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Workers’ Compensation Daily News for July 24th, 2024

  • Court of Appeal Affirms Worker's Fraud Conviction Based on Sub Rosa
    on July 23, 2024 at 10:29 AM

    In January 2019 Waliullah Nazari fell off a ladder at work rendering him unconscious. Hospital records indicated he suffered a broad-based disc herniation between vertebrae 4 and 5, with resulting bilateral/lateral recess stenosis, and sciatica. Nazari submitted a workers’ compensation claim to Liberty Mutual Insurance (Liberty Mutual) and received benefits between January 5 and July 19 totaling $99,656.96.

    During the course of his treatment for this injury, Nazari told an orthopedic surgeon that he needed a walker to stand and could not walk without using a walker.

    On April 11, a private investigator working for Liberty Mutual conducted a recorded surveillance session and saw Nazari enter his car and drive away. He saw Nazari return in the car, exit the car, and walk without using a walker and with a normal gait. Later that day, he saw Nazari walk unassisted to a car, remove a folding aluminum walker from the trunk, assemble the walker, and then carry the walker out of view. A few minutes later, he observed Nazari walking slowly with a walker for support to a medical transport van where the driver assisted him into the van. When the van returned to the residence, the investigator watched as Nazari used the walker to slowly ambulate up the driveway and out of view.

    During another surveillance session Nazari was videotaped carrying a small child in his arms, assisting the child into a vehicle, and driving away.

    Liberty Mutual deposed Nazari during the time between the video surveillance sessions. At the first deposition, the attorney representing Liberty Mutual observed Nazari enter the room using a walker, move very slowly while standing, and take "quite a bit of time" to sit into his chair. During his second deposition, Nazari claimed, among other things, that he has been unable to carry his child and could not drive because he used a walker. Liberty Mutual closed the investigation in August and reported the matter to the local District Attorney’s Office and California Department of Insurance.

    A criminal case was filed, and a jury found Nazari guilty of two counts of making false and fraudulent statements for the purpose of obtaining workers’ compensation benefits (Ins. Code, § 1871.4, subd. (a)(1)) and seven counts of attempted perjury under oath (Pen. Code, §§ 118, subd. (a) & 664). The trial court suspended imposition of sentence and placed Nazari on probation for two years, sentenced him to 365 days in jail as a condition of probation, stayed pending successful completion of probation, and ordered him to pay restitution totaling $53,879.44 at $100 per month. Nazari appealed his conviction.

    The Court of Appeal affirmed the trial court in the unpublished case of People v Nazari -D081940 (July 2024).

    The sole issue raised on appeal was the sufficiency of the evidence. Nazari contended the evidence was insufficient to show the statements he made to the orthopedic surgeon (1) were false and (2) made for the purposes of obtaining workers’ compensation benefits.

    Nazari contends the sub rosa videos of him walking and standing without the use of a walker after his April 1 visit do not show the falsity of his statements on April 1 because the orthopedic surgeon observed symptoms consistent with a back injury and he presumably received relief from the epidural injection.

    However the Court of Appeal noted that "there is no evidence in the record to support Nazari’s contention he received an epidural injection before he was subject to surveillance" And from the "videos, the jury could reasonably conclude Nazari misrepresented his pain level, faked reliance on the walker during his physical examination, and falsely told the orthopedic surgeon that he required a walker to stand or walk".

    Nazari next contends that his statements to the orthopedic surgeon were not made for the purposes of obtaining workers’ compensation benefits but for treatment. "However, a claims specialist at Liberty Mutual testified he 'very much' relies on statements a workers’ compensation claimant makes to medical professionals, as well as the claimant’s deposition testimony and medical records to determine what benefits will be paid to the claimant. Thus, Nazari’s statements to the orthopedic surgeon influenced the surgeon’s opinion that Nazari required further treatment and influenced Liberty Mutual’s decision to pay Nazari’s medical bills - a form of benefits."

  • Ransomware Takes LA Superior Court 36 Office Internal Systems Down
    on July 23, 2024 at 10:29 AM

    On Friday, July 19, 2024, the Superior Court of Los Angeles County announced that its Court Technology Services (CTS) Division identified a serious security event in the Court’s internal systems which was determined to be a ransomware attack. The attack began in the early morning hours of Friday, July 19. The attack is believed to be unrelated to the CrowdStrike issue currently creating disruptions to technology platforms worldwide.

