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Federal Judge George H. Wu was again scheduled to hear more arguments in his downtown Los Angeles Courtroom for and against imposing a preliminary injunction halting the implementation of newly adopted SB 1160. This new law provides for a stay on lien claims filed by indicted medical providers until after their case has been resolved.

Dr. Eduardo Anguizola is facing multiple counts of insurance fraud filed by Orange County prosecutors. His federal lawsuit claims that SB 1160 and Labor Code 4615, the anti-fraud law that took effect January 1, violates the 5th, 6th, and 14th amendments of the United States Constitution. His request for a preliminary injunction was originally scheduled for hearing on July 13, 2017 and the motion was continued to August 24 to allow additional briefing.

Plaintiffs argued that Labor Code 4615 violates the procedural component of the due process clause because it immediately stays all liens without notice or a hearing. The defendants responded that Section 4615 affords sufficient process because Plaintiffs still have the same rights afforded to them by the workers’ compensation scheme generally. However in the Tentative Ruling Judge Wu pointed out that “Defendants do not explain how these pre-existing procedures would actually be used to challenge a stay imposed by Section 4615.” He thus provided the parties additional time before the August 24 hearing to provide information about how due process might be afforded lien claimants under 4615.

The 18 page Tentative Ruling by Judge Wu in July focused the case on the narrow issue of a “facial” challenge to newly adopted Labor Code Section 4615 which implements SB 1160. He ruled that to succeed in a facial challenge to a statute a plaintiff must establish that a law is unconstitutional in all of its applications. Because facial constitutional challenges often rest on speculation, they are disfavored. Thus, the fact that a statute “might operate unconstitutionally under some circumstances is not enough to render it invalid against a facial challenge.”

Between July 13 and August 24 many additional arguments and declarations were filed by both parties. The Defense filed a 117 page Declaration of Workers’ Compensation Chief Judge Paige Levy that clearly articulated how lien claimants subject to 4615 have rights to due process under the new law, and indeed attached several illustrative cases on the stay law that have been decided by either Removal or Reconsideration by the WCAB. Essentially several panel decisions have held that any lien claimant who asserts they do not fall subject to the stay have the right to have their argument heard and decided upon filing a DOR on the issue. Any WCJ that had refused to do so was overturned. Judge Levy pointed out the statutory and regulatory provisions that allowed lien claimants to challenge the application of the “automatic stay” to their individual cases.

Plaintiffs responded to the Levy declaration by claiming “The State knows that the statute is unconstitutional on its face and that the statute provides no mechanism for due process to those affected by the statute. … Because of the clear lack of due process – on its face – the State had no choice but to throw a ‘Hail Mary.’ Behold the declaration of Paige Levy.” They asked for expedited discovery to depose Judge Levy.

The outcome of the August 24 hearing according to the minute order was “Court and counsel confer re scheduling. For reasons stated on the record, Plaintiffs’ motion is continued to September 25, 2017 at 8:30 a.m., with Plaintiffs’ supplemental declaration due by September 12, 2017. Defendants will respond by September 20, 2017.”  Thus the outcome of this case will not be known at least until the end of September.