Opinion ID: 2516402
Heading Depth: 2
Heading Rank: 2

Heading: The Alleged Acts and Motives

Text: Even if the exclusivity provisions cover the alleged injury, plaintiffs may still pursue their causes of action if they fit within the narrow exception to the WCAB's jurisdiction established in Unruh, supra, 7 Cal.3d at pages 629-631, 102 Cal.Rptr. 815, 498 P.2d 1063. ( Marsh, supra, 49 Cal.3d at p. 6, 259 Cal.Rptr. 733, 774 P.2d 762.) This exception focuses on the alleged acts or motives that establish the elements of the cause of action and considers whether these acts or motives constitute a risk reasonably encompassed within the compensation bargain. ( Shoemaker, supra, 52 Cal.3d at p. 16, 276 Cal.Rptr. 303, 801 P.2d 1054.) If they do, then the exclusive remedy provisions govern and bar the cause of action. If they do not, then the exclusive remedy provisions are inapplicable because the malfeasor is no longer acting as an employer, as understood in these provisions. (§§ 3600, 3602, 3850.) Here, plaintiffs' abuse of process and fraud claims do not fall within this exception, but their Cartwright Act and RICO claims do. In addition, plaintiffs' tortious interference and UCL claims escape preemption to the extent they are predicated on the conspiratorial acts of defendantsand not on the individual misdeeds of each defendant. Since Unruh, courts have struggled to define the contours of this exception to workers' compensation exclusivity. Throughout the years, we have identified various circumstances where the exception precludes application of the exclusive remedy provisions. For example, we have held that conduct having a `questionable' relationship to the employment is not protected by the exclusivity rule. ( Cole, supra, 43 Cal.3d at p. 161, 233 Cal.Rptr. 308, 729 P.2d 743; see also Magliulo v. Superior Court (1975) 47 Cal.App.3d 760, 779, 121 Cal.Rptr. 621 ( Magliulo ).) We have also stated that conduct going beyond the normal role of an insurer in a compensation scheme intended to protect the worker is exempt from exclusivity. ( Unruh, supra, 7 Cal.3d at p. 630, 102 Cal.Rptr. 815, 498 P.2d 1063; see also Marsh, supra, 49 Cal.3d at p. 11, 259 Cal.Rptr. 733, 774 P.2d 762 [only conduct so extreme and outrageous that the defendant in effect stepped out of its role as an insurer precludes the application of workers' compensation exclusivity].) Despite these vague pronouncements, several guiding principles are clear. When determining whether the exception applies to a cause of action, courts first determine whether the alleged acts that give rise to that cause of action are of the kind that [are] within the compensation bargain. ( Fermino, supra, 7 Cal.4th at p. 718, 30 Cal.Rptr.2d 18, 872 P.2d 559.) In making this determination, courts may consider only those acts that relate to an element of the cause of action. Where these acts are a normal part of the employment relationship ( Cole, supra, 43 Cal.3d at p. 160, 233 Cal.Rptr. 308, 729 P.2d 743) or the workers' compensation claims process (see Mitchell v. Scott Wetzel Services, Inc. (1991) 227 Cal.App.3d 1474, 1480-1481, 278 Cal.Rptr. 474 ( Mitchell )), the cause of action is subject to exclusivity. Otherwise, it is not. For this initial determination, courts consider only the acts themselves and not the motive behind the acts. (See Fermino, supra, 7 Cal.4th at pp. 722-723, 30 Cal.Rptr.2d 18, 872 P.2d 559.) In the exclusivity context, motive refers to the purpose or reason behind the acts and not the intentional or negligent nature of these acts. (See ibid. ) Thus, courts should disregard any alleged intent beyond the intent to do the acts that establish the elements of the cause of action when determining whether these acts are encompassed within the compensation bargain. Such a focus is necessary in order to preserve the compensation bargain. Indeed, permitting civil claims based on conduct that appeared on its face to be a normal part of the employment relationship [or claims process] . . . merely because the mental state . . . rendered the conduct intentionally or knowingly tortious undermines the premise behind the workers' compensation system. ( Id at p. 713, 30 Cal.Rptr.2d 18, 872 P.2d 559.) Thus, typical employer actions such