Lomeli v. State Dep't of Health Care Servs.

• Citation: 249 Cal.Rptr.3d 115,36 Cal.App.5th 817
• Decision Date: 25 June 2019
• Docket Number: B290608
• Parties: Ethan LOMELI, a Minor, etc., Plaintiff and Appellant, v. STATE DEPARTMENT OF HEALTH CARE SERVICES, Defendant and Respondent.
• Court: California Court of Appeals

36 Cal.App.5th 817

249 Cal.Rptr.3d 115

Ethan LOMELI, a Minor, etc., Plaintiff and Appellant,

v.STATE DEPARTMENT OF HEALTH CARE SERVICES, Defendant and Respondent.

B290608

Court of Appeal, Second District, Division 8, California.

Filed June 25, 2019

Steven B. Stevens, Los Angeles and Steven Weinberg, for Plaintiff and Appellant.

Xavier Becerra, Attorney General, Julie Weng-Gutierrez, Senior Assistant Attorney General, Richard T. Waldow, Supervising Deputy Attorney General, Nicole J. Kau, Deputy Attorney General, for Defendant and Respondent.

WILEY, J.

If you are needy and someone injures you, the government may pay for your medical care but later ask you for repayment if you get a large settlement from the tortfeasor. In California this is by way of Medi-Cal. Medi-Cal seeks repayment from people with settlements so it can provide care to others in need.

This case displays that situation. The trial court approved the existence and amount of the Medi-Cal settlement lien in this case. We affirm. Statutory citations are to the Welfare and Institutions Code.

I

We recount the main facts, which are undisputed.

Ethan Lomeli's guardian sued medical care providers for his catastrophic birth injuries. Through the Medi-Cal system, the Department of Health Care Services paid for his care before and during his lawsuit. Lomeli settled with defendants for $4 million. The Department moved to impose a $ 267,159.60 lien on this settlement. The trial court granted this motion. Lomeli appeals this May 23, 2018 order.

II

Federal law does not block the Department's lien. Our review of this legal question is independent.

Lomeli argues to the contrary, saying sections 14124.72 and 14124.76 violate the Supremacy Clause of the federal constitution. Lomeli's argument relies solely on an analysis from the dissent in Tristani ex rel. Karnes v. Richman (3rd Cir. 2011) 652 F.3d 360, 379–387 ( Tristani ). The trial court went with the Tristani majority. So do we. At pages 367–375, the Tristani majority correctly determined federal law does not prohibit liens like this one.

Briefly, the Tristani debate is this. The Tristani majority held two provisions of the Social Security Act did not bar state Medicare liens. To effectuate Congress's goals in enacting the federal Medicare program, the Tristani majority interpreted federal statutes as containing implied exceptions to provisions that otherwise seemed to bar the liens. (See Tristani , supra , 652 F.3d at p. 370.) The dissent agreed some implicit federal exception to these two Social Security statutes did exist. ( Id. at pp. 384 (dis. opn. of Pollack, J.) ["must constitute an explicit exception"] & 385 (dis. opn. of Pollack, J.) ["a limited implied exception must be read into the anti-recovery provision"].) The dissent argued this implicit exception was narrower than the majority's expression of it.

The Tristani majority analysis is better for two reasons.

First, a desire to effectuate the legislative purpose drove the majority's analysis.

"The dominant mode of statutory interpretation over the past century has been one premised on the view that legislation is a purposive act, and judges should construe statutes to execute that legislative purpose. This approach finds lineage in the sixteenth-century English decision Heydon's Case , which summons judges to interpret statutes in a way ‘as shall suppress the mischief, and advance the remedy.’ " (Katzmann, Judging Statutes (2014) p. 31.)

California courts follow this dominant mode. In our state, we must interpret words to promote rather than to defeat the general purpose of a statute. Suppose the language of a statute is reasonably susceptible of two constructions. If one would produce results that are reasonable, fair, and harmonious with the statute's manifest purpose, and another would produce absurd consequences, we must adopt the former construction. ( Department of Motor Vehicles v. Industrial Acc. Com. (1939) 14 Cal.2d 189, 195, 93 P.2d 131.) Like the Tristani majority, our fundamental task is to ascertain the intent of the lawmakers to effectuate the purpose of the statute. (E.g., Apple Inc. v. Superior Court (2013) 56 Cal.4th 128, 135, 151 Cal.Rptr.3d 841, 292 P.3d 883.)

Federal and California state law agree on this point: read a statute to effectuate its purpose. The Tristani majority correctly discerned Congress's purpose: to ensure Medicaid beneficiaries do not receive a windfall by recovering medical costs they did not pay. (See Tristani , supra , 652 F.3d at pp. 371–373.)

Second, the Tristani majority included common sense and practical reasoning in its analysis. (See id. at pp. 374–375.) Common sense and practical reasoning are attractive in legal analysis.

