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Ethics Slip Voids Plaintiff Lawyers’ Retainer in $374M Global Settlement

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In 2020, attorneys Jennifer McGrath and Darren Kavinoky formed McGrath Kavinoky LLP for a single purpose: to represent victims of sexual abuse by Dr. James Heaps, a gynecologist at UCLA. Jane Doe 1 retained the firm in January 2020, at which point it already represented at least 36 former Heaps patients. Jane Doe 2 retained the firm in February 2021; five weeks later the firm told her it represented 180 patients. The firm ultimately represented 312 clients in separate but coordinated cases against Dr. Heaps and UCLA.

In January 2022, the firm told Does 1 and 2 it had tentatively reached an aggregate settlement. Both agreed. The court appointed retired judges to allocate the $374.4 million global settlement; Doe 1 received $1.4 million and Doe 2 received $1.7 million, less the firm’s contingency fee and costs.

In June 2024, Does 1 and 2 sued the firm and its named partners (collectively, McGrath Kavinoky), asserting professional negligence, breach of fiduciary duty, fraudulent misrepresentation, fraudulent concealment, breach of contract, breach of the implied covenant, and an accounting. They alleged they were among the most severely harmed victims, that the lawyers had promised individualized handling and made specific high-value promises about their cases, that they were “bullied” into the settlement through an improper allocation process — and, critically, that the firm never disclosed, or obtained informed written consent to, the conflicts of interest inherent in representing many clients who would compete for shares of a single settlement.

McGrath Kavinoky moved to compel arbitration under arbitration clauses in its engagement agreements. Does 1 and 2 opposed, arguing the firm violated rule 1.7(b) of the Rules of Professional Conduct — which bars representing a client where there is a significant risk the representation will be materially limited by the lawyer’s duties to another client, absent informed written consent — and that this violation rendered the agreements, including their arbitration clauses, unenforceable.

The trial court denied the motion to compel arbitration. It found that when the plaintiffs signed their retainers, the likelihood of a conflict was high: the firm represented dozens of clients with claims against the same defendant, litigated them in the aggregate toward a global settlement, and so placed each plaintiff in competition with every other for a slice of the recovery. The firm’s failure to disclose that conflict invalidated the retainer agreements and the arbitration clauses within them. McGrath Kavinoky appealed.

The Court of Appeal affirmed the order denying arbitration in the published case of Jane Doe 1 et al. v. McGrath Kavinoky LLP et al. -Case No. B343201 (June 2026). The decision is certified for publication because it resolves a question of first impression in California: whether a lawyer violates rule 1.7(b) — and thereby voids the engagement agreement — by representing multiple clients suing the same defendant for similar injuries without obtaining informed written consent at the outset. The court held that the rule in the 2018 Sheppard, Mullin Supreme Court opinion applies, even though Sheppard involved an actual conflict and this case involves a potential one.

In Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, the Supreme Court held that when a lawyer enters an engagement agreement in violation of an ethical rule, the entire agreement — including its arbitration clause — is unenforceable as against public policy. Citing Civil Code section 1667, the Court reasoned that a contract is unlawful if it is contrary to an express provision or policy of law, and that the Rules of Professional Conduct are not merely guidance for the bar but an expression of public policy protecting the public. Crucially, where grounds exist to void the entire contract, those grounds also vitiate the arbitration clause and prevent severance.

Rule 1.7(b) was violated at the outset. The court held substantial evidence supported the trial court’s finding that a conflict was highly likely when the plaintiffs signed on. Two lawyers who formed a firm specifically to pursue Heaps’s former patients could reasonably be inferred to have intended to represent as many as possible and to resolve them through an aggregate settlement — which is exactly what occurred, only eleven months after Doe 2 signed the retainer agreement. From the start there was a significant risk that clients would disagree about settling, that the defendants might condition any deal on a high participation rate, and that the clients would necessarily compete for their shares — meaning the firm’s ability to advocate for each was materially limited by its duties to the others. Lacking informed written consent, the firm violated rule 1.7(b), which under Sheppard voided the agreements.

The court drew heavily on persuasive authority in an area with no direct California precedent, including ethics opinions and commentary recognizing that conflicts inhere in collective representation. It cited the Bar Association of San Francisco’s Formal Opinion 2017-1 (Sept. 2017), ABA Formal Opinion No. 06-438 (Feb. 10, 2006), and scholarship by Erichson (Beyond the Class Action (2003) 2003 U.Chi. Legal F. 519) and Moore (Ethical Issues in Mass Tort Plaintiffs’ Representation (2013) 81 Fordham L.Rev. 3233), all for the proposition that such conflicts must be disclosed and consented to at the outset of the representation. It also pointed to Bridgepoint Construction Services, Inc. v. Newton (2018) 26 Cal.App.5th 966, where disqualification was proper because multiple clients sought the same damages from a single pool.

The court rejected each of McGrath Kavinoky’s distinctions. It declined to apply Brawerman v. Loeb & Loeb LLP (2022) 81 Cal.App.5th 1106 — where the illegality lay in performance of a retainer by an unlicensed attorney rather than in entering it — because here the violation occurred upon entering the agreements without consent. It rejected the argument that Sheppard reached only actual conflicts, noting rule 1.7 requires informed written consent for both actual (rule 1.7(a)) and potential (rule 1.7(b)) conflicts, and that Sheppard’s rationale applies equally to both. It dismissed the concern that this invites improper “post-hoc” hindsight inquiry, observing that trial courts routinely sit as triers of fact in deciding arbitration motions and are well-equipped to assess whether a significant risk existed at an earlier time. It also clarified that Sheppard expressly left open only the enforceability of blanket advance conflict waivers — an issue not present here, since the firm never claimed to have obtained one.

