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Orthopedists Increase Use of Orthobiologics Over Surgical Intervention

Regenerative medicine is a new field of medicine in which orthopedic surgeons aim to move away from replacement and toward joint preservation. Using orthobiologics, they plan provide the body with the cells, materials, and stimulation it needs to heal without you ever going under the knife.

According to the report on News-Medical.net, the promise of regenerative medicine in orthopedics is a future where a joint replacement can be delayed for as long as possible, perhaps offering a solution to long transplant waiting lists for other disciplines of medicine. The main debate in orthobiologics is whether the body of evidence currently supports incorporating regenerative medicine techniques into national guidelines and conventional treatment strategies.

Case studies and anecdotal evidence often support orthobiologics (biological substances orthopedics surgeons can use to help the body heal) as a treatment option. However, the size and consistency of available studies are still a problem. There is plenty of evidence to support regenerative medicine techniques in specific circumstances such as osteoarthritis and tendinopathy. Still, a broader evidence base will be required before these treatments are accepted as standard practice in wider orthopedic circles.

The idea behind regenerative medicine isn’t new. More recently, regenerative medicine has focused on the implantation of cells to initiate healing in musculoskeletal structures, with the introduction of modern interventions such as platelet-rich plasma, mesenchymal stem cells, and injections of biomaterials that can induce a healing response.

Modern orthopedic regenerative medicine treatments still struggle to find a place within standard practice and large healthcare organizations, owing to the debate over whether the evidence base currently supports its use. Therapies such as platelet-rich plasma and adipose (fat cell) derived stem cell injections often require patients to pay out of pocket as insurance companies refuse to cover these forms of treatment.

There is, however, a growing number of practitioners who use orthobiologics as part of their standard practice. With a growing evidence base, these practitioners have started to treat conditions such as osteoarthritis and tendinopathy in this way, offering treatments including injection of:

– – Platelet-rich plasma – blood plasma with a high concentration of platelets taken from the patient’s blood.
– – Mesenchymal stem cells – stem cells sourced from fat tissue, bone marrow, and pregnancy-related sources such as the umbilical cord, amniotic fluid, and the placenta.
– – Biomaterials – biological substances such as autologous chondrocytes (cells taken from the patient which produce cartilage), bovine collagen, bone matrix, and proteins.

These orthobiologics are generally considered conservative treatments, meaning they are used as a less invasive alternative to surgery or as an additional option when other treatments have failed.

The popularity of orthobiologics is increasing, in no small part due to media coverage of famous athletes undergoing these procedures – Tiger Woods, Steph Curry, and Raphael Nadal, to name just a few. This may have added to the controversy surrounding regenerative medicine. In these circumstances, therapies were used to treat injuries and aid post-surgical healing – an area with less research backing.

Regenerative medicine holds the promise of delaying and possibly reducing surgical intervention in patients with degenerative joint conditions and musculoskeletal injuries. In the near future, we may see orthobiologics used as a middle-ground for conditions like arthritis, sitting somewhere between conservative treatment (such as steroid injection) and surgery.

In the far future, we may even see a complete overhaul of how we replace joints – moving away from metal and ceramic joint replacements towards biological replacement and regeneration. We can also expect a move towards orthobiologic injection as a preventative measure for degenerative joint conditions.

Two Defendants Settle for $54M as SF Opoid Trial Enters Closing Arguments

San Francisco City Attorney David Chiu announced on Tuesday that he has reached a $54 million settlement agreement with two opioid defendants that will go towards addressing the opioid crisis in San Francisco. Under the agreement in principle, opioid manufacturers Allergan and Teva, will pay San Francisco $34 million in cash payments and provide the City $20 million worth of the overdose reversal drug, Narcan.

This settlement stems from ongoing litigation San Francisco brought on behalf of the People of the State of California against the opioid industry. Following this agreement, Allergan and Teva will be severed from the trial, and closing arguments against the remaining defendant, Walgreens, will continue. The bench trial began on April 25, 2022.

