- Newsom Orders Feasibility Study of Mandating AI Kill Switchon September 21, 2026 at 1:45 PM
Gov. Gavin Newsom signed Executive Order N-9-26 on Friday, September 18, directing a state agency to speed up California’s new independent AI-auditor programs and to report by November 16 on whether state law should require a “kill switch” for the most advanced AI models. The order does not itself impose requirements on AI developers. It sets deadlines for the Government Operations Agency, asks for recommendations, and states that it creates no enforceable rights or benefits. Any new mandate would require changes to state law.
The order accelerates two statutory programs. It does not name the bills, but Government Technology reported that the code sections it cites correspond to SB 813 (McNerney) and AB 1405 (Bauer-Kahan), both approved September 9. According to the governor’s press release, SB 813 creates a framework for certifying independent verification organizations that assess AI systems and models for safety risk, and AB 1405 creates a state registry of AI auditors with independence, transparency and integrity standards. The order gives the agency until May 1, 2027, to develop application requirements and criteria for verification organizations under Government Code § 8898.1, and until December 1, 2027, to complete the registry work under Government Code § 11549.82(a) and begin the actions in subdivision (b). Government Technology reported that those dates pull forward original statutory deadlines of January 1, 2028, and January 1, 2029.
Separately, the order asks the agency, working with the Governor’s Office of Emergency Services and unnamed national experts, to submit recommendations to the governor’s office by November 16, 2026. The recommendations must address the technical feasibility and likely efficacy of at least four amendments to state AI safety law. The first would require the largest frontier developers to embed designated independent verification organizations onsite in their labs for periodic audits and evaluations. The second would require independent verification of the safety frameworks, transparency reports and risk assessments those developers already must file under SB 53, the 2025 frontier-AI transparency law. The third would require a kill switch for frontier models, with its effectiveness verified on an ongoing basis by an independent verification organization. The fourth would expand the definition of reportable “critical safety incidents” to include loss-of-control incidents. The order does not say whether the recommendations will be made public.
Coverage has not been uniform about what the order does. The governor’s office described it as advancing the creation of a kill switch, and Fox Business reported that it requires frontier developers to build one. The text, however, asks only whether such a requirement would be technically feasible and effective. In a video message reported by Fox Business, Newsom himself acknowledged that the concept is still taking shape and means different things to different people.
The order’s recitals cite reports of apparent attempts to use AI to create bioweapons and of AI agents defeating company security protocols and hacking other companies, in some cases undetected for months. The order names no companies or incidents and attaches no evidence. The governor’s press release refers to the “Hugging Face attack,” and a Yahoo News report describes a July breach of that platform by autonomous agents built on OpenAI models that escaped a testing environment. Those details come from press accounts, not from the order. The order also faults federal leaders for inaction, and the governor’s office called on Congress and President Trump to adopt California’s framework as a national floor.
Reaction has followed political lines and, in places, technical ones. State Sen. Scott Wiener, who authored the vetoed 2024 kill-switch bill and co-led SB 53, issued a statement of support, calling the order a challenge to lawmakers and saying the Legislature must follow with strong guardrails early next year. Politico, as carried by Yahoo News, reported that some in the tech industry oppose kill switches as technically infeasible, that LinkedIn co-founder Reid Hoffman voiced support for the idea at a Politico event this week, and that Newsom had said he was weighing further options, including a special legislative session. The Washington Examiner reported that critics contend existing product-liability rules already address the risks and that the push for new regulation is an orchestrated effort that could let large technology companies form a cartel and suppress competition. On the federal side, Fox Business reported that Sen. John Kennedy’s attempt to advance a federal kill-switch bill was blocked this week by Sen. Rand Paul, who cautioned against hastily regulating an entire industry.
For employers and insurers, the order’s significance is indirect. Its subject is the developers of frontier AI models, and it does not address employer use of AI, workers’ compensation or insurance. But California is building a certified third-party audit structure around AI, and the November recommendations will show how far the state may go in requiring outside verification of safety claims behind models that some workplace tools may rely on. The order also sits alongside the governor’s May 21 workforce order, which directs agencies to study AI-driven job disruption and to recommend revisions to the state WARN Act within 180 days. The next fixed date is November 16.
- Physician Must Exhaust Hospital Peer Review Before Litigationon September 21, 2026 at 1:45 PM
Dr. Sunil Sujan, a board-certified internist, practiced at Corona Regional Medical Center (CRMC) from 2010 to 2016. He alleged that three rival physicians on staff, competing with his growing practice, orchestrated a campaign to file dozens of false internal "MIDAS" incident reports accusing him of being unresponsive to nursing staff, with the goal of getting him censured or suspended.
After a patient under Sujan's care died of heart failure in June 2016, CRMC's medical executive committee (MEC), chaired by one of the rival physicians, summarily suspended his admitting privileges without, Sujan alleged, any real investigation. Facing the prospect that a suspension lasting 14 days or longer would have to be reported to the California Medical Board and the National Practitioner Data Bank, Sujan signed a lengthy settlement agreement to have his suspension lifted. The agreement did not fully exonerate him: it recited CRMC's continuing concerns about his patient care and record-keeping and imposed a dozen onerous conditions, including mandatory training courses, a monitored backup-physician arrangement, and a mentor who would report on him to the MEC every 90 days.
Sujan later left CRMC voluntarily; when a prospective employer, Good Samaritan Hospital, sought to verify his employment history in 2017, CRMC allegedly conditioned its cooperation on Sujan releasing it from liability, jeopardizing the job offer. Sujan sued CRMC and the three physicians for conversion, interference with economic relations and contract, conspiracy, defamation, and intentional infliction of emotional distress; his wife, Nina Patel, brought a derivative loss-of-consortium claim.
The Riverside County Superior Court granted summary judgment for the defendants on the interference claims, finding Sujan had failed to exhaust the administrative remedies available to him under CRMC's medical staff bylaws before suing for damages, as required by Westlake Community Hospital v. Superior Court (1976) 17 Cal.3d 465. The court rejected Sujan's argument that pursuing an administrative hearing would have been futile, distinguishing Joel v. Valley Surgical Center (1998) 68 Cal.App.4th 360, because — unlike the physician in Joel, who received full, unconditional reinstatement in exchange for withdrawing his hearing request — Sujan's settlement was heavily conditioned and did not represent the maximum relief he could have obtained administratively. The court entered judgment for the defendants and later ruled, based on a fee provision in CRMC's bylaws making a physician who sues without exhausting his remedies liable for the hospital's "full costs, including legal fees," that defendants could recover attorney fees from Sujan, though not from Patel, who never signed the bylaws. The court also found defendants' evidence insufficient to support fees for five prior law firms that had represented them, and it reduced the hourly rates claimed by two of their current partners to align with Riverside County market rates, ultimately awarding $313,830 of the $892,417 defendants had requested. Both sides appealed the fee ruling; Sujan also appealed the underlying summary judgment.
In the published case of Sujan et al. v. UHS Corona, Inc. et al., No. E084185 (Cal. Ct. App., 4th Dist., Div. 2, Sept. 2026). The Court of Appeal affirmed the judgment and the postjudgment attorney fees order in full, rejecting both Sujan's appeal and the defendants' cross-appeal.
On exhaustion, the court held Sujan bore the burden of proving the narrow futility exception and failed to meet it. His settlement, unlike the one in Joel, restated CRMC's ongoing concerns about his competence and imposed a dozen substantive conditions rather than restoring him unconditionally; it therefore did not give him "the maximum relief" an administrative hearing could have provided. The court also found Sujan offered no evidence — only his own declaration — to support his claim that a report to the Medical Board would have been professionally "ruinous," distinguishing the Supreme Court's decision in Mileikowsky v. West Hills Hospital & Medical Center (2009) 45 Cal.4th 1259, and finding persuasive an unpublished federal decision, Ennix v. Stanten (N.D. Cal. 2007), which similarly held that a settlement short of full reinstatement does not excuse exhaustion.
On fees, the court held Business and Professions Code section 809.9, which allows fee awards only when a lawsuit challenging a reportable peer-review action was frivolous or in bad faith, did not apply, because Sujan's suspension lasted less than 14 days and was therefore never required to be reported under section 805. That left CRMC's one-sided contractual fee provision to govern. The court found the provision procedurally unconscionable, as a non-negotiable term of staff bylaws, but not substantively unconscionable, reasoning under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, that the policies behind the exhaustion doctrine — preserving hospital expertise, mitigating damages, and promoting judicial economy — reasonably justified charging fees only against physicians who bypass peer review and then lose.
On the cross-appeal, the court agreed CRMC could not recover fees from Patel, since her loss-of-consortium claim was not based on the bylaws and, under the reciprocity principles of Civil Code section 1717 (which only applies to contract claims), CRMC would not itself have owed her fees had she won. The court also held defendants forfeited any challenge to the exclusion of their prior attorneys' billing records by failing to request oral argument or seek reconsideration after the court's tentative ruling flagged the issue, and, independently, agreed the supporting declaration was inadmissible hearsay as to work it did not personally witness. Finally, the court found no abuse of discretion in capping the hourly rates of defendants' Los Angeles-based partners at Riverside County market rates, noting defendants offered no evidence that competent local counsel was unavailable.
- DOL Spells Out Mental Health Parity Enforcement Prioritieson September 17, 2026 at 8:20 AM
In simple terms, "mental health parity" is a federal requirement that employer health plans and insurers cover mental health and substance use disorder care on the same terms as they cover physical health care. That means comparable co-pays and deductibles, but it also means comparable rules behind the scenes, like how strict a prior-authorization process is or how a plan decides which providers count as "in network." A plan cannot make it noticeably harder to get therapy or addiction treatment covered than it is to get a knee surgery covered. "Compliance" is the ongoing work employers, insurers, and their administrators do to prove, on paper and in practice, that those rules really do match up.
The U.S. Department of Labor's Employee Benefits Security Administration published two new documents on September 8, 2026, that together reshape how the agency says it will police mental health parity compliance: Field Assistance Bulletin No. 2026-03, which sets out "guiding principles" for enforcing the nonquantitative treatment limitation (NQTL) comparative-analysis requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA), and an updated Self-Compliance Tool plan sponsors and issuers can use to test their own coverage against the law.
The bulletin is an internal EBSA policy memorandum, from Assistant Secretary Daniel Aronowitz to the agency's enforcement staff, and by its own terms creates no enforceable rights for plans, issuers, or participants. But it is the clearest public signal yet of how EBSA intends to direct its MHPAEA investigations following an 18-month stretch of regulatory limbo, and it follows through on an enforcement priority the agency flagged on January 15, 2026, when it overhauled its national enforcement projects for fiscal year 2026 to include barriers to mental health and substance use disorder (MH/SUD) benefits alongside cybersecurity, surprise billing, and benefit distributions.
Some background explains why EBSA felt the need to clarify things. In September 2024, the Departments of Labor, Health and Human Services, and the Treasury issued a final rule under MHPAEA, as amended by the Consolidated Appropriations Act, 2021 (CAA), adding new requirements for the NQTL comparative analyses plans and issuers must prepare (the 2024 Final Rule, 89 Fed. Reg. 77,586). Four months later, the ERISA Industry Committee sued in the U.S. District Court for the District of Columbia, arguing the rule was arbitrary and capricious and exceeded the agencies' statutory authority. Then came Executive Order 14219, directing agencies to identify and de-prioritize enforcement of regulations seen as imposing outsized compliance burdens (90 Fed. Reg. 10,583). In May 2025, the three Departments responded to both developments with a formal nonenforcement statement, agreeing not to enforce the new provisions of the 2024 Final Rule until the litigation concludes, plus an additional 18 months, while stressing that MHPAEA's underlying statutory obligations remain fully in effect.
That litigation has since moved further away from the 2024 Final Rule rather than toward defending it. According to a joint status report the Departments and the ERISA Industry Committee filed with the court in late March 2026, the Departments have now decided that, rather than defend the rule as written, they will issue a new proposed rule with anticipated substantial revisions to the challenged provisions, with a notice of proposed rulemaking targeted for no later than December 31, 2026 (see the March 30, 2026 joint status report in ERISA Indus. Comm. v. Dep't of Health & Hum. Servs., No. 1:25-cv-00136 (D.D.C.)). In the meantime, plans and issuers are left navigating NQTL compliance under the pre-2024 regulatory framework, without a finalized replacement rule.
