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Plaintiff Need Not Prove Anyone “Actually Viewed” Stolen Medical Data

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A data breach at an education-technology company gave the California Supreme Court its first occasion to define how far two privacy statutes reach. The decision is a split outcome: the company escapes these particular claims because the plaintiff did not adequately plead that it was a covered entity, but in getting there the Court rejected a defense-friendly rule that had governed medical-privacy breach cases for over a decade – holding that a plaintiff need not prove anyone “actually viewed” the stolen data.

Illuminate Education, Inc. is an education-technology company that maintains a nationwide platform storing K–12 student data – including medical information such as diagnoses and treatment plans – to help educators evaluate students, monitor progress, and build educational plans. It contracts with the Ventura County Office of Education, which serves plaintiff J.M.’s school district. J.M. provided his medical information to the district, which in turn passed it to Illuminate.

In January 2022, Illuminate discovered suspicious activity and later confirmed that databases containing student information had been subject to unauthorized access. It notified families in June 2022, stating there was no evidence of actual or attempted misuse. J.M. alleged he subsequently received solicitations at an address he had given only to Illuminate, plus odd calls about “phantom Amazon accounts.” Through his guardian ad litem, he brought a putative class action under two statutes: the Confidentiality of Medical Information Act (CMIA; Civ. Code, § 56 et seq.) and the Customer Records Act (CRA; Civ. Code, § 1798.80 et seq.).

The Trial court sustained Illuminate’s demurrer without leave to amend, finding J.M. failed to adequately allege that Illuminate was a “provider of health care,” “contractor,” or “administrator” under the CMIA, failed to allege a qualifying “disclosure” or “release,” and could not sue under the CRA because Illuminate’s customer was the County Office of Education, not J.M.

The Court of Appeal reversed, holding that Illuminate fell within both statutes, that J.M. had stated causes of action, and that denying leave to amend was an abuse of discretion. It treated students like J.M. as the “ultimate ‘customers,’ consumers, and beneficiaries” of Illuminate’s services and found a five-month notice delay supported the CRA claim.

The California Supreme Court reversed the Court of Appeal and remanded in the case of J.M. v. Illuminate Education, Inc, No. S286699 (May 2026) reaching three holdings. J.M. did not sufficiently allege that Illuminate is a “provider of health care” under section 56.06, so his Confidentiality of Medical Information Act claims fail. A plaintiff need not allege that medical information was actually viewed by an unauthorized party. Confidentiality is breached when information is exposed to a significant risk of unauthorized access or use. J.M. did not sufficiently allege that he is Illuminate’s “customer,” so his Customer Records Act claim fails. The Supreme Court left it to the lower courts to decide whether J.M. may amend his complaint in light of these holdings.

Section 56.06 of the Confidentiality of Medical Information Act covers businesses that maintain medical information in order to make it available to an individual or health care provider upon request, for the purpose of letting the individual manage that information or for diagnosis and treatment. J.M.’s allegations described a tool for educators to assess and plan – not a service that lets individuals manage their own records or that supplies information to clinicians for diagnosis. The Court noted the Legislature has specified that school dyslexia screening is “a flag for potential risk,” not a diagnosis (Ed. Code, § 53008, subd. (l)). Legislative history confirmed the reading: the statute was built around services like MedicAlert and personal-health-record companies (e.g., WebMD-style tools that let consumers build and share their own records), which Illuminate is not. The Court stressed the statute is broad and technology-adaptive but still has limits – it does not sweep in any entity that stores medical information.

The Court took aim at a line of authority requiring proof that an unauthorized person actually viewed the data – Regents of the University of California v. Superior Court (2013) 220 Cal.App.4th 549, Sutter Health v. Superior Court (2014) 227 Cal.App.4th 1546, and Vigil v. Muir Medical Group IPA, Inc. (2022) 84 Cal.App.5th 197. Reading section 56.101 together with section 56.36, subdivision (b) – which allows $1,000 in nominal damages even when a plaintiff suffered no actual or threatened harm – the Court concluded liability turns on the entity’s negligent conduct, not on whether harm materialized.

An “actually viewed” rule would be nearly impossible to plead or prove (breach victims rarely know what a hacker did, and AI-driven cybercrime can misuse data without anyone reading it), and would gut a remedial statute that must be construed broadly (Pulliam v. HNL Automotive Inc. (2022) 13 Cal.5th 127). The proper test, the Court held, is whether information was exposed to a significant risk of unauthorized access or use – a flexible standard that distinguishes “smash-and-grab” hardware theft from data-targeted breaches and accounts for factors like the form, duration, and extent of the breach and any mitigation. Loss of possession is relevant but neither necessary nor automatically sufficient. The Court disapproved Regents, Sutter Health, and Vigil to the extent inconsistent.

The Customer Records Act (CRA) authorizes suit only by a “customer” – defined as someone who provides personal information to a business to purchase, lease, or obtain a service from that business (§ 1798.80, subd. (c)). The County Office of Education, not J.M., bought Illuminate’s services; J.M. sought educational services from his school district. The Court rejected the Court of Appeal’s “intended beneficiary” theory, noting the Legislature deliberately limited suit to an injured “customer” rather than any “consumer” or “individual” (Ferra v. Loews Hollywood Hotel, LLC (2021) 11 Cal.5th 858), and observed that other laws (e.g., the California Consumer Privacy Act) offer broader avenues for residents.

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Courts Have Broad Discretion to Reduce PAGA Penalties and Fees

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A new published decision gives trial courts broad latitude in two recurring PAGA fights: how to cut a sky-high maximum penalty down to a fair number, and how much to second-guess a judge who shrinks an attorney fee award. On both questions, the Court of Appeal sided with the trial court’s discretion.

Abraham Taduran sued his former employer, dental-products maker Glidewell, under the Labor Code Private Attorneys General Act (PAGA), Labor Code sections 2698 et seq. By the time of trial, liability had effectively been resolved—three issues by summary adjudication and a fourth by stipulation—leaving only the size of the civil penalties to be decided on briefs and stipulated facts.

