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California: Tips for Avoiding Sanctions

March 17, 2016 (11 min read)

Practitioners have noticed a slew of WCAB Noteworthy Panel Decisions recently relating to the imposition of sanctions for “bad faith tactics” under Labor Code § 5813 [LC 5813]. Everyone wants to avoid sanctions, so litigators should pay particular attention to the issues raised in these cases.

[Publisher’s Note: Citations link to; bracketed cites link to Lexis Advance.]

8 Cal. Code Reg. § 10561(b) [R 10561] provides the following extensive list of sanctionable offenses which counsel should study carefully in order to steer clear of triggering an unfortunate encounter with a workers’ compensation judge:

“Violations subject to the provisions of Labor Code Section 5813 shall include…

(1) Failure to appear or appearing late…

(2) Filing a pleading [without] some reasonable justification…

(3) Failure to timely serve documents…

(4) Failing to comply with the WCAB or AD’s regs,… unless that failure results from mistake, inadvertence, surprise, or excusable neglect.

(5) Executing a declaration or verification to any petition, pleading, or other document filed with the Workers' Compensation Appeals Board:

(A) that: (i) contains false or substantially false statements of fact; (ii) contains statements of fact that are substantially misleading; (iii) contains substantial misrepresentations of fact; (iv) contains statements of fact that are made without any reasonable basis or with reckless indifference as to their truth or falsity; (v) contains statements of fact that are literally true, but are intentionally presented in a manner reasonably calculated to deceive; and/or (vi) conceals or substantially conceals material facts; and

(B) where a reasonable excuse is not offered or where the offending party has demonstrated a pattern of such conduct.

(6) …Asserting a position that is without merit…

(7) Presenting a [frivolous] claim or a defense…

(8) Asserting a position that misstates or substantially misstates the law…

(9) Using…(A) offensive, insolent, intemperate, foul, vulgar, obscene, abusive, or disrespectful [language]; or (B) where the language or gesture impugns the integrity of the WCAB….”


I. Frivolously Proceeding to Trial Without Substantial Evidence (Torres)

An en banc decision focusing on sanctions per Labor Code § 5813 is a rarity for the WCAB. Nevertheless, in 2012, they issued the en banc decision affirming the WCJ’s imposition of sanction in the case of Torres v. AJC Sandblasting (2012) 77 Cal Comp Cases 1113 [77 CCC 1113] (Appeals Board en banc decision). In the Torres case, the WCAB affirmed “the finding of the WCJ that by proceeding to trial without any evidence capable of establishing its lien claim, Unitech acted frivolously and in bad faith in violation of section 5813, meriting an award of sanctions, attorney's fees and costs.”

Tito Torres had injured his spine and lower extremities in 2002 and 2003. His employer denied his workers’ compensation claim. On 3/2/2005, the matter settled by a Compromise and Release which listed all outstanding liens. The lien claim of Unitech was not one of those lien claims listed, since it was not filed until 9/15/2010. The matter was set for a lien trial, and the lien claimant offered a sole Exhibit “1” into evidence as follows:

“A copy of an unsigned insurance form from Unitech addressed to Zurich, dated July 15, 2003. This insurance form lists dates of service, procedure codes and treatment charges totaling $5,150.00…”

The lien claimant argued that they had submitted a billing statement to defendant. Therefore, lien claimant believed that that action shifted the burden of proof to defendant to show that the lien claim was not valid. Not so, explained the WCAB. Lien claimant’s theory is inconsistent with Labor Code § 3202.5 [LC 3202.5] and Labor Code § 5705 [LC 5705]. Labor Code § 5705 specifically provides that “the burden of proof rest upon the party or lien claimant holding the affirmative of the issue.” A billing statement alone will not suffice to meet this burden of proof, especially one, such as in the Torres case, that does not include a written description of goods or services that were provided.

The WCAB provided an extensive analysis of what a party or lien claimant needs to provide to sustain their burden of proof and explained that a “lien claimant must prove by a preponderance of the evidence all elements necessary to establish the validity of their lien before the burden shifts to the defendant.” (See Labor Code §§ 3203.5 and 5705.) Although directed at litigants in a lien claim trial, this checklist (with certain modification) would apply to all workers’ compensation litigants:

> The party or lien claimant with the affirmative of an issue must meet their burden of proof with substantial evidence. (Lab. Code, § 5705.)