It is against that backdrop that the new bulletin narrows EBSA's enforcement focus to three categories the agency says carry the highest potential for participant harm. The first is separate treatment limitations, including blanket exclusions of MH/SUD treatments where comparable medical or surgical treatments are covered; EBSA says it will prioritize wholesale exclusions but may still pursue narrower ones, especially in response to complaints. The second is medical necessity standards and review, with particular attention to prior authorization, concurrent review, and retrospective review; plans may rely on proprietary clinical guidelines, the bulletin notes, but must make them available on request during investigations and to participants. The third is network adequacy, with emphasis on provider admission standards and reimbursement methodologies, on the theory that a thin MH/SUD network pushes participants toward costlier out-of-network care. EBSA says it may still investigate other categories of NQTLs as complaints arise, but these three will get the bulk of its attention.
The companion Self-Compliance Tool, a roughly 40-page document plan sponsors, plan administrators, issuers, and state regulators can use as a self-audit checklist, is required to be updated every two years under Section 13001(a) of the 21st Century Cures Act. This edition walks through MHPAEA's six benefit classifications, the "substantially all" and "predominant" tests used to evaluate financial requirements and quantitative treatment limits, and a four-step method for analyzing NQTLs: identifying the limitation, the factors behind it, the evidentiary sources for those factors, and whether the whole process is applied comparably to MH/SUD and medical/surgical benefits, both on paper and in practice. It also folds in DOL's existing guidance on medication-assisted treatment for opioid use disorder and eating-disorder benefits, both of which the tool says remain subject to MHPAEA's parity requirements notwithstanding the rulemaking uncertainty.
For insurers and self-funded plans specifically, the tool's most operationally significant addition may be Appendix II, a framework for benchmarking provider reimbursement rates against Medicare as a way of self-testing network-related NQTLs before DOL auditors do it for them. The tool flags, as possible warning signs warranting further review, MH/SUD reimbursement rates set at or near Medicare levels while medical/surgical rates run well above Medicare, and psychiatrists reimbursed less than other physicians for identical evaluation-and-management billing codes. The tool is explicit that outcomes and denial-rate disparities are not, by themselves, proof of a violation, but it treats them as red flags that can trigger closer scrutiny of the underlying process. The Self-Compliance Tool also complements benchmarking resources the National Association of Insurance Commissioners has developed for state regulators and issuers.
Employee-benefits practitioners who reviewed the bulletin in the days after its release were, by and large, measured about how much it actually changes. One law firm client alert characterized the bulletin as reaffirming existing enforcement priorities rather than establishing new compliance standards, and separately noted that neither the bulletin nor the tool fills the gap left by the 2025 nonenforcement policy on what a compliant NQTL comparative analysis must contain, since a new final rule remains pending. For employers and issuers, the practical takeaway is that while the 2024 Final Rule's new provisions remain unenforced pending litigation and rulemaking, MHPAEA's statutory NQTL comparative-analysis obligations under the CAA are still live and enforceable, and EBSA has now told the regulated community, in some detail, where it plans to look first.
This summary is for general informational purposes only. Readers should consult the full Field Assistance Bulletin and Self-Compliance Tool, and the underlying rules and court filings linked above, for complete details and methodology and consult with legal counsel before making compliance decisions.
- FDA Approves First Motion-Preserving Alternative to Spinal Fusionon September 17, 2026 at 8:20 AM
Low back pain is the single most common driver of lost work time and one of the most contested diagnoses in the workers' compensation system, and spinal fusion surgery — the procedure most often authorized as a last resort — remains among the most expensive, slowest-recovering, and most heavily litigated treatments claims professionals encounter. That landscape shifted in mid-December 2025, when the U.S. Food and Drug Administration granted full premarket approval to the DIAM Spinal Stabilization System, the first posterior, motion-preserving implant cleared in the United States as an alternative to fusion for chronic low back pain caused by degenerative disc disease.
The device, manufactured by Companion Spine, received FDA approval on the strength of a prospective, randomized, multicenter Investigational Device Exemption trial with an average follow-up of 11.5 years, according to the company's December 15, 2025 announcement. Notably, the FDA granted the approval without requiring a post-approval confirmatory study, a step the agency reserves for applications it considers to be supported by unusually strong clinical evidence.
To understand why this approval matters, it helps to understand the treatment gap it is meant to fill. When a worker develops chronic low back pain from degenerative disc disease that does not resolve with physical therapy, medication, and injections, the traditional next step has long been spinal fusion — permanently joining two or more vertebrae together with screws, rods, and bone graft to eliminate motion at the painful segment. Fusion can be effective, but it is also invasive, requires a lengthy recovery, eliminates natural spinal motion at the treated level, places additional mechanical stress on adjacent vertebrae, and forecloses future treatment options if it fails. Many patients with moderate symptoms have historically been left in a gap: too impaired for continued conservative care, but not considered good candidates for the invasiveness of fusion.
The DIAM system is designed for that gap. It is an H-shaped spacer made of silicone and polyester that is implanted between the spinous processes — the bony protrusions at the back of each vertebra — at a single level from L2 to L5. Secured with polyester tethers and titanium crimps, the device is intended to offload stress from the painful disc and posterior joints while preserving natural motion at the treated segment, rather than eliminating it. The procedure is performed on an outpatient basis through a minimally invasive posterior approach, and because it does not fuse the spine, it is designed to be removable and to leave future surgical options, including fusion, open if needed. The implant itself is not new internationally: more than 250,000 units have been implanted in over 200,000 patients across 76 countries since 1997, but this approval marks its first full U.S. clearance after a 20-year regulatory path that included a 2016 FDA advisory panel rejection over insufficient trial data.
The pivotal trial measured a composite clinical success endpoint at 24 months — combining pain relief, functional improvement, and the absence of device-related reoperation — and found a 67.4 percent success rate for DIAM patients compared with 11.9 percent for patients who continued non-operative care, a difference the company describes as showing a Bayesian posterior probability of superiority exceeding 0.999. Secondary measures reported by Companion Spine included a 77 percent responder rate on the Oswestry Disability Index and an 83.2 percent back pain responder rate at 24 months, with durability holding up over the long term: among the long-term follow-up cohort tracked for an average of 11.5 years, 86.4 percent maintained both disability and pain responder status, and 87 percent of patients said they would choose the same treatment again more than a decade later.
On safety, the company reported a 1.6 percent rate of device-related serious adverse events, no reported device migrations or mechanical failures through 11.5 years of follow-up, and a 95.7 percent freedom-from-device-removal rate at the same interval. Notably, according to the trial investigators quoted in the FDA announcement, none of the study patients who received the DIAM implant required conversion to spinal fusion during the study's long-term follow-up period. Independent verification of these figures beyond the company's own release and the underlying FDA premarket approval documentation will accumulate as the device enters broader U.S. use and registry data develops, and claims professionals should treat single-manufacturer clinical trial results with the same scrutiny they would apply to any sponsor-funded study, while recognizing that the FDA's decision to waive a post-approval confirmatory trial reflects the agency's own confidence in the existing evidence base.
Because DIAM is indicated only for patients with single-level lumbar degenerative disc disease who remain symptomatic after at least six months of non-operative care, utilization reviewers will need to confirm that conservative treatment was genuinely exhausted before a request reaches this stage — the same threshold question that already governs fusion requests, but now with a second surgical option in the mix rather than a binary choice between continued conservative care and fusion.
DIAM enters the U.S. market at a moment when spine surgeons and payers alike have been rethinking the "fusion-first" default for degenerative disc disease, a theme that was prominent at the 2026 annual meeting of the International Society for the Advancement of Spine Surgery, where motion-preserving technologies and their long-term economic sustainability were a central focus. Whether DIAM becomes a meaningful presence in workers' compensation treatment plans will depend on real-world outcomes as more U.S. surgeons gain experience with the device, on how commercial and workers' compensation payers approach coverage and fee-schedule classification for a device without an established coding history in this country, and on whether the favorable trial-population results hold up in the more medically and psychosocially complex population typical of workers' compensation claims. Claims professionals reviewing lumbar spine treatment requests over the coming months should ask whether DIAM or a similar motion-preserving device was considered, and utilization review protocols may need updating as this option becomes more familiar to treating physicians and reviewers alike.
- Transnational Organization of Fake Attorneys Defraud 400 Victimson September 16, 2026 at 11:07 AM
A key organizer of a $36 million transnational fraud ring that posed as attorneys to swindle elderly Americans out of timeshare "settlement" money pleaded guilty September 14 to conspiracy to commit money laundering, the U.S. Attorney's Office for the Eastern District of California announced. Juliet Mora, 42, formerly of Hayward, California and now living in Nicaragua, admitted to helping run a scheme that stole from more than 400 mostly elderly American victims.
According to court documents, members of the organization posed as attorneys and contacted elderly timeshare owners and past fraud victims, telling them they were entitled to restitution or settlement payments. Believing they were dealing with real lawyers, victims signed fake representation agreements and bogus non-disclosure agreements, then paid fees and wired money to shell companies the organization's U.S.-based members controlled. Members allegedly evaded banks' anti-money-laundering safeguards by misrepresenting what the transactions were for, repeatedly closing and reopening accounts flagged for suspicious activity.
Mora joined the scheme in August 2021, prosecutors said, maintaining shell companies that took in more than $1.5 million in victim funds; investigators traced roughly $2.7 million in stolen funds to accounts she controlled. She later relocated to Nicaragua and became an organizer, directing U.S.-based co-conspirators on receiving and moving victim money, setting up shell companies, and preparing fraudulent legal paperwork, and used fake paralegal identities to communicate with victims directly. She was arrested in December 2025 after arriving at Boston Logan International Airport on a flight from Panama, on a second superseding indictment. She faces up to 20 years in prison and a fine of up to $500,000 or twice the amount laundered, whichever is greater, when sentenced December 14 by U.S. District Judge Jennifer L. Thurston.
The plea is the latest development in a case that has played out across several countries over the past year. The scheme first became public in October 2025, when the Eastern District's U.S. Attorney's Office, in a case federal investigators dubbed "Operation Silver Shores," announced the indictment of more than 20 people and the arrest of 15 defendants across California, Texas, and Florida. At that point, investigators had identified at least 372 victims and losses exceeding $30 million, with more than $1.5 million in victim funds seized. FBI Sacramento Special Agent in Charge Sid Patel said at the time that some of the arrested defendants were tied to Norteño-affiliated gang members moving into organized financial crime; local reporting on the arrests, including by the San Joaquin Valley Sun, named several Central Valley defendants taken into custody that day.
Both the September plea agreement and the original indictment describe the fraud's reach extending well beyond U.S. borders. Investigators say the organization operated "out of the United States and several countries in Latin America." According to Tuesday's release, Nicaraguan authorities, coordinating with the U.S. State Department's Diplomatic Security Service, arrested one of the case's central figures, Marlon Solis Bonilla, in July 2025 and transferred him to FBI custody in Houston. And in August 2026, Mexican authorities arrested three more defendants, Julian Jauregui, Sergio Jauregui, and Eduardo Navarro, in Guadalajara, an operation the release credits to the FBI's legal attaché office in Mexico City working with the U.S. Marshals Service and Jalisco state security forces; all three were processed by Mexican immigration authorities and removed to the United States. Mexican outlet Crónica separately reported that Jalisco's cybercrime police, working from a U.S. Marshals tip, captured three men with the same first names in coordinated raids in Guadalajara and Zapopan in early September, describing the outstanding October 2025 California warrants as involving cryptocurrency-related wire fraud and money laundering — a somewhat different characterization of the underlying conduct than the elderly-timeshare fraud described in the DOJ release, which readers should note. Three defendants in the case remain at large, according to the U.S. Attorney's Office.
