Opinion
1:01cv171-C.
September 21, 2001
MEMORANDUM AND RECOMMENDATION
THIS MATTER is before the court upon defendant's Motion to Dismiss. Having carefully considered that motion and reviewed the pleadings, the undersigned enters the following findings, conclusions, and recommendation.
FINDINGS AND CONCLUSIONS
I. Procedural History
The complaint in this matter was filed on June 15, 2001, in the North Carolina General Court of Justice, Superior Court Division, Haywood County. Asserting diversity jurisdiction, defendant removed the matter to this court on July 24, 2001. 28 U.S.C. § 1332(a)(1). On August 16, 2001, defendant filed the instant Motion to Dismiss, and plaintiff filed his response August 31, 2001. No reply was filed by the reply deadline of September 13, 2001.
II. Background
In this action, plaintiff is the beneficiary of a life-care plan he received in settlement of claim under workers' compensation that arose from an on-the-job injury in 1990. Pursuant to a "custodial plan" entered into in 1999, which is ancillary to plaintiff's settlement agreement with his employer, defendant administers funds that it uses to pay plaintiff's medical expenses on a monthly basis. It is plaintiff's contention that defendant improperly has paid for unreasonable medical expenses and unreasonable case management hours. Plaintiff asserts claims for breach of contract, breach of fiduciary duty, and unfair and deceptive trade practices. Plaintiff also seeks declaratory relief in the form of an accounting of the funds remaining in the "Custodial Account" and a determination of whether plaintiff is entitled to a refund or distribution.
Defendant has moved to dismiss the action, contending that the North Carolina Industrial Commission has exclusive jurisdiction over this matter. Fed.R.Civ.P. 12(b)(1). Plaintiff contends that the jurisdiction of the Industrial Commission does not reach this matter, inasmuch as the "Custodial Agreement" entered into with defendant was not submitted to the Commission for approval.
III. Standard
Defendant has moved for dismissal pursuant to Rule 12(b), Federal Rules of Civil Procedure, contending that this court lacks jurisdiction over the subject matter of the case. Rule 12(b) authorizes dismissal based upon a dispositive issue of law. Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 1832 (1989); Hishon v. Kinci Spalding, 467 U.S. 69, 73 (1984); Conley v. Gibson, 355 U.S. 41 (1957). As the Court discussed inNeitzke:
This procedure [for dismissal], operating on the assumption that the factual allegations in the complaint are true, streamlines litigation by dispensing with needless discovery and fact finding. Nothing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable. On the contrary, if as a matter of law "it is clear that no relief could be granted under any set of facts . . . a claim must be dismissed, without regard to whether it is based on outlandish legal theory . . . What Rule 12(b)(6) does not countenance are dismissals based on a judge's disbelief of a complaint's factual allegations."Id., at 1832 (citation omitted). For the limited purpose of making a recommendation as to disposition of defendant's motion, the undersigned has accepted as true the facts alleged by plaintiff in the complaint and has viewed them in a light most favorable to plaintiff.
IV. Discussion
As have counsel for the respective parties, this court has searched the reported cases to determine whether disputes that arise from a "custodial agreement" made after and in furtherance of a settlement agreement that was approved by the Industrial Commission, fall within the exclusive jurisdiction of that administrative body. There are no reported cases directly on point; however, this court's reading of reported cases indicates that North Carolina intends the Industrial Commission to be the adjudicator of all disputes arising from injuries sustained on the job (with one exception, not relevant here), all settlement agreements between the employee and employer, and all agreements ancillary or secondary to any Commission-approved settlement or other resolution.
Review of the issue presented must begin with the statutory source — Chapter 97-91 of the North Carolina General Statutes — which provides, in relevant part, as follows:
All questions arising under [the Workers' Compensation Act] if not settled by agreements of the parties interested therein, with the approval of the Commission, shall be determined by the Commission, except as otherwise . . . provided.Id. In Pearson v. C. P. Buckner Steel Erection Co., 348 N.C. 239 (1998), the North Carolina Supreme Court held that the state legislature "intended the Commission to have continuing jurisdiction of proceedings begun before it." Id., at 241-42 (citations omitted). The court inPearson further held that such continuing jurisdiction includes the ability to determine "which [medical] expenses must be paid and in what amount." Id., at 242. In a more recent decision, the North Carolina Court of Appeals held that such continuing jurisdiction applied not just to claims approved by the Commission, but also to claims ancillary to a compromise settlement agreement. To give a sense of the comprehensive nature of the Industrial Commission's jurisdiction, this court will quote at length from Deem v. Treadaway Sons Painting and Wallcovering. Inc., ___ N.C. App. ___, 543 S.E.2d 209 (2001):
Notwithstanding the former release and settlement agreement, on 31 December 1998, plaintiff filed this suit against Treadaway Painting, Montgomery Mutual, Pratt, Goad, Concentra and Concentra's three employees, alleging that defendants committed fraud, bad faith, unfair and deceptive trade practices, intentional infliction of emotional distress and civil conspiracy arising out of the handling of his workers' compensation claim.
