Emerging Trend at California WCAB: Sanctions & Costs

Emerging Trend at California WCAB: Sanctions & Costs

Recently, the WCAB imposed sanctions (sometimes on its own motion) and awarded costs for actions and tactics noted in Labor Code §5813 and described in more detail under Rule 10561 (which I invite you to review).  Labor Code §5813 says:

          “(a) The workers’ compensation referee or appeals board may order a party, the party’s attorney, or both, to pay any reasonable expenses, including attorney’s fees and costs, incurred by another party as a result of bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. In addition, a workers’ compensation referee or the appeals board, in its sole discretion, may order additional sanctions not to exceed two thousand five hundred dollars ($2,500) to be transmitted to the General Fund.

          “(b) The determination of sanctions shall be made after written application by the party seeking sanctions or upon the appeal board’s own motion.

          “(c) This section shall apply to all applications for adjudication that are filed on or after January 1, 1994.”

Although this statute has been on the books for over 15 years, it has been used sparingly until a few years ago.  There have been a series of cases in which the WCAB clarified what conduct is subject to sanctions and costs as well as the procedure to obtain sanctions and costs as follows (NOTE: I urge you to consult with your attorney and read these cases yourself if you intend to use them.  [Publisher’s Note: Lexis.com subscribers can link to the cases below that are within their subscriptions.]):

Not Showing Up

In Albertson v. Collins Electric; Zurich (4/28/08) 2008 Cal.Wrk.Comp. PD LEXIS 402, the defendant failed to appear for a Conference requested by applicant’s attorney.  Although defendant provided the WCAB with no excuse for its failure to appear, the reason was that it later claimed the WCAB had no jurisdiction as the case was under a contract per LC §3201.5 (ADR).  The WCAB sanctioned the defendant $2,500 and awarded $1,000 in applicant’s attorney’s costs even though the case was under ADR.  A party cannot ignore Notices of Hearings.  The opinion also noted that Orders for Sanctions/Costs are final Orders and subject to Petitions for Reconsideration, not Removal.

In Valdez v. Ameron International, PSI (8/5/09) 2009 Cal.Wrk.Comp. PD LEXIS 370, a lien claimant representative failed to appear for a hearing.  There was no indication in the WCAB file that the representative provided contact information.  In its unverified Petition for Reconsideration objecting to an Order Dismissing its lien, the representative erroneously alleged its lien was filed electronically.  The representative did not serve the Petition on the defendant.  The WCAB awarded defendant $1,740 in defense attorney costs for the failure to appear.

Compare those cases with Henkel v. Weyrick Companies, Inc.; SCIF (6/21/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 237, in which a WCJ ordered a claims examiner to a MSC.  The attorney for the defendant (who was present) said the claims examiner was not going to appear as it would take 50 minutes for her to make it and she was available by phone.  The WCJ issued an Order sanctioning the examiner for failing to appear.  Defendant filed a Petition for Reconsideration objecting that the WCJ exceeded his authority because sworn testimony could not be taken at a MSC and the WCJ cannot investigate defendant’s settlement practices.  Moreover, Rule 10420(b) only required the examiner to be available by phone.  The WCAB vacated the Order noting that although the WCJ had the power to order parties to hearing, he did not give defendant reasonable notice or an opportunity to be heard on the Order for sanctions.  There was no reasonable time for the examiner to appear and the WCJ did not take advantage of the examiner’s availability by phone.

Filing Petitions without Merit

The WCAB is clamping down on parties who file Petitions without merit.

In Dixon v. Phillips Buick, Pontiac & Mazda; Clarendon (adm. by AARLA); Security Ins. Co. (adm. by LWP Claims Solutions) (5/24/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 182, etc., an applicant’s law firm submitted an “unintelligible” Petition for Reconsideration by a non-lawyer (Fact of which was not disclosed anywhere in the Petition.  His non-lawyer status did not appear to be conveyed to the applicant either as required under Rule 10773(a).).   The Petition for Reconsideration did not make any specific references to the record (required by Rule 10846).  The proof of service did not show service on the defense attorneys (in violation of Rule 10561).  The WCAB imposed a sanction of $900 for bad-faith tactics.