The case adds to a rapidly growing list of federal actions this year against transnational networks that use fake attorneys and phony government officials to target elderly Americans, particularly former timeshare owners. In August 2026, the Justice Department and FBI announced a much larger set of indictments against leaders of Mexico's Jalisco New Generation Cartel (CJNG), accusing cartel-linked call centers of defrauding more than 6,000 Americans out of roughly $400 million between 2019 and 2023 through fake timeshare resale and settlement schemes, according to Fox News' coverage of the announcement. FBI Director Kash Patel said at that press conference that the bureau had carried out more than 30 international transfers of custody across 15 countries in July 2026 alone as part of its broader elder-fraud enforcement push. There is no indication in the available court filings or press materials that the CJNG-linked case and the Mora/Operation Silver Shores case are the same organization, but both illustrate a pattern federal officials say has become common: elder-fraud networks that blend U.S.-based money-laundering cells with leadership and call-center operations based in Mexico and Central America.
The Mora investigation was conducted by the FBI, IRS Criminal Investigation, and the Bakersfield Police Department, with assistance from the U.S. Postal Inspection Service and the Truckee Police Department. Assistant U.S. Attorneys Cody S. Chapple and Arelis M. Clemente are prosecuting the case.
- 12 Arrested in San Diego $10M "Ghost Daycare" Fraud Sweepon September 16, 2026 at 11:07 AM
Federal, state and local agents arrested all twelve defendants in a single early-morning sweep Thursday, unwinding a scheme prosecutors say siphoned more than $10 million meant to help low-income San Diego families pay for childcare into a network of "ghost" home daycares that billed for children who were never actually in care. The U.S. Attorney's Office for the Southern District of California announced the charges Tuesday, alongside a coordinated operation involving more than 250 federal, state and local law enforcement officers who executed 12 search warrants at homes across San Diego that were licensed as daycare facilities.
According to prosecutors, each of the 12 federal complaints describes a similar scheme, even though the cases are legally unrelated to one another. The Department of Health and Human Services funds childcare subsidies for low-income California families, and in San Diego County those subsidies are administered locally by the County of San Diego, Child Development Associates (CDA), and the YMCA. To get paid, a licensed home daycare provider submits monthly attendance records, signed by both provider and parent under penalty of perjury, documenting the dates and times each child was actually in care. Prosecutors allege the twelve defendants instead submitted false attendance records for children who were not present, falsely certified the records as accurate, and collected government payments they were not entitled to.
IRS Criminal Investigation Chief Jarod Koopman said tracing the money "revealed twelve ghost daycare operations billing for children who were never present," calling it "not a victimless crime" because it "deprived working parents of critical support." Homeland Security Investigations Assistant Director Michael Krol and HHS Office of Inspector General Special Agent in Charge Robb R. Breeden likewise framed the case as an attack on programs meant to serve vulnerable families. U.S. Attorney Adam Gordon put it more bluntly: "Today is a bad day for home daycare fraud. These fraudsters may have criminally gamed the system before. But today, the game is over."
The twelve defendants named in the U.S. Attorney's Office's release, each charged in a separate criminal complaint, are: Fosiya Mohamoud, 50, of El Cajon (case 26-mj-05074); Abdulrahman Alawad, 25, of El Cajon (26-mj-05174); Zetun Abdi, 43, of San Diego (26-mj-05184); Ikramullah Mohmmand, 25, of El Cajon (26-mj-05185); Khetam Haouash, 37, of El Cajon (26-mj-05187); Khatera Hashimi, 39, of El Cajon (26-mj-05188); Mariam Khamis, 42, of San Diego (26-mj-05189); Mohamad Alawad, 29, of San Diego (26-mj-05190); Mazin Alawad, 22, of San Diego (26-mj-05191); Turkiya Alawad, 63, of San Diego (26-mj-05194); Zaryab Daudzai, 25, of El Cajon (26-mj-05195); and Cezar Yaqoob, 36, of El Cajon (26-mj-05215). Four defendants share the Alawad surname, suggesting at least one family was allegedly involved in the scheme across multiple daycare licenses, though the release does not specify the nature of any relationship between them.
Notably, Assistant Attorney General Colin M. McDonald, who spoke at Tuesday's announcement, said the case marks "the first charges alleging this type of fraud since the formation of the National Fraud Enforcement Division." That division is itself new: President Trump ordered its creation in January 2026 as part of a governmentwide task force on fraud chaired by Vice President JD Vance, and the Senate confirmed McDonald, a longtime Southern District of California prosecutor, to lead it by a 52-47 vote in March 2026, according to an Associated Press report carried by WTOP. The division absorbed the Justice Department's Tax Section, Health Care Fraud Unit, and Market, Government, and Consumer Fraud Unit that April, per a client alert from law firm Ropes & Gray describing McDonald's August 2026 enforcement-priorities memo. Its creation followed intense scrutiny of a much larger Minnesota daycare fraud scandal, in which state officials and prosecutors have pursued fraud allegations tied to more than $9 billion across 14 federally funded programs, including daycare providers enrolled in the state's Child Care Assistance Program.
Tuesday's case is not the Southern District of California's first brush with home childcare fraud. In 2023, the same office charged four people, including the president of a University Avenue vocational school, with a scheme that used false employment and school-enrollment verifications to fraudulently draw more than $3.7 million from the same CDA/YMCA-administered subsidy program; that case ended in prison sentences and a $3.7 million restitution order in 2024, according to the U.S. Attorney's Office's original charging announcement. Tuesday's dollar figure, at more than $10 million, is nearly three times the size of that earlier case.
- Hyundai and Kia Face 200 Carriers' California Subrogation Jurisdictionon September 15, 2026 at 9:01 AM
In 2020, a social-media trend nicknamed the "Kia Boyz" popularized a method for stealing certain Hyundai and Kia vehicles in seconds, by exploiting the fact that many of those vehicles lacked an engine immobilizer, a standard anti-theft device. Thefts of Hyundai and Kia vehicles surged nationwide. Lawsuits filed across the country were consolidated into a multidistrict litigation in the Central District of California, organized into three tracks: subrogation claims, consumer claims, and claims by governmental entities. This appeal concerns the subrogation track, brought by roughly 200 insurance companies that paid claims to policyholders whose Hyundai or Kia vehicles, model years 2011 through 2022, were stolen or damaged.
The insurers sued not only the U.S. distributors, Hyundai Motor America and Kia America, but also the Korean parent manufacturers, Hyundai Motor Company (HMC) and Kia Corporation (KC). They alleged the Korean entities designed standard-model vehicles without engine immobilizers specifically for the U.S. market — reserving that anti-theft feature for higher trim packages — even though the same models sold with immobilizers standard in Canada and other markets. Plaintiffs also alleged the Korean entities shipped thousands of vehicles through California's ports: more than 70 percent of HMC's U.S.-bound shipments and about 77 percent of KC's, according to bills of lading plaintiffs submitted.
The Korean entities moved to dismiss for lack of personal jurisdiction, submitting declarations from their American subsidiaries' sales executives stating that vehicles are sold "FOB Origin" in Korea — meaning title and risk of loss pass to the American subsidiaries at the point of shipment — and that the subsidiaries, not the Korean entities, handle importation, port logistics, and distribution once the vehicles reach the United States. Plaintiffs did not submit any competing declarations of their own, relying instead on their complaint's allegations. The district court (Judge James V. Selna) dismissed the claims against the Korean entities, concluding the shipping records did not show the Korean entities intentionally aimed their conduct at California and that, in any event, plaintiffs had not shown their claims arose from California-related conduct. The court also denied plaintiffs leave to amend and denied their request for jurisdictional discovery, then entered a Rule 54(b) final judgment dismissing the Korean entities from the subrogation track.
In the published case of In re: Kia Hyundai Vehicle Theft Marketing, Sales Practices, and Products Liability Litigation: Insurance Subrogation Appeal, No. 24-5219 (9th Cir. Sept. 2026). The Ninth Circuit reversed the dismissal and remanded for further proceedings.
The panel first held the district court properly disregarded plaintiffs' complaint allegations that the Korean entities controlled U.S. distribution, since those allegations were directly contradicted by the subsidiaries' declarations and plaintiffs offered no competing evidence of their own. Turning to the merits, the panel applied the Ninth Circuit's three-part test for specific personal jurisdiction over non-resident defendants, tracing its due-process roots to International Shoe Co. v. Washington, 326 U.S. 310 (1945): the defendant must have purposefully directed activities at, or availed itself of, the forum; the claims must arise out of or relate to those forum contacts; and the exercise of jurisdiction must be reasonable.
On the first element, the panel held the Korean entities' contacts were not the kind of passive "stream of commerce" placement that the Supreme Court held insufficient in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987). Even though the Korean entities did not themselves sell vehicles in California, they were listed as shippers of record on thousands of shipments routed through California ports, and nothing in the record suggested a distributor independently chose that routing. Combined with evidence the Korean entities designed their vehicles without immobilizers specifically for the U.S. market, the panel found this sufficient "purposeful availment and direction," rejecting the Korean entities' argument that only California-specific (as opposed to nationwide) targeting could support jurisdiction. The panel relied heavily on its own 2025 en banc decision in Briskin v. Shopify, Inc., 135 F.4th 739 (9th Cir. 2025), which held that "differential targeting" of a particular state is not required, and on the Supreme Court's decision in Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. 351 (2021), which held that serving a nationwide market does not immunize a company from jurisdiction in any particular state where its products cause injury.
On the second element, the panel held plaintiffs' claims arose from the Korean entities' California contacts because their injuries were caused by vehicles the Korean entities shipped through California's ports. The panel distinguished its earlier decision in Yamashita v. LG Chem, Ltd., 62 F.4th 496 (9th Cir. 2023), where a plaintiff failed to allege that the specific battery that injured him had been shipped through the forum port; here, given that the large majority of the Korean entities' U.S. shipments passed through California, it was reasonable to infer many of the vehicles at issue did too.
The panel left the third element — whether exercising jurisdiction would ultimately be "reasonable," a multi-factor test neither party had briefed on appeal — for the district court to resolve on remand, and did not reach whether the court abused its discretion in denying jurisdictional discovery.
- Sheriff Deputies' Built-In Overtime Counts Toward OCERS Pensionson September 15, 2026 at 9:01 AM
Under the County Employees Retirement Law of 1937 (CERL), an Orange County employee's pension is based in part on "compensation earnable," defined by Government Code section 31461 as average pay computed using the number of days "ordinarily worked by persons in the same grade or class of positions" at "the same rate of pay." Following a 2008 reorganization of the Orange County Sheriff's Department, deputies classified as deputy sheriff II were assigned to patrol, while jail operations were staffed by deputy sheriff I's and by deputy sheriff II's who had opted to remain in the jail. All deputies working exclusively in jail operations, regardless of rank, worked a "platoon schedule" of 80.5 hours every two weeks, which built in a half-hour of overtime known as "6FE" overtime.
Robert Szewczyk and Rodney Morikawa, deputy sheriff II's who worked in jail operations, retired in 2018 and asked the Orange County Employees Retirement System (OCERS) to include their 6FE overtime in their compensation earnable. OCERS denied the request, reasoning that most deputy sheriff II's work outside corrections and are not required to work the extra half-hour, so the 6FE time was not "ordinarily worked" by others in their grade or class. After an administrative hearing officer recommended granting Szewczyk's and Morikawa's appeals, the OCERS Board rejected that recommendation and reaffirmed the exclusion.
Szewczyk and Morikawa petitioned the Orange County Superior Court for writs of administrative mandamus and traditional mandamus to set aside the Board's decision. The trial court granted the petitions, finding that after the 2008 reorganization, deputy sheriff II's working in jail operations were treated as a separate grade or class from other deputy sheriff II's for purposes of the platoon schedule and 6FE overtime, and that the 6FE overtime was ordinarily included in the normal working hours for all deputies assigned to the jail. Relying on section 31461 and the California Supreme Court's decision in Alameda County Deputy Sheriff's Assn. v. Alameda County Employees' Retirement Assn. (2020) 9 Cal.5th 1032, the court ordered OCERS to include the 6FE overtime in Szewczyk's and Morikawa's compensation earnable, retroactive to their retirement dates with interest. OCERS's motion for reconsideration was denied, and OCERS appealed.
