- California CRD Subpoena Reach Extended in SpaceX FEHA Caseon September 10, 2026 at 9:42 AM
In April 2024, a former SpaceX employee filed an administrative complaint with California's Civil Rights Department (CRD), alleging the company violated the Fair Employment and Housing Act (FEHA) by paying her less than a male colleague hired around the same time, passing her over for a promotion in favor of a less experienced man, and firing her in retaliation for helping draft and circulate an open letter accusing the company and its CEO of fostering a hostile work environment and engaging in sexual harassment and gender discrimination. The employee listed a California address for SpaceX.
CRD served SpaceX with interrogatories and a subpoena seeking records related to the employee and her allegations. SpaceX objected on the ground that CRD lacked jurisdiction because the employee resided in Washington state and worked out of SpaceX's Redmond, Washington office, and FEHA does not apply outside California. CRD narrowed its request to fourteen items aimed at the jurisdictional question. Based on SpaceX's supplemental responses, CRD concluded it had jurisdiction over the retaliation claim but needed more information to assess jurisdiction over the discrimination claims. SpaceX declined to provide it, prompting CRD to go to court. In its filings, CRD pointed to a related lawsuit in which the employee alleged she reported to a SpaceX vice president based in California, her direct manager since 2021 was located in California, her pay statements were issued from and listed a California facility, and her new-hire paperwork referenced California employment law.
In April 2025, CRD petitioned the Los Angeles County Superior Court to compel SpaceX's compliance with the subpoena, both on the merits of the retaliation claim and on the jurisdictional question underlying the discrimination claims. SpaceX opposed, submitting a declaration from a Redmond-based HR director asserting that Washington-based managers made the relevant compensation, promotion, and termination decisions, and that the employee was hired, worked, and lived in Washington throughout. On May 23, 2025, Judge Maureen Duffy-Lewis granted CRD's petition without stating her reasons, and set a further hearing on the scope of the requests. SpaceX appealed.
In the partially published opinion of Civil Rights Department v. Space Exploration Technologies Corp., No. B346853 (Cal. Ct. App., 2d Dist., Div. 3, filed Aug. 11, 2026; certified for partial pub. Sept. 9, 2026). The Court of Appeal affirmed the order compelling SpaceX to comply with CRD's subpoena, and awarded CRD its costs on appeal.The Second Appellate District expressly excluded Part 2 of its Discussion section (the portion addressing SpaceX's federal constitutional arguments) from publication
The panel first addressed — in the unpublished portion of the opinion — SpaceX's argument that enforcing the subpoena violates the federal constitution. It found SpaceX's briefing on the commerce clause, due process, full faith and credit, and supremacy clause theories too cursory to preserve any of them, noting that "the most fundamental rule of appellate review is that the judgment or order challenged on appeal is presumed to be correct," placing the burden on the appellant to show error with reasoned legal argument (citing Argueta v. Worldwide Flight Services, Inc. (2023) 97 Cal.App.5th 822, and City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266). A "fishing expedition"/unreasonable-search theory raised for the first time in SpaceX's reply brief was forfeited on the same basis.
Turning to the published portion, the court addressed whether enforcing the subpoena violates the presumption against extraterritorial application of California law. Applying the California Supreme Court's framework in Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, the panel explained that because SpaceX did not argue any extraterritorial effect categorically bars applying FEHA, the real question is what California connections are sufficient to trigger the statute — a question that must be answered separately for CRD's investigatory authority (Gov. Code §§ 12930, 12963.1, 12963.5) than for FEHA's substantive prohibitions, since a subpoena carries less risk of conflict with another state's law than an injunction would.
The court rejected SpaceX's proposed categorical rule, drawn from Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, that FEHA applies only if the adverse employment action itself occurred in California. It found SpaceX never explained where an "adverse employment action" occurs when employer and employee touch multiple states, and that the complaint's actual California connections — including allegations the employee's manager and reporting chain were based in California and her pay statements issued from California — undercut SpaceX's characterization that everything happened in Washington. The court likewise rejected a broader rule, urged at oral argument, that California labor and employment statutes never protect a worker who did not work in California, distinguishing Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, and Oman v. Delta Air Lines, Inc. (2020) 9 Cal.5th 762, as wage-and-hour decisions that left open the possibility of extraterritorial application and that, per Ward, must be read statute-by-statute rather than as announcing a blanket rule for all California employment law.
Finally, the court distinguished Campbell v. Arco Marine, Inc. (1996) 42 Cal.App.4th 1850, where FEHA was held inapplicable to a Washington-based employee's shipboard harassment claims, because there the relevant California connections were undisputed and absent, whereas here the very purpose of the subpoena was to determine whether sufficient California connections exist. The court added that SpaceX's reliance on earlier cases involving conduct that was not actionable under FEHA at all was misplaced, since it is undisputed the conduct the employee alleges — sex/gender discrimination and retaliation — is unlawful under FEHA; the only open question is whether the California nexus is sufficient, which is precisely what CRD's subpoena seeks to investigate.
- California Hospital Association Challenges State Caps on Costson September 10, 2026 at 9:41 AM
A San Francisco judge has tentatively kept alive the California Hospital Association's (CHA) challenge to the state's caps on hospital spending growth, rejecting — at least for now — the state's argument that hospitals cannot sue over the caps until they are actually penalized for exceeding them. San Francisco County Superior Court Judge Joseph M. Quinn issued the tentative ruling ahead of a Wednesday, September 9, 2026 hearing on the state's demurrer to CHA's second amended complaint; because the ruling is tentative and Judge Quinn took the matter under submission after argument, it is not yet a final order, and this account of the court's reasoning is drawn from Courthouse News Service's report of the hearing rather than the tentative ruling itself, which was not independently available.
CHA, which represents roughly 400 California hospitals and health systems, sued the Office of Health Care Affordability (OHCA), its parent Department of Health Care Access and Information, Director Elizabeth Landsberg, and the Health Care Affordability Board on October 15, 2025, in a verified petition for writ of mandate and complaint for declaratory relief filed in San Francisco County Superior Court, Case No. CPF-25-519370.
The original filing challenges five OHCA actions: a statewide health care cost target starting at 3.5% annual growth in 2025 and 2026 and declining to 3.0% by 2029; the creation of a hospital-specific "sector" subject to that same statewide target; and a further, stricter target of 1.8% declining to 1.6% by 2029 for seven hospitals OHCA designated as "high-cost." OHCA was created by the Legislature in 2022 under the California Health Care Quality and Affordability Act, Health and Safety Code section 127500 et seq., and is tasked with slowing health care spending growth while maintaining access, quality, equity, and workforce stability.
CHA's petition argues the cost targets are inconsistent with that statutory mandate, arbitrary and capricious, and violate the takings and due process clauses of the state and federal constitutions; it separately argues the criteria OHCA used to identify "high-cost" hospitals amount to an underground regulation adopted without following the state's rulemaking procedures under the Administrative Procedure Act. CHA's petition states the targets are "arbitrary and irresponsible cost targets that single out hospitals" and projects that if the targets stand, more than 75% of California hospitals would operate at a loss, forcing layoffs and cuts to services including labor and delivery, mental health, and trauma care.
Enforcement of the 2026 targets technically began January 1, but the state has represented in court filings that actual monetary penalties are likely years away, since OHCA must first collect and analyze a full year of spending data and then work through a multi-step notice, waiver, and appeal process before any sanction could be imposed.
The state moved to dismiss the suit by demurrer, filed December 15, 2025 by the Attorney General's office on OHCA's behalf, arguing primarily that CHA's member hospitals lack the "beneficial interest" needed to sue because no hospital has been penalized, or shown it will be penalized, for exceeding a cost target; the state's brief called any such injury "too imaginary or speculative" to support standing.
The state separately argued CHA should not be permitted to sue on a "public interest" theory instead, and that the petition fails to plausibly allege the targets were arbitrary and capricious given OHCA's multi-year public rulemaking process. According to Courthouse News' account of Wednesday's hearing, Deputy Attorney General David Houska pressed the standing argument, telling the court that CHA's asserted harms remain hypothetical and that even a successful lawsuit might only produce a similar or higher target on remand. Judge Quinn reportedly rejected that framing, characterizing the harm CHA alleges not as the numerical targets themselves but as the product of an allegedly unlawful process for setting them — telling the state's counsel, as Courthouse News reported, that "the problem is not with the number 3.5" but with OHCA's alleged failure to weigh the factors the Legislature required, and that hospitals' operational impacts from that allegedly unauthorized rate do not depend on waiting for a formal enforcement action.
For employers in the health care and insurance industries, the litigation matters regardless of how the standing question is ultimately resolved: a ruling allowing the case to proceed keeps in play CHA's broader claims that OHCA's rate-setting methodology, and its process for designating "high-cost" hospitals, did not follow the statutory criteria the Legislature imposed — claims that, if successful, could force OHCA to redo target-setting work that commercial payers and providers have already begun building into contract negotiations. Judge Quinn gave no indication of when a final ruling will issue.
- Russians Behind Largest $1.3B Healthcare Fraud in U.S. Historyon September 9, 2026 at 9:50 AM
A federal grand jury in Boston has indicted a 33-year-old Georgian national on a single count of conspiracy to launder money, in a case federal prosecutors say is tied to the largest health care fraud scheme the Department of Justice has ever prosecuted.
The U.S. Department of Justice announced that Erekle Gugava was charged in the District of Massachusetts in connection with Operation Gold Rush, the government's name for its investigation into a transnational fraud and money-laundering network that DOJ says targeted Medicare and other health insurers. According to a companion release from the U.S. Attorney's Office for the District of Massachusetts, Gugava fled the United States in July 2025, after the conduct alleged in the indictment.
Gugava served as a money launderer for a criminal organization based in Russia and elsewhere that prosecutors describe as responsible for the largest health care fraud case the department has ever brought. Gugava is alleged to have owned ND Medical Solutions LLC, a durable medical equipment supplier based in Pennsylvania, between February and July 2025. During that roughly five-month period, ND Medical is alleged to have submitted at least $1.3 billion in fraudulent equipment claims to Medicare, to private insurers that sell Medicare supplemental coverage, to employer-sponsored health plans, and to other insurers. DOJ states that insurers actually paid out approximately $6.5 million on those claims before the scheme was uncovered — a gap the department attributes to the claims being caught before most of the billed amount was paid.
