Author: WorkCompAcademy

There have been heated battles in courtrooms and appellate courts over a parties contractual right to arbitrate disputes. These battles are largely fought by plaintiffs lawyers seeking to avoid arbitration in favor of jury verdicts in forums such as employment law, PAGA actions, and other arenas. This month the arbitration battled was at issue again in the arena of uninsured motorist coverage which is part of most automobile insurance policies.

Kathryn Tornai had an automobile insurance policy with CSAA Insurance Exchange which provided uninsured motorist coverage of up to $300,000 per accident. On February 2, 2022, she was injured in a traffic accident with another driver. In September,Tornai settled with the driver’s insurance carrier for $25,000, his policy limits.

Tornai than made a written demand to CSAA Insurance Exchange under the policy for $275,000 – the policy limits of $300,000, less the $25,000 she had already received from the settlement with the UIM. CSAA Insurance Exchange refused to tender the $275,000 demanded, or make any offer.

She filed a lawsuit against CSAA Insurance Exchange for breach of contract and bad faith. The policy had a clause in the UM/UIM coverage endorsement, which read in part that the carrier would pay damages for bodily injury caused by the driver of an uninsured vehicle. “Determination whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by arbitration.”

CSAA Insurance Exchange filed a motion in Superior Court to compel arbitration of her underinsured motorist claim.

The trial court denied the motion, citing Insurance Code section 11580.2 and several cases. The trial court concluded that her “claims involve different alleged wrongdoing and disputes. She alleges [in her opposition] . . . , and provides evidence demonstrating, that after she made a demand under the Policy, Defendant unreasonably failed to investigate the claim or settle the claim, Defendant has failed to make any effort to address Plaintiff’s request for payment, resolve the matter in any way, or pay any funds whatsoever, even though Plaintiff demonstrated that her medical bills and expenses amount to $30,451.98, so that she is unequivocally entitled to at least that amount.”

The Court of Appeal concluded that the denial of arbitration was error, and reversed in the published case of Tournai v. CSAA Insurance Exchange -A167666 (Decided on 12/18/23, Certified for Publication on 1/11/24).

One of the issues raised by the Plaintiff was a claim the carrier “waived” arbitration for a number of reasons. One of them relied on was Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418 where the Supreme Court concluded that a health insurance carrier had waived its right to arbitrate a dispute by deliberately failing to advise its insureds of the availability of and procedure for initiating arbitration at the time it rejected the insureds’ claims.

However, in Davis the arbitration clause was ‘buried in an obscure provision of a hospitalization agreement, such that the carrier knew the insureds would not be aware of it, and that the insureds were proceeding without legal representation. In this case the Court of Appeal concluded that none of the concerns regarding “basic fairness of the arbitration process” presented in Davis exists in this case and that none of the Plaintiff’s claims of waiver were meritorious.  

Moving then to the arbitrability of the dispute, Insurance Code Section 11580.2 requires insurers to provide coverage for bodily injury or wrongful death caused by uninsured or underinsured motorists. The California Supreme Court in Bouton v. USAA Casualty Ins. Co. (2008) 43 Cal.4th 1190 explained, “section 11580.2, subdivision (f) requires the parties to arbitrate the narrow issues of whether the insured is entitled to recover damages from the uninsured or underinsured motorist, and if so, the amount of those damages.”

As such, “an insurer’s contractual right to arbitrate the value of a UIM claim does not prevent an insured from filing suit for bad faith.” Put slightly differently, “if the insured files a lawsuit for ‘bad faith’ before resolving the UM/UIM claim, the UM/UIM claim is still subject to arbitration, even if the ‘bad faith’ action is not subject to arbitration.”

The parties here “plainly failed to reach an agreement as to the amount of damages owed, thereby triggering the requirements of section 11580.2, subdivision (f) and the terms of the policy for arbitration of that issue.” Therefore that issue must be sent to arbitration pursuant to the policy and section 11580.2, subdivision (f).

In declining to order arbitration in this case, the trial court erred. It cited a number of reasons for its ruling, but in our view, none of those reasons justified the denial of defendant’s motion to compel arbitration. The Court of Appeal reviewed those cases including was McIsaac v. Foremost Ins. Co. Grand Rapids, Michigan (2021) 64 Cal.App.5th 418 (McIsaac), which “held that an insurer was entitled to arbitration under . . . section 11580.2(f) where there was a dispute over the amount of damages owed to the plaintiff, even though the plaintiff had brought a bad faith claim against the insurer”

“The quoted language plainly supports defendant’s right to compel arbitration of the amount of UIM damages.”

