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Lien Activation Fee for Pre-2014 Lien Claims Found To Be Constitutional

Angelotti Chiropractic v. Baker (2015)

U.S. App. LEXIS 11063.

On June 29, 2015, the Ninth Circuit Court of Appeal issued its opinion in the case of Angelotti.

Chiropractic, et al. v. Christine Baker, et al., finding that the lien activation fee adopted as part of SB 863 does not violate the constitutional rights of lien claimants. By way of background, one of the provisions of SB 863 was that, effective January 1, 2013, most lien claimants who had previously filed liens were required to pay a lien activation fee of $100. The activation fee had to be paid as a condition of filing a Declaration of Readiness to Proceed to a lien conference. If no activation fee was paid by January 1, 2014, the law declared that the lien would be dismissed by operation of law. In July, 2013, a group of lien claimants filed a lawsuit against the Department of Industrial Relations and Workers’ Compensation Appeals Board asserting that the activation fee violated the Takings Clause, the Due Process Clause, and the Equal Protection Clause of the US Constitution. At the trial level, the district court judge dismissed the claims for violation of the Takings Clause and the Due.

Process Clause, but on November 12, 2013, issued a preliminary injunction against collection of the fee, finding that the claim for violation of the Equal Protection clause had merit. The WCAB then stopped collecting lien activation fees on November 19, 2013. Both sides appealed. In the decision issued June 29, the Ninth Circuit upheld the dismissal of the claims for violation of the Takings Clause and Due Process Clause, and also found that there was no violation of the Equal Protection Clause. As a result, the court found that the District Court judge abused his discretion in issuing the preliminary injunction. The Court of Appeals vacated the injunction, and dismissed the claim for violation of the Equal Protection Clause. The reasons for the Court of Appeal decision are too complex to discuss in detail here. Very briefly summarized, the Court of Appeal found that it was not an unconstitutional taking to require lie claimants to pay a fee to protect their unsecured interest in payment for their services; that the activation fee did not deprive the lien claimants of access to the courts and was justified by the rational legislative purpose of clearing the lien backlog; and similarly, that applying the activation fee to some lien claimants and not others did not violate the Equal Protection Clause because the legislature had a rational basis for applying the fee to only those types of lien claimants which were perceived to be the main cause of the backlog.

While the plaintiffs who filed this case can still seek further review, any further review is discretionary. Unless and until there is a further decision finding otherwise, the WCAB is now free to collect the activation fees. However, the time for paying the activation fee expired on January 1, 2014. Under the statute, if no activation fee was paid, the lien should now be deemed dismissed. But since there was a period of approximately six weeks in late 2013 when the WCAB was not collecting the activation fee, it is possible a grace period will be granted. For now, we at least have an argument that any pre-2013 liens for which no activation fee was paid should be deemed dismissed. We expect to receive further direction from the Board on this issue in the near future. Rehearing has been requested.