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Alejandro Chavero Velazquez was employed as a tile setter. In 2018, he was working for his employer on a tile project at the residence of a customer. While working at the residence, Velazquez reportedly suffered a dog bite injury by the homeowner’s dog. He was apparently diagnosed with nerve damage and “complex regional pain syndrome” and underwent several surgeries.

A workers’ compensation case was opened against his employer and the workers’ compensation carrier, NorGUARD Insurance Company. He also filed a personal injury action against the homeowners. One of the disputed issues in the personal injury action was his claim of complex regional pain syndrome. Employer fault was not raised or litigated in the personal injury action. In May 2020, in the personal injury action, NorGUARD filed a notice of lien in the amount of $89,176.27 relating to workers’ compensation benefits that had been paid to Velazquez.

The homeowners had an insurance policy with a $1 million limit. They settled appellant’s personal injury action for the policy limit. The settlement agreement provided that the homeowners’ insurer would pay a portion of the settlement to appellant’s personal injury attorneys and that the amount would not be disbursed by the attorneys until the workers’ compensation lien was resolved. Specifically, the settlement agreement stated that the homeowners’ insurer would pay “$109,587.11 to be held in trust and not disbursed at all until the WC lien is fully resolved by settlement or judicial order payable to the LAMB and FRISCHER Law Firm IOLTA client trust account.” Velazquez’s attorney and NorGUARD’s attorney signed the settlement agreement, approving it “as to form and content,” in January 2022.

NorGUARD and Velazquez were unable to settle the workers’ compensation lien. The parties disagreed regarding the amount by which the lien should be reduced for attorney’s fees and the extent, if any, of employer fault. As a result, NorGUARD filed a civil action against Velazquez for breach of contract, alleging that Velazquez’s “failure to perform under the [settlement agreement] by payment to [respondent] of its workers’ compensation benefits constitutes a material breach of the [settlement agreement] . . . .”

Velazquez filed a special motion to strike the breach of contract cause of action under Code of Civil Procedure section 425.16, commonly known as the anti-SLAPP statute, which provides that a cause of action arising from constitutionally protected speech or petitioning activity is subject to a special motion to strike unless the plaintiff establishes a probability of prevailing on the claim. (§ 425.16, subd. (b)(1).) The trial court denied his anti-SLAPP motion.

Velazquez appealed,contending that the trial court erred in denying his anti-SLAPP motion and that in any event, the Workers’ Compensation Appeals Board (WCAB) has exclusive jurisdiction over this case because it involves an issue of whether the employer was at fault for appellant’s injury.

The Court of Appeal affirmed the trial court’s order in the unpublished case of NorGUARD Insurance Company v. Chavero Velazquez -H050725 (March 2014).

The parties disagree whether this breach of contract action involving respondent’s lien may be litigated in the trial court or must be determined in the workers’ compensation forum. Depending on the circumstances, the issue of employer negligence may be adjudicated in court or in the workers’ compensation arena. (See, e.g., Short v. State Compensation Ins. Fund (1975) 52 Cal.App.3d 104, 107.)

The Court of Appeal concluded tha Velazquez failed “to persuasively demonstrate that the WCAB has exclusive jurisdiction over the issue of employer negligence in the context of respondent’s breach of contract action. On this point, we find Marrujo v. Hunt (1977) 71 Cal.App.3d 972 (Marrujo) instructive.” In the present case, employer fault was not raised in the personal injury action against the homeowners. If the issue had been raised, the employer or carrier could have filed a complaint in intervention to protect a claim for reimbursement.

Velazquez contended that the lawsuit was a SLAPP (SLAPP is an acronym for strategic lawsuit against public participation,) because NorGUARD’s breach of contract claim “interfere[d] with [his] efforts in petitioning” the WCAB. The workers’ compensation attorney stated that the “issue of employer fault and how it will affect the lien and credit rights of [Velazquez]” are “currently being litigated” in the workers’ compensation case. It thus appears that “the proceeds of the settlement were subject to [respondent workers’ compensation carrier’s] lien in the amount of the benefits paid by it.” “In sum, appellant fails to establish that the trial court is an improper forum for resolving the dispute over respondent’s lien.”

In opposition to the anti-SLAPP motion, NorGUARD contended that it sought to enforce its subrogation rights under the Labor Code through its breach of contract action and that the action did not infringe upon appellant’s right to free speech or to petition the government.

In this case, although respondent’s breach of contract action was filed after appellant’s petitioning activity in the workers’ compensation arena, and even assuming appellant’s petitioning activity triggered respondent’s breach of contract claim, we determine that respondent’s breach of contract claim did not “aris[e] from” appellant’s petitioning activity (§ 425.16, subd. (b)(1)). Rather, the basis for respondent’s breach of contract claim, as alleged in the complaint, is appellant’s failure to pay.”