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S.F. City Official to Serve 3 Years for $600K Work Comp Fund Theft

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Stanley Ellicott has been sentenced to a term of three years in State Prison after pleading guilty and being convicted of seven felony counts of public corruption in connection to a complex scheme that defrauded the city of San Francisco of more than $627,000 directly from the Department of Human Resources’ Division of Workers’ Compensation, and another case where he aided and abetted public corruption.  Ellicott was remanded into custody and is currently in San Francisco County Jail, awaiting transfer to the California Department of Corrections and Rehabilitation’s custody in State Prison.

Ellicott pled guilty and was convicted of two counts of misappropriation of public moneys, grand theft, financial conflict of interest, presentation of fraudulent claim, money laundering, and aiding and abetting a financial conflict of interest in a government contract. His guilty plea and conviction settled two fraud cases he was facing.

Ellicott was born and raised in Maine. He earned a Bachelor of Arts degree from Wheaton College and a Master of Public Policy from the University of California, Berkeley’s Goldman School of Public Policy. Prior to his roles with the City and County of San Francisco, where he began working on and off in 2012, Ellicott was employed as an associate analyst at Moody’s.

Over a four-and-a-half-year period from May of 2019 to January of 2024, Ellicott stole $627,118.86 from the City, where he previously served as the Assistant Director of Finance and Technology for the Human Resources Department, Workers’ Compensation Division. One of his responsibilities was to oversee “the financial integrity of the Workers’ Compensation Division.”

Ellicott enlisted a friend to register a fake business in Illinois called “IAG Services” and open a bank account for the business, which she gave full control of to Ellicott.  Ellicott then added this fake business as a vendor in the workers’ compensation system and over time billed more than 600 actual City workers’ compensation claims with charges for auditing services.

Department archives show no evidence any auditing services were ever performed.  Because the City is self-insured for workers’ compensation purposes, payments to doctors, employees, and vendors related to workers’ compensation claims come directly from the City’s coffers.

All the City payments to “IAG Services” were deposited into the account set up by Ellicott’s friend, then the money was systematically transferred into Ellicott’s personal checking accounts in a pattern to appear like they were payroll payments. In total, he transferred more than $488,000 from IAG’s account into accounts belonging to him.

The website for the Illinois business “IAG Services” created in Oakland – where Ellicott lives – and IAG emails sent to Ellicott’s work address that appear to be created by him. On several occasions, Ellicott emailed his subordinates and directed them to process payments to IAG that he had approved, enlisting their unknowing and unwitting assistance in his fraud.

Ellicott also pled guilty to and was convicted in a separate case for his role in a scheme to misappropriate grant funds awarded through the City’s Community Challenge Grant Program.

The cases against Ellicott were prosecuted by Assistant District Attorney Erin Loback, with assistance from District Attorney Investigator Mike Reilly, paralegal Chloe Mosqueda and the entire Public Integrity Task Force.

Investigators were able to locate and freeze all of the stolen funds before he was arrested. The stolen $627,118.86 back to the City’s Worker’s Compensation Fund.”

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Research Lab to Pay $1M for Controlled Substances Violations

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Charles River Laboratories, Inc. (CRL), successor by merger to Explora Biolabs Holdings, Inc., has agreed to pay $1,000,000 to resolve allegations that Explora engaged in the unlawful manufacturing and distribution of controlled substances between 2019 and 2022 in violation of the Controlled Substances Act (CSA). CRL also entered into a separate agreement with the U.S. Drug Enforcement Administration (DEA) that contains provisions to ensure the company’s compliance with the CSA over the next three years.

Explora, a provider of contract vivarium research services, was previously registered with the DEA for its facilities in South San Francisco and San Diego. Both facilities held Researcher registrations, which generally do not authorize the manufacture or distribution of controlled substances.

Explora was acquired by CRL in April 2022 for approximately $295 million in cash, as part of CRL’s expansion into contract vivarium research services, but public SEC filings from CRL do not delve into the specifics of the pre-acquisition violations or any internal investigations.

Charles River Laboratories, Inc. (CRL) operates as a contract research organization (CRO) in California, providing products and services to support drug discovery, early-stage development, and manufacturing for pharmaceutical and biotechnology clients.

Their operations in the state include rodent breeding facilities in Hollister, as well as multiple Charles River Accelerator and Development Lab (CRADL) sites offering turnkey rentable vivarium spaces and in vivo research support services in regions like the San Francisco Bay Area and Thousand Oaks. This includes contract vivarium management, preclinical testing, and related infrastructure for biotech companies.