> Lien claimant must prove by a preponderance of the evidence that applicant sustained an industrial injury. (Lien claimant provided no evidence on this issue.)

> Lien claimant must prove by a preponderance of the evidence that it rendered medical treatment in relation to the industrial injury. (Lien claimant provided no evidence on this issue.)

> Lien claimant must prove by a preponderance of the evidence that it rendered treatment that was reasonable and necessary. (As stated above, a “bare bones” billing statement will not suffice to meet this burden of proof.)

> Once lien claimant has met its prima facie burden of proof on the issues above, then the burden of proof shifts to the defendant to rebut the elements established by lien claimant as to the validity of their lien claim. (In this case, lien claimant did not meet its prima facie burden, so the burden of proof never shifted to defendant.)

When this list is applied to the specific facts in the Torres case (as indicated in the comments in parentheses), it is clear that the evidence offered by lien claimant did not meet its burden of proof. Therefore, the WCAB affirmed the Workers’ Compensation Judge’s (WCJ’s) finding that proceeding to trial without sufficient evidence to meet one’s burden of proof, may constitute a frivolous action and/or bad faith action per Labor Code § 5813. The imposition of sanctions was warranted in this case and affirmed.

II. Misstating Facts in Petition for Recon (Teitelbaum)

In the Noteworthy Panel Decision (NPD) of Teitelbaum v. Kaiser Foundation Hospital, 2015 Cal. Wrk. Comp. P.D. LEXIS 763 [2015 Cal. Wrk. Comp. P.D. LEXIS 763], the underlying case resolved on 10/8/2013. Thereafter both sides filed a Petition for Sanctions with the WCJ. The WCJ declined to sanction either party and the applicant’s attorney filed a Petition for Reconsideration from that decision.

In her Report and Recommendation on the Petition for Reconsideration, the Judge noted that, “Petitioner misstates the facts of the case in both his Amended Trial Brief of August 5, 2015, and in his Petition for Reconsideration, as to what transpired before this judge on day one of trial on September 10, 2013.”

The WCAB then stated the following, “In his Petition, Mr. Gurvey has used a tone that is insulting and intemperate in violation of Appeals Board Rule 10561(b)(9). We agree with the WCJ that the rhetoric employed by applicant's attorney is offensive, extreme, and disrespectful to her. Thus, because Mr. Gurvey's Petition includes language that is unprofessional, inappropriate, and intemperate, we are persuaded that sanctions are warranted. Additionally, in filing the Petition for Reconsideration, applicant attorney's conduct falls within WCAB Rule 10561(b)(5) because the Petition appears to contain multiple material misrepresentations and misstatements of facts.” Again, the WJC’s decision was affirmed.

PRACTICE TIP: Although the WCAB was clearly concerned about misleading assertions in this case, in violation of WCAB Rule 10561(b)(5), they were also offended by the “rhetoric” used. It is not uncommon for a normally mild mannered attorney to become outraged by a perceived injustice in the legal system. However, attorneys must be extremely mindful as to how best to express their position. When drafting any sort of petition, the tone should be clinical, dispassionate and void of any form of accusation or derogatory comment, so as to obtain the best result for their client.

III. Misrepresentations in Petition (Valencia)

In the NPD of Valencia v. Frys, 2015 Cal. Wrk. Comp. P.D. LEXIS 733 [2015 Cal. Wrk. Comp. P.D. LEXIS 733], applicant’s attorney, Mr. Carlisle, represented the applicant for four years before being dismissed by the applicant, after which he filed a lien claim for his attorney’s fees.

The case in chief was brought to trial by the subsequent attorney. On 11/6/2014 a Findings, Award and Order issued, including an Order that 12% of the 34% permanent disability be held in trust pending resolution of Mr. Carlisle’s lien claim.

The case later was fully resolved by Compromise and Release for $87,500.