Arbitration could not be severed. The court held McGrath Kavinoky forfeited its severance argument by not raising it below, and that it failed on the merits regardless: under Sheppard, when an entire contract is void for illegality, the arbitration clause falls with it. The court distinguished the firm’s cited severance and fraud-in-the-inducement cases — including Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312 — because those involved either severable provisions in otherwise valid contracts or claims of fraudulent inducement, not a claim that the entire agreement was illegal and void as against public policy.

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No Surprises Act “Outrageous” Arbitration Awards Cost Carriers Billions

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“A law meant to end surprise medical billing has led to large paydays for some surgical assistants, who can earn far more than the doctors they help,” The New York Times finds in a report titled “$22,000 Per Hour: Assistants Use a Legislative Loophole to Outearn Surgeon.“

America’s Health Insurance Plans (AHIP) is saying “Outrageous provider-driven abuse of the No Surprises Act is adding billions in wasteful spending and raising healthcare costs for everyone. Policy action is needed to address flawed incentives in the IDR process and protect consumers from unconscionable price gouging by out-of-network providers and IDR middlemen,” said Chris Bond, AHIP spokesperson.

The federal No Surprises Act was signed into law on December 27, 2020, to protect patients from surprise billing – unexpected charges from doctors, hospitals, or other health care providers who are not part of a patient’s health plan’s network. The law limits the amount that patients are required to pay in those situations and creates an independent dispute resolution (IDR) process for resolving disputes between commercial insurers and health care providers about payments for such out-of-network care.

In January 2021, the Congressional Budget Office estimated that the law would reduce the in- and out-of-network prices that insurers pay to providers who had high rates of surprise billing before the law was enacted. CBO expected that those lower prices would, in turn, reduce the premiums that insurers charge for commercial plans by roughly 1 percent, thus decreasing federal deficits by $17 billion from 2021 to 2030 (CBO 2021). Contemporaneous analyses supported those projections, although experts noted at the time that outcomes would vary depending on how the law was implemented (Duffy et al. 2020; Adler et al. 2021; Chhabra, Brown, and Ryan 2021; Fiedler, Adler, and Ippolito 2021).

According to a new post on the CBO website by Jessica Hale, Tamara Hayford and Daria Pelech this month, emerging evidence suggests that the law might not have the effects that CBO anticipated. Although prices for some services that had high rates of surprise billing before the law’s enactment have declined (after adjusting them for inflation), several published reports indicate that providers are winning more than 8 in 10 independent dispute resolution (IDR) cases and are being awarded payments that are much higher than expected, particularly in certain geographic areas.

Evidence based on outcomes from arbitration suggests that the law could cause premiums to increase if outcomes from arbitration enhance providers’ ability to secure higher prices by credibly threatening to stay out of network. The number of IDR cases has far exceeded projections, and awarded payments are often much higher than anticipated. Amounts from arbitration settlements may be much larger than the typical prices for health care services in part because of the number of lawsuits challenging the law – at least 50 cases as of 2026 (O’Neill Institute 2026).

Health care providers have largely prevailed in those lawsuits, and federal agencies have been directed to rewrite rules for arbitration so that additional considerations listed in the law – including providers’ experience, the severity of a patient’s condition, and good faith efforts to join networks – are considered on an equal basis with the QPA (Keith 2025). Those changes and the uncertainty they bring may be contributing to higher arbitration awards, raising the prospect that, over time, the law could increase health care prices and premiums (Baron 2023).

Reports also suggest that IDR claims are disproportionately concentrated in certain segments of the health care system. In 2023 and 2024, the five organizations with the most claims accounted for nearly 60 percent of all filings (Hoadley and Watts 2025). Many cases came from large groups backed by private equity and other investors or revenue-cycle management firms (Hoadley et al. 2026, Fiedler and Adler 2024). Claims are also concentrated in certain states; through 2024, nearly two-thirds of them were filed in four states—Arizona, Florida, Tennessee, and Texas—that collectively represent less than 20 percent of the U.S. population (Hoadley and Watts 2025). Although heavy use of the IDR system is currently concentrated among specific firms and localities, the financial gains for those firms may incentivize broader use of the system over time.

The administrative costs associated with the IDR system have also exceeded CBO’s projections. Recent estimates suggest that insurers and providers spent nearly $900 million in fees associated with the arbitration process through 2024 (Hoadley and Watts 2025). Those fees are greater than anticipated because the volume of IDR cases exceeded CBO’s projections and because the fees were increased by CMS during that period to cover the unexpected volume. (The administrative fees assessed for each party submitting a claim were reduced in a recently published rule; see CMS 2026.)

Insurers’ and providers’ administrative costs may also be greater than expected because of the costs of submitting information to the IDR system, although the magnitude of such costs is more uncertain. Significant increases in insurers’ administrative costs can increase premiums for commercial health insurance and, in turn, federal subsidies for health insurance.

Although evidence suggests that prices for services affected by the No Surprises Act may have initially decreased, arbitration outcomes could lead to higher prices over time. If providers can systematically secure large payments through the IDR process, they have an incentive to remain out of network or demand higher in-network rates. Although surveys of insurers suggest that less than 0.05 percent of all claims go to arbitration (AHIP 2024), those claims could have an outsized effect on bargaining and, over time, cause negotiated prices to increase. An increase in prices would increase premiums for commercial health insurance and, in turn, lead to larger federal deficits.

