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Koszdin v. State Compensation Insurance Fund

July 6, 2010

KENTON KOSZDIN ET AL., PLAINTIFFS AND APPELLANTS,
v.
STATE COMPENSATION INSURANCE FUND, DEFENDANT AND RESPONDENT. [AND FIVE OTHER CASES.*FN1 ]



APPEAL from a judgment of the Superior Court of Los Angeles County. Carl J. West, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC392986)

The opinion of the court was delivered by: Zelon, J.

CERTIFIED FOR PUBLICATION

Appellants Kenton Koszdin and Gilbert Lipman (collectively "Appellants") appeal from the trial court's judgment of dismissal following the sustaining of a demurrer for lack of subject matter jurisdiction. Appellants are attorneys who represented injured workers in proceedings before the Workers' Compensation Appeals Board (WCAB). In six related class action complaints, they alleged that respondent employers and insurers (collectively "Respondents")*fn2 failed to pay them and the putative class interest owed on attorney fee awards issued by the WCAB. In their joint demurrer to the complaints, Respondents argued that Appellants lacked standing to pursue claims for interest because the right of recovery belonged solely to the injured workers, and that the trial court lacked jurisdiction to grant the relief requested because the WCAB awards at issue did not provide for the payment of interest. We conclude that, under the relevant provisions of the Workers' Compensation Act (Lab. Code,*fn3 § 3200 et seq.), Appellants have standing to seek interest on the attorney fees awarded directly to them by the WCAB; however, the trial court lacks jurisdiction to entertain the claims for unpaid interest where the WCAB did not expressly order the payment of interest in its attorney fee awards. We therefore affirm the trial court's judgment dismissing the actions with prejudice.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

I. The Class Action Complaints

Koszdin and Lipman are California licensed attorneys who practice before the WCAB. They filed six class action complaints in Los Angeles County Superior Court against six different defendants. Each defendant named in the complaints was either an employer or workers' compensation insurance carrier that allegedly failed to pay interest owed on attorney fee awards issued by the WCAB. The proposed class consisted of California attorneys "who petitioned for and received an award from the WCAB [for] attorney's fees . . . and who were not paid interest on said awards by Defendants" in accordance with the Workers' Compensation Act. The complaints sought certification of two plaintiff sub-classes. The first sub-class would be comprised of class members who were awarded fees in connection with their representation of injured workers seeking vocational rehabilitation benefits. The second sub-class would consist of class members who were awarded fees arising out of their defense of injured workers in deposition proceedings.*fn4

Each complaint alleged three causes of action: (1) conversion, (2) unfair business practices in violation of Business and Professions Code section 17200, and (3) imposition of a constructive trust under Civil Code section 2223. In their prayer for relief, Appellants requested that the superior court award damages in the form of "all interest from awards issued for attorney fees" by the WCAB, and permanently enjoin each named defendant from failing to pay interest on WCAB fee awards. The complaints did not allege that the WCAB had ordered the payment of interest in the attorney fee awards issued to the putative class, or that Appellants had sought relief from the WCAB for any amount of unpaid interest.

II. The Demurrer to the Complaints

The cases were assigned for all purposes to Los Angeles County Superior Court Judge Carl West in the complex litigation department. Pursuant to a stipulation between the parties, Respondents filed a joint demurrer to the complaints on jurisdictional and standing grounds. As to standing, Respondents contended that Appellants lacked standing to pursue claims for interest on their attorney fee awards because the Workers' Compensation Act mandates that all compensation must be paid directly to the injured worker unless otherwise ordered by the WCAB. As to jurisdiction, Respondents argued that the superior court lacked subject matter jurisdiction over the actions because the claims alleged were barred by the exclusive remedy provisions of the Workers' Compensation Act. Respondents also asserted that jurisdiction was lacking because Appellants failed to comply with certain statutory prerequisites to bringing suit by filing certified copies of their WCAB fee awards with the clerk of the superior court.

The day after Respondents filed their demurrer, Appellants filed a "Notice of Filing Award for Attorney Fees and Certification for Execution" in each of the six cases. The notices attached certified copies of various attorney fee awards that had been issued to Appellants by the WCAB. Appellants later filed an opposition to the demurrer which included copies of the previously filed notices and fee awards. Each WCAB fee award filed by Appellants included an order for the payment of attorney fees directly to Koszdin or Lipman, but did not expressly provide for the payment of any interest on those fees.

On December 17, 2008, Judge West issued a written order sustaining the demurrer to the six class action complaints without leave to amend. Judge West concluded that Appellants had standing to seek interest on their WCAB fee awards, but that the superior court lacked subject matter jurisdiction over the claims alleged. Judge West found that, because the WCAB failed to order the payment of interest on the attorney fee awards at issue, the superior court did not have the authority to alter the awards to include an order for interest. Instead, the exclusive remedy afforded to Appellants was to seek relief in the first instance before the WCAB or the Court of Appeal. The trial court thus dismissed the actions "with prejudice to the re-filing of the claims in [superior] court, but without prejudice to [Appellants'] right to pursue their claims before the Workers' Compensation Appeals Board." Appellants timely filed a notice of appeal.

DISCUSSION

I. Standard of Review

In reviewing the sufficiency of a complaint against a demurrer, we "treat[] the demurrer as admitting all material facts properly pleaded," but we do not "assume the truth of contentions, deductions or conclusions of law." (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) We liberally construe the pleading to achieve substantial justice between the parties, giving the complaint a reasonable interpretation and reading the allegations in context. (Code Civ. Proc., § 452; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) When a demurrer is sustained, we must determine de novo whether the complaint alleges facts sufficient to state a cause of action under any legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) When a demurrer is sustained without leave to amend, we also must decide whether there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) ...


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