Based upon stipulated language, federal judge Wu will issue a preliminary injunction ending the application of the new lien activation fee imposed by SB 863. The order applies to all lien holders, not just the few who were plaintiffs in the federal lawsuit filed last summer. The order reads

“1. Defendants are hereby enjoined and restrained from enforcing the lien activation fee provisions of SB 863, which are codified at Cal. Lab Code § 4903.06, against any workers’ compensation lien holder, including Plaintiffs. Specifically, Defendants shall not:
a. Subject any existing workers’ compensation lien holder to a lien activation fee pursuant to Cal. Lab. Code. § 4903.06(a).
b. Require or collect payment of any activation fee on any existing lien, electronically or otherwise, pursuant to Cal. Lab. Code §§ 4903.06(a)(1) and (a)(3).
c. Require any lien claimant to provide proof of payment of a lien activation fee with any declaration of readiness to proceed, pursuant to Cal. Lab. Code § 4903.06(a)(2).
d. Require any lien claimant to provide proof of payment of a lien activation fee at the time of any lien conference, pursuant to Cal. Lab. Code § 4903.06(a)(4).
e. Dismiss any lien for failure to pay an activation fee by the time of any lien conference, pursuant to Cal. Lab. Code § 4903.06(a)(4).
f. Dismiss any lien for which an activation fee has not been paid prior to January 1, 2014, pursuant to Cal. Lab. Code § 4903.06(a)(5).
g. Enforce any issued emergency regulations or any final regulation implementing any provision of Cal. Lab. Code § 4903.06.
h. Take any other action, whether or not listed above, intended to effectuate or enforce any provision of Cal. Lab. Code § 4903.06.
2. This injunction shall take effect seven days from the date of this order.
3. This injunction shall apply to all Defendants as well as any of Defendants’ officers, agents, servants, employees and attorneys. This injunction shall further apply to any other persons who are in active concert or participation with Defendants or Defendants’ officers, agents, servants, employees and attorneys. Fed. R. Civ. P. 65(d)(2).
4. The Court’s reasons for issuing this injunction are contained in a forthcoming opinion, as well in the transcripts of proceedings held on November 4 and 7, 2013. Fed. R. Civ. P. 65 (d)(1)(A).
5. This injunction shall be in effect until further order of the Court.”

The DIR may appeal this decision to the 9th Circuit Court of Appeals, and if unsuccessful to the U.S. Supreme Court. For some time, the 9th U.S. Circuit Court of Appeals has suffered a reputation as being the circuit most at odds with the U.S. Supreme Court. The San Francisco-based court has been perceived as the most liberal in the nation and has frequently been the most reversed among the circuit courts, with one term in the mid-1990s seeing 27 of its 28 decisions reversed or vacated by the high court.

The injunction in this case was based upon federal civil rights law contained in 42 U.S.C. § 1983. The Civil Rights Attorney’s Fees Awards Act of 1976 provides that one who prevails in a section 1983 action is entitled to recover attorneys’ fees. It is unclear if these lien claimants will claim, or recover attorney fees in addition to the injunction they have obtained. Typically the request for an attorney fee is made after the litigation has become final.

The workers’ compensation industry had hoped that hundreds of thousands of dormant liens – with no activation fees paid – would be deemed invalid as a matter of law on January 1, 2014. This would have cleared the system of a longstanding backlog. Unless the 9th Circuit Court of Appeals reverses the injunction, this hoped for outcome of SB. 863 legislation will not be the case this January.