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Attorney Fees and Costs – “The Tail that Wags the (Litigation) Dog”

Employers and Insurance Carriers need to be mindful of the risks of attorney fee and costs awards, which may – at the end of the day – be a major disincentive for using a courtroom to resolve conflicts. As one appellate jurist wisely observed, “All too often attorney fees become the tail that wags the dog in litigation.” Deane Gardenhome Assn. v. Dentkas, 13 Cal.App.4th 1394, 1399 (1993).

An award of fees and costs in litigation may be authorized by statutory provisions, such as in Public Attorney General Actions (PAGA) involving employers. Or by a provision stated in a contract agreed to by the litigating parties before the dispute arose. In the latter instance Cal. Civ. Code §1717(a)(1) provides that attorney’s fees be awarded to the prevailing party in any action on a contract where the contract specifically provides that attorney’s fees and costs shall be awarded to the prevailing party.

The website California Attorney Fees provides a resource tool to practitioners, jurists, and the public about the law governing attorneys’ fees/costs awards, but focused on the law and pragmatic experiences in California state or California federal judicial forums. Their most recent post on Monday provided insights about how attorney fees and costs are allowed, and disallowed, in a report on a Los Angeles County Superior Court (Norwalk) final ruling on attorney’s fees and costs to a prevailing plaintiff in WnG Construction JV, Inc. v. AAA Solar Electric, Inc., et al., L.A. Superior Court Case No. VC065473 [Judge Porras].

Plaintiff WnG won a construction dispute with a contractual fees clause against the defense, winning compensatory damages of about $3.116 million (inclusive of prejudgment interest) despite an offset and plaintiff not winning all that it wanted. However, given that plaintiff did gain much of what it wanted, plaintiff was the prevailing party under the fees clause. Plaintiff then moved for fees and costs, with various law firms submitting fee requests totaling around $2.1 million and with costs claimed of over $205,000.

After some reductions on both counts, Judge Porras awarded fees of about $1.309 million and costs of around $82,000.

Here are some interesting highlights to show his thinking on awarding reasonable fees and costs:

– – An attorney disqualified based on ethical obligation violations is not entitled to any fees, an almost $223,000 reduction;
– – A law firm requesting over $653,000 in fees did not get them because they were involved in a discovery dispute which showed plaintiff deliberately spoliated evidence;
– – The principal law firm did get a majority of its requested fees, although J.D. law clerk/non-J.D. law clerk/secretarial work was not allowed and the main attorney charging $500 per hour for a breach of contract case was reasonable (but not an enhanced $750 hourly rate based on the Laffey Matrix, which the lower court found did not reflect L.A. County rates);
– – A law firm billing for potential post-trial/appellate consultation was not entitled to fees until those events materialized into situations allowing for fee recovery;
– – Although a CCP § 998 offer was rejected and could have potentially resulted in expert fee recoupment (although it is not clear from the record), the failure to identify pre-offer versus post-offer costs did not allow for an award of expert fees without a clearer allocation;
– – Charges for additional or duplicate copies of court reporter transcripts resulted in a reduction of expenses for these items.

The litigation between the parties in this case started with a complaint filed in April 2016, and this month a Notice of Appeal has been filed, thus it is likely there will be several more years of litigation, and subsequent motions for additional attorney fees and costs.

The 11 page Minute Order prepared by Judge Porras is a good read, and good resource on the case law he relied on in making his complex review of the requested attorney fees and costs. Plaintiffs here claimed they paid $2.1 million in attorney fees and costs of $205,000 to ultimately obtain a judgment of $3.116 million in damages.  It would be reasonable to assume the defense also had a similar expense for their attorneys and litigation costs. Overall, it would seem that the parties together spent about $4.5 million in fees and costs to resolve this dispute adjudicated to be worth about $3.116 million. And it is likely that another million or two will be spent on the appeal process over the next few years.  In rough numbers, it will probably cost about $6 million to resolve a $3 million dispute.

Returning then to what was said in 1993 by Justice Wallen in Deane Gardenhome Assn. v. Dentkas, – litigation between a homeowner association and Dentkas – who owned a home there over the color of the paint applied to their home – the homeowner prevailed and filed a motion seeking an award of $11,533 in attorney fees. The trial court denied their request noting, “I remember I made some remarks about this when the case ended. [¶] I think I said don’t come back here looking for attorneys [sic] fees. [¶] My thought is with a micro ounce of cooperation, insight and judgment, this could have been a ten-minute small claims case. [¶] I’m not giving attorneys [sic] fees to anybody.”

