Opinion
No. 540 C.D. 2012
02-15-2013
Sheree Richman, Petitioner v. Workers' Compensation Appeal Board (Charming Shoppes, Inc.), Respondent
BEFORE: HONORABLE RENÉE COHN JUBELIRER. Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
This opinion was reassigned to the authoring judge on November 16, 2012.
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE BROBSON
Petitioner Sheree Richman (Claimant) petitions for review of an order of the Workers' Compensation Appeal Board (Board). The Board reversed a decision of a Workers' Compensation Judge (WCJ), which denied the petition of Charming Shoppes, Inc. (Employer), to modify and/or review Claimant's workers' compensation benefits and benefit offset (modification/offset petition). The Board's order directed Claimant to reimburse Employer in the amount of $38,880.21 to satisfy Employer's subrogation lien against Claimant. The subrogation lien arose as a consequence of Claimant's settlement of a third-party lawsuit that she filed against Creekside Construction and Remodeling, LLC, and U.S. Electrical Construction Company (the third parties). We affirm the Board's order.
The WCJ's decision does not discuss the injuries that precipitated Claimant's claim for workers' compensation benefits and her lawsuit against the third parties, but Claimant indicates in her brief that on September 24, 2005, she was injured in the course of her employment when a piece of drywall in Employer's stock room fell on her left foot. The incident caused Claimant to suffer from Reflex Sympathetic Dystrophy. Thereafter, Claimant filed her lawsuit against the third parties in the United States District Court for the Eastern District of Pennsylvania.
According to Employer, a settlement conference pertaining to Claimant's federal lawsuit was scheduled for September 18, 2008. In apparent anticipation of the settlement conference, Claimant sent a letter dated September 15, 2008, to counsel for the third parties, which identified the lien amount as $347,723.16. By letter dated September 16, 2008, however, Employer's counsel indicated that the amount of the lien was $232,843.99. (Reproduced Record at 63.) In that letter, counsel for Employer also indicated that an earlier figure she received from an insurance adjuster in the amount of $393,069.75 was incorrect. Employer's counsel further indicated in that letter that she had sent Claimant's counsel "a copy of the payout sheets by mail for [his] review." (Id.)
The Honorable J. William Ditter, Jr., of the district court, presided over a settlement conference for the parties. According to Employer, after the first day of the settlement conference, Judge Ditter requested and/or insisted that Employer attend the remaining days of the settlement conference, even though Employer was not a party to the federal lawsuit. Also according to Employer, during the conference, Judge Ditter sought to have Employer agree to reduce its lien, but Employer refused to accept any amount below its lien. Employer asserts that the reason it refused was because of the earlier compromise and release that it had negotiated with Claimant.
On the morning of September 23, 2008, Employer realized that the amount identified in its September 16, 2008 letter ($232,843.99), and which Claimant relied upon in reaching her settlement with the third parties, was erroneous, and that the correct amount was $294,404.50. Employer's counsel immediately tried to contact Claimant's counsel, but learned that Claimant had signed a settlement agreement in the federal lawsuit that morning. Judge Ditter issued an order on September 24, 2008, dismissing with prejudice Claimant's lawsuit against the third parties.
On October 6, 2008, Judge Ditter conducted a post-settlement hearing, during which he entertained oral discussion/argument. Thereafter, he issued an order on October 9, 2008, which provided that "the oral settlement reached in this matter on September 22, 2008 is conclusive, binding and enforceable as to all matters discussed." (R.R. at 61.)
Employer then filed the subject modification/offset petition. The parties submitted into evidence a stipulation of fact, and the WCJ issued a decision dated July 30, 2009. The WCJ made the following pertinent factual findings:
5. Claimant submitted into evidence the Transcript of [the post-s]ettlement [h]earing before . . . Judge Ditter . . . . The transcript reveals that the [post-s]ettlement [h]earing was after three days of negotiations had been conducted to reach a settlement. The workers' compensation claims manager, the adjuster, and [Employer]'s counsel attended the third day of the settlement conference before Judge Ditter when it was represented that the workers' compensation carrier was
entitled to a net lien recovery of $151,842.94. Judge Ditter further indicated during the [post-s]ettlement [h]earing that the lien "amount of 232 was mentioned at least a half a dozen times."(WCJ's Decision; Findings of Fact numbers 5, 7; emphasis added.) Based upon this factual finding, the WCJ concluded that Employer was bound by the subrogation lien amount Claimant relied upon and also bound by the language in Judge Ditter's October 9, 2008 order. The Board reversed on appeal, concluding that the WCJ erred in determining that Employer was bound by the erroneous subrogation lien amount that Employer's counsel provided during the course of Claimant's settlement negotiations with the third parties.
