Tag: 2014 News

Sondra Andrews was employed by Securitas Security Services USA, Inc, an independent contractor retained by Verizon to provide security services at its facilities. Securitas employees are stationed at guard shacks, which are small, freestanding structures from which guards monitor those who enter and exit the Verizon facility. Normally an office chair is available for use by Securitas employees during their eight-hour shifts. However, a few days before the incident, the office chair broke. Marvin Kephart, another Securitas employee, replaced the broken chair with a barstool-type chair he obtained from one of Verizon’s buildings with the permission of a Verizon employee.

On the day of the accident, Andrews was working a graveyard shift. At approximately 4:00 a.m., Andrews attempted to get down from the replacement chair, but the top of her right foot became caught in the chair’s footrest. She stumbled trying to stand up from the chair causing both her and the chair to fall. Andrews sustained a fracture to her upper spine, which required surgery and a spinal fusion. She has not returned to work since the incident.

Andrews filed a negligence suit against Verizon, alleging it failed to exercise reasonable care, failed to provide a reasonably safe place for Andrews to work, and failed to “furnish, maintain or repair” a chair that was reasonably safe for her use. Andrews claimed Verizon “knew or should have known the chair was unsafe . . . .”

Verizon moved for summary judgment. After considering the parties’ submissions and conducting a hearing, the court granted Verizon’s summary judgment motion. The court reasoned that Andrews was an employee of Verizon’s independent contractor, and therefore she was required to prove Verizon “affirmatively contributed to the injury.” The court found no “such evidence has been presented.” Her case was therefore dismissed. The Court of Appeal affirmed in the unpublished case of Andrews v. Verizon.

“Generally, when employees of independent contractors are injured in the workplace, they cannot sue the party that hired the contractor to do the work. . . . [¶] By hiring an independent contractor, the hirer implicitly delegates to the contractor any tort law duty it owes to the contractor’s employees to ensure the safety of the specific workplace that is the subject of the contract.” (SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590, 594; see Privette v. Superior Court (1993) 5 Cal.4th 689, 696; Toland v. Sunland Housing Group, Inc. (1998) 18 Cal.4th 253, 256.)

Two exceptions are potentially relevant here. First, an exception applies when the hirer’s act of providing unsafe equipment affirmatively contributed to the party’s injuries. (McKown v. Wal-Mart Stores, Inc. (2002) 27 Cal.4th 219, 225 (McKown).) Second, the hirer of an independent contractor may be held liable for injuries to the contractor’s employee if the hirer’s negligent exercise of retained control over safety conditions at a worksite “affirmatively contributed to the employee’s injuries.” (Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 202 (Hooker).)

Neither exception applied here.

Floyd, Skeren and Kelly is pleased to announce its 2nd Annual 2014 Northern California Employment Law Conference.  The Keynote Speaker will be Phyllis W. Cheng, Director, California Department of Fair Employment and Housing. The Conference will cover important workplace topics related to the Interactive Process, Disability Leave, Pregnancy Leave, the Affordable Care Act, Workers’ Compensation and the crossover issues related to the Fair Employment Act, and much more. The event is scheduled for November 6, 2014 at the Hilton Garden Inn, 1800 Powell Street in Emeryville.

California has over 16 statutes related to employee leaves of absences. These statutes are often confusing and more significantly, often impose overlapping employer obligations. This presentation will identify those statutes, focusing in on the triangle of leave related statutes that pose the biggest headache for employers: workers’ compensation, the Fair Employment and Housing Act and the California Family Rights Act/Family and Medical Leave.

Significant changes have been proposed to the California Family Rights Act (CFRA) which governs family and medical leave. This presentation will review key sections of the proposed regulations.

When an employee is injured, all California employers must comply with workers’ compensation laws and all employers with five or more employees must comply with the overlapping disability discrimination laws under the Fair Employment and Housing Act (FEHA) which are likely triggered when an employee sustains a work related injury. Failure to understand the employer’s obligations under both sets of laws can turn a straightforward workers’ compensation case into a FEHA nightmare. This presentation will provide key guidance, focusing on:

1) How a workers’ compensation case can evolve into a FEHA matter;
2) Best practices for complying with FEHA in workers’ compensation cases;
3) A review of the employer’s IP obligations in a workers’ compensation case;
4) Global settlements in a workers’ compensation case;
5) What to expect if a workers’ compensation case becomes a FEHA lawsuit.