as demotions, promotions, criticism of work practices, and frictions in negotiations as to grievances do not, by themselves, exempt a cause of action from exclusivity. ( Cole, supra, 43 Cal.3d at p. 160, 233 Cal.Rptr. 308, 729 P.2d 743.) Similarly, termination, a known risk of any employment relationship, does not, by itself, insulate a cause of action from the exclusive remedy provisions. (See Shoemaker, supra, 52 Cal.3d at p. 20, 276 Cal.Rptr. 303, 801 P.2d 1054.) [Reasonable attempts to investigate employee theft, including employee interrogation, are [also] a normal part of the employment relationship and cannot give rise to a court action against the employer. ( Fermino, supra, 7 Cal.4th at p. 717, 30 Cal.Rptr.2d 18, 872 P.2d 559.) Insurer activity intrinsic to the workers' compensation claims process is also a risk contemplated by the compensation bargain. Thus, insurer actions closely connected to the payment of benefits fall within the scope of the exclusive remedy provisions. ( Mitchell, supra, 227 Cal. App.3d at p. 1481, 278 Cal.Rptr. 474.) For example, a claims investigation, by itself, does not exempt a cause of action from exclusivity. (See Unruh, supra, 7 Cal.3d at pp. 628-629, 102 Cal.Rptr. 815, 498 P.2d 1063; Teague v. Home Ins. Co. (1985) 168 Cal.App.3d 1148, 1153, 214 Cal.Rptr. 773 ( Teague ).) Because denying or objecting to claims for benefits is also a normal part of the claims process, misconduct stemming from the delay or discontinuance of payments . . . is properly addressed by the WCAB. ( Marsh, supra, 49 Cal.3d at p. 11, 259 Cal.Rptr. 733, 774 P.2d 762.) Indeed, California courts have invariably barred statutory and tort claims alleging that an insurer unreasonably avoided or delayed payment of benefits even though the insurer committed fraud and other misdeeds in the course of doing so. [8] Of course, an employer or insurer may not use the exclusive remedy provisions as a get out of jail free card by characterizing its acts as a normal employer or insurer activity. What matters . . . is not the label that might be affixed to the . . . conduct. . . . ( Fermino, supra, 7 Cal.4th at p. 718, 30 Cal.Rptr.2d 18, 872 P.2d 559.) Rather, the critical issue is whether the alleged acts, bereft of their motivation, can ever be viewed as a normal aspect of the employer relationship or claims process. ( Ibid. ) Where the tortious act is not closely connected to a normal employer or insurer action, it is not subject to exclusivity. (See Marsh, supra, 49 Cal.3d at p. 10, 259 Cal.Rptr. 733, 774 P.2d 762 [Only when the entity commits tortious acts independent of its role as a provider of workers' compensation benefits may an employee maintain a private cause of action under Unruh ].) Thus, courts have permitted fraud claims against an employer when the employer conceals the existence of an employee's workplace injury because such concealments cannot be linked to a normal employer action. (See Johns-Manville, supra, 27 Cal.3d at p. 477, 165 Cal.Rptr. 858, 612 P.2d 948.) Involuntary confinement is not closely connected to a typical employment action even when committed in the course of an investigation of employee theft. Therefore, a claim of false imprisonment, by definition, falls outside the scope of the compensation bargain. ( Fermino, supra, 7 Cal.4th at p. 723, 30 Cal. Rptr.2d 18, 872 P.2d 559.) Indeed, violent and coercive criminal conduct committed against an employee's person is always illegal regardless of the employer's state of mind and is never subject to the exclusive remedy provisions. ( Id, at p. 723, fn. 7, 30 Cal.Rptr.2d 18, 872 P.2d 559; see also Iverson v. Atlas Pacific Engineering (1983) 143 Cal.App.3d 219, 227-228, 191 Cal.Rptr. 696 [physical assault and false imprisonment]; Meyer v. Graphic Arts International Union (1979) 88 Cal.App.3d 176, 178-179, 151 Cal.Rptr. 597 [assault and battery, false imprisonment, and rape]; Magliulo, supra, 47 Cal.App.3d at pp. 763, 779, 121 Cal.Rptr. 621 [assault and battery].) With respect to insurers, courts have permitted fraud claims when the insurer denies the existence of a workers' compensation insurance policy, because such denials are not a normal part of the claims process. (See Jablonski v. Royal Globe Ins. Co. (1988) 