On 7/28/2015, Mr. Carlisle went to trial on his lien claim arguing that he should have been awarded 15% of the Compromise and Release settlement amount of $87,500 or $13,125. Instead, the Judge awarded him $3,300, which was approximately 9% of the PD awarded in the case in chief.

In addition, the WCJ issued sanctions against Mr. Carlisle in the amount of $1,000. The WCJ provided a lengthy rationale for imposing sanctions. He based his decision, in part, due to the following:

“…representations made by Mr. Carlisle in the two verified petitions were inconsistent with the evidentiary record… Furthermore, the statements made in Mr. Carlisle's Accounting of Attorney Time, that the psychological QME initially found there was no compensable secondary psychological injury and that Mr. Carlisle attended the QME's deposition and was able to eventually get the QME to reverse his opinions, is also inconsistent with the evidentiary record.”

Instead of receiving an attorney fee of $13,125, Mr. Carlisle netted an attorney fee of $2,300 after deducting the amount for sanctions.

PRACTICE TIP: When drafting petitions of any kind, accuracy, specificity and clarity are paramount. Statements of facts should be bolstered by exact references to the record. Inconsistencies should be avoided at all costs, as that sheds doubt on the petitioner’s credibility.

IV. Failure to Appear – Violation of Court Order (Guerrero)

In the NPD of Guerrero v. 5 Star Farm, 2013 Cal. Wrk. Comp. P.D. LEXIS 370 [2013 Cal. Wrk. Comp. P.D. LEXIS 370], a status conference was scheduled for 12/18/2012, based on defendant’s Declaration of Readiness to Proceed (DOR). Applicant’s attorney requested the conference be taken off calendar (OTOC) as all issues had become moot. The OTOC request did not reach the conference judge before the conference on 12/18/2012. The WCJ therefore issued sanctions of $500 on both parties, since neither appeared for the hearing. Only the WCJ may issue an OTOC. The parties are not permitted to assume an OTOC has issued merely because they have requested one.

Thereafter, defendant filed another DOR and the matter was set for a priority conference on 3/13/2013. The Notice of Hearing indicated that applicant was ordered to appear at this conference on 3/13/2013 and “answer for failure to pay sanctions & costs and additional sanctions of $1000 for willful non-payment.”

Applicant counsel again failed to appear at the 3/13/2013 priority conference. Instead he hired another attorney to appear in his place. This action violated the WCJ’s specific order for the applicant’s attorney, Mr. Coleman, to appear in person. At the Priority Conference on 3/13/2013, the parties completed a pre-trial conference statement. On page 1 of the pre-trial conference statement, the WCJ wrote:

“Attorney Klayton Khishaveh [applicant’s attorney] is ordered to attend trial in person to answer for failure to pay sanctions & costs and additional sanctions of $1000 for willful non-payment.”

On page 3 of the pre-trial conference statement, the WCJ wrote:

“Additional issue: Additional sanctions of $1000 for failure to pay ORDER of SANCTIONS & COSTS of 12/18/12”

At the trial on 5/28/2013 applicant’s attorney again failed to appear. Instead, as he had done for the priority conference, applicant’s attorney hired Mr. Coleman to appear on his behalf and on behalf of his client. The WCJ determined this to be a clear violation of his 3/13/2013 Order to appear. Additional sanctions were imposed and affirmed by the WCAB.

PRACTICE TIP: Judges often insert Orders on the Pre-Trial Conference Statement, which are not always followed or preceded by the language “IT IS SO ORDERED.” It is incumbent on attorneys to thoroughly review and comply with said orders, or face the displeasure of the judge and often an imposition of sanctions. When an attorney is unable to comply with a judge’s order for some reason, he should alert the judge immediately. To avoid any ex parte communication, the attorney should alert opposing counsel, simultaneously. A full explanation should be provided for the attorney’s inability to comply with the WCJ’s order, along with a proposed solution or alternate resolution.


Most errors and omissions in litigation can be avoided by attention to detail and clear communication. However, it is also most important for parties and attorneys to take seriously their representations to each other, as well as to the court. This will help to avoid misunderstandings and waste of judicial resources, which may result in imposition of sanctions, and which may ultimately result in a reportable event to the State Bar.

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