Four violations remained. On the wage statement issue, Glidewell’s weekly statements omitted piece-rate pay information, though that information appeared on a separate “Production Sheet,” and no employee actually lost wages. On the rest period issue, Glidewell’s method of rounding fractional rest minutes into hours underpaid some piece-rate workers an average of $0.26 per pay period (about $63,464 total over five years). On the uptime issue, overtime pay was calculated without including non-productive “uptime” pay, costing employees roughly $7,310. On the bonus pay issue, non-discretionary bonuses were left out of the regular-rate calculation, costing about $13,433.

Taduran calculated the maximum statutory penalties at roughly $55.9 million and asked the court not to slash them drastically. Glidewell argued the violations were “hyper-technical” and proposed reductions of more than 99 percent.

The trial court reduced the maximum penalties dramatically, awarding a total of $516,965, allocated as: $100,165 (wage statement), $190,900 (rest period, calculated as 1,909 employees × $100), $167,400 (uptime, $150 × affected employees), and the full $58,500 (bonus pay – no reduction). The court reduced the first three penalties on a per-employee basis, reasoning that the larger violations caused little or no actual wage loss, that Glidewell had acted in good faith and corrected its systems before adjudication, and that the maximum penalties would be “unjust, arbitrary[, and] oppressive.”

Taduran sought about $1,571,658.75 in fees – a $1,047,772.50 lodestar enhanced by a 1.5 multiplier – plus $98,138.21 in costs. The court accepted the lodestar but applied a negative (0.70) multiplier, awarding $733,440 in fees plus the full costs. It found only contingency risk favored an increase (and only slightly), treated attorney skill as neutral, and identified several factors favoring a decrease: the records-based simplicity of the claims, the very limited success (the penalty award was under 1 percent of what was sought), and the fact that the lodestar already reflected current – rather than historical – billing rates for work done years earlier.

The Court of Appeal affirmed the judgment in full in the published case of Taduran v. James R. Glidewell, Dental Ceramics, Inc., No. G064718 (June 2026), rejecting both of Taduran’s arguments: that the penalty reduction had to be done per pay period, and that the negative fee multiplier could not survive “heightened scrutiny.”

Reviewing the scope of the trial court’s authority de novo and its exercise for abuse of discretion (see Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157; Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112), the court held that section 2699, subdivision (e)(2) lets a court award a “lesser amount” but supplies no formula for how to get there. While the maximum penalty is calculated per pay period under subdivision (f), nothing requires a reduction to follow that same path. A trial court may therefore reduce a penalty “on a percentage, per pay period or per employee basis.”

The court rejected Taduran’s deterrence argument, noting an employer cannot predict which reduction method (if any) a court will use – and here the court imposed the full penalty on the bonus pay claim, preserving deterrence. It distinguished Moniz v. Adecco USA, Inc. (2021) 72 Cal.App.5th 56, where a settlement unfairly split recovery between two employee classes; here, a single common fund compensated all aggrieved employees proportionately. The court also stressed that the same drastic result could have followed from a per-pay-period reduction, since the math can produce identical numbers.

The negative fee multiplier was within the court’s discretion. Applying the lodestar-multiplier framework of Laffitte v. Robert Half Internat. Inc. (2016) 1 Cal.5th 480 and the deferential review described in Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, the court sidestepped the unsettled debate over whether “heightened scrutiny” applies to across-the-board fee cuts – a split running between Warren v. Kia Motors America, Inc. (2018) 30 Cal.App.5th 24 and Kerkeles v. City of San Jose (2015) 243 Cal.App.4th 102 (applying heightened scrutiny) and Morris v. Hyundai Motor America (2019) 41 Cal.App.5th 24 (rejecting it), an issue now before the California Supreme Court in Cash v. County of Los Angeles (2025) 111 Cal.App.5th 741, review granted Aug. 20, 2025, No. S291827. Because the trial judge gave specific reasons, the panel found those reasons survived even the stricter standard.

The court approved each rationale. Under PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, a judge may consider lower historical rates – not to double-count, but to ensure the lodestar reflects fair market value for older work. And in representative actions like PAGA, the degree of monetary success may properly support a negative multiplier (Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19), a principle that does not apply to non-representative cases such as Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal.App.4th 140. Finding the trial court had weighed the proper factors, the panel held there was no abuse of discretion.

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Comp Medical Inflation Driven by Growing Use of Unlisted Codes

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California’s workers’ compensation fee schedules continue to hold the line on inflation for most scheduled medical services, but a new California Workers’ Compensation Institute (CWCI) study finds that a growing share of treatment rendered to injured workers in the state is billed under unlisted codes that fall outside fee schedule pricing controls, creating a new and increasingly important source of medical cost growth.

The new CWCI study, the second in a series on workers’ comp medical inflation, uses data from the Institute’s Industry Research Information System (IRIS) database to examine medical payments from 2017 through 2024. The results show that while professional services and facility fees consistently accounted for about 70% of all California workers’ comp medical spending, the strongest inflationary pressures came from professional services billed under codes that are not listed in the state’s Official Medical Fee Schedule (OMFS), where prices often grew far faster than applicable fee schedule benchmarks. Among the key findings:

– – The average payment per professional service transaction increased 33.2% between 2017 and 2024, exceeding the 25.9% growth in the Medicare Economic Index (MEI).
– – Total reimbursements for unlisted professional service codes more than doubled during the 8-year study period, as average payments rose 106.7%, while their share of professional service payments increased from 5.6% to 14.4%.
– – A single code, 97799 (unlisted physical medicine and rehabilitation), accounted for nearly half of all unlisted professional service payments in 2024, with an average payment of $1,663 per transaction.
– – Unlisted codes for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) increased from 41.9% of DMEPOS payments in 2017 to 50.1% in 2024, surpassing scheduled DMEPOS codes for the first time.
– – Medical-legal costs surged following the 2021 Medical-Legal Fee Schedule revision, with average payments increasing 35.1% above 2017 levels by the first full year of implementation.
– – Medical interpreter expenses were driven primarily by utilization rather than price, as the percentage of claims involving interpreter services nearly tripled between 2017 and 2024.
– – Pharmacy was the only major medical category to show sustained spending declines, largely due to reduced utilization following adoption of the MTUS Drug Formulary and opioid prescribing reforms.
– – Inpatient hospital utilization continued a long-term decline as inpatient discharges fell 33.8% from 2017 to 2024.