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WCAB En Banc Ruled Orders Suspending Action Requires Due Process

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This en banc decision gathered twenty-four individual cases (some carrying multiple case numbers) that shared a common thread: each involved a Compromise and Release (“C&R”) agreement submitted for approval at the Van Nuys District Office, and each was handled by the same workers’ compensation administrative law judge (“WCJ”), Karinneh Aslanian.

The underlying claims were varied but followed recognizable patterns. Many were cumulative-injury or psychiatric claims premised on a “hostile work environment” – filed by ramp scrubbers, warehouse and delivery workers, nursing assistants, laborers, and others against employers including ABM, Amazon, Lyft, FedEx, and NBC Universal. The proposed settlements ranged from roughly $4,000 to $37,500. A recurring feature was that the parties wished to settle a denied claim quickly – often expressly to “buy their peace” – and frequently without any medical reporting on file, sometimes before any discovery or qualified medical evaluator (“QME”) examination had occurred. In several cases the defendants’ own cover letters acknowledged that no medical reports existed to support an injury.

Importantly, none of these matters had proceeded to an evidentiary hearing on the merits before reaching the Appeals Board.

In each case, rather than approving or formally disapproving the settlement, the WCJ issued an Order Suspending Action (“OSA”) on the C&R. Across the cases, the OSAs went well beyond requesting minor corrections. The WCJ generally:

– –  demanded supporting medical documentation to test adequacy, treating the absence of medical evidence as fatal;
– –  directed applicants, in the text of the OSA, to either obtain a medical evaluation or dismiss the claim with prejudice;
– –  requested witness statements, information about related civil lawsuits, and the source of any benefits paid; and
– –  required applicants’ attorneys to justify the requested 15% attorney’s fee.

The OSAs issued without first giving the parties notice and an opportunity to be heard. In the accompanying Reports to the Board, the WCJ used pointed language – referring to a “free cash money handout system,” asserting that an applicant who would not attend even one medical exam “is clearly not injured,” and describing the Van Nuys venue as a “haven” for a “get rich quick” scheme in which the WCJ “will no longer participate.”

The applicants Petitioned for Removal, arguing the OSAs improperly compelled additional discovery, that the WCJ exceeded the permissible scope of review, and that a WCJ may review only whether a settlement is adequate.

The Appeals Board, sitting en banc by unanimous vote, granted consolidated and granted 24 Petitions for Removal from various Orders Suspending Action, all issued by the same WCJ and issued an en banc decision in the captioned case of Calvin Gaines, et al. v. ABM Aviation, Inc., Adj. Nos. ADJ20216367 et al. (Van Nuys District Office) (June 2026). As its Decision After Removal, the Board rescinded every OSA, disqualified WCJ Aslanian from all twenty-four cases, and returned each matter to the Presiding WCJ for reassignment to a new judge.

Although the Applicants’ Petition was granted, this case was not an affirmance. It a reversal of the WCJ’s orders – though a nuanced one. The Board did not adopt the applicants’ broadest position. It held that a WCJ’s authority to scrutinize settlements is real and substantial: a WCJ may demand relevant medical records, may seek additional information bearing on valuation, and may delay approval until adequacy can be assessed. What the WCJ could not do was use an OSA to compel evaluations, dismissals, or fee reductions without notice, due process, and a record – and could not bring open hostility to the bench.

A workers’ compensation settlement is enforceable only after WCAB approval; in approving it, the WCJ must determine the agreement is valid and adequate to protect the injured worker and the public interest.
Where a settlement’s terms are inconsistent, non-compliant with the Labor Code, or inadequate, the WCJ may investigate through an OSA – and, if the parties do not supply sufficient information, may hold a hearing to create an evidentiary record establishing adequacy.

Due process drove the removal. Settlement review proceeds by stipulation, and there is ordinarily no due-process problem when a WCJ approves a joint request. But once a WCJ intends to reject a settlement or condition its approval, the parties are owed notice and an opportunity to be heard. The OSAs here delivered ultimatums – get evaluated or dismiss with prejudice – without any hearing. Because Appeals Board decisions must rest on an admitted evidentiary record (Hamilton v. Lockheed Corp. (2001) 66 Cal.Comp.Cases 473 (Appeals Board en banc)) and a WCJ cannot enter judgment on the pleadings, the proper path when adequacy is genuinely in doubt is to set a hearing and build a record, not to coerce the parties by order.

The Board emphasized that substantial medical evidence is not required to support a stipulation. Stipulations exist precisely to obviate the need for proof and narrow the issues (County of Sacramento v. Workers’ Comp. Appeals Bd. (Weatherall) (2000) 77 Cal.App.4th 1114 [65 Cal.Comp.Cases 1]). The only requirement is that sufficient information exist in the formal record to support the adequacy finding. The WCJ erred by treating missing medicals as disqualifying and by, in effect, ordering medical evaluations inside an OSA – an order that may issue only after proper notice, and a medical-legal evaluation that may be compelled only after an evidentiary hearing establishes a basis for it.