In the published case of Szewczyk et al. v. Orange County Employees Retirement System et al., No. G065386 (Cal. Ct. App., 4th Dist., Div. 3, Aug. 2026) the Court of Appeal affirmed the judgment in full, with respondents to recover costs on appeal.
The court explained that CERL does not define "grade or class of positions," and that the California Supreme Court in Alameda described the statutory phrase as "both very general and somewhat inscrutable." Applying Alameda's framework, the court looked to whether deputy sheriff II's in jail operations were truly "comparable" to deputy sheriff II's on patrol. It found they were not: only 30 of 630 deputy sheriff II's worked in the jail and the platoon schedule, jail assignment had historically been a matter of employee choice tied to the 2008 reorganization, and deputies in the jail had markedly different duties, unit-recruitment requirements, work locations, and schedules than those on patrol. The court also noted this conclusion aligned with a 2024 amendment to section 31461 allowing retirement systems to define "grade" by reference to shared job duties, schedules, and similar factors, even though that amendment was not yet effective when the trial court ruled.
OCERS argued the case was controlled by Stevenson v. Board of Retirement of Orange County Employees Retirement System (2010) 186 Cal.App.4th 498, in which the same appellate district held that a narcotics investigator's unusually heavy overtime did not make him part of a distinct "narcotics investigator" grade, since the department's own job descriptions and memoranda of understanding recognized only five broader classes. The court distinguished Stevenson on two grounds: the overtime there arose case-by-case "whenever it was necessary to complete an ongoing investigation," rather than being built into a fixed, regularly scheduled shift, and a 2022 Orange County Board of Supervisors resolution — issued after Stevenson — confirmed that the County's labor agreements had never bothered to formally designate grades for retirement purposes even where real differences in duties and schedules existed, undercutting the inference that the absence of a "custody deputy" job title meant no such grade could exist.
The court also rejected OCERS's argument that the trial court ignored section 31461's requirement that comparable employees share the "same rate of pay," clarifying that the trial court never found deputy sheriff I's and deputy sheriff II's in the jail formed a single combined grade; rather, it found deputy sheriff II's in jail operations formed their own grade, separate from deputy sheriff II's on patrol, a distinction the court held was adequately supported by the record. Reviewing for substantial evidence, the court found the record amply supported the trial court's findings and affirmed.
- Section 504 of the Rehabilitation Act Requires VA to House Veteranson September 14, 2026 at 9:16 AM
This case is a class action brought by homeless veterans with serious mental illness or traumatic brain injuries against the Department of Veterans Affairs (VA), centered on the VA's West Los Angeles campus. The named plaintiffs, along with the National Veterans Foundation, alleged that the VA's failure to build permanent supportive housing on or near the campus discriminates against disabled veterans in violation of § 504 of the Rehabilitation Act, because without such housing they cannot meaningfully access the medical care the VA otherwise provides. They pressed two theories: a "meaningful access" claim (housing as a necessary accommodation to reach VA healthcare) and an "Olmstead" claim, drawing on Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999), that the lack of housing places veterans at risk of institutionalization.
Following an August 2024 bench trial, the district court (Judge David O. Carter, C.D. Cal.) ruled for the plaintiffs on both § 504 theories and ruled that the land-use leases the VA had with the Regents of the University of California, Los Angeles, Brentwood School, and Bridgeland Resources, LLC, were unlawful; voided these leases; and enjoined the VA from renegotiating them.and requiring the VA to develop, within six months, a plan to construct 1,800 additional units of permanent supportive housing on the campus, to be built and operational within six years — a project both dissents peg at over $100 million.
On appeal, a three-judge Ninth Circuit panel affirmed the judgment and injunction against the VA based on the meaningful-access and Olmstead theories, vacated the judgment as to a co-defendant (HUD) for lack of legal basis, and upheld certification of the veteran class under Federal Rule of Civil Procedure 23(b)(2). See Powers v. McDonough, 163 F.4th 1162 (9th Cir. 2025). The VA petitioned for rehearing en banc, arguing the panel's decision conflicts with Supreme Court and circuit precedent limiting § 504 claims and misapplied the class-certification commonality requirement.
In the 2026 ruling in Powers, et al. v. McDonough, et al., No. 24-6576 (9th Cir. Sept. 2026), the full court, by vote of the non-recused active judges, denied the petition for rehearing en banc; no further petitions for rehearing would be entertained. Two judges did not participate. The panel's 2025 decision therefore stands as circuit precedent. Judge Collins and Judge Bumatay each filed a dissent from the denial, but a dissent from denial of rehearing en banc is not a ruling and does not alter the panel's judgment.
In a dissenting opinion, Judge Collins argued the panel's "meaningful access" holding cannot be squared with Alexander v. Choate, 469 U.S. 287 (1985), in which the Supreme Court held that § 504 requires only "reasonable" modifications to a federal program, not ones that "fundamentally alter" it. In his view, ordering the VA to build an entirely new, $100-million-plus housing program to accompany its medical-care program is a fundamental alteration by any measure, and the panel could not evade that conclusion by treating the VA's separate, statutorily distinct housing initiatives on the campus as part of the same "program."
He also argued the panel misapplied Olmstead, which addresses the risk of institutionalization inherent in how an agency delivers its own services, not the general risk that homelessness exposes someone to jail or hospitalization by other actors. And he argued both theories independently fail because § 504 requires that a plaintiff be denied a benefit "solely by reason of" disability, whereas the veterans' inability to access campus healthcare stems from many intersecting circumstances, not disability alone. On class certification, Judge Collins argued individualized differences among class members' diagnoses, housing situations, and proximity to other VA facilities defeat the commonality required by Federal Rule of Civil Procedure 23(a)(2), as construed in, Wal-Mart Stores, Inc. v. Dukes 564 U.S. 338 (2011).
Judge Bumatay's dissent pressed two further points. First, he argued the Rehabilitation Act contains no private right of action, express or implied, against a federal agency operating its own programs (as opposed to acting as a grant-maker), and that the panel's contrary position rests on outdated Ninth Circuit precedent he says should be overruled, citing a split with the First, Second, and Fourth Circuits on the question. Second, he argued the class certified here lacks the "glue" Wal-Mart requires: because many class members may not be injured by the VA's housing policy at all — some already live on or near the campus, some receive vouchers, some may not seek care there — certifying them together conflicts with Article III standing principles as well as Rule 23(a)(2).
Because this is an order denying en banc rehearing rather than a merits ruling, the panel's 2025 opinion continues to bind the district court on remand, and the dissents' criticisms carry no immediate legal effect beyond flagging the issue for possible Supreme Court review.
- 6 BART Employees Recover $7.8M in FEHA Caseon September 14, 2026 at 9:16 AM
In October 2021, the San Francisco Bay Area Rapid Transit District (BART) adopted a policy requiring employees to be fully vaccinated against COVID-19 by December 13, 2021, subject to medical or religious exemptions. Employees seeking a religious exemption submitted a standardized questionnaire to BART's Leave Management Department describing their beliefs and the accommodation sought. Of 181 religious exemption requests, BART found 70 employees eligible for a potential exemption, but concluded that none of the 70 could actually be accommodated without undue hardship to its operations. Those employees were told to get vaccinated or lose their jobs; about half complied, and the remaining 37 resigned, retired, or were terminated. Combined with 36 employees whose exemption requests were denied outright, 73 employees who had sought a religious accommodation lost their positions.
Six of those former employees — Tonya Lewis-Williams, Raymond Lockett, Rosalind Parker, Bradford Mitchell, Ryan Rivera, and Szu-Cheng Sun — ultimately took their claims to trial. Their jobs included a platform utility worker, a train-car maintenance supervisor, a ticket-window clerk behind a bullet-proof partition, a computer technician who said 90 percent of his work could be done alone or remotely, a contractor-escort supervisor who worked mostly outdoors, and a storekeeper who could have worked alone in an isolated, separately ventilated office. None of the six were shown to be in frequent close contact with the public or with co-workers, and BART did not present evidence that any of them were unwilling to mask or take other precautions.
Thirty-five former BART employees originally sued in the U.S. District Court for the Northern District of California (Judge William Alsup), asserting failure-to-accommodate claims under Title VII and California's Fair Employment and Housing Act (FEHA), plus a First Amendment free-exercise claim under 42 U.S.C. § 1983. The district court granted BART summary judgment on the free-exercise claim and denied the employees summary judgment on their statutory claims. After that ruling, most plaintiffs settled, leaving the six above for trial.
The district court split the case into two phases: whether BART could prove its "undue hardship" defense, and, if not, the remaining liability and damages issues. The jury found BART had not established undue hardship, then awarded the six plaintiffs a combined $7,824,580. BART renewed its motion for judgment as a matter of law and moved in the alternative for a new trial; the district court denied both, and also declined to order reinstatement for one plaintiff, Ryan Rivera, awarding him front pay instead. BART appealed; the employees cross-appealed the summary-judgment ruling on their free-exercise claim, and Rivera separately appealed the reinstatement question.
In the published case of Lewis-Williams, et al. v. San Francisco Bay Area Rapid Transit District, Nos. 25-618, 25-619 & 25-740 (9th Cir. Sept. 2026). The Ninth Circuit affirmed the judgment in full. It held BART was entitled to neither judgment as a matter of law nor a new trial, and it found Rivera's front-pay award was not plain error. Because the verdict was affirmed, the panel found the cross-appeal on the free-exercise claim moot and did not decide it. Judge R. Nelson wrote the opinion for a unanimous panel (Judges Rawlinson and Bade joining) and also wrote separately, concurring in the panel's judgment but writing at length to criticize the district court's free-exercise analysis and, more broadly, to argue that Employment Division v. Smith, 494 U.S. 872 (1990), was wrongly decided.
The panel applied the Title VII/FEHA undue-hardship standard the Supreme Court articulated in Groff v. DeJoy, 600 U.S. 447 (2023): an employer must show the accommodation's burden would be "substantial," "excessive," or "unjustifiable," not merely somewhat less safe than the challenged requirement. BART argued that because vaccination was the most effective way to limit COVID-19 transmission, any less-effective alternative (masking, distancing, remote work) was unreasonable as a matter of law, and that its reliance on public-health guidance settled the question. The panel rejected that framing. Citing Bragdon v. Abbott, 524 U.S. 624 (1998), it reasoned that public-health guidance is entitled to special weight but is not conclusive, and it noted that BART never introduced the actual guidance it claimed to rely on, instead offering only after-the-fact litigation experts whose testimony the jury was free to weigh rather than accept outright.
The panel distinguished two of its own recent decisions in which similar hardship defenses succeeded, involving firefighters and hospital workers whose jobs required close, continuous contact with the public and colleagues and whose accommodation would have created serious operational and financial risk. BART, by contrast, is a transportation agency, not a health-care provider, and the evidence showed the six employees' jobs involved little sustained close contact with others. Because the "undue hardship" inquiry is fact-specific and generally suited to jury resolution, and because the record here did not make the outcome obvious as a matter of law, the panel held the jury's verdict was adequately supported and that the district court did not abuse its discretion in denying a new trial, including over a since-cured order-in-limine violation by plaintiffs' counsel that the court found non-prejudicial.
Judge Nelson's concurrence went further than the majority opinion needed to. He argued the district court erred in applying an "unfettered discretion" test to conclude BART's exemption process was a neutral, generally applicable policy not subject to strict scrutiny — a test the Ninth Circuit had already rejected en banc in Fellowship of Christian Athletes v. San Jose Unified School District Board of Education, 82 F.4th 664 (9th Cir. 2023), applying Fulton v. City of Philadelphia, 593 U.S. 522 (2021). Because the panel's affirmance on the Title VII and FEHA claims mooted the cross-appealed free-exercise issue, this discussion is not part of the court's binding holding. Judge Nelson used the balance of his concurrence to argue at length, on originalist grounds, that Employment Division v. Smith was wrongly decided and should eventually be overturned, noting that the Supreme Court has granted certiorari in a case, St. Mary Catholic Parish v. Roy (cert. granted Apr. 20, 2026), that may address related questions about Smith's "generally applicable" test.