Multiple state and federal laws such as the Family and Medical Leave Act, California Family Rights Act and the Fair Employment and Housing Act, govern the amount of pregnancy leave that an employee may be entitled to receive. Employers are often surprised to learn that due to these overlapping laws, eligible pregnant employees may be entitled to more than 7 months of pregnancy leave. Although that may seem like a substantial amount of leave, an employer’s failure to provide the appropriate amount of pregnancy leave can result in a costly claim for pregnancy discrimination. Key areas of this problem area will be discussed.

MCLE and CE credits will be provided. This program, 223509, has been approved for 7 (HR (General)) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute.

Please visit the FSK website for registration information.

Pharmaceutical manufacturers that promote off-label uses for prescription drugs have become litigation targets for third-party payors – especially after Kaiser received a nine-figure RICO award last year against the manufacturer of Neurontin. Health care insurers have filed most of these cases; in May 2014, Humana joined the crowd, suing a manufacturer over off-label use of a device designed for spinal fusion surgeries.

The U.S. Supreme Court, last December, left intact a $142 million jury verdict against Pfizer Inc over the marketing of the epilepsy drug Neurontin. The jury had ruled in favor of an insurer who said it had been misled into paying for the drug for “off-label” uses, or uses for which it was not approved. In 2010, the jury in Massachusetts found that due to Pfizer’s marketing of the drug for off-label uses, Kaiser Foundation Health Plan Inc, one of the nation’s largest health maintenance organizations, and affiliates were damaged because they paid for prescriptions relating to conditions Neurontin did not effectively treat. The Supreme Court’s refusal to hear Pfizer’s appeal means similar claims brought against the company by insurer Aetna Inc and Harden Manufacturing Corp can also go forward.

Workers compensation carriers – and even automobile insurers – can also spend large amounts on the same medications. Their claims face substantial obstacles and the results have been inconsistent, as shown by the recent decision dismissing the complaint in The Travelers Indemnity Co. v. Cephalon, Inc. which was filed in the United States District Court, for the Eastern District of Pennsylvania, case 12-4191.

Cephalon manufactures two opioid pain relievers, Actiq and Fentora, which were approved by the FDA only for the management of “breakthrough” pain in cancer patients already receiving opioid therapy. In September 2008, Cephalon settled with the federal government and several states over its alleged promotion of Actiq for use by non-cancer patients. Follow-on suits included an action by a union health plan and, in June, a suit by the City of Chicago. The Travelers suit alleged that Cephalon’s marketing misleadingly understated the risks of its products for non-cancer patients, and specially targeted doctors who treat injured workers, because workers compensation laws limit insurers’ ability to restrict coverage for particular drugs. As a result, Travelers paid nearly $20 million for the two products. It asserted claims for fraud, negligent misrepresentation, violation of consumer protection statutes, and unjust enrichment.

The court dismissed the complaint on several grounds, beginning with lack of standing. Travelers claimed it was injured when it paid for Cephalon’s drugs, because (1) they were ineffective in off-label uses, and (2) they were prescribed in place of cheaper alternatives. On the first point, the court held that the absence of data proving a drug’s effectiveness for off-label use “does not support the conclusion that the drug is actually ineffective,” and that “[t]he fact that a drug poses – a significant possibility of harm does not – establish injury-in-fact to the party paying for the drug.” These findings also doomed the insurer’s second theory because the court further held that “[a] plaintiff is not injured simply because it paid for a more expensive drug.” It chided Travelers for failing to name “an equally effective, safer, less expensive drug” that could have been prescribed in lieu of Cephalon’s products. It found the failure to allege an injury fatal to the state statutory claims, as well.

The court also dismissed Travelers’s claims for intentional and negligent misrepresentation, as well as for unjust enrichment, on the ground that “off-label promotion is not inherently deceptive,” and that the insurer had failed to specifically allege an instance of false or misleading claims. The court expressly refused to infer the use of false statements from the fact that doctors prescribed the drug for off-label uses.

As Kaiser proved, it is possible to overcome all of these positions – in some cases. But even substantial evidence of improper marketing will not, without more, get a third-party payor before a jury. Yet, other actions are pending around the country, and the stakes are high. Perhaps cases in the 9th Circuit which includes California will be more successful since the 9th Circuit is deemed by many to the the most liberal in the nation. Choice of forum may play a role in the success of these cases.

Ellen Jones was employed as a lecturer by San Francisco State University (SFSU) from July 2005 to July 2006. During this period she injured her bilateral upper extremities and lower back. SFSU, retained legal counsel who, in turn, filed an application for adjudication of claim with the WCAB in May 2009. At the same time, SFSU noticed applicant’s deposition for July 2009. When this application was filed, applicant was unrepresented.