In Francis v. Russell Construction Services; SCIF (6/7/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 233, the parties entered into a Stipulation which the WCJ awarded.  Defendant petitioned for reconsideration because it disagreed with part of the attorney’s fee awarded based on SJDB (even though that fee was in the Stipulation).  A Stipulation cannot be reversed absent good cause (County of Sacramento v. WCAB (Weatherall) (2000) 77 Cal.App.4th 1114.  Defendant is not entitled to relief “... from its own lack of diligence” in stipulating to an attorney’s fee based in part on the SJDB.  The WCAB imposed a sanction of $250 for “filing a verified Petition for Reconsideration that does not establish good cause ... .”

In Richardson v. Helpmates Staffing; CIGA (3/15/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 146, a lien claimant was sanctioned $500 for filing an untimely Petition for Reconsideration challenging an Order Approving C&R (OACR).  The lien claimant was not aggrieved by the OACR and had no right to challenge it.  While the OACR was final as to applicant and defendant, it was not as to the lien claimant. The lien claimant had the right to litigate its lien later (and such right was preserved in the C&R).

In Santangelo v. Newport-Mesa Unified School District (4/22/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 149, the WCAB stated sanctions are properly imposed to address intentional bad faith conduct, but are not appropriate to punish a party for the conduct of a representative when the party is reasonably unaware of the representative’s conduct, or has not condoned or otherwise intentionally supported it.  In this case the lien representative threatened to file and then filed a Petition for Reconsideration objecting to an Order Approving C&R based on the frivolous contention the defendant did not engage in good-faith efforts to resolve the lien.  The representative also failed to appear at Trial, then failed to have witness available for the next Trial and requested a continuance for a supplemental medical report which was never obtained.  He also failed to file Points & Authorities ordered by the WCJ.  In addition he made several ex parte communications to the governing board of the District, individual members of the Board and the claims examiner (including making incomplete and inaccurate factual statements) along with derogatory comments to the defense attorney.  The panel believed sanctions and defense attorney costs should be imposed, the case was remanded back to the WCJ because he did not explain how those costs and sanctions were the result of bad-faith actions or tactics.  In addition the defendant requested the matter be referred to the WCAB for the lien representative to be removed from practicing before the WCAB and the WCJ did so.

In Tambara v. County of LA-LAC/USC; Tristar Risk Mgt. (4/22/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 156, the WCAB removed the matter under its own power to itself to issue a Notice of Intention to lien claimant to impose a sanction of $1,000 for filing frivolous Petition for Removal that was “indisputably without merit.”  The WCJ cancelled a Status Conference because not all 3 cases were on calendar and replaced it with a Status Conference on the same date and time for all 3 cases.  Lien claimant representative alleged in Petition for Removal such action created a wrongful delay.  The WCAB found the Petition “... led to unnecessary delay in the proceedings and a waste of judicial resources.”  Had the lien claimant properly reviewed the record before filing the Petition, it would have ascertained the true facts.  Moreover, the lien claimant did not withdraw its Petition upon learning the facts as indicated in the WCJ’s Report.  This lien claimant representative had been sanctioned previously for filing frivolous petitions and other improper conduct.  Those sanctions did not deter the lien claimant, so it is appropriate to sanction again.  The lien claimant will have an opportunity to present argument in writing prior to the issuance of an order imposing a sanction to satisfy its due process right.

Misrepresentations in Petitions

The WCAB can impose sanctions where misrepresentations are made in the Petitions:

A defense attorney alleged in a Petition for Reconsideration that a medical report should not have been admitted at Trial, among other reasons, because the report was not listed on the Stips & Issues when in fact it had in Cardinale v. First Blackhawk Financial Corp.; State Farm  (4/27/10)  2010 Cal. Wrk. Comp. P.D. LEXIS 174.  Moreover, contrary to the Petition for Reconsideration, the issue of the admissibility of the report was not raised on the Stips & Issues.  The WCAB not only pointed to LC §5813, but the Rules of Professional Conduct for attorneys (Rule 500-2(A) & (B)) which requires that an attorney tell the truth.  The defense attorney was sanctioned $2,500.

