Tag: 2024 News

In 2010, Ari Resnik Resnick and Dr. Ismael Silva, an orthopedic surgery specialist, discussed forming a factoring business to purchase medical accounts receivable, including workers’ compensation liens, from healthcare treatment providers at a discount and then collect on them. They agreed to each invest $500,000 into the new company.

Silva owned or controlled several entities even if he is not formally named as an officer, owner, or manager, including cross-defendants Healthcare Management Associates, Inc.(HMA), National Intra-Operative Monitoring, Inc. (NIOM), Orangewood Surgical Center, LLC (Orangewood), Starbase, Inc. (Starbase), and American Financial Investment Services, Inc. (AFIS), and non-parties Healthpointe Medical Group, Inc. (Healthpointe) and ProCare.

Other than NIOM and Healthpointe, these companies were headed, on paper, by Silva’s relatives, including cross-defendants Mary Aviles for HMA, James Aviles for Orangewood and ProCare, and Silva’s son, Geli Silva (Geli) for AFIS and Starbase, and non-party Medina for ProCare.

Healthcare Financial Solutions, LLC was a company that factored healthcare-related receivables. When the parties that formed it, Ari Resnick through R.O.A.R. Management Company, Inc. and Dr. Ismael Silva, Jr. through Healthcare Management Associates, Inc, could not agree how to dissolve it, litigation commenced. HMA sued Resnick, ROAR, and another Resnick-owned company for breach of the HFS operating agreement, theft of trade secrets, and various business-related torts.

Resnick and ROAR (the Resnick parties) filed a cross-complaint against HMA and another individual for declaratory relief and breach of fiduciary duty. The Resnick parties assert that during the litigation they learned that a decade’s worth of Silva’s past assurances, including his statements about the lack of merit to numerous prior civil suits and a criminal case against Silva, were untrue.

The Resnick parties then filed a first amended cross-complaint (FAXC), asserting Racketeer Influenced and Corrupt Organizations Act (RICO; 18 U.S.C. § 1961 et seq.) claims and a civil fraud cause of action against Silva and others allegedly affiliated with him based on Silva’s alleged misrepresentations. Silva and the cross-defendants named in these RICO and fraud claims either filed or joined in an anti-SLAPP motion to strike portions of the FAXC. Silva and his fellow cross-defendants argued certain allegations of the FAXC described statements made in connection with prior litigation and, thus, were protected activity. They further argued the Resnick parties had not demonstrated that these claims had minimal merit.

The trial court denied the special motion to strike. It found the challenged allegations were not protected activity because they related to statements about judicial proceedings and not to statements made in connection with judicial proceedings. As its analysis of the first prong of section 425.16 was dispositive, the court did not address whether the Resnick parties’ claims had minimal merit.

Silva and his fellow cross-defendants argued on appeal that the trial court erred because statements made about legal proceedings to interested nonparties are protected conduct under the anti-SLAPP statute, and the Resnick parties failed to show those allegations have minimal merit.

The Resnick parties counter that the trial court properly denied the special motion to strike because the challenged portions of the FAXC are only context or evidence of the wrongs complained of, and do not supply the elements of any cause of action. To the extent any of the subject allegations involve protected activity, the Resnick parties have abandoned any effort on appeal to contend such claims have minimal merit. Instead, the Resnick parties argue the appropriate disposition would be to strike only those claims involving protected activity and not their causes of action, which they contend they can state without any stricken allegations.

The allegations challenged by the special motion to strike fall into four categories: (1) statements Silva or other cross-defendants made about other lawsuits to interested parties; (2) statements Silva made in other lawsuits (most of which he made in an unrelated family law divorce case); (3) information the Resnick parties learned from the other lawsuits; and (4) allegations that appear to have nothing to do with any prior lawsuit.

As to the first category, case law establishes that statements by a litigant about a lawsuit to an interested person are protected conduct and, here, those protected statements supply at least one element of the RICO and fraud causes of action alleged in the FAXC. However, as to the remaining categories, none of the allegations concerning litigation-related statements supply an element of the challenged claims.

