Malloy v Davis Mech., Inc
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NO. COA11-476 NORTH CAROLINA COURT OF APPEALS Filed: 20 December 2011 RAYMOND MALLOY, Employee, Plaintiff, v. North Carolina Industrial Commission I.C. No. 89375 DAVIS MECHANICAL, INC., Employer, and STONEWOOD INSURANCE COMPANY, Carrier, Defendants. Appeal December by 2010 defendants by the from North opinion Carolina and award Industrial entered 29 Commission. Heard in the Court of Appeals 11 October 2011. The Law Offices of William K. Goldfarb, Goldfarb, for plaintiff-appellee. by William K. Brooks, Stevens & Pope, P.A., by Bambee B. Blake and Ginny P. Lanier, for defendants-appellants. HUNTER, Robert C., Judge. Davis Mechanical, Inc. ( Davis ) and Stonewood Insurance Company (collectively defendants ) appeal from the Industrial Commission s opinion and award in which the Commission -2determined that the mediated settlement agreement reached between defendants and Raymond Malloy ( plaintiff ) was not fair and just. Defendants argue that the Commission erred in its determination, or, alternatively, that the Commission erred in denying defendants motion to reconsider and amend the opinion and award. After careful review, we reverse and remand. Background On the date of injury, plaintiff was employed as a truck driver for Davis. Plaintiff s job required him to deliver animal feed to farms and leave receipts for the purchaser. 19 August 2008, plaintiff inadvertently disturbed a hornet s nest while placing a receipt in a customer s mailbox. stung approximately 29 times. On He was Plaintiff subsequently suffered an allergic reaction and was hospitalized on 20 August 2008. Plaintiff was in the hospital for seven days, during which time he had recurrent envenomation seizures associated with brought his hornet on by significant bites[.] Plaintiff continues to have seizures and has not returned to work since 19 August 2008. Plaintiff received temporary total disability benefits from defendants 1 from 18 September 2008 through 8 October These payments were made without prejudice per Form 63. 2008.1 -3Defendants subsequently denied plaintiff s claim and plaintiff requested a hearing before the Commission. On 21 April 2009, the parties participated in a mediation. Plaintiff was represented by counsel. At the mediation, plaintiff presented medical records and bills which showed that plaintiff had incurred $56,216.33 in medical expenses related to his hospitalization and seizure condition. His personal insurance carrier paid a significant portion of these medical expenses; however, plaintiff $11,525.00 out of pocket. matter for agreement, a total or lump was responsible for paying The parties agreed to settle the sum clincher of $10,000.00. agreement, The explicitly mediation stated that defendants were not undertaking to pay any medical expenses[.] The agreement further stated that plaintiff s settlement would be held in trust by plaintiff s attorney because it was subject to a child support lien. agreement were The terms of the signed mediation incorporated into an Agreement of Final Settlement and Release and sent to plaintiff for his signature. Plaintiff refused to sign the agreement. On 4 June 2009, defendants requested an expedited hearing before the Commission, seeking enforcement of the mediation agreement. Plaintiff s -4counsel withdrew from the matter and plaintiff retained a new attorney. On 22 December 2009 and 19 January 2010, this matter was heard before the Deputy Commissioner. The only issue for resolution was whether the mediation agreement was enforceable. On 20 May 2010, the Deputy Commissioner issued an opinion and award concluding that: (1) the mediation agreement contained the necessary language and substance required by N.C. Gen. Stat. § 97-17 (2009) Compensation and Rule Rules; (2) 502 of there the was North Carolina insufficient Workers evidence that plaintiff lacked the mental capacity to enter into the mediation agreement; and (3) the mediation agreement was not fair and just. Consequently, the Deputy Commissioner held that the mediation agreement was unenforceable. Defendants December 2010, appealed the to the Commission Full entered Commission, an and, opinion and on 20 award affirming the opinion and award of the Deputy Commissioner with minor modifications. The Commission ultimately concluded: After careful review of the facts and the applicable law, the Full Commission concludes that the Compromise Settlement Agreement entered into by the parties in this case is not fair and just to plaintiff and the agreement therefore cannot be approved. The Mediated Settlement Agreement sum of $10,000.00 is not fair and -5just to plaintiff considering plaintiff s claim in the most favorable manner, as