The Board grounded the WCJ’s review power in the purpose of approval: protecting workers who might accept “unfortunate compromises because of economic pressure or lack of competent advice” (Johnson v. Workmen’s Comp. Appeals Bd. (1970) 2 Cal.3d 964 [35 Cal.Comp.Cases 362], quoting Chavez v. Industrial Acc. Com. (1958) 49 Cal.2d 701 [321 P.2d 449]), and protecting the public interest by ensuring benefits are not improperly shifted onto public programs such as Medicare, Medi-Cal, EDD, and Social Security (Department of Rehabilitation v. Workers’ Comp. Appeals Bd. (2003) 30 Cal.4th 1281 [68 Cal.Comp.Cases 831]). The Board also reaffirmed that the WCAB’s jurisdiction reaches only Labor Code benefits, and mere execution of a preprinted form does not release claims outside workers’ compensation (Camacho v. Target (2018) 24 Cal.App.5th 291 [83 Cal.Comp.Cases 1014]).

Protecting insurers from “overpaying” is not within adequacy review – if anything, evidence that a carrier is overvaluing a claim suggests the settlement is adequate. Inquiry into civil suits is permissible only to the limited extent it bears on a possible third-party credit, and must occur on the record. And while requesting documentation to justify the 15% attorney’s fee was proper (the WCAB is the final arbiter of fee reasonableness under Vierra v. Workers’ Comp. Appeals Bd. (2007) 154 Cal.App.4th 1128 [72 Cal.Comp.Cases 1128]), the remedy for a disputed fee is a hearing – the C&R may be approved with the fee held in trust – not a coercive order.

Finally, under Labor Code section 5311 and Code of Civil Procedure section 641(f)–(g), a WCJ may be disqualified for having formed or expressed an unqualified opinion on the merits or for a state of mind evincing bias. The Board found the WCJ’s “free cash money handout” and “get rich quick scheme” commentary plainly demonstrated both, reminded the WCJ of her obligations under the Code of Judicial Ethics, and ordered reassignment of all twenty-four cases to new judges.

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California AG Targets Illegal Corporate Practice of Medicine

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The California Attorney General announced a settlement with Carbon Health Technologies, Inc., its affiliated medical groups, and its co-founder and former CEO, Eren Bali, (Carbon Health), resolving allegations that the company violated California’s prohibition on the corporate practice of medicine, engaged in false advertising, used unlawful consumer contracts, and improperly billed patients and insurance providers.

Founded in the Bay Area in 2015, Carbon Health operates over 80 clinics across eight states, including 54 in California. As alleged in the complaint filed alongside the settlement, an investigation by the California Department of Justice (DOJ) found that Carbon Health used a structure in which a corporate entity not licensed to provide medical care effectively owned and controlled all aspects of the medical practice, in violation of California’s prohibition on the corporate practice of medicine.

The settlement requires Carbon Health to end this structure and ensure that physicians control medical decisions. It also permanently enjoins Carbon Health from having policies that, as uncovered by the DOJ investigation, subjected patients to billing errors, overcharges, and other improper billing practices. As added accountability for the conduct at issue, the settlement imposes $4.4 million in penalties on Carbon Health and $100,000 on Mr. Bali.

According to the AG Press Release, Carbon Health used a “friendly professional corporation” model in which Carbon Health Technologies, a management services organization (MSO), controlled the clinics’ business operations through contracts. Those contracts unlawfully gave Carbon Health Technologies the power to replace the physician-owner of the clinics with a physician of its choosing, while preventing the physician-owner from replacing the MSO without risking losing ownership of the medical practice. As a result, the MSO effectively ran these captive clinics, divided physician loyalties, subordinated patient wellbeing to its financial interests, and allowed Mr. Bali and the MSO’s unlicensed officers to direct staffing, advertising, and insurance negotiations.

DOJ’s investigation also found that Carbon Health misled patients about insurance coverage, including misrepresenting which plans it accepted and sometimes telling patients they were in-network when they were not, leading to unexpected out-of-network bills. Further, the investigation identified billing problems, such as a hidden automatic charging term for credit cards, overcharges, charging patients twice for the same service, and delaying refunds when errors were discovered.

Under the settlement, Carbon Health has agreed to comprehensive injunctive relief requiring significant changes to its corporate structure and business practices. Among other things, the settlement requires Carbon Health to:

– – Revise its corporate structure: Carbon Health must change its organizational structure so that a non-medical management company can no longer control or have ownership interests in physician-owned medical practices. Physicians must have independent control over medical decisions and how the practices operate.
– – Stop misleading advertising: Carbon Health must end advertising and communications that falsely or misleadingly represent insurance coverage or whether services are in-network.
– – Update patient contracts: The company must revise its consent forms and contracts to remove unclear or unlawful terms that affected how and when patients were billed.
– – Fix billing practices: Carbon Health must correct how it bills patients and insurers to reduce errors, prevent overcharges, and ensure patients are not improperly charged.

Carbon Health filed for Chapter 11 bankruptcy restructuring in the U.S. Bankruptcy Court for the Southern District of Texas while the Attorney General’s investigation was ongoing. Carbon Health and the California Attorney General’s Office are now filing the settlement, which is subject to court approval, in the Los Angeles County Superior Court.

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June 22, 2026 – News Podcast

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Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Plaintiff Need Not Prove Anyone “Actually Viewed” Stolen Medical Data. Tesla Freemont Yard Hostlers Engage in Interstate Commerce. Courts Have Broad Discretion to Reduce PAGA Penalties and Fees. Judge Said Use of AI Was “Worst Example of Misconduct by a Lawyer”. Rising SoCal CT Claims Are Shifting Costs and Claim Patterns. Cal/OSHA National Trench Safety Stand Down Week. Harvard Poll Shows Dramatic Decline in Trust in Federal Health Agencies. Comp Medical Inflation Driven by Growing Use of Unlisted Codes.