    Immediately upon discovery of the attack, the Court disabled its network systems to mitigate further harm. The Court’s network systems will remain disabled at least through the weekend to enable the Court to further remediate the issue. The Court is receiving support from the California Governor’s Office of Emergency Services (CALOES) as well as local, state and federal law enforcement agencies to investigate the breach and mitigate its impacts. At this time, the preliminary investigation shows no evidence of court user’s data being compromised.

    Over the past few years, the Court said it "has invested heavily in its cybersecurity operations, modernizing its cybersecurity infrastructure and making strategic staff investments in the Cybersecurity Division within CTS. As a result of this investment, the Court was able to quickly detect an intrusion and address it immediately."

    By Sunday, July 21, the Superior Court provided an update and announced that the "Superior Court of Los Angeles County will be closed tomorrow, July 22, 2024, as the Court works diligently to repair and reboot network systems that were severely impacted by a ransomware attack first detected the morning of Friday, July 19. This closure includes all 36 courthouse locations throughout Los Angeles County."

    "The Court experienced an unprecedented cyber-attack on Friday which has resulted in the need to shut down nearly all network systems in order to contain the damage, protect the integrity and confidentiality of information and ensure future network stability and security," said Presiding Judge Samantha P. Jessner. "While the Court continues to move swiftly towards a restoration and recovery phase, many critical systems remain offline as of Sunday evening. One additional day will enable the Court’s team of experts to focus exclusively on bringing our systems back online so that the Court can resume operations as expeditiously, smoothly and safely as possible."

    The update said that "Court staff have been working vigorously over the past 72 hours in partnership with outside consultants, vendors, other courts and law enforcement to get the Court’s network systems back online. These systems span the Court’s entire operation, from external systems such as the MyJuryDuty Portal and the Court’s website to internal systems such as the Court’s case management systems."

    "While the team of experts has made significant progress, there remain some challenges that are delaying progress. With many of the Court’s network systems still inaccessible as of Sunday evening, the Court will close tomorrow in order to provide one additional day to get essential networks back online. At this time, the Court does not anticipate being closed beyond Monday, July 22. The Court recognizes the significance of a court closure on the communities it serves and the mission it abides by, however, it is essential that judicial officers and court staff are able to work in an environment that is safe and secure and with the information they need to meet the Court’s mission at their disposal. The Court is confident the closure will not exceed one day as it continues to make progress and overcome obstacles."

    At the end of Monday, July 23, the Superior Court of Los Angeles County announced it would reopen Tuesday, July 23, with many technology functions restored and some technology functions either operating with limited functionality or remaining offline after a ransomware attack first detected on Friday, July 19, left most of the Court’s internal and external systems inaccessible.

    Nonetheless, another announcement said that remote appearances would not be available today in Civil, Family Law, Probate and Traffic cases. Parties with cases on calendar today in Civil, Family Law, Probate and Traffic departments are instructed to appear in person if possible. Matters in which parties do not appear in person will be continued and parties will be notified of a continuance date by the Court.

    Electronic filing remains available for filing of case initiating documents only. Electronic filing of subsequent documents in existing cases remains unavailable at this time.
    Certain pages of the Court’s website at are available now. Other pages will come back online over the next few days as the remainder of the Court’s systems are brought back online.

  • Guidelines Specified for Severability of Unconscionable Arbitration Provisions
    on July 22, 2024 at 1:44 PM

    Charter Communications has nearly 100,000 employees and provides telecommunications services throughout the United States. Charter has adopted an alternative dispute resolution program called Solution Channel, which it describes as "the means by which a current employee, a former employee, an applicant for employment, or Charter can efficiently and privately resolve covered employment-based legal disputes."

    Charter job applicants had to agree to use Solution Channel. If a job offer was made, prospective employees used a computerized onboarding process. They were required to read several company documents and policies and to agree by use of an electronic signature. Thse documents included a Mutual Arbitration Agreement and the Solution Channel Guidelines.

    Charter hired plaintiff Angelica Ramirez in July 2019. Using the onboarding process, Ramirez accepted the proposed Agreement, including adherence to the Guidelines. In May 2020, Ramirez was fired. She sued Charter in July 2020, alleging claims for discrimination, harassment, and retaliation under the Fair Employment and Housing Act along with a claim of wrongful discharge in violation of public policy.