Over the course of this litigation, the City Attorney’s Office has thus far secured over $120 million in cash payments and other benefits from the opioid industry to go towards opioid abatement and overdose prevention in San Francisco.

In 2018, the San Francisco City Attorney’s Office filed this landmark case on behalf of the People of the State of California alleging that the corporate practices of opioid manufacturers, distributors, and dispensers fueled a widespread surge of opioid-related addiction and overdose in San Francisco, creating an ongoing public nuisance in the region.

The lawsuit alleges that the remaining defendant, Walgreens, over-dispensed opioids without proper due diligence and failed to identify, divert, and report suspicious orders as required by law.

The People are seeking funds to abate the public nuisance as well as injunctive relief and civil penalties to repair the damage caused from the opioid epidemic and prevent such practices in the future. The bench trial is currently underway in the U.S. District Court for the Northern District of California with Judge Charles R. Breyer presiding.

As a result of the City’s litigation, the City Attorney’s Office secured a $10 million settlement agreement with the pharmaceutical company Endo at the start of the trial, and the City previously approved a $60 million settlement with opioid manufacturer Johnson & Johnson and distributors McKesson, Cardinal, and AmerisourceBergen. Additionally, San Francisco is likely to receive funding from the bankruptcy estate of Purdue Pharma and the Sackler family.

This trial is the fourth bellwether case in the federal opioid litigation proceeding involving more than 3,000 American cities, towns, and counties, bringing opioid manufacturers, distributors, and pharmacy chains to court for fueling the opioid epidemic. The case will serve as a test trial to help reach resolutions and seek accountability for the destruction these companies caused.

Controversial New City of LA Healthcare Worker $25/hr Minimum Wage

On July 8, Los Angeles Mayor Eric Garcetti signed an ordinance establishing a $25 minimum hourly wage for workers at eligible privately owned healthcare facilities. The signing came after the Los Angeles City Council voted unanimously June 29 in favor of raising the minimum wage.

The ordinance will affect workers in a range of roles at certain privately owned healthcare facilities in the city, such as acute care hospitals, affiliated clinics and skilled nursing facilities. Affected roles include clinicians, nurses, aides, technicians, maintenance workers, janitorial or housekeeping staff, groundskeepers, guards, food service workers, pharmacists and administrative or clerical workers. The increase excludes managers and supervisors.

According to a July 8 news release from the mayor’s office, the new minimum wage becomes effective 31 days after the ordinance is published. The office estimates the minimum wage increase will affect about 20,000 healthcare workers.

SEIU-UHW originally collected more than 145,000 signatures to put the pay increase on the Nov. 8 ballot. Councilmen Curren Price and Marqueece Harris-Dawson decided to move more quickly, pushing their colleagues to adopt the measure immediately.

But some are not happy with the new law.

A coalition of Los Angeles hospitals and other health facilities launched a campaign on Tuesday to repeal a newly enacted ordinance boosting the minimum wage for thousands of healthcare workers to $25 per hour, saying the law will have a harmful effect on medical care across the city. The coalition acted just days after Mayor Eric Garcetti signed the measure into law.

The No on the Unequal Pay Measure Coalition, a group sponsored by the California Assn. of Hospitals and Health Systems, said it will start gathering signatures this week for a referendum to put the wage hike question in front of voters.

The coalition claims that the new $25/hr minimum wage standard applies to certain workers at private hospitals, hospital-based facilities and dialysis clinics, but completely excludes workers who do the exact same job at public hospitals, clinics, and health care facilities, including all University of California and county hospitals and clinics.

The also complain that the measure also completely excludes workers at health care facilities not affiliated with hospitals, including community health clinics, Planned Parenthood clinics, nursing homes, medical centers, and more.

They say “hospitals and health care providers go to great lengths to pay all health care workers competitive, living wages with strong benefits. In fact, the average nurse working in a Southern California hospital earns $57 per hour, the average clinical worker earns $28 per hour, and the average non-clinical worker in a hospital earns approximately $18 per hour.”