A vivarium is an enclosed area or container designed for keeping and raising live animals or plants under conditions that simulate their natural environment, typically for observation, research, or as pets. It can range from simple glass terrariums for small reptiles or insects to larger laboratory facilities for scientific studies. In research contexts, like those involving biotech or pharmaceutical companies, vivariums often house animal models (such as rodents) for preclinical testing and must meet strict standards for humidity, temperature, lighting, and biosecurity.

U.S attorneys alleged that Explora nevertheless engaged in those activities at its South San Francisco and San Diego facilities without the appropriate registration. Based on its investigation, they claimed that Explora unlawfully manufactured and distributed controlled substances in at least 178 instances, in violation of provisions of the CSA that closely regulate the manufacture, distribution, dispensation, importation, and exportation of controlled substances, and that Explora also violated multiple recordkeeping requirements of the CSA.

The United States alleged that CRL has successor liability for Explora’s violations of the CSA, but does not allege that CRL itself violated the CSA.

“DEA registrants play a critical role in protecting the public and that responsibility starts with strict compliance to the Code of Federal Regulations,” said San Diego Division DEA Special Agent in Charge James Nunnallee. “When or if a company chooses to ignore these obligations, it puts communities at risk and undermines the safeguards designed to keep the public safe. DEA holds registrants accountable and in turn, expects them to keep the public safe.”

Assistant U.S. Attorney Michael Pyle handled this matter for the government. The investigation and settlement resulted from a coordinated effort by the U.S. Attorney’s Office for the Northern District of California, and DEA Diversion Investigators in San Francisco and San Diego.  

There is no indication that litigation was filed in court regarding this case. The matter was resolved through a civil settlement agreement with the U.S. Department of Justice to address the allegations of Controlled Substances Act violations, without any formal complaint or lawsuit being initiated in a judicial proceeding.

The claims resolved by the settlement are allegations only; there has been no determination of liability.

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Admin Remedies Not Required for Firefighter’s Whistleblower Action

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Anthony Romero began his career with the Kern County Fire Department in October 1999 as a fireman. Over the years, he received positive performance reviews, earned certifications in fire prevention and code enforcement, and advanced through the ranks, becoming an engineer in 2009 and a captain in 2019.

In January 2020, Romero discovered that fire extinguishers on the county’s fire engines were being improperly serviced, which he believed posed a safety hazard and violated various laws and regulations. He reported these concerns verbally to his battalion chief and in writing to the deputy chief, who forwarded the complaint to the fire marshal. Shortly after, Romero received a text from the assistant fire marshal banning him from working in the fire marshal’s office or in fire prevention roles. Romero alleged this ban was retaliatory, but his internal complaints were dismissed, with the county citing “unauthorized overtime” as the reason.

In April 2020, he filed an internal relations complaint with the county’s Human Resources office, which was denied in July 2020. He escalated the issue to the Kern County Civil Service Commission in the fall of 2020 but withdrew it after assurances from the fire chief that it would be handled internally. Tensions escalated in January 2022 when Romero was notified of an investigation into possible misconduct, leading to his placement on administrative leave four months later. On October 4, 2022, the county terminated his employment, citing violations of civil service and fire department rules. Romero then filed a claim under the Government Claims Act on March 24, 2023, which the county rejected on May 8, 2023.

In September 2023, Romero sued the County of Kern in superior court, alleging wrongful termination in retaliation for his whistleblower activities in violation of Labor Code sections 1102.5, 6310, and 98.6. He filed a first amended complaint the following month, reiterating these three causes of action. After answering the complaint, the county moved for judgment on the pleadings, arguing that Romero failed to exhaust internal administrative remedies under Ordinance Code section 3.04.080 and related civil service rules, which require appealing dismissals to the Civil Service Commission.

The trial court ruled that Romero’s lawsuit was jurisdictionally barred because he failed to exhaust administrative remedies by appealing his termination to the Kern County Civil Service Commission under Ordinance 3.04.080 and rule 1700 et seq. It accepted the county’s argument that these procedures for challenging dismissals applied to Romero’s claims, regardless of their whistleblower retaliation basis.

The Court of Appeal reversed the judgment in the published case of Romero v County of Kern -F088325 (December 2025) concluding Romero was not required to exhaust the county’s internal remedies because they did not apply to or adequately address whistleblower retaliation claims.