204 Cal.App.3d 379, 391, 251 Cal.Rptr. 160.) Trespassing is also an atypical insurer activity even when committed in the course of a claims investigation. Therefore, it falls outside the compensation bargain. (See Teague, supra, 168 Cal.App.3d at p. 1153, 214 Cal. Rptr. 773.) Finally, assault and the formation of a romantic relationship with an injured employee are not closely connected to the claims process and are exempt from exclusivity. (See Unruh, supra, 7 Cal.3d at pp. 627-628, 630-631, 102 Cal.Rptr. 815, 498 P.2d 1063.) In addition to the acts themselves, the motive element of a cause of action may insulate that cause of action from the purview of the exclusive remedy provisions. This exception to exclusivity, however, is quite limited. [A]ny inquiry into an employer's motivation is undertaken not to determine whether the employer intentionally or knowingly injured the employee, but rather to ascertain whether the employer's conduct violated public policy and therefore fell outside the compensation bargain. ( Fermino, supra, 7 Cal.4th at pp. 714-715, 30 Cal.Rptr.2d 18, 872 P.2d 559.) In other words, the motive element of a cause of action excepts that cause of action from exclusivity only if it violates a fundamental public policy of this state. (See Gantt, supra, 1 Cal.4th at p. 1100, 4 Cal.Rptr.2d 874, 824 P.2d 680.) Thus, we have refused to bar both statutory and tort claims where their motive element violates such a policy. (See, e.g., City of Moorpark, supra, 18 Cal.4th at pp. 1155, 1161, 77 Cal.Rptr.2d 445, 959 P.2d 752 [FEHA claim]; Gantt, at p. 1100, 4 Cal.Rptr.2d 874, 824 P.2d 680 [ Tameny claim]; Shoemaker, supra, 52 Cal.3d at pp. 22-23, 276 Cal.Rptr. 303, 801 P.2d 1054 [whistleblower claim under Gov.Code, former § 19683].) We now apply these principles to plaintiffs' specific claims and allegations.
After reviewing the acts and motives that give rise to plaintiffs' abuse of process and fraud claims, we conclude these claims do not fit within the Unruh exception to workers' compensation exclusivity. Thus, they are barred. Plaintiffs' abuse of process and fraud claims, in essence, allege that each defendant engaged in a pattern or practice of delaying or denying payments in bad faith. For example, the abuse of process claims allege that defendants misused the claims process by making frivolous objections, filing sham petitions and documents with the WCAB, issuing unnecessary subpoenas, and improperly threatening to depose plaintiffs' physicians. Similarly, the fraud claim states that each individual defendant made false statements about and during its processing of plaintiffs' lien claims. All of these alleged acts are closely connected to a normal insurer activity the processing and payment of medical lien claims. Therefore, plaintiffs' abuse of process and fraud claims are encompassed within the compensation bargain. (See Marsh, supra, 49 Cal.3d at pp. 9-11, 259 Cal.Rptr. 733, 774 P.2d 762.) In reaching this conclusion, we reject plaintiffs' attempt to shield these claims from preemption by including superfluous allegations unrelated to the elements of the cause of action. For example, plaintiffs claim defendants committed abuse of process by advising other insurers not to pay plaintiffs' claims, distributing hit lists of medical providers and conducting training sessions on how to delay or avoid payments on plaintiffs' claims. These acts do not, however, support an abuse of process claim because they do not involve the use of a procedure incident to litigation. ( Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 104, fn. 4, 101 Cal.Rptr. 745, 496 P.2d 817 ( Barquis ).) Consequently, they cannot shield plaintiffs' abuse of process claims from the reach of the exclusive remedy provisions. Plaintiffs' characterization of defendants' acts of fraud as a scheme suffers from the same defect. Fraud does not require a scheme, and a scheme does not establish an element of a fraud claim. (See Civ. Code, § 1709.) Thus, the existence of a scheme cannot insulate plaintiffs' fraud claim from preemption. In any event, the mere allegation of a conspiracy is not enough where, as here, the alleged acts in furtherance of the conspiracyi.e., the fraudulent statementsare closely