To qualify the referendum for the ballot, the coalition would need to gather nearly 41,000 valid signatures from L.A. voters within 30 days. Such a move, if successful, would block the wage increase from going into effect – at least until an election to determine its fate.

A Los Angeles Times report on the new law says that at Gateways Hospital and Mental Health Center in Echo Park, administrators said they are weighing whether to scale back operations – possibly by as much as 20% – as a way of absorbing the increased costs. That 300-bed psychiatric facility serves a large number of people who are either homeless or at risk of becoming homeless, hospital CEO Phil Wong said in an interview.

In Woodland Hills, the nonprofit Motion Picture and Television Fund is now looking at how to cover a $1.5-million yearly increase in labor costs, according to Bob Beitcher, the fund’s chief executive. That increase is currently set to take effect in August.

Beitcher said some security guards at the motion picture fund’s 300-bed campus, which provides care for seniors who have retired from the entertainment industry, would receive pay increases of 40% to 50%. Some nursing assistants would see pay hikes of 30% to 40%, he said.

“The only way we could absorb that is either to cut back on services, which isn’t something we’d like to do, or fundraise another million and a half [dollars] per year,” he said.

“Yellowstone” Television Series Actress Faces Comp Fraud Charges

32 year old Q’Orianka Kilcher, who lives in North Hollywood, has been charged with two felony counts of workers’ compensation insurance fraud.

Kilcher is an actress, singer, and activist. Her best known film roles are Pocahontas in Terrence Malick’s 2005 film The New World, and Kaʻiulani in Princess Kaiulani (2009). In 2020 she starred in a recurring role on the Paramount television series Yellowstone. She plays Angela Blue Thunder in the third season of “Yellowstone,” one of TV’s most popular dramas.

In October 2018 while acting in the movie “Dora and the Lost City of Gold,” Kilcher allegedly injured her neck and right shoulder.

She saw a doctor a few times that year, but stopped treatment and did not respond to the insurance company handling her claim on behalf of her employer.

A year later, in October 2019, Kilcher contacted the insurance company saying she needed treatment. Kilcher told the doctor handling her claim that she had been offered work since her injury occurred but had been unable to accept it because her neck pain was too severe.

Based on Kilcher’s statements to the doctor, she began receiving temporary total disability benefits.

After reviewing wage information from her employer, the investigation found Kilcher had worked as an actress on the television show “Yellowstone” from July 2019 to October 2019, despite her statements to the doctor that she had been unable to work for a year. According to records, she returned to the doctor and started receiving disability benefits five days after last working on the show.

When told about Kilcher’s recent employment history, the doctor on her claim stated if they had been aware of it they would have never granted her the disability payments.

“Third-party doctors verified her injury and entitlement to benefits. Ms. Kilcher was at all times candid with her doctors and treatment providers. … She never intentionally accepted benefits that she did not believe she was entitled to,” her attorney Michael Becker said.

Kilcher will “vigorously defend herself and asks that she be afforded the presumption of innocence both in and outside the courthouse,” Becker said.

Kilcher self-surrendered and was arraigned on May 27, 2022. Her next scheduled court date is August 7, 2022.

Job Applicants Not Employees When Tested for Drugs

WinCo Foods operates a supermarket chain with just over 100 locations across the western United States, including California.

When WinCo hires new employees, a Hiring Manager calls successful applicants to extend what WinCo terms a contingent offer of employment. The Hiring Manager informs the applicant of a mandatory drug test as part of the contingent job offer. When an applicant consents, WinCo instructs applicants to report to a testing location. It pays the drug testing facility’s fee, but does not compensate for the travel expenses and time required to undergo the testing.

Plaintiff Alfred Johnson, on behalf of himself and other WinCo employees in California, filed this class action in California state court. Johnson alleges violations of the California Labor Code relating to the payment of wages and business-related expenses and the California Business & Professions Code §§ 17200, et seq., proscribing unfair business practices. WinCo removed the case to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d).

The federal district court certified the class, and then entered judgment in favor of WinCo on the ground that under California law, plaintiffs were not yet employees when they took the drug test. Plaintiffs appealed contending that they were employees. The 9th Circuit Court of Appeals affirmed in the published case of Johnson v WinCo Foods 21-55501 (June 2022).