The appellate court examined the exhaustion doctrine, noting that administrative remedies must be exhausted as a jurisdictional prerequisite where provided by statute or internal rules, as established in cases like Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280 and Campbell v. Regents of University of California (2005) 35 Cal.4th 311. However, exceptions apply if remedies are unavailable, inadequate, or outside the agency’s jurisdiction, as in Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320, where whistleblower claims fell outside discrimination-focused rules.

The court analyzed Kern County’s ordinances and rules. It agreed rule 1810 et seq. (for discrimination and harassment) did not apply to whistleblower retaliation. Focusing on Ordinance 3.04.080 and rule 1700 et seq. (for dismissals), it found these provided procedures for challenging disciplinary actions but lacked “clearly defined machinery” for submitting, evaluating, and resolving whistleblower retaliation complaints specifically. The rules required the commission to address only the appointing authority’s stated grounds for dismissal, not alternative claims like retaliation. Arguments were limited to rule violations, and the commission was not obligated to investigate or make findings on retaliation. This contrasted with explicit procedures for discrimination claims and cases like Campbell, where specific whistleblower policies existed.

The court distinguished the county’s position: while an employee might raise retaliation defensively, the commission was not required to address it, failing to promote exhaustion’s purposes like factual development or judicial economy. It cited precedents where optional or non-mandatory processes do not trigger exhaustion (e.g., City of Coachella v. Riverside County Airport Land Use Com. (1989) 210 Cal.App.3d 1277.

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Law Violation Not Required for Application of Whilstleblower Protections

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Manuel Contreras worked for Green Thumb Produce, Inc., a produce packaging company, from 2016 to 2020, primarily in the sanitation department driving forklifts. During his employment, he discovered he was being paid less than other employees performing similar duties, including some with less seniority. He raised this pay disparity with his supervisors multiple times, but no action was taken. In August 2020, Contreras researched his legal rights, believing the law required equal pay for equal work. He contacted the Labor Commissioner’s Office in San Bernardino County, where a deputy labor commissioner suggested Green Thumb might be violating the law and referred him to the California Equal Pay Act (EPA) and the office’s website.

Contreras reviewed a seven-page FAQ document titled “California Equal Pay Act: Frequently Asked Questions,” which he interpreted as applying to his situation, even though he did not believe the pay difference was due to his gender, race, or ethnicity. On September 3, 2020, he brought the FAQ to work to request a raise from human resources. During lunch, he discussed it with coworkers to find a witness, leading to an encounter with his manager, Miguel Ramos, who took him to HR manager Sendy Ochoa. Contreras explained the FAQ and requested a raise, but Ochoa denied it, accused him of insubordination after he stated he would no longer drive a forklift (meaning additional duties, not his primary one), and sent him home. The next day, Contreras was terminated via security escort and a letter citing violations of company policies, such as disrupting work and refusing instructions.

In 2021, Contreras sued Green Thumb Produce, Inc., for wrongful termination. In his operative first amended complaint filed in 2023, he asserted three causes of action under the California Labor Code: (1) retaliation for exercising employment rights (§ 98.6), (2) whistleblower retaliation (§ 1102.5(b)), alleging he was fired for reporting a believed EPA violation, and (3) retaliation for discussing wages (§ 232). The case proceeded to a jury trial in 2023. The jury found in Contreras’s favor on all three claims, awarding $53,000 in past economic damages, $72,428 in future economic damages, and $47,000 in past non-economic damages, totaling $172,428, plus statutory penalties.

After the verdict, Green Thumb filed a motion for partial judgment notwithstanding the verdict (JNOV) on August 18, 2023, challenging only the whistleblower retaliation claim under § 1102.5(b). The trial court granted the partial JNOV, ruling that Contreras’s testimony showed he had not complained of any actual legal violation and could not “make up a non-existent law” for § 1102.5 protections. It entered a second amended judgment on November 20, 2023, reducing penalties to $10,000 (for § 98.6 only) and awarding Contreras $182,428 total. Contreras appealed this ruling, arguing substantial evidence supported the jury’s finding of his reasonable belief in an EPA violation.

The Court of Appeal reversed the JNOV ruling and directed the trial court to reinstate the jury’s verdict in the published case of Contreras v Green Thumb Produce -D085440 (December 2025).