California Healthline reports that Gov. Gavin Newsom is revisiting California’s phase-in of a nation-leading $25 minimum wage for health workers in the face of a projected $38 billion deficit, less than three months after he approved the measure. But renegotiating wages could threaten a delicate compromise between unions and the health industry.

Newsom, whose administration initially opposed the wage deal as too costly, signed the bill, SB 525, into law without knowing the final price tag. His Democratic administration now projects the first-year cost to be $4 billion, though that number has been questioned by labor leaders.

Citing data from the U.S. Bureau of Labor Statistics, finance officials said the law would boost wages for at least 500,000 workers who directly provide health care, not including related employees like janitors, groundskeepers, and security staff who also are covered under the law. According to the Department of Finance, it would also increase wages for state employees and boost the cost of health services by increasing Medi-Cal managed care payments. About half that cost is expected to be paid by California taxpayers and the rest covered by federal payments to Medi-Cal providers.

The governor’s latest budget asks the state legislature to add an annual trigger making the minimum wage increases contingent on state revenues and to clarify which state employees are included, citing “the significant fiscal impact” of the law. Newsom acknowledged that negotiations are ongoing, a month after his office said talks would begin.

The governor insisted he had reservations all along and pledged to work with fellow Democrats, who control the legislature, to make the law more affordable. But the bill he signed did not include built-in triggers, such as those used by his predecessor, Democratic Gov. Jerry Brown, that could have delayed the increase in the face of a budgetary downturn. Newsom did, however, reject a number of spending bills last year.

David Huerta, president of Service Employees International Union California and SEIU United Service Workers West, said in a statement Jan. 10 that the union looks forward to working with the administration and the legislature “to ensure that these critically needed workforce investments are implemented while maximizing federal funds and holding the healthcare industry accountable for investing their resources in their workers and in patient care.”

Yet last month, SEIU-United Healthcare Workers West President Dave Regan asserted the state must “hold fast to its commitment.” SEIU-UHW is a local affiliate of SEIU California.

Assembly Speaker Robert Rivas, who helped negotiate the earlier deal, wouldn’t comment on reopening the negotiations, and State Sen. María Elena Durazo, the Los Angeles Democrat who introduced the bill, also declined comment.

The phase-ins are set to start in June, giving state officials time to roll them back before the new fiscal year.

Proponents of the law say it covers about 3,000 employees in the state departments of Corrections and Rehabilitation, Veterans Affairs, and Developmental Services because they operate facilities licensed as hospitals, clinics, or nursing homes. But undoing one portion of the law threatens to unravel the entire intricate compromise between labor and the health industry.

For instance, as part of the deal United Healthcare Workers West agreed in a separate memorandum of understanding to halt for four years its repeated attempts to impose regulations on dialysis clinics. The union also previously advocated for health worker minimum wage increases in several California cities. The compromise banned such local boosts for 10 years, a big relief to the California Hospital Association.

Finance Department spokesperson H.D. Palmer acknowledged the administration’s calculation did not include offsets such as a reduction in the number of lower-income workers relying on Medi-Cal.

California has clearly established a very liberal test to resolve the classification of an employee or independent contractor by its passage of AB-5 which codified the A-B-C test. For workers’ compensation claims under California jurisdiction, the A-B-C test is appropriate. However employers with out-of-state employees need to be aware that there are other standards.

For example, this week the Department of Labor published a final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, to provide guidance on whether a worker is an employee or independent contractor under the FLSA. This rule will help to ensure that workers who are employees are paid the minimum wage and overtime due them, and that responsible employers that comply with the law are not placed at a competitive disadvantage when competing against employers that misclassify employees.

Importantly, the final rule rescinds the Trump administration 2021 Independent Contractor Rule, which the DOL believes is out of sync with longstanding judicial precedent and increased the likelihood of misclassification. The new rule’s realignment of the department’s guidance with judicial precedent will reduce confusion, improve compliance and better protect working people.

Specifically, the final rule revises the department’s guidance by:

– – Returning to the multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA.
– – Explaining that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
– – Using the longstanding interpretation of the economic reality factors. These factors include opportunity for profit or loss depending on managerial skill, investments by the worker and the potential employer, the degree of permanence of the work relationship, the nature and degree of control, the extent to which the work performed is an integral part of to the potential employer’s business, and the worker’s skill and initiative.

The DOL claims that the “economic reality test in our new regulations is nimble enough to continue to provide a useful analysis for the broad range of work arrangements that exist today. The final rule will help the Wage and Hour Division to continue addressing misclassification and prioritizing the most vulnerable workers who are being misclassified – because that’s what we must do. In addition, the rule will help to ensure that independent contractors, including freelancers, who are in business for themselves are properly classified. We recognize that independent contractors play an important role in our economy – and this rule won’t change that.”