7. This Judge finds that when Claimant negotiated the third-party settlement she relied on the lien amount of $232,843.99, which was supplied by [Employer] and its workers' compensation insurance carrier and which was the amount used during extensive settlement negotiations before Judge Ditter with the participation of [Employer] and its carrier. This Judge finds that the parties are bound by the subrogation lien amount of $232,843.99 based on Judge Ditter's Order, which was not appealed.
Claimant petitioned for review of the Board's decision, raising only the issue of whether substantial evidence supports the WCJ's factual determination that Employer entered a binding agreement during the settlement negotiations between Claimant and the third parties. Claimant's primary argument is that Employer agreed to the amount to which it was owed in subrogation during the negotiations and that Judge Ditter concluded that an oral agreement existed, which had a binding effect upon Employer. We agree with the Board's conclusion that the WCJ's factual findings are insufficient as a matter of law to support the WCJ's legal conclusion.
Our standard of review in this matter is limited to considering whether necessary factual findings are supported by substantial evidence, whether any constitutional rights were violated, and whether an error of law occurred. 2 Pa. C.S. § 704.
Claimant also relies upon the doctrine of res judicata, contending that the hearing that Judge Ditter conducted following the settlement agreement and Judge Ditter's October 9, 2008 order precluded Employer from challenging the WCJ's determination. Claimant's own reference to legal authority relating to the doctrine of res judicata supports the contrary conclusion. Res judicata will bar re-litigation of a claim when there is an identity of four factors, one of which is an identity of the parties. Weney v. Workers' Comp. Appeal Board (Mac Sprinkler System), 960 A.2d 949, 954 (Pa. Cmwlth. 2008), appeal denied, 601 Pa. 691, 971 A.2d 494 (2009). Employer was not a party to the federal lawsuit. Consequently, the doctrine of res judicata does not apply in this case.
We begin by considering the relevant statutory and decisional law. Section 319 of the Pennsylvania Workers' Compensation Act (Act) provides that "[w]here the compensable injury is caused in whole or in part by the act or omission of a third party, the employer shall be subrogated to the right of the employee . . . against such third party to the extent of the compensation payable under this article by the employer." As the Board noted, our Supreme Court observed in Thompson v. Workers' Compensation Appeal Board (USF&G), 566 Pa. 420, 781 A.2d 1146 (2001), that Section 319 "is clear and unambiguous. It is written in mandatory terms and, by its terms, admits of no express exceptions, equitable or otherwise. Furthermore, it does more than confer a 'right' of subrogation upon the employer; rather, subrogation is automatic." Thompson, 566 Pa. at 428, 781 A.2d at 1151 (emphasis added). The Supreme Court in Thompson observed in dicta that an employer who acts deliberately and in bad faith to "subvert a third party suit brought by its employee," may be subject to less than its full subrogation lien. Id. at 433, 781 A.2d at 1154. This Court, however, in following Thompson, has specifically rejected a claimant's claim that equitable principles such as reliance may support reductions in an employer's full subrogation lien rights. Superior Lawn Care v. Workers' Comp. Appeal Bd. (Hoffer), 878 A.2d 936, 941 (Pa. Cmwlth. 2005). In Superior Lawn Care, we held that an employer's subrogation rights are absolute in the absence of deliberate, bad faith. Id. at 940-41. In Growth Horizons, Inc. v. Workers' Compensation Appeal Board (Hall), 767 A.2d 619 (Pa. Cmwlth. 2001), the case relied upon by the Board in reversing the WCJ's decision, we concluded that, even when an employer incorrectly calculates the amount of a subrogation lien, a claimant is not relieved of its obligation to pay from proceeds of an action against a third party the full amount of the lien, unless the employer expressly agrees to compromise the lien.
Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 671.
In Growth Horizons, an employer had a subrogation lien in the amount of $80,873.61. The claimant filed a third-party action against an alleged tortfeasor, and the employer's insurance claims administrator obtained an agreement to have the claimant's counsel represent the employer's interest in the third-party litigation. With regard to the workers' compensation aspect of the case, the employer and the claimant agreed to a commutation of benefits. Several weeks after the commutation agreement, the employer's insurance claims administrator sent a letter to the claimant's third-party counsel, indicating that the employer's subrogation lien was $41,126.21. The insurance claims administrator sent a letter to the claimant's law firm, referring to the representation agreement and noting again that the subrogation lien was $41,126. The claimant participated in arbitration of her third-party claim and disclosed the existence, but not the amount, of the subrogation lien. The arbitrator awarded civil damages in the amount of $120,000. Thereafter, the claimant's counsel offered to pay the employer $26,624.46 in satisfaction of the employer's lien. (This amount represented the erroneous figure of $41,126.21 that the insurance claims administrator provided, less attorneys' fees.) The employer then notified the claimant's counsel that the subrogation amount was incorrect and requested payment in the full amount. When the claimant refused, the employer filed a modification petition, seeking satisfaction of its lien.
The WCJ in that case reasoned that the employer and the claimant never entered into an agreement permitting the claimant to pay a lower subrogation amount and, ultimately, concluded that the claimant was required to pay the employer the full subrogation lien amount. The claimant appealed to the Board, which reversed the WCJ's decision based upon its belief that the employer's provision of an erroneous subrogation lien and the claimant's reliance upon the erroneous figure relieved the claimant of the requirement to pay the full subrogation amount.
This Court reversed. We agreed with the employer's argument that there was no basis in the record from which to conclude that the employer had "agreed to compromise its lien." Id. at 621 (emphasis added). The Court considered several arguments the claimant asserted, and we observed, inter alia, that: (1) unlike other subrogation cases, the employer had not expressly agreed to compromise its subrogation rights; and (2) absent an express compromise agreement, misrepresentations by an agent that may affect a thirdparty arbitration award do not alter the rule that an employer has an absolute right to subrogation in the full amount of a lien.
The question of whether an enforceable agreement, i.e., a contract, existed in this case is a question of law, not of fact, which we review in a plenary fashion. See Reitmyer v. Coxe Bros. & Co., Inc., 264 Pa. 372, 376, 107 A. 739, 741 (1919) (holding that question of whether implied contract existed between parties is question of law for court). Our Superior Court has recited the law regarding the distinctions between express and implied contracts:
"A contract implied in fact has the same legal effect as any other contract. It differs from an express contract only in the manner of its formation. An express contract is formed by either written or verbal communications." Ingrassia Constr. Co. v. Walsh, 337 Pa. Super. 58, 486 A.2d 478, 483 n.7 (Pa. Super. 1984). "A contract implied in fact[] is an actual contract, and . . . arises where the parties agree upon the obligations to be incurred, but their intention, instead of being expressed in words, is inferred from their acts in the light of the surrounding circumstances." Tyco Elecs. Corp. v. Davis, . . . 895 A.2d 638, 640 (Pa. Super. 2006) (citation and internal quotation marks omitted). "A contract implied in fact can be found by looking to the surrounding facts of the parties' dealings. Offer and acceptance need not be
identifiable and the moment of formation need not be pinpointed." Ingrassia Constr. Co., 486 A.2d at 483. "Implied contracts . . . arise under circumstances which, according to the ordinary course of dealing and the common understanding of men, show a mutual intention to contract." Id.Bricklayers of W. Pennsylvania v. Scott's Dev. Co., 41 A.3d 16, 29-30 (Pa. Super.), appeal granted in part on other grounds, ___ Pa. ___, 58 A.3d 748 (2012).
