Opinion
Civil Action No. 03-4999.
August 10, 2004
MEMORANDUM AND ORDER
In this declaratory judgment action, Larry Pitt, Esquire ("Pitt") seeks a declaration that sections 442 and 449 of the Pennsylvania Workers' Compensation Act, which provide for the review and approval of attorney's fees by workers' compensation judges, are unconstitutional because they violate the state separation of powers doctrine. Pitt, an attorney representing claimants in workers' compensation claims, argues that section 442 is an unconstitutional delegation of judicial power to the legislative and executive branches of state government because it empowers workers' compensation judges, who are members of the executive branch, to determine the award of attorney's fees. He also contends that the state legislature, in violation of the state constitution, delegated to the executive branch the regulation of the practice of law, a function which resides solely in the judicial branch. He claims these challenges to the state constitution take on a federal dimension, specifically, a denial of substantive and procedural due process, and equal protection.
PA. STAT. ANN. tit. 77 § 998 ("section 442"); PA. STAT. ANN. tit. 77 § 1000.5 ("section 449").
In his complaint, Pitt specifically requests a declaration that the challenged statutory provisions are "unconstitutional as violative of the separation of power [sic] and Article 5, Section 10 of the Pennsylvania Constitution." Compl. at 16.
Workers' compensation judges are appointed by and subject to the general supervision of the Pennsylvania Secretary of Labor and Industry. PA. STAT. ANN. tit. 77 § 701. Labor and Industry is a department within the executive branch of state government. PA. STAT. ANN. tit. 71 § 61.
PA CONST. art. 5, § 10(c).
The defendants have moved to dismiss the complaint for lack of jurisdiction. They argue that the Rooker-Feldman doctrine precludes our considering Pitt's claims because they have been decided by the state court and are inextricably intertwined with the state court's determination.
Because Pitt has sued the Commonwealth of Pennsylvania and several state agencies, 11th Amendment immunity issues arise. Immunity under the 11th Amendment is an affirmative defense and the burden is on the defendants to establish immunity from suit. Carter v. City of Philadelphia, 181 F.3d 339, 347 (3d Cir. 1999). In their motion, the defendants do not argue that they are immune. Therefore, we need not consider whether this case can survive such a challenge.
After a careful review of the state court proceedings and the plaintiff's complaint, we conclude that Pitt's federal lawsuit is an improper attempt to recast the same claims he unsuccessfully presented in the Pennsylvania courts as purported federal constitutional claims. Thus, we shall dismiss the complaint for lack of subject matter jurisdiction.
In considering the defendants' facial challenge to our subject matter jurisdiction under Rule 12(b)(1), the complaint's allegations must be considered in the same manner as a Rule 12(b)(6) motion, that is, by viewing the facts in the light most favorable to plaintiff. Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000); Mortensen v. First Fed. Sav. Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).
Background
Pitt had entered into contingent fee agreements with clients who had agreed that Pitt would receive one-third of any award or settlement of their workers' compensation claims. After the claims were resolved, workers' compensation judges ultimately refused to approve the one-third fees, instead reducing the fee in each case to one-fifth, the presumptively reasonable fee under the statute. Pitt, through the named claimants, appealed these fee determinations to the Workers' Compensation Appeal Board ("WCAB"). Those appeals were denied as were his subsequent appeals to the Pennsylvania Commonwealth Court. The Pennsylvania Supreme Court denied his applications for allowance of appeal. Samuel v. Workers' Compensation Appeal Bd., 814 A.2d 274 (Pa. Commw. 2002), reargument denied (Pa.Commw. Jan. 23, 2003), allocatur denied, 827 A.2d 1203 (Pa. 2003); Cardwell v. Workers' Compensation Appeal Bd., 786 A.2d 1014 (Pa.Commw. 2002), reargument en banc denied (Pa.Commw. Jan. 8, 2002), allocatur denied, 800 A.2d 934 (Pa. 2002); Gaither v. Workers' Compensation Appeal Bd., 812 A.2d 1231 (Pa. 2002), denying appeal from the Commonwealth Court, No. 772 CD 2001 (Pa.Commw. 2001).Pitt also filed a declaratory judgment action in the Philadelphia Court of Common Pleas, claiming — as he does in this federal action — that section 442 is unconstitutional. The common pleas court transferred the case to the Commonwealth Court, which has original jurisdiction over all actions challenging the constitutional validity of a state statute. The Commonwealth Court dismissed the action for failure to exhaust administrative remedies. The Pennsylvania Supreme Court affirmed. Larry Pitt Assocs., P.C. v. Butler, 785 A.2d 1092 (Pa.Commw. 2001), aff'd per curiam, 811 A.2d 974 (Pa. 2002) (" Butler").
Section 442 reads:
All counsel fees, agreed upon by claimant and his attorneys, for services performed in matters before any workers' compensation judge or the board, whether or not allowed as part of a judgment, shall be approved by the workers' compensation judge or board as the case may be, providing the counsel fees do not exceed twenty per centum of the amount awarded. The official conducting any hearing, upon cause shown, may allow a reasonable attorney fee exceeding twenty percentum of the amount awarded at the discretion of the hearing official.