The same issues have arisen in a number of similar cases removed from California state courts to federal district court. The other district courts in those cases have also ruled in favor of the employer. There is as yet, however, no authoritative California state court decision. Thus the 9th Circuit affirmed in a published opinion.

Plaintiffs argue on appeal that because the tests were administered under the control of the employer, plaintiffs must be regarded as employees, as California law applies a control test to determine whether an employment relationship exists. See Martinez v. Combs, 49 Cal. 4th 35, 64 (2010). Second, and alternatively, they contend that under California law the test should be regarded as a “condition subsequent” to their hiring as employees. See Cal. Civ. Code § 1438.

The 9th Circuit rejected both arguments noting that “the class members were not performing work for an employer when they took the preemployment drug test; they were instead applying for the job. They were not yet employees.”

Johnson relies in major part on a workers’ compensation case, Bowen v. Workers’ Compensation Appeals Board, 73 Cal. App. 4th 15 (1999). At issue in Bowen was whether an injured baseball player had been hired in California, where he accepted an offer subject to approval by the Commissioner of Baseball, or out of state, where the Commissioner was located and where the plaintiff worked. Johnson argues that this case is like Bowen and the employment contract was made when the class members accepted a comprehensive offer of employment over the phone.

The 9th Circuit distinguished this case by noting that the “court in Bowen, however, went to great lengths to explain that it was deciding a workers’ compensation case and its decision was guided by the policy of liberally construing contracts in favor of employees in accordance with California workers’ compensation law.”

The Bowen opinion suggests that if the court had applied California contract law, rather than workers’ compensation principles, there would not have been a contract until all of the conditions were satisfied.

DWC to Re-Adopt Emergency Med-Legal Telehealth Regulations

The Division of Workers’ Compensation (DWC) has issued its notice of intent to re-adopt emergency regulation Section 46.3 to extend the effective date beyond the current expiration date of July 18, 2022.

This regulation addresses the ongoing need for telehealth medical-legal evaluations and office location flexibility resulting from various state and local public health safety measures related to COVID-19. These emergency regulations will help injured workers and employers continue to move their workers’ compensation claims towards a resolution and avoid additional and undue delay.

The Notice, Finding of Emergency and text of the regulations to extend the effective date of these emergency regulations will be filed for review with the state Office of Administrative Law (OAL) on July 8, 2022. The documents can be found on the DWC website.

Upon OAL approval and filing with the Secretary of State, the regulations are effective for an additional 90 days. This is the first re-adoption; DWC can issue a second if needed. The Division intends to commence rulemaking to make this regulation permanent within the next 90 days.

For information on the OAL procedure, and to learn how you may comment on the emergency regulations, go to OAL’s website.

(1) A QME or AME may complete a medical-legal evaluation through telehealth when a hands on physical examination is not necessary and all of the following conditions are met:

– – (A) There is a medical issue in dispute which involves whether or not the injury is AOE/COE (Arising Out of Employment / Course of Employment), or the physician is asked to address the termination of an injured worker’s indemnity benefit payments or address a dispute regarding work restrictions; and

– – (B) There is agreement in writing to the telehealth evaluation by the injured worker, the carrier or employer, and the QME. Agreement to the telehealth evaluation cannot be unreasonably denied. If a party to the action believes that agreement to the telehealth evaluation has been unreasonably denied under this section, they may file an objection with the Worker’s Compensation Appeals Board, along with a Declaration of Readiness to Proceed to set the matter for a hearing;

– – (C) The telehealth evaluation conducted by means of a virtual meeting is consistent with appropriate and ethical medical practices, as determined by the QME and the relevant medical licensing board; and

– – (D) The QME attests in writing that the evaluation does not require an in person physical exam.

A notice will be posted at the DWC website when the re-adoption is approved.

COVID-19 Returns to Top Five Telehealth Services Nationwide

In April 2022, COVID-19 returned to the top five telehealth diagnoses nationally for the first time since January, according to FAIR Health’s Monthly Telehealth Regional Tracker.