    Charter moved to compel arbitration. The trial court found that the Agreement was one of adhesion because it was required as a condition of employment and also concluded additional provisions were unconscionable. Finding the Agreement was "permeated with unconscionability," the court refused to enforce it and denied the motion to compel arbitration

    The California Supreme Court granted review of the to consider the remedy (among other issues). Should the courts have refused to enforce the agreement, or could they have severed the unconscionable provisions and enforced the rest?

    The Supreme Court concluded that the matter must be remanded for further consideration of this question in the case of Ramirez v. Charter Communications, Inc. -S273802 (July 2024).

    In its Opinion, the Supreme court agreed that some of the provisions of the Agreement were appropriately found to be unconscionable by the Court of Appeal, and disagreed in the reasoning of the Court of Appeals in others.  Many pages of the Opinion were dedicated to a discussion of the standards to be used in the analysis, and indeed are a clear guideline for employers who have agreements with employees as to arbitration of disputes.  However the Supreme Court when on to discuss the concept of severing the unconscionable provisions rather than refusing to enforce the agreement as a whole.

    Civil Code section 1670.5, enacted in 1979,codifies the principle that a court can refuse to enforce an unconscionable provision in a contract. Civ. Code, § 1670.5, subd. (a).) provides that "If a contractual clause is found unconscionable, the court may, in its discretion, choose to do one of the following: (1) refuse to enforce the contract; (2) sever any unconscionable clause; or (3) limit the application of any clause to avoid unconscionable results."

    The "strong legislative and judicial preference is to sever the offending term and enforce the balance of the agreement." Though the "statute appears to give a trial court some discretion as to whether to sever or restrict the unconscionable provision or whether to refuse to enforce the entire agreement," it "also appears to contemplate the latter course only when an agreement is ‘permeated’ by unconscionability." The trial court’s decision to act as Civil Code section 1670.5 permits is reviewed for abuse of discretion. (Murphy v. Check ’N Go of California, Inc. (2007) 156 Cal.App.4th 138, 144 (Murphy).)

    According to Charter, the Court of Appeal assumed that "while one or two provisions may be severed from an arbitration agreement, three or four is too many." Charter urges that there is no hard and fast rule regarding the number of provisions that may be severed from a contract.

    The Supreme Court noted that "some Courts of Appeal have treated the severance question as more of a quantitative inquiry than a qualitative one. (See, e.g., Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 90; Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494 at p. 515; Murphy supra, 156 Cal.App.4th at p. 149.) However, other courts have rejected the proposition that 'more than a single unconscionable provision in an arbitration agreement precludes severance.' (Lange, supra, 46 Cal.App.5th at p. 454.) "

    The Supreme Court then clarified by saying: "Here, we clarify that no bright line rule requires a court to refuse enforcement if a contract has more than one unconscionable term. . Likewise, a court is not required to sever or restrict an unconscionable term if an agreement has only a single such term. Instead, the appropriate inquiry is qualitative and accounts for each factor Armendariz identified. At the outset, a court should ask whether 'the central purpose of the contract is tainted with illegality.' " Other clarifying remarks on this topic were made in the Opinion.

    "The Court of Appeal’s judgment is reversed. The matter is remanded for further proceedings consistent with our decision." ... "On remand, the Court of Appeal may consider the severance question anew, in light of its answers to those questions, and in a manner consistent with this opinion."

  • DOI Calls for WCIRB Study of Workers' Compensation Silicosis Claims
    on July 22, 2024 at 1:44 PM

    In response to rising concerns over the prevalence of silicosis among California workers, the California Insurance Commissioner issued a letter to the Workers’ Compensation Insurance Rating Bureau (WCIRB) requesting a detailed study and data collection on silicosis claims.

    This request aims to better understand the impact of this serious occupational disease and ensure that affected workers receive the benefits they are entitled to.

    Silicosis is a progressive and incurable lung disease caused by inhaling crystalline silica dust, often during the cutting and finishing of engineered stone countertops, a consumer preference more prevalent in recent years. Reports indicate that this occupational hazard has been increasingly affecting workers, particularly young Latino men, since 2015.