In the case now before the Court, pursuant to our holding in Growth Horizons, Claimant is not relieved from paying the full amount of the subrogation lien unless the WCJ finds that Employer knowingly agreed to accept less than the full amount of the subrogation lien. As explained in Growth Horizons, the distinction between an employer providing erroneous information regarding an amount of a lien (during a settlement conference involving a claim in a lawsuit to which it was not even a party) and an employer indicating its intent to compromise its full lien rights is an important distinction under the law. We believe our case law and Section 319 of the Act indicates that in order for a claimant to obtain a reduction of an employer's full subrogation lien, some corresponding formal expression of such an agreement to accept less than the full amount is warranted. With that framework in mind, we now review the record to determine whether there is substantial evidence to support a finding that Employer knowingly agreed to compromise its subrogation lien.
The record simply reveals that Employer incorrectly represented the amount of the subrogation lien. The district court post-settlement hearing transcript does not reveal any facts demonstrating an express agreement between Claimant and Employer to accept less than the full amount of the subrogation lien. In other words, although Employer may have represented that $232,843.99 was the full amount of the lien (or even agreed that it was the full amount of the lien), there is no evidence of record that Employer expressly agreed to compromise its subrogation lien or waive its full subrogation rights. There is no record evidence reflecting any of the normal characteristics of a formal agreement to compromise between Claimant and Employer, such as a written or oral contract that would establish that Employer knowingly agreed to accept less than the full amount in satisfaction of its lien. Furthermore, it appears that Employer expressed throughout the settlement process an unwillingness to compromise its lien. To the extent, therefore, that the WCJ determined as a fact that Employer agreed to waive its full subrogation lien rights, such a finding is not supported by evidence of record.
During the course of the discussions before Judge Ditter, counsel for Claimant disputed Employer's assertion that Claimant's counsel ever received the payout sheets that Employer's counsel, in her September 16, 2008 letter, indicated she sent to Claimant's counsel. The WCJ did not make a specific finding on this factual matter, but such a finding does not appear to be necessary for our resolution of this appeal.
Although Judge Ditter characterized the acts that transpired during the settlement conference between Claimant and the third-party tortfeasors as an "agreement" between Employer and Claimant, we disagree with that characterization and the WCJ's apparent view that, under the law, reliance is sufficient to create a binding agreement under Section 319 of the Act. We reiterate that even if Employer agreed to accept $232,843.99 at the settlement conference, that agreement would be insufficient as a matter of law to bind Employer, because an employer must make a knowing compromise or waiver in order for the compromise or waiver to be enforceable.
Although an identifiable offer and acceptance may not be necessary for the formation of an implied contract, in this case, there is no indication that Employer even realized that the amount it represented as the subrogation lien was less than the full amount, let alone agreed to accept less. See Bricklayers of W. Pa., 41 A.3d at 29-30. To the contrary, as we noted above, throughout the entire process Employer was unwilling to compromise what it mistakenly believed to be the full amount of the lien. Thus, even if we were to consider whether an implied contract existed, we would conclude that no implied contract to compromise the lien existed.
As noted above, in the absence of bad faith, equitable factors may not be used to support reductions in an employer's full subrogation lien rights. Superior Lawn Care, 878 A.2d at 941. The WCJ did not make any finding that Employer acted in bad faith, and Claimant advances no such argument before this Court. Reliance alone, therefore, is insufficient to provide a basis for the WCJ to depart from the clear mandate of the Act. Similarly, for the reasons expressed above in our discussion of Growth Horizons, we may not apply other principles of equity, such as equitable estoppel, in this case.
Our Supreme Court has described equitable estoppel as "a doctrine that prevents one from doing an act differently than the manner in which another was induced by word or deed to expect. A doctrine sounding in equity, equitable estoppel recognizes that an informal promise implied by one's words, deeds or representations which leads another to rely justifiably thereon to his own injury or detriment may be enforced in equity." Kreutzer v. Monterey Cnty. Herald Co., 560 Pa. 600, 606, 747 A.2d 358, 361 (2000). Kreutzer also sets forth the distinctions between equitable estoppel and the contracts doctrine of promissory estoppel. Id. Promissory estoppel is similarly inapplicable to this case.