COVID-19 also returned to the list of top five telehealth diagnoses in every US census region except the South; it had been off the list in all four regions (Midwest, Northeast, South and West) since January.

The data represent the privately insured population, including Medicare Advantage and excluding Medicare Fee-for-Service and Medicaid. The reappearance of COVID-19 on the national and regional lists coincided with a rise in COVID-19 cases in April reported by the Centers for Disease Control and Prevention.

Also in April 2022, telehealth utilization, as measured by telehealth’s share of all medical claim lines, grew nationally and in every region after two months of decline, according to the Monthly Telehealth Regional Tracker. National telehealth utilization increased 6.5 percent, from 4.6 percent of medical claim lines in March to 4.9 percent in April. Regionally, the greatest increase was in the South, where telehealth utilization grew 11.8 percent in April. The rise in telehealth utilization may have been due to the growth in the reported number of COVID-19 cases, which may have led more patients to avoid in-person care.

Various other diagnoses dropped off the lists as the share of COVID-19 diagnoses increased. Nationally, substance use disorders fell off the list; in the Midwest and Northeast, joint/soft tissue diseases and issues did so; and in the West, endocrine and metabolic disorders did so. In all regions and nationally, mental health conditions remained the top-ranking telehealth diagnosis.

The rankings of the top five telehealth specialties did not change nationally or regionally in April 2022 when compared to March 2022, with social worker remaining the top-ranking telehealth specialty in all regions and nationally. But primary care physician increased its percentage share of telehealth claim lines by about one percent nationally and in the Northeast and South.

In April 2022, the rankings of the top five telehealth procedure codes did not change nationally or in any region when compared to the prior two months. The number one telehealth procedure code nationally and in every region remained CPT®2 90837, one-hour psychotherapy.

For April 2022, the Telehealth Cost Corner spotlighted the cost of CPT 90832, 30-minute psychotherapy. Nationally, the median charge amount for this service when rendered via telehealth was $115.40, and the median allowed amount was $64.84.3

WCAB Panel Grants Applicant’s Appeal of IMR Determination

It is not easy for parties to succeed in the appeal of an IMR determination at the WCAB. The California legislature adopted as a standard that the aggrieved party must show that at the IMR level there was a “plainly erroneous finding of fact based upon ordinary knowledge and not expert opinion.” A recent Opinion after Reconsideration demonstrates how this standard is viewed by a WCAB panel on Reconsideration.

In this case, Erlinda Cantillo suffered injury to her back and knee while working for Amazon.com Inc. Following her total knee replacement, and lumbar spine surgery she was using a walker to assist with ambulation, and was having “severe difficulties” with activities of daily living. Her. treating physician requested home health care 4 hours a day and 4 days a week for 3 months. After the UR process, IMR determined that the home health care was “not medically necessary and appropriate” and declined to authorize the request.

The matter proceeded to trial, and the WCJ admitted exhibits entitled Initial Approaches to Treatment Guidelines dated June 30, 2017, Medical Report of Dr. Ahmed dated June 14, 2021, and IMR Final Determination dated January 12, 2022, into evidence. After submission, the WCJ found that the “IMR determination was not the result of a plainly erroneous finding of fact based upon ordinary knowledge and not expert opinion” and denied to reverse the IMR determination.

Applicant petitioned for reconsideration, and a WCAB panel rescinded the F&O and substituted a finding that “the January 12, 2022 IMR determination applied the MTUS Initial Approaches to Treatment Guidelines in a plainly erroneous manner based upon ordinary knowledge and not expert opinion” and substituted an order that the UR determination be remanded to the AD for submission to a different independent review organization or different reviewer as provided in Labor Code section 4610.6(i) in the panel decision of Cantillo v Amazon – ADJ12704660 (June 2022).

The Court of Appeal held that IMR determinations are subject to meaningful review, even if the Appeals Board cannot change medical necessity determinations, noting that “[t]he Board’s authority to review an IMR determination includes the authority to determine whether it was adopted without authority or based on a plainly erroneous fact that is not a matter of expert opinion” (Stevens v. Workers’ Comp. Appeals Bd. (2015) 241 Cal.App.4th 1074, 1100.)