    The Commissioner's letter highlights the urgency of addressing this issue and outlines specific data points that the WCIRB is requested to provide.

    The requested data includes:

    - - The number of silicosis cases filed in the past 10 years
    - - The average age of the claimants
    - - The percentage of claim acceptances and denials
    - - The average medical, temporary disability, and permanent disability costs associated with these claims
    - - The average allocated loss adjustment expenses on these claims
    - - The average number of insurers associated with each claim

    "We need to gather comprehensive data on silicosis claims to make informed decisions and protect California workers effectively," said the Insurance Commissioner in his letter. "This disease has a devastating impact on individuals and their families, and it is our duty to ensure they are supported."

    The California Department of Insurance said it remains committed to safeguarding consumers and will continue to work with the WCIRB and other stakeholders to address this critical issue.

  • S.F. Zen Center Worker Meets ADA Discrimination Ministerial Exception
    on July 18, 2024 at 12:05 PM

    The San Francisco Zen Center is the largest Soto Zen Buddhist temple in North America. It was formed to "encourage the practice of Zen Buddhism by operating one or more religious practice facilities and educating the public about Zen Buddhism."

    The Center operates three residential programs that build on each other. First, an individual can be a "guest student" who lives at the temple for two to six weeks. Second, an individual can be a Work Practice Apprentice (WPA) for a two-to-three-year residency. Third, an individual who completes a Work Practice Apprenticeship can be staff at the temple as a continuation of Zen training.

    WPAs follow a strict practice schedule of formal and work practice. Formal practice includes morning and evening meditations and services, soji (temple cleanings), dharma talks, classes, and a range of other events. Work practice includes things like cooking, dishwashing, cleaning, and doan ryo ceremonial tasks ‘which support the formal practice, such as ringing bells, cleaning altars, and watching the door during zazen meditations.

    Alexander Behrend became involved with the Center in 2014 after he was in a car accident that left him with physical disabilities and PTSD. Following his car accident, Behrend was unable to remain in his prior employment and therefore unable to afford his apartment. In 2016, he spoke with the Center’s head of practice because he was given a one-month notice of losing his housing. He then applied and was accepted as a guest student in November 2016. In January 2017, he was accepted as a WPA, where he received room and board at the center and a small stipend.

    Behrend was assigned to the maintenance crew in September 2018, but that work exacerbated his PTSD symptoms. Behrend sought accommodations, including moving off the maintenance crew, but eventually the Center "made a decision to end [his] participation in the Program."

    Behrend sued for disability discrimination under the Americans with Disabilities Act (ADA) in the Northern District of California, and the Center moved for summary judgment on its affirmative defense under the First Amendment’s ministerial exception.

    The district court granted the Center’s motion, determining that no party disputed that the Center is a religious organization and the undisputed facts established that Behrend fit within the ministerial exception. Behrend appealed, arguing that he was not a minister because he performed mostly menial work and did not have a "key role in making internal church decisions and transmitting the faith to others."

    The 9th Circuit Court of Appeals affirmed the district court’s grant of summary judgment in the published case of Alexander Behrend V. San Francisco Zen Center, Inc. -23-15399 (July 2024).

    The ministerial exception exempts a church’s employment relationship with its ‘ministers’ from the application of some employment statutes, even though the statutes by their literal terms would apply. The exception is grounded in both religion clauses of the First Amendment. The Establishment Clause prevents the Government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own.

    The ministerial exception was recognized to preserve a church’s independent authority to select, supervise, and if necessary, remove a minister without interference by secular authorities.

    Behrend argued on appeal that the exception only covers those with "key roles" in preaching and transmitting the faith to others. But precedent from the 9th Circuit and the Supreme Court evinces a much broader rule that covers positions like his.

    There is no "rigid formula for deciding when an employee qualifies as a minister." Hosanna-Tabor Evangelical Lutheran Church and School. v. EEOC, 565 U.S. 171(2012) at 190. In Hosanna-Tabor, the Supreme Court of the United States considered whether the exception applied to a "called" teacher at a Lutheran school who was commissioned by the Church after completing a special religious teaching program, and who taught elementary school math, language arts, social studies, gym, art, music, and religion to her students. Id. at 178.

