Category: Daily News

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Valencia doctor pleaded guilty to federal charges for submitting more than $2.4 million in fraudulent claims to Medicare.

Dr. Gary J. Ordog, 61, pleaded guilty before United States District Judge Fernando M. Olguin to one count of health care fraud. Judge Olguin is scheduled to sentence Ordog on August 18.

According to admissions made as part of his plea agreement, Ordog, a physician specializing in toxicology, specifically admitted he “submitted false and fraudulent claims to Medicare for purported office visits and other services that the defendant, in fact, never provided, including: (a) purported services for Medicare beneficiaries who were deceased well before the purported dates of services; (b) services purportedly provided to beneficiaries on dates and times when the defendant was, in fact, out of the area, including on dates and times when the defendant was outside of the United States; (c) for dates and times in which the defendant claimed to have provided more than 24 hours of services for that date. Defendant, at times, fabricated patient records to support false and fraudulent claims to Medicare”.

He also specifically admitted that he “submitted and caused the submission of approximately $2,435,089.00 in false and fraudulent claims.”

Despite these admissions, Ordog continues to be fully licensed as a physician to practice medicine in California, despite this case, his guilty plea, and prior disciplinary problems with the Board of Medicine.

His license to practice medicine in California was restricted in April 2015 by a condition in the order setting bail. At the time he was required to submit copies of paper billing with written notes and other supporting documents to the Department of Justice for billing submitted to Medicare.

But the following month the Medical Board of California issued an Order Following Completion of Probation indicating that Ordog had completed probation on prior charges against him and his license was “fully restored and renewed/current status and free of probation requirements, effective March 13, 2015.”

Notwithstanding his serial legal and ethical problems the Board of Medicine currently indicates his license is “Renewed & Current” and Ordog is at this moment free to practice medicine in California despite his admission that he committed a $2.4 fraud. He only agreed as part of his written plea agreement that “Defendant understands and acknowledges that as a result of pleading guilty pursuant to this agreement, defendant will be excluded from Medicare, Medicaid, and all Federal health care programs.”  The California Medical Board seems to be slow to respond in any way to his current admitted multi-million dollar fraudulent medical practice.

According to a report by the Center for Investigative Reporting, providers who have been convicted of fraud, or banned from practicing in one health system, have no problem starting a second career in California’s workers’ compensation system. Perhaps Ordog can join the growing list of refugee physicians who just migrate over to industrial patients for a living.

The HHS-OIG and the California Department of Justice investigated the case, which was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. Fraud Section Trial Attorneys Ritesh Srivastava and Niall O’Donnell are prosecuting the case.

There seems to be relentless constitutional challenges to legislative limits to the ever expanding worker’s compensation system. California has seen this play out in the Stevens case which has been resolved in favor of the constitutionality of the SB 863 IMR process. Similar constitutional battles against legislative reform to the rising costs of workers’ compensation coverage are being waged in courtrooms nationwide. These battles seem to define the trend of what might be expected in the industry in the near future.

In a major victory for injured workers and stinging defeat for businesses, the Florida Supreme Court on Thursday struck down a law limiting attorney’s fees in workers’ compensation cases. The story reported in the Miami Herald says that the 5-2 ruling is a setback for business groups who say legal fees drive up the cost of workers’ compensation insurance and threaten Florida’s economy and they must seek help from a reliably pro-business Legislature. The long-awaited decision puts pressure on lawmakers to call a special session in an election year to referee a high-stakes battle between Republican-aligned businesses and Democrat-leaning law firms, two deep-pocketed rivals that are among the biggest contributors to legislators’ political campaigns.

The case before the high court involves a Miami man, Marvin Castellanos, who suffered head, neck and shoulder injuries while working for Next Door Company, a maker of doors and door frames in Miami. The company waged an aggressive defense, but Castellanos won and received benefits of $822.70. His lawyer, who worked on the case for 107 hours, sought a fee of $36,817.50. He received a fee of $164.54, the equivalent of $1.53 per hour under a fee system the Legislature approved in 2009. Under that law, attorneys who successfully represent injured workers are paid 20 percent of the first $5,000 in benefits obtained and 15 percent of the next $5,000 in benefits.

But the question is not only how the fees are calculated, but also who pays the fee. When litigation is filed in Florida for workers’ compensation medical care or wages, the defendants have thirty days to provide the benefit voluntarily. After that point, they become responsible for payment of the fee associated with any benefits provided as a result of the suit. This is commonly called a “prevailing party” fee shifting provision. The Castellanos case involves a fee that was to be paid by the employer, unlike California where it is paid out of the worker’s benefits.

Writing for the majority, Justice Barbara Pariente said the law violates workers’ due process rights under the state and U.S. Constitution because it prevents challenges to the “reasonableness” of legal fees in workers-compensation cases. “Without the likelihood of an adequate attorney’s fee award, there is little disincentive for a carrier to deny benefits or to raise multiple defenses, as was done here,” Pariente wrote. “Virtually since its inception, the right of a claimant to obtain a reasonable prevailing party attorney’s fee has been central to the workers’ compensation law.” By replacing the former “reasonable” standard with a sliding scale of legal fees, Pariente said, “the Legislature has thus eliminated any consideration of reasonableness.”

Workers’ compensation rates in Florida are regulated by the Office of Insurance Regulation, run by Kevin McCarty, who has resigned effective May 2 but who has offered to stay on with no permanent successor in place. “Limiting attorney’s fees has been an important factor in reducing workers’ compensation rates,” McCarty said. “A legislative remedy will be required to prevent significant increases in rates, and we look forward to working with all parties affected to bring about a sensible solution.”

The effect on rates businesses pay for workers’ comp insurance will be clearer in about a month when the National Council on Compensation Insurance, a federal clearinghouse, is expected to submit a proposed rate filing with McCarty’s office. The impact on Florida’s workers compensation system costs is expected to be significant, said Chris Bailey, a spokesman for NCCI.