Angelotti Chiropractic, Inc. v. Baker

• Citation: 791 F.3d 1075
• Decision Date: 29 June 2015
• Docket Number: Nos. 13–56996,13–57080.,s. 13–56996
• Parties: ANGELOTTI CHIROPRACTIC, INC. ; Mooney & Shamsbod Chiropractic, Inc.; Christina–Arana & Associates, Inc. ; Joyce Altman Interpreters, Inc. ; Scandoc Imaging, Inc. ; Buena Vista Medical Services, Inc. ; David H. Payne M.D., Inc., Plaintiffs–Appellants, v. Christine BAKER, in her official capacity as Director of the California Department of Industrial Relations; Ronnie Caplane, in her official capacity as Chair of the Workers' Compensation Appeals Board; Destie Lee Overpeck, in her official capacity as Acting Administrative Director of the California Division of Workers Compensation, Defendants–Appellees. Angelotti Chiropractic, Inc. ; Mooney & Shamsbod Chiropractic, Inc.; Joyce Altman Interpreters, Inc. ; Scandoc Imaging, Inc. ; Buena Vista Medical Services, Inc. ; David H. Payne M.D., Inc.; Christina–Arana & Associates, Inc., Plaintiffs–Appellees, v. Christine Baker, in her official capacity as Director of the California Department of Industrial Relations; Ronnie Caplane, in her official capacity as Chair of the Workers' Compensation Appeals Board; Destie Lee Overpeck, in her official capacity as Acting Administrative Director of the California Division of Workers Compensation, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

791 F.3d 1075

ANGELOTTI CHIROPRACTIC, INC. ;

Mooney & Shamsbod Chiropractic, Inc.;

Christina–Arana & Associates, Inc. ;

Joyce Altman Interpreters, Inc. ;

Scandoc Imaging, Inc. ;

Buena Vista Medical Services, Inc. ;

David H. Payne M.D., Inc., Plaintiffs–Appellantsv.Christine BAKER, in her official capacity as Director of the California Department of Industrial Relations;

Ronnie Caplane, in her official capacity as Chair of the Workers' Compensation Appeals Board;

Destie Lee Overpeck, in her official capacity as Acting Administrative Director of the California Division of Workers Compensation, Defendants–Appellees.

Angelotti Chiropractic, Inc. ;

Mooney & Shamsbod Chiropractic, Inc.;

Joyce Altman Interpreters, Inc. ;

Scandoc Imaging, Inc. ;

Buena Vista Medical Services, Inc. ;

David H. Payne M.D., Inc.;

Christina–Arana & Associates, Inc., Plaintiffs–Appelleesv.Christine Baker, in her official capacity as Director of the California Department of Industrial Relations;

Ronnie Caplane, in her official capacity as Chair of the Workers' Compensation Appeals Board;

Destie Lee Overpeck, in her official capacity as Acting Administrative Director of the California Division of Workers Compensation, Defendants–Appellants.

Nos. 13–56996

13–57080.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 18, 2014.

Filed June 29, 2015.

Donna M. Dean (argued), Deputy Attorney General, Joel A. Davis, Supervising Deputy Attorney General, Kristin G. Hogue, Senior Assistant Attorney General, Kathleen A. Kenealy, Chief Assistant Attorney General, and Kamala D. Harris, Attorney General of California, Los Angeles, CA, for Defendants–Appellants & Cross–Appellees.

Glenn E. Summers (argued), Sundeep K. Addy, and Daniel C. Taylor, Bartlit Beck Herman Palenchar & Scott LLP, Denver, CO; Paul Murphy and Mark Nagle, Murphy Rosen LLP, Santa Monica, CA, for Plaintiffs–Appellees & Cross–Appellants.

Nicholas P. Roxborough and Anne S. Kelson, Roxborough, Pomerance, Nye, & Adreani, LLP, Woodland Hills, CA, for Amicus Curiae California Society of Industrial Medicine and Surgery.

Michael A. Marks, Allweiss & McMurtry, Tarzana, CA, for Amicus Curiae California Workers' Compensation Institute & American Insurance Association.

Ellen Sims Langille and Katherine F. Theofel, Finnegan, Marks, Theofel & Desmond, San Francisco, CA, for Amicus Curiae California Chamber of Commerce.

Eric S. Boorstin (argued) and Jeremy B. Rosen, Horvitz & Levy LLP, Encino, CA, for Amicus Curiae State Compensation Insurance Fund.

Appeal from the United States District Court for the Central District of California, George H. Wu, District Judge, Presiding. D.C. No. 8:13–cv–01139–GW–JEM.

Before: MARY M. SCHROEDER and JACQUELINE H. NGUYEN, Circuit Judges and JACK ZOUHARY,^* District Judge.

OPINION

NGUYEN, Circuit Judge:

In 2012, California enacted Senate Bill 863 (“SB 863”) to combat an acute “lien crisis” in its workers' compensation system. These liens are filed by medical providers and other vendors to seek payment for services provided to an injured worker with a pending claim. In an effort to clear an enormous and rapidly growing backlog of these liens, SB 863 imposes a $100 “activation fee” on entities like plaintiffs for each workers' compensation lien filed prior to January 1, 2013. Plaintiffs sued, claiming that SB 863 violates the Takings Clause, the Due Process Clause, and the Equal Protection Clause of the United States Constitution.

We affirm the district court's dismissal of plaintiffs' claims under the Takings Clause and Due Process Clause. As to the Equal Protection claim, however, we vacate the preliminary injunction and, through pendent appellate jurisdiction, reverse the district court's denial of the motion to dismiss this claim.