The fraudulent billings relied in part on stolen identities of Medicare beneficiaries, including elderly and disabled Americans across New England and elsewhere in the country, some of whom reported concerns to Medicare after receiving explanation-of-benefit notices for equipment they say they never received, prescribed by doctors they say they never saw. Prosecutors allege Gugava opened several bank accounts in ND Medical's name, was the sole signatory on those accounts, deposited insurance reimbursement checks into them, and then moved the funds to overseas accounts for the benefit of the broader organization. DOJ's release notes that health care fraud proceeds are especially attractive to launderers because they originate from legitimate payors — Medicare and established private carriers — which gives the funds an initial appearance of legitimacy.
Assistant Attorney General Colin M. McDonald of DOJ's National Fraud Enforcement Division was quoted in the department's release saying deterring "facilitators is essential to safeguarding taxpayer resources," and that the indictment reflects the department's "resolve to hold all participants in fraud networks accountable." Those are characterizations from a DOJ official, not adjudicated findings, and the indictment itself remains only an accusation — DOJ's own release states that Gugava is presumed innocent unless and until the government proves the charge beyond a reasonable doubt.
Gugava is charged with one count of conspiracy to commit money laundering and faces a maximum of 20 years in prison if convicted. The case was announced jointly by the National Fraud Enforcement Division, the U.S. Attorney's Office for Massachusetts, and investigators from HHS's Office of Inspector General, the FBI, the U.S. Postal Inspection Service, IRS Criminal Investigation, Homeland Security Investigations, and the Department of Labor's Employee Benefits Security Administration. DOJ's release places the case in the context of its Health Care Fraud Strike Force Program, which it says has charged more than 6,200 defendants tied to over $45 billion in claims billed to federal health programs and private insurers since 2007, and notes that its fraud-enforcement work supports the White House's Task Force to Eliminate Fraud, chaired by Vice President J.D. Vance.
For employers and insurers, the case is a reminder that durable medical equipment billing — an area with comparatively light utilization review compared to other claim types — remains a favored vector for large-scale, organized fraud rings, and that fraudulent claims can flow not just to Medicare but directly into employer-sponsored plans and Medicare supplemental products. Claims and special-investigations units may want to revisit DME billing controls and identity-verification protocols for beneficiaries in light of the pattern DOJ describes.
- DME CEO Pleads Guilty to $137M Health Care Fraudon September 9, 2026 at 9:50 AM
Sevindik Huseynov, a national of Azerbaijan, pleaded guilty in federal court to three counts of health care fraud in connection with a $137 million scheme targeting Medicare Advantage Programs.
Huseynov, 48, formerly of Sunnyvale, California and a national of Azerbaijan was indicted by a federal grand jury on September 25, 2025. Under the plea agreement, Huseynov pleaded guilty to three counts of health care fraud.
In pleading guilty, Huseynov, who was the Chief Executive Officer of a fraudulent durable medical equipment (DME) company, Vonyes Inc., admitted to aiding and abetting a scheme to submit thousands of fraudulent claims to Medicare Advantage Organizations (MAOs). The claims were submitted on behalf of unsuspecting beneficiaries and sought reimbursement for medical equipment such as wound dressing and orthotic braces. Beginning in January 2025 and continuing until Huseynov was arrested on June 17, 2025, he participated in the scheme with other individuals in the United States and abroad to submit large volumes of claims to MAOs offering Medicare Part C benefit plans.
In total, Huseynov, through Vonyes, sought reimbursements of at least $137 million from MAOs for medical equipment that was not provided, not needed by patients, and not authorized by a medical provider. Huseynov admitted to receiving reimbursement checks for $2.8 million and depositing those checks in Vonyes bank accounts he set up. After the money was deposited, Huseynov wired most of the money to bank accounts in Hong Kong.
Huseynov is currently in federal custody. Huseynov’s sentencing hearing is scheduled for February 2, 2027 at 1:30 PM before U.S. District Judge Noel Wise. Huseynov faces a maximum statutory penalty of 10 years in prison and a $250,000 fine for a violation of 18 U.S.C. § 1347, health care fraud. Any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant U.S. Attorney Maya Karwande with the assistance of Lynette Dixon, Ambereise McElrath, and Mimi Lam. The prosecution is the result of an investigation by the U.S. Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.
On April 7, 2026, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs.
- FDA Warns on DT MedTech H3 Ankle Replacement Revision Rateon September 8, 2026 at 9:48 AM
The FDA updated its safety communication regarding the Hintermann Series H3 Total Ankle Replacement (TAR) System, manufactured by DT MedTech LLC of Towson, Maryland. The agency stated it is now recommending that surgeons and patients "consider using other available treatment options where possible." That language represents a meaningful escalation from the FDA's two earlier communications on the device, issued in February 2024 and October 2025, which flagged higher-than-expected failure rates but stopped short of recommending alternatives.
The H3 TAR system is a three-component, mobile-bearing ankle prosthesis consisting of a metal tibial plate, a metal talar component, and a mobile polyethylene (plastic) bearing that sits between them. It is indicated for use as a non-cemented artificial ankle joint to replace a painful arthritic ankle caused by osteoarthritis, post-traumatic osteoarthritis, or inflammatory arthritis. The FDA approved the device in 2019, making it only the second total ankle replacement to receive full FDA premarket approval following the Scandinavian Total Ankle Replacement (STAR) system cleared in 2009.
The updated safety communication draws on three independent data sources, and the findings from each tell a consistent story. The manufacturer's own FDA-mandated post-approval study — a prospective cohort tracking 280 patients from the original premarket clinical trials — found that 31.8% of patients required revision surgery within 10 years. That includes revisions of both the metal and polyethylene components. Even when only metal component revisions are counted, the rate was 14.9% at 10 years, more than double the 6.5% rate observed at 5 years. Notably, the FDA flagged significant data quality concerns with the study: 55.7% of patients were lost to follow-up or had missing data at the 10-year mark, a limitation that could make the actual revision rate either higher or lower than the reported figure.
The most striking data, however, came from outside the manufacturer's study. The Australian Orthopaedic Association's National Joint Replacement Registry analyzed 573 H3 TAR implants alongside 4,806 other total ankle replacements performed in Australia through 2024. The 15-year cumulative revision rate for the H3 was 25.7%, compared to 15.2% for all other total ankle devices — nearly 70% higher. After adjusting for patient age and sex, the H3 carried a statistically significant hazard ratio of 1.93 for revision compared to other devices, meaning patients with the H3 were roughly twice as likely to need additional surgery. The United Kingdom's National Joint Registry reported a 9.5% revision rate for the H3 at 10 years, though the UK registry acknowledged that up to one-third of ankle revisions in Britain go unreported, suggesting the actual rate may be higher.
Polyethylene fracture — breakage of the plastic bearing component — emerged as a particularly concerning failure mode. The Australian registry data showed the 10-year cumulative incidence of revision due to polyethylene fracture was approximately four times higher for the H3 than for all other ankle replacement devices. While loosening was the most common reason for H3 revision overall at 25%, polyethylene breakage was the second most common at 16.7%, followed by infection and instability at 10.2% each. For comparison, among all other total ankle devices, polyethylene breakage ranked fifth as a reason for revision, accounting for only 6.3% of cases.
The regulatory response has been swift and international. Australia's Therapeutic Goods Administration went further than the FDA, issuing a market action on February 12, 2026 and banning the sale and distribution of the H3 TAR system in Australia entirely as of May 5, 2026. The device remains available in the United States, but the FDA's updated recommendation to consider alternatives is the strongest language the agency has used short of ordering a market withdrawal.
The FDA's safety communication does not recommend removal of functioning H3 implants. Patients whose devices are working well and who have no new or worsening symptoms should continue with their existing follow-up schedules. However, the FDA does recommend close monitoring for loosening, polyethylene fracture, and wear-related complications, and notes that CT imaging may be needed because the signs of plastic component fracture can be subtle even on standard X-rays. For adjusters and case managers overseeing claims involving workers with H3 implants already in place, this means ongoing surveillance costs and the potential for future revision surgery should be factored into reserve estimates.
The FDA has stated it will continue reviewing data from all available sources and will keep the public informed if significant new information emerges. Given the trajectory of the agency's communications — from alerting, to updating, to now recommending alternatives — further action remains a possibility. Stakeholders with open claims involving the H3 TAR system, or with pending treatment authorizations for total ankle replacement, should be tracking this issue closely.
- Newsom Appoints Nicole Richardson New DWC Directoron September 8, 2026 at 9:48 AM
Governor Gavin Newsom has appointed Nicole Richardson of San Ramon as Administrative Director of California's Division of Workers' Compensation (DWC), the top post overseeing the state workers' compensation system, according to the Governor's Office announcement.
Richardson steps into the role after serving as acting Administrative Director since early this year. She succeeds George Parisotto, who retired from state service at the end of January 2026, according to earlier announcement of the leadership transition.
Richardson has a long history with the DWC. She joined the division as staff counsel in 2017 and was elevated to Chief Counsel of the DWC in January 2026, a position she has held into this year. Before joining the state, her career was built almost entirely within California workers' compensation: she was an attorney at SiliconBay Training from 2013 to 2017, staff counsel at Pacific Compensation Insurance Company from 2011 to 2013, and staff counsel at the State Compensation Insurance Fund from 2004 to 2011.
She holds a Juris Doctor from Santa Clara University and a bachelor's degree in political science from the University of California, Berkeley. She is registered without party preference.
The appointment requires state Senate confirmation, and the position carries an annual salary of $217,692, per the Governor's Office announcement.
The industry professionals will get an early look at her vision for the DWC. According to the Elevate Conference & Exhibition's announcement, Richardson will make a special appearance at Elevate 2026, the workers' compensation and risk management conference running September 21–23 at the Hotel del Coronado in San Diego, taking the main stage at 8:20 a.m. on Wednesday, September 23.
Richardson was quoted saying she looks forward to speaking with the Elevate community about the issues facing California's workers' compensation system and her vision for the future. Elevate founder Duane Johnson said the organization was honored to welcome her so soon after her appointment.
Elevate 2026 is expected to draw more than 700 attendees across risk management, healthcare, safety, and business, with more than 40 educational sessions and 120-plus speakers, according to the announcement.