In Deza v. The Home Depot, PSI (3/17/08) 2008 Cal.Wrk.Comp PD LEXIS 228, a defense attorney was sanctioned $500 for quoting from an AME deposition transcript which was not admitted as a part of the record.  The attorney did not list it as an exhibit on the Stips & Issues (although applicant’s attorney did).  The defense attorney’s argument that AME reports and deposition transcripts are admitted by the WCAB as “a matter of practice” fell on deaf ears.

In DeFazio v. Resort at Squaw Creek; Zurich (7/11/08) 2008 Cal.Wrk.Comp. PD LEXIS 537, a defense attorney was sanctioned $250 for attaching documents to the Petition for Reconsideration which were already a part of the legal file (albeit not admitted as evidence) and for filing “an uninvited and unapproved” Response to applicant’s Answer to defendant’s Petition for Reconsideration.  A party cannot file supplemental pleadings beyond the Answer to a Petition for Reconsideration without prior WCAB approval under Rule 10848.  The sanction was reduced from $500 apparently because this violation was the first by the attorney.

Compare these cases with Palengat v. The Town of Hillsborough, PSI (10/26/09) 2009 Cal.Wrk.Comp. PD LEXIS 543, where a defense attorney alleged in a Petition for Reconsideration that applicant failed to object timely or at all to a UR report.  Applicant’s Answer included the objection he made.  The WCAB found the defense attorney made false and misleading statements as defined under Rule 10561 and LC §5813 and imposed a sanction of $750.  The defense attorney admitted he made a mistake, claiming he thought he had the entire file with him at the time the Petition was prepared, but “the main file” was transported back to the San Jose office for storage and apparently contained the objection.  He asked to be excused from the sanction and apologized for his false statement.  The WCAB accepted his excuse and did not impose the sanction.

Disrespectful Conduct is Subject to Sanctions

Subsection (9) of Rule 10561 provides that sanctionable conduct includes:

          “Using any language or gesture at or in connection with any hearing, or using any language in any pleading or other document:

          “(A) where the language or gesture (i) is directed to the Workers’ Compensation Appeals Board, to any of its officials or staff, or to any party or lien claimant (or the attorney or other representative for a party or lien claimant) and (ii) is patently insulting, offensive, insolent, intemperate, foul, vulgar, obscene, abusive, or disrespectful; or      

          “(B) where the language or gesture impugns the integrity of the Workers’ Compensation Appeals Board or its Commissioners, judges, or staff.”

In  Miller v. Carol-Carter Design & Construction; SCIF (6/18/09) 2009 Cal.Wrk.Comp. PD LEXIS 316, the WCAB imposed sanctions against applicant’s attorney who filed a Petition for Reconsideration disputing the division of attorney’s fees in approving a C&R.  According to the opinion the attorney made the following statements: “(1) ‘[t]he WCJ, Robert McEvilly has a history of bias, hatred and contempt for [attorney] spanning ten (10) years’ (italics added); (2) ‘McEvilly dictated a “minutes of hearing” blatantly misstating the facts of representation, misapplied a heuristic rule of thumb at the Stockton WCAB to grant a windfall of 30% of the fees earned by [attorney] to CVIWLC, and then made sure [attorney] received a delayed copy of the minutes to prevent him from “timely” objecting to his rendition.’ (bolded language in original; italics added); (3) ‘McEvilly's conduct here is so fundamentally dishonest and outrageous as to justify an investigation and termination of his employment from the WCAB’ (italics added); (4) ‘the WCAB has decided to employ a legal fiction upon legal fiction of untimeliness to deny the Petitioner Trial on the merits of CVIWLC's lien claim.  This is outrageous and fundamentally dishonest.  The WCAB accomplishes this dishonesty by dishonoring Regulations designed to ensure traditional notions of due process and fair play.’ (bolded language in original; italics added); (5) ‘There is no way for the WCAB to justify these false facts.’ (bolded language in original; italics added); (6) ‘The Findings and Order and Opinion is an Underhanded Attempt to Undermine California's Preference for Trial on the Merits’ (italics added); (7) ‘The Findings and Order and Opinion is thin hogwash’ (italics added); (8) ‘The unvarnished facts strongly suggest WCAB contrivance by McEvilly, and now by Judge Bovett to try to set in stone the unfair results of McEvilly's unconscionable edict’ (italics added); and (9) ‘Why is that? The obvious answer is the patent bias and dishonesty of McEvilly, and the apparent desire by Judge Bovett to back him up’ (italics added).”  The WCAB upheld its $500 sanction order.  Harmless errors in service cannot support a claim of due process violations.  Applicant’s attorney did not allege specific facts, but used general platitudes.  Rule 10561 is consistent with LC §5813 in defining bad faith tactics that are to punish litigation abuses.  His freedom of speech was not violated - attorneys’ free-speech rights are limited in judicial proceedings.