The Court of Appeal first clarified that § 1102.5(b), California’s whistleblower statute, protects employees from retaliation for disclosing information they reasonably believe reveals a legal violation, emphasizing objective reasonableness without requiring proof of an actual violation.

It rejected Green Thumb’s argument that a mistaken legal interpretation automatically defeats a claim, identifying three scenarios of employee mistakes (law, facts, or both) and focusing on reasonableness to align with the statute’s purpose of encouraging reports without fear.

The court dismissed hypotheticals of patently unreasonable beliefs (e.g., mandatory 100% raises) as failing the objective reasonableness test. It then found substantial evidence supporting the jury’s verdict: Contreras’s consultation with a deputy labor commissioner (who suggested a possible violation), his lay interpretation of the FAQ (which often omitted protected classes and could mislead a non-lawyer), and his testimony.

The FAQ’s structure, starting with expansions beyond original gender protections and questions like 9 focusing on “substantially similar work,” supported a reasonable lay misinterpretation, especially given the EPA’s name and Contreras’s limited education. The court distinguished this from cases where no legal foundation was cited, noting Contreras pointed to the EPA as his basis.

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Pension Denied for Injured Deputy’s Unreasonable Refusal of Surgery

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Alberto Mendoza began working as a Ventura County Deputy Sheriff in 2012, assigned to the Todd Road Jail Facility. In December 2014, he suffered a back injury after slipping on stairs, causing lower back discomfort. In May 2015, he sustained another back injury when an inmate kicked him in the right waist area during a subdue attempt. An MRI in May 2015 revealed degenerative disc disease at the L5-S1 level, a disc herniation abutting the right S1 nerve root, and extrusion of nucleus pulposus material also affecting the nerve root.

Mendoza was evaluated by several doctors. Dr. Robert Fields, the Qualified Medical Evaluator in his workers’ compensation case, recommended referral to a spine specialist and noted a high likelihood of needing surgery. Dr. Brian Grossman, an orthopedic surgeon, initially suggested physical therapy and an epidural injection but later concluded Mendoza had reached maximal medical improvement without surgery, though he discussed microscopic discectomy as an option; Mendoza declined, citing colleagues’ negative experiences. Dr. Sam Bakshian, his treating physician, reported worsening symptoms post-injection and requested authorization for a hemilaminectomy microdiscectomy at L5-S1, which the County authorized, but Mendoza refused due to fears and concerns about outcomes.

Subsequent MRIs in December 2015 and June 2017 showed progression of discopathy. Dr. Fields reevaluated Mendoza in 2016, urging surgery with a 90% chance of good to excellent results, allowing potential return to work. Mendoza continued to decline. By 2017, Dr. Bakshian recommended a more extensive laminoforaminotomy discectomy due to scar formation and annular tearing, but this was denied via utilization review for lack of objective evidence. Dr. Richard Rosenberg evaluated Mendoza in 2018 and 2019, opining he no longer needed surgery, had lost less than 5% lifting capacity, and could return to most deputy duties with accommodations, recommending a home exercise program and work hardening; Mendoza stopped the exercises due to pain and declined work hardening.

Mendoza testified at an administrative hearing that he refused surgery because his urinary incontinence resolved and he believed his body was improving, though he reported constant pain. The County presented evidence from radiologist Dr. Stephen Rothman that the 2017 MRI showed no nerve compression, and testimony that accommodations were possible. A supplemental report from Dr. Bakshian in 2020 agreed the disc extrusion resolved but noted significant disc height loss and dysfunction, now requiring decompression, neurolysis, and possibly fusion.

In May 2016, Mendoza applied for service-connected disability retirement benefits with the Ventura County Employees’ Retirement Association (VCERA). The County challenged the application, leading to an administrative hearing before a VCERA hearing officer in December 2019. The hearing officer issued proposed findings in October 2020, recommending denial because Mendoza unreasonably refused surgery with a high success probability (90% per Dr. Fields), stopped his home exercise program, and declined work hardening, potentially worsening his condition. The Board adopted this decision, denying benefits.

Mendoza then petitioned the Ventura County Superior Court for a writ of administrative mandate under Code of Civil Procedure section 1094.5, challenging the Board’s denial as an abuse of discretion and unsupported by evidence.

The trial court denied Mendoza’s writ petition, exercising independent judgment and upholding the Board’s findings. The court held Mendoza’s delay worsened his condition, making his disability self-inflicted rather than service-connected. Substantial evidence, including uncontradicted medical opinions, supported this, and Mendoza failed to meet his burden.