In cases where the efforts of claimant's counsel produce a result favorable to the claimant but where no immediate award of compensation is made such as in cases of termination or suspension the hearing official shall allow or award reasonable counsel fees, as agreed upon by claimant and his attorneys, without regard to any per centum.
The companion statute, section 449, discusses comprom ise and release of workers' compensation claims and incorporates the counsel fee provisions contained in section 442.
State Court Actions
In his state court declaratory judgment action, Pitt argued that the state legislature impermissibly delegated the power to regulate the practice of law to the executive branch when it authorized workers' compensation judges, absent a showing of good cause meriting a higher fee, to limit attorney's fees to 20 percent of the claimant's recovery. Butler, 785 A.2d at 1095. Pitt asserted that the state judiciary is vested with the exclusive power to regulate the practice of law.
Addressing the defendants' preliminary objections, the Commonwealth Court held that Pitt had failed to exhaust his available statutory remedies. Butler, 785 A.2d at 1100-01. The court reasoned that the statutory framework provided an adequate remedy to resolve Pitt's fee dispute. Id. at 1100. The majority concluded that "the reasonableness and extent of the amount awarded as attorney fees under Section 442 is a finding of fact to be made initially by a [Workers' Compensation Judge], this determination is subject to review on appeal to the [Workers' Compensation] Board and, ultimately, is subject to further review on appeal to this Court." Id. The court observed that Pitt may have prevailed before the WCAB and, if not there, before the Commonwealth Court. Id. at 1101. In other words, contrary to Pitt's characterization that the statute fixes an absolute 20 percent cap on attorney's fees, an attorney can obtain a fee award consistent with the terms of his agreement in excess of 20 percent, provided the fee is found reasonable. Id.
The Butler court rejected Pitt's argument that a constitutional challenge to a statute relieved him from the exhaustion requirement. 785 A.2d at 1098. The court concluded that a litigant cannot circumvent the exhaustion requirement by raising a constitutional claim when there is an adequate statutory remedy. Id. at 1099.
In a concurring opinion, Judge Friedman found that Pitt's constitutional argument triggered an exception to the exhaustion requirement, allowing an examination of the merits. Butler, 785 A.2d at 1103 (Friedman, J., concurring in result). Nevertheless, she would have dism issed Pitt's separation of powers claim on the merits because "the Pennsylvania Supreme Court explicitly permits legislation like section 442 of the Act." Id. at 1106 (citing Pennsylvania Rules of Disciplinary Enforcem ent 1.5(c) and cm t.). Accordingly, while disagreeing with the majority's exhaustion argument, she concurred in the ultimate conclusion to dismiss Pitt's suit.
In Samuel, after Butler had been decided, Pitt sought review of the WCAB's decision affirming a workers' compensation judge's refusal to allow an attorney's fee in excess of 20 percent. Again raising the separation of powers doctrine, he contended that section 442 violates article 5, section 10(c) of the Pennsylvania Constitution. The Commonwealth Court concluded that it did not. 814 A.2d at 277-78.
Subject Matter Jurisdiction
When a claim has been litigated in state court or is so "inextricably intertwined" with the state court's decision that granting relief would require finding that the state court was wrong, the Rooker-Feldman doctrine deprives a lower federal court of subject matter jurisdiction. ITT Corp. v. Intelnet Int'l Corp., 366 F.3d 205, 210 (3d Cir. 2004); Desi's Pizza, Inc. v. City of Wilkes-Barre, 321 F.3d 411, 417-18 (3d Cir. 2003). A federal district court cannot directly review a state court's decision. Gulla v. North Strabane Twp., 146 F.3d 168, 171 (3d Cir. 1998). Only the United States Supreme Court has jurisdiction to review a decision of a state's highest court. Desi's Pizza, 321 F.3d at 419.
Contrary to Pitt's allegation in his complaint, Com pl. ¶ 50, the Pennsylvania Supreme Court did not deny allocatur in Butler. It affirmed per curiam the Comm onwealth Court's order granting the defendants' preliminary objections and dismissing Pitt's complaint. Larry Pitt Assocs., P.C. v. Butler, 811 A.2d 974 (Pa. 2002) (per curiam). The entry of a per curiam order affirming a final order of a lower tribunal signifies the Pennsylvania Supreme Court's agreement with the lower tribunal's final disposition which becomes the law of the case. Com. v. Tilghman, 673 A.2d 898, 904 (Pa. 1996).
A claim has been actually litigated if it had been presented to the state court for review and the state court addressed it. Desi's Pizza, 321 F.3d at 420-21. In his federal complaint, Pitt alleges that the defendants "created and enforced legislation" that violated the state's separation of powers doctrine by vesting powers in the executive branch which are specifically reserved to the judicial branch under the state constitution. Compl. ¶¶ 54-56. He claims that he has resorted to a federal forum because he has been denied judicial review and an opportunity to pursue his constitutional claim in the state courts. Compl. ¶¶ 62-63.
