Angelotti Chiropractic, Mooney and Shamsbod Chiropractic, Christina-Arana and Associates, Joyce Altman Interpreters, Scandoc Imaging and Buena Vista Medical Services filed a lawsuit last July in the United States District Court contesting the constitutionality of certain provisions of SB 863, and seeking to avoid payment of millions of dollars in lien activation fees before the end of 2013. The suit requests declaratory, injunctive and other relief. Plaintiffs allege that they filed valid liens prior to December 31, 2013 that constitute “vested property rights.” They allege that the mandatory dismissal provisions of the activation fee law unconstitutionally interferes with those rights.

Christina Arana and Associates Inc. holds approximately 4,500 liens, Joyce Altman Interpreters, Inc. holds approximately 4,745 liens, Sandoc Imaging Inc. holds approximately 2,300 liens and Buena Vista Medical Services Inc. allege they hold approximately 20,888 liens. In total Plaintiffs allege they hold “tens of thousands of liens” which require activation fees in an amount of “more than $2 million” and the Plaintiffs allege they presently lack the ability to pay the lien activation fees.

In September, the Defendants Christine Baker, Ronnie Caplane and Destie Overpeck filed a motion to dismiss the lawsuit. The hearing was set for October 24.

With respect to the constitutional issue, the DIR argued that In order to state a claim under the Fifth Amendment’s takings clause of the US Constitution, “a plaintiff must establish that he possesses a constitutionally protected property interest” and that his property was taken without just compensation. Two categories of regulatory action generally will be deemed per se takings for Fifth Amendment purposes. First, where government requires an owner to suffer a permanent physical invasion of its property, it must provide just compensation. A second categorical rule applies to regulations that completely deprive an owner of all economically beneficial use of the property. The DIR argues that Plaintiffs’ liens are not protected property rights for purposes of the takings clause because, under California law,Plaintiffs’ rights to recover on the liens are not vested interests. Unlike a common law right, a statutory remedy does not vest until final judgment. When a pending workers’ compensation claim rests solely on a statutory basis, and when the rights under the statute have not vested in a final judgment, the legislature can modify or entirely repeal the right at any time. Numerous citations were given in the DIR brief to support this argument.

In October, the California Chamber of Commerce entered the litigation requesting a order allowing them to appear as “amicus” or friend of the court, and participate in the debate. Its Amicus Brief supports the arguments provided by the DIR. Essentially it argues that there is no vested property rights in a pre-judgment lien, and cites California Court of Appeal cases in support of this argument.

To balance the litigation, the California Society of Industrial Medicine and Surgery (CSIMS), and the California Workers’ Compensation Service Association, (CWCSA) also requested an order allowing it to appear as amicus in the case. Its filing claims that CSIMS is a non-profit organization comprised of individual physicians, medical service providers and medical groups that provide medical-legal evaluation and medical treatment to California’s injured workers. And CWCSA says it is a non-profit organization representing the individuals and entities that provide document recovery, reproduction, retention and management, language interpretation and translation services, medical transportation and other services to assist California’s injured workers.

CSIMS and CWCSA argue that implementation of the activation fee results In three separate acts of impermissible taking of property rights and also deprives the plaintiffs of due process. Because of the retroactive activation fee requirement it says that “many members of CSIMS and CWCSA will be deprived of their opportunity to be heard, because due to the financial costs, they will not even make it to Court and incur an automatic dismissal without a hearing.” The final section of its brief pleads “Don’t Destroy the System.” It goes on to claim that “amici believe that the retroactive application of an “activation” fee on individuals liens that span decades of time should be viewed as an impact that is so negative that the transactional instability resulting from the imposition of unforeseen costs would adversely impact the entire Act and cause all injured workers who require service to be shunned and viewed as undesirable.”

Unfortunately, the Motion to Dismiss was not heard on October 24 as scheduled. Judge Wu continued the hearing to November 4, 2013 at 8:30 am. After reading the voluminous documents filed in this case by both sides thus far, it would seem that the Plaintiffs will have an uphill battle on that day as they attempt to convince a federal judge that there is good cause to proceed in federal court with a case that seeks to find the imposition of a lien filing fee by the WCAB to be a violation of the US Constitution.