On appeal, the trial judge was reversed and Dentkas was awarded attorney fees and costs. In doing so the Court of Appeal noted “We are not at all unsympathetic to the trial court’s concerns. All too often attorney fees become the tail that wags the dog in litigation. Particularly in homeowner disputes such as this where the allegedly offending homeowner, rather than comply with neighborhood demands he or she remove something deemed to be offensive, decides to stand on his or her “property rights.” Often the economic value of what the homeowner gains is minute compared to the litigation costs.”

DOJ Proposes New Rule for Temporary Farm Worker Protections

The U.S. Department of Labor has just proposed a new rule that would strengthen protections for farm workers in the H-2A program and help prevent abuses that undermine wages and standards for all agricultural workers.

The proposed rule would add new protections for worker self-advocacy, better protect workers against retaliation, make foreign labor recruitment more transparent and enhance the department’s enforcement. This proposal builds on a final rule the department published in October 2022 that modernized key aspects of the H-2A program.

“Farm workers are vital to our farmers, our food supply and our communities,” said Acting Secretary Julie Su. “This proposed rule would strengthen protections for H-2A farm workers who are particularly vulnerable to labor abuses, empower them to advocate for fair treatment and ensure that their employment does not depress labor standards and undercut domestic farm workers. The administration is committed to protecting all workers, and this proposal would significantly advance that effort.”

The proposed rule includes:

– – Adding new protections for worker self-advocacy. The proposed rule would improve workers’ ability to advocate for better working conditions by expanding and clarifying existing anti-retaliation protections. The proposed rule would also expand workers’ rights to invite and accept guests – including labor organizations – to employer-provided housing. Additionally, for workers not protected by the National Labor Relations Act, the proposed rule would require employers to provide a list of workers to a requesting labor organization, permit workers to designate a representative to attend any meeting between a worker and the employer where the worker reasonably believes that the meeting may lead to discipline, and prohibits employers from holding captive audience meetings unless the employer provides certain information to ensure that such meetings are not coercive. The proposal would also create greater transparency for workers about their prospective employers’ stance on their right to organize freely and without interference by requiring employers seeking to hire H-2A workers to provide a certification to the Department of Labor that the employer will bargain in good faith over the terms of a proposed labor neutrality agreement with a requesting labor organization or will explain why they will not do so.
– – Clarifying when a termination is “for cause.” The proposed rule would clarify that an employer only terminates a worker “for cause” when the worker either fails to meet pre-specified productivity standards or fails to comply with employer policies after the employer applies a system of progressive discipline. The proposal would establish six conditions to terminate a worker for cause, including that the employee has been informed of, or reasonably should have known, the employer’s policy, rule or productivity standards. Clarifying the meaning of the term “for cause” in existing regulations is important because termination “for cause” generally strips affected workers of their right to be offered work hours of at least three-quarters of the contract period and right to outbound transportation. For U.S. workers, termination “for cause” also strips them of their right to be contacted for employment in the subsequent year.
– – Making foreign labor recruitment more transparent. In line with concerns expressed by workers’ rights and anti-trafficking organizations, the Government Accountability Office and the department’s Office of Inspector General, the department has found that increased transparency is necessary to help protect agricultural workers from predatory practices during the recruitment process. The proposed rule would require employers to provide a copy of all agreements with any agent or recruiter the employer engages in recruiting prospective H-2A workers to the department, regardless of whether the agent is in the U.S. or abroad. The proposed rule would also require employers to identify and disclose the name and location of anyone soliciting H-2A workers on their behalf.
– – Making wages more predictable. The proposed rule would make wages more predictable in the H-2A program by making new wage rates applicable immediately upon their publication in the Federal Register rather than weeks later. This will ensure that agriculture workers are paid the most up-to-date wages as soon as possible. The rule would also require employers who fail to provide adequate notice to workers of a delay in their start date to pay workers the applicable rate for each day that work is delayed for up to 14 days. The proposal would further require enhanced transparency for employers to communicate minimum productivity standards, applicable wage rates, overtime opportunities and delayed start dates to workers.
– – Improving workers’ access to safe transportation, including seat belts. Workers in the H-2A program often travel long distances to and from the worksite in crowded vans and buses, sometimes driven by workers who worked all day, raising grave concerns about transportation safety. The proposed rule would add a seat belt requirement to reduce these hazards. For vehicles that are required by the Department of Transportation to be manufactured with seat belts, the proposed rule would prohibit the use of any employer-provided vehicle to transport H-2A workers unless each occupant is wearing a seat belt before the vehicle is operated, except in specific circumstances.
– – Enhancing enforcement to improve program integrity. The proposed rule would increase the speed with which the debarment of any business that violates H-2A program rules becomes effective by streamlining deadlines for Office of Foreign Labor Certification integrity and Wage and Hour Division enforcement actions. The proposed rule would also make it easier for the workforce system to discontinue necessary recruitment services for employers who have failed to meet program requirements. Finally, the proposed rule would prohibit employers from holding or confiscating a worker’s passport, visa, or other immigration or government identification documents.