    Even though only a small part of her day was spent actually teaching religion, the Court determined the exception applied, considering "all the circumstances of her employment." The Court found relevant that she was given a formal title by the Church, that she held herself out as a minister, and that she received the title after "a formal process of commissioning."

    "Here, the ministerial exception protects the Center’s ability to determine who may serve in its WPA program. While Behrend argues that he was not a minister because, as a WPA, he performed mostly menial work, there is no genuine dispute that '[w]ork itself is an essential component of Zen training and is indistinguishable from other forms of practice.' "

  • Federal Judiciary Has Systemic Sexual Harassment Protection Failures
    on July 18, 2024 at 12:05 PM

    In December 2017, the Chief Justice of the Supreme Court of the United States issued a call urging the Judiciary to ensure every employee of the Judiciary had a safe workplace. Shortly afterwards, the Federal Judiciary Workplace Working Group (WCWG) was created. From the recommendations provided by the working group, in 2019 the Judicial Conference adopted revisions to the Judiciary’s Codes of Conduct. In 2022, WCWG provided additional recommendations; however, many reforms remain to be implemented.

    California congresswoman Norma J. Torres (CA-35), a senior member of the House Appropriations Committee, just released a "startling" 200 page joint study by the National Academy of Public Administration and the Federal Judicial Center. The study as directed by Congresswoman Torres and funded by the Consolidated Appropriations Act of 2023, is an unprecedented joint report by the Federal Judicial Center (FJC) and the National Academy of Public Administration (NAPA) assessing the Judiciary’s internal systems to prevent and manage workplace sexual assault, harassment, and misconduct.

    The report details systemic failures of the Judiciary to prevent workplace sexual assault, harassment, and misconduct, including 34 recommendations for reform. It comes a week after U.S. District Judge Joshua Kindred, a appointed to the District of Alaska, resigned amid sexual misconduct claims. An internal investigation found Kindred had created a hostile work environment, encouraging his clerks to rate people based on sexual desirability. Kindred also had an inappropriate sexual relationship with one clerk.

    Courts are required to have employee dispute plans posted on their websites so workers know their rights. Investigators found that only 26% of public websites met all the requirements while 11% of court websites failed to include any workplace conduct information.

    "No American should suffer sexual misconduct, abuse, or harassment while on the job, yet it continues even in the halls of our judicial system where decisions about every aspect of our lives are made," said Congresswoman Norma Torres, "the era of judges abusing their power and taking comfort in an environment that rewards silence and fear are over."

    "It is disheartening to hear about incidents of sexual assault and harassment involving judicial employees who lack trustworthy and safe avenues to report and navigate these horrifying and traumatic encounters. The federal Judiciary must urgently establish robust systems to handle sexual harassment claims, because clearly its longstanding reliance on the good character and conduct of individuals alone has been grossly insufficient."

    "The report reveals startling findings, emphasizing the absolute need for internal reforms. We have waited on the Judiciary to prove it is capable of protecting its employees, and sadly it has failed to do so. Congress will be forced to step in."

    Background: Investigators interviewed a wide variety of employees from judges to Circuit Directors of Workplace Relations. The four main tasks this report assesses are the Implementation of the Model Employment Dispute Resolution (EDR) Plans, Monitoring and Assessing How the Resolution Processes Are Working, Educational and Outreach Efforts Related to Workplace Issues, and Evaluation of Public-Facing Judiciary Websites.

    Some of the findings include:

    - - No one entity in the Judiciary is tasked with overseeing the systems that prevent or confront misconduct. No one is tasked with monitoring or evaluating the implementation of the Informal Advice process or the formal employee dispute resolution (EDR) process with the exception of the appeals process, which the vast majority of victims never reach. No one is tasked with overseeing how cases are investigated, preventative training, and other preventative measures
    - - The Judiciary requires each court to have a plan to address employment disputes (EDR plan) and to post relevant information on its websites so that employees know their rights. Only 26% of public judiciary websites fulfill all the requirements of inclusion of workplace misconduct information. 11% of websites have NO workplace conduct information.
    - - The Law Clerk -Judge relationship is especially perilous, and the Judiciary should address underlying structural issues that create power imbalances.
    - - There is no national requirement for employees or judges to attend trainings or any preventative educational measures.