The Court of Appeal affirmed the trial court’s denial, in the published opinion of Mendoza v. Bd. of Retirement of the Ventura County Employee’s Retirement Association  -B327347 (December 2025). It reasoned that allowing benefits despite unreasonable refusal would undermine the doctrine’s purpose: preventing employees from relying on unfounded fears to reject treatment and claim disability.

The appellate court reviewed for substantial evidence supporting the trial court’s findings, given Mendoza’s vested right to benefits required independent judgment. It presumed the administrative findings correct, with Mendoza bearing the burden to show otherwise. The court applied the doctrine of avoidable consequences, which denies benefits if disability is caused, continued, or aggravated by unreasonable refusal of treatment with inconsiderable risk relative to injury severity.

The court found substantial evidence for the unreasonable refusal: recommendations from three doctors (Bakshian, Fields, Grossman), Dr. Fields’ 90% success opinion outweighing risks, and Mendoza’s fears based on anecdotal information. It noted conflicts in Dr. Bakshian’s testimony but deemed them insufficient to compel reversal. The court also upheld findings on refusal of work hardening and home exercises, and forfeiture of Mendoza’s sufficiency claim for omitting favorable evidence in his brief. It reasoned that allowing benefits despite unreasonable refusal would undermine the doctrine’s purpose: preventing employees from relying on unfounded fears to reject treatment and claim disability.

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Court Denies Carriers Suit Against Attorneys for Worker’s Fraudulent Claim

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Veronica McRae filed a claim with the U.S. Department of Labor (DOL) for death benefits as the alleged widow of a deceased worker who had been injured at the Port of Oakland and later passed away. Homeport Insurance, the insurer for the employer, participated in mediation and reached a settlement with McRae. Pursuant to an application under federal law, an administrative law judge (ALJ) issued an order approving the settlement, requiring Homeport to pay McRae $425,000 for all claims related to disability, medical, and death benefits, and an additional $30,000 directly to her attorneys – Philip Weltin, Daniel Weltin, and their firm, Weltin, Streb & Weltin, LLP – for fees and costs.

Approximately nine months later, the decedent’s daughter informed Homeport that her father had not been married to McRae at the time of his death. Homeport’s investigation revealed a 2010 judgment dissolving the marriage between McRae and the decedent, as well as McRae’s unsuccessful 2022 motion to set aside that default judgment. Homeport then moved with the DOL to vacate the ALJ’s order, alleging it was procured through McRae’s fraud.

While that motion was pending, Homeport initiated a state court lawsuit in Alameda County Superior Court against McRae and her attorneys asserting claims for conversion, imposition of a constructive trust, unjust enrichment, and injunctive and declaratory relief. It also sued McRae separately for fraud.

The attorneys filed a special motion to strike Homeport’s complaint under California’s anti-SLAPP statute (Code Civ. Proc., § 425.16), arguing that the claims arose from their protected petitioning activity in representing McRae in the administrative proceeding. They contended Homeport could not prevail because it had no ownership interest in the attorney fees (which were ordered paid directly by the ALJ), the litigation privilege (Civ. Code, § 47) barred liability, and the economic loss rule applied. Homeport opposed the motion, arguing it was untimely, the claims did not arise from protected activity (but rather McRae’s fraud, which was not a public issue), the illegality exception to anti-SLAPP applied, and it had a probability of prevailing based on evidence of McRae’s misrepresentation and its right to the funds.

The trial court granted the attorneys’ anti-SLAPP motion and struck Homeport’s complaint in its entirety. The Court of Appeal affirmed the trial court’s order striking the complaint in the unpublished case of Homeport Insurance v. McRae -A172243 (December 2025).

The Court of Appeal conducted a de novo review, applying the two-prong anti-SLAPP framework. On prong one (protected activity), the court focused on whether the attorneys’ conduct giving rise to liability fell under section 425.16, subdivision (e) – statements or writings in judicial or official proceedings. It concluded that Homeport’s claims, particularly the conversion claim (from which the others derived), arose from the attorneys’ prosecution of McRae’s allegedly fraudulent LHWCA claim and the procurement of the ALJ order.

The court emphasized that the “wrongful act” element of conversion was tied to these petitioning activities, not merely the receipt of funds. It distinguished cases like Drell v. Cohen (2014) and Optional Capital, Inc. v. DAS Corp. (2014), where protected activity was incidental, and analogized to Rusheen v. Cohen (2006), where noncommunicative acts (like levying on property) were protected if necessarily related to privileged communications.