Upon publication in the Federal Register, the notice of proposed rulemaking will be open for public comment for 60 days. The department has provided information on sending comments, and will consider all comments received before publishing a final rule.

OWC Proposes Changes to Longshore Penalty and Penalty Appeal Rules

The Longshore and Harbor Workers’ Compensation Act (LHWCA), 33 U.S.C. 901-50, establishes a comprehensive Federal workers’ compensation system for an employee’s disability or death arising in the course of covered maritime employment. The Office of Workers’ Compensation Programs (OWCP) administers the Longshore and Harbor Workers’ Compensation Act and its extensions.

The Act’s provisions have been extended to (1) contractors working on military bases or U.S. government contracts outside the United States (Defense Base Act, 42 U.S.C. 1651-54); (2) employees of nonappropriated fund instrumentalities (Nonappropriated Fund Instrumentalities Act,5 U.S.C. 8171-73); (3) employees engaged in operations that extract natural resources from the outer continental shelf (Outer Continental Shelf Lands Act, 43 U.S.C. 1333(b)); and (4) private employees in the District of Columbia injured prior to July 26, 1982 (District of Columbia Workers’ Compensation Act of May 17, 1928, Public Law 70-419 (formerly codified at 36 DC Code 501 et seq. (1973) (repealed 1979)). Consequently, the Act and its extensions cover a broad range of claims for injuries that occur throughout the United States and around the world.

OWCP has just proposed new rules for imposing and reviewing civil money penalties prescribed by the Longshore Act. The proposed rules would also set forth the procedures to contest OWCP’s penalty determinations.

The proposed rules would add new sections and amend existing sections to implement the Act’s civil money penalty provisions. The Act allows OWCP to impose a penalty when an employer or insurance carrier fails to timely report a work-related injury or death, 33 U.S.C. 930(e), or fails to timely report its final payment of compensation to a claimant, 33 U.S.C. 914(g). See 20 CFR 702.204, 702.236.

The proposed rule would revise current § 702.204 to provide for graduated penalties for an entity’s failure to timely file, or falsification of, the required report of an employee’s work-related injury or death. See 33 U.S.C. 930(a); 20 CFR 702.201. The proposed rule provides that the penalty assessed will increase for each additional violation the employer has committed over the prior two years.

The current regulation states only the maximum penalty allowable, without providing further guidance or a graduated penalty scheme.

The proposed rule would also add new §§ 702.206, 207, and 208. These proposed sections would add procedures for the District Director to notify entities of failures to accurately and timely file, provide an opportunity for a response before the District Director issues a notice of proposed penalty, and provide guidance to both the District Director and the Director in determining the amount of the proposed penalty and penalty by setting forth aggravating and mitigating factors they may consider.

The proposed rule also contains a new subpart I setting out procedures for challenging proposed penalties and penalties under both § 702.204 (for an entity’s failure to timely file, or falsification of, the required report of an employee’s work-related injury or death) and § 702.236 (for failing to report the termination of payments). These proposed procedures would allow an entity against whom a penalty is assessed the opportunity for a hearing before an administrative law judge, and to petition the Secretary of Labor (Secretary) for further review.

During the hearing, entities would have the opportunity to submit facts and arguments for consideration consistent with the Rules of Practice and Procedure for Administrative Hearings Before the Office of Administrative Law Judges (29 CFR part 18).

The ALJ would determine whether the respondent violated the statutory or regulatory provision under which the penalty was assessed and whether the amount of the penalty assessed was appropriate. Consistent with section 557 of the APA, the ALJ’s decision would become the decision of the Agency without further proceedings, unless within 30 days, the respondent requested reconsideration of the ALJ’s decision

The Department invites written comments on the proposed rule from interested parties. Written comments must be received by November 13, 2023.  Written comments may be submitted in on of several methods detailed in the Federal Register announcement of this proposed rule change.

The Federal Register announcement also contains a Section-by-Section Explanation of the proposed rule if you would like a better understanding of what is proposed.

L.A. County Health Initiative to Pay $1.3M to Resolve HIPAA Violations

The Local Initiative Health Authority for Los Angeles County (L.A. Care) is a public agency that provides health insurance for low-income individuals in Los Angeles County through four health coverage programs including Medi-Cal.