The analysis noted that the scheduled professional services generally behaved as intended under the OMFS, with price growth closely tracking established inflation benchmarks. In contrast, the unlisted professional service codes experienced substantially higher price growth and increased utilization, while in DMEPOS, the growing use of unlisted codes was the key cost driver. Thus, the report concludes that while the OMFS remains effective at controlling payments for scheduled services, its influence is diminishing as more treatment is billed under unlisted codes. Given the growing use of multidisciplinary pain programs, platelet-rich plasma injections, specialized medical equipment, and other unlisted medical services, policymakers and system stakeholders are likely to face growing pressure to address the widening gap between fee schedule-governed and market-rate pricing.

CWCI has issued its study, Medical Inflation and Cost Drivers in California Workers’ Compensation as a Report to the Industry, available free to CWCI members and subscribers. Others may purchase a copy for $23 by calling 510-251-9470.

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Cal/OSHA National Trench Safety Stand Down Week

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As employers across the country observe National Trench Safety Stand Down Week from June 15–19, Cal/OSHA is calling on employers statewide to review trench safety requirements and reinforce jobsite protections to eliminate preventable cave-in incidents.

Sponsored annually by the National Utility Contractors Association (NUCA), the nationwide NSSD campaign serves as a critical reminder that trenching and excavation work remains among the most hazardous construction operations. A single cubic yard of soil can weigh as much as a car, making proper shoring, sloping, and shielding essential safety practices.

June is recognized nationally as Trench Safety Month, an annual campaign dedicated to raising awareness of trenching and excavation hazards and promoting safe work practices across the construction industry.

As part of this effort, Trench Safety Stand Down Week, encourages employers and workers to pause work activities to discuss trench safety, review hazard prevention measures, and reinforce the importance of protecting workers from cave-ins and other excavation-related hazards.

From 2021 through 2025, Cal/OSHA issued approximately 90 trench safety violations tied to worker injuries and fatalities. Currently, Cal/OSHA is investigating two Los Angeles County trench collapses that resulted in fatalities this year. Cal/OSHA enforces trench safety through penalties and criminal referrals while actively guiding employers to prevent future tragedies. Recent enforcement actions include:

– –  Blackhawk Electric Company, San Diego; willful-serious and serious violations; $160,000 in proposed penalties. On December 3, 2025, the employer knowingly allowed their employees to work in a trench more than five feet high without protection from cave-ins.
– –  W.E. O’Neill Construction Company of California, San Diego; willful-serious and serious violations; $160,000 in proposed penalties. On December 3, 2025, the employer knowingly allowed their employees to work in a trench more than five feet high without protection from cave-ins.
– –  City of San Diego Public Utilities Department; willful-serious violations; $297,850 in proposed penalties. On December 1, 2025, two employees were working in a trench when the sides collapsed, causing injuries that required hospitalization.
– –  Smelly Mel’s Plumbing and Sewer Rat Plumbing, South San Francisco; willful-serious, serious accident-related violations; $529,640 in fines combined. On August 1, 2024, a crew was handling a sewer-line project at a private residence; the walls of the trench collapsed, burying a worker and causing injuries that required hospitalization. Cal/OSHA’s Bureau of Investigations referred the case to the San Mateo District Attorney’s office, which has pressed felony charges.

What Cal/OSHA Chief Debra Lee said: “Trenching is one of the most dangerous jobs in construction, and employers are legally required to protect their workers. These recent citations highlight a troubling lack of compliance in the industry.”

A trench collapse is an avoidable tragedy. Fatalities and serious injuries continue to occur because employers fail to follow established trench safety requirements. Under Cal/OSHA regulations, employers are responsible for evaluating excavation hazards, including the potential for cave-ins, regardless of trench depth, and must implement appropriate protective measures to ensure worker safety.

For detailed trenching safety guidelines, review the “Excavation, Trenches, and Earthwork” chapter in Cal/OSHA’s Pocket Guide for the Construction Industry. Additional resources are available on NUCA’s Trench Safety Stand Down webpage.

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Harvard Poll Shows Dramatic Decline in Trust in Federal Health Agencies

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One Year In: Public Views of a Changing Public Health Landscape is a national poll by Harvard T.H. Chan School of Public Health and the de Beaumont Foundation’s Public Health Listening Lab. The poll was conducted March 19 – April 1, 2026, among a probability-based, nationally representative sample of 2205 U.S. adults ages 18 and older, to better understand people’s views about the changing public health landscape one year into the new federal administration.

It was fielded online and via telephone (cell phone and landline) by SSRS, an independent research company. This survey is nationally representative of U.S. adults. Interviews were conducted in English and Spanish, March 19 – April 1, 2026, among a sample of 2205 adults ages 18 or older in the United States. Republicans include adults who lean Republican, Democrats include adults who lean Democrat, and Independents includes adults who identify as “other” or are unaffiliated. The margin of error at the 95% confidence interval is +/- 2.0 percentage points.

For decades, the Centers for Disease Control and Prevention was one of the most trusted institutions in American life. Trust in the CDC remained relatively stable in the wake of the COVID-19 pandemic, hovering around 75% from 2022 to 2025. These new national poll findings show concerning declines in the American public’s trust in federal health agencies one year into the new federal administration. One year into new leadership of the U.S. public health system, trust in the Centers for Disease Control and Prevention (CDC) and other federal health institutions has dropped dramatically. Only 50% of the public says they now trust health recommendations from the CDC, compared to 77% in spring 2025.