- Lawfirm Rules for AI Deployment Remain a Work-in-Progresson September 3, 2026 at 7:49 AM
California does not yet have a single, fully enacted statute or amended Rule of Professional Conduct that is uniquely dedicated to attorney use of AI. As of September 2, 2026, the governing framework is a combination of existing ethics rules, detailed State Bar guidance, court rules for the judiciary, and pending legislation and rule amendments.
Since ABA Formal Opinion 512 gave lawyers nationwide their first real ethical roadmap for generative AI in July 2024, California has moved further and faster than any other state, shifting from advisory guidance toward binding rules with real teeth. Below is where the rules actually stand today, what's still just proposed, and other relevant information.
Attorneys must comply with the existing California Rules of Professional Conduct and the State Bar Act when using any technology, including generative or agentic AI. The most relevant existing rules are:
- - Rule 1.1 (Competence) — Includes keeping abreast of relevant technology. A lawyer remains responsible for the work product and cannot delegate professional judgment to AI. Outputs must be reviewed and verified.
- - Rule 1.6 and Bus. & Prof. Code § 6068(e) (Confidentiality) — Do not input confidential client information into a public or inadequately secured generative AI system. “Reveal” can include exposing information to an AI tool that trains on inputs or lacks adequate security.
- - Rule 3.3 (Candor toward the tribunal) — A lawyer must not make false statements of law or fact. Courts have sanctioned lawyers for filing briefs with AI-hallucinated citations that the lawyer did not personally read and verify.
- - Rules 5.1 and 5.3 (Supervision) — Firm leaders must have policies on AI use; lawyers must supervise nonlawyer assistants (and, by extension, AI tools) so that ethical duties are met.
- - Rule 1.4 (Communication) — Clients must be kept reasonably informed. Material use of AI that affects cost, risk, or the manner of representation may need to be discussed.
- - Rule 1.5 (Fees) — You may charge for time spent prompting, reviewing, and editing AI output. You generally should not bill as if you performed the work the AI performed without adjustment for efficiency.
These duties already apply; the State Bar’s guidance simply maps them onto AI.
Another binding rule is California Rule of Court 10.430, effective September 1, 2025 — but it's worth being precise about who it actually governs. Rule 10.430 requires every California court that permits generative AI use to adopt a written AI use policy by December 15, 2025, covering court staff for any purpose and judicial officers for any task outside their adjudicative role (a companion provision, Standard of Judicial Administration 10.80, separately covers judges' adjudicative use). It is a rule for the courts themselves, not a rule directly regulating how outside attorneys or law firms use AI in their own practices.
The Standing Committee on Professional Responsibility and Conduct (COPRAC) issued Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law in November 2023 and replaced it with an updated version approved by the Board of Trustees in May 2026. The update specifically addresses agentic AI (systems that can plan and execute tasks with limited human prompting). It is guidance, not a disciplinary rule, but it is the most detailed official statement and is the document the California Supreme Court directed the Bar to consider incorporating into the Rules.
Core principles from the 2026 Guidance:
- - Do not input confidential or nonpublic client information into a public generative AI system that lacks adequate security and confidentiality protections.
- - Attain a reasonable understanding of the specific tool’s capabilities, limitations, data sources, and risks before using it.
- - Independently review, verify, and exercise professional judgment over every output used in a representation. Detecting hallucinations is necessary but not sufficient.
- - Do not let agentic systems make substantive legal determinations, give legal advice, or file pleadings without meaningful lawyer supervision and review.
- - The lawyer remains fully responsible for all work product.
- - Take reasonable steps to avoid biased or discriminatory outputs.
- - Fees should reflect actual time and value; AI efficiency should not be billed as if the lawyer performed the work unaided.
- - Comply with all other applicable law (privacy, IP, cybersecurity, AI-specific statutes, etc.).
The rule that will actually bind practicing attorneys directly is still in progress. On direct order from the California Supreme Court, the State Bar's Committee on Professional Responsibility and Conduct (COPRAC) has drafted proposed amendments to six Rules of Professional Conduct addressing AI. In response to an August 22, 2025 letter from the California Supreme Court, COPRAC proposed comments to Rules 1.1, 1.4, 1.6, 3.3, 5.1, and 5.3. A second public-comment period ran after the June 12, 2026 COPRAC meeting (deadline August 6, 2026). The proposals still require Board of Trustees and Supreme Court approval and are not yet binding. If adopted they would, among other things:
- - Explicitly require independent review and verification of AI (and other technology) outputs.
- - Clarify that “reveal” under Rule 1.6 includes exposing confidential information to AI systems that create a substantial risk of inconsistent use.
- - Require verification that cited authorities exist and are accurate before submission to a tribunal (including AI-assisted citations).
- - Require managerial lawyers to establish internal AI policies and to instruct/supervise nonlawyer assistants on ethical use of AI.
Legislation is moving on a parallel, faster track. Senate Bill 574, introduced by Senate Judiciary Chair Tom Umberg passed both houses unanimously and was ordered to engrossing and enrolling on August 31, 2026. As of September 2, 2026 it has been sent to Governor Newsom but has not yet been signed. The Governor typically has until September 30 to act on end-of-session bills.
If enacted, SB 574 would add a new Business and Professions Code section 6068.1 codifying attorneys' AI duties (protecting confidentiality, verifying accuracy, avoiding bias, considering disclosure for public-facing content), and would amend the state's existing sanctions statute, Code of Civil Procedure section 128.7, to make it explicit grounds for sanctions if a court filing contains any citation the responsible attorney has not personally read and verified — whether or not AI produced it.
Separately, the bill would add Code of Civil Procedure section 1282.1, barring arbitrators from delegating any part of their decision-making to generative AI, barring reliance on AI-sourced information outside the arbitration record without disclosure, and holding the arbitrator personally responsible for the award regardless of AI assistance used along the way.
The landscape is moving quickly. The Practical Guidance is the best current official map; the proposed rule comments and SB 574, if they become law, will convert much of that guidance into enforceable duties. Check the State Bar’s Ethics & Technology page and the official bill status for updates.
- No Fair Procedure Doctrine for Staffing Company Physician Removalon September 3, 2026 at 7:49 AM
Kuljit S. Hundal is an emergency room physician who held medical staff membership at Adventist Health Medical Center Tehachapi in Kern County. He provided ER services at the hospital as an independent contractor under an agreement with Stallion Springs Medical Services, a medical corporation responsible for staffing and scheduling the hospital's emergency department. In March 2019, a patient posted a social-media complaint alleging Hundal yelled at her and twice told her to leave the ER after she refused lab work.
The hospital's chief of medical staff opened an investigation and directed Stallion Springs to pull Hundal from the ER schedule pending review. Stallion Springs complied, conducted its own investigation — including interviews with Hundal and coworkers — and then terminated its contract with him for cause.
Hundal sued the hospital, the hospital's medical staff, and Stallion Springs, alleging none of them gave him notice or a hearing before he was pulled from the schedule, in violation of Health and Safety Code section 1278.5, California's hospital peer review statute (Bus. & Prof. Code §§ 805–809.9), and the common law right of fair procedure, plus a claim for intentional infliction of emotional distress. The hospital and its medical staff later settled with Hundal and were dismissed from the case, leaving Stallion Springs as the sole remaining defendant on the fair procedure and emotional distress claims.
Stallion Springs moved for summary judgment or, alternatively, summary adjudication, arguing it owed Hundal no duty of fair procedure because it is not a "peer review body" under the statute and is not the kind of quasi-public organization to which the common law fair procedure doctrine applies. The Kern County Superior Court granted summary adjudication on the emotional distress claim but denied it on the fair procedure claim. The court gave no explanation for its ruling either during the unreported hearing or in the written order that Stallion Springs' own counsel was directed to prepare, and the Court of Appeal separately noted that omission fell short of the statement-of-reasons requirement in Code of Civil Procedure section 437c(g), though it found the omission harmless given its own de novo review.
In the published case of Stallion Springs Medical Services v. Superior Court (Kuljit S. Hundal, Real Party in Interest), No. F090834, Super. Ct. No. BCV-21-100159 (Cal. Ct. App., 5th Dist., Sept. 2026) the Court of Appeal, Fifth Appellate District, granted the Stallion Springs petition for writ of mandate. It directed the trial court to vacate its order denying summary judgment and to enter a new order granting Stallion Springs' motion for summary judgment in its entirety.
The panel explained that the common law right of fair procedure, as articulated by the California Supreme Court in Potvin v. Metropolitan Life Ins. Co. (2000) 22 Cal.4th 1060, protects against arbitrary decisions only by private organizations that are "quasi-public" in nature — entities such as labor unions, hospitals, and professional licensing bodies whose importance to the public, market power, or legislative recognition justify imposing due-process obligations beyond any contract. Stallion Springs argued the doctrine was displaced entirely in the physician-discipline context by California's peer review statute, relying on the Second District's recent decision in Asiryan v. Medical Staff of Glendale Adventist Medical Center (2024) 100 Cal.App.5th 947, which held the statute is the exclusive source of procedural protections for physicians subject to hospital peer review. The Fifth District found it unnecessary to resolve that broader question, deciding instead on narrower grounds that the fair procedure doctrine simply does not reach an entity like Stallion Springs as a matter of law.
The court reasoned that Stallion Springs, as a staffing company that contracted with physicians as independent contractors to fill hospital shifts, was not "tinged with public stature or purpose" the way a union, hospital, or licensing organization is, citing the Ninth Circuit's decision in Flaa v. Hollywood Foreign Press Assn. (2022) 55 F.4th 680, and this court's own decision in Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172.
It was undisputed that Stallion Springs had no power over whether Hundal retained his medical staff membership at the hospital — that determination belonged to the hospital alone — and that Stallion Springs was contractually obligated to remove him from the schedule once the hospital so directed. The court rejected Hundal's argument that Stallion Springs' role in staffing and scheduling amounted to "gatekeeping" authority sufficient to trigger fair procedure duties, noting Potvin itself requires that the organization's power be so substantial that removal significantly impairs a physician's ability to practice in an entire geographic area, and Hundal lost privileges at only one hospital.