Back in March 2022 LA Care was fined $55 million by the California Department of Managed Health Care and the California Department of Health Care Services for “deep-rooted, systemic failures that threaten the health and safety of its members.” The departments said their investigations were triggered by a September 2020 Los Angeles Times article that identified multiple county residents who died of their conditions following extensive delays for treatment.

And now – slightly more that one year later – the U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) just announced a settlement of potential violations of the Health Insurance Portability and Accountability Act (HIPAA) Rules with L.A. Care, the nation’s largest publicly operated health plan that provides health care benefits and coverage through state, federal, and commercial programs.

OCR enforces the HIPAA Privacy, Security, and Breach Notification Rules that set the requirements that HIPAA-regulated entities must follow to protect the privacy and security of protected health information (PHI)

The settlement concludes two OCR investigations initiated from a large breach report and a media article regarding a separate security incident.  Under the agreement, LA Care agreed to pay $1,300,000 and to implement a corrective action plan, discussed in further detail below, which identifies steps LA Care will take to resolve these potential violations of the HIPAA Security Rule and protect the security of electronic protected health information (ePHI).

“Breaches of protected health information by a HIPAA-regulated entity often reveal systemic, noncompliance with the HIPAA Rules,” said OCR Director Melanie Fontes Rainer.  “HIPAA-regulated entities need to be proactive in ensuring their compliance with the HIPAA Rules, and not wait for OCR to reveal long-standing HIPAA deficiencies.  Entities such as LA Care must protect the health information of its insureds while providing health care for the most vulnerable residents of Los Angeles County through its coverage, which includes Medicaid, Medicare, and Affordable Care Act health plans.”

The potential violations in this case included:

– – Failure to conduct an accurate and thorough risk analysis to determine risks and vulnerabilities to ePHI across the organization,
– – Failure to implement security measures sufficient to reduce risks and vulnerabilities to ePHI to a reasonable and appropriate level,
– – Failure to implement sufficient procedures to regularly review records of information system activity,
– – Failure to perform a periodic technical and nontechnical evaluation in response to environmental or operational changes affecting the security of ePHI, and
– – Failure to implement hardware, software, and/or procedural mechanisms that record and examine activity in information systems that contain or use ePHI.

OCR’s investigation found evidence of potential noncompliance with the HIPAA Privacy and Security Rules across LA Care’s organization, a serious concern given the size of this covered entity. In addition to the monetary settlement, LA Care has agreed to take the following steps under a comprehensive corrective action plan that will be monitored for three years by OCR to ensure compliance with HIPAA:

– – Conduct an accurate and thorough risk analysis to determine risks and vulnerabilities to electronic patient/system data across the organization.
– – Develop and implement a risk management plan to address identified risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI.
– – Develop, implement, and distribute policies and procedures for a risk analysis and risk management plan.
– – Report to HHS when it conducts an evaluation due to an environmental and operational change that affects the security of ePHI in LA Care’s possession or control.
– – Report to HHS within thirty (30) days when workforce members fail to comply with the HIPAA Rules.

The resolution agreement and corrective action plan may be found on the HHS website

Firefighter Death Count From Toxic Exposure Increasing 22 Years After 9/11

A heartbreaking milestone haunts this year’s 9/11 anniversary. The NY Post and other media report that 341 FDNY members have now died of Ground Zero-related illnesses, nearly equaling the death toll for other fire fighters that perished in the 2001 terror attack at Ground Zero.

Twenty-two years ago the loss of 343 firefighters was an unimaginable number and sadly the day we pass that milestone is quickly approaching,” Andrew Ansbro, president of the FDNY Uniformed Firefighters Association, said at a news conference Friday. “It is inevitable.”

We’ve attended 40 or so funerals this year for the members that we lost and we know it’s not going to end. So for us it’s every day or every week – but for the general public we have this press conference to remind everyone that it is ongoing and that funding is still needed,” he said.

James Brosi, president of the FDNY Uniformed Fire Officers Association, warned that “we may exceed” the immediate 9/11 death toll “even before the anniversary.” In February, Brosi said he lost his own father, Joseph Brosi, who worked at Engine 88 in the Bronx and battled both lung and bladder cancers after 9/11.

“In the early anniversaries that immediately followed 9/11, our primary focus was on the people we had lost because that was our greatest concern,” Brosi said. “And as the years passed, and as the latency period passed for those illnesses that will now affect us, our concern is shifted not only with the people we lost, but the people we’ve lost since, and the people that are now struggling.”

Exposure to the enormous cloud of toxins, dust and debris that resulted from the terrorist attack on the World Trade Center in 2001 has been linked to an increased risk of cardiovascular disease among first-responder firefighters, according to a recent study published in the JAMA Network.