This decline in trust is driven by deep partisan divides. From 2025 to 2026, trust in CDC health recommendations has fallen from 92% to 34% among Democrats and from 77% to 47% among Independents, (92% to 34%) and 30 percentage points among Independents (77% to 47%), while trust among Republicans has increased very slightly from 63% to 67%.

The steep drop in public trust also translates to losses in trust across many demographic groups. Trust in the CDC has fallen more than 30 percentage points among women (80% to 48%); Black and Hispanic adults (77% to 43% and 81% to 50% respectively); those living in urban areas (80% to 48%); and those with a college degree (80% to 46%).

When examining public trust across prominent leaders and groups, the top trusted sources for health recommendations in 2026 are clinicians – nurses (89%), doctors (88%), and pharmacists (85%) – followed by friends and family (81%), nonprofit health and healthcare groups (79% – 80%), and researchers (78%).

State and local public health agencies are now substantially more trusted than the CDC. Trust in state and local public health agencies has also fallen in the last year, but not by as much. A majority of the public still trusts health recommendations from their local (70%) and state (66%) public health agencies.

A slim majority disapproves of federal public health agency actions in the past year, with a high level of concern about the influence of leaders’ personal beliefs, misplaced priorities, and budget cuts. With 55% public disapproval of federal health agencies’ actions in the past year, top concerns about their actions under new leadership include wide agreement that their recommendations have been influenced too much by leaders’ personal beliefs (68%), leaders are focused on the wrong priorities (66%), and programs have been cut or scaled back too much (61%).

Public support for routine childhood vaccination policies remains strong, though a substantial minority supports reductions to the routine vaccine schedule. More than three-quarters (77%) of the public – including majorities across party lines – say that parents should be required to vaccinate their children in order to attend school. A majority (58%) also oppose reducing the childhood vaccine schedule, which forms the basis of childhood vaccine requirements, but there is substantial minority support (42%) for this change.

Views of vaccine safety have dropped closer to pre-COVID-19 levels. As another indication that support for vaccines may be softening, the fraction of the public saying childhood vaccines are “very safe” has dipped from 63% in 2025 to 57% in 2026, trending back to pre-pandemic levels (54% in 2019) from a high of 70% during COVID-19 (2022).

A majority of the public supports federal changes to the Dietary Guidelines for Americans, with higher support for individual recommendations on less sugar and more protein. Six in ten (60%) support the recent changes to the food pyramid and dietary guidelines, and even stronger majorities support specific measures, like recommendations to avoid or sharply limit sugar and highly-processed food (90%) and to increase protein intake (85%). A much smaller majority (62%) supports recommendations to increase beef and whole milk consumption.

Support is bipartisan for limiting sugar and highly-processed food (Republicans: 94%, Democrats: 89%) and for increasing protein intake (Republicans: 92%, Democrats: 79%).

However, there is more division when considering overall support for changes, with 83% of Republicans saying they support the overall changes, compared to only 37% of Democrats. Support for recommendations to increase beef and whole milk consumption is also divided, with 80% support among Republicans and 44% support among Democrats.

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Rising SoCal CT Claims Are Shifting Costs and Claim Patterns

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The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has released Emerging Patterns of Cumulative Trauma Claims. The new report finds that cumulative trauma (CT) claims have increased sharply in recent years and are contributing to notable changes in claim characteristics, costs and claim outcomes.

CT claims have long been a part of the California workers’ compensation system. Recently, while claim frequency for non-CT claims has been relatively flat, the proportion of claims involving CT has increased sharply. This contrasts with the rest of the country, where rates of CT claims have remained stable since 2013. This report explores the key drivers of the recent CT claim increases and their impact on system costs.

The report shows CT claims are playing a growing role in system-wide trends, with higher levels of litigation and earlier involvement of medical-legal and interpreter services than non-CT claims. These differences are influencing both medical and allocated loss adjustment expense (ALAE) costs and shaping overall claim severity trends.

While the frequency of non-CT claims has remained relatively stable, the rising share of CT claims has shifted the composition of claims in California’s workers’ compensation system, with implications for pricing, reserving and trend analysis.

The report examines:

– – Key drivers of the recent increase in CT claims
– – The extent to which CT claim growth is affecting medical and ALAE cost trends
– – How changes in CT claim filings are influencing claim severity trends

Summary of Key Findings:

– – The share of CT claims filed post-termination has risen sharply, and these claims are highly likely to be litigated, driving significant increases in allocated loss adjustment expenses (ALAE) costs across the system
– – Whether claims are valued at 18 months or at a projected ultimate level, the share of indemnity claims involving CT was relatively stable prior to the pandemic and has increased since.
– – The shares in 2023 and 2024 are almost double the share in 2012 and the highest levels observed in this period.
– – CT claims are consistently more common in Southern California, with the highest rates in Los Angeles (LA) and surrounding areas followed by San Diego, likely reflecting higher litigation activity and larger workforce concentrations in industries with high rates of CT filings
– – Regardless of where in the state the injured worker is located, the vast majority of litigated CT claims are represented by firms based in the LA area.
– – CT claims are more likely to involve medical-legal and interpreter services early on, contributing significantly to increases in these medical costs for the system.
– – The share of CT claims without medical payments at 18 months past policy inception is consistently much higher than for non-CT claims and has increased since accident year (AY) 2019.
– – Since 2021, changes in average indemnity and medical costs have been lower for CT claims than for non-CT claims, suggesting the increase in CT claims is dampening overall claim severity trends. Changes in average ALAE costs have been lower for CT claims than for non-CT claims.
– – Since 2020, total costs (pure premium) for CT claims have more than doubled, while costs for non-CT claims have increased by more than 30%. CT claims now account for roughly a quarter of total pure premium costs.

This study relies on WCIRB unit statistical report (USR), medical transaction and CT survey data. Access the report on the Research Studies and Reports page, where you can also explore related WCIRB research.