The court distinguished Economy v. Sutter East Bay Hospitals (2019) 31 Cal.App.5th 1147, noting that case addressed a hospital's own liability for routing a peer review decision through an intermediary medical group, not the intermediary's independent duties, and that here there was no evidence Stallion Springs had any peer review policies of its own. Because Stallion Springs was never a "quasi-public" gatekeeper to the profession, the panel held, the trial court erred as a matter of law in denying summary adjudication of the fair procedure claim, entitling Stallion Springs to summary judgment on the entire case.
- WCAB Affirms Lien Dismissal for Missing LC 4903.05(c) Declarationon September 2, 2026 at 12:57 PM
Angela Derby had a workers' compensation claim against the City of Los Angeles, permissibly self-insured. A lien claimant, Lien On Me, Inc., filed a lien in the case on November 14, 2012, seeking reimbursement for medical-legal expenses under Labor Code section 4903(b).
Because the lien was filed before January 1, 2013, it was subject to the lien activation fee established by Labor Code section 4903.06. The lien claimant did not file the declaration required by Labor Code section 4903.05(c), the "anti-fraud" declaration the Legislature added in 2016 (through SB 1160) requiring lien claimants to state, under penalty of perjury, the specific statutory basis authorizing their lien. Section 4903.05(c)(3) provides that failure to file that declaration "shall result in the dismissal of the lien with prejudice by operation of law."
At a March 25, 2026 hearing, the workers' compensation administrative law judge (WCJ) addressed whether the lien was subject to dismissal for failure to file the section 4903.05(c) declaration. The lien claimant argued it was exempt from the declaration requirement: because its lien predated January 1, 2013 and was therefore governed by the activation-fee provision of section 4903.06, it contended the separate declaration requirement of section 4903.05(c) simply did not apply to it. The WCJ rejected that argument, and the lien claimant petitioned the Appeals Board for reconsideration.
In the panel decision of Derby v. City of Los Angeles, ADJ3309119 (Cal. Workers' Comp. Appeals Bd., Aug. 2026) — the WCAB denied the lien claimant's petition for reconsideration, leaving the dismissal of the lien in place.
The panel, in an opinion authored by Commissioner Snellings, held the lien claimant's exemption argument failed because it misread the relationship between the two fee provisions. The declaration requirement of section 4903.05(c) and the activation fee of section 4903.06 were both enacted to combat fraud and frivolous filings in the lien system, not to create mutually exclusive tracks.
Relying on its own panel decision in Montelongo v. Gelson's Market (2022), the panel traced the legislative history of SB 1160, which described the declaration as an "anti-fraud measure" responding to press reports of more than $1 billion in fraudulent activity by medical providers exploiting the lien system, and which the Division of Workers' Compensation estimated involved roughly $600 million in liens — about 17% of all liens in the system — held by providers charged or convicted of fraud.
The Legislature, the panel emphasized, expressly intended the declaration requirement to apply to "all lien claimants," with section 4903.05(c)(1) governing liens filed after January 1, 2017 and section 4903.05(c)(2) governing those filed before that date.
The panel further rejected the premise that the two fees serve qualitatively different purposes. Quoting the Ninth Circuit's decision in Angelotti Chiropractic, Inc. v. Baker (9th Cir. 2015) 791 F.3d 1075, the panel explained that both the $150 filing fee for post-2013 liens and the $100 activation fee for pre-2013 liens were designed to provide a disincentive to file frivolous liens.
Because the two provisions share that anti-fraud, anti-frivolity purpose rather than exempting one class of liens from the other's requirements, the panel held it could not, and would not, upset the Legislature's clear intent that the declaration requirement reach all lien claimants.
The panel noted that several other Appeals Board panels have reached the same conclusion, including Carrillo v. Troon Golf Management (2025), Cornejo v. Sears Holding Corp. (2025), Hurst v. Kimco Staffing Services (2026), and Leshen v. State of California Highway Patrol (2026).
Because the lien claimant did not file the required declaration and was not exempt from doing so, its lien was subject to dismissal with prejudice by operation of law, and the panel denied reconsideration accordingly.
- WCIRB Reports on Medical Service Cost Trends through 2025on September 2, 2026 at 12:57 PM
The WCIRB released Medical Service Cost Trends through 2025 tracking medical service costs across service years 2014 through 2025. Medical costs accounted for 52% of total loss payments in the system in 2025.California's workers' compensation medical costs rose a modest 5% in 2025, but the composition of that increase tells a more pointed story: the fastest growth is now concentrated in services that no fee schedule caps, in medical-legal activity rather than medical treatment, and in Southern California.
Medical paid per claim rose 5% in 2025, following a 10% jump in 2024. The 2025 increase decomposes into a 4% rise in paid per transaction (price) and a 1% rise in transactions per claim (utilization). The longer arc is more striking: between 2014 and 2019, paid per transaction rose 9% while transactions per claim fell 24%, producing a 17% net decline in paid per claim. Between 2020 and 2025 that reversed entirely, with paid per transaction up 33%, utilization down just 2%, and paid per claim up 29%. Notably, after a decade of decline, the number of medical service transactions per claim began rising in 2024 and continued across multiple service categories in 2025.
The service mix has also shifted meaningfully over the past decade. Physician Services remain the largest category at 48% of medical payments in 2025 (up from 45% in 2015), but Medical-Legal has climbed from 13% to 17% and Medical Equipment and Other Services from 9% to 13%, while Pharmaceuticals collapsed from 11% of payments in 2015 to just 2% in 2025, largely on the back of SB 863 and sharply reduced opioid prescribing. Inpatient fell from 12% to 10% and Outpatient from 9% to 8%.
Perhaps the report's most policy-relevant finding concerns services that fall outside fee schedule price caps. Their share of total medical payments rose from 12% in 2021 to 17% in 2025, while the share subject to a fee schedule slipped from 83% to 79%. More telling is the utilization trend: indexed to 2021, utilization of non-fee-schedule services reached 120 by 2025 while fee schedule service utilization sat flat at 99. In 2024 and 2025, non-fee-schedule services accounted for nearly 30% of all utilization growth across the entire medical system, despite representing a relatively small share of payments — and they carry substantially higher average payments per transaction than capped services.
These services cluster in two places. Within Medical Equipment and Other Services, the leading non-fee-schedule items are Interpreter services (HCPCS T1013) and Home Health Aide services (S9122). Within Physician Services, they are three unlisted procedure codes: Unlisted Physical Medicine (97799), Unlisted Special Services and Report (99199), and Unlisted Evaluation and Management (99499). In 2025, 58% of all non-fee-schedule payments fell in the Medical Equipment and Other Services category and 31% in Physician Services.
By service type, Medical-Legal (up 13% paid per claim) and Medical Equipment and Other Services (up 8%) were the largest contributors to 2025 cost growth, with cumulative trauma claims driving both. Copy Services, though only 1.5% of payments, grew 8%. Physician Services — the dominant 2024 driver at 12% growth — moderated to 4% in 2025. Inpatient was flat and Pharmaceuticals declined 3%.
Medical-Legal costs have risen 47% per claim since 2021, when the new Medical-Legal Fee Schedule took effect. Early increases reflected higher reimbursement levels; more recent growth is almost entirely utilization, with services per claim up 30% since 2021 and rising another 12% in 2025 alone. Comprehensive evaluations account for 68% of medical-legal payments but only 45% of services, at $3,334 paid per service in 2025; supplemental evaluations make up 31% of services but 16% of payments, at $1,176 each. Additional record review costs — charges for reviewing records beyond the 2021 fee schedule's page limit — have risen 14% per review since 2021 and now attach to roughly one-third of all medical-legal evaluations.
The cumulative trauma link is explicit. Indexed to 2014, medical-legal services per claim on CT claims reached 189 by 2024, versus 110 for non-CT claims, while paid per service grew at nearly identical rates for both (127 and 130). In other words, the medical-legal cost problem is a CT claims volume problem, not a pricing problem.
The single most dramatic trend in the report involves a category that accounts for just 3.6% of all medical payments. Interpreter services paid per claim has risen 714% since 2014 and 141% since 2020 alone — the fastest-growing service category over the past five years. Both components contributed: paid per transaction up 25% since 2020 and transactions per claim up 93%. Interpreter services are now the second-largest component within Medical Equipment and Other Services at 27% of that category's payments, up from 8% in 2015, having overtaken Durable Medical Equipment (down from 31% to 17%). WCIRB attributes the growth to the absence of any fee schedule, the fact that interpreter services are billed by service duration, and a rising share of CT claims involving interpreters — interpreter transactions per claim on CT claims hit an index of 589 by 2023 versus 460 for non-CT claims.
Home Health tells a related demographic story. Paid per claim rose 52% between 2020 and 2025, with no fee schedule governing the category. Injured workers over age 60 accounted for 51% of Home Health payments in 2025, compared with 26% of payments across all medical services — and up from 35% of Home Health payments in 2015, a shift WCIRB links to an aging workforce.
Southern California drove statewide trends decisively. Overall paid per claim rose 8% there in 2025 versus 1% in Northern California, where declining average prices offset higher utilization. Medical-Legal is the sharpest split: costs rose 18% per claim in Southern California, driven by a 16% jump in services per claim, while falling 6% in Northern California as utilization dropped 7%. Southern California recorded 20.0 medical-legal services per 100 claims in 2025 against 10.8 in the north, a gap that has widened substantially since 2022.
The pattern holds across categories. Physician Services paid per claim reached $1,163 in Southern California versus $763 in the north, with transactions per claim 57% higher. Physical Medicine paid per claim was $290 versus $235, with visits per claim about 46% higher. Medical Equipment and Other Services showed the widest proportional gap at $283 versus $147, with utilization more than double.
Elsewhere in the report, Evaluation and Management (38% of Physician Services payments) and Physical Medicine (28%) together account for roughly 70% of physician spending, with E&M costs rising 6% per claim in 2025 almost entirely on price, reflecting a shift toward higher-complexity office visits. Inpatient surgical payments per episode fell from $34,854 in 2021 to $24,205 in 2025 even as surgical episodes per 1,000 claims rose, narrowing the gap with non-surgical episodes. WCIRB will host a Research Forum webinar on the report, "Behind the Numbers: Medical Cost Trends through 2025," on September 23, 2026.