BACKGROUND

A. Overview of the Workers' Compensation System

Employers in California typically provide medical care and other services to employees for work-related injuries. See generally Cal. Lab.Code §§ 3600, et seq. An employer or its workers' compensation insurer may choose to provide medical care to workers through the employer's Medical Provider Network (“MPN”), 2 Witkin, Summ. Cal. Law, Work. Comp. § 262 (10th ed.2005), its Health Care Organization (“HCO”), Cal. Lab.Code § 4600.3, or neither of these. An MPN is a group of health care providers selected by an employer or insurer to treat injured workers, and an HCO is a managed care organization that contracts with an employer to provide managed medical care.

In certain cases, an employer or its insurer might decline to provide medical treatment to an injured employee on the grounds that an injury is not work-related or the treatment is not medically necessary. An injured worker may then seek medical treatment on his or her own, and, if the injury is later deemed work-related and the treatment medically necessary, the employer is liable for the “reasonable expense” incurred in providing treatment, which may include ancillary services such as an interpreter to facilitate treatment. Cal. Lab.Code § 4600(a), (f) ; 2 Witkin, Summ. Cal. Law, Work. Comp. § 264; Guitron v. Santa Fe Extruders, 76 Cal.Comp. Cases 228, 2010 WL 6098653, at *9 (WCAB 2011). An employer also may be liable for “medical-legal expenses” necessary “for the purpose of proving or disproving a contested claim” for workers' compensation benefits, such as diagnostic tests, lab fees, and medical opinions. Cal. Lab.Code § 4620(a).

A provider of services—whether for medical treatment, ancillary services, or medical-legal services—may not seek payment directly from the injured worker. Id. § 3751(b). Nor may a provider seek payment through the filing of a civil action against the employer or its insurer. Vacanti v. State Comp. Ins. Fund, 24 Cal.4th 800, 815, 102 Cal.Rptr.2d 562, 14 P.3d 234 (2001) (“[C]laims seeking compensation for services rendered to an employee in connection with his or her workers' compensation claim fall under the exclusive jurisdiction of the [Workers' Compensation Appeals Board].”). Instead, these providers may seek compensation by filing a lien in the injured employee's workers' compensation case. See generally Rassp & Herlick, Cal. Workers' Comp. Law ch. 17 (Lexis 2014). The filing of a lien entitles a provider to participate in the workers' compensation proceeding in order to protect its interests. Id. § 17:111[5]. After the underlying workers' compensation case is adjudicated, a “lien conference” is held to discuss the liens that have not already been resolved through settlement. Id. § 17:113. Any issues not resolved at the lien conference will be set for a “lien trial.” Id.

Whether a provider of medical or ancillary services obtains payment on its lien depends on the result reached in the underlying case. These providers are entitled to payment of their liens if the injured worker establishes that the injury was work-related and that the medical treatment provided was “reasonably required to cure or relieve the injured worker from the effects of his or her injury.” Cal. Lab.Code § 4600 ; see also id. § 4903.

Providers of medical-legal services must demonstrate that the expense was “reasonably, actually, and necessarily incurred,” Cal. Labor Code § 4621, “for the purpose of proving or disproving a contested” workers' compensation claim, Rassp & Herlick § 17.70[1](c) (quoting Cal. Lab.Code § 4620(a) ). Medical-legal lien claimants may still obtain payment even if the injured worker does not prevail in the underlying workers' compensation proceeding, provided that the medical-legal expenses are “credible and valid.” Id.

B. The Lien Crisis and SB 863

The parties do not dispute that California's workers' compensation system is overwhelmed by liens, with a substantial backlog that is growing rapidly. On September 18, 2012, California enacted SB 863, which aims to address the “lien crisis,” described in a January 5, 2011 report prepared by the California Commission on Health and Safety and Workers' Compensation (“Commission Report”). The Commission Report noted that the workers' compensation courts lacked “the capacity to handle all the lien disputes” that were filed. For example, the Los Angeles Office of the Workers' Compensation Appeals Board devotes 35 percent of its time to lien-related matters, and even though it resolves liens at the rate of approximately 2,000 per month as of October 2010, the rate of filings is such that the backlog of unresolved liens grows by approximately 2,000 per month, on top of the pre-existing backlog of 800,000. According to the Commission Report, the backlog has two effects. First, frivolous liens remain pending for years rather than being denied outright, resulting in the employer paying to settle just to close the case. Second, meritorious liens are delayed, which means that employers can deny these claims with impunity for years. One of the reforms recommended by the Commission Report is the institution of a lien filing fee in order to deter the filing of liens generally, and particularly to deter the filing of frivolous liens.

SB 863 imposes a $150 filing fee for all liens filed on or after January 1, 2013. Cal. Lab.Code § 4903.05(c)(1). Plaintiffs do not challenge the filing fee in this action. More pertinently, SB 863 imposes a $100 “activation fee” for pending liens filed prior to January 1, 2013, which must be paid at the time that a declaration of readiness is filed for a lien conference. Id. § 4903.06(a)(1), (2). Any lien for which the activation fee is not paid by January 1, 2014, is “dismissed by operation of law.” Id. § 4903.06(a)(5). The purpose of these fees, according to a report of the State Assembly's Committee on Insurance, is to “provide a disincentive to file frivolous liens.” The lien activation fee provision exempts the following entities:

a health care service plan licensed pursuant to Section 1349 of the Health and Safety Code, a group disability insurer under a policy issued in this state pursuant to the provisions of Section 10270.5 of the Insurance

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