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AI Beats Physicians in Diagnoses of Joint Replacement Infections

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Zimmer Biomet Holdings, Inc. (NYSE: ZBH), headquartered in Warsaw, Indiana, is a global medical technology company with a portfolio focused on maximizing mobility and improving musculoskeletal health. It was named to Forbes’ America’s Best Companies 2026 list and employs approximately 18,000 people worldwide.

According to a new study published in the journal Diagnostics, a machine learning algorithm developed by Zimmer Biomet has demonstrated significantly higher accuracy in diagnosing periprosthetic joint infection – one of the most dreaded and expensive complications in orthopedic surgery – than experienced physicians evaluating the same cases.

Periprosthetic joint infection, or PJI, occurs when bacteria or fungi infect the tissues surrounding an artificial joint after knee or hip replacement surgery. It affects roughly 1 to 2 percent of primary joint replacements – a number that sounds small until you consider that more than one million joint replacements are performed in the United States each year. PJI is the leading cause of failure after total knee replacement and the third leading cause after total hip replacement. In severe cases, it can lead to amputation or death. Five-year mortality rates following PJI of the hip have been reported as high as 25 percent.

The core clinical challenge is diagnosis. PJI is notoriously difficult to identify, particularly in culture-negative cases – where standard laboratory cultures fail to grow an organism – and in borderline cases where symptoms and test results are ambiguous. There is no single gold-standard diagnostic test in the United States. Instead, physicians must synthesize multiple laboratory results, clinical findings, and imaging studies to reach a judgment. Published research has shown that even experienced specialists often struggle with diagnostic consistency, leading to delayed treatment when infection is present or unnecessary revision surgery when it is not.

The new tool, called SynTuition, is a machine learning algorithm that analyzes results from Zimmer Biomet’s Synovasure comprehensive PJI test panel – a battery that measures 11 biomarkers in synovial fluid drawn from the suspect joint. Rather than requiring a physician to manually interpret each biomarker result and weigh them against diagnostic criteria, the algorithm identifies patterns across all 11 markers simultaneously and generates a continuous probability score from 0 to 100, estimating the likelihood that the patient has a periprosthetic joint infection.

The model was built using a dataset of more than 104,000 synovial fluid samples collected from nearly 3,000 institutions between 2018 and 2024 — an enormous training dataset by orthopedic research standards.

In the study, 12 physicians were presented with 274 clinical vignettes representing suspected PJI cases and asked to provide diagnoses. Their results were compared against both an expert-adjudicated clinical reference standard and the SynTuition algorithm’s output.

The results were striking. The AI algorithm achieved 96 percent overall agreement with the expert-adjudicated reference, compared to 90.8 percent for the pooled physician group. More importantly, the algorithm showed dramatically lower diagnostic uncertainty. Physicians frequently expressed indecision – particularly in culture-negative and borderline cases, which are precisely the cases that drive the most disputes in clinical practice. The AI tool provided a definitive probability score in every case, eliminating the ambiguity that leads to diagnostic delays.

The study also conducted a cost analysis. Misdiagnoses – both false positives (leading to unnecessary revision surgery) and false negatives (leading to delayed treatment and progression of infection) – carry significant economic consequences. The researchers found that the AI tool’s superior accuracy translated to meaningful cost reductions compared to standard physician-driven diagnosis.

This study is part of a broader trend in orthopedic medicine: the integration of artificial intelligence into clinical decision-making at critical junctures in patient care. Diagnosing PJI is one of the most consequential decisions an orthopedic surgeon makes – get it right, and the patient receives timely, targeted treatment; get it wrong in either direction, and the clinical and financial consequences are severe.

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Incarcerated Prisoner Charged in $9.5M Medicare Fraud Scheme

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A federal grand jury indictment charges a mother and daughter with conspiring to defraud Medicare by billing millions of dollars for wound care services while the mother – the licensed nurse practitioner listed as the provider – was serving time in federal prison. The charges are part of the Department of Justice’s 2026 National Health Care Fraud Takedown.

According to the indictment, Blanca Estela Cardenas, a San Diego nurse practitioner and owner of Mobile Care Medical Providers, LLC and B&R Wound Care, Inc., and her daughter, Raquel Pasillas, allegedly carried out a scheme to bill Medicare for mobile medical services between April and October 2024.

Prosecutors allege that during that time, Cardenas was incarcerated, serving a federal sentence for an unrelated bulk cash smuggling conviction and was therefore unable to personally provide care or supervise medical services as required under Medicare regulations.

Despite her incarceration, the indictment alleges, the businesses continued submitting claims to Medicare under Cardenas’ National Provider Identifier (NPI), falsely representing that she was the rendering provider for the services.

According to prosecutors, Pasillas – who held operational leadership roles at the businesses but had no medical license or certification – personally provided medical services to Medicare beneficiaries, including wound care and the application of costly skin substitute allografts.

Over the six-month period, the defendants allegedly submitted approximately $9.5 million in claims to Medicare and received approximately $5.5 million in reimbursements.

The indictment further alleges the pair diverted fraud proceeds for personal use, including more than $4.7 million in cash withdrawals, deposits into their personal bank accounts, and rent payments for Cardenas’ residence while she remained in custody.

The charges announced today by U.S. Attorney Adam Gordon are part of a strategically coordinated, nationwide law enforcement action that resulted in charges against 455 defendants, including 90 doctors and other licensed medical professionals, for their alleged participation in health care fraud and opioid abuse schemes involving over $6.5 billion in false claims and significant patient harm, including death. Today’s takedown represents a new era in federal, state, and international cooperation to combat health care fraud: cases in 56 federal districts and 45 U.S. states and territories, with 50 state Medicaid Fraud Control Units participating, the most in Department history.