In this cohort study of 9796 firefighters, age-adjusted incident rates of cardiovascular disease were higher for firefighters with greater World Trade Center exposure. Both acute World Trade Center as well as repeated exposure during 6 or more months at the World Trade Center site appeared to be associated with long-term elevated cardiovascular disease risk.

“The findings of the study suggest a significant association between greater WTC exposure and long-term CVD risk. The findings appear to reinforce the importance of long-term monitoring of the health of survivors of disasters.”

Among the firefighters in the study, “the ones with the greatest exposure – those present in the morning of 9/11 – had a higher risk than those who showed up later in the week,” said Dr. David Prezant, chief medical officer for the Fire Department of the City of New York and a professor at the Albert Einstein College of Medicine, who was senior author of the new study.

The exposure [among first responders] was really dramatic,explains Dr. Michael Crane, a physician and environmental medicine professor at the Icahn School of Medicine at Mount Sinai, who also is the medical director of a clinic that delivers care to 9/11 first responders. “There were all kinds of carcinogens and combustion products,” Crane says.

The contents of two skyscrapers including concrete, pipes, computers, were pulverized into burning ash laden with lead and other heavy metals. The plume of smoke that could be seen from space. “It was a real witch’s brew,” Crane says.

And another study published in JNCI Cancer Specturm used a study population that consisted of 28 729 members of the General Responder Cohort. A restricted analyses identified 1072 cancers in 999 responders, with elevations in cancer incidence for all cancer sites combined  

VR Technology Successfully Used to Train Surgeons and Treat Patients

While consumer VR remains a niche product and a massive money-burning venture for Meta CEO Mark Zuckerberg, CNBC reports that the technology is proving to be valuable in certain corners of health care. Kettering Health Dayton is one of dozens of health systems in the U.S. working with emerging technologies like VR as one tool for helping doctors to train on and treat patients.

Just days before assisting in his first major shoulder-replacement surgery last year, Dr. Jake Shine strapped on a virtual reality headset and got to work. As a third-year orthopedics resident at Kettering Health Dayton in Ohio, Shine was standing in the medical center’s designated VR lab with his attending physician, who would oversee the procedure.

Both doctors were wearing Meta Quest 2 headsets as they walked through a 3D simulation of the surgery. The procedure, called a reverse total shoulder arthroplasty, can last around two hours and requires surgeons to carefully navigate around neurovascular structures and the lungs.

For its orthopedics program, Kettering Health Dayton uses software developed by PrecisionOS, a company that builds VR modules for training surgeons, medical residents and medical device representatives. PrecisionOS co-founder and CEO, Dr. Danny Goel, said the company has nearly 80 customers across the globe.

Orthopedics residents at the University of Rochester also use PrecisionOS. Dr. Richard Miller, a retired professor at the university, said the software is “sophisticated” and “very realistic,” especially as a way to learn the steps of a procedure. He finds it so compelling that he’s been actively helping the orthopedics department implement the technology even though he retired three years ago.

Jan Herzhoff, Elsevier Health’s president, is quoted as saying that her company’s Complete HeartX mixed reality offering ”will help prepare medical students for clinical practice by using hyper-realistic 3D models and animations that help them understand and visualize medical issues, such as ventricular fibrillation, and how to apply their knowledge with patients.”

To date, one of the primary applications of VR in health care has been targeted at pain treatment.

“It’s very hard to keep track of pain when you’re in a fantastical cyberdelic world,” said Dr. Brennan Spiegel, director of health services research at Cedars-Sinai in Los Angeles. Spiegel said that when someone is injured, there is both a physical and an emotional component to their pain. Those signals are sent to two different parts of the brain, and VR can serve to tamp down the signals in both regions. “It’s training people how to modify their spotlight of attention so they can swing it away from the painful experiences,” Spiegel said. “Not just the physical, but the emotional experiences.”

Spiegel said Cedars-Sinai is preparing to launch a virtual platform to help people with gastrointestinal issues like Crohn’s disease, celiac disease or acid reflux, as well as others for anxiety, addiction and perimenopausal health.

The technology has also attracted the attention of the U.S. Department of Veterans Affairs, which is using extended reality at more than 160 facilities to help patients with pain management, behavioral therapy and both physical and cognitive rehabilitation. Caitlin Rawlins, the immersive program manager at the VA, said there are currently more than 40 separate use cases for the technology across the agency’s different sites. The VA first introduced extended reality in a limited capacity around 2015, and has found more opportunities to put it to use as the technology has improved.