connected to claims processing, a normal insurer activity. (See Hazelwerdt v. Industrial Indent. Exchange (1958) 157 Cal. App.2d 759, 763, 321 P.2d 831 ( Hazelwerdt ).) The fact that the misdeeds alleged in the abuse of process and fraud claims may constitute crimes under Insurance Code sections 1871 and 1871.4 does not alter our conclusion. Unlike those classes of intentional . . . crimes against the employee's person by means of violence and coercion, such as those crimes numerated in part 1, title 8 of the Penal Code, regulatory crimes like the ones cited by plaintiffs do not violate the employee's reasonable expectations and transgress the limits of the compensation bargain. ( Fermino, supra, 7 Cal.4th at p. 723, fn. 7, 30 Cal. Rptr.2d 18, 872 P.2d 559; see also Up-Right, Inc. v. Van Erickson (1992) 5 Cal. App.4th 579, 582-584, 7 Cal.Rptr.2d 34 ( Up-Right ) [criminal violations of child labor laws do not support an exception to exclusivity].) Finally, neither abuse of process nor fraud contains a motive element that violates a fundamental public policy. Abuse of process claims merely require malice, which may be inferred from the wilful abuse of the process. ( Tranchina v. Arcinas (1947) 78 Cal.App.2d 522, 526, 178 P.2d 65.) This malice element does not violate a fundamental public policy. Meanwhile, fraud requires only an intent to induce another to alter his position to his injury or risk and not an intent that violates a public policy rooted in a constitutional, statutory, or regulatory provision. (Civ.Code, § 1709.) Because the acts and motives underlying plaintiffs' abuse of process and fraud claims fall within the risks contemplated by the compensation bargain, these claims are barred. (See Shoemaker, supra, 52 Cal.3d at p. 16, 276 Cal. Rptr. 303, 801 P.2d 1054.)
Although we find plaintiffs' abuse of process and fraud claims barred on exclusivity grounds, we reach a contrary conclusion as to their Cartwright Act claim. Because the wrongful acts and motives that give rise to plaintiffs' Cartwright Act claim fall outside the compensation bargain, it is not subject to workers' compensation exclusivity. We begin with the alleged acts that give rise to plaintiffs' Cartwright Act claim. The Cartwright Act makes unlawful any `trust.' ( Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, 118, 81 Cal.Rptr. 592, 460 P.2d 464 ( Jones ); Bus. & Prof.Code, § 16726.) To establish that defendants comprised a trust, plaintiffs allege that defendants combined their capital, skill and acts in order to drive them out of business. As part of this combination, each defendant not only mishandled lien claims filed against it, but also: (1) encouraged other insurers to deny plaintiffs' claims; (2) distributed hit lists of medical providers; and (3) exchanged strategies for delaying or avoiding payments to plaintiffs. This concerted effort by insurers to interject themselves into lien claims they did not insure is not a normal part of the claims process. Indeed, only the insurer that has insured a claimant's employer and no other insureris typically involved in that claimant's workers' compensation claim. By conspiring to influence the processing of claims it did not insure, each defendant stepped outside its proper role as an insurer and became a `person other than the employer.' ( Unruh, supra, 7 Cal.3d at p. 630, 102 Cal.Rptr. 815, 498 P.2d 1063.) In doing so, each defendant stripped itself of the protection afforded by the exclusive remedy provisions of the WCA. The motive element of a Cartwright Act claim also makes the exclusivity bar inapplicable. A cause of action for restraint of trade under the Cartwright Act . . . must allege . . . a purpose to restrain trade. ( Jones, supra, 1 Cal.3d at p. 119, 81 Cal.Rptr. 592, 460 P.2d 464; see also Bus. & Prof.Code, § 16726.) By imposing such a requirement, [t]he Cartwright Act merely articulates in greater detail a public policy against restraint of trade that has long been recognized at common law. ( Speegle v. Board of Fire Underwriters (1946) 29 Cal.2d 34, 44, 172 P.2d 867 ( Speegle ).) Because a Cartwright Act claim requires a motive that violates a fundamental public policy rooted in a statutory provision, it is not reasonably encompassed