Author: WorkCompAcademy

Todd Kelly, a Senior Partner, has announced his retirement from the firm of Floyd, Skeren & Kelly, LLP,.

Given his youth, he stated that he may undertake charitable projects in addition to his active involvement in the Boy Scouts, engage other business pursuits, look into other legal disciplines, or look into other avenues within workers’ compensation that involve neither litigation nor competition with FSK.

Mr. Kelly started with the Law Offices of John B. Floyd as an undergraduate college student and never looked back. During college and law school he was with us explained Mr. Floyd. When he passed the bar we were Floyd & Skeren and welcomed him in as a new attorney.

Mr. Kelly was made a partner in 1998 and the firm took on the Floyd, Skeren & Kelly name in 1998. Todd, as he is known to his friends and associates was an integral part of the firm’s growth over the last decade. He is known at the firm as not only a hard-nosed litigator but a knowledgeable marketer as he knows well the clients’ needs to defend their interests and to do so in a straight forward and economic fashion.

Although he is leaving the firm, Senior Partner’s Amanda Manukian and John Langevin aptly described that he will be gone but only a phone call away when his wisdom is needed.

The whole firm, but particularly the partners, will miss his presence, sense of humor and friendship.

Despite a growing awareness of the problems and long-term repercussions associated with opioid use, utilization of these drugs in California’s workers’ compensation system has expanded to the point where they now comprise the single largest category of medications prescribed to injured workers.

A number of CWCI studies have tracked this growth, the most recent being an analysis published in May 2014 that measured utilization and payment trends for Schedule II opioids such as oxycodone, morphine, and fentanyl, as well as less potent, but still potentially addictive Schedule III opioids (primarily hydrocodone combination drugs such as Vicodin, Norco and Lortab).

The results of the 2014 analysis showed that except for a brief dip following the enactment of SB 899 in 2004, use of Schedule II opioids had risen steadily, increasing nearly sixfold from 1.3 percent of all workers’ compensation prescriptions in 2002 to a record 7.3 percent in the first half of 2013. Furthermore, the study noted that although the growth rate for Schedule II opioids plateaued after 2010, use of these drugs remained at an all-time high and payments for these painkillers had increased from about 4 percent of all California workers’ compensation prescription dollars in 2005 to nearly 20 percent in the first half of 2013.

Use of less powerful Schedule III drugs fell to a post reform low in 2005 and remained fairly level thereafter. From 2005 through the first half of 2013, these drugs consistently accounted for about 20 percent of the prescriptions dispensed to injured workers and around 10 percent of the prescription dollars.

Now a new CWCI report updates and expands upon those earlier findings using data from more than 10.8 million workers’ compensation prescriptions that were dispensed to injured workers in California between January 2005 and December 2014. Aggregate payments for these prescriptions totaled $1.1 billion.

Several measures of opioid utilization that increased in the first several years of the study period have showed decline in recent years.

1) The number of opioid prescriptions per user increased from 3.38 in 2005 to a peak of 4.43 in 2009 and then declined to 4.10 in 2012.
2) The average number of morphine equivalents per opioid prescription increased from 473 in 2005 to a. peak of 550 in 2007 and then declined to 422 in 2012.
3) Morphine equivalents per opioid user increased from 1,599 in 2005 to a. peak of 2,355 in 2008 then decreased to 1,728 in 2012.
4) Opioids increased from 27.0 percent of all prescription drugs dispensed to California injured workers in 2005 to a peak of 31.8 percent in 2008 and then declined to 27.2 percent in 2014. Even with the recent decline, however, opioids have remained the number one prescription category in both use and payments since 2006.
5) In 2005, 15.9 percent of every dollar paid for an opioid was for a brand name drug; by 2009, the percentage had more than tripled to 49.4 percent. However, between 2009 and 2014, the proportion of brand name opioids declined to 41.0 percent as the use of the lower cost generic opioids increased relative to brand name opioids.

The CWCI concluded that “These recent trends are positive, so it will be important to monitor them and to explore what may be driving them as this information may be useful to those charged with shaping policies to govern the use of opioids in workers’ compensation.”

Albert Matthews settled his workers’ compensation claim with a structured settlement approved by the WCAB. The settlement provided for monthly payments of $2,800 for life, with ten years guaranteed. The employer’s insurer assigned the obligation to make the monthly payments to Liberty Assignment Corporation through a qualified assignment under federal tax law. (26 U.S.C. § 130(c).) The structured settlement agreement provided that the payments to Matthews “cannot be accelerated, deferred, increased or decreased” by Matthews. Liability for the monthly payments was funded through an annuity purchased from Liberty Life Assurance Company.