“I’ve seen it change a whole lot,” Rawlins told CNBC in an interview. “The first virtual reality headset that I used was this big clunky headset that had all these wires it had to be connected to a laptop to function.”

Rawlins said what drew her to extended reality was seeing the immediate response from patients. She recalled the first time she watched a patient use VR. He was a man in his 80s who had just undergone knee replacement surgery. The pain was so severe that opioids didn’t help, Rawlins said.

After mere minutes in VR, he told Rawlins he couldn’t feel the pain in his leg anymore.

″Just using that for a simple 30-minute session can mean the difference between excruciating pain, unable to do the exercises and the ambulation that they need to, to actually get up and move and get ready to go home,” she said.

Kaiser Resolves Illegal Disposal of Medical Waste Claim for $49M

The California Attorney General in partnership with six district attorneys, announced a settlement with Kaiser Foundation Health Plan, Inc., and Kaiser Foundation Hospitals resolving allegations that the healthcare provider unlawfully disposed of hazardous waste, medical waste, and protected health information at Kaiser facilities statewide. As part of the settlement, Kaiser will be liable for a total of $49 million and be required to take significant steps to prevent future unlawful disposals.

The settlement is the result of undercover inspections conducted by the district attorneys’ offices of dumpsters from 16 different Kaiser facilities. During those inspections, the district attorneys’ offices reviewed the contents of unsecured dumpsters destined for disposal at publicly accessible landfills, finding hundreds of items of hazardous and medical waste (aerosols, cleansers, sanitizers, batteries, electronic wastes, syringes, medical tubing with body fluids, and pharmaceuticals) and over 10,000 paper records containing the information of over 7,700 patients.

The California Department of Justice subsequently joined the district attorneys and expanded the investigation of Kaiser’s disposal practices further throughout the state. In response to this joint law enforcement investigation, Kaiser immediately hired a third-party consultant and conducted over 1,100 trash audits at its facilities in an effort to improve compliance. Kaiser also modified its operating procedures to improve its handling, storage, and disposal of waste.    

Kaiser is headquartered in Oakland, California and operates over 700 facilities statewide, making it the largest healthcare provider in California. Kaiser provides healthcare to approximately 8.8 million Californians, as well as members of the public who seek emergency care from Kaiser facilities. In announcing today’s settlement, Attorney General Bonta is joined by the district attorneys of Alameda, San Bernardino, San Francisco, San Joaquin, San Mateo, and Yolo counties.

As part of the settlement, Kaiser:

– – Will pay $47.250 million. That amount includes $37,513,000 in civil penalties; $4,832,000 in attorneys’ fees and costs; and $4,905,000 for supplemental environmental projects, primarily environmental prosecutor training.
– – Must pay an additional $1.75 million in civil penalties if, within 5 years of the entry of the final judgment, Kaiser has not spent $3.5 million at its California facilities to implement enhanced environmental compliance measures to ensure compliance with relevant provisions of the law that are alleged to have been violated.
– – Must retain an independent third-party auditor – approved by the Attorney General’s Office and the district attorneys – who will: perform no less than 520 trash compactor audits at Kaiser’s California facilities to help ensure that regulated wastes (including items containing protected health information) are not unlawfully disposed of; and conduct at least 40 programmatic field audits each year, for a period of five years after entry of the final judgment, to evaluate Kaiser’s compliance with policies and procedures designed to ensure compliance with applicable laws related to hazardous waste, medical waste, and protected health information.

Kaiser’s unlawful disposals are alleged to violate California’s Hazardous Waste Control Law, Medical Waste Management Act, Confidentiality of Medical Information Act, Customer Records Law, and Unfair Competition Law. The disposals are also alleged to violate the federal Health Insurance Portability and Accountability Act of 1996, known as HIPAA.

In 2014, the California Department of Justice filed a lawsuit against Kaiser after it delayed notifying its employees about an unencrypted USB drive that was discovered at a Santa Cruz thrift store. The USB drive contained over 20,000 employee records.

Kaiser paid $150,000 in penalties and attorneys’ fees, and agreed to comply with California’s data breach notification law in the future, provide notification of any future breach on a rolling basis, and implement additional training regarding the sensitive nature of employee records. In addition, Kaiser has been the subject of prior enforcement actions by local prosecutors for mismanagement of regulated wastes.

Ballot Measure to Make $36B Managed Care Organization Tax Permanent

The Coalition to Protect Access to Carewhat Politico reports as “an amalgam of monied health care interests that includes representatives for doctors, hospitals, health plans and other key players,”-  has filed paperwork to put a November 2024 ballot measure before voters, that would make permanent a tax on health plans and funnel the revenue to certain parts of the health safety net.