- Newsom Orders Feasibility Study of Mandating AI Kill Switchon September 21, 2026 at 1:45 PM
Gov. Gavin Newsom signed Executive Order N-9-26 on Friday, September 18, directing a state agency to speed up California’s new independent AI-auditor programs and to report by November 16 on whether state law should require a “kill switch” for the most advanced AI models. The order does not itself impose requirements on AI developers. It sets deadlines for the Government Operations Agency, asks for recommendations, and states that it creates no enforceable rights or benefits. Any new mandate would require changes to state law.
The order accelerates two statutory programs. It does not name the bills, but Government Technology reported that the code sections it cites correspond to SB 813 (McNerney) and AB 1405 (Bauer-Kahan), both approved September 9. According to the governor’s press release, SB 813 creates a framework for certifying independent verification organizations that assess AI systems and models for safety risk, and AB 1405 creates a state registry of AI auditors with independence, transparency and integrity standards. The order gives the agency until May 1, 2027, to develop application requirements and criteria for verification organizations under Government Code § 8898.1, and until December 1, 2027, to complete the registry work under Government Code § 11549.82(a) and begin the actions in subdivision (b). Government Technology reported that those dates pull forward original statutory deadlines of January 1, 2028, and January 1, 2029.
Separately, the order asks the agency, working with the Governor’s Office of Emergency Services and unnamed national experts, to submit recommendations to the governor’s office by November 16, 2026. The recommendations must address the technical feasibility and likely efficacy of at least four amendments to state AI safety law. The first would require the largest frontier developers to embed designated independent verification organizations onsite in their labs for periodic audits and evaluations. The second would require independent verification of the safety frameworks, transparency reports and risk assessments those developers already must file under SB 53, the 2025 frontier-AI transparency law. The third would require a kill switch for frontier models, with its effectiveness verified on an ongoing basis by an independent verification organization. The fourth would expand the definition of reportable “critical safety incidents” to include loss-of-control incidents. The order does not say whether the recommendations will be made public.
Coverage has not been uniform about what the order does. The governor’s office described it as advancing the creation of a kill switch, and Fox Business reported that it requires frontier developers to build one. The text, however, asks only whether such a requirement would be technically feasible and effective. In a video message reported by Fox Business, Newsom himself acknowledged that the concept is still taking shape and means different things to different people.
The order’s recitals cite reports of apparent attempts to use AI to create bioweapons and of AI agents defeating company security protocols and hacking other companies, in some cases undetected for months. The order names no companies or incidents and attaches no evidence. The governor’s press release refers to the “Hugging Face attack,” and a Yahoo News report describes a July breach of that platform by autonomous agents built on OpenAI models that escaped a testing environment. Those details come from press accounts, not from the order. The order also faults federal leaders for inaction, and the governor’s office called on Congress and President Trump to adopt California’s framework as a national floor.
Reaction has followed political lines and, in places, technical ones. State Sen. Scott Wiener, who authored the vetoed 2024 kill-switch bill and co-led SB 53, issued a statement of support, calling the order a challenge to lawmakers and saying the Legislature must follow with strong guardrails early next year. Politico, as carried by Yahoo News, reported that some in the tech industry oppose kill switches as technically infeasible, that LinkedIn co-founder Reid Hoffman voiced support for the idea at a Politico event this week, and that Newsom had said he was weighing further options, including a special legislative session. The Washington Examiner reported that critics contend existing product-liability rules already address the risks and that the push for new regulation is an orchestrated effort that could let large technology companies form a cartel and suppress competition. On the federal side, Fox Business reported that Sen. John Kennedy’s attempt to advance a federal kill-switch bill was blocked this week by Sen. Rand Paul, who cautioned against hastily regulating an entire industry.
For employers and insurers, the order’s significance is indirect. Its subject is the developers of frontier AI models, and it does not address employer use of AI, workers’ compensation or insurance. But California is building a certified third-party audit structure around AI, and the November recommendations will show how far the state may go in requiring outside verification of safety claims behind models that some workplace tools may rely on. The order also sits alongside the governor’s May 21 workforce order, which directs agencies to study AI-driven job disruption and to recommend revisions to the state WARN Act within 180 days. The next fixed date is November 16. - Physician Must Exhaust Hospital Peer Review Before Litigationon September 21, 2026 at 1:45 PM
Dr. Sunil Sujan, a board-certified internist, practiced at Corona Regional Medical Center (CRMC) from 2010 to 2016. He alleged that three rival physicians on staff, competing with his growing practice, orchestrated a campaign to file dozens of false internal "MIDAS" incident reports accusing him of being unresponsive to nursing staff, with the goal of getting him censured or suspended.
After a patient under Sujan's care died of heart failure in June 2016, CRMC's medical executive committee (MEC), chaired by one of the rival physicians, summarily suspended his admitting privileges without, Sujan alleged, any real investigation. Facing the prospect that a suspension lasting 14 days or longer would have to be reported to the California Medical Board and the National Practitioner Data Bank, Sujan signed a lengthy settlement agreement to have his suspension lifted. The agreement did not fully exonerate him: it recited CRMC's continuing concerns about his patient care and record-keeping and imposed a dozen onerous conditions, including mandatory training courses, a monitored backup-physician arrangement, and a mentor who would report on him to the MEC every 90 days.
Sujan later left CRMC voluntarily; when a prospective employer, Good Samaritan Hospital, sought to verify his employment history in 2017, CRMC allegedly conditioned its cooperation on Sujan releasing it from liability, jeopardizing the job offer. Sujan sued CRMC and the three physicians for conversion, interference with economic relations and contract, conspiracy, defamation, and intentional infliction of emotional distress; his wife, Nina Patel, brought a derivative loss-of-consortium claim.
The Riverside County Superior Court granted summary judgment for the defendants on the interference claims, finding Sujan had failed to exhaust the administrative remedies available to him under CRMC's medical staff bylaws before suing for damages, as required by Westlake Community Hospital v. Superior Court (1976) 17 Cal.3d 465. The court rejected Sujan's argument that pursuing an administrative hearing would have been futile, distinguishing Joel v. Valley Surgical Center (1998) 68 Cal.App.4th 360, because — unlike the physician in Joel, who received full, unconditional reinstatement in exchange for withdrawing his hearing request — Sujan's settlement was heavily conditioned and did not represent the maximum relief he could have obtained administratively. The court entered judgment for the defendants and later ruled, based on a fee provision in CRMC's bylaws making a physician who sues without exhausting his remedies liable for the hospital's "full costs, including legal fees," that defendants could recover attorney fees from Sujan, though not from Patel, who never signed the bylaws. The court also found defendants' evidence insufficient to support fees for five prior law firms that had represented them, and it reduced the hourly rates claimed by two of their current partners to align with Riverside County market rates, ultimately awarding $313,830 of the $892,417 defendants had requested. Both sides appealed the fee ruling; Sujan also appealed the underlying summary judgment.
In the published case of Sujan et al. v. UHS Corona, Inc. et al., No. E084185 (Cal. Ct. App., 4th Dist., Div. 2, Sept. 2026). The Court of Appeal affirmed the judgment and the postjudgment attorney fees order in full, rejecting both Sujan's appeal and the defendants' cross-appeal.
On exhaustion, the court held Sujan bore the burden of proving the narrow futility exception and failed to meet it. His settlement, unlike the one in Joel, restated CRMC's ongoing concerns about his competence and imposed a dozen substantive conditions rather than restoring him unconditionally; it therefore did not give him "the maximum relief" an administrative hearing could have provided. The court also found Sujan offered no evidence — only his own declaration — to support his claim that a report to the Medical Board would have been professionally "ruinous," distinguishing the Supreme Court's decision in Mileikowsky v. West Hills Hospital & Medical Center (2009) 45 Cal.4th 1259, and finding persuasive an unpublished federal decision, Ennix v. Stanten (N.D. Cal. 2007), which similarly held that a settlement short of full reinstatement does not excuse exhaustion.
On fees, the court held Business and Professions Code section 809.9, which allows fee awards only when a lawsuit challenging a reportable peer-review action was frivolous or in bad faith, did not apply, because Sujan's suspension lasted less than 14 days and was therefore never required to be reported under section 805. That left CRMC's one-sided contractual fee provision to govern. The court found the provision procedurally unconscionable, as a non-negotiable term of staff bylaws, but not substantively unconscionable, reasoning under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, that the policies behind the exhaustion doctrine — preserving hospital expertise, mitigating damages, and promoting judicial economy — reasonably justified charging fees only against physicians who bypass peer review and then lose.
On the cross-appeal, the court agreed CRMC could not recover fees from Patel, since her loss-of-consortium claim was not based on the bylaws and, under the reciprocity principles of Civil Code section 1717 (which only applies to contract claims), CRMC would not itself have owed her fees had she won. The court also held defendants forfeited any challenge to the exclusion of their prior attorneys' billing records by failing to request oral argument or seek reconsideration after the court's tentative ruling flagged the issue, and, independently, agreed the supporting declaration was inadmissible hearsay as to work it did not personally witness. Finally, the court found no abuse of discretion in capping the hourly rates of defendants' Los Angeles-based partners at Riverside County market rates, noting defendants offered no evidence that competent local counsel was unavailable. - DOL Spells Out Mental Health Parity Enforcement Prioritieson September 17, 2026 at 8:20 AM
In simple terms, "mental health parity" is a federal requirement that employer health plans and insurers cover mental health and substance use disorder care on the same terms as they cover physical health care. That means comparable co-pays and deductibles, but it also means comparable rules behind the scenes, like how strict a prior-authorization process is or how a plan decides which providers count as "in network." A plan cannot make it noticeably harder to get therapy or addiction treatment covered than it is to get a knee surgery covered. "Compliance" is the ongoing work employers, insurers, and their administrators do to prove, on paper and in practice, that those rules really do match up.
The U.S. Department of Labor's Employee Benefits Security Administration published two new documents on September 8, 2026, that together reshape how the agency says it will police mental health parity compliance: Field Assistance Bulletin No. 2026-03, which sets out "guiding principles" for enforcing the nonquantitative treatment limitation (NQTL) comparative-analysis requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA), and an updated Self-Compliance Tool plan sponsors and issuers can use to test their own coverage against the law.
The bulletin is an internal EBSA policy memorandum, from Assistant Secretary Daniel Aronowitz to the agency's enforcement staff, and by its own terms creates no enforceable rights for plans, issuers, or participants. But it is the clearest public signal yet of how EBSA intends to direct its MHPAEA investigations following an 18-month stretch of regulatory limbo, and it follows through on an enforcement priority the agency flagged on January 15, 2026, when it overhauled its national enforcement projects for fiscal year 2026 to include barriers to mental health and substance use disorder (MH/SUD) benefits alongside cybersecurity, surprise billing, and benefit distributions.
Some background explains why EBSA felt the need to clarify things. In September 2024, the Departments of Labor, Health and Human Services, and the Treasury issued a final rule under MHPAEA, as amended by the Consolidated Appropriations Act, 2021 (CAA), adding new requirements for the NQTL comparative analyses plans and issuers must prepare (the 2024 Final Rule, 89 Fed. Reg. 77,586). Four months later, the ERISA Industry Committee sued in the U.S. District Court for the District of Columbia, arguing the rule was arbitrary and capricious and exceeded the agencies' statutory authority. Then came Executive Order 14219, directing agencies to identify and de-prioritize enforcement of regulations seen as imposing outsized compliance burdens (90 Fed. Reg. 10,583). In May 2025, the three Departments responded to both developments with a formal nonenforcement statement, agreeing not to enforce the new provisions of the 2024 Final Rule until the litigation concludes, plus an additional 18 months, while stressing that MHPAEA's underlying statutory obligations remain fully in effect.
That litigation has since moved further away from the 2024 Final Rule rather than toward defending it. According to a joint status report the Departments and the ERISA Industry Committee filed with the court in late March 2026, the Departments have now decided that, rather than defend the rule as written, they will issue a new proposed rule with anticipated substantial revisions to the challenged provisions, with a notice of proposed rulemaking targeted for no later than December 31, 2026 (see the March 30, 2026 joint status report in ERISA Indus. Comm. v. Dep't of Health & Hum. Servs., No. 1:25-cv-00136 (D.D.C.)). In the meantime, plans and issuers are left navigating NQTL compliance under the pre-2024 regulatory framework, without a finalized replacement rule.
