Tag: 2022 News

In the closely watched underlying case of Moriana v Viking River Cruises Inc. Angie Moriana sued her former employer Viking River Cruises, a company located in Woodland Hills California, in a California state court seeking recovery of civil penalties under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.).

She alleged that Viking had failed to provide her with her final wages within 72 hours, as required by §§101-102 of the California Labor Code. The complaint also asserted a wide array of other code violations allegedly sustained by other Viking employees, including violations of provisions concerning the minimum wage, overtime,meal periods, rest periods, timing of pay, and pay statements.

Moriana’s employment contract with Viking contained a mandatory arbitration agreement. Viking moved to compel arbitration of Moriana’s individual PAGA claim and to dismiss her other PAGA claims. The trial court denied Viking’s motion and the 2nd district Court of Appeal affirmed in the unpublished Court of Appeal opinion.

Viking argued that the United States Supreme Court’s decision in Epic Systems Corp. v. Lewis (2018) overruled the California Supreme Court’s decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, in which the California Supreme Court held” “that an employee’s right to bring a PAGA action is unwaivable,” and that “here . . . an employment agreement compels the waiver of representative claims under the PAGA, it is contrary to public policy and unenforceable as a matter of state law.”

Applying California’s Iskanian precedent, the California courts denied that motion,holding that categorical waivers of PAGA standing are contrary to California policy and that PAGA claims cannot be split into arbitrable “individual” claims and nonarbitrable “representative” claims.

The Supreme Court of the United States granted certiorari to decide whether the Federal Arbitration Act preempts the California rule. In an 8-1 decision, it held that the FAA preempts the rule of Iskanian insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate in the case of Viking River Cruises v Morniana – No. 20-1573 (June 2022).

The California Legislature enacted PAGA to address a perceived deficit in the enforcement of the State’s Labor Code. The primary function of PAGA is to delegate a power to employees to assert “the same legal right and interest as state law enforcement agencies,” But it does not create any private rights or private claims for relief. As the California courts conceive of it, the State “is always the real party in interest in the suit.”

California precedent also interprets the statute to contain what is effectively a rule of claim joinder. Rules of claim joinder allow a party to unite multiple claims against an opposing party in a single action. An employee who alleges he or she suffered a single violation is entitled to use that violation as a gateway to assert a potentially limitless number of other violations as predicates for liability. In this regard the SCOTUS opinion noted that this “mechanism radically expands the scope of PAGA actions.”

The FAA was enacted in response to “judicial hostility to arbitration.” The FAA’s “mandate is to enforce arbitration agreements.” Yet conflict between PAGA’s procedural structure and the FAA does exist, and that it derives from the statute’s built-in mechanism of claim joinder.

PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. And under PAGA’s standing requirement, a plaintiff has standing to maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.

“State law cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.”

Iskanian’s prohibition on wholesale waivers of PAGA claims is not preempted by the FAA. But Iskanian’s rule that PAGA actions cannot be divided into individual and non-individual claims is preempted, so Viking was entitled to compel arbitration of Moriana’s individual claim.

“When an employee’s own dispute is pared away from a PAGA action, the employee is no different from a member of the general public, and PAGA does not allow such persons to maintain suit.” As a result, Moriana would lack statutory standing to maintain her non-individual claims in court, and the correct course was to dismiss her remaining claims.

In responding to the decision, the California Attorney General said “While today’s decision is disappointing and adds new limits, key aspects of PAGA remain in effect and the law of our state.”

Cerebral Inc. is a San Francisco based mental health telemedicine startup that provides access to medication management, therapy, and counseling for anxiety, depression, insomnia, ADHD, and more. The company is now under intense scrutiny from a number of oversight organizations, and the media.

Congressional investigators are asking the U.S. Drug Enforcement Administration what it’s doing to oversee mental health startups such as Cerebral Inc., calling the company’s business and prescribing practices “manipulative” and “aggressive,” according to a copy of a letter seen by Bloomberg.

In the letter, the chairman of the House Committee on Oversight and Government Reform asked the DEA about the startups, which have rapidly expanded by offering online consultation with clinicians as well as prescriptions for drugs such as Adderall and Xanax.

“The Committee respectfully requests information from the Drug Enforcement Administration to ensure you are focused on catching bad actors who take advantage of the current permissive regulatory structure,” committee Chairman Gerald Connolly said in the June 6 letter, which mentions Cerebral several times. “Reports claim that some companies believe DEA will not or do not have the capacity to enforce its rules.”

In response to the letter, a spokesman for Cerebral told Bloomberg: “Our clinicians are directed to act based on what they conclude is best for patients. We provide best-in-class resources and support systems to our clinicians and do not dictate how clinicians should treat patients.”

Because of pandemic-era regulatory relaxations, remote prescribing of controlled substances for mental health treatments has been permitted over the last two years. Cerebral, a SoftBank Group-backed startup, became a leader in the field of remote prescribing for mental health ailments such as depression and ADHD. The firm, which recently ousted its founder, is being investigated by the federal government for possible violations of the Controlled Substances Act. The company is fully cooperating with that investigation, a Cerebral spokesperson said last month.