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Tesla Freemont Yard Hostlers Engage in Interstate Commerce

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Kenneth Doss worked for Tesla, Inc. at the company’s Fremont distribution center, first as a materials handler and then as a “yard hostler.” Yard hostlers drive tractor trucks to move, position, and park 53-foot trailers around Tesla’s factory grounds. The trailers contained auto parts — including, by Doss’s account, battery parts shipped in from Nevada — that had arrived from out of state and would be unloaded into a warehouse and eventually used to assemble Tesla vehicles. Doss never crossed state lines or physically left the factory grounds; his job was to reposition the still-loaded trailers from the parking and docking area to the warehouse dock so the parts could be unloaded.

Doss filed a putative class action against Tesla in Alameda County Superior Court, alleging eight causes of action for wage-and-hour violations under the Labor Code and the Unfair Competition Law (“UCL”), covering unpaid wages, overtime, meal and rest periods, wage statements, final-pay timing, and business-expense reimbursement. When he was hired, Doss had electronically signed an offer letter containing an arbitration provision with both a class action waiver and a clause stripping the arbitrator of authority to consolidate employee claims or award class-wide relief. Tesla moved to compel individual arbitration.

The central legal question was whether the Federal Arbitration Act (“FAA”) governed the agreement. The FAA exempts from its coverage the employment contracts of transportation workers “engaged in foreign or interstate commerce” (9 U.S.C. § 1). If that exemption applied, the FAA would not preempt California law that could defeat or limit arbitration.

The trial court denied Tesla’s motion to compel arbitration in its entirety. The court found that (1) the yard hostlers were transportation workers engaged in interstate commerce, so the arbitration agreement was exempt from the FAA under section 1 — reasoning that “the flow of commerce does not stop at the loading dock door”; (2) Labor Code section 229 (which lets courts disregard arbitration agreements in certain wage actions) rendered the agreement ineffective as to seven of Doss’s eight causes of action; (3) the class waiver was invalid under the four-factor test of Gentry v. Superior Court, 42 Cal. 4th 443 (2007); and (4) severance of the class waiver was inappropriate because the agreement was tainted with illegality.

The Court of Appeal issued a mixed disposition: affirmed in part, reversed in part, and remanded in the partially published case of Doss v. Tesla, Inc., No. A173210 (June, 2026). It affirmed the core holding that Doss and the putative class are exempt from the FAA under section 1. It reversed the trial court’s application of Labor Code section 229 to four of the causes of action, and it found legal error in the trial court’s severance analysis, remanding for the trial court to decide unconscionability issues it had not yet reached. The court affirmed the trial court’s Gentry ruling in the unpublished portion of the opinion.

The FAA section 1 exemption (affirmed — published). Reviewing the legal question de novo, the court held the yard hostlers are exempt “transportation workers.” Drawing on Circuit City Stores v. Adams, 532 U.S. 105 (2001), and Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022), the court explained that the inquiry focuses on the actual work performed, that a worker need not be in the transportation industry (Bissonnette v. LePage Bakeries Park St., LLC, 601 U.S. 246 (2024)) and need not personally cross state lines. Saxon held that loading and unloading cargo from vehicles in interstate transit is activity within the flow of commerce; the Ninth Circuit extended that logic to a warehouse worker in Ortiz v. Randstad Inhouse Services, LLC, 95 F.4th 1152 (9th Cir. 2024). The court placed the yard hostlers along this continuum: because their handling of the trailers was “a necessary step” in completing the interstate journey of the auto parts, they fell within the exemption.

Labor Code section 229 (reversed in part — published). Section 229 applies only to actions “for the collection of due and unpaid wages” arising from Labor Code sections 200–244. Applying Lane v. Francis Capital Management LLC, 224 Cal. App. 4th 676 (2014), and Kirby v. Immoos Fire Protection, Inc., 53 Cal. 4th 1244 (2012), the court held that Doss’s second (overtime), third (meal periods), fourth (rest periods), and fifth (wage statements) causes of action are not collection-of-wages actions within section 229 — the second and third because they arise outside sections 200–244, and the fourth and fifth because their underlying legal violation is the denial of breaks or accurate statements, not the nonpayment of wages. The court rejected Doss’s argument that Naranjo v. Spectrum Security Services, Inc., 13 Cal. 5th 93 (2022), superseded Lane, reading Naranjo to reaffirm that characterization turns on the nature of the violation, not the remedy. But the court affirmed application of section 229 to the first (unpaid wages) and sixth (final pay under sections 201–203) causes of action, plus the derivative UCL claim — disagreeing with Lane to the extent it suggested a section 203 waiting-time-penalty claim falls outside section 229, and aligning with Villalobos v. Maersk, Inc., 114 Cal. App. 5th 1170 (2025).

The Gentry factors (affirmed — unpublished). Reviewing for abuse of discretion, the court upheld the finding that the class waiver was invalid. Counsel’s declaration adequately supported a modest individual recovery (~$25,000), consistent with figures accepted in Garrido v. Air Liquide Industrial U.S. LP, 241 Cal. App. 4th 833 (2015), and Betancourt v. Transportation Brokerage Specialists, Inc., 62 Cal. App. 5th 552 (2021). The court found the trial court could reasonably infer real-world obstacles to individual arbitration, and noted that not all four Gentry factors must point the same way to support invalidation.

Severance (reversed for legal error; remanded — unpublished). The court agreed with Tesla that the trial court’s refusal to sever was based on legal error. Under Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478 (2024), severance is the strongly preferred course unless the agreement is “permeated” by unconscionability. The trial court wrongly treated the presence of a class waiver as itself evidence of a systematic effort to disadvantage employees, contrary to Gentry, which says severance is “particularly appropriate” for class-waiver provisions. Because Doss had argued other provisions were substantively unconscionable and the trial court never ruled on them, the appellate court remanded for the trial court to decide those unconscionability issues in the first instance.