In addition, unprecedented international cooperation over the two-week takedown resulted in the apprehension and return to the United States of the following health care fraudsters: one defendant in Kyrenia in connection with an over $3.7 billion scheme; two defendants in Estonia in connection with a previously charged $10.6 billion scheme; and, in the Philippines, one of FBI’s Most Wanted Fraudsters in connection with a previously-charged $1.2 billion telemedicine fraud scheme. The takedown involves the cutting-edge use of data analytics to target the worst actors; the seizure of over $182 million in cash, luxury vehicles, jewelry, and other assets; and full-spectrum accountability for all criminal actors from doctor’s offices to corporate boardrooms.  

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Court Rules 500 S.F. Municipal Attorneys Remain At-Will Employees

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The Meyers-Milias-Brown Act (MMBA) (Gov. Code, §§ 3500–3511) governs labor disputes between California public employers and unions, and establishes impasse procedures. Under the MMBA’s default scheme, a factfinding panel’s settlement recommendation is “advisory only,” and the employer may, after a public hearing, implement its last, best, and final offer. As an alternative, the statute allows charter cities and counties to adopt their own impasse procedures – so long as those procedures include binding arbitration (Gov. Code, § 3505.5, subd. (e)).

The City and County of San Francisco, a charter city and county, took that alternative. Under Charter section A8.409-4, eligible labor disputes that reach impasse go to “interest arbitration,” where arbitrators must select between each side’s last offer on each disputed issue, and their decision is “final and binding.”

The real party in interest, the Municipal Attorneys Association of San Francisco (MAA), represents roughly 500 City attorneys. Under Charter section 10.104, those attorneys are “exempt” employees who serve “at the pleasure of the appointing authority”- meaning they are at-will and may be terminated without cause. During recent negotiations – prompted by what the MAA said was a history of “mass political firings” at the San Francisco District Attorney’s Office – the union advanced two proposals that would change that status. Proposal 1 required “just cause” and progressive discipline for any discipline, including terminations, with disputes subject to binding arbitration. Proposal 14 required layoffs in inverse order of seniority. Together the court called these the “just cause proposals.”

The City refused to submit the proposals to binding interest arbitration. It agreed to bargain, mediate, and proceed through MMBA factfinding, but maintained throughout that the proposals conflicted with the Charter and were not eligible for the Charter’s binding interest arbitration. The MAA disagreed and filed an unfair practice charge with the Public Employment Relations Board (PERB).

After an expedited hearing, an Administrative Law Judge issued a proposed decision concluding that section 10.104 conflicted with the MMBA, that the MMBA superseded section 10.104 under the home rule doctrine as a narrowly tailored matter of statewide concern, that the just cause proposals were eligible for binding interest arbitration, and that the City’s refusal to arbitrate constituted bad faith bargaining.

PERB, in Municipal Attorneys Association of San Francisco, Teamsters Local 856 v. City and County of San Francisco (2025) PERB Dec. No. 2958-M, affirmed the ALJ’s conclusions but on different reasoning. Rather than finding a conflict, PERB harmonized section 10.104 with the MMBA, reasoning that the section permits the City to establish just cause protections by regulation, policy, MOU, or through the Charter’s interest arbitration mechanism. PERB held the City violated both its Charter and the MMBA by refusing to arbitrate, found bad faith bargaining, enjoined the City from refusing to arbitrate, and ordered the City to make the MAA whole for extra bargaining costs plus interest. The City petitioned for a writ of extraordinary relief under Government Code section 3542, and the Court of Appeal issued a writ of review.

The Court of Appeal reversed in the published case of City and County of San Francisco v. Public Employment Relations Board -Case No. A173302 (June 2026). It held that the MAA’s just cause proposals are not eligible for binding interest arbitration under the Charter, vacated PERB’s finding that the City committed an MMBA violation, and set aside the associated remedies.

The court began with the standard of review, drawing a sharp line. Courts defer to PERB’s construction of labor laws within its jurisdiction, such as the MMBA, and will follow that construction unless clearly erroneous. But the Charter is not a labor law – it is “the supreme law of the City” – and PERB receives no deference when construing it. Instead, the City’s interpretation of its own charter receives “great weight,” particularly as to the broad powers of its Civil Service Commission.

Construing the Charter de novo, the court found independent textual bases for excluding the proposals from arbitration.

The Commission carve-out (section A8.409-3), while restating the City’s duty to bargain in good faith, also provides that “matters within the jurisdiction of the Commission which establish, implement and regulate the civil service merit system shall not be subject to bargaining under this part.” Tracing the word “part” through related provisions (sections A8.409, A8.409-1, A8.409-6, and 16.116, which collects these sections as “Appendix A”), the court held that “part” necessarily includes the binding interest arbitration provisions of section A8.409-4. It then held the at-will status of exempt attorneys falls squarely within the carved-out matters: exempt employees are part of the City’s civil service merit system (sections 10.100, 10.101, and Commission rule 114), and altering their at-will status implicates the merit system’s “definitions, administration and organization,” the “standards . . . for employment . . . and appointment,” and the “designation of positions as exempt.” The Commission’s own rule treating exempt employees as serving at pleasure was entitled to deference.