Launched in January 2020, Cerebral became one of the most prominent companies in the budding industry. At first, it prescribed only non-controlled substances, such Lexapro and Prozac. Only after regulators loosened prescribing rules during the pandemic did it begin to prescribe drugs that are more tightly controlled by regulators because of their potential for abuse. After a $300 million investment from SoftBank in 2021, Cerebral was valued at $4.8 billion.

In a March report in Bloomberg Businessweek, former nurse practitioners for the company described a fear that Cerebral was over-prescribing the medications. Since then, Cerebral has gone through a variety of changes. In early May, founder and then-chief executive officer Kyle Robertson announced the company would stop writing prescriptions for controlled substances. Robertson has since been ousted by the board of directors and replaced by David Mou, who was the chief medical officer for the company.

The Federal Trade Commission has begun an investigation into mental-health startup Cerebral Inc., according to a letter the FTC sent the company that was reviewed by The Wall Street Journal.

In the letter dated June 1, the FTC said it was investigating whether Cerebral engaged in deceptive or unfair practices related to advertising or marketing of mental-health services. The letter also directed the company to preserve documents.

The FTC’s letter asks Cerebral to answer dozens of questions related to its business. In particular it seeks information related to any programs where Cerebral continues to bill customers a subscription fee until the customer cancels, also called “negative option programs.”

Cerebral said in a statement that it intends to cooperate fully with the FTC and that it is working to improve its service for patients. The company said it has recently undergone an effort to redesign the cancellation process.

Cerebral also has announced layoffs, with affected employees being notified by July 1. A spokesman said the layoffs were part of a decision to “double down on quality” and restructure operations.

A putative class action has been in various stages of litigation, in both state and federal courts since 2015, against Berkshire Hathaway Homestate Insurance Company, its wholly owned subsidiary Cypress Insurance Company, Zenith Insurance Company, the defense lawfirm of Knox Ricksen, LLP, and others.alleging that the defendants illegally “hacked” confidential information about workers’ compensation claimants to use to defend claims pending before the WCAB.

Palmdale based HQSU Sign Up Services, Inc. was the centerpiece of the compromised data. HQSU is allegedly paid a pre-negotiated flat fee to provide “administrative services” for clients unable to come to an attorney’s office due to physical, financial, or transportation limitations, and to.assist attorneys signing a retainer agreement and filling out an In-Take Packet with personal information. HQSU then uploads the documents to its allegedly username and password-protected website.

The alleged “hacking” of the HQSU files was first suspected during an in-chambers hearing in a worker’s compensation case before Presiding Judge Paige Levy. The case was being defended by Knox Ricksen. Knox Ricksen’s attorneys allegedly revealed they had Mr. Casillas’ attorney-privileged In-Take Packet. Judge Levy ruled it was attorney client privileged and ordered it to be returned.

Allegedly the downloading of documents from HQ Sign Up compromised approximately 32,500 intake sheets, in addition to the Casillas documents. Plaintiff’s experts have allegedly discovered that the documents were obtained by a “directory traversal attack.” Directory traversal is an HTTP exploit which allows attackers to access restricted directories and execute commands outside of the web server’s root directory.

On the other hand, Zenith has argued HQSU intake packet materials were obtained using a Google search of the claimant’s name and thus “were found in the public domain.” There was a suspicion at the time that HQSU was really a runner or capper organization soliciting injury claimants for lawfirms

The 2015 and 2016 cases filed in federal district court were not successful for various reasons including standing to sue in federal court. In July 2017, the litigation proceeded to state court when plaintiffs filed a complaint for a cause of action for trespass to chattels. In 2019 (after appeals of the federal court dismissal were exhausted) the trial judge in state court sustained demurrers to the state lawsuit. The plaintiffs appealed the dismissal and Court of Appeal sustained the dismissal in the published case of Casillas v Berkshire Hathaway et. al.B302442 (June 2022).

Having abandoned a privacy claim during their federal litigation, appellants effectively attempted, both in the trial court and on appeal, to repackage an alleged invasion of privacy as a trespass to chattels.

In deciding the appeal, the Court relied heavily on the California Supreme Court case of Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 71 P.3d 296. The elements of the tort of trespass to chattels include “injury to the plaintiff’s personal property or legal interest therein.

Appellants conceded respondents had not damaged the HQSU system, corrupted the files they allegedly copied from the system, or impaired appellants’ access to the files.

Subsequent cases have applied Intel to instances of alleged hacking, similar to Plaintiffs’ allegations here. None of Plaintiffs’ authorities support the proposition that an actionable trespass to chattel claim exists when an alleged tortfeasor neither damages nor impairs a plaintiff’s computer system.

The Court of Appeal concluded that the appellants failed to allege any actionable injury because: (1) they did not allege damage or disruption to the computer system, as required by Intel; and (2) in any event, they did not allege injury to the copied files or their asserted property interests therein.

Minas Kochumian M.D., a physician previously practicing in the Los Angeles area, has agreed to pay $9,486,287 to resolve allegations that he submitted false claims to Medicare and Medi-Cal for procedures and tests that were never performed.