  • Privette Doctrine Applies to Injury Working Inside Jet Tank
    on July 17, 2024 at 12:58 PM

    While working inside a jet fuel tank at the San Francisco International Airport, Eugene Bowen fell from a ladder and was injured. Bowen attributed his fall to the flexible metal floor at the bottom of the fuel tank and the sand on that floor. The floor was made of pieces of metal welded together. When walked on, the surface would "raise up and down like a waterbed," "flex" and "pop and move." There was sand on the floor of the tank, underneath the ladder. Bowen did not notice the sand before he decided to use the ladder.

    At the time, Bowen was employed by sub-tier independent contractor Team Industrial Services, Inc.. He sued general contractor Burns & McDonnell Engineering Company Inc. and subcontractor HMT, LLC  who hired Team, alleging a premises liability cause of action based on defendants’ negligence and negligent supervision.

    The operative first amended complaint alleged a single cause of action for premises liability. Bowen averred defendants negligently owned, maintained, and operated premises with dangerous conditions that caused his injuries, including a ladder that was not properly secured to the scaffolding, an unbalanced floor, and debris on the floor.

    Bowen received workers’ compensation benefits through Team in connection with the incident.

    The trial court granted defendants’ respective motions for summary judgment based on the Privette doctrine (Privette v. Superior Court (1993) 5 Cal.4th 689 (Privette)), which limits a hirer’s liability for on-the-job injuries sustained by an independent contractor or its workers unless an exception applies.

    With respect to Burns, the court observed that it did not own, install, or tag the ladder or scaffolding, nor did it direct or control the means by which Team did its work. Relative to HMT, the court stated HMT demonstrated it had a contract with Team providing that Team would "furnish all material, equipment, and labor necessary to perform the work." Additionally, HMT presented evidence that it installed the scaffolding and ladder for its own work. Bowen did not dispute these facts or introduce evidence that Burns or HMT directed Teams or Bowen or required them to use HMT’s equipment. The court therefore entered judgment for defendants.

    The Court of Appeal affirmed the trial court in the published case of Bowen v. Burns & McDonnell Engineering Co., Inc. -A166793 (July 2024). (NOTE:The opinion in the above-entitled matter filed on June 17, 2024 was not certified for publication in the Official Reports.  For good cause, the request for publication by Association of Southern California Defense Counsel was granted.)

    Under the Privette doctrine, "a hirer is typically not liable for injuries sustained by an independent contractor or its workers while on the job." As originally articulated, the doctrine was grounded on the principle that it would be unfair for the hirer of an independent contractor to be held liable for injuries to a contractor’s employee when the contractor’s own liability would be capped by the limits of its workers’ compensation coverage.

    However, an exception to the Privette doctrine may exist when a hirer fails to effectively delegate all responsibility for workplace safety to the independent contractor. For the retained control exception to apply, there must be some indication the hirer directed that the contractor perform its work in a certain way or interfered with the means and methods by which the work was to be accomplished

    "Here, it is undisputed that the Privette doctrine applies, and Bowen bears the burden of raising a triable issue of fact as to the applicability of an exception to the doctrine." Bowen asserts that HMT "failed to meet its burden on summary judgment to show that there was no triable issue of material fact" regarding HMT’s retention of control over safety conditions; he further contends HMT "effectively" retained control because it was contractually responsible for the safety of its subcontractors and negligently set up a ladder and scaffolding for Bowen to use.

    "But these arguments erroneously place the burden on HMT to demonstrate the lack of a triable issue of material fact when it is Bowen’s burden to raise a triable issue of fact as to an exception to the Privette doctrine once defendants demonstrate the applicability of that doctrine."

    "Bowen has presented no evidence HMT directed his work or told him to use the scaffold it left in place for its own employees. In fact, the evidence indicates that HMT was completely unaware Bowen would use its ladder and scaffold."

  • Guardant Health, Inc. Agrees to Pay $914K to Resolve FCA Charges
    on July 17, 2024 at 12:58 PM

    Guardant Health, Inc., a precision oncology company based in Palo Alto, has agreed to settle allegations that it knowingly violated the False Claims Act, and regulations of the Defense Health Agency (DHA). In connection with the settlement, the United States acknowledged that Guardant took a number of significant steps entitling it to credit for cooperating with the government, including voluntarily disclosing the conduct to HHS-OIG. Guardant will pay $913,932.93 to settle the FCA allegations and $31,082.00 in an administrative settlement with DHA.