It is against that backdrop that the new bulletin narrows EBSA's enforcement focus to three categories the agency says carry the highest potential for participant harm. The first is separate treatment limitations, including blanket exclusions of MH/SUD treatments where comparable medical or surgical treatments are covered; EBSA says it will prioritize wholesale exclusions but may still pursue narrower ones, especially in response to complaints. The second is medical necessity standards and review, with particular attention to prior authorization, concurrent review, and retrospective review; plans may rely on proprietary clinical guidelines, the bulletin notes, but must make them available on request during investigations and to participants. The third is network adequacy, with emphasis on provider admission standards and reimbursement methodologies, on the theory that a thin MH/SUD network pushes participants toward costlier out-of-network care. EBSA says it may still investigate other categories of NQTLs as complaints arise, but these three will get the bulk of its attention.
The companion Self-Compliance Tool, a roughly 40-page document plan sponsors, plan administrators, issuers, and state regulators can use as a self-audit checklist, is required to be updated every two years under Section 13001(a) of the 21st Century Cures Act. This edition walks through MHPAEA's six benefit classifications, the "substantially all" and "predominant" tests used to evaluate financial requirements and quantitative treatment limits, and a four-step method for analyzing NQTLs: identifying the limitation, the factors behind it, the evidentiary sources for those factors, and whether the whole process is applied comparably to MH/SUD and medical/surgical benefits, both on paper and in practice. It also folds in DOL's existing guidance on medication-assisted treatment for opioid use disorder and eating-disorder benefits, both of which the tool says remain subject to MHPAEA's parity requirements notwithstanding the rulemaking uncertainty.
For insurers and self-funded plans specifically, the tool's most operationally significant addition may be Appendix II, a framework for benchmarking provider reimbursement rates against Medicare as a way of self-testing network-related NQTLs before DOL auditors do it for them. The tool flags, as possible warning signs warranting further review, MH/SUD reimbursement rates set at or near Medicare levels while medical/surgical rates run well above Medicare, and psychiatrists reimbursed less than other physicians for identical evaluation-and-management billing codes. The tool is explicit that outcomes and denial-rate disparities are not, by themselves, proof of a violation, but it treats them as red flags that can trigger closer scrutiny of the underlying process. The Self-Compliance Tool also complements benchmarking resources the National Association of Insurance Commissioners has developed for state regulators and issuers.
Employee-benefits practitioners who reviewed the bulletin in the days after its release were, by and large, measured about how much it actually changes. One law firm client alert characterized the bulletin as reaffirming existing enforcement priorities rather than establishing new compliance standards, and separately noted that neither the bulletin nor the tool fills the gap left by the 2025 nonenforcement policy on what a compliant NQTL comparative analysis must contain, since a new final rule remains pending. For employers and issuers, the practical takeaway is that while the 2024 Final Rule's new provisions remain unenforced pending litigation and rulemaking, MHPAEA's statutory NQTL comparative-analysis obligations under the CAA are still live and enforceable, and EBSA has now told the regulated community, in some detail, where it plans to look first.
This summary is for general informational purposes only. Readers should consult the full Field Assistance Bulletin and Self-Compliance Tool, and the underlying rules and court filings linked above, for complete details and methodology and consult with legal counsel before making compliance decisions. - FDA Approves First Motion-Preserving Alternative to Spinal Fusionon September 17, 2026 at 8:20 AM
Low back pain is the single most common driver of lost work time and one of the most contested diagnoses in the workers' compensation system, and spinal fusion surgery — the procedure most often authorized as a last resort — remains among the most expensive, slowest-recovering, and most heavily litigated treatments claims professionals encounter. That landscape shifted in mid-December 2025, when the U.S. Food and Drug Administration granted full premarket approval to the DIAM Spinal Stabilization System, the first posterior, motion-preserving implant cleared in the United States as an alternative to fusion for chronic low back pain caused by degenerative disc disease.
The device, manufactured by Companion Spine, received FDA approval on the strength of a prospective, randomized, multicenter Investigational Device Exemption trial with an average follow-up of 11.5 years, according to the company's December 15, 2025 announcement. Notably, the FDA granted the approval without requiring a post-approval confirmatory study, a step the agency reserves for applications it considers to be supported by unusually strong clinical evidence.
To understand why this approval matters, it helps to understand the treatment gap it is meant to fill. When a worker develops chronic low back pain from degenerative disc disease that does not resolve with physical therapy, medication, and injections, the traditional next step has long been spinal fusion — permanently joining two or more vertebrae together with screws, rods, and bone graft to eliminate motion at the painful segment. Fusion can be effective, but it is also invasive, requires a lengthy recovery, eliminates natural spinal motion at the treated level, places additional mechanical stress on adjacent vertebrae, and forecloses future treatment options if it fails. Many patients with moderate symptoms have historically been left in a gap: too impaired for continued conservative care, but not considered good candidates for the invasiveness of fusion.
The DIAM system is designed for that gap. It is an H-shaped spacer made of silicone and polyester that is implanted between the spinous processes — the bony protrusions at the back of each vertebra — at a single level from L2 to L5. Secured with polyester tethers and titanium crimps, the device is intended to offload stress from the painful disc and posterior joints while preserving natural motion at the treated segment, rather than eliminating it. The procedure is performed on an outpatient basis through a minimally invasive posterior approach, and because it does not fuse the spine, it is designed to be removable and to leave future surgical options, including fusion, open if needed. The implant itself is not new internationally: more than 250,000 units have been implanted in over 200,000 patients across 76 countries since 1997, but this approval marks its first full U.S. clearance after a 20-year regulatory path that included a 2016 FDA advisory panel rejection over insufficient trial data.
The pivotal trial measured a composite clinical success endpoint at 24 months — combining pain relief, functional improvement, and the absence of device-related reoperation — and found a 67.4 percent success rate for DIAM patients compared with 11.9 percent for patients who continued non-operative care, a difference the company describes as showing a Bayesian posterior probability of superiority exceeding 0.999. Secondary measures reported by Companion Spine included a 77 percent responder rate on the Oswestry Disability Index and an 83.2 percent back pain responder rate at 24 months, with durability holding up over the long term: among the long-term follow-up cohort tracked for an average of 11.5 years, 86.4 percent maintained both disability and pain responder status, and 87 percent of patients said they would choose the same treatment again more than a decade later.
On safety, the company reported a 1.6 percent rate of device-related serious adverse events, no reported device migrations or mechanical failures through 11.5 years of follow-up, and a 95.7 percent freedom-from-device-removal rate at the same interval. Notably, according to the trial investigators quoted in the FDA announcement, none of the study patients who received the DIAM implant required conversion to spinal fusion during the study's long-term follow-up period. Independent verification of these figures beyond the company's own release and the underlying FDA premarket approval documentation will accumulate as the device enters broader U.S. use and registry data develops, and claims professionals should treat single-manufacturer clinical trial results with the same scrutiny they would apply to any sponsor-funded study, while recognizing that the FDA's decision to waive a post-approval confirmatory trial reflects the agency's own confidence in the existing evidence base.
Because DIAM is indicated only for patients with single-level lumbar degenerative disc disease who remain symptomatic after at least six months of non-operative care, utilization reviewers will need to confirm that conservative treatment was genuinely exhausted before a request reaches this stage — the same threshold question that already governs fusion requests, but now with a second surgical option in the mix rather than a binary choice between continued conservative care and fusion.
DIAM enters the U.S. market at a moment when spine surgeons and payers alike have been rethinking the "fusion-first" default for degenerative disc disease, a theme that was prominent at the 2026 annual meeting of the International Society for the Advancement of Spine Surgery, where motion-preserving technologies and their long-term economic sustainability were a central focus. Whether DIAM becomes a meaningful presence in workers' compensation treatment plans will depend on real-world outcomes as more U.S. surgeons gain experience with the device, on how commercial and workers' compensation payers approach coverage and fee-schedule classification for a device without an established coding history in this country, and on whether the favorable trial-population results hold up in the more medically and psychosocially complex population typical of workers' compensation claims. Claims professionals reviewing lumbar spine treatment requests over the coming months should ask whether DIAM or a similar motion-preserving device was considered, and utilization review protocols may need updating as this option becomes more familiar to treating physicians and reviewers alike. - Transnational Organization of Fake Attorneys Defraud 400 Victimson September 16, 2026 at 11:07 AM
A key organizer of a $36 million transnational fraud ring that posed as attorneys to swindle elderly Americans out of timeshare "settlement" money pleaded guilty September 14 to conspiracy to commit money laundering, the U.S. Attorney's Office for the Eastern District of California announced. Juliet Mora, 42, formerly of Hayward, California and now living in Nicaragua, admitted to helping run a scheme that stole from more than 400 mostly elderly American victims.
According to court documents, members of the organization posed as attorneys and contacted elderly timeshare owners and past fraud victims, telling them they were entitled to restitution or settlement payments. Believing they were dealing with real lawyers, victims signed fake representation agreements and bogus non-disclosure agreements, then paid fees and wired money to shell companies the organization's U.S.-based members controlled. Members allegedly evaded banks' anti-money-laundering safeguards by misrepresenting what the transactions were for, repeatedly closing and reopening accounts flagged for suspicious activity.
Mora joined the scheme in August 2021, prosecutors said, maintaining shell companies that took in more than $1.5 million in victim funds; investigators traced roughly $2.7 million in stolen funds to accounts she controlled. She later relocated to Nicaragua and became an organizer, directing U.S.-based co-conspirators on receiving and moving victim money, setting up shell companies, and preparing fraudulent legal paperwork, and used fake paralegal identities to communicate with victims directly. She was arrested in December 2025 after arriving at Boston Logan International Airport on a flight from Panama, on a second superseding indictment. She faces up to 20 years in prison and a fine of up to $500,000 or twice the amount laundered, whichever is greater, when sentenced December 14 by U.S. District Judge Jennifer L. Thurston.
The plea is the latest development in a case that has played out across several countries over the past year. The scheme first became public in October 2025, when the Eastern District's U.S. Attorney's Office, in a case federal investigators dubbed "Operation Silver Shores," announced the indictment of more than 20 people and the arrest of 15 defendants across California, Texas, and Florida. At that point, investigators had identified at least 372 victims and losses exceeding $30 million, with more than $1.5 million in victim funds seized. FBI Sacramento Special Agent in Charge Sid Patel said at the time that some of the arrested defendants were tied to Norteño-affiliated gang members moving into organized financial crime; local reporting on the arrests, including by the San Joaquin Valley Sun, named several Central Valley defendants taken into custody that day.
Both the September plea agreement and the original indictment describe the fraud's reach extending well beyond U.S. borders. Investigators say the organization operated "out of the United States and several countries in Latin America." According to Tuesday's release, Nicaraguan authorities, coordinating with the U.S. State Department's Diplomatic Security Service, arrested one of the case's central figures, Marlon Solis Bonilla, in July 2025 and transferred him to FBI custody in Houston. And in August 2026, Mexican authorities arrested three more defendants, Julian Jauregui, Sergio Jauregui, and Eduardo Navarro, in Guadalajara, an operation the release credits to the FBI's legal attaché office in Mexico City working with the U.S. Marshals Service and Jalisco state security forces; all three were processed by Mexican immigration authorities and removed to the United States. Mexican outlet Crónica separately reported that Jalisco's cybercrime police, working from a U.S. Marshals tip, captured three men with the same first names in coordinated raids in Guadalajara and Zapopan in early September, describing the outstanding October 2025 California warrants as involving cryptocurrency-related wire fraud and money laundering — a somewhat different characterization of the underlying conduct than the elderly-timeshare fraud described in the DOJ release, which readers should note. Three defendants in the case remain at large, according to the U.S. Attorney's Office.