The court rejected Homeport’s argument that the attorneys failed to identify specific protected acts, as the claims were not “mixed” but entirely based on protected conduct. It also dismissed the illegality exception from Flatley v. Mauro (2006), finding no conclusive evidence that the attorneys knowingly made false representations under the LHWCA’s fraud provision (33 U.S.C. § 931(a)).

On prong two (probability of prevailing), the court held that Homeport failed to meet its burden. It noted Homeport forfeited any challenge to the litigation privilege by not addressing it in its opening brief, but even on the merits, the privilege applied to communications and related acts in the administrative proceeding, including receipt of fees under the ALJ order. Drawing again from Rusheen, the court reasoned that the attorneys’ retention of funds was not an independent wrong but stemmed from the privileged prosecution of the claim.

Homeport also failed to show conversion, as it lacked evidence of a right to the fees or wrongful possession by the attorneys. The court dismissed Homeport’s reliance on a temporary restraining order against McRae (obtained before the attorneys appeared) and other undeveloped arguments, such as public interest concerns or comparisons to New York and Texas law.

The court remanded for the trial court to determine the attorneys’ appellate attorney fees and costs under section 425.16, subdivision (c), as prevailing defendants are entitled to them..

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December 15, 2025 – 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: Court Removes Comp & Liability Provisions From Fair Plan Policies. Another SoCal Attorney Sanctioned for an AI Appellate Brief. Grounds for County of LA Workplace Violence Restraining Order Affirmed. Employer’s Class Action Pre-Certification Conduct Waives Arbitration. Physician to Serve 2.5 Years For Selling Ketamine to Matthew Perry. Previously Convicted Fresno Healthcare CEO Arrested for $7M Fraud. CEO Convicted in $100M Health Care Fraud Scheme. Four Face Sentencing in Staged Collision Insurance Fraud Case. National Company Pays $500K For Unlawful “No Poaching” Agreements. Prop 103 Reform Competing Ballot Measures Declare Armistice.

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Court Removes Comp & Liability Provisions From Fair Plan Policies

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The California FAIR Plan Association (CFPA), established under the Basic Property Insurance Law (Ins. Code, §§ 10090–10100.2) as the state’s insurer of last resort, challenged an order issued by Insurance Commissioner Ricardo Lara on September 24, 2021 (Order No. 2021-2). The order directed CFPA to amend its plan of operation to offer a “Homeowners Policy” that included, among other coverages, premises liability and incidental workers’ compensation – elements not part of CFPA’s existing dwelling fire policy.

CFPA petitioned the Los Angeles County Superior Court for a writ of mandate to vacate the order, arguing that the Commissioner lacked authority under the statute to mandate liability coverage, as “basic property insurance” is limited to first-party coverage against direct loss to real or tangible personal property.

The superior court denied the petition, finding the statutory definition ambiguous and deferring to the Department of Insurance’s (DOI) interpretation, which permitted liability coverage if it had some connection to the property.

On appeal, the central issue was whether Insurance Code section 10091, subdivision (c), authorizes the Commissioner to expand “basic property insurance” to include liability coverage. The California Court of Appeal ruled that it did not, and reversed the trial court In the published case of California FAIR Plan Association v. Lara  -B336043 (December 2025).

The statute defines the term as “insurance against direct loss to real or tangible personal property at a fixed location . . . from perils insured under the standard fire policy and extended coverage endorsement, from vandalism and malicious mischief, and includes other insurance coverages as may be added with respect to that property.” The court agreed the phrase “other insurance coverages . . . with respect to that property” is ambiguous, as it could plausibly refer to additional first-party perils or broader coverages, including liability.

However, after examining extrinsic aids, the court concluded the Legislature intended “basic property insurance” to encompass only first-party property coverage. The law was enacted in 1968 amid instability in California’s property insurance market, triggered by urban riots (e.g., Watts in 1965) and wildfires, which left property owners in high-risk areas unable to obtain basic fire insurance. It mirrored the federal Urban Property Protection and Reinsurance Act of 1968, which incentivized states to create “FAIR” (Fair Access to Insurance Requirements) plans to ensure residual market access for property risks, not liability.