    As alleged by the government, in or around April 2021, a physician based in Austin, Texas contacted Guardant’s Human Resources Department to recommend a close friend of the physician’s family member for a position as an Account Manager in Guardant’s Oncology Division. Guardant hired the family friend as an Account Manager.

    In October 2021, the physician contacted Guardant again, this time seeking a position for his step-daughter upon her graduation from college. The step-daughter was considered but rejected for a position in Guardant’s Screening Division. However, in or around February 2022, two Guardant employees arranged for the family friend to be promoted, thereby creating an opening in the Oncology Division for employment of the step-daughter. These employees knew of the relationship between the step-daughter and the physician, and that the step-daughter was not qualified for the role. The physician then ordered significantly more Guardant tests per quarter after both hirings.

    Based on this conduct, the United States alleges that Guardant submitted claims to and received payments from Medicare for clinical laboratory services that had been referred to Guardant by the physician in violation of the Physician Self-Referral Law, or Stark Law, 42 U.S.C. § 1395nn. The United States further alleges that Guardant knowingly submitted or caused the submission of false claims for payment for Guardant tests ordered by the physician during the relevant time period to Medicare Part B in violation of the FCA and to TRICARE in violation of 32 C.F.R. § 199.9.

    Guardant cooperated with the government’s investigation of the issues and took prompt and substantial remedial measures. Shortly after receiving information regarding the physician’s referrals, Guardant stopped billing federal health care programs for Guardant tests ordered by the physician. Guardant also terminated the physician’s family memer’s employment.

    Assistant U.S. Attorneys Sharanya Mohan and Ekta Dharia handled this matter for the government, with assistance from Jonathan Birch. The investigation and settlement resulted from a coordinated effort by the U.S. Attorney’s Office for the Northern District of California, HHS-OIG, and DOD-OIG. Mr. Ramsey thanked HHS-OIG, DOD-OIG, and HHS’s Office of General Counsel for their assistance with this matter.

    The claims resolved by the settlement are allegations only, and there has been no determination of liability

  • SCOTUS Rules Insurers May Participate in Insured Bankruptcy Proceedings
    on July 16, 2024 at 10:12 AM

    Truck Insurance Exchange is the primary insurer for companies that manufactured and sold products containing asbestos. Two of those companies, Kaiser Gypsum Co. and Hanson Permanente Cement (Debtors), filed for Chapter 11 bankruptcy after facing thousands of asbestos-related lawsuits.

    As part of the bankruptcy process, the Debtors filed a proposed reorganization plan. That Plan creates an Asbestos Personal Injury Trust under 11 U. S. C. §524(g), a provision that allows Chapter 11 debtors with substantial asbestos-related liability to fund a trust and channel all present and future asbestos-related claims into that trust.

    Truck is contractually obligated to defend each covered asbestos personal injury claim and to indemnify the Debtors for up to $500,000 per claim. For their part, the Debtors must pay a $5,000 deductible per claim, and assist and cooperate with Truck in defending the claims.

    The Plan treats insured and uninsured claims differently, requiring insured claims to be filed in the tort system for the benefit of the insurance coverage, while uninsured claims are submitted directly to the Trust for resolution.

    Truck sought to oppose the Plan under §1109(b) of the Bankruptcy Code, which permits any "party in interest" to "raise" and "be heard on any issue" in a Chapter 11 bankruptcy. Among other things, Truck argues that the Plan exposes it to millions of dollars in fraudulent claims because the Plan does not require the same disclosures and authorizations for insured and uninsured claims. Truck also asserts that the Plan impermissibly alters its rights under its insurance policies.

    The District Court confirmed the Plan. It concluded, among other things, that Truck had limited standing to object to the Plan because the Plan was "insurance neutral," i.e., it did not increase Truck’s pre-petition obligations or impair its contractual rights under its insurance policies.

    The Fourth Circuit affirmed, agreeing that Truck was not a "party in interest" under §1109(b) because the plan was "insurance neutral."

    The United States Supreme Court Reversed in the case of Truck Insurance Exchange v. Kaiser Gypsum Company, Inc. No. 22-1079 (June 2024)

    An insurer with financial responsibility for bankruptcy claims is a "party in interest" under §1109(b) that "may raise and may appear and be heard on any issue" in a Chapter 11 case. Section 1109(b)’s text, context, and history confirm that an insurer such as Truck with financial responsibility for a bankruptcy claim is a "party in interest" because it may be directly and adversely affected by the reorganization plan.