The concept of mutual or unilateral mistake of fact is generally applicable only where a party seeks to avoid the enforcement of a contract. See 7 Corbin on Contracts § 28.27. Here, we have concluded that no contract existed between Claimant and Employer. Mutual mistake is an equitable doctrine in other contexts, such as where a party seeks to challenge a consent decree, International Organization Masters v. International Organization Masters, 456 Pa. 436, 318 A.2d 918 (1974), or, for example, where a party asserts estoppel as a defense, as in Earl Township v. Reading Broadcasting, Inc., 770 A.2d 794 (Pa. Cmwlth. 2001). As indicated above, under Section 319 of the Act, equitable principles do not apply unless there is evidence of bad faith on the part of an Employer.
Accordingly, we affirm the Board's order.
/s/_________
P. KEVIN BROBSON, Judge
ORDER
AND NOW, this 15th day of February, 2013, the order of the Workers' Compensation Appeal Board is AFFIRMED.
/s/_________
P. KEVIN BROBSON, Judge BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED
DISSENTING OPINION BY SENIOR JUDGE COLINS
I respectfully dissent from the Majority opinion. I agree with the Majority that the WCJ erred in basing his holding on Claimant's reliance on Employer's erroneous representations. However, I would hold, based on the specific set of facts here, that Employer and Claimant reached an agreement regarding the amount of Employer's subrogation lien. Because that agreement was made based on Employer's unilateral mistake of fact, I would hold that Employer cannot now escape the bargain it reached with Claimant.
First, as the Majority correctly notes, whether an agreement exists is a question of law. Nevertheless, Claimant prevailed before the WCJ and we must view the facts, the evidence, and the inferences that can be drawn therefrom in Claimant's favor. "In the case of a disputed oral contract, what was said and done by the parties as well as what was intended by what was said and done by them are questions of fact." United Coal v. Hawley Fuel Coal, Inc., 525 A.2d 741, 742 (Pa. Super. 1987); Kramer v. Schaeffer, 751 A.2d 241, 245 (Pa. Super. 2000).
Here, the facts found by the WCJ and the evidence before him show that Employer made an agreement with Claimant regarding the amount of Employer's subrogation lien and that that amount represented Employer's full recovery under Section 319 of the Act, 77 P.S. § 671. The evidence below included the transcript of the settlement hearing conducted by Judge Ditter in the third-party proceeding. During that hearing, Judge Ditter, who had presided over the settlement negotiations and requested that Employer actively participate in them, recalled that an agreement had been reached between Claimant and Employer regarding the total amount of Employer's recovery. He also recalled that Employer's counsel, its claims manager, and adjuster all participated in reaching the agreement. Judge Ditter stated that "it's my recollection that the amount of 232 was mentioned at least a half a dozen times" and that "it's also my recollection . . . that [Claimant's counsel] prepared the formula that showed what the comp carrier would be entitled to receive if the lien was $232 and whatever it is, and he worked out some kind of a formula which he then presented to the others and they ['Employer's counsel and her principal'] all agreed that that was correct." (Settlement Hearing Transcript at 10-11, R.R. at 31-21.) Thus, there was an offer and an acceptance, based on Employer's understanding that if the case did not settle, it risked recovering nothing.
The record is clear that Employer's counsel and adjuster were privy to the presentations of Claimant and the third parties regarding the strengths and weaknesses of their respective claims and defenses. It is also clear that Employer participated in the settlement proceedings with the understanding that it was there to facilitate a settlement. This makes the instant matter quite different than Growth Horizons, Inc. v. Workers' Compensation Appeal Board (Hall), where the employer had no independent representation at, and no direct role in, the third-party arbitration. 767 A.2d 619 (Pa. Cmwlth. 2001).