The coalition has until March or April to collect 546,651 signatures to qualify for the November ballot, and they’re already a few weeks behind other initiatives.

The coalition that secured a $36 billion tax deal to pump more money into Medi-Cal last June, that followed months of private negotiations between bitter industry rivals, state lawmakers and the governor’s office.wants to make it harder for future administrations to spend that revenue elsewhere.

The battle surrounds the California Managed Care Organization (MCO) tax. An MCO provider tax is a federally allowable Medicaid funding mechanism whereby a taxis imposed by states on health care services where the burden of the tax falls mostly on providers, such as a tax on managed care plans per members served. Provider taxes have become an integral source of financing for Medicaid nationwide.

In California the MCO tax has existed for nearly 20 years and been enacted by both Democratic and Republican governors. Recently AB 115 (Chapter 348, Statutes of 2019) and SB 78 (Chapter 38, Statutes of 2019) authorized a successor MCO tax from July 1, 2019, through December 31, 2022, similar to the 2016 MCO Tax. SB 78 (Chapter 33, Statutes of 2013) extended the MCO tax sunset date from June 30, 2011, to June 30, 2013.

California “taxes” MCOs, and uses the revenue to draw down federal matching funds to support the Medi-Cal program. Specifically, California:
– 1.Imposes a tax on all managed care plans per members served in a prior year.
– – a.The tax varies for Medi-Cal managed care plans compared to non-Medi-Cal managed plans or other managed care plans as seen in proposed budgetlanguage.
– – b.The fee also has tiers based on the number of members served by the managed care plan. Some tiers have no fee and some tiers cap the number of members the fee applies to in that tier.
– 2.Runs several “tests” based on federal rules to ensure the tax structure meets all federal requirements.
– 3.Increases the rates the state pays to Medi-Cal managed care plans to account for thetax. As such, there is no net impact to Medi-Cal managed care plans.
– 4.Uses the collected funds to secure a federal match to support the Medi-Cal program,which results in a General Fund gain.

According to the article in Politico, the last three times California levied this tax on health plans, it used the money to balance the budget during economic downturns. But after the Coalition entered the negotiations earlier this year, which led to the June 2023 agreement, and for the first time, much of the revenue stayed in the health care system, especially in Medi-Cal. – in a year when the state faces a $32 billion budget deficit.

That deal raised rates for primary care, OBGYN care and specialty mental health care and set aside money to cover such costs as emergency room physicians and ambulance services. The new ballot initiative preserves those priorities and adds more, like money for community health workers, specialty dental services, prescription drugs and some clinician and dentist loan repayments.

The ballot initiative sets out a spending plan that hews fairly closely to the priorities laid out in June’s iteration of the tax, which expires in 2026. It assumes that the tax will bring in around $4.3 billion when it’s renewed in 2027.

“We need to make sure that this is permanent and will last beyond the next several years and become something that providers and patients can count on for decades to come,” said Dustin Corcoran, CEO of the California Medical Association and chair of the coalition behind the initiative. “We don’t know what future administrations may or may not do.”

The ballot measure would make the MCO tax that expired on December 31, 2022, and then renewed by the negotiated outcome by industry rivals in June 2023, which will now otherwise expire in 2026 permanent. Any future changes would have to be approved by voters, making it harder for the state to update how it spends the revenue. The tax will be levied on California Managed Care Organizations (MCOs) who will no doubt pass those costs on to the price of ultimately paid on behalf of participants in one of the MCO organizations.  

CMS has indicated they will be issuing new MCO Tax guidelines that will be more restrictive no later than 2026.

Recently Retired WCJ Terry Smith Returns to Floyd Skeren Lawfirm

Terry Smith, a recently retired Worker’s Compensation Judge, has returned to the law firm of Floyd Skeren Manukian Langevin as a partner its Complex Litigation Unit.

He will also be assisting retired Workers Compensation Judge David O’Brien maintain and edit his treatise California Workers’ Compensation Claims and Benefits, Online Edition, and other special projects.

Judge Smith is a Certified Specialist in California Workers’ Compensation Law and has defended insurance carriers, private employers, public agencies, self-insured employers, administrators, school districts, and transit districts. He is a trial attorney litigating special investigation cases, serious willful misconduct claims, §132(a) claims and appellate work.

Judge Smith served as a Deputy Sheriff for the County of Ventura and has worked for the Ventura District Attorney’s office. He began his workers’ compensation career 30 years ago as an adjuster and then as an attorney working at a national insurance carrier specializing in Special Investigations Unit (SIU) cases.

