27 Jun 2014

California: Lien Disallowed for Surgical Hardware Provided to Pacific Hospital of Long Beach

WCAB disallows lien for surgical hardware based on admitted fraudulent activities of Michael Drobot and adverse inferences drawn against lien claimant including failure to produce documents of its ownership interests, fictitious business name statement and licensure

In Olivas v. North American Plywood Corporation, 2014 Cal. Wrk. Comp. P.D. LEXIS – (Appeals Board noteworthy panel decision), the WCAB affirmed the WCJ’s order disallowing lien claimant Access Mediquip’s lien for surgical hardware allegedly provided to Pacific Hospital of Long Beach (owned by Michael Drobot at the time in question) and used in the applicant’s 10/26/2009 spinal surgery. The WCJ’s order was based, in part, on adverse inferences drawn by the WCJ against the lien claimant for failure to comply with a discovery order, including inferences that the lien claimant had a financial interest in providing surgical hardware to Pacific Hospital of Long Beach, that the lien claimant lacked the capacity for litigating its lien in the absence of a Fictitious Business Name certificate, and that the lien claimant lacked the required licensure to dispense surgical hardware to Pacific Hospital of Long Beach.

In Olivas, the WCAB found that the lien claimant acted as middlemen supplying surgical hardware from other companies to Pacific Hospital of Long Beach and, because the hardware was invoiced after surgery, the evidence did not establish that the hardware was actually used in the applicant’s surgery. The WCAB further found that in light of the admitted fraudulent activities of Michael Drobot, the then owner of Pacific Hospital of Long Beach, and the lien claimant’s failure to appropriately respond to a demand for production of documents regarding its ownership interests, fictitious business name statement and licensure, the WCJ properly drew adverse inferences against the lien claimant. Additionally, the WCAB found that the lien claimant was precluded from recovering its lien by 8 Cal. Code Reg. § 9789.22(d) (applicable under SB 863), which precluded liability to anyone other than hospitals (here, Pacific Hospital of Long Beach) for surgical hardware, and that contrary to its assertion, the lien claimant was not entitled to lien recovery under Labor Code § 5318, as that provision was repealed by SB 863.

The WCAB remanded the matter to the WCJ for further proceedings on the issue of sanctions against the lien claimant for engaging in frivolous litigation of its lien claim without evidence, filing a frivolous petition for reconsideration, and failing to comply with 8 Cal. Code Reg. § 10846(b) by asserting facts not in the record under a questionable verification.

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