Applicant’s attorney claimed an attorney fee as a result of the University having filed an application against an unrepresented worker. In September 2012, the WCJ issued his Findings, Award, and Order, which included the determinations that the employer “may not utilize section 4062.3, subdivision (g) to defeat liability for attorney fees pursuant to section 4064.” The WCAB then granted the SFSU motion for reconsideration and removal, and amended this finding as follows before remanding for further proceedings: “The issue of whether [petitioner] may utilize section 4062.3(g) to defeat its liability for attorney fees pursuant to section 4064 is deferred with jurisdiction reserved at the trial level”.

At the time the WCAB issued this remand/removal order with respect to the WCJ’s September 2012 Findings, Award and Order, the version of labor code section 4064, subdivision (c), in effect provided: “Subject to Section 4906, if an employer files an application for adjudication and the employee is unrepresented at the time the application is filed, the employer shall be liable for any attorney’s fees incurred by the employee in connection with the application for adjudication.”

However, effective January 1, 2013, section 4064, subdivision (c) was amended pursuant to SB 863 to provide: “Subject to Section 4906, if an employer files a declaration of readiness to proceed and the employee is unrepresented at the time the declaration of readiness to proceed is filed, the employer shall be liable for any attorney’s fees incurred by the employee in connection with the declaration of readiness to proceed.” Thus, the triggering event for the unrepresented applicant’s right to attorney fees changed from the employer’s filing of an application for adjudication of claim to the employer’s filing of a declaration of readiness to proceed. (Here, applicant filed this declaration of readiness to proceed.) In addition, when enacting these and other amendments to the Labor Code, the Legislature made the express finding that: “This act shall apply to all pending matters, regardless of date of injury, unless otherwise specified in this act, but shall not be a basis to rescind, alter, amend, or reopen any final award of workers’ compensation benefits.” )

In July 2013, following the effective date of the amended version of section 4064, subdivision (c), the WCJ conducted further proceedings on remand from the WCAB’s December 13, 2012 decision. The WCJ thereafter issued Findings of Fact and an Opinion on Decision, dated October 16, 2013, in which it determined, based upon the amended statute, that applicant was not entitled to attorney fees. As such, the WCJ declared moot all other previously-decided issues relating to attorney fees.

This time, applicant sought reconsideration by the WCAB of the WCJ’s October 2013 findings and opinion on attorney fees. The WCAB, in an order dated January 14, 2014, granted her request for reconsideration and set aside the WCJ’s denial of fees under the newly revised statute, explaining: “We did not intend to state [in footnote one of the December 13, 2012 opinion and decision] that Finding of Fact number 6 [awarding applicant attorney fees under section 4064] was not a final decision subject to reconsideration, although we recognize that the footnote could be interpreted that way. In any event, a footnote in an Opinion on Decision does not change the effect of our affirmation [of] Finding of Fact number 6. Finding of Fact number 6 is a final decision.” The WCAB thus concluded based on this reasoning that “the amendment of the Labor Code section 4064 does not affect applicant’s attorney’s fee request in this case,” and remanded the matter to the WCJ for calculation of the amount of fees to which applicant was entitled.

The Court of Appeal reversed in the unpublished case of San Francisco State University v WCAB, Ellen Jones.

Whether the WCAB (or WCJ) made the proper decision in this regard hinges on whether there was “any final award” of workers’ compensation benefits, which includes the benefit of attorney fees, when the amended statute took effect on January 1, 2013. “Simply put, there was no ‘final award’ of attorney fees as of January 1, 2013, when the amendment took force. What we had in place was the WCAB’s December 13, 2012, order granting petitioners’ motion for reconsideration and removal, which expressly states that “the WCJ has not yet awarded attorney’s fees.” Where the issue of applicant’s right to fees under section 4064 is “deferred” and the matter remanded to the WCJ – after the WCAB twice recognized in its opinion that the WCJ had “not yet awarded” such fees – we can conceive of no basis in law or reason for concluding that a “final award” of fees had already been, or was being, made.