When Judge Ditter gave Employer opportunities to rebut those facts, Employer strategically chose to raise only legal argument and refused invitations to present evidence. Instead, Employer expressly agreed with Judge Ditter and with Claimant's counsel regarding the facts, did not dispute that an agreement had been reached, and admitted that it made a mistake as to the amount. Nowhere in the record of the settlement proceedings did Employer dispute that it reached an agreement regarding the amount of its lien. Rather, Employer made the legal argument that it could not be bound by such an agreement because it discovered later that it had miscalculated the amount. Employer argued, as it did before the Board and on appeal to this Court, that it has an absolute right to subrogation under Section 319 of the Act. Employer is correct, but that right is not at issue here, where Employer agreed, by choice, to the amount of its lien in order to induce the third-party settlement agreement and avoid collecting nothing on its lien, and then later admitted to the agreement during a hearing conducted to determine whether an agreement was made. On this record, there is substantial evidence to support the conclusion that an agreement was made.
Employer was represented at the settlement negotiations by a junior attorney who made the agreement. Employer was represented at the hearing by the supervising attorney who did not participate in the actual negotiations. Not only did the supervising attorney elect not to present any factual evidence to dispute Claimant's and Judge Ditter's recollection of events, he first represented to the court that his associate was not available to attend the settlement hearing, only to admit later that she was available and that he had decided it was not in Employer's best interest for her to attend. (Settlement Hearing Transcript at 12, R.R. at 33.)
The colloquy between Judge Ditter and Employer's counsel proceeded as follows:
Court: Well, I'm very interested in what you had to say and it sounds to me as though you are confirming exactly what [Claimant's counsel] said and what [third party counsel] said and what my recollection is.
Employer's Counsel: From the factual basis, Your Honor, but I come to an alternative conclusion. . . .
Second, having established an agreement was made, the issue becomes whether Employer's mistake of fact was mutual or unilateral such that it can be released from that agreement. Mutual mistake will afford a basis for reforming a contract. Mutual mistake exists, however, only where both parties to a contract are mistaken as to existing facts at the time of agreement. Moreover, to obtain reformation of a contract because of mutual mistake, the moving party is required to show the existence of the mutual mistake by evidence that is clear, precise, and convincing. Zurich American Ins. Co. v. O'Hanlon, 968 A.2d 765, 770-71 (Pa. Super. 2009); Holmes v. Lankenau Hosp., 627 A.2d 763, 767-68 (Pa. Super. 1993). Generally, unilateral mistake provides no relief to the party guilty of the mistake. Hoang v. Workers' Compensation Appeal Board (Howmet Aluminum Casting, Inc.), 51 A.3d 905, 910 (Pa. Cmwlth. 2012); Welsh v. State Employees' Retirement Board, 808 A.2d 261 (Pa. Cmwlth. 2002). On the other hand, "if the other party knows or has good reason to know of the unilateral mistake, relief will be granted to the same extent as a mutual mistake." Kramer, 751 A.2d at 246; Welsh, 808 A.2d at 265 (holding that unilateral mistake will be treated as mutual mistake if other party "knows or has reason to know of a unilateral mistake"); Growth Horizons, Inc. v. Workers' Compensation Appeal Board (Hall), 767 A.2d 619 (Pa. Cmwlth. 2001).
Here, the facts found by the WCJ show, and a review of the record confirms, that Employer's mistake was unilateral and that Employer may not shift the burden of its own mistake onto Claimant. Employer's numerous representations regarding the amount of its lien were clear and unequivocal. In the letter from Employer's counsel to Claimant's counsel of September 16, 2008, counsel corrected an earlier calculation and gave Claimant personal assurance that $232,843.99, was the correct amount of the lien. During the settlement negotiations, Claimant's counsel presented that amount to Employer's counsel and its claims manager and claims adjuster, who all agreed to that amount. Employer later admitted that it made a mistake, but only after Claimant had released her third-party claims. Nowhere in the record is there any evidence that Employer hedged when it agreed with Claimant on the lien amount or cautioned Claimant that it would seek the full amount of its lien notwithstanding any potential calculation errors. The Majority finds that Claimant's counsel received from Employer's counsel, prior to the third-party settlement, printouts that indicated the correct amount of the lien. (Majority Op. at 2, 8.) However, Claimant disputed that version of the facts, explaining that the printouts were not provided until after settlement, and the WCJ agreed with Claimant, rejecting the notion that the printouts could have alerted Claimant to Employer's error.
