California: Appellate Court Dumps Lien Filing Fee Challenge

The Second District Court of Appeal has handed down a decision affirming the legislature’s creation of the lien filing fee as part of SB 863. In Chorn v W.C.A.B. a physician (Robin Chorn M.D.) filed a complaint joined by two injured workers in an effort to challenge on constitutional grounds the imposition of a lien filing fee. The court, with frequent references to Angelotti Chiropractic, Inc. v. Baker, rejected similar arguments that were raised in that case, which unsuccessfully (so far) challenged the lien activation fee provisions of SB 863.

First, the court dealt with the issue of standing for the injured workers to raise an issue of constitutionality as to the lien filing fee provisions and in short order dismissed their claims in the case:

“Petitioners Kalestian, Vounov, and Buie contend they have a ‘real and direct interest in challenging constitutionally infirm provisions of law that are transparently intended to impair access to expeditious treatment of their workplace injuries.’ They claim that ‘the imposition of a lien filing fee that bears no connection to the value of the services rendered will make it less likely that medical providers will offer or render care to workers’ compensation patients on a lien basis,’ and will ‘deprive injured workers of any choice as where [sic] they receive their care (if they receive care at all),’ thereby ‘impairing the promise of unencumbered access to medical treatment of their injuries.’ But petitioners have not submitted any evidence in support of these claims or any details of their alleged injuries beyond the bare assertion that they have ‘been denied medical care access as a consequence of SB863.’ Moreover, they have not demonstrated that they are more affected than the ‘public at large’ by the operation of sections 4903.05 and 4903.8, or that their constitutional challenges, if successful, would directly affect their rights.”

After dismissing the causes of action by the purported injured workers (no doubt added into the mix in an unsuccessful effort to piggyback onto a more sympathetic plaintiff than the medical provider), the court turned to the multiple arguments raised by the medical provider plaintiff.

On the issue of the imposition of a lien filing fee as an impermissible “encumbrance” on the system, the court was unimpressed, noting that the plaintiff failed to cite any legal authority for its assertions. The court pointed out that the courts have rarely been willing to substitute their judgment for the legislature’s in its efforts to create or maintain a system of workers’ compensation. Noting the legislature’s findings regarding workers' compensation abuse on a broad scale, the court found the imposition of a $150 filing fee to be a rational exercise of legislative authority.

The court then sequentially addressed the additional arguments: Right to Petition, Due Process, Equal Protection and Right to Contract. In each argument the court found the medical lien provider failed to demonstrate a constitution violation based on the obligation to pay a filing fee. The court was particularly swayed by the fact the lien claimants could, upon meeting the statutory criterion and prevailing in litigation, recover their fees:

“…The compromise effected by section 4903.05 – lien claimants must pay to file their liens, but may recoup their filing fees if they ultimately prevail – sufficiently protects the due process rights of lien claimants while serving the legitimate goal of deterring frivolous filings.”

The court was particularly dismissive of the claim of contractual impairment as the court noted the contracts of which the plaintiff claimed were being impaired had not yet been created. The statutory prohibition on impairing contractual rights essentially prevents the government from changing existing contracts but does not extend to future contracts.

The petition requesting an injunction enforcing the lien activation provisions of SB 863 was denied as to Dr. Chorn and dismissed as to the injured worker plaintiffs with respondents to recover their costs.

COMMENTS AND CONCLUSIONS:

This case had more or less dropped off the radar screen, particularly since the initial filing by Dr. Chorn was dismissed. The refiled Petition was filed directly with the Court of Appeal, which is the first level of appellate review that can consider constitutional issues. As a result there really is no factual record to review. The court’s decision rests almost entirely upon statutory interpretation and the court’s conclusions, based on much the same logic as Angelotti, that the legislature has broad discretion in addressing issues it feels require a remedy. The imposition of a recoverable filing fee turns out to be no more of an impermissible exercise of the Legislature’s power than the activation fee.

It should be noted that the plaintiff’s in Angelotti Chiropractic, Inc. v. Baker have filed a petition in the U.S. Supreme Court. It is difficult to imagine that Court giving this issue a review but the Court did order the DIR to respond to t6he Petition.

This case is likely to be appealed to the California Supreme Court and almost just as likely to fail there also.

© Copyright 2016 Shaw, Jacobsmeyer, Crain & Claffey PC. All rights reserved. Reprinted with permission.