The compliance carve-out (section A8.409-4(g)). Separately, the impasse procedures “shall not apply” to any rule or policy “necessary to ensure compliance with . . . local laws, ordinances or regulations,” and disputes over such determinations “may be challenged in a court of competent jurisdiction” rather than arbitrated. In rejecting the proposals, the court reasoned, the City acted to ensure compliance with section 10.104 and Commission rule 114—so the proposals were exempt from arbitration on that ground as well.

The court reinforced these readings with the measures’ legislative history. San Francisco voters have repeatedly affirmed the at-will status of City attorneys and, in 1976, rejected a measure that would have allowed removal only for cause; yet the ballot materials for the interest arbitration provisions never suggested that unelected arbitrators could override section 10.104 and strip exempt employees of at-will status. Because at-will status is “such a vital condition of employment,” the court inferred the voters never intended that result. It also deferred to the City’s longstanding and consistent position that the at-will status of exempt employees is not arbitrable.

Finally, because the just cause proposals were in fact ineligible for arbitration, PERB’s sole basis for finding bad faith – the City’s statements that the proposals were ineligible – collapsed. The court therefore vacated the bad faith finding and its remedies.

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Healthcare Fraud Takedown Results in 10 SoCal Defendants Charged

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The charges against the ten Southern California defendants are part of a coordinated, nationwide enforcement action – the National Health Care Fraud Takedown – that resulted in charges against 455 defendants across 56 federal districts and 45 states and territories. Those defendants, who include 90 doctors and other licensed medical professionals, are alleged to have participated in health care fraud and opioid schemes involving more than $6.5 billion in false claims.

In the Central District of California, federal prosecutors brought criminal charges against ten defendants accused either of defrauding government health programs or of abusing prescribing authority to dispense controlled substances. Six cases are summarized below.

– –  United States v. Dorsey — workers’ compensation fraud. Dr. Eugene Richard Dorsey, 83, of Orange, a psychiatrist, is charged via information with health care fraud for allegedly falsifying psychiatric reports so claimants would qualify for federal workers’ compensation and submitting false reimbursement claims, resulting in roughly $1.83 million in overpayments to the U.S. Department of Labor’s workers’ compensation program between December 2020 and December 2025. He faces up to 10 years.

– –  United States v. Mareik — the $270 million Medi-Cal pharmacy scheme. Christina Mareik, 61, of Whittier, was arrested June 17 on a complaint charging health care fraud and released on $100,000 bond. She allegedly created fraudulent prescriptions for Medi-Cal beneficiaries and directed another participant to sign them despite knowing the patients had not been seen and the drugs were not medically necessary. Prosecutors allege that from May 2022 to April 2023 the scheme billed Medi-Cal nearly $270 million for expensive, non-contracted drugs containing low-cost generic ingredients, with Medi-Cal paying more than $178 million. The scheme allegedly exploited a temporary suspension of Medi-Cal’s prior-authorization requirements during a transition to a new payment system. Mareik worked with patient marketer Paul Richard Randall, 67 (who pleaded guilty in April to wire fraud committed while on release and faces up to 30 years at sentencing), pharmacy owner Kyrollos Mekail, 38, and Patricia Anderson, 59. Mareik faces a statutory maximum of 10 years.

– – United States v. Shachar, et al. — $27 million in hospice fraud. Oren David Shachar, 59, of Van Nuys, along with marketers Abraham Shin, 66, and Jeannie Choi, 57, is charged in a 16-count indictment with conspiring to defraud Medicare of roughly $27 million. From February 2021 to March 2026, Shachar allegedly billed for hospice services that were medically unnecessary (the beneficiaries were not terminally ill) or never provided (some beneficiaries were already deceased), and paid illegal kickbacks to procure and retain enrollees. Shin and Choi allegedly sold living and deceased patients’ identifying information to Shachar. The counts include health care fraud conspiracy, aggravated identity theft, and Anti-Kickback Statute violations; the defendants face decades in prison.

– –  United States v. Lopez — a $9 million laboratory scheme. Brenda Lee Lopez, 63, of Norwalk, a medical office manager, is charged in a grand jury indictment with seven counts of health care fraud and six counts of aggravated identity theft. She allegedly prepared false test orders using the forged signatures of four medical providers, for beneficiaries who provided no specimens and some of whom were deceased. The laboratory billed Medicare roughly $9.1 million and was paid about $2.1 million, allegedly paying Lopez and family members about $335,000 in return. She faces up to 10 years per fraud count plus a mandatory two-year consecutive term per identity-theft count.

– –  United States v. Galbraith — hospice billing. Lynn Galbraith, 59, of Anaheim, owner of Garden Grove–based Azure Hospice Care Inc., is charged in a single-count information with health care fraud for allegedly submitting about $2.27 million in fraudulent Medicare hospice claims between April 2021 and February 2024, of which Medicare paid roughly $2.14 million. She faces up to 10 years.

– –  United States v. Khader, et al. — physicians prescribing to one another. Three physicians—Wisam Khader, 36, Patrick Murphy, 40, and Justin Evans, 37—are charged in a single-count indictment with conspiracy to distribute controlled substances. They allegedly wrote nearly 90 prescriptions to one another, outside the course of professional practice, for drugs including amphetamine, oxycodone, buprenorphine, diazepam, morphine, and pregabalin. They face up to 40 years.

These are charges at varying procedural stages – complaints, informations, and indictments – and several defendants have already had initial appearances, with arraignments and trial dates set into the summer. The penalties described are statutory maximums, not sentences; actual sentences, if any defendant is convicted, would be determined by the court. As noted above, all defendants are presumed innocent.