- California CRD Subpoena Reach Extended in SpaceX FEHA Caseon September 10, 2026 at 9:42 AM
In April 2024, a former SpaceX employee filed an administrative complaint with California's Civil Rights Department (CRD), alleging the company violated the Fair Employment and Housing Act (FEHA) by paying her less than a male colleague hired around the same time, passing her over for a promotion in favor of a less experienced man, and firing her in retaliation for helping draft and circulate an open letter accusing the company and its CEO of fostering a hostile work environment and engaging in sexual harassment and gender discrimination. The employee listed a California address for SpaceX.
CRD served SpaceX with interrogatories and a subpoena seeking records related to the employee and her allegations. SpaceX objected on the ground that CRD lacked jurisdiction because the employee resided in Washington state and worked out of SpaceX's Redmond, Washington office, and FEHA does not apply outside California. CRD narrowed its request to fourteen items aimed at the jurisdictional question. Based on SpaceX's supplemental responses, CRD concluded it had jurisdiction over the retaliation claim but needed more information to assess jurisdiction over the discrimination claims. SpaceX declined to provide it, prompting CRD to go to court. In its filings, CRD pointed to a related lawsuit in which the employee alleged she reported to a SpaceX vice president based in California, her direct manager since 2021 was located in California, her pay statements were issued from and listed a California facility, and her new-hire paperwork referenced California employment law.
In April 2025, CRD petitioned the Los Angeles County Superior Court to compel SpaceX's compliance with the subpoena, both on the merits of the retaliation claim and on the jurisdictional question underlying the discrimination claims. SpaceX opposed, submitting a declaration from a Redmond-based HR director asserting that Washington-based managers made the relevant compensation, promotion, and termination decisions, and that the employee was hired, worked, and lived in Washington throughout. On May 23, 2025, Judge Maureen Duffy-Lewis granted CRD's petition without stating her reasons, and set a further hearing on the scope of the requests. SpaceX appealed.
In the partially published opinion of Civil Rights Department v. Space Exploration Technologies Corp., No. B346853 (Cal. Ct. App., 2d Dist., Div. 3, filed Aug. 11, 2026; certified for partial pub. Sept. 9, 2026). The Court of Appeal affirmed the order compelling SpaceX to comply with CRD's subpoena, and awarded CRD its costs on appeal.The Second Appellate District expressly excluded Part 2 of its Discussion section (the portion addressing SpaceX's federal constitutional arguments) from publication
The panel first addressed — in the unpublished portion of the opinion — SpaceX's argument that enforcing the subpoena violates the federal constitution. It found SpaceX's briefing on the commerce clause, due process, full faith and credit, and supremacy clause theories too cursory to preserve any of them, noting that "the most fundamental rule of appellate review is that the judgment or order challenged on appeal is presumed to be correct," placing the burden on the appellant to show error with reasoned legal argument (citing Argueta v. Worldwide Flight Services, Inc. (2023) 97 Cal.App.5th 822, and City of Santa Maria v. Adam (2012) 211 Cal.App.4th 266). A "fishing expedition"/unreasonable-search theory raised for the first time in SpaceX's reply brief was forfeited on the same basis.
Turning to the published portion, the court addressed whether enforcing the subpoena violates the presumption against extraterritorial application of California law. Applying the California Supreme Court's framework in Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, the panel explained that because SpaceX did not argue any extraterritorial effect categorically bars applying FEHA, the real question is what California connections are sufficient to trigger the statute — a question that must be answered separately for CRD's investigatory authority (Gov. Code §§ 12930, 12963.1, 12963.5) than for FEHA's substantive prohibitions, since a subpoena carries less risk of conflict with another state's law than an injunction would.
The court rejected SpaceX's proposed categorical rule, drawn from Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, that FEHA applies only if the adverse employment action itself occurred in California. It found SpaceX never explained where an "adverse employment action" occurs when employer and employee touch multiple states, and that the complaint's actual California connections — including allegations the employee's manager and reporting chain were based in California and her pay statements issued from California — undercut SpaceX's characterization that everything happened in Washington. The court likewise rejected a broader rule, urged at oral argument, that California labor and employment statutes never protect a worker who did not work in California, distinguishing Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191, and Oman v. Delta Air Lines, Inc. (2020) 9 Cal.5th 762, as wage-and-hour decisions that left open the possibility of extraterritorial application and that, per Ward, must be read statute-by-statute rather than as announcing a blanket rule for all California employment law.
Finally, the court distinguished Campbell v. Arco Marine, Inc. (1996) 42 Cal.App.4th 1850, where FEHA was held inapplicable to a Washington-based employee's shipboard harassment claims, because there the relevant California connections were undisputed and absent, whereas here the very purpose of the subpoena was to determine whether sufficient California connections exist. The court added that SpaceX's reliance on earlier cases involving conduct that was not actionable under FEHA at all was misplaced, since it is undisputed the conduct the employee alleges — sex/gender discrimination and retaliation — is unlawful under FEHA; the only open question is whether the California nexus is sufficient, which is precisely what CRD's subpoena seeks to investigate. - California Hospital Association Challenges State Caps on Costson September 10, 2026 at 9:41 AM
A San Francisco judge has tentatively kept alive the California Hospital Association's (CHA) challenge to the state's caps on hospital spending growth, rejecting — at least for now — the state's argument that hospitals cannot sue over the caps until they are actually penalized for exceeding them. San Francisco County Superior Court Judge Joseph M. Quinn issued the tentative ruling ahead of a Wednesday, September 9, 2026 hearing on the state's demurrer to CHA's second amended complaint; because the ruling is tentative and Judge Quinn took the matter under submission after argument, it is not yet a final order, and this account of the court's reasoning is drawn from Courthouse News Service's report of the hearing rather than the tentative ruling itself, which was not independently available.
CHA, which represents roughly 400 California hospitals and health systems, sued the Office of Health Care Affordability (OHCA), its parent Department of Health Care Access and Information, Director Elizabeth Landsberg, and the Health Care Affordability Board on October 15, 2025, in a verified petition for writ of mandate and complaint for declaratory relief filed in San Francisco County Superior Court, Case No. CPF-25-519370.
The original filing challenges five OHCA actions: a statewide health care cost target starting at 3.5% annual growth in 2025 and 2026 and declining to 3.0% by 2029; the creation of a hospital-specific "sector" subject to that same statewide target; and a further, stricter target of 1.8% declining to 1.6% by 2029 for seven hospitals OHCA designated as "high-cost." OHCA was created by the Legislature in 2022 under the California Health Care Quality and Affordability Act, Health and Safety Code section 127500 et seq., and is tasked with slowing health care spending growth while maintaining access, quality, equity, and workforce stability.
CHA's petition argues the cost targets are inconsistent with that statutory mandate, arbitrary and capricious, and violate the takings and due process clauses of the state and federal constitutions; it separately argues the criteria OHCA used to identify "high-cost" hospitals amount to an underground regulation adopted without following the state's rulemaking procedures under the Administrative Procedure Act. CHA's petition states the targets are "arbitrary and irresponsible cost targets that single out hospitals" and projects that if the targets stand, more than 75% of California hospitals would operate at a loss, forcing layoffs and cuts to services including labor and delivery, mental health, and trauma care.
Enforcement of the 2026 targets technically began January 1, but the state has represented in court filings that actual monetary penalties are likely years away, since OHCA must first collect and analyze a full year of spending data and then work through a multi-step notice, waiver, and appeal process before any sanction could be imposed.
The state moved to dismiss the suit by demurrer, filed December 15, 2025 by the Attorney General's office on OHCA's behalf, arguing primarily that CHA's member hospitals lack the "beneficial interest" needed to sue because no hospital has been penalized, or shown it will be penalized, for exceeding a cost target; the state's brief called any such injury "too imaginary or speculative" to support standing.
The state separately argued CHA should not be permitted to sue on a "public interest" theory instead, and that the petition fails to plausibly allege the targets were arbitrary and capricious given OHCA's multi-year public rulemaking process. According to Courthouse News' account of Wednesday's hearing, Deputy Attorney General David Houska pressed the standing argument, telling the court that CHA's asserted harms remain hypothetical and that even a successful lawsuit might only produce a similar or higher target on remand. Judge Quinn reportedly rejected that framing, characterizing the harm CHA alleges not as the numerical targets themselves but as the product of an allegedly unlawful process for setting them — telling the state's counsel, as Courthouse News reported, that "the problem is not with the number 3.5" but with OHCA's alleged failure to weigh the factors the Legislature required, and that hospitals' operational impacts from that allegedly unauthorized rate do not depend on waiting for a formal enforcement action.
For employers in the health care and insurance industries, the litigation matters regardless of how the standing question is ultimately resolved: a ruling allowing the case to proceed keeps in play CHA's broader claims that OHCA's rate-setting methodology, and its process for designating "high-cost" hospitals, did not follow the statutory criteria the Legislature imposed — claims that, if successful, could force OHCA to redo target-setting work that commercial payers and providers have already begun building into contract negotiations. Judge Quinn gave no indication of when a final ruling will issue. - Russians Behind Largest $1.3B Healthcare Fraud in U.S. Historyon September 9, 2026 at 9:50 AM
A federal grand jury in Boston has indicted a 33-year-old Georgian national on a single count of conspiracy to launder money, in a case federal prosecutors say is tied to the largest health care fraud scheme the Department of Justice has ever prosecuted.
The U.S. Department of Justice announced that Erekle Gugava was charged in the District of Massachusetts in connection with Operation Gold Rush, the government's name for its investigation into a transnational fraud and money-laundering network that DOJ says targeted Medicare and other health insurers. According to a companion release from the U.S. Attorney's Office for the District of Massachusetts, Gugava fled the United States in July 2025, after the conduct alleged in the indictment.
Gugava served as a money launderer for a criminal organization based in Russia and elsewhere that prosecutors describe as responsible for the largest health care fraud case the department has ever brought. Gugava is alleged to have owned ND Medical Solutions LLC, a durable medical equipment supplier based in Pennsylvania, between February and July 2025. During that roughly five-month period, ND Medical is alleged to have submitted at least $1.3 billion in fraudulent equipment claims to Medicare, to private insurers that sell Medicare supplemental coverage, to employer-sponsored health plans, and to other insurers. DOJ states that insurers actually paid out approximately $6.5 million on those claims before the scheme was uncovered — a gap the department attributes to the claims being caught before most of the billed amount was paid.