On appeal to this Court, Employer asserts that it made clear during the settlement proceedings that it would not negotiate or compromise the full amount of its subrogation lien. That argument is not supported by the settlement hearing transcript or the WCJ's findings. Thus, where the Majority relies on Employer's purported assertions (Majority Op. at 9), the WCJ rejected that version of events.
The information supposedly made available to Claimant's counsel prior to the execution of the third-party release was a 30-page printout of various line item amounts with the header "Sheree RichmanMedical Payments, Total Payments Summary." There are 492 line items. The net amount on the printout is the incorrect figure that Employer's counsel had corrected in her September 16, 2008 letter, in which she wrote that the figure was incorrect because it included "attorney's fees and reserves on the claim. I personally reviewed the payout sheets and the lien at this time as $232,843.99." (F.F. ¶4b; Sept. 16, 2008 letter, R.R. at 63.) Thus, Employer's argument that the printout accurately reflected the correct amount of its lien is factually incorrect. --------
Third, and finally, I would hold that the Board's reliance on Growth Horizons is misplaced. Nothing in our holding in Growth Horizons, or in the Workers' Compensation Act, prevents parties from agreeing to the amount of a subrogation lien. The ability of employers and claimants to arrive at such agreements is important to the workers' compensation system, especially considering that, as we see in this case, such agreements make possible the settlement of third-party lawsuits without which the employer could receive nothing.
In Growth Horizons, this Court found that the employer was not bound by its erroneous calculation of its subrogation lien under circumstances drastically different from those present here. The claimant and the employer's insurer were represented by the same attorney in the third-party lawsuit. 767 A.2d at 620. The insurer's claims administrator entered a separate agreement with the attorney in which the insurer provided to the attorney the amount of the subrogation lien and the attorney agreed, on behalf of the insurer and the employer, to protect that lien amount during the third-party proceedings, even though the attorney was separately representing the claimant in those proceedings. Id. After the arbitration, the claimant settled her third-party claims and the attorney offered to pay the employer the lien amount. Id. The insurer informed the attorney that the lien amount it previously provided was incorrect and demanded payment in full. Id. at 621. The attorney refused and the employer filed a modification petition seeking full satisfaction of its subrogation lien. Id.
The WCJ ruled in favor of the employer and ordered the claimant to pay the full, corrected amount of the lien, finding that there was no evidence that the claimant could have relied on the employer's mistake. The specific amount of the lien was never disclosed during the third-party arbitration (id. at 622), and the only evidence of an agreement was between the employer and the attorney, not between the employer and the claimant (id. at 620-21). The WCJ specifically addressed the issue of mistake, holding that the claimant knew or had reason to know that the lien amount provided by the insurer was incorrect, because the attorney had a printout of disability and medical benefits already paid and had personal knowledge that the employer had previously paid the claimant for commutation, which amount should have been calculated in the lien. Id. at 622-23. The Board reversed the WCJ and we reversed the Board, reinstating the WCJ's findings in favor of the employer because they were supported by substantial evidence.
Here, the circumstances are different. First, unlike Growth Horizons, Employer was represented at the third-party proceedings by its own counsel and claims personnel. Second, unlike Growth Horizons, the subrogation lien and net recovery figures were specifically and repeatedly represented by Employer during the third-party proceedings, leading up to the agreement. Third, unlike Growth Horizons, the agreement regarding the amount of the lien was made between Employer's counsel and Claimant's counsel, not between the employer and its own attorney. Fourth, unlike Growth Horizons, the WCJ found in Claimant's favor on the facts related to the agreement, mistake, and reliance. The record shows that Employer here was instructed by Judge Ditter to appear at the settlement proceedings for the express purpose of facilitating settlement, that Employer directly participated in extensive settlement proceedings, and that Employer had the specific understanding that Claimant would use the agreed-upon lien amount to settle her third-party claims. Thus, our holding in Growth Horizons, while instructive, is not controlling.
Further, the reality of our legal system depends on judges being able to rely on the factual information provided by attorneys at settlement conferences, whether or not such conferences are recorded.
For the above reasons, I dissent.
/s/ _________
JAMES GARDNER COLINS, Senior Judge
(Settlement Hearing Transcript at 17-18, R.R. at 38-39.)