Travelers Indemnity Co. v. Wallis

Travelers Indemnity Co. v. Wallis (2002-360); 176 Vt. 167; 845 A.2d 316

2003 VT 103

[Filed 31-Oct-2003]
[Motion for Reargument and/or Clarification Denied 12-Jan-2004]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2003 VT 103

                                No. 2002-360


  Travelers Indemnity Co.	                 Supreme Court

                                                 On Appeal from
       v.	                                 Washington Superior Court

  R. Tasha Wallis, Commissioner and	         March Term, 2003
  Department of Labor and Industry

  Alan W. Cheever, J.
  	
  Andrew W. Goodger and Stephen D. Ellis of Kiel Ellis & Boxer, Springfield,
    for Plaintiff-Appellant.

  William H. Sorrell, Attorney General, and William H. Rice, Assistant
    Attorney General, Montpelier, for Defendant-Appellee.

  Craig A. Jarvis of Biggam, Fox & Skinner, Montpelier, for Amicus Curiae
    Vermont Labor Council, AFL-CIO.


  PRESENT:  Amestoy, C.J., Dooley, Johnson and Skoglund, JJ., and Allen, C.J.
            (Ret.), Specially Assigned

        
       ¶  1.  DOOLEY, J.   Plaintiff Travelers Indemnity Co. appeals from a
  decision of the Washington Superior Court dismissing its suit against the
  Department of Labor and Industry and its Commissioner for lack of subject
  matter jurisdiction.  In its suit, Travelers sought to challenge certain
  Department practices in issuing interim orders of benefits under 21 V.S.A.
  § 662(b), and asserted that the statute is constitutionally deficient on
  its face.  Construing the complaint as an appeal rather than a declaratory
  judgment action, the superior court dismissed the suit because Travelers
  did not obtain certified questions from the Commissioner as required by 21
  V.S.A. § 671.  On appeal, Travelers claims the court misconstrued its
  complaint and should have allowed the suit to go forward under V.R.C.P. 75,
  3 V.S.A. § 807, and 12 V.S.A. § 4711.  We accept Travelers's argument that
  its complaint was not an appeal, but we affirm the dismissal of the
  company's challenge to the Commissioner's actions on primary jurisdiction
  grounds.  As to the facial constitutional challenges to § 662(b) set forth
  in the complaint, we reverse and remand to the superior court for further
  proceedings.
        
       ¶  2.  Travelers issues workers' compensation policies to numerous
  employers and, thus, appears regularly before the Commissioner in
  connection with workers' compensation claims against it.  It is
  dissatisfied with the Commissioner's administration of interim payments,
  that is, compensation payments ordered by the Commissioner pursuant to 21
  V.S.A. § 662(b) after the insurance carrier has denied a claim, but before
  a hearing on the claim.  Section 662(b) authorizes such payments, pending a
  hearing and final determination, where the Commissioner finds that the
  evidence put forth by the employer or carrier "does not reasonably support
  the denial."
   
       ¶  3.  On September 15, 2000, Travelers filed a complaint with the
  Washington Superior Court seeking review of the Department's actions
  related to issuing interim orders under V.R.C.P. 75 and 3 V.S.A. § 807, and
  requesting declaratory and injunctive relief under 12 V.S.A. § 4711.  In
  its complaint, Travelers cited an interim order the Department issued on a
  claim that Travelers had twice denied as outside its workers' compensation
  coverage.  Travelers alleged that the Department's order violated 21 V.S.A.
  § 662(b) and denied Travelers due process.  Travelers requested that the
  court permanently enjoin the Department from enforcing the order cited in
  its complaint.  Travelers also asked the court to issue an order "declaring
  the appropriate legal standard for the issuance of interim orders pursuant
  to the provisions of 21 V.S.A. § 662(b) and the Vermont Workers'
  Compensation and Occupational Disease Rules."  The same day Travelers filed
  its suit in superior court, the Department rescinded the interim order
  cited in Travelers's complaint.

       ¶  4.  The Commissioner and Department moved to dismiss for lack of
  jurisdiction and because the case was moot.  This led to skirmishing in
  which Travelers attempted to keep the case alive, eventually culminating in
  the filing of an amended complaint in which Travelers described additional
  workers' compensation cases in which, it alleged, the Commissioner had
  violated its rights under § 622(b) and the state and federal constitutions. 
  As described in the complaint, the cases were in various stages of
  processing.  For example, in four of the cases, the interim payment order
  was still outstanding.  None had been appealed to the superior court.  In
  others, the interim order had been rescinded.  For three of these,
  Travelers had apparently taken no action to have the interim order
  reconsidered or stayed. (FN1)  For the other, a motion for a stay was
  pending.  Another case involved termination of compensation under 21 V.S.A.
  § 643a, a statute not otherwise involved in Travelers's complaint and for
  which Travelers sought no relief.    
   