Accordingly, the Court of Appeal reversed in part, and remand with instructions to strike only the statements in the first category. It affirmed the denial of the special motion to strike as to the remaining allegations in the unpublished case of Healthcare Management v. R.O.A.R. Management -B330809 (August 2024)

Of interest to the workers’ compensation community are the allegations of the FAXC. The FAXC alleged that as a result of the litigation, the Resnick parties more closely scrutinized Silva’s representations and actions since 2010, ” ‘connect[ed] the dots,’ ” and determined cross-defendants had defrauded them. The allegations also show the inter relatedness and entanglement of the multitude of organizations that were involved. And that Silva, his companies, and his family members were involved in lawsuits and a criminal prosecution.

The list of “dots” connected by the Resnik parties begins by learning that in 2011, a physician at Healthpointe sued it and Silva in Orange County Superior Court, asserting claims that included fraud and breach of contract. Among other things, the physician alleged that Silva overbilled insurance companies for physician services at Healthpointe, pressured physicians to perform unnecessary medical procedures, and concealed conflicts of interest from Healthpointe patients. The FAXC does not state when the Resnick parties learned of this lawsuit or that Silva made any representations to Resnick about this lawsuit.

On October 16, 2013, WorkCompCentral, a workers’ compensation industry publication, reported that Healthpointe was involved in a qui tam case asserting it had overbilled for procedures and devices, used counterfeit medical implant hardware, and paid illegal kickbacks to doctors. The publication further asserted Silva controlled Healthpointe. In response to this article, Silva reassured Resnick there was no problem with HFS continuing to accept business generated by Healthpointe. However, HFS scaled back its purchase of liens from Healthpointe. Silva and Mary Aviles formed ProCare, which accepted lien referrals from Healthpointe.

In May 2015, Resnick discovered that Silva, Starbase, and Healthpointe had been named in a civil RICO lawsuit filed by the State Compensation Insurance Fund (SCIF). When Resnick emailed Silva about the lawsuit, Silva assured Resnick that the allegations were not true, but that they might have to deal with bad publicity.

In 2017, the Orange County District Attorney filed a felony complaint against Silva and Geli for fraud and kickbacks related to patient and client referrals. The complaint asserted that Healthpointe doctors referred workers’ compensation applicants for urine toxicology tests administered by Christopher King and Tanya Moreland King, and Silva aided the Kings in submitting fraudulent claims for payment. In exchange, the Kings made payments to Starbase. Resnick learned about the lawsuit, but Silva assured Resnick that Starbase and AFIS would cooperate to protect HFS and that Geli, but not Starbase, had been named as a criminal defendant.

An Orange County man was sentenced to 87 months in federal prison for defrauding companies who in mid-2020 paid more than $3 million for COVID-related medical protective equipment that was never delivered.

Christopher John Badsey, 63, of Lake Forest, was sentenced by United States District Judge Josephine L. Staton, who also ordered him to pay $1,938,990 in restitution.

Badsey pleaded guilty in April 2023 to four counts of wire fraud.

In June and July of 2020, Badsey lied to three victim companies when he told them he had access to millions of boxes of nitrile gloves through his Irvine-based company, First Defense International Security Services Corp. (FDI).

This type of personal protective equipment was in high demand and short supply during the early months of the COVID-19 pandemic.

Badsey agreed by contract to sell millions of boxes of gloves to each of the three companies. But he told the companies’ representatives that before they could inspect the gloves, which he claimed were stored in a Los Angeles warehouse, the companies would be required to pay deposits of upwards of $1 million to FDI.

In fact, Badsey did not have any gloves stored in any warehouse.

Badsey instructed the companies to wire the deposits to accounts controlled by himself, FDI or a co-schemer. Relying on Badsey’s false statements, the companies wired a total of $3,231,990 to these accounts.