Here, the IMR reviewer relied upon MTUS providing that “[h]ome healthcare is selectively recommended . . . to overcome deficits in activities of daily living . . . [and indicated when] the patient is unable to leave the home without . . . [a] walker.” In doing so, the reviewer explicitly recognized medical evidence that applicant has ” ‘severe difficulty’ with activities of daily living” and “ambulates with [an] assistive device” due to those difficulties.

Yet the reviewer concluded that home healthcare was “not medically necessary” without explaining how this evidence fell outside the MTUS or citing evidence that applicant was able to perform daily living activities without difficulty or ambulate without an assistive device or was not “homebound” as her primary treating physician had opined.

“Hence, inasmuch as the MTUS recommend that home healthcare is to be provided to overcome deficits in daily living – and specifically indicated when the patient is unable to leave the home without major assistance requiring devices such as a walker – it is clear that the IMR determination applied the MTUS in a plainly erroneous manner based upon ordinary knowledge and not expert opinion.”

In addition, the IMR reviewer relied upon MTUS providing that a “home evaluation is necessary to develop the home health care treatment plan” as a separate ground supporting the conclusion that home healthcare was not medically necessary.

However, the MTUS do not state that a home evaluation must be performed in order for home healthcare to be recommended, but rather to ensure that such care is provided safely and correctly.

“It follows that the IMR reviewer’s conclusion that the lack of ‘documentation of home health evaluation’ provided an additional ground to deny applicant’s home healthcare request was also based upon a plainly erroneous application of the MTUS.”

Employers Fail to Keep Food and Farm Workers Safe From COVID

Although farm and food production workers were considered essential workers during the pandemic, many of California’s food employers endangered those workers, violating Cal/OSHA’s COVID-19 guidelines more often than most industries, a new report said.

The California Institute for Rural Studies’report said farm and food production employers routinely failed to provide workers with face masks, nor did they enforce physical distancing or notify workers when there were COVID outbreaks at worksites. The study was based on OSHA inspections from April 2020 through December 2021.

Though farms and food companies had the most violations of all the industries, they had some of the smallest penalties, the report said; the average penalty was $22,473.

Cal/OSHA did not answer CalMatters’ question about the size of the fines. It issued a statement Wednesday saying, “Cal/OSHA recognizes and appreciates the importance of this issue, and is reviewing CIRS’ report and recommendations.”

Dvera Saxton, a researcher with the rural studies institute, said Cal/OSHA cited food production employers four times more than any other California industries during the first year of the pandemic. But food companies utilized the judicial and appeals process to try to reduce their penalties, she said.

Oftentimes the fines will be reduced or eliminated,” she said. “We know that the food production employers – and the companies they’re producing for – have very powerful legal teams to reduce the fines.”

The companies’ violations often included failure to provide and implement a health and safety system, which is required by a 1991 state law, the study said.

The report describes food production workers as those working in meat packing, dairy operations and agriculture – primarily Black, Latino, and Indigenous people, often undocumented immigrants.  
Keeping workers safe

Among 36 agricultural workplaces that utilize contractors, the report names Brutocao Vineyards. Cal/OSHA fined Brutocao Vineyards $3,710 in September 2020 for allegedly failing to provide face masks for three workers and neglecting to keep workers six feet apart.

Len Brutocao, director of vineyard operations, blamed the violations on the workers.  “We provided the masks, and they just didn’t wear them,” he said in an interview, adding that the company has since increased training and stressed wearing masks.

California’s food and farm employers aren’t very different from similar employers around the country, said Suzanne Adely, co-director of the Los Angeles-based Food Chain Workers Alliance, a national coalition of food workers unions. The 21.5 million farm and food workers make up the nation’s largest workforce, she said. The lack of COVID protections is just one of their many vulnerabilities.