The United States has filed civil complaints in a federal district court in Los Angeles, under the False Claims Act against Michigan neurosurgeon Dr. Aria Sabit, spinal implant company Reliance Medical Systems, a Utah company, two Reliance distributorships – Apex Medical Technologies and Kronos Spinal Technologies, both , Florida companies – and the companies’ owners, Brett Berry, John Hoffman and Adam Pike. Reliance Medical Systems allegedly sold spinal implants in Southern California through distributorships that it controlled, including Apex Medical Technologies and Kronos Spinal Technologies. Drs. Aria Sabit and Sean Xie were physician-investors in Apex, and Drs. Gowriharan Thaiyananthan who practices neurosurgery in Orange California and Ali Mesiwala who practices in Pomona California were allegedly physician-investors in Krons. The complaints allege that Apex Medical and Kronos Spinal paid physicians, including Sabit, to induce them to use Reliance spinal implants in the surgeries they performed. The litigation also involves Ventura County neurosurgeon Moustapha Abou-Samra, M.D. and Community Memorial Health System hospital in Oxnard.

The complaints allege that Berry and Pike founded Reliance in 2006, and subsequently created more than 12 physician-owned distributorships that sold Reliance devices. Each of Reliance’s distributorships sold spinal implants ordered by their physician-owners for use in procedures the physician-owners performed on their own patients. The complaints allege that Reliance used one of its distributorships, Apex Medical, to funnel improper payments to Sabit for using Reliance spinal implants in his surgeries. According to the complaints, Sabit began using Reliance implants on his patients only after he acquired an ownership interest in Apex and started receiving payments from the sale of Reliance’s spinal implants. Apex allegedly paid Sabit $438,570 between May 2010 and July 2012, during which time Sabit used Reliance implants in approximately 90 percent of his spinal fusion surgeries. The government also alleges that these payments caused Sabit to perform medically unnecessary or excessive surgeries on certain patients who did not need the spinal implants.

The government further alleges that Reliance operated a second distributor, Kronos, in southern California, which made improper payments to two other physicians, Drs. Ali Mesiwala and Gowriharan Thaiyananthan. Allegedly, Reliance’s owners were recorded telling a potential Kronos investor that Reliance was formed as part of a plan to “get around” the federal Anti-Kickback Statute, which prohibits such improper payments, and that Reliance pays its physician-investors enough in the first month or two to “put their kids through college.”

The allegations that Sabit performed medically unnecessary or excessive surgeries were raised in a separate lawsuit filed by Dr. Cary Savitch and Dr. Gary Proffett under the qui tam, or whistleblower, provisions of the False Claims Act. The act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. The act also permits the government to intervene in the whistleblowers’ lawsuit. In this case, the government has both intervened in the whistleblowers’ medical necessity claims and filed a separate lawsuit containing kickback claims against both Sabit and the Reliance defendants.

With respect to involved Ventura County defendants, the private complaint alleges that in the spring of 2009, defendant Moustapha Abou-Samra, M.D. a Board Certified neurosurgeon and president of Ventura County Neurosurgical Associates with full privileges at Community Memorial Health System (CMH), recruited Aria Omar Sabit, M.D., a non-board certified neurosurgeon, to relocate from New Jersey to Ventura County, California to be employed by Abou-Samra’s corporation. Sabit was allegedly allowed to perform highly specialized neurosurgical operative procedures including spinal surgeries with open reduction and internal fixation, spinal fusions, laminectomies and pedicle screw implantation at CMH despite demonstrations that his surgeries were allegedly plagued with high infection rates, high return-to-surgery rates, violations of operating room protocols, failures in instrumentation, surgical mishaps, inappropriate case selection and high complication rates. Sabit had allegedly performed over 375 procedures from June 2009 to December 2010 while under provisional privileges at CMH. Some 27 patients who were injured by Sabit’s procedures brought individual lawsuits in the Superior Court of the State of California for the County of Ventura against Sabit and some of the other defendants for medical malpractice. Not all of these plaintiffs are Medicare beneficiaries. Sabit was using Apex manufactured instrumentation in many of the surgeries at CMH and that Sabit had a financial interest in Apex. Sean Xie, M.D., a neurosurgeon in Los Angeles to whom Sabit referred some of his patients with complications from Sabit’s surgeries, also had an interest in Apex.

This investigation was a coordinated effort among the Commercial Litigation Branch of the department’s Civil Division and the U.S. Department of Health and Human Services-Office of the Inspector General. The lawsuits were filed in the Central District of California (Los Angeles), and are captioned United States ex rel. Carey Savitch, M.D., and Gary Proffett, M.D. v. Aria Sabit, M.D., Moustapha Abou-Samra, M.D., and Community Memorial Health System, Case No. 13-3363, and United States v. Reliance Medical Systems, Apex Medical Technologies, Kronos Spinal Technologies, Bret Berry, John Hoffman, Adam Pike, and Aria Sabit, M.D. Case No 14-6979