After receiving the deposits, Badsey allegedly instructed victims to travel to the Los Angeles area, where he claimed the gloves were stored in a warehouse. But when victims attempted to visit the warehouse, Badsey and other FDI employees allegedly provided excuses as to why the gloves could neither be inspected, nor delivered, to the victims.

Nitrile gloves were never provided to the victims, and Badsey is alleged to have absconded with the deposit money. Badsey used the deposit money to make expensive purchases, all while stringing would-be purchasers along with false stories, including absurd claims that government agents were blocking access to his warehouse of gloves, prosecutors argued in a sentencing memorandum.

He has forfeited all title and interest in money or items derived from his crimes, including a yacht, a pontoon boat, two Mercedes-Benz automobiles, two Ford pickup trucks, an RV, a tractor, three ATVs, miscellaneous fishing equipment, and $58,923 in cash.

The FBI investigated this matter.  Assistant United States Attorneys Kristin N. Spencer and Melissa S. Rabbani of the Santa Ana Branch Office prosecuted this case.

In 2010, the City of Los Angeles contracted with PricewaterhouseCoopers to modernize the billing system for the City’s Department of Water and Power. The rollout of the new billing system did not go smoothly. When the system went live in 2013, it sent inaccurate or delayed bills to a significant portion of the City’s population.

In March 2015, following the botched rollout, the City filed suit against PwC. In a complaint filed by the City’s attorneys and special counsel Paul Paradis, Gina Tufaro, and Paul Kiesel, the City alleged that PwC had fraudulently misrepresented its qualifications to undertake the LADWP billing modernization project.

Then, about a month later, in April 2015, attorney Jack Landskroner, representing Los Angeles resident Antwon Jones, filed a putative class action against the City on behalf of overbilled LADWP customers (Jones v. City of Los Angeles). The two lawsuits were assigned to the same trial judge. (City of Los Angeles v. PricewaterhouseCoopers, LLC (2022) 84 Cal.App.5th 466, 477 (City of L.A.).)

Instead of filing an answer to the Jones v. City of Los Angeles complaint, the City quickly entered into negotiations with Landskroner. On August 7, 2015, the parties arrived at a preliminary settlement agreement, which provided that the City would reimburse 1.6 million LADWP customers the full amount by which they were overcharged.The City publicly announced its intent to recover the full cost of the Jones v. City of Los Angeles settlement in its lawsuit against PwC.

Meanwhile, over the next five years, pretrial discovery in the PwC case would gradually reveal a more substantial connection between the two lawsuits: Counsel for the City had been behind the Jones v. City of Los Angeles lawsuit, and they had sought to engineer the litigation so that the City could definitively settle all of the claims brought by overbilled customers while passing the costs of the settlement in a suit against PwC.

One of the discovery issues was the Cities assertion of attorney client privilege. At one point the City filed a petition for writ of mandate to appeal the court’s determination that the attorney-client privilege did not apply. But before the Court of Appeal could review the writ petition, the City voluntarily dismissed with prejudice its case against PwC. As a result of the dismissal, the City did not complete its production of documents responsive to PwC’s discovery requests.

After the dismissal, federal prosecutors announced that Paul Paradis, Thomas Peters, and two other City officials had pleaded guilty to criminal charges. Paradis and Peters admitted that the City had pursued a collusive litigation strategy wherein Paradis and Kiesel would represent both Jones and the City in parallel lawsuits against PwC.

Paradis, a disbarred New York City lawyer, who simultaneously represented the Los Angeles Department of Water and Power and a ratepayer suing the City of Los Angeles in the wake of an LADWP billing debacle, was sentenced to 33 months in federal prison for accepting a kickback of nearly $2.2 million for causing another lawyer to purportedly represent his ratepayer client in a collusive lawsuit against the city, which enabled the city to settle the case on favorable terms.

After years of stonewalling discovery efforts, the City eventually turned over information revealing serious misconduct in the initiation and prosecution of the lawsuit. The trial court found that the City had been engaging in an egregious pattern of discovery abuse as part of a campaign to cover up this misconduct. The court ordered the City to pay $2.5 million in discovery sanctions which the City appealed. .