The cases were investigated by a mix of federal and state agencies, including the FBI, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), the Drug Enforcement Administration, the U.S. Postal Service Office of Inspector General, the California Department of Justice, and the Fraud Division of the California Department of Insurance. They are being prosecuted by Assistant U.S. Attorneys in the Central District of California and Trial Attorneys from the Justice Department’s Criminal Division, Fraud Section. The announcement situates the local cases within the work of the Department’s newly created National Fraud Enforcement Division and its Health Care Strike Force program.

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Class Certification Denied in Carrier “Hidden Premium” Case

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Two California policyholders, Brian Guthrie and Grady Lee Harris, Jr., sued Transamerica Life Insurance Company on behalf of themselves and a proposed class, alleging the company violated all three prongs of California’s Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) – the unlawful, unfair, and fraudulent business practice prongs – in connection with a term life product called “Trendsetter LB.”

Transamerica markets two products in its Trendsetter line. The older, more basic Trendsetter Super offers term life coverage plus a single “accelerated death benefit” allowing an insured to draw down part of the death benefit early in the event of a qualifying terminal illness. Beginning in 2012, the company introduced Trendsetter LB, a bundled product that adds two more accelerated death benefits – for qualifying chronic and critical illness – delivered through one endorsement and two riders that are automatically included. The bundled LB policy is sold at a single premium rate.

The plaintiffs’ grievance centered on language in the policy’s “data pages.” A schedule listing “ADDITIONAL BENEFITS WHICH ARE PROVIDED BY RIDER” showed “NONE” and “NO CHARGE” in the plaintiffs’ policies, and the premium summary referred to the “INITIAL ANNUAL PREMIUM FOR POLICY EXCLUDING RIDERS.” Plaintiffs argued this language misleadingly portrayed the automatically included chronic and critical illness benefits as free, when (they claimed) Transamerica conceded in discovery that the total premium actually embedded charges for those benefits.

Notably, the plaintiffs did not claim they failed to receive the coverage they paid for. Their complaint was that the premium was never broken down into separate line items for each bundled component, which they said obscured the existence of the cheaper Trendsetter Super alternative.

For purposes of their class certification motion, the plaintiffs sharply narrowed their theory. They dropped any comparison to Trendsetter Super and rested certification solely on the proposition that the standard form policy language itself – read in isolation – was misleading and therefore amenable to common, classwide proof.

The Alameda County Superior Court granted certification in part and denied it in part in August 2024, and after two rounds of clarification ultimately denied certification entirely.The court found the proposed class numerous (Transamerica had issued more than 38,000 Trendsetter LB policies in California since May 2017) and ascertainable. The dispositive problem was predominance.

For the unlawful prong – premised on Insurance Code sections 330 through 332, which govern concealment and a party’s duty to communicate material facts – the court held common issues did not predominate. The claim “necessarily concern[ed]” not only the standard policy text but also marketing materials and oral representations by agents, which would differ from one purchaser to the next. The court reached the same conclusion on the unfair prong (applying the requirement that an unfair practice be “tethered” to a legislatively declared policy) and the fraudulent prong (which asks whether the language is “likely to deceive” a reasonable consumer), because each turned on the same individualized inquiry.

The court initially certified narrow unlawful/unfair claims tied to section 10127.9 – the “free look” statute requiring a cancellation-and-refund notice – reasoning that whether the standard policy contained the required notice was a common question. But after the plaintiffs sought clarification, the court confirmed that this certified claim was limited to whether Transamerica failed to provide the statutory notice. The plaintiffs then asked the court to deny certification outright, conceding they had never brought, and would not bring, a notice-failure claim. The court obliged, denying certification in full.

The Court of Appeal affirmed in the published case of Guthrie v. Transamerica Life Insurance Company, -Case No. A171526 (June 2026). It held the trial court did not abuse its discretion in denying class certification, and Transamerica was awarded its costs on appeal.

The plaintiffs’ appeal rested on a single premise: because their pared-down claims relied solely on “unambiguous” form language, common issues necessarily predominated. The appellate court rejected that premise on two independent grounds.

First, the language is not unambiguous. Reading the contract as a whole, as required by Civil Code section 1641, the court found the data-page language “ambiguous” on its face. Plaintiffs had ignored numerous other rider-related provisions – including a “Schedules of Premiums” paragraph stating that premiums “(excluding premiums for certain Riders)” remain level, the riders’ own recitals that they were issued “in consideration of … payment of the premiums for the policy,” and an application item identical to the disputed data-page language that lists only optional additional riders. At best, the court said, plaintiffs offered “an arguably plausible reading,” not the outright misstatement they claimed. Because the plaintiffs themselves had argued certification depended on the language being unambiguous, they effectively conceded that ambiguity would defeat certification. Under Brinker, the court found it proper to evaluate this merits-adjacent issue because it was germane to the certification question.

Second, even assuming the language were misleading, that common question would not establish common liability. Drawing on two governing precedents, the court explained that the unlawful and unfair claims – grounded in sections 330 through 332 – require examining not just the policy text but what additional information was conveyed to each purchaser. The statutes themselves (§ 10295.12) contemplate that agents will discuss accelerated death benefit policies with applicants, so Transamerica could introduce marketing materials and other extrinsic evidence in its defense, generating individualized issues. As for the fraud prong, the court noted that the data pages are customized: an insured who buys optional riders sees different rider and premium entries than one who declines them, so even “within the four corners” the policies differ. Because the plaintiffs purchased through agents and alleged no way to buy the product on policy language alone, liability could not be resolved on a classwide basis.

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