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On April 26, 2009, applicant Luis Enriquez was working on a farm when he was gored by a bull, ultimately resulting in his death. Mercy Air Services provided air ambulance services by airlifting Enriquez from the injury site to a hospital in Modesto, a distance of about 26 miles. Mercy billed Zenith in the amount of $11,132.93. Pursuant to AD Rule 9789.70(a), Zenith reimbursed Mercy in the amount of $4,756.42.

Administrative Director Rule 9789.70(a) provides, in relevant part, that “[t]he maximum reasonable fee for ambulance services rendered after January 1, 2004 shall not exceed 120% of the applicable fee for the Calendar Year 2004 set forth in CMS’s Ambulance Fee Schedule, which is established pursuant to Section 1834 of the Social Security Act (42 U.S.C. § 1395m) and applicable to California.” (Cal. Code Regs., tit.8, § 9789.70.)

The workers’ compensation judge concluded that, to the extent it purports to apply to air ambulance services covered by the federal Airline Deregulation Act of 1978 (“ADA”), AD Rule 9789.70 is preempted by federal law. The WCJ therefore found that “on April 26, 2009, [AD Rule 9789.70] did not apply to the provision of air ambulance services[,]” and that “lien claimant Mercy Air Services has established that the reasonable value of its services on behalf of defendant’s employee Luis Enriquez on April 26, 2009 is $11,132.93.” The WCJ ordered Zenith Insurance Company to pay that sum to Mercy.

Zenith petitioned for reconsideration in the case of Luis Enriquez (deceased) v Couto Dairy and Zenith Insurance Company, contending that (1) by making a substantive ruling on preemption, the WCJ exceeded his authority under the California Constitution; (2) the WCJ erred in concluding that AD Rule 9789.70 is preempted by the ADA; and (3) if the ADA preempts Rule 9789.70, it also preempts Labor Code section 4600, in which case Zenith allegedly “owes Mercy nothing.”

An amicus brief and request for an en banc decision was filed by California Shock Trauma Air Rescue and Reach Air Medical Services, two air ambulance companies who allege they have hundreds of pending lien claims similar to Mercy’s.

Article III, section 3.5(c) of the California Constitution declares that “[a]n administrative agency … has no power … [t]o declare a statute  unenforceable, or to refuse to enforce a statute  on the basis that federal law … prohibit[s] the enforcement of such statute  unless an appellate court has made a determination that the enforcement of such statute  is prohibited by federal law …” (Italics added.). The WCAB noted however that “it has no bearing on the Appeals Board’s ability to declare a regulation   preempted by federal law. This is because the provision refers only to an administrative agency’s lack of power “[t]o declare a statute unenforceable[.]” As further discussed below, we are finding preemption of AD Rule 9789.70, a regulation“.

However, the WCAB concluded that Mercy has the burden of showing that it is an air carrier subject to the provisions of the ADA. In order to be considered an “air carrier” under the ADA’s preemption provision, the air ambulance provider must show all of the following: (1) it is a “citizen of the United States undertaking by any means, directly or indirectly, to provide air transportation” (49 U.S.C. § 40102(a)(2); (2) it provides foreign, interstate, or mail transportation by air as a common carrier (49 U.S.C. § 40102(a)(5), (25));13 and (3) it is subject to regulation under 49 U.S.C. §§ 41101 et seq. (Med-Trans Corp., supra, 581 F.Supp.2d at 731-732.) Of course, air ambulance liens do not involve either foreign air transportation or the transportation of mail. Therefore, the essential question is whether the air ambulance “may provide” interstate air transportation.In this case, the record requires clarification as to whether Mercy is an “air carrier that may provide air transportation” within the meaning of the preemption provision of the ADA.