The statute’s express purposes (§ 10090) – stabilizing the property insurance market, assuring availability of basic property insurance, encouraging maximum use of the normal market, and equitably distributing responsibility among property insurers – all align with first-party property risks.

Expanding to liability would undermine these goals by distorting CFPA’s role as a backstop, disincentivizing voluntary market use (where liability via Difference in Conditions policies is readily available), and unfairly burdening non-property insurers.

The court further held that deference to DOI’s interpretation was unwarranted under Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1. DOI’s 1972 report to the Legislature, contemporaneous with enactment, confirmed the law’s narrow focus on property insurance. Its 1994 shift – approving CFPA’s Businessowners Policy with liability coverage – was not consistently maintained, lacked formal rulemaking, and rested on flawed reasoning solicited to avert legislative intervention after the 1992 Los Angeles riots. DOI possessed no comparative interpretive advantage, as the issue turned on statutory construction rather than technical expertise.

The judgment was reversed, and the matter remanded with directions to grant the writ and vacate Order No. 2021-2. CFPA was awarded costs on appeal.

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Employer’s Class Action Pre-Certification Conduct Waives Arbitration

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Litigation originated against Sierra Pacific Industries in October 2018 when plaintiff Quinton McDonald, a former nonexempt employee at one of Sierra Pacific’s California sawmills, filed a class action complaint alleging various wage and hour violations under the Labor Code and related unfair competition claims under the Business and Professions Code. The complaint sought to represent eight classes of current and former nonexempt employees, without excluding those who had signed arbitration agreements.

Sierra Pacific, a lumber manufacturer operating facilities across California, answered the initial complaint without asserting arbitration as an affirmative defense. Although it briefly raised arbitration in its response to the first amended complaint in 2019, it omitted the defense from its answer to the operative second amended complaint filed in 2021.

Discovery proved contentious. In December 2018, McDonald requested production of documents, including arbitration agreements applicable to nonexempt employees. Sierra Pacific objected on grounds of overbreadth and third-party privacy. The trial court granted McDonald’s motion to compel in February 2020, ordering production of the agreements without confidentiality restrictions absent a protective order.

Sierra Pacific’s supplemental response provided only an unsigned form agreement and stated that approximately 2,000 nonexempt employees had signed it, without producing signed copies or identifying signatories. Despite multiple instances of monetary sanctions for other discovery violations in 2022, Sierra Pacific did not produce signed agreements until after class certification.

Plaintiffs,including Gary W. Dunehew and Robert L. Sherrill, moved for class certification in October 2021, proposing classes that included signatory employees. Sierra Pacific opposed, noting the existence of arbitration agreements but producing only one unsigned form. The trial court certified eight classes in November 2022. Shortly thereafter, in response to a new production request, Sierra Pacific disclosed over 3,400 signed agreements between January and March 2023. It immediately moved to compel arbitration against absent class members who had signed the agreements, arguing the Federal Arbitration Act governed and that the motion was timely under Sky Sports, Inc. v. Superior Court (2011) 201 Cal.App.4th 1363, as it could not enforce arbitration against unnamed class members pre-certification.

Plaintiffs opposed on waiver grounds and separately moved for sanctions based on Sierra Pacific’s failure to comply with the February 2020 order. They highlighted Sierra Pacific’s extensive participation in classwide discovery involving signatories (e.g., producing records for 642 signatories in a sample of 1,388 putative members without differentiation), reliance on signatory declarations to oppose certification, and involvement in two mediations aimed at classwide settlements.

The trial court denied the motion to compel in August 2023, applying the multifactor test from St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187 and finding Sierra Pacific’s conduct inconsistent with an intent to arbitrate. It also granted sanctions, precluding Sierra Pacific from introducing evidence of the agreements or arguing that class members signed them.

On appeal, the appellate court reviewed the waiver finding de novo under the updated standard from Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, which requires clear and convincing evidence that the party knew of its arbitration right and intentionally relinquished it through inconsistent conduct, without requiring prejudice.

The Court of Appeal affirmed the trial court’s denial of defendant Sierra Pacific Industries’ motion to compel arbitration and dismissed the appeal from the trial court’s order imposing evidentiary and issue sanctions.In the published case of Sierra Pacific Industries Wage and Hour Cases -C099436 (December 2025).