Lomeli adds nothing to the Tristani debate and, except for our agreement with that majority's careful and correct analysis, neither do we.

III

Collateral estoppel does not bar this May 23, 2018 lien. Again our review is independent.

Lomeli incorrectly claims the trial court decided something about the Medi-Cal lien by approving his minor's compromise on August 30, 2016. Before that 2016 approval, however, Lomeli informed the court his pending petition did not "address the [Medi-Cal] lien at all." Lomeli's representation was correct: the August 30, 2016 order did not address the Medi-Cal lien at all. The trial court decided about the Medi-Cal lien only much later, on May 23, 2018.

Lomeli's collateral estoppel argument is wrong. Collateral estoppel is about how an earlier decision affects a later one. There must be two decisions before this doctrine can be pertinent. In this case there was only one decision, which was on May 23, 2018. There was no earlier decision of relevance.

The trial court order of August 30, 2016 did not decide anything about the Medi-Cal lien. The text of this order confirms Lomeli's representation that it did not decide the Medi-Cal lien in any way. The order is on Judicial Council form MC-351. Lomeli's lawyer typed his name and address in the heading on page one. The form order states that, "[u]ntil further order of the court," the court reserves jurisdiction "to determine a claim for a reduction of a Medi-Cal lien ...." This order continues that "[t]he amount shown payable to the Department of Health Care Services in item 7c(1)(d) of this order is the full amount of the lien claimed by the department but is subject to reduction on further order of the court upon determination of the claim for reduction." Lomeli's lawyer, however, left "item 7c(1)(d)" blank—an oversight, or an acknowledgement the lien issue remained undecided.

As Lomeli represented, this order did not "address the [Medi-Cal] lien at all." The collateral estoppel argument has no sound basis.

Lomeli now argues, erroneously, the August 30, 2016 order indeed did address the Medi-Cal lien, because of what his lawyer wrote in this form's final "Additional orders" section. Lomeli's entry here claims the settlement proceeds are allocated in five ways, with four entries and then a fifth line that reads "Past Medical Expenses - (zero)." Whatever this line might signify, it does not mean this court order determined some issue concerning the Medi-Cal lien, for the reasons stated above.

There is an added and independently adequate reason to disregard this purported allocation. When a private plaintiff and a private defendant settle, it often will be for a lump sum—here, $ 4 million. The defendant wants only to pay the minimum to flee the lawsuit and does not care how the $ 4 million is "allocated." From the defendant's perspective, these "allocation" terms are empty words that cost it nothing. Defendants in fact will be happy to please plaintiffs by writing down somewhere that $ X is for this and $ Y is for that, for this gesture can facilitate the deal at no expense to defendants. And plaintiffs can have an illegitimate tactical reason for presenting an "allocation": to reduce Medicare's recovery and to keep more money for themselves. (Cf. Arkansas Dept. of Health and Human Services v. Ahlborn (2006) 547 U.S. 268, 287–288, 126 S.Ct. 1752, 164 L.Ed.2d 459 ( Ahlborn ) [discussing risk that settling private parties will allocate away the State's interest]; id. at p. 288, fn. 18, 126 S.Ct. 1752 ["concerns about settlement manipulation"]; Wos v. E.M.A. ex rel. Johnson (2013) 568 U.S. 627, 634, 133 S.Ct. 1391, 185 L.Ed.2d 471 [possibility exists that Medicaid beneficiaries and tortfeasors might collaborate to allocate an artificially low portion of a settlement to medical expenses].)

The August 30, 2016 order did not address the Medi-Cal lien at all. Lomeli's contrary argument is invalid.

IV

The trial court's lien calculation of $ 267,159.60 was correct. We independently review the court's approach to lien calculation, which was proper as a matter of law. Substantial evidence supports the application of this approach in this case.

We first explain the trial court's method, which one can call a reality-based approach.

Here is what the court did. The trial court adopted the Department's approach. This approach was based in reality because it focused on Lomeli's actual medical costs. Those costs were for medical services provided between January 24, 2014 (the date of birth and injury) and July 13, 2016. Five pages in the record list these actual costs, procedure by procedure. The costs total $ 367,646.60. The Department then reduced this gross total of $ 367,646.60 by 25 percent to account for a reasonable share of Lomeli's attorney's fee. A statute requires this 25 percent reduction. (§ 14124.72, subd. (d).) The Department further subtracted $ 8,575.35 to account for its share of Lomeli's total litigation costs of $ 93,300. This further reduction was also according to statute. (See ibid. )

This reality-based approach yielded a lien sum of $ 267,159.60 ($ 367,646.60 - $ 91,911.65 - $ 8,575.35 = $ 267,159.60). In other words, the gross sum of actual costs, minus an attorney fee adjustment, minus a litigation cost adjustment,...