Kochumian’ medical corporation reportedly practiced under the name California Medical And Rehabilitation Group, located at 18546 Roscoe Blvd, 312, Northridge, California. The mailing address for California Medical And Rehabilitation Group was 2980 N Beverly Glen Cir, 301, Los Angeles.

Kochumian pleaded guilty to one count of federal health care fraud, and on May 2, 2022, he was sentenced to a prison term of three years and five months and ordered to pay restitution in the amount of $5.4 million. This sum is included in the overall civil lawsuit settlement amount.

The civil settlement resolves contentions by the United States and the State of California that Kochumian, over a period of more than six years ending in April 2018, submitted claims to Medicare and Medi-Cal for procedures, services, and tests that were never conducted or administered to patients, including injections of medication designed to treat osteoarthritis and osteoporosis, drainage of tailbone cysts, and the removal and destruction of various growths.

As part of the settlement agreement, Kochumian admitted that he intentionally submitted false claims for payment with the intent to deceive the United States and California. In doing so, Kochumian violated both the federal False Claims Act and the California False Claims Act. Those statutes allow the government to recover damages and penalties for the presentation of false claims for payment to the United States and the State of California, respectively.

The civil settlement with Kochumian resolves allegations originally brought in a lawsuit filed by Elize Oganesyan and Damon Davies, Kochumian’s former medical assistant and former informational technology consultant, under the whistleblower provisions of the False Claims Act.

The Act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The whistleblowers who filed the case against Kochumian will receive more than $1.75 million as their share of the recovery. The whistleblowers’ claims for attorneys’ fees are not resolved by this settlement.

The state of California will receive $630,099 from the settlement amount – double the damages which were incurred by Medi-Cal.

Kochumian’s payment obligation set forth in the settlement agreement is secured by the four real properties located at 18251 Roscoe Boulevard, Northridge, California 91325; 18501 Marblehead Way, Tarzana, California 91356; 10986 Vanalden Avenue, Northridge, California, 91326; and 8157 Morse Avenue, North Hollywood, California 91405.

The civil settlement was the result of an investigation by the Office of Inspector General of the U.S. Department of Health and Human Services. The civil lawsuit is captioned United States and State of California ex rel. Elize Oganesyan and Damon Davies v. Minas Kochumian, et al., Case No. 2:17-cv-2236 KJM JDP, and the parallel criminal case, which was filed in the Central District of California, is captioned United States v. Minas Kochumian, M.D., Case No. 2:20-CR-00423 (RGK).

Robert Gonzales was employed by Northrop Grumman Systems structural aircraft mechanic when he suffered an admitted CT injury to both shoulders, both knees, cervical spine, lumbar spine, and internal injury in the form of heart disease and hypertension.

The WCJ found 85% medical apportionment with regard to the permanent disability attributable to the cervical and lumbar spines, left knee and right knee; 100% industrial apportionment with regard to left shoulder, right shoulder and right wrist; and 50% industrial apportionment with regard to hypertension and coronary artery disease.

The medical apportionment was based upon the findings of agreed medical examiner (AME) Steven Silbart, M.D., and panel qualified medical examiner (PQME) Benjamin Simon, M.D.,

However, the vocational expert who reported on behalf of Mr. Gonzales said that “It must be understood that the concept of apportionment in medicine and in vocational issues are two different concepts which are not always the same as one another. In medicine the concept applies to impairment, whereas in vocational issues it is disability/ employability, and the two are different from one another.”

The WCJ therefore found that the injury caused 100% permanent disability without apportionment. Reconsideration was denied in the panel decision of Gonzales v Northrop Grumman – ADJ9689895 (June 2022).

The employer contended that the WCJ erred in finding applicant 100% permanently disabled, arguing that total permanent disability cannot be found where there is valid apportionment, and that the vocational expert opinion was not substantial evidence.

In deciding the dispute, the WCAB reviewed Ogilvie v. Workers’ Comp. Appeals Bd. (2011) 197 Cal.App.4th 1262 as well as Contra Costa County v. Workers’ Comp. Appeals Bd. (Dahl) (2015) 240 Cal.App.4th 746 [80 Cal.Comp.Cases 119], both landmark decisions on this issue.

The primary method for rebutting the scheduled rating is based upon a determination that the injured worker is “not amenable to rehabilitation and therefore has suffered a greater loss of future earning capacity than reflected in the scheduled rating.”

The case authority reviewed by the WCAB conceded that “The employee’s diminished future earnings must be directly attributable to the employee’s work-related injury and not due to nonindustrial factors such as general economic conditions, illiteracy, proficiency in speaking English, or an employee’s lack of education.”

In this case, there was ample evidence of medical apportionment. However the record summarized in this decision said nothing about non-industrial vocational factors listed as factors that cannot be a directly attributable to the work related injury. Lacking such evidence by way of rebuttal to the vocational expert, or a cross examination of the claimant’s expert to establish and embellish these factors, the award was supported by substantial evidence.

The clear take away from this decision is to be aware of the difference between apportionment based on medical factors and apportionment based on vocational factors, and thoroughly develop evidence on both.