Is the WCAB About to Shoot Itself in the Foot with New Lien Regs?

Friday, June 8, 2012 | 0

In mid-May, the Workers’ Compensation Appeals Board (WCAB) promulgated three new administrative regulations designed to address and reduce the growing number of pending workers’ compensation liens. The bold move, however, may really only exacerbate a looming crisis and cripple the fledgling, but flawed, Electronic Adjudication Management System (EAMS).

Recently, the state has been concerned about the number of liens filed in workers’ compensation cases in California, particularly in litigious Los Angeles and Orange counties. There are perhaps 800,000 pending liens in Los Angeles alone, but the WCAB has no idea how many are serious, duplicates, settled, dormant or abandoned.

In an effort to reduce the number of dormant, settled or abandoned liens, the WCAB enacted Regulation 10582.5 to permit a party or the WCAB to petition to have any lien dismissed for lack of prosecution if the lien claimant fails to file a declaration of readiness to proceed (DOR) by the earlier of either 180 days after a case is settled and the lien claimant becomes a “party” in the case, or 180 days after a lien conference or lien trial at which the particular lien was at issue is ordered off calendar.

In concept, this sounds like a great idea. Rather than letting liens pile up for months or years, why not require the lien claimant to begin collection proceedings in earnest once the case-in-chief has been resolved? If you’re not serious about your lien, dismiss it and get on with your life.

There presently exist tens or hundreds of thousands of liens in cases that have settled. Beginning later this summer, these liens will become vulnerable to petitions from defendants to have them dismissed for lack of prosecution. How many such liens are there? Nobody knows. How much money is potentially involved in these liens? Nobody knows, but I’ve seen estimates in excess of $1 billion. In any case, there is enough money involved to get many serious lien claimants concerned and motivated to file their DORs by Aug. 1, when the dismissal regulations become operative.

Herein lies the rub. DORs for liens may be filed electronically into the EAMS system directly by using E-Form or JET File or by mail/walk-in to WCAB offices using hard copy “OCR” (optical character recognition) forms. EAMS was created to reduce the paper flow, so electronic filing is clearly the preferred method for perfecting liens and filing DORs. Unfortunately, EAMS does not let a lien claimant file a DOR unless it can simultaneously set a court date for the trial. As hundreds and thousands of lien claimants race to file their DORs by Aug. 1, the number of available court dates will quickly evaporate and the filing of new DORs will be blocked by EAMS. A perfect Catch-22!

The alternative is to file hard copy DORs at various WCAB offices. The paper lien crisis of several years ago – when boxes and boxes of unrecorded liens piled up faster than clerks could file them – led to the creation of EAMS. This new rush to the courthouse will inevitably return us to the old days where no one really knew if their lien or DOR had been processed and many lien claimants never received notice that their liens were being placed at issue in settlement conferences and trials.

Did the WCAB consider how its new regulations would play out in practice? Maybe it did? In any case, I foresee an immediate crisis. The regs are effective now. The race is on to file DORs before Aug. 1. The likelihood of blocked DOR filings in many WCAB offices is growing. The requests for lien trials will skyrocket and valuable judge time will be spent on those issues rather than on primary cases involving injured workers and their employers. In addition, already sparse WCAB staff will be overloaded having to verify the validity of petitions and attachments filed to dismiss alleged dormant liens.

A few pundits have alleged that some defendants will not file petitions to dismiss because they will “let sleeping dogs lie.” Why go to the expense of retrieving and compiling all the supporting documents required by the new regulations only to dismiss a lien that has been inactive for years and may never be prosecuted? This seems reasonable but, unfortunately, it will be the lien holders who will initiate the process by filing their DORs and that will force defendants to retrieve all the evidence from their archives to meet their burden in the upcoming lien trial. This could be a boon for the defense attorney community.

The clock is ticking. The train wreck may be inevitable. It’s time for the WCAB to put its new regulations “on hold” until it sits down with all stakeholders to design a new system that is not destined to fail.

Meanwhile, what should lien holders do? To protect your bona fide liens on settled cases, I suggest that you attempt to file your DORs before Aug. 1. If EAMS blocks your attempted filings, serve your DORs on the defendants. Include an allegation that you attempted to file your DOR with the Board but were blocked. This will send them a clear message that you intend to prosecute your lien as soon as you can get a trial date and it will discourage them from initiating proceedings to dismiss your lien for lack of prosecution. (Remember, under Labor Code Section 4903.6(b), a DOR may not be filed until the case in chief has been resolved or the applicant chooses not to proceed with his/her case.)

<i>Carlyle Brakensiek is executive vice president of the California Society of Industrial Medicine and Surgery.</i>