The fraudulent billings relied in part on stolen identities of Medicare beneficiaries, including elderly and disabled Americans across New England and elsewhere in the country, some of whom reported concerns to Medicare after receiving explanation-of-benefit notices for equipment they say they never received, prescribed by doctors they say they never saw. Prosecutors allege Gugava opened several bank accounts in ND Medical's name, was the sole signatory on those accounts, deposited insurance reimbursement checks into them, and then moved the funds to overseas accounts for the benefit of the broader organization. DOJ's release notes that health care fraud proceeds are especially attractive to launderers because they originate from legitimate payors — Medicare and established private carriers — which gives the funds an initial appearance of legitimacy.
Assistant Attorney General Colin M. McDonald of DOJ's National Fraud Enforcement Division was quoted in the department's release saying deterring "facilitators is essential to safeguarding taxpayer resources," and that the indictment reflects the department's "resolve to hold all participants in fraud networks accountable." Those are characterizations from a DOJ official, not adjudicated findings, and the indictment itself remains only an accusation — DOJ's own release states that Gugava is presumed innocent unless and until the government proves the charge beyond a reasonable doubt.
Gugava is charged with one count of conspiracy to commit money laundering and faces a maximum of 20 years in prison if convicted. The case was announced jointly by the National Fraud Enforcement Division, the U.S. Attorney's Office for Massachusetts, and investigators from HHS's Office of Inspector General, the FBI, the U.S. Postal Inspection Service, IRS Criminal Investigation, Homeland Security Investigations, and the Department of Labor's Employee Benefits Security Administration. DOJ's release places the case in the context of its Health Care Fraud Strike Force Program, which it says has charged more than 6,200 defendants tied to over $45 billion in claims billed to federal health programs and private insurers since 2007, and notes that its fraud-enforcement work supports the White House's Task Force to Eliminate Fraud, chaired by Vice President J.D. Vance.
For employers and insurers, the case is a reminder that durable medical equipment billing — an area with comparatively light utilization review compared to other claim types — remains a favored vector for large-scale, organized fraud rings, and that fraudulent claims can flow not just to Medicare but directly into employer-sponsored plans and Medicare supplemental products. Claims and special-investigations units may want to revisit DME billing controls and identity-verification protocols for beneficiaries in light of the pattern DOJ describes. - DME CEO Pleads Guilty to $137M Health Care Fraudon September 9, 2026 at 9:50 AM
Sevindik Huseynov, a national of Azerbaijan, pleaded guilty in federal court to three counts of health care fraud in connection with a $137 million scheme targeting Medicare Advantage Programs.
Huseynov, 48, formerly of Sunnyvale, California and a national of Azerbaijan was indicted by a federal grand jury on September 25, 2025. Under the plea agreement, Huseynov pleaded guilty to three counts of health care fraud.
In pleading guilty, Huseynov, who was the Chief Executive Officer of a fraudulent durable medical equipment (DME) company, Vonyes Inc., admitted to aiding and abetting a scheme to submit thousands of fraudulent claims to Medicare Advantage Organizations (MAOs). The claims were submitted on behalf of unsuspecting beneficiaries and sought reimbursement for medical equipment such as wound dressing and orthotic braces. Beginning in January 2025 and continuing until Huseynov was arrested on June 17, 2025, he participated in the scheme with other individuals in the United States and abroad to submit large volumes of claims to MAOs offering Medicare Part C benefit plans.
In total, Huseynov, through Vonyes, sought reimbursements of at least $137 million from MAOs for medical equipment that was not provided, not needed by patients, and not authorized by a medical provider. Huseynov admitted to receiving reimbursement checks for $2.8 million and depositing those checks in Vonyes bank accounts he set up. After the money was deposited, Huseynov wired most of the money to bank accounts in Hong Kong.
Huseynov is currently in federal custody. Huseynov’s sentencing hearing is scheduled for February 2, 2027 at 1:30 PM before U.S. District Judge Noel Wise. Huseynov faces a maximum statutory penalty of 10 years in prison and a $250,000 fine for a violation of 18 U.S.C. § 1347, health care fraud. Any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The case is being prosecuted by Assistant U.S. Attorney Maya Karwande with the assistance of Lynette Dixon, Ambereise McElrath, and Mimi Lam. The prosecution is the result of an investigation by the U.S. Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.
On April 7, 2026, the Department of Justice announced the creation of the National Fraud Enforcement Division (“Fraud Division”). The Fraud Division is investigating and prosecuting those who commit fraud against the American people. The Department’s work to combat fraud supports President Trump’s Task Force to Eliminate Fraud, a whole-of-government effort chaired by Vice President J.D. Vance to eliminate fraud, waste, and abuse within Federal benefit programs. - FDA Warns on DT MedTech H3 Ankle Replacement Revision Rateon September 8, 2026 at 9:48 AM
The FDA updated its safety communication regarding the Hintermann Series H3 Total Ankle Replacement (TAR) System, manufactured by DT MedTech LLC of Towson, Maryland. The agency stated it is now recommending that surgeons and patients "consider using other available treatment options where possible." That language represents a meaningful escalation from the FDA's two earlier communications on the device, issued in February 2024 and October 2025, which flagged higher-than-expected failure rates but stopped short of recommending alternatives.
The H3 TAR system is a three-component, mobile-bearing ankle prosthesis consisting of a metal tibial plate, a metal talar component, and a mobile polyethylene (plastic) bearing that sits between them. It is indicated for use as a non-cemented artificial ankle joint to replace a painful arthritic ankle caused by osteoarthritis, post-traumatic osteoarthritis, or inflammatory arthritis. The FDA approved the device in 2019, making it only the second total ankle replacement to receive full FDA premarket approval following the Scandinavian Total Ankle Replacement (STAR) system cleared in 2009.
The updated safety communication draws on three independent data sources, and the findings from each tell a consistent story. The manufacturer's own FDA-mandated post-approval study — a prospective cohort tracking 280 patients from the original premarket clinical trials — found that 31.8% of patients required revision surgery within 10 years. That includes revisions of both the metal and polyethylene components. Even when only metal component revisions are counted, the rate was 14.9% at 10 years, more than double the 6.5% rate observed at 5 years. Notably, the FDA flagged significant data quality concerns with the study: 55.7% of patients were lost to follow-up or had missing data at the 10-year mark, a limitation that could make the actual revision rate either higher or lower than the reported figure.
The most striking data, however, came from outside the manufacturer's study. The Australian Orthopaedic Association's National Joint Replacement Registry analyzed 573 H3 TAR implants alongside 4,806 other total ankle replacements performed in Australia through 2024. The 15-year cumulative revision rate for the H3 was 25.7%, compared to 15.2% for all other total ankle devices — nearly 70% higher. After adjusting for patient age and sex, the H3 carried a statistically significant hazard ratio of 1.93 for revision compared to other devices, meaning patients with the H3 were roughly twice as likely to need additional surgery. The United Kingdom's National Joint Registry reported a 9.5% revision rate for the H3 at 10 years, though the UK registry acknowledged that up to one-third of ankle revisions in Britain go unreported, suggesting the actual rate may be higher.
Polyethylene fracture — breakage of the plastic bearing component — emerged as a particularly concerning failure mode. The Australian registry data showed the 10-year cumulative incidence of revision due to polyethylene fracture was approximately four times higher for the H3 than for all other ankle replacement devices. While loosening was the most common reason for H3 revision overall at 25%, polyethylene breakage was the second most common at 16.7%, followed by infection and instability at 10.2% each. For comparison, among all other total ankle devices, polyethylene breakage ranked fifth as a reason for revision, accounting for only 6.3% of cases.
The regulatory response has been swift and international. Australia's Therapeutic Goods Administration went further than the FDA, issuing a market action on February 12, 2026 and banning the sale and distribution of the H3 TAR system in Australia entirely as of May 5, 2026. The device remains available in the United States, but the FDA's updated recommendation to consider alternatives is the strongest language the agency has used short of ordering a market withdrawal.
The FDA's safety communication does not recommend removal of functioning H3 implants. Patients whose devices are working well and who have no new or worsening symptoms should continue with their existing follow-up schedules. However, the FDA does recommend close monitoring for loosening, polyethylene fracture, and wear-related complications, and notes that CT imaging may be needed because the signs of plastic component fracture can be subtle even on standard X-rays. For adjusters and case managers overseeing claims involving workers with H3 implants already in place, this means ongoing surveillance costs and the potential for future revision surgery should be factored into reserve estimates.
The FDA has stated it will continue reviewing data from all available sources and will keep the public informed if significant new information emerges. Given the trajectory of the agency's communications — from alerting, to updating, to now recommending alternatives — further action remains a possibility. Stakeholders with open claims involving the H3 TAR system, or with pending treatment authorizations for total ankle replacement, should be tracking this issue closely. - Newsom Appoints Nicole Richardson New DWC Directoron September 8, 2026 at 9:48 AM
Governor Gavin Newsom has appointed Nicole Richardson of San Ramon as Administrative Director of California's Division of Workers' Compensation (DWC), the top post overseeing the state workers' compensation system, according to the Governor's Office announcement.
Richardson steps into the role after serving as acting Administrative Director since early this year. She succeeds George Parisotto, who retired from state service at the end of January 2026, according to earlier announcement of the leadership transition.
Richardson has a long history with the DWC. She joined the division as staff counsel in 2017 and was elevated to Chief Counsel of the DWC in January 2026, a position she has held into this year. Before joining the state, her career was built almost entirely within California workers' compensation: she was an attorney at SiliconBay Training from 2013 to 2017, staff counsel at Pacific Compensation Insurance Company from 2011 to 2013, and staff counsel at the State Compensation Insurance Fund from 2004 to 2011.
She holds a Juris Doctor from Santa Clara University and a bachelor's degree in political science from the University of California, Berkeley. She is registered without party preference.
The appointment requires state Senate confirmation, and the position carries an annual salary of $217,692, per the Governor's Office announcement.
The industry professionals will get an early look at her vision for the DWC. According to the Elevate Conference & Exhibition's announcement, Richardson will make a special appearance at Elevate 2026, the workers' compensation and risk management conference running September 21–23 at the Hotel del Coronado in San Diego, taking the main stage at 8:20 a.m. on Wednesday, September 23.
Richardson was quoted saying she looks forward to speaking with the Elevate community about the issues facing California's workers' compensation system and her vision for the future. Elevate founder Duane Johnson said the organization was honored to welcome her so soon after her appointment.
