After battling the combined forces of California workers’ comp insurers, attorneys in a class action lawsuit are seeking interest payments on past attorney fee awards. A Superior Court has said they’re legally in the right, just not in the correct court, and an appellate court agrees.

But the insurance industry, which spends 65% of its legal dollars on defense counsel, appears to want to hassle applicant attorneys. It has the potential to clog the Workers’ Compensation Appeals Board with tens of thousands more cases, slowing down justice and of course payouts for all claimants, all for something the appellate court says the attorneys are due under the Labor Code.

The lead case — Koszdin v. State Compensation Insurance Fund — could involve millions of dollars in unpaid interest owed by State Compensation Insurance Fund (SCIF) and other carriers and third-party administrators on cases dating back decades. The plaintiffs alleged that the payers failed to pay interest to as many as 5,000 attorneys involved in prior actions that recovered benefits for injured workers. Those awards for benefits also covered fees that applicant attorney Kenton Koszdin and others received for their work. The Workers’ Comp Appeals Board (WCAB) has jurisdiction, but its lack of specificity is tying up a big payday for Koszdin and his fellow attorneys.

So they filed a lawsuit in Superior Court to recover the unpaid interest they allege is due, and the case was dismissed. The Court of Appeal agreed with the dismissal but ruled that plaintiffs are owed the money and have filed the case in the wrong place. 

“Section 5800 is mandatory in nature. It compels the payment of accrued interest on all WCAB compensation awards and gives no discretion to the WCAB not to award interest.”
— Second District
Court of Appeal

“This statutory scheme provides a party affected by an order of the [Workers’ Compensation Appeals Board] the right to seek judicial review of that order in the Court of Appeal or the Supreme Court,” the Court of Appeal ruled in upholding a Superior Court’s dismissal of the case. The Superior Court reasoned that it lacked jurisdiction to award the interest because the original awards from the workers’ comp judge failed to mention interest in the actual awards. “Although [Labor Code] section 5806 authorizes the entry of a civil judgment in conformity with a WCAB award, the superior court ‘has no jurisdiction to stay or modify any proceedings under the award,’” the court pointed out.

But the Court of Appeal did agree with plaintiffs’ point that, per Labor Code section 5800, interest is automatically a part of any award issued by WCAB.

“We do not disagree that Appellants have the right to recover unpaid interest on the fee awards issued to them by the WCAB irrespective of whether the awards specifically provided for the payment of interest. By its terms, [Labor Code] section 5800 is mandatory in nature. It compels the payment of accrued interest on all WCAB compensation awards and gives no discretion to the WCAB not to award interest,” the court pointed out. “[But] Appellants’ remedies in this matter are limited to pursuing a claim for unpaid interest on their fee awards before the WCAB, or if appropriate, filing a petition for writ of review before a proper appellate court.”

The finding was welcome news to the defense. “We are pleased that the appellate court affirmed the dismissal of the case on jurisdictional grounds, and we look forward to defending any claims of purported unpaid interest on a case-by-case basis at the WCAB, where such matters belong,” notes SCIF’s legal team. 

But the issue is not quite dead yet.

Nicola Kazandjieff of Kazandjieff & Traney in Sherman Oaks expressed disappointment in the outcome of the ruling but was buoyed by several key points in the court’s opinion. “They found that my clients have standing, that the interest is owed to the attorneys, and that they have a right to seek it whether the orders have an expressed award of it or not,” he tells Workers’ Comp Executive. “They’re just saying it doesn’t belong in the Superior Court .”

“They found that my clients have standing, that the interest is owed to the attorneys, and that they have a right to seek it.”
 — attorney Nicola Kazandjieff

And attorney Jeff Ehrlich, who argued the case for Koszdin and the others before the Court of Appeals, isn’t interested in a partial victory finding that the interest is due but that they have to start all over to collect it.

“I respect the panel that decided it, but I don’t think they reached the right result here,” he noted. “They seem to acknowledge that the awards automatically draw interest regardless of whether the WCAB says they do or doesn’t say that. In my mind, if it’s automatic, then the Superior Court can pay the interest without it being considered an amendment or change to the award.”

Ehrlich says the plaintiffs will file a writ seeking Supreme Court review of the decision. Otherwise the only option is to start over with a petition to the Workers’ Compensation Appeals Board, and he says that likely would devolve into a fight over WCAB’s ability to hear class action cases.

Other defendants in the case include Travelers Insurance Company, Kemper Casualty Insurance Company, State Farm, Marriott Claims and Stater Brothers.

But a couple of unanswered questions remain: If applicant attorneys are having this much trouble collecting money the courts say is due them from SCIF and other carriers and payors as the result of claims, what chance does an ordinary person have to collect what is due him or her? And further, have one or more of these carriers violated the RICO statutes? 

For past coverage of the dispute, see With Interest… and Attorney Tries Again…. For a copy of the court of Appeals decision in the case, click here.