within the compensation bargain. Hazelwerdt does not compel a contrary result. In Hazelwerdt, the plaintiff alleged that an insurer and a physician employed by that insurer to treat the plaintiff conspired to mishandle the plaintiffs medical treatment. The Court of Appeal barred plaintiffs civil conspiracy claim because the acts in furtherance of the conspiracy were closely connected to a normal insurer activitythe provision of medical treatment for a workplace injury. (See Hazelwerdt, supra, 157 Cal.App.2d at p. 763, 321 P.2d 831.) Unlike the conspiracy claim in Hazelwerdt, plaintiffs' Cartwright Act claim alleges that each defendant conspired with parties that had no role in the handling of that defendant's claims and sought to influence lien claims filed against other unrelated insurers. Thus, defendants' conspiratorial acts cannot be linked to a normal insurer action during the claims process. (See Fermino, supra, 7 Cal.4th at p. 718, 30 Cal.Rptr.2d 18, 872 P.2d 559.) Moreover, a Cartwright Act claim, unlike a civil conspiracy claim, requires a motive that violates a fundamental public policy. (Compare Speegle, supra, 29 Cal.2d at p. 44, 172 P.2d 867, with Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1019, 48 Cal. Rptr.2d 174.) Accordingly, Hazelwerdt is inapposite, and we decline to bar plaintiffs' Cartwright Act claim on exclusivity grounds.
We reach a similar conclusion with respect to plaintiffs' RICO claims. The pattern of racketeering activity necessary to establish a RICO enterprise always falls outside the scope of the compensation bargain. Thus, plaintiffs' RICO claims are exempt from the exclusivity bar. In their complaint, plaintiffs allege that defendants violated and conspired to violate 18 United States Code section 1962(c). A violation of 18 United States Code section 1962(c) requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. ( Sedima, S.P.R.L. v. Imrex Co., Inc. (1985) 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346, fn. omitted.) To establish a pattern of racketeering activity, plaintiffs must allege at least two predicate acts that `are interrelated by distinguishing characteristics' ( H.J. Inc. v. Northwestern Bell Telephone Company (1989) 492 U.S. 229, 240, 109 S.Ct. 2893, 106 L.Ed.2d 195 ( H.J.Inc. )) and amount to or pose a threat of continued criminal activity. ( Id at p. 239, 109 S.Ct. 2893.) [T]he threat of continuity is sufficiently established where the predicates can be attributed to a defendant operating as part of a long-term association that exists for criminal purposes or where it is shown that the predicates are a regular way of conducting defendant's ongoing legitimate business . . . or of conducting or participating in an ongoing and legitimate RICO `enterprise.' ( Id. at pp. 242-243,109 S.Ct. 2893, fn. omitted.) Here, plaintiffs' RICO claims allege that defendants conducted or conspired to conduct various enterprises through numerous acts of mail and wire fraud. Because these predicate acts of mail and wire fraud allegedly form a pattern of racketeering activity, they, by definition, cannot be closely connected to a normal insurer activity. The compensation bargain anticipates that an insurer may commit various misdeeds during the claims process, including some criminal acts. (See Fermino, supra, 7 Cal.4th at p. 723, fn. 7, 30 Cal.Rptr.2d 18, 872 P.2d 559; Vuillemainroy v. American Rock & Asphalt, Inc. (1999) 70 Cal.App.4th 1280, 1286-1287, 83 Cal.Rptr.2d 269 [involuntary manslaughter does not support an exception to exclusivity]; Up-Right, supra, 5 Cal.App.4th at pp. 582-584, 7 Cal.Rptr.2d 34.) It does not contemplate that an insurer will engage in systematic and longterm criminal activities bound by common `purposes, results, participants, victims, or methods of commission. . . .' ( H.J. Inc., supra, 492 U.S. 229, 240, 109 S.Ct. 2893, 106 L.Ed.2d 195, quoting 18 U.S.C. former § 3575(e).) Indeed, such organized and systemic criminal misconduct is always illegal, regardless of the employer's state of mind. (See 18 U.S.C. § 1962.) Accordingly, RICO claims are never subject to the exclusive remedy provisions, and we refuse to bar them here. (See Fermino, supra, 7 Cal.4th at p. 723, fn. 7, 30 Cal.Rptr.2d 18, 872 P.2d 559.)