well as the extent of his outstanding medical expenses and outstanding child support lien. Defendants timely appealed to this Court. Standard of Review [O]ur role in reviewing decisions of the Commission is strictly limited to the two-fold inquiry of (1) whether there is competent evidence to support the Commission s findings of fact; and (2) whether these findings of fact justify the Commission s conclusions of law. Foster v. Carolina Marble and Tile Co., 132 N.C. App. 505, 507, 513 S.E.2d 75, 77, disc. review denied, 350 N.C. 830, 537 S.E.2d 822 (1999). will not be disturbed on appeal The Commission s findings if they are supported by competent evidence even if there is contrary evidence in the record. However, reviewable de novo the by Commission s this conclusions Court. Hawley of v. law Wayne are Dale Constr., 146 N.C. App. 423, 427, 552 S.E.2d 269, 272, disc. review denied, 355 N.C. 211, 558 S.E.2d 868 (2001) (internal citations omitted). Discussion I. Defendants unsupported by argue the that: evidence; (1) (2) finding the of fact Commission 14 was improperly -6relied on a medical record that was generated after the mediation; (3) the Commission improperly considered plaintiff s child support obligation; and (4) the Commission erred in concluding as a matter of law that the mediation agreement was not fair and just. We hold that finding supported by the evidence; however, we agree of fact 14 was with defendants that the Commission improperly considered the medical record and plaintiff s child support obligation. Consequently, we remand this case to the Commission for reconsideration of whether the mediation agreement is fair and just based on the evidence available at the time of the mediation. The Commission recognizes . . . two forms of voluntary settlements, namely, the compensation agreement in uncontested cases, and the compromise or clincher agreement in contested or disputed cases. Vernon v. Steven L. Mabe Builders, 336 N.C. 425, 430, 444 S.E.2d 191, 193 (1994); Chaisson v. Simpson, 195 N.C. App. 463, 474, 673 S.E.2d 149, 158 (2009) ( A clincher or compromise agreement recognized by the is a Commission contested or disputed workers and quotation marks omitted)). form and of used voluntary to finally compensation cases. It settlement resolve (citation is well established that [c]ompromise agreements are governed by the legal principles -7applicable to contracts generally. Dixie Lines v. Grannick, 238 N.C. 552, 556, 78 S.E.2d 410, 414 (1953); see Lemly v. Colvard Oil Co., 157 N.C. App. 99, 103, 577 S.E.2d 712, 715 (2003) ( Compromise settlement settlement agreements, are agreements, governed by including general mediated principles of contract law. (citation and quotation marks omitted)). Pursuant to N.C. Gen. Stat. § 97-17(a) and Rule 502, all settlement agreements must be approved by the Commission. The Commission must undertake a full investigation to determine that a settlement agreement is fair and just[.] N.C. at 432, 444 S.E.2d at 195. Vernon, 336 The conclusion the agreement is fair and just must be indicated in the approval order of the Commission and must come after a full review of the medical records filed with the agreement submitted to the Commission. Lewis v. Craven Reg l Med. Ctr., 134 N.C. App. 438, 441, 518 S.E.2d 1, 3 (1999), aff d per curiam, 352 N.C. 668, 535 S.E.2d 33 (2000). Here, defendants first argue that the Commission s finding of fact 14 was not supported by competent evidence. Finding 14 states: The Compromise Settlement Agreement prepared by defendants and provided to plaintiff pursuant to the April 21, 2009 Mediated Settlement Agreement obligated plaintiff to -8 bear responsibility for the unpaid bills arising out of this incident. Furthermore, the Compromise Settlement Agreement represents the unpaid medical bills to be approximately $11,525.00 as evidenced by the attached medical bill chart which is marked as Exhibit 1 and hereby incorporated by reference. However, hearing testimony and other evidence indicates that the actual amount may be higher, in addition to the fact that plaintiff has continued to incur medical expenses. Plaintiff s settlement proceeds were also subject to a child support lien in excess of $11,000.00. Defendants contend that the finding inaccurately states that there was an inconsistency between Exhibit 1 and what was presented at the hearing. Defendants misinterpret the finding, which merely recognizes that plaintiff has incurred additional medical bills since the mediation agreement was signed. evidence supports this finding. At the hearing, The plaintiff submitted documentation that his medical expenses had increased to $86,422.56 and that he owed $12,131.50 out of pocket. Defendants argument that this finding is