Pitt's denial of judicial review argument appears to rest upon the Pennsylvania Supreme Court's refusal to grant allocatur in the three cases Pitt had pursued in his clients' names through the WCAB and the Commonwealth Court. Because the Pennsylvania Supreme Court refused to entertain Pitt's appeals from the Commonwealth Court's decisions does not render Rooker-Feldman inapplicable. The doctrine applies to decisions of lower state courts as well as the state's highest court. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 364 F.3d 102, 104 (3d Cir. 2004).
The Rooker-Feldman analysis begins with a determination of what claims were decided by the state court. If the federal claims are identical to the state court claims and the state court decided them, the federal district court lacks jurisdiction. See Desi's Pizza, 321 F.3d at 419. Although Pitt has framed the issue in terms of federal constitutional law, his claim is no different than the one he had already presented to the state court. Pitt attempts to resurrect the same issue which was addressed in the state court action, namely, whether the state workers' compensation statutory scheme with respect to the award of attorney's fees violates the state constitution because it impermissibly delegates power within the discrete control of the judicial branch to the executive branch. The Commonwealth Court, in Samuel, was faced with and rejected the identical challenge. 814 A.2d at 277-78.
In performing the Rooker-Feldman analysis, we examine not only one state court decision but the four cases Pitt pursued in the state courts. See supra "State Court Actions."
Examining the nature of the specific relief requested reveals what is actually being challenged. Centifanti v. Nix, 865 F.2d 1422, 1429 (3d Cir. 1989). Indeed, Pitt's request for relief — a declaration that the statutory provision violates the Pennsylvania Constitution — exposes the real issue which he asks the federal court to consider. The Commonwealth Court decided that issue in Samuel.
Pitt's claim is also inextricably intertwined with the state court action. If the federal court "must determine that the state court judgment was erroneously entered" in order to grant the requested relief or the federal court must take action which would "render [the state court's] judgment ineffectual," the federal claim is inextricably intertwined with the state court action. Desi's Pizza, 321 F.3d at 421 (quoting FOCUS v. Allegheny County Ct. of Common Pleas, 75 F.3d 834, 840 (3d Cir. 1996)) (alteration in original).
The Commonwealth Court concluded in Butler that Pitt possessed an adequate administrative remedy for pursuing his claim through the statutory framework provided for those seeking attorney's fees in excess of the presumptively reasonable fee. Butler, 785 A.2d at 1100-01. That tribunal unequivocally concluded that the ultimate decision on the amount of the fee that could be awarded rested with the state judicial branch. Pitt chose to avoid that route and elected to resort to the federal court.
A losing party in state court cannot skip the state appellate process and seek review in the federal court by disguising his claims as federal constitutional ones. Allowing Pitt to pursue his federal lawsuit would permit him to bypass the procedure prescribed by the statute. To do so would render the Commonwealth Court's Butler decision ineffectual.
Pitt argues that the Commonwealth Court failed to consider his claims on the merits when it dismissed his case for failure to exhaust his administrative remedies. Nevertheless, it did later address the merits in Samuel, a case decided after Butler and one where Pitt had pursued the claim from the workers' compensation judge through the WCAB to the Commonwealth Court. In Samuel, the Commonwealth Court specifically rejected Pitt's arguments that section 442 violates the separation of powers doctrine and impermissibly regulates attorneys' contingent fees. Samuel, 814 A.2d at 278.
It is the state court's decision, not its length or the depth of its analysis, that raises Rooker-Feldman. ITT Corp., 366 F.3d at 212-13 (quoting Gulla, 146 F.3d at 172).
Entertaining Pitt's claim would require us to critically reexamine the Pennsylvania courts' decisions. If this Court were to find for Pitt and issue the requested declaration, our ruling would have the practical effect of "revers[ing] the state court judgment" and "would prevent a state court from enforcing its orders." Desi's Pizza, 321 F.3d at 422. Before we could grant Pitt's requested relief, we would have to find that the workers' compensation statutory scheme violates the state constitution and that the Commonwealth Court had erroneously concluded otherwise. We cannot do so.
Pitt argues that the Rooker-Feldman doctrine does not apply to this case because he was not a party in three of the cases brought in the Commonwealth Court. His argument defies logic and common sense. Throughout his federal complaint, Pitt relies upon the state court proceedings in those cases as well as the Butler case. Bringing those cases in his clients' names when he was the real party in interest was a fiction. He was the one who would have benefitted from favorable rulings. Indeed, the attorney's fee was deducted from the claimant's recovery. Hence, under those circumstances, we cannot permit Pitt to circumvent the application of the Rooker-Feldman doctrine by claiming he was not a party to the state court actions. Marran v. Marran, ___ F.3d ___, 2004 WL 1576485, at *5 (3d Cir. July 15, 2004); Exxon Mobil, 364 F.3d at 105 (quoting Valenti v. Mitchell, 962 F.2d 288, 297 (3d Cir. 1992)).
Pitt's request for injunctive relief does not get him around Rooker-Feldman. An injunction could issue only if the statute were declared unconstitutional. Because the constitutionality of the statute has been determined by the state court and we cannot question that determination, we can not entertain enjoining the defendants from applying the statute.