    "Section 1109(b)’s text is capacious. To start, it provides an illustrative but not exhaustive list of parties in interest, all of which are directly affected by a reorganization plan either because they have a financial interest in the estate’s assets or because they represent parties that do. This Court has observed that Congress uses the phrase "party in interest" in bankruptcy provisions when it intends the provision to apply "broadly."Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U. S. 1, 7."

    "This understanding aligns with the ordinary meaning of the terms "party" and "interest," which together refer to entities that are potentially concerned with, or affected by, a proceeding. The historical context and purpose of §1109(b) also support this interpretation. Congress consistently has acted to promotegreater participation in reorganization proceedings. That expansion of participatory rights continued with the enactment of §1109(b).Broad participation promotes a fair and equitable reorganization process."

    "Applying these principles, insurers such as Truck are parties in interest. An insurer with financial responsibility for bankruptcy claims can be directly and adversely affected by the reorganization proceedings in myriad ways."

  • SIBTF Has Burden of Proof For L.C. 4753 Benefit Reductions
    on July 16, 2024 at 10:12 AM

    The Subsequent Injuries Benefits Trust Fund pays additional compensation to workers who suffer an industrial injury that, when combined with pre-existing disabilities, causes permanent disability equal to 70 percent or more. (Labor Code, § 4751. ) Section 4753 requires this additional compensation to "be reduced to the extent of any monetary payments received by the employee, from any source whatsoever, for or on account of such preexisting disability or impairment." This reduction or "credit" preserves state resources by ensuring applicants receive benefits commensurate with their combined disabilities - no more, no less.

    Nancy Vargas drove a bus for the Santa Barbara Metropolitan Transit District (district) for 25 years. She injured her foot in March of 2018 while stepping off the driver’s pedestal. Vargas settled her claim against the district in December of 2020. They stipulated the injury caused permanent disability of 26 percent and agreed on the amount of her weekly indemnity payments going forward.

    Vargas applied for subsequent injury benefits from the Fund while her workers’ compensation case was pending. She listed pre-existing disabilities to her back, upper extremities, left knee, and right ankle. She disclosed filing one prior workers’ compensation case. Vargas confirmed she had applied for SSDI in January of 2018 and was currently receiving monthly SSDI payments of $940.

    The Fund acknowledged Vargas qualified for benefits but claimed section 4753 credit for a significant portion of the Social Security Disability Insurance (SSDI) payments she began receiving after her latest injury.

    The WCJ found the Fund "ha[d] not met their burden to show an entitlement to credit for social security disability award nor any other disability retirement benefit." The Board denied the Fund’s petition for reconsideration, finding "section [4753] does not state that credit is absolute. [The Fund] would need to show that the monetary payment received is for or on account of such pre-existing disability or impairment. [It] did not show that in this case." The Board noted Vargas’s award letter and subsequent SSDI statements "did not describe the basis of the benefit." It concluded "[w]hat is before the court without assumptions does not establish credit and therefore no credit was awarded."

    The SIBTF filed a petition for review that challenges the Board’s decision. The Fund contends the Board erred by placing the burden of proof on the Fund to show Vargas received SSDI benefits "for or on account of" her pre-existing disabilities.

    The Court of Appeal affirmed the WCAB in the published case of Subsequent Injuries Benefits Trust Fund v. Workers Comp. App. Bd. -B333633 (July 2024).

    "We agree with the Board that the Fund must prove its entitlement to a credit for SSDI and other "monetary payments" received by applicants. The burden of proof in workers’ compensation proceedings "rests upon the party . . . holding the affirmative of the issue. (§ 5705.)"

    "Applicants must initially show they are entitled to subsequent injury benefits under section 4751 by proving: (1) they were "permanently partially disabled" and (2) they "receive[d] a subsequent compensable injury resulting in additional permanent partial disability."

    "The Fund must then show it is entitled to reduce the applicant’s subsequent injury benefit under section 4753, and, if so, the "extent" it may reduce those payments. Both sides must meet their burden by a preponderance of the evidence."

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