“Proper classification of employees and independent contractors results in workers who are employees under the FLSA receiving the hard-earned wages and protections they’re legally entitled to, while also ensuring that independent businesses continue to thrive. Employees across industries and workplaces should have access to both flexibility and essential worker rights.”

Workers and employers alike are urged to check out the DOL website to learn more about the new rule, which was published in the Federal Register on Jan. 10 and has an effective date of March 11.

Former California plaintiffs’ personal injury lawyer Thomas Vincent Girardi has been indicted by a federal grand jury for allegedly embezzling more than $15 million from several of his legal clients, and has been just been declared competent to stand trial despite his claim of advanced dementia.

Girardi owned the downtown Los Angeles-based Girardi Keese law firm. He was once a powerful figure in California’s legal community until creditors forced his law firm into bankruptcy in December 2020.  Along the way he had at least two claims to fame: he played a key role in winning a $333 million settlement for residents of Hinkley, California, in their lawsuit against Pacific Gas & Electric, a case that later became the basis for the film “Erin Brockovich.” Decades later, he and his wife Erika Jayne were cast on the reality show “Real Housewives of Beverly Hills.”

Last year, a Chicago law firm accused star Erika Jayne of acting as a “frontwoman” for her then-husband, Girardi. The court filing called Girardi’s now-shuttered law firm “the largest criminal racketeering enterprise in the history of plaintiffs’ law.”

Girardi gave more than $1 million in gifts and payments to a state bar investigator and his wife, according to a corruption probe released by the State Bar of California. During a 16-month investigation, the State Bar team reviewed over 950,000 documents, issued 23 subpoenas, and interviewed, either voluntarily or under compulsion, 74 witnesses.

The report indicated that Girardi intentionally cultivated relationships at many levels in the State Bar to increase his influence in the agency. The report outlines several instances of past State Bar staff exercising poor judgment, ignoring or poorly handling conflicts of interest, and otherwise behaving unethically. None of the individuals identified as engaging in unethical conduct remain affiliated with or employed by the State Bar. Girardi was finally disbarred in 2022.

And late last month, a Los Angeles federal judge ruled that Girardi is competent enough to stand trial despite claims he suffers from late-onset Alzheimer’s disease and dementia. The 52 page Order written by U.S. District Judge Josephine Staton was filed under seal until attorneys for both sides are able to decide whether any information – such as health records – should remain confidential. The Order was unsealed on January 5. The decision comes after the federal judge presided over a three-day hearing last year.

Girardi’s lawyers argued that he resides in a dementia ward because he has no short-term memory. They said he does not recognize them or remember the criminal case. They entered a plea of not guilty on his behalf last year due to competency concerns.

However, the Order noted that there “were no contemporaneous anecdotal reports (i.e., text messages, emails, letters) of Defendant’s alleged cognitive decline from 2017 through the end of 2020. The first of such anecdotal reports were made to Defendant’s lawyer and/or experts related to the conservatorship proceeding in 2021.” However a number of his acquaintances were interviewed and recalled a decline in his memory and performance after a motor vehicle accident and a subsequent fall both of which caused head injuries.

However there were many inconsistencies reviewed in the Order. For example the Judge noted that Girardi claimed difficulty remembering his wife of over 20 years, Erika, However the Order noted that during an interview with an evaluator he “refused to silence his cell phone, and took calls from his wife. Specifically, after having said earlier he did not remember having a third wife, he answered a phone call from the woman who had in fact been his third wife for twenty years, accurately remembering she was leaving for Spain on that day to film a television show and accurately identifying her as an ‘ex.’ “

Dr. Diana S. Goldstein, a psychologist retained by the Government, conducted a psychological and neurocognitive evaluation of Girardi on three consecutive days in late April 2023. Dr, Goldstein, said “Mr. Girardi’s clinical presentation is not one of severe amnesia, but in my opinion a deliberate attempt at deception, an intentional embellishment of mild cognitive impairment for secondary gain, in this particular matter, an adaptive attempt to avoid prosecution.” She opined that Girardi “meets both criteria of mental competency to stand trial.”

Dr. R. Ryan Darby, a neurologist with specialization in behavioral neurology and neuropsychiatry reviewed records and interviewed Girardi over the course of three days. Dr. Darby concluded that Girardi “is malingering or exaggerating the severity of his memory impairment.” And found his “patterns of confabulation to be atypical and non-credible.”