In Gonzalez v. Walgreens; Sedgwick Claims Mgt. Services (5/24/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 184, the WCJ imposed a $500 sanction against applicant’s attorney for “apparent disrespect and uncooperative nature in his outbursts and the fact he raised his voice to talk over the Court.”  The WCAB panel said the WCJ improperly issued the Order because he did not allow applicant’s attorney opportunity to be heard.  However, due process does not require a formal hearing.  Arguments and evidence can be presented in written form (Ezra v. WCAB (2008) 73 CCC 391 (writ denied)).

Party Must File Petition for Costs

One of the explicit requirements under Labor Code §5813 is that a written application for costs must be made in order for a party to be awarded costs.  In Santiago v. Ayala Construction; Clarendon (adjusted by AARLA) (3/16/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 150, a WCJ awarded defense attorney’s fees against lien claimant for which lien claimant alleged there was no statutory basis.  The Judge simply said in his report, “it was the finding of the court that lien claimants were frivolous and thus defense attorney fees were awarded.”  Rule 10561(e) notes that a lien claimant is considered a party for purposes of LC §5813.  However, without a written motion, the lien claimant cannot mount an adequate defense.  Moreover, the WCJ did not sufficiently describe the offending conduct (However, his report explains the lien claimant presented unsubstantiated new evidence with its Petition for Reconsideration which was not offered at Trial and did not subpoena the applicant to appear at Trial.).  Therefore, the order re: defense attorney costs was denied.

Actions or Tactics Must be Willful

There is a higher standard in imposing sanctions and costs than simple excusable neglect.  The actions or tactics must be shown to be intentional or willful.  In Tober v. Garvey School District (administered by York) (6/8/10) 2010 Cal. Wrk. Comp. P.D. LEXIS 260, a defense attorney was sanctioned by WCJ because “there is no logical reason why it would take 11 months to comply with the request [for discovery of the claims file].”  Defendant filed a Petition for Reconsideration which the WCAB granted because defense counsel responded to the request for discovery throughout the 11 months mentioned by the WCJ, although not fully providing the claims file.  Accordingly, “While defendant’s actions may not have been as diligent and timely as desired, they did not rise to the level described in Section 5813 and Rule 10561.  We see no evidence that the actions were in bad faith, frivolous, or solely intended to cause unnecessary delay.  Moreover, defendant was reasonably justified in disputing the need to pay applicant’s attorney’s fee for discovery pursuits defendant considered unnecessary.  To order sanctions pursuant to section 5813, the WCJ must find that the offending party had a specific state of mind.”

As can be seen, simply acting reasonably and thoroughly reviewing the contentions in a Petition will likely not result in an Order of Sanctions and Costs.  However, should a party act willfully and unreasonably, then grounds are established for an award of sanctions and costs.

 © Copyright 2010 Nigel Scott Baker, Esq. All rights reserved. Reprinted with permission.