The case adds to a rapidly growing list of federal actions this year against transnational networks that use fake attorneys and phony government officials to target elderly Americans, particularly former timeshare owners. In August 2026, the Justice Department and FBI announced a much larger set of indictments against leaders of Mexico's Jalisco New Generation Cartel (CJNG), accusing cartel-linked call centers of defrauding more than 6,000 Americans out of roughly $400 million between 2019 and 2023 through fake timeshare resale and settlement schemes, according to Fox News' coverage of the announcement. FBI Director Kash Patel said at that press conference that the bureau had carried out more than 30 international transfers of custody across 15 countries in July 2026 alone as part of its broader elder-fraud enforcement push. There is no indication in the available court filings or press materials that the CJNG-linked case and the Mora/Operation Silver Shores case are the same organization, but both illustrate a pattern federal officials say has become common: elder-fraud networks that blend U.S.-based money-laundering cells with leadership and call-center operations based in Mexico and Central America.
The Mora investigation was conducted by the FBI, IRS Criminal Investigation, and the Bakersfield Police Department, with assistance from the U.S. Postal Inspection Service and the Truckee Police Department. Assistant U.S. Attorneys Cody S. Chapple and Arelis M. Clemente are prosecuting the case. - 12 Arrested in San Diego $10M "Ghost Daycare" Fraud Sweepon September 16, 2026 at 11:07 AM
Federal, state and local agents arrested all twelve defendants in a single early-morning sweep Thursday, unwinding a scheme prosecutors say siphoned more than $10 million meant to help low-income San Diego families pay for childcare into a network of "ghost" home daycares that billed for children who were never actually in care. The U.S. Attorney's Office for the Southern District of California announced the charges Tuesday, alongside a coordinated operation involving more than 250 federal, state and local law enforcement officers who executed 12 search warrants at homes across San Diego that were licensed as daycare facilities.
According to prosecutors, each of the 12 federal complaints describes a similar scheme, even though the cases are legally unrelated to one another. The Department of Health and Human Services funds childcare subsidies for low-income California families, and in San Diego County those subsidies are administered locally by the County of San Diego, Child Development Associates (CDA), and the YMCA. To get paid, a licensed home daycare provider submits monthly attendance records, signed by both provider and parent under penalty of perjury, documenting the dates and times each child was actually in care. Prosecutors allege the twelve defendants instead submitted false attendance records for children who were not present, falsely certified the records as accurate, and collected government payments they were not entitled to.
IRS Criminal Investigation Chief Jarod Koopman said tracing the money "revealed twelve ghost daycare operations billing for children who were never present," calling it "not a victimless crime" because it "deprived working parents of critical support." Homeland Security Investigations Assistant Director Michael Krol and HHS Office of Inspector General Special Agent in Charge Robb R. Breeden likewise framed the case as an attack on programs meant to serve vulnerable families. U.S. Attorney Adam Gordon put it more bluntly: "Today is a bad day for home daycare fraud. These fraudsters may have criminally gamed the system before. But today, the game is over."
The twelve defendants named in the U.S. Attorney's Office's release, each charged in a separate criminal complaint, are: Fosiya Mohamoud, 50, of El Cajon (case 26-mj-05074); Abdulrahman Alawad, 25, of El Cajon (26-mj-05174); Zetun Abdi, 43, of San Diego (26-mj-05184); Ikramullah Mohmmand, 25, of El Cajon (26-mj-05185); Khetam Haouash, 37, of El Cajon (26-mj-05187); Khatera Hashimi, 39, of El Cajon (26-mj-05188); Mariam Khamis, 42, of San Diego (26-mj-05189); Mohamad Alawad, 29, of San Diego (26-mj-05190); Mazin Alawad, 22, of San Diego (26-mj-05191); Turkiya Alawad, 63, of San Diego (26-mj-05194); Zaryab Daudzai, 25, of El Cajon (26-mj-05195); and Cezar Yaqoob, 36, of El Cajon (26-mj-05215). Four defendants share the Alawad surname, suggesting at least one family was allegedly involved in the scheme across multiple daycare licenses, though the release does not specify the nature of any relationship between them.
Notably, Assistant Attorney General Colin M. McDonald, who spoke at Tuesday's announcement, said the case marks "the first charges alleging this type of fraud since the formation of the National Fraud Enforcement Division." That division is itself new: President Trump ordered its creation in January 2026 as part of a governmentwide task force on fraud chaired by Vice President JD Vance, and the Senate confirmed McDonald, a longtime Southern District of California prosecutor, to lead it by a 52-47 vote in March 2026, according to an Associated Press report carried by WTOP. The division absorbed the Justice Department's Tax Section, Health Care Fraud Unit, and Market, Government, and Consumer Fraud Unit that April, per a client alert from law firm Ropes & Gray describing McDonald's August 2026 enforcement-priorities memo. Its creation followed intense scrutiny of a much larger Minnesota daycare fraud scandal, in which state officials and prosecutors have pursued fraud allegations tied to more than $9 billion across 14 federally funded programs, including daycare providers enrolled in the state's Child Care Assistance Program.
Tuesday's case is not the Southern District of California's first brush with home childcare fraud. In 2023, the same office charged four people, including the president of a University Avenue vocational school, with a scheme that used false employment and school-enrollment verifications to fraudulently draw more than $3.7 million from the same CDA/YMCA-administered subsidy program; that case ended in prison sentences and a $3.7 million restitution order in 2024, according to the U.S. Attorney's Office's original charging announcement. Tuesday's dollar figure, at more than $10 million, is nearly three times the size of that earlier case. - Hyundai and Kia Face 200 Carriers' California Subrogation Jurisdictionon September 15, 2026 at 9:01 AM
In 2020, a social-media trend nicknamed the "Kia Boyz" popularized a method for stealing certain Hyundai and Kia vehicles in seconds, by exploiting the fact that many of those vehicles lacked an engine immobilizer, a standard anti-theft device. Thefts of Hyundai and Kia vehicles surged nationwide. Lawsuits filed across the country were consolidated into a multidistrict litigation in the Central District of California, organized into three tracks: subrogation claims, consumer claims, and claims by governmental entities. This appeal concerns the subrogation track, brought by roughly 200 insurance companies that paid claims to policyholders whose Hyundai or Kia vehicles, model years 2011 through 2022, were stolen or damaged.
The insurers sued not only the U.S. distributors, Hyundai Motor America and Kia America, but also the Korean parent manufacturers, Hyundai Motor Company (HMC) and Kia Corporation (KC). They alleged the Korean entities designed standard-model vehicles without engine immobilizers specifically for the U.S. market — reserving that anti-theft feature for higher trim packages — even though the same models sold with immobilizers standard in Canada and other markets. Plaintiffs also alleged the Korean entities shipped thousands of vehicles through California's ports: more than 70 percent of HMC's U.S.-bound shipments and about 77 percent of KC's, according to bills of lading plaintiffs submitted.
The Korean entities moved to dismiss for lack of personal jurisdiction, submitting declarations from their American subsidiaries' sales executives stating that vehicles are sold "FOB Origin" in Korea — meaning title and risk of loss pass to the American subsidiaries at the point of shipment — and that the subsidiaries, not the Korean entities, handle importation, port logistics, and distribution once the vehicles reach the United States. Plaintiffs did not submit any competing declarations of their own, relying instead on their complaint's allegations. The district court (Judge James V. Selna) dismissed the claims against the Korean entities, concluding the shipping records did not show the Korean entities intentionally aimed their conduct at California and that, in any event, plaintiffs had not shown their claims arose from California-related conduct. The court also denied plaintiffs leave to amend and denied their request for jurisdictional discovery, then entered a Rule 54(b) final judgment dismissing the Korean entities from the subrogation track.
In the published case of In re: Kia Hyundai Vehicle Theft Marketing, Sales Practices, and Products Liability Litigation: Insurance Subrogation Appeal, No. 24-5219 (9th Cir. Sept. 2026). The Ninth Circuit reversed the dismissal and remanded for further proceedings.
The panel first held the district court properly disregarded plaintiffs' complaint allegations that the Korean entities controlled U.S. distribution, since those allegations were directly contradicted by the subsidiaries' declarations and plaintiffs offered no competing evidence of their own. Turning to the merits, the panel applied the Ninth Circuit's three-part test for specific personal jurisdiction over non-resident defendants, tracing its due-process roots to International Shoe Co. v. Washington, 326 U.S. 310 (1945): the defendant must have purposefully directed activities at, or availed itself of, the forum; the claims must arise out of or relate to those forum contacts; and the exercise of jurisdiction must be reasonable.
On the first element, the panel held the Korean entities' contacts were not the kind of passive "stream of commerce" placement that the Supreme Court held insufficient in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987). Even though the Korean entities did not themselves sell vehicles in California, they were listed as shippers of record on thousands of shipments routed through California ports, and nothing in the record suggested a distributor independently chose that routing. Combined with evidence the Korean entities designed their vehicles without immobilizers specifically for the U.S. market, the panel found this sufficient "purposeful availment and direction," rejecting the Korean entities' argument that only California-specific (as opposed to nationwide) targeting could support jurisdiction. The panel relied heavily on its own 2025 en banc decision in Briskin v. Shopify, Inc., 135 F.4th 739 (9th Cir. 2025), which held that "differential targeting" of a particular state is not required, and on the Supreme Court's decision in Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. 351 (2021), which held that serving a nationwide market does not immunize a company from jurisdiction in any particular state where its products cause injury.
On the second element, the panel held plaintiffs' claims arose from the Korean entities' California contacts because their injuries were caused by vehicles the Korean entities shipped through California's ports. The panel distinguished its earlier decision in Yamashita v. LG Chem, Ltd., 62 F.4th 496 (9th Cir. 2023), where a plaintiff failed to allege that the specific battery that injured him had been shipped through the forum port; here, given that the large majority of the Korean entities' U.S. shipments passed through California, it was reasonable to infer many of the vehicles at issue did too.
The panel left the third element — whether exercising jurisdiction would ultimately be "reasonable," a multi-factor test neither party had briefed on appeal — for the district court to resolve on remand, and did not reach whether the court abused its discretion in denying jurisdictional discovery. - Sheriff Deputies' Built-In Overtime Counts Toward OCERS Pensionson September 15, 2026 at 9:01 AM
Under the County Employees Retirement Law of 1937 (CERL), an Orange County employee's pension is based in part on "compensation earnable," defined by Government Code section 31461 as average pay computed using the number of days "ordinarily worked by persons in the same grade or class of positions" at "the same rate of pay." Following a 2008 reorganization of the Orange County Sheriff's Department, deputies classified as deputy sheriff II were assigned to patrol, while jail operations were staffed by deputy sheriff I's and by deputy sheriff II's who had opted to remain in the jail. All deputies working exclusively in jail operations, regardless of rank, worked a "platoon schedule" of 80.5 hours every two weeks, which built in a half-hour of overtime known as "6FE" overtime.
Robert Szewczyk and Rodney Morikawa, deputy sheriff II's who worked in jail operations, retired in 2018 and asked the Orange County Employees Retirement System (OCERS) to include their 6FE overtime in their compensation earnable. OCERS denied the request, reasoning that most deputy sheriff II's work outside corrections and are not required to work the extra half-hour, so the 6FE time was not "ordinarily worked" by others in their grade or class. After an administrative hearing officer recommended granting Szewczyk's and Morikawa's appeals, the OCERS Board rejected that recommendation and reaffirmed the exclusion.
Szewczyk and Morikawa petitioned the Orange County Superior Court for writs of administrative mandamus and traditional mandamus to set aside the Board's decision. The trial court granted the petitions, finding that after the 2008 reorganization, deputy sheriff II's working in jail operations were treated as a separate grade or class from other deputy sheriff II's for purposes of the platoon schedule and 6FE overtime, and that the 6FE overtime was ordinarily included in the normal working hours for all deputies assigned to the jail. Relying on section 31461 and the California Supreme Court's decision in Alameda County Deputy Sheriff's Assn. v. Alameda County Employees' Retirement Assn. (2020) 9 Cal.5th 1032, the court ordered OCERS to include the 6FE overtime in Szewczyk's and Morikawa's compensation earnable, retroactive to their retirement dates with interest. OCERS's motion for reconsideration was denied, and OCERS appealed.