unsupported by the evidence is Commission without merit; improperly however, considered as discussed evidence, infra, including the medical expenses, compiled after the mediation. Defendants further argue that the Commission improperly found as fact that Dr. Steven Karner wrote a letter on 4 May 2009, after the mediation, in which he stated that plaintiff s -9 return to Defendants consider work for contend any that medical agreement is reached. The the Commission foreseeable the future Commission records produced is is not after unlikely. permitted the to mediation We agree. reviewed medical records, evidence of medical expenses, and depositions of medical experts generated after the mediation occurred, but prior to the hearing, that pertained to plaintiff s condition after the mediation agreement was signed. We hold that the Commission improperly examined this evidence in relation to its fair and just determination.2 The Commission is charged with conducting a full investigation to determine that a settlement agreement is fair and just, Vernon, 336 N.C. at 432, 444 S.E.2d at 195, but this type of investigation is limited to the circumstances that existed at the time of the settlement agreement. at 441, 518 Commission S.E.2d must review settlement agreement. 2 at 3, the this In Lewis, 134 N.C. App. Court medical recognized records filed that the with the In Chaisson, 195 N.C. App. at 483, 673 It is clear from the Commission s findings that it properly considered the depositions and medical evidence regarding plaintiff s mental competency at the time of the mediation. The Commission found that, there is insufficient evidence to find by the greater weight that plaintiff lacked the requisite mental capacity to execute the Mediated Settlement Agreement on April 21, 2009. -10S.E.2d at 164 (emphasis added), we held that, based on the evidence available to the parties at the time of the settlement negotiation, the Commission correctly concluded that the parties decision to settle plaintiff s claim for $97,500 was fair and just . . . . Moreover, N.C. Gen. Stat. § 97-17 (b)(2) states that the settlement agreement must contain a list of medical expenses Consequently, to the the date Commission of the is settlement required to agreement. evaluate the settlement or mediation agreement based strictly on the evidence available at the time the agreement was reached. To hold otherwise would potentially permit either party to avoid their contractual obligation should new circumstances arise prior to approval by the Commission. App. 45, 49, 425 S.E.2d See Glenn v. McDonald s, 109 N.C. 727, 730 (1993) (stating that the Commission may not set aside an agreement merely because one party to the agreement acquired new information or evidence ). We must, therefore, reverse the Commission s order and remand for reconsideration based on the circumstances, and evidence pertaining to those circumstances, that existed at the time the mediation agreement was signed. Dr. Karner s 4 May 2009 letter should not be considered on remand. -11Additionally, defendants argue that the Commission should not have considered plaintiff s child support lien when determining whether the mediation agreement was fair and just. We agree. clincher The mediation agreement stated: Upon approval of the by personally NCIC, will be all monies held in payable trust with to Raymond Plaintiff s Malloy attorney pending the result of a petition to the court . . . requesting an order on disbursal concerning his child support arrearage and the lien attaching to this settlement. of arrangement is not unusual where Undoubtedly, this type there is a lien that attaches to any award a plaintiff may receive in a civil action. It does not appear that the parties were contracting to pay plaintiff s child support arrears. Plaintiff has not cited a case or statute, nor have we found one, that would suggest that the Commission should consider the non-medical debts of the plaintiff when examining the mediation or settlement agreement. We fail to see how plaintiff s child support obligation relates to the fair and just determination. is not permitted to consider On remand, the Commission plaintiff s outstanding child support lien with regard to its fair and just determination. Finally, ultimately defendants determining argue that the that the Commission mediation agreement erred in was not -12 fair and just. We need not address this issue since the Commission s determination may change on remand after properly considering mediation the circumstances agreement was that signed.3 existed at the Nevertheless, we time wish the to emphasize several points. First, the Commission in this case consider[ed] plaintiff s claim in the most favorable manner[.] We do not believe