Three years later, Matthews filed in superior court a request for entry of a clerk’s judgment on the workers’ compensation award, pursuant to Labor Code section 5806. The clerk entered the judgment “in conformity with the Order Approving Compromise & Release.” WC then moved for entry of a qualified order approving assignment of the judgment from Matthews to WC Funding Group, Inc., a factoring company.

WC Funding alleged Matthews and WC entered into an “Agreement to Assign Award,” by which Matthews agreed to convert his workers’ compensation compromise and release into a civil judgment, then assign his right, title, and interest in the judgment to WC Funding. In exchange, he would receive a lump-sum payment of $40,343.34 on court approval of the transaction. He would also receive monthly payments of $1,950 from WC until 2021, when the payments would return to $2,800 per month for life. Matthews stated he would use the lump sum to pay his delinquent mortgage in order to avoid foreclosure on his house.

The trial court denied WC’s motion, concluding that converting the workers’ compensation award to a judgment was prohibited by Labor Code 4900. The Court of Appeal affirmed the dismissal in the published opinion in Matthews v Liberty Assignment Corporation.

Labor Code 4900 provides that “[n]o claim for compensation……is assignable before payment.” The term “claim for compensation” has been interpreted expansively. The Court said it “is evident that the legislature intended that there should be no assignment of claimant’s rights whatsoever and that the award should be paid by the one against whom it was made directly to the claimant and to no one else.”

“Because of the unique nature of workers’ compensation awards and the judgments entered on those awards, we believe a workers’ compensation award is not assignable simply because a judgment on the award has been entered. In a workers’ compensation proceeding, the WCAB may determine all relevant matters and enter an award. (§§ 5301, 5313.) Alternatively, if the parties reach a compromise, the WCAB may approve it and enter an award based on the compromise and release agreement. (§§ 5002, 5003.) WCAB approval is mandatory: “No release of liability or compromise agreement is valid unless it is approved by the appeals board or referee.” (§ 5001.)

The parties to the workers’ compensation proceeding put the terms of their structured settlement into a compromise and release agreement. The WCAB ordered that the compromise and release agreement be approved and entered it as the award to Matthews. Thus, the anti-assignment language became part of the WCAB’s award.

Roshea Maderer worked as a typist for Los Angeles Department of Water and Power. She alleges that, on December 24, 2012, an incident took place in which fellow employees threatened and verbally abused her in front of approximately 75 fellow employees at an office holiday party. Maderer claims that employees threatened to kick her in the face, falsely accused her of engaging in sexual encounters, and accused her of being a racist, a child molester, a liar, a thief, and a rat.

Maderer filed a complaint with LADWP managers shortly after the incident occurred. Managers interviewed Maderer and her alleged attackers, and the City’s Equal Employment Opportunity Section (EEOS) initiated a formal complaint. In the absence of a response from the EEOS, Maderer filed a civil complaint alleging that LADWP had denied her right to due process under the United States Constitution by failing to investigate the incident, and she also alleged violations of state law.

The City removed the case to federal court where after a series of motions the federal law related claims were dismissed after which the federal court remanded the case to the trial court with respect to the state claims. At that point the trial court sustained without leave to amend the City’s demurrer. The court found (1) that Maderer had not identified any statutory basis for liability, as required by Government Code section 815; (2) that she had not alleged that she had presented the claim to the City prior to filing the suit, pursuant to Government Code sections 911.2 and 945.4; and (3) that the only recovery available for injuries of the type Maderer alleged she had suffered was through the workers’ compensation system.

The Court of Appeal sustained the dismissal in the unpublished case of Maderer v City of Los Angeles.

The trial court granted the City’s demurrer in part because it found that Maderer had not identified a statute allowing her to bring a suit against the City for the hazing injuries she alleges she suffered, as required by Government Code section 815 which provides that “[e]xcept as otherwise provided by statute: [¶] (a) A public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.” Maderer failed to identify a statute creating City liability for the hazing injuries she claims she suffered.

The trial court identified two other bases for granting the demurrer. First, the trial court found that the attacks Maderer described in her complaint were examples of “[f]lare-ups, frustrations, and disagreements among employees [that] are commonplace in the workplace and may lead to ‘physical act[s] of aggression.’ ” (Torres v. Parkhouse Tire Service, Inc. (2001) 26 Cal.4th 995, 1009.) Because actions like these are expressions of human nature which are inseparable from working together and are inherent in the working environment, the court found that Maderer could not seek recovery for her injuries outside the workers’ compensation system.