Elevate 2026 is expected to draw more than 700 attendees across risk management, healthcare, safety, and business, with more than 40 educational sessions and 120-plus speakers, according to the announcement. - Lawfirm Rules for AI Deployment Remain a Work-in-Progresson September 3, 2026 at 7:49 AM
California does not yet have a single, fully enacted statute or amended Rule of Professional Conduct that is uniquely dedicated to attorney use of AI. As of September 2, 2026, the governing framework is a combination of existing ethics rules, detailed State Bar guidance, court rules for the judiciary, and pending legislation and rule amendments.
Since ABA Formal Opinion 512 gave lawyers nationwide their first real ethical roadmap for generative AI in July 2024, California has moved further and faster than any other state, shifting from advisory guidance toward binding rules with real teeth. Below is where the rules actually stand today, what's still just proposed, and other relevant information.
Attorneys must comply with the existing California Rules of Professional Conduct and the State Bar Act when using any technology, including generative or agentic AI. The most relevant existing rules are:
- - Rule 1.1 (Competence) — Includes keeping abreast of relevant technology. A lawyer remains responsible for the work product and cannot delegate professional judgment to AI. Outputs must be reviewed and verified.
- - Rule 1.6 and Bus. & Prof. Code § 6068(e) (Confidentiality) — Do not input confidential client information into a public or inadequately secured generative AI system. “Reveal” can include exposing information to an AI tool that trains on inputs or lacks adequate security.
- - Rule 3.3 (Candor toward the tribunal) — A lawyer must not make false statements of law or fact. Courts have sanctioned lawyers for filing briefs with AI-hallucinated citations that the lawyer did not personally read and verify.
- - Rules 5.1 and 5.3 (Supervision) — Firm leaders must have policies on AI use; lawyers must supervise nonlawyer assistants (and, by extension, AI tools) so that ethical duties are met.
- - Rule 1.4 (Communication) — Clients must be kept reasonably informed. Material use of AI that affects cost, risk, or the manner of representation may need to be discussed.
- - Rule 1.5 (Fees) — You may charge for time spent prompting, reviewing, and editing AI output. You generally should not bill as if you performed the work the AI performed without adjustment for efficiency.
These duties already apply; the State Bar’s guidance simply maps them onto AI.
Another binding rule is California Rule of Court 10.430, effective September 1, 2025 — but it's worth being precise about who it actually governs. Rule 10.430 requires every California court that permits generative AI use to adopt a written AI use policy by December 15, 2025, covering court staff for any purpose and judicial officers for any task outside their adjudicative role (a companion provision, Standard of Judicial Administration 10.80, separately covers judges' adjudicative use). It is a rule for the courts themselves, not a rule directly regulating how outside attorneys or law firms use AI in their own practices.
The Standing Committee on Professional Responsibility and Conduct (COPRAC) issued Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law in November 2023 and replaced it with an updated version approved by the Board of Trustees in May 2026. The update specifically addresses agentic AI (systems that can plan and execute tasks with limited human prompting). It is guidance, not a disciplinary rule, but it is the most detailed official statement and is the document the California Supreme Court directed the Bar to consider incorporating into the Rules.
Core principles from the 2026 Guidance:
- - Do not input confidential or nonpublic client information into a public generative AI system that lacks adequate security and confidentiality protections.
- - Attain a reasonable understanding of the specific tool’s capabilities, limitations, data sources, and risks before using it.
- - Independently review, verify, and exercise professional judgment over every output used in a representation. Detecting hallucinations is necessary but not sufficient.
- - Do not let agentic systems make substantive legal determinations, give legal advice, or file pleadings without meaningful lawyer supervision and review.
- - The lawyer remains fully responsible for all work product.
- - Take reasonable steps to avoid biased or discriminatory outputs.
- - Fees should reflect actual time and value; AI efficiency should not be billed as if the lawyer performed the work unaided.
- - Comply with all other applicable law (privacy, IP, cybersecurity, AI-specific statutes, etc.).
The rule that will actually bind practicing attorneys directly is still in progress. On direct order from the California Supreme Court, the State Bar's Committee on Professional Responsibility and Conduct (COPRAC) has drafted proposed amendments to six Rules of Professional Conduct addressing AI. In response to an August 22, 2025 letter from the California Supreme Court, COPRAC proposed comments to Rules 1.1, 1.4, 1.6, 3.3, 5.1, and 5.3. A second public-comment period ran after the June 12, 2026 COPRAC meeting (deadline August 6, 2026). The proposals still require Board of Trustees and Supreme Court approval and are not yet binding. If adopted they would, among other things:
- - Explicitly require independent review and verification of AI (and other technology) outputs.
- - Clarify that “reveal” under Rule 1.6 includes exposing confidential information to AI systems that create a substantial risk of inconsistent use.
- - Require verification that cited authorities exist and are accurate before submission to a tribunal (including AI-assisted citations).
- - Require managerial lawyers to establish internal AI policies and to instruct/supervise nonlawyer assistants on ethical use of AI.
Legislation is moving on a parallel, faster track. Senate Bill 574, introduced by Senate Judiciary Chair Tom Umberg passed both houses unanimously and was ordered to engrossing and enrolling on August 31, 2026. As of September 2, 2026 it has been sent to Governor Newsom but has not yet been signed. The Governor typically has until September 30 to act on end-of-session bills.
If enacted, SB 574 would add a new Business and Professions Code section 6068.1 codifying attorneys' AI duties (protecting confidentiality, verifying accuracy, avoiding bias, considering disclosure for public-facing content), and would amend the state's existing sanctions statute, Code of Civil Procedure section 128.7, to make it explicit grounds for sanctions if a court filing contains any citation the responsible attorney has not personally read and verified — whether or not AI produced it.
Separately, the bill would add Code of Civil Procedure section 1282.1, barring arbitrators from delegating any part of their decision-making to generative AI, barring reliance on AI-sourced information outside the arbitration record without disclosure, and holding the arbitrator personally responsible for the award regardless of AI assistance used along the way.
The landscape is moving quickly. The Practical Guidance is the best current official map; the proposed rule comments and SB 574, if they become law, will convert much of that guidance into enforceable duties. Check the State Bar’s Ethics & Technology page and the official bill status for updates. - No Fair Procedure Doctrine for Staffing Company Physician Removalon September 3, 2026 at 7:49 AM
Kuljit S. Hundal is an emergency room physician who held medical staff membership at Adventist Health Medical Center Tehachapi in Kern County. He provided ER services at the hospital as an independent contractor under an agreement with Stallion Springs Medical Services, a medical corporation responsible for staffing and scheduling the hospital's emergency department. In March 2019, a patient posted a social-media complaint alleging Hundal yelled at her and twice told her to leave the ER after she refused lab work.
The hospital's chief of medical staff opened an investigation and directed Stallion Springs to pull Hundal from the ER schedule pending review. Stallion Springs complied, conducted its own investigation — including interviews with Hundal and coworkers — and then terminated its contract with him for cause.
Hundal sued the hospital, the hospital's medical staff, and Stallion Springs, alleging none of them gave him notice or a hearing before he was pulled from the schedule, in violation of Health and Safety Code section 1278.5, California's hospital peer review statute (Bus. & Prof. Code §§ 805–809.9), and the common law right of fair procedure, plus a claim for intentional infliction of emotional distress. The hospital and its medical staff later settled with Hundal and were dismissed from the case, leaving Stallion Springs as the sole remaining defendant on the fair procedure and emotional distress claims.
Stallion Springs moved for summary judgment or, alternatively, summary adjudication, arguing it owed Hundal no duty of fair procedure because it is not a "peer review body" under the statute and is not the kind of quasi-public organization to which the common law fair procedure doctrine applies. The Kern County Superior Court granted summary adjudication on the emotional distress claim but denied it on the fair procedure claim. The court gave no explanation for its ruling either during the unreported hearing or in the written order that Stallion Springs' own counsel was directed to prepare, and the Court of Appeal separately noted that omission fell short of the statement-of-reasons requirement in Code of Civil Procedure section 437c(g), though it found the omission harmless given its own de novo review.
In the published case of Stallion Springs Medical Services v. Superior Court (Kuljit S. Hundal, Real Party in Interest), No. F090834, Super. Ct. No. BCV-21-100159 (Cal. Ct. App., 5th Dist., Sept. 2026) the Court of Appeal, Fifth Appellate District, granted the Stallion Springs petition for writ of mandate. It directed the trial court to vacate its order denying summary judgment and to enter a new order granting Stallion Springs' motion for summary judgment in its entirety.
The panel explained that the common law right of fair procedure, as articulated by the California Supreme Court in Potvin v. Metropolitan Life Ins. Co. (2000) 22 Cal.4th 1060, protects against arbitrary decisions only by private organizations that are "quasi-public" in nature — entities such as labor unions, hospitals, and professional licensing bodies whose importance to the public, market power, or legislative recognition justify imposing due-process obligations beyond any contract. Stallion Springs argued the doctrine was displaced entirely in the physician-discipline context by California's peer review statute, relying on the Second District's recent decision in Asiryan v. Medical Staff of Glendale Adventist Medical Center (2024) 100 Cal.App.5th 947, which held the statute is the exclusive source of procedural protections for physicians subject to hospital peer review. The Fifth District found it unnecessary to resolve that broader question, deciding instead on narrower grounds that the fair procedure doctrine simply does not reach an entity like Stallion Springs as a matter of law.
The court reasoned that Stallion Springs, as a staffing company that contracted with physicians as independent contractors to fill hospital shifts, was not "tinged with public stature or purpose" the way a union, hospital, or licensing organization is, citing the Ninth Circuit's decision in Flaa v. Hollywood Foreign Press Assn. (2022) 55 F.4th 680, and this court's own decision in Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172.
It was undisputed that Stallion Springs had no power over whether Hundal retained his medical staff membership at the hospital — that determination belonged to the hospital alone — and that Stallion Springs was contractually obligated to remove him from the schedule once the hospital so directed. The court rejected Hundal's argument that Stallion Springs' role in staffing and scheduling amounted to "gatekeeping" authority sufficient to trigger fair procedure duties, noting Potvin itself requires that the organization's power be so substantial that removal significantly impairs a physician's ability to practice in an entire geographic area, and Hundal lost privileges at only one hospital.
