California's State Compensation Insurance Fund has found itself the target of yet another potential class action lawsuit that's an outgrowth of the scandal surrounding its safety group program. The case accuses two former State Fund executives, James Tudor and Renee Koren, of wrongfully diverting funds to pay fees administrative fees to two former board members Kent Dagg and Frank Del Re who ran State Fund safety groups. This is the second class action filed against State Fund, former executives, board members and safety groups.

The lead plaintiff in the new case, filed this month in Los County Superior Court, is Notis Enterprises, which does business as L&M Construction, a residential and commercial developer in Los Angeles, according to its website. It's represented by Gina Lisitsa, a Los Angeles attorney.

Notis accuses State Fund of disbursing funds to group administrators "under a variety of names, such as fees, discounts, and bonuses, which funds were known or should have been known by State Fund to be applied to the personal benefit of the administrators or their owners." It estimates, that State Fund paid Western Insurance Administrators, operated by Frank DelRe, and Shasta Builders Exchange, operated by Dagg, were paid more than $25 million in the last four years. These moneys could instead have been used to pay out dividends to policyholders or extend policy credits, Notis argues.

The case, filed in Los Angeles County Superior Court, seeks $25 million in compensatory damages, $25 million in restitution and $50 million in punitive damages on behalf of a class of unknown size.

Most of the case rehashes events already reported by Workers' Comp Executive, in general that State Fund groups did precious little in exchange for the administrative fees they were paid. It also alleges that the funds were diverted to administrative fees to "establish political alliances and establish political power at SCIF." The complaint offers no proof.

Its causes of action span from negligence and Business and Professions Code Section 17200 violations to breach of fiduciary duty.

The defendants and causes of action in the case are a veritable carbon copy of a similar class action case filed in Los Angeles last June by Acro Constructors Inc. But the new case has one more defendant: Collecto Inc., which runs debt management company Collection Company of America. That outfit is loosely described in the filing as "a Massachusetts corporation that has been assigned all of the rights and liabilities under the contract between Notis Enterprises Inc. and SCIF."

Attempts to reach Collecto were fruitless. Messages left yesterday with Notis' president Mordecai (Motty) Notis, and his attorney, Lisitsa, went unreturned.

The question is how will the Acro and Notis cases move forward?

Nick Roxborough, an experienced California insurance litigator whose law firm has taken on State Fund in the courtroom on frequent occasions in class action suits (and won), says that this second case may be folded into the class action by Acro.

"It's not uncommon to see class action piggy back or copy cat lawsuits," Roxborough says. He recalls similar copy cat suits filed on class actions his law firm was spearheading and that a choice has to be made whether or not to fold the new class action into the original complaint. Sometimes one case also has a better class representative than the other and may be chosen as the lead case.

One danger, according to Pomerance, is that a copy cat suit can put the kybosh on the original case depending on the judicial rulings handed down on the case. For a copy of the case, click here.

And that, as they say, is -30-