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U.S. Supreme Court Denies Appeal of Lien Activation Case

May 31, 2016

by Don Powelson

On Monday May 23, 2016, the U.S. Supreme Court denied lien claimants’ petition for certiorari in the case of Angelotti v. Baker. The denial effectively ends the litigation over the constitutionality of the lien activation fee imposed by SB 863, now Labor Code section 4903.06.

Labor Code section 4903.06 required payment of an activation fee of $100.00 to the Division of Workers’ Compensation prior to January 1, 2014 if the lien was filed prior to January 1, 2013. If the fee was not paid, the lien was subject to dismissal as a matter of law as of January 1, 2014. Due to litigation in the Angelotti case, the final day to pay the activation fee was extended to the end of December 31, 2015.

In Angelotti, several medical providers filed challenges to the constitutionality of the activation fee at the U.S. Ninth Circuit Court of Appeals. They argued that the activation fee was a forfeiture penalty and a governmental deprivation of their right to be paid.  However, the circuit court found that a lien is only an expectation of payment, so there was no governmental “taking” with the imposition of a fee. The expectation of payment was not property subject to governmental taking.  The DIR argued that the fee was akin to a user fee. The circuit court found that the activation fee was constitutional.

The plaintiffs requested reconsideration by the Ninth Circuit, which was denied. The only option remaining was to file a petition for certiorari to the U.S. Supreme Court, which they did.  The California Department of Industrial Relations submitted a waiver of its right to respond, but the U. S. Supreme Court requested a response, which was filed. After receipt of the response, the Court issued notice on May 23, 2016 that it was declining to hear the case. Thus, the circuit court decision stands.

What does this mean in practical terms?   Lien claimants subject to the activation fee who did not pay by the end of December 31, 2015 are deemed dismissed by operation of law without further action by the parties.  Select medical liens are exempted from the activation fee as follows:

  • A Health care service plan under Health and Safety Code section 1349
  • A Group disability insurer under Insurance Code, section 10270.5
  • A Self-insured employee welfare benefit plan under Insurance Code section 10121
  • A Taft-Hartley health and welfare fund
  • A Publicly funded program providing medical benefits on a nonindustrial basis.

Additionally, non-medical lien claimants are not subject to the activation fee, including liens for attorneys’ fees, living expenses, burial expenses, spousal and child support expenses, Employment Development Department liens, and Victims of Crime liens.

Questions?  Find your local Hanna Brophy attorney: www.hannabrophy.com/offices/

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