* * *
In enacting the North Carolina Workers' Compensation Act ("the Act"), our General Assembly set clear boundaries for how an employee injured on the job must seek remedy. Additionally, although the Legislature has amended parts of the Act over time, the main thrust of the Act and its purpose have remained the same:
. . . to provide compensation for an employee in this State who has suffered an injury by accident which arose out of and in the course of his employment, the compensation to be paid by the employer, in accordance with the provisions of the act, without regard to whether the accident and resulting injury was caused by the negligence of the employer, as theretofore defined by the law of this State. . . .
Johnson, 131 N.C. App. at 144, 504 S.E.2d at 810 (quoting Lee v. American Enka Corp., 212 N.C. 455, 461-62, 193 S.E. 809, 812 (1937)). We note here that, North Carolina is a contributory negligence state. Thus, to gain any remedy before the Act was enacted, an employee injured on the job would be subject to proving not only that the employer was negligent but that she herself was not negligent at all. See Woodson v. Rowland, 329 N.C. 330, 338, 407 S.E.2d 222, 227 (1991); Blue v. Canela, 139 N.C. App. 191, 532 S.E.2d 830 (2000). Instead, under the Act:
The right of the employee to compensation, and the liability of the employer therefor[e], are founded upon mutual concessions, as provided in the [A]ct, by which each surrenders rights and waives remedies which he theretofore had under the law of this State. . . .
Johnson, 131 N.C. App. at 144, 504 S.E.2d at 810 (emphasis in original) (quoting American Enka Corp., 212 N.C. at 462, 193 S.E. at 812). Thus, although there is a trade-off of rights, our Supreme Court has held that "[t]he act establishes a sound public policy, and is just to both employer and employee." American Enka Corp., 212 N.C. at 462, 193 S.E. at 812. See also Woodson, 329 N.C. at 338, 407 S.E.2d at 227.
Nevertheless, plaintiff at bar argues that it matters not that his claims originally arose out of his compensable injury. Instead, he argues that the "intentional conduct" of defendants fails to come under the exclusivity provisions of the Act because that conduct did not arise out of and in the course of plaintiff's employment relationship. Again, finding Johnson on point, we disagree.
From both his complaint and his brief to this Court, we can clearly glean that plaintiff's cause of action arises out of his belief that "defendants engaged in fraudulent, illegal, and improper conduct designed at forcing plaintiff back into the job market at a made up job so that the defendants could artificially cut off plaintiffs right to benefits under the Workers' Compensation Act." (Emphasis added.) Therefore, plaintiff's complaint is nothing more than an allegation that defendants did not appropriately handle his workers' compensation claim, and thus he was injured because he did not receive his entitled benefit. This is the exact argument of the Johnson plaintiffs and, in that case, this Court held that "[t]he North Carolina Workers' Compensation Act (N.C. Gen.Stat. § 97-1 through 97-200) gives the North Carolina Industrial Commission exclusive jurisdiction over workers' compensation claims and all related matters, including issues such as those raised in the case at bar." Johnson, 131 N.C. App. at 143-44, 504 S.E.2d at 809 (emphasis added). Noting that the Johnson plaintiffs also alleged the defendant committed intentional torts against them (including unfair and deceptive trade practices), we hold in the case at bar that plaintiff's claims are ancillary to his original compensable injury and thus, are absolutely covered under the Act and this collateral attack is improper. Id. at 144-45, 504 S.E.2d at 809. See also Spivey v. Oakley's General Contractors, 32 N.C. App. 488, 232 S.E.2d 454 (1977).Id., at 210-12 (emphasis deleted). With some exceptions as to who administered the payment of expenses as part of a Commission-approved life-care plan, plaintiff's claim in this case is no different from the claim in Deem or Johnston. It is plaintiff's contention herein that defendant mishandled proceeds of the approved settlement intended to pay for plaintiff's reasonable medical and administrative costs and, in doing such, diminished his cash distribution from the plan. The undersigned must find that the "Custodial Agreement for Future Medical Expense of Clifton Ira Coleman" is collateral and ancillary to the "Settlement Agreement" approved by the North Carolina Industrial Commission. The Commission, therefore, retains exclusive jurisdiction over the claims asserted herein, and the undersigned must recommend that this action be dismissed without prejudice for lack of subject-matter jurisdiction, in accordance with Rule 12(b)(1), Federal Rules of Civil Procedure, and Chapter 97-91 of the North Carolina General Statutes.
RECOMMENDATION
IT IS, THEREFORE, RESPECTFULLY RECOMMENDED that defendant's Motion to Dismiss be ALLOWED and this matter be DISMISSED without prejudice for lack of subject-matter jurisdiction.
The parties are hereby advised that, pursuant to 28, United States Code, Section 636(b)(1)(C), written objections to the findings of fact, conclusions of law, and recommendation contained herein must be filed within ten (10) days of service of same. Failure to file objections to this Memorandum and Recommendation with the district court will preclude the parties from raising such objections on appeal. Thomas v. Am, 474 U.S. 140 (1985), reh'g denied, 474 U.S. 1111 (1986); United States v. Schronce, 727 F.2d 91 (4th Cir.), cert. denied, 467 U.S. 1208 (1984).
This Memorandum and Recommendation is entered in response to defendant's Motion to Dismiss (#5).