The court distinguished Economy v. Sutter East Bay Hospitals (2019) 31 Cal.App.5th 1147, noting that case addressed a hospital's own liability for routing a peer review decision through an intermediary medical group, not the intermediary's independent duties, and that here there was no evidence Stallion Springs had any peer review policies of its own. Because Stallion Springs was never a "quasi-public" gatekeeper to the profession, the panel held, the trial court erred as a matter of law in denying summary adjudication of the fair procedure claim, entitling Stallion Springs to summary judgment on the entire case. - WCAB Affirms Lien Dismissal for Missing LC 4903.05(c) Declarationon September 2, 2026 at 12:57 PM
Angela Derby had a workers' compensation claim against the City of Los Angeles, permissibly self-insured. A lien claimant, Lien On Me, Inc., filed a lien in the case on November 14, 2012, seeking reimbursement for medical-legal expenses under Labor Code section 4903(b).
Because the lien was filed before January 1, 2013, it was subject to the lien activation fee established by Labor Code section 4903.06. The lien claimant did not file the declaration required by Labor Code section 4903.05(c), the "anti-fraud" declaration the Legislature added in 2016 (through SB 1160) requiring lien claimants to state, under penalty of perjury, the specific statutory basis authorizing their lien. Section 4903.05(c)(3) provides that failure to file that declaration "shall result in the dismissal of the lien with prejudice by operation of law."
At a March 25, 2026 hearing, the workers' compensation administrative law judge (WCJ) addressed whether the lien was subject to dismissal for failure to file the section 4903.05(c) declaration. The lien claimant argued it was exempt from the declaration requirement: because its lien predated January 1, 2013 and was therefore governed by the activation-fee provision of section 4903.06, it contended the separate declaration requirement of section 4903.05(c) simply did not apply to it. The WCJ rejected that argument, and the lien claimant petitioned the Appeals Board for reconsideration.
In the panel decision of Derby v. City of Los Angeles, ADJ3309119 (Cal. Workers' Comp. Appeals Bd., Aug. 2026) — the WCAB denied the lien claimant's petition for reconsideration, leaving the dismissal of the lien in place.
The panel, in an opinion authored by Commissioner Snellings, held the lien claimant's exemption argument failed because it misread the relationship between the two fee provisions. The declaration requirement of section 4903.05(c) and the activation fee of section 4903.06 were both enacted to combat fraud and frivolous filings in the lien system, not to create mutually exclusive tracks.
Relying on its own panel decision in Montelongo v. Gelson's Market (2022), the panel traced the legislative history of SB 1160, which described the declaration as an "anti-fraud measure" responding to press reports of more than $1 billion in fraudulent activity by medical providers exploiting the lien system, and which the Division of Workers' Compensation estimated involved roughly $600 million in liens — about 17% of all liens in the system — held by providers charged or convicted of fraud.
The Legislature, the panel emphasized, expressly intended the declaration requirement to apply to "all lien claimants," with section 4903.05(c)(1) governing liens filed after January 1, 2017 and section 4903.05(c)(2) governing those filed before that date.
The panel further rejected the premise that the two fees serve qualitatively different purposes. Quoting the Ninth Circuit's decision in Angelotti Chiropractic, Inc. v. Baker (9th Cir. 2015) 791 F.3d 1075, the panel explained that both the $150 filing fee for post-2013 liens and the $100 activation fee for pre-2013 liens were designed to provide a disincentive to file frivolous liens.
Because the two provisions share that anti-fraud, anti-frivolity purpose rather than exempting one class of liens from the other's requirements, the panel held it could not, and would not, upset the Legislature's clear intent that the declaration requirement reach all lien claimants.
The panel noted that several other Appeals Board panels have reached the same conclusion, including Carrillo v. Troon Golf Management (2025), Cornejo v. Sears Holding Corp. (2025), Hurst v. Kimco Staffing Services (2026), and Leshen v. State of California Highway Patrol (2026).
Because the lien claimant did not file the required declaration and was not exempt from doing so, its lien was subject to dismissal with prejudice by operation of law, and the panel denied reconsideration accordingly. - WCIRB Reports on Medical Service Cost Trends through 2025on September 2, 2026 at 12:57 PM
The WCIRB released Medical Service Cost Trends through 2025 tracking medical service costs across service years 2014 through 2025. Medical costs accounted for 52% of total loss payments in the system in 2025.California's workers' compensation medical costs rose a modest 5% in 2025, but the composition of that increase tells a more pointed story: the fastest growth is now concentrated in services that no fee schedule caps, in medical-legal activity rather than medical treatment, and in Southern California.
Medical paid per claim rose 5% in 2025, following a 10% jump in 2024. The 2025 increase decomposes into a 4% rise in paid per transaction (price) and a 1% rise in transactions per claim (utilization). The longer arc is more striking: between 2014 and 2019, paid per transaction rose 9% while transactions per claim fell 24%, producing a 17% net decline in paid per claim. Between 2020 and 2025 that reversed entirely, with paid per transaction up 33%, utilization down just 2%, and paid per claim up 29%. Notably, after a decade of decline, the number of medical service transactions per claim began rising in 2024 and continued across multiple service categories in 2025.
The service mix has also shifted meaningfully over the past decade. Physician Services remain the largest category at 48% of medical payments in 2025 (up from 45% in 2015), but Medical-Legal has climbed from 13% to 17% and Medical Equipment and Other Services from 9% to 13%, while Pharmaceuticals collapsed from 11% of payments in 2015 to just 2% in 2025, largely on the back of SB 863 and sharply reduced opioid prescribing. Inpatient fell from 12% to 10% and Outpatient from 9% to 8%.
Perhaps the report's most policy-relevant finding concerns services that fall outside fee schedule price caps. Their share of total medical payments rose from 12% in 2021 to 17% in 2025, while the share subject to a fee schedule slipped from 83% to 79%. More telling is the utilization trend: indexed to 2021, utilization of non-fee-schedule services reached 120 by 2025 while fee schedule service utilization sat flat at 99. In 2024 and 2025, non-fee-schedule services accounted for nearly 30% of all utilization growth across the entire medical system, despite representing a relatively small share of payments — and they carry substantially higher average payments per transaction than capped services.
These services cluster in two places. Within Medical Equipment and Other Services, the leading non-fee-schedule items are Interpreter services (HCPCS T1013) and Home Health Aide services (S9122). Within Physician Services, they are three unlisted procedure codes: Unlisted Physical Medicine (97799), Unlisted Special Services and Report (99199), and Unlisted Evaluation and Management (99499). In 2025, 58% of all non-fee-schedule payments fell in the Medical Equipment and Other Services category and 31% in Physician Services.
By service type, Medical-Legal (up 13% paid per claim) and Medical Equipment and Other Services (up 8%) were the largest contributors to 2025 cost growth, with cumulative trauma claims driving both. Copy Services, though only 1.5% of payments, grew 8%. Physician Services — the dominant 2024 driver at 12% growth — moderated to 4% in 2025. Inpatient was flat and Pharmaceuticals declined 3%.
Medical-Legal costs have risen 47% per claim since 2021, when the new Medical-Legal Fee Schedule took effect. Early increases reflected higher reimbursement levels; more recent growth is almost entirely utilization, with services per claim up 30% since 2021 and rising another 12% in 2025 alone. Comprehensive evaluations account for 68% of medical-legal payments but only 45% of services, at $3,334 paid per service in 2025; supplemental evaluations make up 31% of services but 16% of payments, at $1,176 each. Additional record review costs — charges for reviewing records beyond the 2021 fee schedule's page limit — have risen 14% per review since 2021 and now attach to roughly one-third of all medical-legal evaluations.
The cumulative trauma link is explicit. Indexed to 2014, medical-legal services per claim on CT claims reached 189 by 2024, versus 110 for non-CT claims, while paid per service grew at nearly identical rates for both (127 and 130). In other words, the medical-legal cost problem is a CT claims volume problem, not a pricing problem.
The single most dramatic trend in the report involves a category that accounts for just 3.6% of all medical payments. Interpreter services paid per claim has risen 714% since 2014 and 141% since 2020 alone — the fastest-growing service category over the past five years. Both components contributed: paid per transaction up 25% since 2020 and transactions per claim up 93%. Interpreter services are now the second-largest component within Medical Equipment and Other Services at 27% of that category's payments, up from 8% in 2015, having overtaken Durable Medical Equipment (down from 31% to 17%). WCIRB attributes the growth to the absence of any fee schedule, the fact that interpreter services are billed by service duration, and a rising share of CT claims involving interpreters — interpreter transactions per claim on CT claims hit an index of 589 by 2023 versus 460 for non-CT claims.
Home Health tells a related demographic story. Paid per claim rose 52% between 2020 and 2025, with no fee schedule governing the category. Injured workers over age 60 accounted for 51% of Home Health payments in 2025, compared with 26% of payments across all medical services — and up from 35% of Home Health payments in 2015, a shift WCIRB links to an aging workforce.
Southern California drove statewide trends decisively. Overall paid per claim rose 8% there in 2025 versus 1% in Northern California, where declining average prices offset higher utilization. Medical-Legal is the sharpest split: costs rose 18% per claim in Southern California, driven by a 16% jump in services per claim, while falling 6% in Northern California as utilization dropped 7%. Southern California recorded 20.0 medical-legal services per 100 claims in 2025 against 10.8 in the north, a gap that has widened substantially since 2022.
The pattern holds across categories. Physician Services paid per claim reached $1,163 in Southern California versus $763 in the north, with transactions per claim 57% higher. Physical Medicine paid per claim was $290 versus $235, with visits per claim about 46% higher. Medical Equipment and Other Services showed the widest proportional gap at $283 versus $147, with utilization more than double.
Elsewhere in the report, Evaluation and Management (38% of Physician Services payments) and Physical Medicine (28%) together account for roughly 70% of physician spending, with E&M costs rising 6% per claim in 2025 almost entirely on price, reflecting a shift toward higher-complexity office visits. Inpatient surgical payments per episode fell from $34,854 in 2021 to $24,205 in 2025 even as surgical episodes per 1,000 claims rose, narrowing the gap with non-surgical episodes. WCIRB will host a Research Forum webinar on the report, "Behind the Numbers: Medical Cost Trends through 2025," on September 23, 2026.