this is the correct standard since plaintiff s claim was a contested claim. There is a difference between an uncontested claim and a contested claim. Where a claim is uncontested by the employer and there are multiple remedies (such as temporary disability benefits and permanent disability benefits), [t]he employee is allowed to select the more favorable remedy when reaching a settlement. Kyle v. Holston Group, 188 N.C. App. 686, 696, 656 S.E.2d 667, 673 (quoting Effingham v. Kroger Co., 149 N.C. App. 105, 113-14, 561 S.E.2d 287, 293 (2002)), disc. review denied, 362 N.C. 359, 662 S.E.2d 905 (2008); see Lewis, 134 N.C. App. at 441, 518 S.E.2d at 3 ( The agreement is fair and just only if it allows the injured employee to receive the 3 To be clear, we are not holding that the Commission is never permitted to review medical records or depositions of medical experts that were generated after the mediation. That evidence is properly considered so long as it pertains to the circumstances that existed at the time the contract was signed. -13most favorable disability benefits to which he is entitled. ). In that situation, the Commission is, in a sense, considering the plaintiff s claim in the most favorable manner in order to ensure that the plaintiff is receiving possible in an uncontested claim. the maximum remedy When a claim is contested, however, the plaintiff is not able to select the more favorable remedy. In that situation, the plaintiff is faced with the possibility of receiving no compensation if he or she proceeds to a hearing on compensability and does not prevail. The plaintiff must scrutinize the validity of his or her claim and determine if a settlement would be in his or her best interest. Consequently, because this is a contested claim, we hold that the Commission in this case improperly consider[ed] plaintiff s claim in the most favorable manner[.] Rule 502 states that before the Commission accepts a compromise settlement agreement, it must determine whether the agreement is fair and just and in the best interest of all parties . . . . I.C. Rule 502(1) (2011); N.C. Gen. Stat. § 97- 17(b)(1); see Chaisson, 195 N.C. App. at 482-83, 673 S.E.2d at 163-64 (applying Rule 502 and holding that the compromise agreement was fair and just and in the best interest of the parties ). On remand, the Commission must review the mediation -14agreement and determine if it is fair and just and in the best interest of all parties, as required by statute and Rule 502; however, plaintiff s claim should not be considered in the most favorable manner[.] We recognize that the fair somewhat subjective in nature. and just determination is Neither the statutory Workers Compensation Act nor the Workers Compensation Rules provide a specific procedure or guideline for deciding what is fair and just. While Rule 502 sets forth what must be contained in a compromise agreement, it does not specify how the Commission should go about its fair and just determination. must necessarily plaintiff s claim, take into despite account the compensability is not before it. fact the The Commission validity that the of issue the of In many instances, the amount of the settlement reached reflects how the parties perceive the viability of the plaintiff s claim. The Commission is not blind to this reality, but it must determine for itself whether the settlement is fair and just based on the evidence before it. Next, we further recognize that a situation may arise where the compromise agreement reached does not fully compensate a plaintiff for his or her medical expenses. Such a settlement may still be deemed fair and just considering the fact that the -15plaintiff may not have been able to obtain any compensation at all had he or she pursued a hearing on compensability. Finally, we wish to point out that our Courts have disapproved of employers settling cases with plaintiffs who were unrepresented settlement. and unaware of the law at the time of Kyle, 188 N.C. App. at 696, 656 S.E.2d at 674. Plaintiff, in this case, was represented by able counsel who testified that workers compensation cases comprise 30 to 40% of his practice, and that he assisted plaintiff in weighing the decision to proceed to a hearing on compensability or accept the mediated $10,000.00 settlement offer. II. Defendants also argue that the Commission erred in denying their motion to reconsider and amend the opinion and award. Defendants claim that the findings of fact related to medical records and compensability. testimony tended to resolve the issue of We need not address this argument since we remand for a full reconsideration by the Commission. Reversed and Remanded. Judges McGEE and CALABRIA concur.
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