This order worked its way to the California Supreme Court. The central question before the Supreme Court was whether the trial court had the authority to issue the order under the general provisions of the Civil Discovery Act concerning discovery sanctions, Code of Civil Procedure sections 2023.010 and 2023.030.

The Court of Appeal in this case answered no. Bucking the long-prevailing understanding of these provisions, the appellate court read the Civil Discovery Act as conferring authority to sanction the misuse of certain discovery methods, such as depositions or interrogatories, but as conferring no general authority to sanction other kinds of discovery misconduct, including the pattern of discovery abuse at issue here.

The Supreme Court reversed the Court of Appeal in the Case of City of Los Angeles v. Pricewaterhousecoopers, LLP -S277211 (August 2024).

Sections 2023.010 and 2023.030 were enacted as part of the Civil Discovery Act of 1986, a comprehensive revision of the statutes governing discovery in California courts.Before 1986, discovery in civil cases was governed by the Discovery Act of 1957, which had been “the California Legislature’s first attempt to codify a comprehensive system of discovery procedures in California.”

After decades of experience under the 1957 Act revealed gaps in the statute’s coverage, a Joint Commission on Discovery of the State Bar and Judicial Council began a top-to-bottom reexamination of California’s system of civil discovery. It then made recommendations that were ultimately enacted, with some amendments, as part of the 1986 Act.

“Before the Court of Appeal’s decision in this case, courts frequently cited sections 2023.010 and 2023.030 as sources of authority to impose sanctions for discovery misuse.” The Court of Appeal in this case acknowledged cases reflecting this prevailing understanding of sections 2023.010 and 2023.030. But as the court correctly noted, none of these cases carefully considered the language of the provisions in their broader statutory context. (City of L.A., supra, 84 Cal.App.5th 466.).

The Supreme Court concluded: “Under the general sanctions provisions of the Civil Discovery Act, Code of Civil Procedure sections 2023.010 and 2023.030, the trial court had the authority to impose monetary sanctions for the City’s pattern of discovery abuse. The court was not limited to imposing sanctions for each individual violation of the rules governing depositions or other methods of discovery.”

In response to the Federal Trade Commission’s promulgation of the Non-Compete Rule (16 C.F.R. § 910) on April 23, 2024, Ryan LLC initiated a lawsuit against the FTC on the same day in the United States District Court for the Northern District of Texas Dallas Division.

Ryan and the Plaintiff-Intervenors filed motions to stay and preliminary enjoin the FTC from enforcing the Rule. Because the Court concluded that there was a substantial likelihood that Plaintiffs would succeed on the merits – including the conclusions that (i) the FTC exceeded its statutory authority and (ii) the Rule is arbitrary and capricious – and that the Rule would cause irreparable harm, the Court preliminarily enjoined implementation and enforcement of the Rule as to the named Plaintiffs on July 3, 2024.

Both Plaintiffs and the FTC then moved for summary judgment. Ryan and Plaintiff-Intervenors’ Motions for Summary Judgment were granted on August 20, 2024. Additionally, for the reasons the Court granted Plaintiffs’ Motions for Summary Judgment, the Court denied the FTC’s Motion for Summary Judgment. The Non-Compete Rule, 16 C.F.R. § 910.1-.6, was set aside “and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter” in the closely watched case of Ryan LLC v Federal Trade Commission filed in the United States District Court for the Northern District of Texas Dallas Division – Civil Action No. 3:24-CV-00986-E.

This is a dispute over the FTC’s rulemaking authority concerning the enforceability of employer/employee non-compete agreements. These agreements are restrictive covenants that prohibit an employee from competing against the employer. Ryan, LLC was the first party to challenge the lawfulness of the Non-Compete Rule. A group of trade associations led by the United States Chamber of Commerce intervened in the case to challenge the Rule as well.

