Leegin Creative Leather Products v. Diaz

Guest Blogger: Steven M. Chanley

Leegin Creative Leather Products v. Diaz

The employer sued an employee for fraud after a sub rosa investigation captured evidence that the employee displayed physical capabilities that were inconsistent with her temporary total disability claim. The civil suit was filed while the application was still pending before the WCAB and before there had been any administrative finding of fraud. The trial court granted the employee’s anti-SLAPP motion to dismiss.

The Court of Appeal affirmed. The employer did not contest that the employee’s application to the WCAB implicated her right to petition the government for the redress of grievances, and the Court of Appeal determined that, for two reasons, the employer’s Complaint failed to make a prima facie showing sufficient to sustain a judgment in its favor. First, the employer’s forwarding the employee’s application for benefits to its insurer was not evidence of justifiable reliance, according to the Court, because that act was non-discretionary and compelled by law. Second, the Court found that the employer could not show any resulting loss, because any eventual finding of fraud by the WCAB would preclude an award of benefits and an increase in insurance premiums as a matter of law. The Court of Appeal also based its holding on public policy grounds: “Permitting an employer to bring a civil action for fraud against an employee while the workers’ compensation proceeding is pending could have a chilling effect on an employee’s exercise of the right to file a workers’ compensation claim.”

Comment: This is clearly the case of a company’s frustration over a frivolous comp claim trumping its better judgment. As the Court of Appeal points out, adequate remedies exist at the administrative level (where the insurer bears the attorneys’ costs) for dealing with applicant fraud. I’ll bet the civil suit was probably several times costlier than whatever premium increase the employer would feel as a result of the comp claim.