who has a claim for payment over and above what the injured worker gets, wants his claim adjudicated then there should be some cost.

This should help ensure that only legitimate claims for payment make it into the adjudication system.

But the time to collect a fee is when such claim rises to the level of adjudication. Not before then.

As far as an administrative burden on the workers' compensation courts in California, liens only become a problem at the time of a hearing.

Remember in California we have this neat $60 million (and growing) computing system that permits the electronic filing of documents, including lien claims. Before that system (the Electronic Adjudication Management System, or "EAMS") there was the EDEX system for filing liens, also electronic and built specifically in the early 1990s to resolve the paper burden associated with liens.

So the FILING of liens has never been a real administrative burden on the courts - it's been electronic for a long, long time (okay, when EAMS was introduced and EDEX taken off line for filing - then filing electronically was limited to a few privileged players so lien claimants were forced to file on paper to be scanned by WCAB clerks into EAMS; yes that was an administrative problem but it was created by DWC itself...).

Liens DO become a problem, however, when a case goes to hearing, whether for a settlement or status conference or to an evidentiary hearing. Suddenly the list of case participants trying to occupy a 200 square foot hearing room swells and complicates the hearing process.

Some time ago the Division of Workers' Compensation (DWC) dealt with this issue by issuing regulations that prevented lien claimants from participating in a hearing until the case in chief was resolved to some extent. DWC did this by providing that lien claimants were not case parties until after the injured workers' case had been resolved (by either Award or settlement, or abandoned). 

Because lien claimants were not parties to the litigation until the case in chief was resolved they had no rights to do anything relative to the case. They sat on the side lines until the case ripened. Once the case in chief was resolved, then lien claimants came out of the wood works to get their share of the pie - creating additional delays on the closure of a claim.

Those rules have since remained on the books without alteration.

Now, the new rule is that a lien claimant, a person or entity that has made a claim of interest in the adjudication of an injured worker's case, is NOT a party to a case until after the injured worker has the dispute resolved, AND must pay a fee before, some times long before, the privilege of becoming a party is bestowed upon it.

In my mind this is wrong and, likely, illegal and will end up challenged and overturned in a civil case.

It's one thing to charge a filing fee to BECOME a party to litigation. It's another to charge a filing or activation fee, and then tell that participant that they have no rights in the litigation until some other status has been achieved.

This is a complete failure in equity and equal protection under the law, particularly when there is a tight (18 months) statute of limitations on the filing of a lien from the date when the services were provided, and the extended time it takes to bring most workers' compensation cases in California to a close (3-5 years) or when failure to pay a fee for a property claim (which a lien is) to be activated results in the summary denial of that claim without further adjudication.

This leaves lien claimants at the outrageous disadvantage of having to fund millions upon millions of dollars in state fees while waiting for their pipeline of cases to "ripen" for adjudication.

Perhaps the drafters of SB 863 knew exactly what they were doing with regards to lien claims, and knew that not a single lien claimant of significant size and volume (perhaps any size or volume?) could possibly afford to pay the filing and activation fees on their entire 3-5 year pipeline of outstanding accounts receivables.

Because one good way to eliminate millions of dollars of "costs" in the system, as promised by the proponents of SB 863, is to simply wipe out millions of dollars in vendor receivables. Lien filing fees, along with the fact that a lien claimant isn't a party to the litigation even if they do pay the fee, spells doom for any provider of services to the injured worker who does not have a direct contractual relationship with the employer. 

Worse, lien activation fees, for those liens that were filed prior to 1/1/2013, must be paid or the lien is summarily dismissed. This causes two things to occur: small value liens likely won't be brought to prosecution, whether valid or not, because of the cost. Second, for the volume of liens whose holders deem there to be sufficient value, will seek resolution en masse creating additional burden on the trial courts. The activation fee itself is not such as issue, but it is the summary disassociation of property rights that is at issue.

In other words, if you are a legitimate business trying to help the injured worker and his or her attorney, you just got run out of town - and your house and all your assets vaporize in the process. If the lien claimant is a high volume, low fee per service vendor (such as a durable medical equipment vendor or pharmacy) there is no recourse and those services become unavailable. 

If liens won’t be heard or considered until the case in chief is resolved, then why require the liens to be filed BEFORE that event – often LONG before that event?

This leaves the injured worker whose case is in dispute but who may legitimately be entitled to, or may require, such services and goods, without recourse.

Let's talk about the "unintended consequence" of what I think will be a typical defense strategy: forcing lien claimants to pay the filing or activation fee before payment of an invoice would even be considered.  Because a lien claimant has no rights - remember they are not a party until the case in chief is resolved - there are no enforcement options a lien claimant has whatsoever. Sure there are penalties and business practice issues in the audit process - those will never come to light in my opinion. 

SB863 makes it far too enticing for employers and defense attorneys to play games with providers and force them to jump through all the new hoops before paying them – and that is going to exacerbate the “lien problem”, not fix it.

The illegal part of this scheme is not relative to the lien claimant vendor attempting to collect a debt. It is illegal to the extent that a California worker may be denied services to which he or she is rightfully entitled and which could provide relief from an industrial injury. The "party in interest" in this lien issue is the injured worker whose claim has been denied and seeks treatment pending resolution of the reason for the denial.

This not a "California workers' compensation system that is equitable and efficient for both injured workers and employers."

While the legislature has plenary power (unqualified and absolute) to "fix and control the method and manner of trial of any such dispute, the rules of evidence and the manner of review," that power is tempered with the duty to provide "for the comfort, health and safety and general welfare of any and all workers and those dependent upon them for support to the extent of relieving from the consequences of any injury or death incurred or sustained by workers in the course of their employment,... to the end that the administration of such legislation shall accomplish substantial justice in all cases expeditiously, inexpensively, and without incumbrance of any character." (California Constitution Article 14, Section 4).

By requiring a non-party to a case to pay a fee so it MIGHT assert a claim against that case some time in the unknown future without any rights whatsoever jeopardizes the constitutional right "for the comfort, health and safety and general welfare of ANY and ALL workers." Article 14, Section 4 clearly applies to "ANY and ALL workers" - not just those workers whose claims are accepted.

There is a simple way to legally correct this conflict: make a lien claimant a party to a case upon the payment of the requisite fee - then that lien claimant will have all of the rights, entitlements AND responsibilities of a case party. This is a simple regulatory change. And no legitimate lien claimant can argue with the fee because then they become a party to the case, entitled to evidence, and procedural protections (and obligations).

The filing of a lien, especially electronically, isn't a burden on ANYBODY. It's just a place marker. It's the Declaration of Readiness to Proceed and subsequent appearances that are the burden.

The fee is on the wrong process. It's either a huge bone-head move, or intended genocide of a very large class of vendors trying to help out injured workers whose cases are either delayed or denied, but otherwise are legitimate.

By the way, don't start writing about all of the "bad" lien claimants out there. I know they exist. These malodorous people will always exist. They exist in all forms of life - they are the outliers. And trust me that lien filing fees won't get rid of them... In the meantime those who are in the business of actually helping people will no longer be helping people.

I hope my cynicism is misplaced.

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