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Judge Said Use of AI Was “Worst Example of Misconduct by a Lawyer”

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In June 2024, the Lipeles Law Group (“LLG”) filed a wage-and-hour class action in Los Angeles County against Harbor Distributing and related entities (the Ascensao action). Six months later, in December 2024, the same firm filed a nearly identical class action in San Francisco County against the same defendants on behalf of a different named plaintiff, Jaime Arguello Amaya Quinteros — an “overlapping, duplicate, copycat action,” in the words of the defense.

When Harbor moved to stay the San Francisco case under the doctrine of exclusive concurrent jurisdiction, LLG filed an opposition brief that proved to be a disaster. A contract attorney, James Sansone, had drafted it. Associate Jasmine Badawi reviewed it for flow but did not read the cited cases or check the citations; partners Kevin Lipeles and Thomas Schelly did not read the brief at all. The brief turned out to be riddled with fabrication: two case citations did not exist, and the trial court counted no fewer than eight fabricated quotations from five different cases, with the court observing that “[l]iterally every other purported quotation from a case in the brief is similarly fictitious.” The hallmarks pointed to undisclosed use of generative AI. Sansone denied using AI and insisted a Lexis citation check had validated everything — a claim the court found wholly incredible.

The trial court granted the stay and separately issued an order to show cause (“OSC”) re sanctions. After receiving declarations and holding a hearing — at which the firm’s lawyers apologized but could not coherently explain why they had filed a duplicative second action or opposed the stay, and continued to disclaim awareness of their own earlier-filed Los Angeles case — the court imposed sanctions under Code of Civil Procedure section 128.7(b). It ordered LLG and attorneys Lipeles, Schelly, and Badawi, jointly and severally, to pay $5,000 to Harbor and $1,000 to the court, to serve the order on the Los Angeles judge and on any San Francisco judge before whom they appeared for a year, and it referred the matter to the State Bar. The court called this “the worst example of misconduct by a lawyer” it had seen on the bench. Sansone, the court found, was “particularly blameworthy” for using AI and then denying it under oath, but the court held the firm bore “ultimate responsibility” because its name was on the brief.

The Court of Appeal affirmed the sanctions order in full in the published case of Quinteros v. Harbor Distributing, LLC (Lipeles et al., Objectors and Appellants), No. A174202 (June 2026). It held that LLG had forfeited two of its three arguments — the “safe harbor” procedural challenge and the objection to sanctions being paid to Harbor — and that the remaining argument, that the conduct did not warrant sanctions, had no merit because the trial court did not abuse its discretion.

The forfeited “safe harbor” challenge. LLG argued that section 128.7(c)(2) entitled it to 21 days to withdraw the offending opposition before sanctions could issue, and that the court’s compressed timeline denied that protection. The court rejected this for several reasons. First and foremost, LLG conceded it never raised section 128.7 in the trial court, and arguments not asserted below are forfeited. It declined to exercise its discretion to reach the forfeited issue, observing that a safe-harbor provision is not a matter of “vital public policy” (City of Rocklin v. Legacy Family Adventures-Rocklin, LLC, 86 Cal. App. 5th 713 (2022)). The court further invoked the invited-error doctrine: LLG had stipulated to the tentative ruling and never sought to cure, so any lost opportunity to withdraw was self-manufactured (Transport Insurance Co. v. TIG Insurance Co., 202 Cal. App. 4th 984 (2012)). Finally, the court noted LLG had buried its request for discretionary review in a footnote — itself a forfeiture (Golden Door Properties, LLC v. County of San Diego, 50 Cal. App. 5th 467 (2020)) — and raised the “important public policy” framing for the first time in its reply brief, too late to consider (American Indian Model Schools v. Oakland Unified School District, 227 Cal. App. 4th 258 (2014)).

The merits of the sanctions (abuse-of-discretion review). Reviewing under the deferential standard of Noland v. Land of the Free, L.P., 114 Cal. App. 5th 426 (2025), the court held the trial court acted well within its discretion. Section 128.7 lets a court sanction a filing made for an improper purpose or unwarranted by existing law; a claim is frivolous if any reasonable attorney would agree it is totally without merit (Kumar v. Ramsey, 71 Cal. App. 5th 1110 (2021)). The court surveyed the rapidly growing body of law on AI-fabricated citations, emphasizing that a fake opinion is not “existing law” and citing it abuses the adversary system — drawing on Noland, the seminal federal decision Mata v. Avianca, Inc., 678 F. Supp. 3d 443 (S.D.N.Y. 2023), and People v. Alvarez, 114 Cal. App. 5th 1115 (2025).

The forfeited objection to paying Harbor. LLG argued sanctions cannot be paid to an opposing party when the court issues an OSC on its own motion. The court found this forfeited too — not raised below (Doe WHBE 3 v. Uber Technologies, Inc., 102 Cal. App. 5th 1135 (2024)) and inadequately briefed, occupying only five lines with a miscited authority and no analysis (Dilbert v. Newsom, 101 Cal. App. 5th 317 (2024)). The court added that California Rules of Court, rule 2.30(b), independently permits awarding sanctions to an aggrieved party. It also observed in a footnote that the combined $6,000 sanction was far less than the “conservative” $10,000 imposed on a single attorney in Noland, and that LLG had improperly raised new authorities and a challenge to the amount for the first time at oral argument (Ramirez v. Charter Communications, Inc., 16 Cal. 5th 478 (2024)).

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Court Must Decide if Federal or State Arbitration Law Applies

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Rebecca Orr worked briefly for United Parcel Service, Inc. (“UPS”) as a Seasonal Support Driver in late 2023, picking up packages from other UPS drivers and delivering them to their final destinations during the holiday rush. When she applied, she signed an “Arbitration Agreement/Seasonal Hiring Agreement” through an online portal. The agreement was drafted to be “as broad as legally permissible” and contained four provisions that mattered to her case: a Delegation Clause giving the arbitrator exclusive authority over disputes about the agreement’s validity and enforceability; a Class Action Waiver; a PAGA Individual Action Requirement Clause; and a “How This Agreement Applies” section declaring the contract governed by the Federal Arbitration Act (“FAA”) — unless the FAA “does not apply to a particular dispute or to one or both parties.”