He has lectured to insurance company’s claims units and employers in association with the Employer’s Fraud Task Force and the Los Angeles County, San Bernardino County, Orange County and Riverside County District Attorney’s Offices.

Judge Smith has also lectured to the International Association of Special Investigation Units and the Southern California Fraud Investigators Association.

After serving as a Workers’ Compensation Judge at the Marina Del Rey Board, he now has decided to return to his prior home with Floyd Skeren at its Westlake Village office where he was formerly a Partner and Manager of the attorneys in that office.

His colleagues at that facility and in other firm offices across the state are very excited to learn of his return to his former group. He spent seventeen years as a defense lawyer with the firm before being recruited as a Workers’ Compensation Judge by the WCAB.

Judge Smith said he was very pleased to return to the group of colleagues he has known and worked with for many years, and to work with the firm’s clients, many of which he has worked in the capacity as defense lawyer.

In addition to his work with Floyd Skeren, he enjoys traveling and vacationing with his wife of 30 years. On weekends he enjoys riding his Harley Davidson Street Glide Special with the local Harley Owners Group (HOG) and the local Blue Knights® International Law Enforcement Motorcycle Club – a non-profit fraternal organization consisting of active and retired law enforcement officers who enjoy riding motorcycles.

Court Rejects Longshore Benefits for Worker Injured at Yacht Club

The Alamitos Bay Yacht Club in Long Beach hired Brian Ranger as a maintenance worker. He helped the club with its fleet by painting, cleaning, maintaining, repairing, unloading, and mooring vessels.

One day, Ranger used a hoist to lower a club boat into navigable waters. He stepped from the dock onto its bow, fell, was hurt, and applied for workers’ compensation. Then he sued the club in state court on federal claims of negligence and unseaworthiness.

The trial court sustained the club’s final demurrer to the second amended complaint. The trial court ruled there was no admiralty jurisdiction.

The California Court of Appeal affirmed the trial court decision in the published case of Ranger v. Alamitos Bay Yacht Club -B315302 (September 2023).

Congress enacted the Longshoremen’s and Harbor Workers’ Compensation Act of March 4, 1927, which established a workers’ compensation program for “any person engaged in maritime employment.” The 1972 amendments extended the coverage of the Longshore Act but created uncertainty about the boundaries of that extension.

Congress later learned the 1972 law had created “a general confusion as to whether or not the Longshore Act applies.” The rules of coverage became a prolific generator of litigation. In 1984, Congress responded by introducing a degree of clarity: Congress sharpened the Longshore Act’s focus to exclude employees who, although they happened to work on or next to navigable waters, lacked a sufficient nexus to maritime navigation and commerce.

The 1984 statute thus carved out specific employee categories, placed them beyond the coverage of the Longshore Act, and assigned these employees to the “appropriate state compensation laws.” Among the carveouts were employees working for clubs.

Which clubs? All clubs. Initially there was disagreement between the Senate and the House of Representatives about whether the Longshore Act should exclude only employees working at nonprofit clubs. (H.R.Rep. No. 98-570, 1st Sess., p. 4 (1983) (H.R.Rep. 98-570).) The Senate wanted a broader approach but the House initially favored the narrower one. The Senate’s view prevailed: the exclusion applies to all club employees and is not limited to nonprofits.

Ranger concedes that his employer is a “club,” but then asserts that federal law preempts state law in this case.However the Court of Appeal noted that “national and state interests do not clash here. Federal and state law are in accord. For employees like Ranger, both Congress and the California legislature have replaced the fault-based regime of tort with the no-fault alternative of workers’ compensation. Both bodies have preferred the virtues of speedy, predictable, and efficient compensation for occupational accident victims like Ranger.”

Ranger counters this analysis by repeatedly stressing the importance of “uniformity” of the general maritime law. In this quest, Ranger relies on Green v. Vermilion Corp. (5th Cir. 1998) 144 F.3d 332, 334–341.

The Court of Appeal responded “We respectfully but profoundly differ with Green. We therefore also part ways with Freeze v. Lost Isle Partners (2002) 96 Cal.App.4th 45, 51-52 (Freeze), which relied on Green without adding to its analysis.”

Apart from Green and Freeze, Ranger cites cases predating 1984. However, “these authorities deal with old superseded law, not the new governing law.”

In sum, California’s workers’ compensation law is Ranger’s exclusive remedy. Congress in 1984 decreed this state law aptly covers his situation. A core part of the state workers’ compensation bargain is that injured workers get speedy and predictable relief irrespective of fault. In return, workers are barred from suing their employers in tort. The trial court correctly dismissed Ranger’s tort suit against his employer.”