Saturday, April 26, 2014

Payout Preservation and Partially Prevailing Payments

Bonanno v. Verizon Bus. Net. Sys., 2014 VT 24

By Andrew Delaney

This case is about the vagaries of workers’ compensation settlements—with a Vermont-specific twist to keep it interesting.

Plaintiff sued his employer and its third-party administrator for breach of a workers’ compensation settlement agreement. The superior court granted summary judgment against plaintiff and in favor of employer, but awarded plaintiff a small amount of attorney’s fees. Plaintiff appealed, arguing that employer shouldn’t have been able to deduct temporary total disability (TTD) payments from the total settlement payout, and that the attorney’s fee award was too small.  Employer appealed the attorney’s fee award—period. The SCOV affirms. 
 

The facts underlying the settlement are, as the SCOV puts it, “somewhat convoluted.” Plaintiff was working for Verizon when he “suffered spinal cord injuries during a series of three car accidents.” The employer challenged the necessity of a proposed surgery and plaintiff won that battle at the administrative level. Read more about that here. Employer appealed that decision to the superior court.

There were complications from the surgery “that necessitated lifetime care.” Before the trial on appeal (which sounds weird but is an actual thing), the parties reached a settlement agreement. The Department of Labor (DOL) generally has to approve worker’s compensation settlement agreements before they become effective. The proposed settlement included (1) a lump-sum payment payable within fifteen days of approval; (2) payment of TTD benefits to a certain date; and (3) payment of “regular medical benefits” until 30 days after a medical trust received approval. Eventually, the DOL approved the agreement.

Seems simple enough, right? Well, employer sent a check that plaintiff felt was short by approximately $13 grand. Employer’s explanation was that it had taken credit for interim TTD payments—the TTD payments made after the date certain in the agreement but before approval by the DOL. Employer, through its third-party administrator, also refused to pay for a doctor’s visit made in the interim because—in the administrator’s view—it wasn’t related to the work injury.

“Hold up just a second, here!” said plaintiff, and filed suit. In pretrial proceedings, employer admitted to making an error in calculating the TTD credit and issued a couple of refund checks for the miscalculation and interest. Employer also filed a motion to compel an expert disclosure for the medical bill, which was granted. Plaintiff submitted the disclosure, and employer paid up.

Employer and its administrator then “moved for summary judgment, which the trial court granted.” The trial court concluded that the total amount called for in the lump-sum settlement had been paid, and rejected plaintiff’s the-payments-made-in-the-not-specifically-covered-by-the-agreement-time-were-voluntary argument, reasoning that employer was essentially required to make those payments during the pendency of the agreement because a notice to discontinue payments—even if run up the flagpole—wouldn’t have flown.

On a motion for reconsideration, the trial court granted plaintiff a small, heavily discounted award of attorney’s fees for his troubles in enforcing the medical-payments provision of the agreement, noting that the defendants had to file a motion to compel and that they paid up after plaintiff gave them proof. Plaintiff appealed and employer cross-appealed on the attorney’s fees issue.

Plaintiff’s first argument is that the trial court shouldn’t have granted summary judgment. The SCOV completely reviews a grant of summary judgment with no deference to the trial court. If the standards were Twitter hashtags, it’d go something like this: #denovo #nogenuinedisputeofmaterialfact, #entitledtojudgmentasamatteroflaw, #nonmovingpartydeference. I don’t know about you, but I’m greatly amused by the idea of the SCOV “tweeting” opinions. Alas, it’ll probably never happen.

Back to our regular programming . . . plaintiff’s argument turns on employer’s failure to file a notice of discontinuance of payments after the date-certain for termination of TTD payments in the agreement. Because there was no notice, plaintiff contends that the interim payments were purely voluntary and employer should not get credit for them as an advance against the lump-sum settlement amount.

The SCOV notes that an employer’s payment is considered voluntary when there’s no obligation to make the payment or when the payment doesn’t protect any of the employer’s interests. Here, the SCOV concludes that, under the workers’ compensation rules, employer’s interim TTD payments were not voluntary. The SCOV reasons that employer’s duty to pay only ceased upon the DOL’s approval of the settlement agreement. The agreement also specifically indicated when TTD payments would cease should the agreement be approved.

Thus, the SCOV reasons that the approval had a retroactive effect—terminating employer’s obligation to make TTD payments as of the date in the agreement, and making payments made in the interim credit eligible—after all, it’s what the parties agreed to. The SCOV concludes that the lump-sum and termination-of-TTD provisions, when read together, dictate that the TTD payments made after the date certain be treated as an advance against the total settlement. Otherwise—as the trial court noted—plaintiff would receive a windfall beyond what the parties agreed to.

The SCOV also notes that nothing in the workers’ compensation rules allows a termination of TTD payments on the basis of a submitted yet-to-be-approved settlement agreement. Accordingly, the SCOV is satisfied that the payments were not voluntary, that employer was entitled to credit for the payments, and that summary judgment was proper.

The SCOV emphasizes that it limits its holding “on the specific terms of the parties’ approved settlement agreement in this case and the timing of the settlement approval process.”

Plaintiff’s next argument is that the attorney’s fee award was unreasonably small. Defendants argue that plaintiff didn’t get any judicial relief and thus can’t get any attorney’s fees. The general rule is that unless there’s a contractual or statutory provision, parties pay for their own lawyers.

In this case, there’s a statute that allows an employee to recover reasonable attorney fees if the employee prevails in enforcing an approved agreement. Here, the trial court allowed only a small amount of attorney’s fees because plaintiff prevailed only slightly on the medical payments issue—employer paid the bill during litigation, but nonetheless, had wrongly refused to pay the bill initially.

Defendants’ argument is based on a SCOTUS decision that generally holds a court’s decision is a predicate of an attorney’s fees award. Under the SCOTUS decision, plaintiff can’t recover any attorney’s fees.

The SCOV’s decision thus becomes whether to keep Vermont’s catalyst theory or follow the SCOTUS’s reasoning. Here’s the Vermont-specific twist.  The SCOV rejects the SCOTUS's reasoning.  Go Vermont!

Our catalyst theory holds that if a lawsuit is an important and necessary element for changing the other party’s mind and there’s a reasonable likelihood of success on the merits, then it can be considered “prevailing” for purposes of the statute. Phrased another way, this might be called the “just-because-you-do-something-you-were-going-to-have-to-do-anyway-when-you-did-it-wrong-in-the-first-place-doesn’t-mean-you’re-off-the-hook” theory. But I guess “catalyst” has that brevity thing going for it.

Here, the SCOV reasons that the lawsuit was surely a necessary and important factor in changing defendants’ position and that plaintiff had a reasonable-enough likelihood of success—defendants had paid for the same doctor in the past and the diagnosis was related to (if slightly different) to past diagnoses. Plus, the burden was on defendants to show that the denial was reasonable. On the whole, the SCOV concludes that the trial court’s conclusion that plaintiff prevailed on the medical bills issue was reasonable.

An attorney’s fees award is discretionary. Here, the SCOV reasons that the trial court did not abuse its discretion in that function. The SCOV does make sure to note that, in general, courts should remember to keep the burden on employers in showing that a denial is reasonable, and that a reduction may not be warranted when an employee has to fight with an employer to get them to pay a bill. Nonetheless, in this case, the SCOV reasons that the medical bill was a largely peripheral issue and that the substantial reduction in requested fees was therefore warranted.

#affirmed.

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