We now turn to plaintiffs' remaining claimstortious interference with business relations and violations of the UCL. These claims encompass a wide range of misconduct due, in part, to the breadth of these causes of action and some haziness in the pleadings. After reviewing the alleged misconduct, we conclude these claims are barred to the extent they focus on the individual misdeeds of each defendant. They, however, are not precluded to the extent they are predicated on the conspiratorial misconduct of defendants. As an initial matter, we note that neither tortious interference nor the UCL requires a motive that violates a fundamental public policy. Tortious interference claims encompass wrongful interferences and do not require an improper motive. ( Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393, 45 Cal.Rptr.2d 436, 902 P.2d 740 ( Della Penna ).) The UCL focuses solely on conduct and prohibits `anything that can properly be called a business practice and that at the same time is forbidden by law.' ( Barquis, supra, 7 Cal.3d at p. 113, 101 Cal.Rptr. 745, 496 P.2d 817, quoting Note, Unlawful Agricultural Working Conditions as Nuisance or Unfair Competition (1968) 19 Hastings L.J. 398, 408-409.) As a result, to state a claim under the [UCL] one need not plead and prove the elements of a tort. Instead, one need only show that `members of the public are likely to be deceived.' ( Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267, 10 Cal.Rptr.2d 538, 833 P.2d 545, quoting Chern v. Bank of America (1976) 15 Cal.3d 866, 876, 127 Cal.Rptr. 110, 544 P.2d 1310.) Thus, these claims only escape preemption if the underlying acts fall outside the scope of the compensation bargain. An examination of the alleged acts underlying plaintiffs' tortious interference and UCL claims yields mixed results. These acts fit into two categories: (1) individual acts of a defendant that establish a pattern or practice of mishandling plaintiffs' lien claims; or (2) acts in furtherance of a conspiracy among defendants to mishandle plaintiffs' lien claims. As explained below, we find plaintiffs' tortious interference and UCL claims barred to the extent they are predicated on the first category of misconduct but permissible to the extent they are based on the second. The first category of misconduct covers the wrongful acts of each individual defendant during the claims process and is virtually identical to the misconduct alleged in plaintiffs' abuse of process and fraud claims. The mere fact that an individual insurer has a pattern or practice of bad faith delays or denials of payment is not enough to insulate a cause of action from preemption where, as here, each wrongful act is closely connected to a normal insurer activitythe processing of medical lien claims. Indeed, such misconduct is indistinguishable from the insurer misconduct alleged in the claims barred by Marsh, supra, 49 Cal.3d at pages 9-11, 259 Cal.Rptr. 733, 774 P.2d 762. [9] In contrast, the second category involves far more than the pattern or practice of an individual insurer. This misconduct consists of a conspiracy among multiple insurers to coordinate the economic destruction of plaintiffs through the mishandling of their lien claims. By joining this conspiracy, each individual defendant necessarily became involved in claims it did not insure. Thus, the second category of misconduct is almost identical to the misconduct underlying plaintiffs' Cartwright Act claim and cannot be connected to a normal insurer activity. Accordingly, plaintiffs' tortious interference and UCL claims are not barred to the extent they are predicated on defendants' conspiratorial acts. In closing, we stress that our decision today merely holds that some of plaintiffs' claims are not barred by the exclusive remedy provisions of the WCA. We make no judgment as to the viability of these claims, and defendants are free to challenge them on any other grounds.