Orr’s experience on the job was rocky. Although UPS told her she would work eight-hour days, six days a week, her routes were shortened or canceled the morning of a scheduled shift on at least seven occasions. After a December route cancellation, she contacted HR and was told there were not enough packages to deliver. She received no further assignments despite repeated requests for work.

Orr sued UPS in the Superior Court of California for the County of Riverside, raising five state-law claims (including a claim that UPS failed to pay drivers their required “reporting time pay”) on behalf of three putative classes, later adding a sixth claim under California’s Private Attorneys General Act (“PAGA”). UPS removed the case to federal court and moved to compel arbitration and stay proceedings.

A central dispute emerged: Orr and UPS disagreed over whether the FAA or the California Arbitration Act (“CAA”) governed the agreement. The distinction was not merely academic — the two statutes differ in ways that could change which of Orr’s claims could be heard in court versus arbitration.

The district court granted UPS’s motion. It ordered Orr to arbitrate her individual claims “consistent with the terms of the binding arbitration agreement,” while staying litigation of the class claims pending arbitration. Critically, the court declined to decide whether the FAA or CAA applied, reasoning that the “result is the same” under either statute, so the question need not be resolved. It also concluded that Orr had forfeited any challenge to the Delegation Clause.

Orr moved for clarification under Federal Rule of Civil Procedure 60(a) and (b), arguing the court itself had to decide whether her contract fell within the FAA’s exemption for certain employment contracts (9 U.S.C. § 1). The district court denied the motion, holding it had “properly refrained” from determining whether a Section 1 exemption applied because, in its view, the CAA does not require that analysis before compelling arbitration.

Because neither the FAA nor California law allows an ordinary appeal from an order granting arbitration, Orr sought a writ of mandamus from the Ninth Circuit.

This was a mandamus proceeding, not a conventional appeal, so the Ninth Circuit did not “affirm” or “reverse.” Instead, the panel granted Orr’s petition for a writ of mandamus and directed the district court to determine the appropriate statutory basis for its authority to compel arbitration in the published case of In re Rebecca Orr, No. 25-2330 (9th Cir. June 9, 2026). The court made clear it was not ordering that arbitration is improper — only that the legal basis for it must be decided first, with the remaining arbitrability issues left to the district court to address afterward.

The panel evaluated the five factors governing mandamus relief from Bauman v. U.S. District Court, 557 F.2d 650, 654–55 (9th Cir. 1977): (1) the absence of another adequate remedy such as direct appeal; (2) prejudice not correctable on appeal; (3) clear legal error by the district court; (4) an oft-repeated error or persistent disregard of the rules; and (5) a new and important problem or issue of first impression. The third factor — clear error — is a necessary condition, so the court began there.

Clear legal error (Factor 3). The court held the district court clearly erred by compelling arbitration without identifying the source of its authority, thereby improperly handing the FAA § 1 exemption question to the arbitrator. Under New Prime Inc. v. Oliveira, 586 U.S. 105, 111 (2019), a court — not an arbitrator — must decide whether the § 1 “contracts of employment” exclusion applies before ordering arbitration under the FAA, because a court’s power to compel arbitration is bounded, not “unconditional.”

Two features made the error especially clear here. First, the agreement’s own choice-of-law clause assumed the FAA would control unless found inapplicable, making the FAA question a contractual prerequisite. Second, the choice of governing law was not a mere technicality: under Perry v. Thomas, 482 U.S. 483, 490–91 (1987), the FAA preempts California Labor Code § 229 (which lets employees pursue unpaid-wage claims in court despite an arbitration agreement), but California courts allow such suits when only the CAA applies, Garrido v. Air Liquide Industries U.S. LP, 241 Cal. App. 4th 833, 845 (2015).

The panel rejected UPS’s argument that New Prime does not apply where state law offers an alternative basis for arbitration, noting that no federal court of appeals has allowed a district court to skip the § 1 question simply because a state statute might also compel arbitration. It pointed to its own precedents Romero v. Watkins & Shepard Trucking, Inc., 9 F.4th 1097, 1100 (9th Cir. 2021), and In re Van Dusen, 654 F.3d 838, 846 (9th Cir. 2011), as well as decisions from sister circuits, including Harper v. Amazon.com Services, Inc., 12 F.4th 287, 296 (3d Cir. 2021), and Cunningham v. Lyft, Inc., 17 F.4th 244, 253 (1st Cir. 2021).

With the first three factors — including the critical clear-error factor — strongly favoring relief, the panel granted the writ.

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CVS Resolves Insulin Pen Overbilling Medi-Cal Case for $36.5M

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The California Attorney General in collaboration with the United States Department of Justice, announced a settlement with national pharmacy chain CVS Pharmacy, Inc. (CVS) over its submissions of false claims to the Medi-Cal program for excessive dispensing of insulin pens.

The settlement resolves allegations that between January 2010 and December 2020, CVS broke the law by submitting fraudulent claims to Medi-Cal, intentionally giving patients more insulin than prescribed and lying about refill timelines to get paid for unauthorized, unnecessary medication.

The settlement agreement requires CVS to pay $36.5 million total with California’s share being over $2.7  million.

Insulin pens (hard plastic, pen-shaped cases containing syringes filled with insulin solution) are a common way for diabetic patients to self-administer insulin.  During the relevant period, manufacturers frequently distributed insulin pens in five-pen cartons with each pen containing 300 units (3 mL) of insulin solution.  Insulin prescriptions must set forth the “directions for use,” which typically designate both how much insulin to administer and the frequency and/or timing of when to administer it.