The court concluded Sierra Pacific waived its rights, emphasizing its years-long litigation without asserting arbitration, defiance of the discovery order, undifferentiated class discovery, mediation participation, and deletion of the arbitration defense. It distinguished cases like Sky Sports, Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, and Piplack v. In-N-Out Burgers (2023) 88 Cal.App.5th 1281, where delays were justified by intervening legal changes, and drew support from Hill v. Xerox Business Services, LLC (9th Cir. 2023) 59 F.4th 457, holding that pre-certification conduct can establish waiver.
Regarding sanctions, the court dismissed the appeal for lack of jurisdiction, as no statute authorizes direct appeal from evidentiary or issue sanctions orders (Code Civ. Proc., § 904.1). It rejected Sierra Pacific’s argument that the order was effectively an arbitration denial appealable under section 1294 or ancillary under section 1294.2, noting the motions’ distinct purposes and logical separateness.

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Previously Convicted Fresno Healthcare CEO Arrested for $7M Fraud

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The CEO of a Fresno-based home health care company was arrested at San Francisco International Airport while attempting to board a flight to Nigeria. He is charged in a criminal complaint alleging that he fraudulently obtained more than $7 million in payments from the Department of Veterans Affairs for services that were never actually rendered, including care purportedly rendered to veterans weeks after they had died, U.S. Attorney Eric Grant announced.

According to court documents, between December 2019 and July 2024, Cashmir Chinedu Luke, believed to be 66, of Antioch, operated Four Corners Health LLC. That entity provided unskilled in-home nursing and day-to-day care for elderly VA beneficiaries under the Veterans Community Care Program. Four Corners provided services in Fresno, Tulare, Merced, Mariposa, Madera, San Francisco, and Contra Costa Counties.

Luke engaged in a five-year scheme to bill the VA for hours of care that were not actually rendered to veterans. Luke caused Four Corners to submit approximately 10,000 individual false claims of care provided that caused the VA, through its third-party benefits administrator, to reimburse Four Corners $7 million for duplicate claims for care actually provided, claims for days caretakers were not present with veterans, claims for hours of care beyond those actually worked by caretakers, and claims of care for veterans who were actually dead.

Luke served as the sole owner and billing representative for Four Corners and actively deceived the VA’s third-party benefits administrator as it attempted to recover some of the fraudulently paid reimbursements. This allowed the Four Corners billing scheme to continue.

Luke personally profited from the scheme as the sole owner of the bank account that received the reimbursement payments. Luke spent reimbursement payments immediately after being paid by the VA, either by spending lavishly on personal expenses or by promptly transferring the funds across a network of bank accounts throughout Asia and Africa.

This is not Luke’s first encounter with federal law. In 2009, he was convicted in the U.S. District Court for the District of Maryland of conspiracy to commit identification document fraud and aggravated identity theft. His appeal in United States v. Luke, 628 F.3d 114 (4th Cir. 2010), was filed following his October 23, 2009, conviction in the U.S. District Court for the District of Maryland on all four counts of the indictment.

Luke challenged the sufficiency of the evidence supporting his convictions, arguing that his actions did not fall within the scope of the relevant federal statutes. The Fourth Circuit, in a published opinion authored by Judge Allyson K. Duncan, rejected these arguments in a unanimous decision and affirmed the district court’s judgment. The opinion emphasized that the statutes’ broad language clearly encompassed Luke’s fraudulent conduct, and the evidence at trial was more than sufficient to support the jury’s verdict. He served a 27-month prison sentence, followed by three years of supervised release.

Court records from that case indicate Luke, a naturalized U.S. citizen originally from Nigeria, used two identities – his legal name (Cashmir Luke) and birth name (Chinedu Cashmire Osuagwu) – and was found to have committed perjury during his testimony. The 2008 detention order noted his “ties to Nigeria,” which may explain the timing of his attempted departure.

Luke immigrated to the United States from Nigeria in 1982 and became a naturalized citizen in 1984. He initially obtained a U.S. passport and a Virginia driver’s license under his birth name, Chinedu Cashmire Osuagwu. In 1996, he legally changed his name to Cashmir Chinedu Luke but continued to actively maintain both identities for separate purposes, such as professional and personal dealings. At the time of the 2009 offenses, Luke resided in Randallstown, Maryland, and worked as a respiratory therapist at a rehabilitation hospital in Baltimore.

This 2025 case is the product of an investigation by the U.S. Veterans Affairs Office of Inspector General. Assistant U.S. Attorney Calvin Lee is prosecuting the case.

If convicted, Luke faces a maximum statutory penalty of 10 years in prison and a $250,000 fine. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

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