Regarding the prevalence of non-compete agreements, the Parties’ joint appendix provides: [T]he Commission finds that non-competes are in widespread use throughout the economy and pervasive across industries and demographic groups, albeit with some differences in the magnitude of the prevalence based on industries and demographics. The Commission estimates that approximately one in five American workers – or approximately 30 million workers – is subject to a non-compete.

In 2018, the FTC began to study non-competes through public hearings and workshops; invitations for public comment; and a review of academic studies.Three years later, the FTC initiated several investigations into the use of non-competes to determine whether they constitute unfair methods of competition. On January 19, 2023, the FTC proposed the Non-Compete Rule – which would “prohibit employers from entering into non-compete clauses with workers starting on the rule’s compliance date” and “require employers to rescind existing non-compete clauses no later than the rule’s compliance date.” On April 23, 2024, the FTC adopted the final Non-Compete Rule.

Plaintiffs assert the Commission’s claimed statutory authority in promulgating the Rule – Section 6(g) of the FTC Act – does not authorize substantive rulemaking. The question to be answered is not what the Commission thinks it should do but what Congress has said it can do.

“The judiciary remains the final authority with respect to questions of statutory construction and must reject administrative agency actions which exceed the agency’s statutory mandate or frustrate congressional intent.”

The Court concluded that “the text and the structure of the FTC Act reveal the FTC lacks substantive rulemaking authority with respect to unfair methods of competition, under Section 6(g).”

Also a court must “hold unlawful and set aside agency action, findings and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).

“The record does not support the Rule. In enacting the Rule, the Commission relied on a handful of studies that examined the economic effects of various state policies toward non-competes. The record shows no state has enacted a non-compete rule as broad as the FTC’s Rule.” Second, “the record shows the FTC failed to sufficiently address alternatives to issuing the Rule.”

“In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action. See 5 U.S.C. § 706(2).”

The court’s summary judgment order applies nationwide. Attorneys representing Ryan LLC said that the FTC may appeal the ruling to the Fifth Circuit. The FTC has not yet indicated whether or when it may appeal.

California Highway Patrol (CHP) investigators arrested a former CHP officer on suspicion of workers’ compensation insurance fraud and theft, pursuant to an arrest warrant issued by the Sacramento County District Attorney’s Office for the following charges:

– – 1871.4(a)1 IC – False statement to fraudulently obtain compensation
– – 550(b)(1) PC – Present false statement regarding insurance claim or benefit
– – 550(b)(3) PC – Conceal or fail to disclose event affecting benefits
– – 118(a) PC – Perjury
– – 20 VC – False statements to DMV or CHP

Jordan Lester, 44, was arrested without incident in Quincy and was booked into the Plumas County Jail in Plumas County. The arrest resulted from an extensive, multi-year investigation by the CHP’s Workers’ Compensation Fraud Investigations Unit based at CHP’s Headquarters in Sacramento.

Lester filed a workers’ compensation insurance claim on July 12, 2021, and was placed off work by his physician in January 2022. While off work, an anonymous tip was received by the CHP’s Workers’ Compensation Fraud Investigations Unit, and an investigation was initiated.

The investigation revealed Lester committed worker’s compensation fraud by engaging in activities, while on injury leave, inconsistent with limitations and restrictions given by his medical providers. During the investigation, CHP investigators also discovered that Lester committed perjury and made false statements to the Department of Motor Vehicles when he fraudulently misrepresented the purchase price of a vehicle he purchased.

Lester, a 16-year veteran of the Department, was assigned to the Quincy CHP Area.

The CHP wants to assure the public that it takes all allegations of employee misconduct very seriously. When allegations of misconduct by an employee are suspected, the Department takes swift and appropriate action to investigate the allegations. Additional questions regarding the criminal case should be directed to the Sacramento County District Attorney’s Office.

The CHP’s Workers’ Compensation Fraud Investigations Unit is a specialized team that investigates allegations of workers’ compensation fraud. Allegations of workers’ compensation fraud may be reported by calling a toll-free Fraud Reporting Hotline (1-866-779-9237) or at https://www.chp.ca.gov/notify-chp/workers-comp-fraud