When pharmacies seek reimbursement from Group Health Plans (GHPs) for insulin pens, they are required to report, among other data, the “quantity dispensed” and the “days-of-supply.”  The “quantity dispensed” means the total amount of medication dispensed to a patient when the pharmacy fills the prescription, and the “days-of-supply” refers to the number of days that the quantity dispensed is expected to last if taken as directed by the prescriber.  Typically, pharmacists calculate days-of-supply by dividing the total quantity of medication dispensed by the patient’s “daily dose,” i.e., the amount of medication that the prescriber directs the patient to use each day.

GHP plans, and pharmacy benefit managers (“PBMs”) working on their behalf, typically set limits on the days-of-supply that a pharmacy may dispense when filling prescriptions (such as a 30-day supply), and reject reimbursement claims for fills that exceed those limits.  GHPs and PBMs also deny reimbursement for prematurely refilled prescriptions—refills dispensed before the beneficiary would have consumed a substantial portion of the previously-dispensed quantity of medication if taken as prescribed.  PBMs use automated processes to review claims for reimbursement submitted by pharmacies and deny claims that are submitted too far in advance of the expected refill date.  The ability of PBMs to detect and reject reimbursement claims for premature refills depends on pharmacies complying with their obligations to accurately report days-of-supply data.

Dispensing insulin in full cartons containing five pens can exceed applicable days-of-supply limits, resulting in claim rejections.  PBMs developed rules to address reimbursement when dispensing medications like insulin in the smallest commercially-available container would exceed the days-of-supply limit.  Some PBMs required pharmacies to seek an override of the limit and then to resubmit the claim reporting the accurate days-of-supply actually dispensed so the PBM could verify when the next refill would be needed.  Other PBMs permitted pharmacies to submit claims reporting the maximum days-of-supply allowed, even if that number was lower than the actual supply dispensed.  Importantly, however, those PBMs still required pharmacies to track and use the actual days-of-supply dispensed to determine when patients would actually need a refill.  All PBMs prohibited pharmacies from seeking reimbursement for premature refills, regardless of container size.  

As alleged in the Government’s Complaint: From January 1, 2010, through December 31, 2020 (the “Covered Period”), CVS violated the FCA by knowingly submitting, or causing to be submitted, false claims to GHPs for reimbursement for insulin pens where CVS: dispensed more insulin to GHP beneficiaries than was specified by their prescriptions and refilled GHP beneficiary prescriptions substantially before GHP beneficiaries needed the refills; falsely under-reported the days-of-supply for the insulin refills, which often prevented PBMs from detecting that the refills were premature; and failed to comply with applicable rules when refilling insulin prescriptions requiring pharmacies to calculate refill dates using the actual days-of-supply dispensed.

To fill insulin prescriptions as quickly as possible and to ensure that reimbursement claims for insulin pens were not rejected, CVS instructed its pharmacy staff simply to report the maximum days-of-supply allowed under the beneficiary’s plan when dispensing full insulin pen cartons, which was often lower than the actual days-of-supply dispensed.  Many CVS pharmacies did not internally document and use the actual days-of-supply dispensed to determine when patients could next refill their prescription.  To the contrary, CVS’ dispensing software calculated refill dates automatically based on inaccurate days-of-supply data reported to the PBM.  As a result, CVS pharmacy staff repeatedly refilled prescriptions prematurely, dispensing substantially more insulin to GHP beneficiaries than they actually needed and substantially sooner than they needed it according to their prescriptions. As a result, some GHP beneficiaries accumulated large quantities of unused insulin, which was both wasteful and potentially dangerous as insulin can expire.

CVS management was well aware that it was over-dispensing insulin.  PBMs conducted periodic audits of CVS pharmacies and repeatedly found violations of the dispensing rules, including reporting invalid days-of-supply data, refilling insulin pen prescriptions too soon, and dispensing insulin pens in excess of the quantities authorized by the prescription.  PBMs issued chargebacks to CVS based on these violations.  For several years, CVS management knew that insulin pens were among the drug products most frequently subject to chargebacks for premature refills.   Yet, despite these audit findings, CVS failed to take necessary steps to address this long-standing problem during the Covered Period.

Under the settlement, CVS admitted, among other things, that:

– – During much of the covered period, many CVS pharmacies did not break open insulin pen cartons when dispensing insulin pens. As a result, at times, CVS pharmacies dispensed amounts of insulin that exceeded applicable days-of-supply limits. When a claim for reimbursement was rejected for exceeding the limit, some CVS pharmacies did not obtain overrides and re-submit the claim listing the actual days-of-supply dispensed as required by some PBMs. Instead, CVS pharmacies often reported the maximum days-of-supply allowed under the beneficiary’s insurance plan for insulin pens when resubmitting the claim, which was lower than the actual days-of-supply dispensed. While certain PBMs allowed this practice because the carton was the smallest commercially-available container for the medication, CVS pharmacies at times did not adhere to the appropriate refill intervals for patients that were to be based on the actual days-of-supply dispensed.
– – During much of the covered period, CVS customers with insulin-pen prescriptions who enrolled in CVS’ optional auto-refill program received automatic prompts notifying them that their refilled prescriptions were available to be picked up. CVS’ auto-refill logic calculated prescription refill dates based on the days-of-supply data recorded by pharmacy staff and sent customers refill notifications based on those dates. When pharmacy staff recorded days-of-supply numbers that were lower than the actual days-of-supply dispensed, the system would at times calculate refill dates for patients that were premature. As a result, some CVS pharmacies dispensed insulin pen refills to GHP beneficiaries before the beneficiaries needed more insulin and before the GHP plan or PBM would have approved such refills for reimbursement.
– – At times during the covered period, GHPs and the payors working on their behalf paid CVS substantial amounts for insulin pen refills that were ineligible for reimbursement, and CVS pharmacies dispensed more insulin to GHP beneficiaries than they needed.

In connection with the filing of the lawsuit and settlement, the Government joined five private whistleblower lawsuits that had previously been filed under seal pursuant to the False Claims Act.

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