In the published case of Szewczyk et al. v. Orange County Employees Retirement System et al., No. G065386 (Cal. Ct. App., 4th Dist., Div. 3, Aug. 2026) the Court of Appeal affirmed the judgment in full, with respondents to recover costs on appeal.
The court explained that CERL does not define "grade or class of positions," and that the California Supreme Court in Alameda described the statutory phrase as "both very general and somewhat inscrutable." Applying Alameda's framework, the court looked to whether deputy sheriff II's in jail operations were truly "comparable" to deputy sheriff II's on patrol. It found they were not: only 30 of 630 deputy sheriff II's worked in the jail and the platoon schedule, jail assignment had historically been a matter of employee choice tied to the 2008 reorganization, and deputies in the jail had markedly different duties, unit-recruitment requirements, work locations, and schedules than those on patrol. The court also noted this conclusion aligned with a 2024 amendment to section 31461 allowing retirement systems to define "grade" by reference to shared job duties, schedules, and similar factors, even though that amendment was not yet effective when the trial court ruled.
OCERS argued the case was controlled by Stevenson v. Board of Retirement of Orange County Employees Retirement System (2010) 186 Cal.App.4th 498, in which the same appellate district held that a narcotics investigator's unusually heavy overtime did not make him part of a distinct "narcotics investigator" grade, since the department's own job descriptions and memoranda of understanding recognized only five broader classes. The court distinguished Stevenson on two grounds: the overtime there arose case-by-case "whenever it was necessary to complete an ongoing investigation," rather than being built into a fixed, regularly scheduled shift, and a 2022 Orange County Board of Supervisors resolution — issued after Stevenson — confirmed that the County's labor agreements had never bothered to formally designate grades for retirement purposes even where real differences in duties and schedules existed, undercutting the inference that the absence of a "custody deputy" job title meant no such grade could exist.
The court also rejected OCERS's argument that the trial court ignored section 31461's requirement that comparable employees share the "same rate of pay," clarifying that the trial court never found deputy sheriff I's and deputy sheriff II's in the jail formed a single combined grade; rather, it found deputy sheriff II's in jail operations formed their own grade, separate from deputy sheriff II's on patrol, a distinction the court held was adequately supported by the record. Reviewing for substantial evidence, the court found the record amply supported the trial court's findings and affirmed. - Section 504 of the Rehabilitation Act Requires VA to House Veteranson September 14, 2026 at 9:16 AM
This case is a class action brought by homeless veterans with serious mental illness or traumatic brain injuries against the Department of Veterans Affairs (VA), centered on the VA's West Los Angeles campus. The named plaintiffs, along with the National Veterans Foundation, alleged that the VA's failure to build permanent supportive housing on or near the campus discriminates against disabled veterans in violation of § 504 of the Rehabilitation Act, because without such housing they cannot meaningfully access the medical care the VA otherwise provides. They pressed two theories: a "meaningful access" claim (housing as a necessary accommodation to reach VA healthcare) and an "Olmstead" claim, drawing on Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999), that the lack of housing places veterans at risk of institutionalization.
Following an August 2024 bench trial, the district court (Judge David O. Carter, C.D. Cal.) ruled for the plaintiffs on both § 504 theories and ruled that the land-use leases the VA had with the Regents of the University of California, Los Angeles, Brentwood School, and Bridgeland Resources, LLC, were unlawful; voided these leases; and enjoined the VA from renegotiating them.and requiring the VA to develop, within six months, a plan to construct 1,800 additional units of permanent supportive housing on the campus, to be built and operational within six years — a project both dissents peg at over $100 million.
On appeal, a three-judge Ninth Circuit panel affirmed the judgment and injunction against the VA based on the meaningful-access and Olmstead theories, vacated the judgment as to a co-defendant (HUD) for lack of legal basis, and upheld certification of the veteran class under Federal Rule of Civil Procedure 23(b)(2). See Powers v. McDonough, 163 F.4th 1162 (9th Cir. 2025). The VA petitioned for rehearing en banc, arguing the panel's decision conflicts with Supreme Court and circuit precedent limiting § 504 claims and misapplied the class-certification commonality requirement.
In the 2026 ruling in Powers, et al. v. McDonough, et al., No. 24-6576 (9th Cir. Sept. 2026), the full court, by vote of the non-recused active judges, denied the petition for rehearing en banc; no further petitions for rehearing would be entertained. Two judges did not participate. The panel's 2025 decision therefore stands as circuit precedent. Judge Collins and Judge Bumatay each filed a dissent from the denial, but a dissent from denial of rehearing en banc is not a ruling and does not alter the panel's judgment.
In a dissenting opinion, Judge Collins argued the panel's "meaningful access" holding cannot be squared with Alexander v. Choate, 469 U.S. 287 (1985), in which the Supreme Court held that § 504 requires only "reasonable" modifications to a federal program, not ones that "fundamentally alter" it. In his view, ordering the VA to build an entirely new, $100-million-plus housing program to accompany its medical-care program is a fundamental alteration by any measure, and the panel could not evade that conclusion by treating the VA's separate, statutorily distinct housing initiatives on the campus as part of the same "program."
He also argued the panel misapplied Olmstead, which addresses the risk of institutionalization inherent in how an agency delivers its own services, not the general risk that homelessness exposes someone to jail or hospitalization by other actors. And he argued both theories independently fail because § 504 requires that a plaintiff be denied a benefit "solely by reason of" disability, whereas the veterans' inability to access campus healthcare stems from many intersecting circumstances, not disability alone. On class certification, Judge Collins argued individualized differences among class members' diagnoses, housing situations, and proximity to other VA facilities defeat the commonality required by Federal Rule of Civil Procedure 23(a)(2), as construed in, Wal-Mart Stores, Inc. v. Dukes 564 U.S. 338 (2011).
Judge Bumatay's dissent pressed two further points. First, he argued the Rehabilitation Act contains no private right of action, express or implied, against a federal agency operating its own programs (as opposed to acting as a grant-maker), and that the panel's contrary position rests on outdated Ninth Circuit precedent he says should be overruled, citing a split with the First, Second, and Fourth Circuits on the question. Second, he argued the class certified here lacks the "glue" Wal-Mart requires: because many class members may not be injured by the VA's housing policy at all — some already live on or near the campus, some receive vouchers, some may not seek care there — certifying them together conflicts with Article III standing principles as well as Rule 23(a)(2).
Because this is an order denying en banc rehearing rather than a merits ruling, the panel's 2025 opinion continues to bind the district court on remand, and the dissents' criticisms carry no immediate legal effect beyond flagging the issue for possible Supreme Court review. - 6 BART Employees Recover $7.8M in FEHA Caseon September 14, 2026 at 9:16 AM
In October 2021, the San Francisco Bay Area Rapid Transit District (BART) adopted a policy requiring employees to be fully vaccinated against COVID-19 by December 13, 2021, subject to medical or religious exemptions. Employees seeking a religious exemption submitted a standardized questionnaire to BART's Leave Management Department describing their beliefs and the accommodation sought. Of 181 religious exemption requests, BART found 70 employees eligible for a potential exemption, but concluded that none of the 70 could actually be accommodated without undue hardship to its operations. Those employees were told to get vaccinated or lose their jobs; about half complied, and the remaining 37 resigned, retired, or were terminated. Combined with 36 employees whose exemption requests were denied outright, 73 employees who had sought a religious accommodation lost their positions.
Six of those former employees — Tonya Lewis-Williams, Raymond Lockett, Rosalind Parker, Bradford Mitchell, Ryan Rivera, and Szu-Cheng Sun — ultimately took their claims to trial. Their jobs included a platform utility worker, a train-car maintenance supervisor, a ticket-window clerk behind a bullet-proof partition, a computer technician who said 90 percent of his work could be done alone or remotely, a contractor-escort supervisor who worked mostly outdoors, and a storekeeper who could have worked alone in an isolated, separately ventilated office. None of the six were shown to be in frequent close contact with the public or with co-workers, and BART did not present evidence that any of them were unwilling to mask or take other precautions.
Thirty-five former BART employees originally sued in the U.S. District Court for the Northern District of California (Judge William Alsup), asserting failure-to-accommodate claims under Title VII and California's Fair Employment and Housing Act (FEHA), plus a First Amendment free-exercise claim under 42 U.S.C. § 1983. The district court granted BART summary judgment on the free-exercise claim and denied the employees summary judgment on their statutory claims. After that ruling, most plaintiffs settled, leaving the six above for trial.
The district court split the case into two phases: whether BART could prove its "undue hardship" defense, and, if not, the remaining liability and damages issues. The jury found BART had not established undue hardship, then awarded the six plaintiffs a combined $7,824,580. BART renewed its motion for judgment as a matter of law and moved in the alternative for a new trial; the district court denied both, and also declined to order reinstatement for one plaintiff, Ryan Rivera, awarding him front pay instead. BART appealed; the employees cross-appealed the summary-judgment ruling on their free-exercise claim, and Rivera separately appealed the reinstatement question.
In the published case of Lewis-Williams, et al. v. San Francisco Bay Area Rapid Transit District, Nos. 25-618, 25-619 & 25-740 (9th Cir. Sept. 2026). The Ninth Circuit affirmed the judgment in full. It held BART was entitled to neither judgment as a matter of law nor a new trial, and it found Rivera's front-pay award was not plain error. Because the verdict was affirmed, the panel found the cross-appeal on the free-exercise claim moot and did not decide it. Judge R. Nelson wrote the opinion for a unanimous panel (Judges Rawlinson and Bade joining) and also wrote separately, concurring in the panel's judgment but writing at length to criticize the district court's free-exercise analysis and, more broadly, to argue that Employment Division v. Smith, 494 U.S. 872 (1990), was wrongly decided.
The panel applied the Title VII/FEHA undue-hardship standard the Supreme Court articulated in Groff v. DeJoy, 600 U.S. 447 (2023): an employer must show the accommodation's burden would be "substantial," "excessive," or "unjustifiable," not merely somewhat less safe than the challenged requirement. BART argued that because vaccination was the most effective way to limit COVID-19 transmission, any less-effective alternative (masking, distancing, remote work) was unreasonable as a matter of law, and that its reliance on public-health guidance settled the question. The panel rejected that framing. Citing Bragdon v. Abbott, 524 U.S. 624 (1998), it reasoned that public-health guidance is entitled to special weight but is not conclusive, and it noted that BART never introduced the actual guidance it claimed to rely on, instead offering only after-the-fact litigation experts whose testimony the jury was free to weigh rather than accept outright.
The panel distinguished two of its own recent decisions in which similar hardship defenses succeeded, involving firefighters and hospital workers whose jobs required close, continuous contact with the public and colleagues and whose accommodation would have created serious operational and financial risk. BART, by contrast, is a transportation agency, not a health-care provider, and the evidence showed the six employees' jobs involved little sustained close contact with others. Because the "undue hardship" inquiry is fact-specific and generally suited to jury resolution, and because the record here did not make the outcome obvious as a matter of law, the panel held the jury's verdict was adequately supported and that the district court did not abuse its discretion in denying a new trial, including over a since-cured order-in-limine violation by plaintiffs' counsel that the court found non-prejudicial.
Judge Nelson's concurrence went further than the majority opinion needed to. He argued the district court erred in applying an "unfettered discretion" test to conclude BART's exemption process was a neutral, generally applicable policy not subject to strict scrutiny — a test the Ninth Circuit had already rejected en banc in Fellowship of Christian Athletes v. San Jose Unified School District Board of Education, 82 F.4th 664 (9th Cir. 2023), applying Fulton v. City of Philadelphia, 593 U.S. 522 (2021). Because the panel's affirmance on the Title VII and FEHA claims mooted the cross-appealed free-exercise issue, this discussion is not part of the court's binding holding. Judge Nelson used the balance of his concurrence to argue at length, on originalist grounds, that Employment Division v. Smith was wrongly decided and should eventually be overturned, noting that the Supreme Court has granted certiorari in a case, St. Mary Catholic Parish v. Roy (cert. granted Apr. 20, 2026), that may address related questions about Smith's "generally applicable" test.