Finally, the trial court found that Maderer had failed to satisfy the claim presentation requirements expressed in Government Code sections 911.2 and 945.4, under which a plaintiff must present a personal injury claim to the public entity defendant within six months of the accrual of the cause of action.

With regard to these issues the Court of Appeal noted “We need not address these issues because Maderer’s failure to identify a basis for city liability pursuant to Government Code section 815 was sufficient to justify the trial court’s decision to sustain the City’s demurrer. Even if Maderer were correct with respect to the workers’ compensation and claim presentation arguments, the court’s decision to dismiss her case would still have been proper.”

The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. Beginning in 1972, 33 States adopted state RICO laws to be able to prosecute similar conduct. In order to prevail in a RICO action, a plaintiff must prove a “predicate offense” one of which is fraud. In addition to the predicate offense, a plaintiff must also prove a “pattern of racketeering activity” which requires a showing of at least two acts of racketeering activity. This second requirement opens the doors to fairly broad discovery rights covering practically any history of a target defendant that might prove a pattern of racketeering, an open ended discovery process. Federal RICO allows a successful plaintiff to recover treble damages, plus attorney fees.

The plaintiffs bar has sought to apply RICO laws as a penalty in workers’ compensation claims for at least a decade with mixed results. Conceptually they allege that an employer, carrier or third party administrator concocts a fraudulent scheme that is used over and over to prevent workers from obtaining just benefits.

Plaintiff efforts to succeed at RICO in the federal 6th Circuit (Kentucky, Michigan, Ohio, and Tennessee) ultimately ended in failure. In one the the last tries, a Michigan claimant alleged that employer/carrier defrauded him with “false” medical testimony, and filed federal Racketeer Influenced and Corrupt Organizations Act RICO case, In that case, Brown v. Ajax Paving Industries, 752 F.3d 656 (2014), the United States Court of Appeals for the Sixth Circuit followed the prior ruling in Jackson v. Sedgwick Claims Management Services, a carbon copy of this case, 731 F.3d 556, 558 (6th Cir.2013) (en banc). Essentially in the 6th Circuit, RICO cannot be based on an underlying workers’ compensation claim because the court held that “loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to ‘business or property’ under RICO.”

The effort to win comp related RICO cases then moved to the 9th Circuit (nine western states including California and Arizona) arguably the most liberal Circuit in the federal system. In Laurie Miller et al. v. York Risk Services Group, nine plaintiffs worked as firefighters or engineers for the Phoenix fire department, and York adjusted the department’s workers comp claims. The plaintiffs alleged, in part, that York worked with the City of Phoenix to wrongfully deny or delay their workers comp benefits in violation of the federal RICO Act. York moved to dismiss based partly on the en banc decision from the 6th U.S. Circuit Court of Appeals, which dismissed similar RICO claims against Sedgwick Claims Management Services Inc. That defense did not work in Arizona. Judge Sedwick ruled in 2013 that the employees “possess a property right in their workers compensation benefits under Arizona law,” which allows them to have a property interest under RICO law and the case was allowed to proceed. Before the case went to trial, it was settled at the end of 2015. Thus the ruling was not tested in the 9th Circuit Court of Appeals.

Now there is another 9th Circuit RICO case this time filed in California. John Black, and a group of police officers and fire fighters assert a RICO claim in their third amended complaint involving the City of Rialto and the City of Stockton, CorVel Enterprises, York Risk Services Group and others. These plaintiffs allege “York, CorVel, and Rialto engaged in a pattern of fraudulently denying and delaying legitimate claims in order to lower the liability of the city, while at the same time maximizing the TPA’s revenues (and allowing the TPA to maintain and obtain contracts with other public entities based on their ‘outstanding’ financial performance at the expense of public servants)”

At the end of April, the Federal Judge granted the defendant’s motion to dismiss but gave the plaintiffs leave to amend for the fourth time. The decision was based in part upon a determination that a workers’ compensation benefit is or is not a property right subject to RICO. In a ruling consistent with the 6th Circuit, the federal judge found that it was not a property right until it “vests” after entitlement issues have been resolved. Plaintiffs have 21 days to amend for the fourth time.

It will be important to monitor the City of Rialto case until it reaches its ultimate conclusion.