Dr. Darby went on to say Girardi’s decline in hygiene was noted to coincide with his forensic evaluations beginning in April 2023. Most notably, Defendant ‘began wearing the same burgundy sweater to all evaluations.  Dr. Darby found particularly probative the fact that, according to the assisted living staff, Girardi would search out the same clothes day after day. He explained that wearing the same clothes on successive days is found in “[p]atients with memory problems,” but that is because they simply “forget to change” clothes. Such patients typically “do not actively seek out dirty clothes to wear,” which tends to show intact memory rather than memory problems

The Order also noted that the “timing of Defendant’s reported symptoms is highly suspect. On November 21, 2020, Defendant moderated a panel and commented appropriately on the detailed presentations of four other successful trial lawyers. A mere three weeks later, on December 14, 2020, when Defendant was facing a civil contempt sanction and facing accusations that he unlawfully withheld settlement funds from his clients, the very first claim of ongoing mental impairment arose.”

The Judge concluded the timing of defendant’s reported symptoms and Multiple clinical observations by experts support a finding of partial malingering, and that he meets the competency criteria to stand trial.

Ariana Miles worked for Kirkland’s, a chain of home décor stores, from about February 2011 to July 2018. She alleges that Kirkland’s unlawfully required employees to (1) remain in the stores during their rest breaks, and (2) work off-the-clock by getting their bags checked after they had clocked out. Based on these two claims, Miles sought class certification for various subclasses for the class period from May 2014 to the present.

The district court denied class certification because it found that common issues failed to predominate over individual ones under Rule 23(b)(3) of the Federal Rules of Civil Procedure for both the Rest Break and Bag Check Claims.

For the Rest Break Claim, the district court assumed in part that on-premises rest breaks do not automatically violate California law. It then held that in the “absence of evidence that Kirkland’s Stores’ rest period policy, as implemented class-wide, violates California law,” it “‘would have to conduct individualized inquiries’ into whether each Subclass member was denied a duty-free rest break while being required to stay on premises.”

And for the Bag Check Claim, the district court denied certification because “there is insufficient evidence to demonstrate a general practice across Kirkland’s Stores’ California facilities of unlawful bag checks that predominates over individualized inquiries.”

The 9th Circuit Court of Appeals reversed the district court’s denial of class certification for the Rest Break Claim, affirmed the denial of certification for the Bag Check Claim in the published case of Miles v Kirkland’s Stores Inc., 22-55522 (January, 2024).

With regard to the Rest Break Claim, under California law, employers may not require employees to work during rest periods. Cal. Lab. Code § 226.7(b). California’s Supreme Court has interpreted Section 226.7(b) to mean that employers must “relinquish any control over how employees spend their break time.” Augustus v. ABM Sec. Servs., Inc., 385 P.3d 823, 826 (Cal. 2016) (citing Brinker Rest. Corp. v. Superior Court, 273 P.3d 513, 535-36 (Cal. 2012)).

With regard to the Bag Check Claim, under California law, employers must pay employees for all hours worked. Cal. Lab. Code § 1194(a).

Rule 23 requires the district court to engage in a rigorous analysis before certifying a class. Rule 23 is designed to promote efficiency and economy of litigation. “A party cannot plead or speculate her way to class certification. She must marshal facts showing, by a preponderance of the evidence, that class issues predominate.” She must “show that the common question relates to a central issue in her claim.”

For a wage and hour claim, an employer’s official policies are relevant to the Rule 23(b)(3) analysis,” but a district court abuses its discretion by “rely[ing] on such policies to the near exclusion of other relevant factors touching on predominance.”

Kirkland’s admitted that it had a “uniform employee handbook policy requiring employees to remain on premises during their 10-minute paid rest breaks until sometime in 2018.” But a company’s policy by itself – even if it remains constant during the class period – “is not an elixir that turns canned allegations in a complaint into a pot of class action gold.” Courts still need to look at evidence of whether the company consistently implemented and enforced the policy across all employees during the class period.

The district court, after examining declarations of nine employees, determined that it “would have to conduct individualized inquiries into whether each Subclass member was denied a duty-free rest break while being required to stay on premises.”

“But the district court appears to have misinterpreted those declarations. The declarations cited by the district court only discuss store conditions in 2021, not the entire class period from 2014 to the present. These declarations do not establish that Kirkland’s employees could have left the store premises for their rest breaks from 2014 to 2018.” And “Kirkland’s consistently enforced that policy across its stores from at least May 2014 to sometime in 2018.”

The 9th Circuit concluded that the district court erred in denying class certification of the Rest Break Claim, but that it properly denied certification of the Bag Check Claim. It remanded the case back to the district court to reassess the evidence and apply the remaining Rule 23 requirements to the Rest Break Claim, consistent with this opinion.