Federal Litigation Challenging Constitutionality of Lien Activation Fee Provisions of SB863 Continues

The case of Angelotti Chiropractic et al. vs. Baker et al.  (U.S. District Court for the Central District of California Case No.8:13-CV-01139-GW-JEM), wherein the plaintiffs, medical provider and ancillary service lien claimants before California’s Workers’ Compensation Appeals Board, are challenging the constitutionality of the lien activation fee requirement contained in Labor Code section 4903.06, is now set for oral argument before the United States Court of Appeals for the Ninth Circuit.

On November 12, 2013, U.S. District Court Judge George H. Wu issued a preliminary injunction barring any further collection of the $100 lien activation fee from lien claimants and also prohibiting the dismissal of liens for which the activation fee had not yet been paid.  This temporary injunction, which became effective November 19, 2013, currently remains in effect.

The plaintiffs in Angelotti Chiropractic have argued that the lien activation provision constitutes an unlawful taking of private property and violates the due process and equal protection provisions of the United States Constitution.  In granting the preliminary injunction, Judge Wu dismissed the unlawful taking and due process arguments, but allowed the plaintiffs to continue pursuit of the equal protection argument. The argument under the equal protection clause contends that there is no rational basis for the imposition of the activation fee on medical providers and providers of ancillary services, while exempting health care service plans, group disability insurers, self-insured employee welfare benefit plans, Taft-Hartley health and welfare funds, and public entities providing benefits on a nonindustrial basis from the fee requirement.

The plaintiffs have appealed the dismissal of the unlawful taking and due process arguments.  Meanwhile, the Administration is defending the imposition of the activation fee and is asking the Court of Appeals to find that that the lien activation fee provision does not violate the equal protection clause and to set aside the temporary injunction preventing collection of the fee.  California Society of Industrial Medicine and Surgery (CSIMS) has filed an amicus brief supporting plaintiffs, while State Compensation Insurance Fund, the American Insurance Association (AIA), and the California Workers’ Compensation Institute (CWCI) have filed amicus briefs in support of the Administration.

Oral arguments in this case are scheduled for 9AM on November 18, 2014 before the Ninth Circuit Court of Appeals in Pasadena, California.

Boehm & Associates will keep you posted regarding the Court’s decision in this high profile case and its impact on the lien prosecution rights of medical treatment lien claimants.