“Food workers have the lowest median wage than any workforce and are the most food insecure,” Adely said. “They have some of the highest rates of health and safety violations – and high rates of wage theft.”

As the pandemic continues, the report recommends that state leaders and Cal/OSHA officials strengthen paid sick leave protections, increase workplace inspections and ensure that employer health and safety data is more accessible to the public.

Second Suit Follows Unclear Wording of First Suit Settlement Agreement

A staffing agency (FlexCare LLC) arranged for a nurse (Lynn Grande) to work at a hospital (Eisenhower Medical Center), which she did for about a week in February 2012.

Under the terms of an agreement between the staffing agency (FlexCare) and the hospital (Eisenhower), the staffing agency purportedly “retain[ed] . . . exclusive and total legal responsibility as the employer of Staff,” including “the obligation to ensure full compliance with and satisfaction of” wage and hour requirements. The hospital retained discretion to assign shifts.

The nurse who filed the present case (Grande) joined the prior action against FlexCare as a named plaintiff, alleging wage and hour violations during the time she worked at the hospital. The hospital was not named as a defendant in this prior action and did not intervene in it.

The parties settled the prior action with the staffing agency to pay no more than $750,000, and the court entered judgment upon the settlement. The settlement did not name the hospital as a released party. For purposes of the judgment, the court certified a class of ” ‘all persons who at any time from or after January 30, 2008 through April 8, 2014 were non-exempt nursing employees of [the staffing agency] employed in California’ “

The nurse then sued the hospital based on the same alleged violations. The staffing agency filed a complaint in intervention, seeking declaratory relief. The staffing agency and the hospital argued both that the hospital was entitled to the benefit of the earlier release, and that the first judgment precludes the nurse from bringing this second suit.

The trial court found that “the language in the release clause cannot reasonably be construed to extend to claims Plaintiff may have against [the hospital] in this case.” The court further concluded that because the hospital “is not in privity with [the staffing agency], as that term is understood for claim preclusion (res judicata) purposes, Plaintiff’s claim against [the hospital] in this case is not barred by the Final Judgment” in the first action.

A divided panel of the Court of Appeal affirmed the trial court in Grande v. Eisenhower Medical Center (2020) 44 Cal.App.5th 1147 (Grande I ). The California Supreme Court agreed to hear the case, and affirmed the judgment of the Court of Appeal in Grande v. Eisenhower Medical Center, (Grande II) S261247 (June 2022).

The core of this dispute concerns the issue of privity. Judgments bind not only parties, but also “those persons ‘in privity with’ parties.Questions about privity typically arise when a litigant attempts to use a judgment against someone who was not party to that judgment The circumstances recognized as creating privity have evolved in appellate decisions over time.

The hospital and staffing agency contend that their position is supported by the Court of Appeal’s decision in Castillo v. Glenair, Inc. (2018) 23 Cal.App.5th 262. Castillo concerned a temporary staffing agency (GCA), the agency’s employees, and its client (Glenair), and two sequential lawsuits filed against the parties for labor code wage violations similar to the Grande II case here.

The Supreme Court distinguished the facts in Castillo such that it was not on point in this case The scope of the (putative) class at issue in this second action against the hospital differs from the class at issue in the first case against the staffing company.

Unlike the first suit, which concerned nonexempt employees of the staffing agency placed throughout the state (not just at Eisenhower), this second suit concerns nonexempt employees of the hospital placed by any staffing agency (not just by FlexCare).

The Supreme Court concluded by say that “For these reasons, the hospital and staffing agency have not demonstrated that the Court of Appeal erred in rejecting their claim preclusion argument. We do not decide whether preclusion would have been appropriate on any other ground.”

It is worthy of note that had the settlement documents and release been drafted with different language, the second action here may have been precluded. In this respect the Supreme Court said “The trial court’s fact-specific determination – construing this particular release, based on the evidence adduced at this particular trial – is supported by substantial evidence. We affirm on that basis. Our decision on this issue is thus fact- and case-specific.”

The lesson here for employers is that the wording of a settlement agreement in anticipation of possible avenues of additional litigation and liability is critical.