       ¶  5.  To address the mootness issue defendants raised, Travelers's
  amended complaint contended that "this action implicates administrative
  conduct which is capable of repetition, yet evasive of judicial review." 
  Travelers also argued that the issues raised in the action would not become
  moot with the ultimate resolution of the specific cases, and requested that
  the court lay out "the appropriate legal standard" for the issuance of
  interim benefits orders.  The complaint alleged three improper actions
  taken in one or more of the cases described in the complaint: (1) ordering
  interim payments in cases in which the employer or carrier has submitted
  evidence, which if believed, would support denial of the compensation
  claim; (2) relying on ex parte information submitted by the employee in
  deciding whether to order interim payments; and (3) ordering interim
  payments even though the claimant has not requested a hearing on the denial
  and served a request on the employer or carrier.  Travelers has also
  alleged here that defendants' actions are unconstitutional because they
  grant interim benefits without articulated standards for determining
  whether the carrier/employer's evidence reasonably supports its denial, and
  because interim payments are ordered without any right of recoupment if the
  claimant is found not to be entitled to benefits.  Travelers claimed that
  defendants' practices violated § 662(b), and its rights to due process and
  equal protection of the laws.

       ¶  6.  On July 31, 2002, the superior court dismissed the case for
  lack of subject matter jurisdiction. (FN2)  The court ruled that Travelers
  had failed to properly exercise its statutory rights of appeal under 21
  V.S.A. § 671 of the Workers' Compensation Act, which requires "questions of
  fact or questions of fact and law" certified by the Commissioner in order
  to establish jurisdiction in the superior court.  Travelers subsequently
  brought this appeal.
                                              
       ¶  7.  We review a dismissal for lack of subject matter jurisdiction
  de novo, taking all uncontroverted factual allegations of the complaint as
  true and construing them in the light most favorable to the nonmoving
  party.  Jordan v. State, 166 Vt. 509, 511, 702 A.2d 58, 60 (1997).

       ¶  8.  On appeal, Travelers contends that its suit was not an appeal
  as the trial court characterized it, but, rather, was a declaratory
  judgment action seeking to challenge the legality of the Department's
  general practices with respect to issuing interim orders, and therefore the
  court had original jurisdiction over Travelers's claims under V.R.C.P. 75,
  12 V.S.A. § 4711 (the Declaratory Judgment Act), and 3 V.S.A. § 807 (the
  Administrative Procedure Act).  We accept Travelers's characterization of
  the action, but conclude dismissal of most of the complaint is supported by
  our decision in C.V. Landfill, Inc. v. Envtl. Bd., 158 Vt. 386, 610 A.2d 145 (1992).  We refer to that part of the complaint that challenges the
  Commissioner's implementation of § 662(b).

       ¶  9.  In C.V. Landfill, the plaintiff attempted to challenge a
  decision of a district environmental commission that its landfill required
  an Act 250 permit because of modifications made to resolve environmental
  problems raised by the Agency of Natural Resources.  Rather than
  challenging the commission's finding by appealing to the environmental
  board, however, the plaintiff brought a declaratory judgment action in
  superior court.  The superior court dismissed the action on the basis of
  the primary jurisdiction doctrine, and we affirmed.

       ¶  10.  Three factors were particularly critical to our decision, all
  of which are present here.  We reasoned in C.V. Landfill:
   
    First, the "legal question" raised was actually one mixed in law
    and fact.  In retaining jurisdiction, the court would have had to
    decide if plaintiff's modifications to its landfill site
    constituted a "substantial change" under 10 V.S.A. § 6086
    triggering Act 250 permit requirements.  This task would have
    entailed an application of the facts to the relevant legal
    authority; hence, both factual and legal questions were
    implicated.

    In addition, these are issues so intertwined with environmental
    law that, under the doctrine of primary jurisdiction previously
    discussed, the body charged with interpreting Act 250 is the most
    appropriate tribunal to interpret them.  We give great weight to
    the Environmental Board's expertise in these areas.  See, e.g., In
    re Agency of Transportation, 157 Vt. 203, 208, 596 A.2d 358, 360
    (1991) (Act 250 gives "primacy over, without preemption of,
    ancillary permit and approval processes").

    Finally, C.V. is not challenging the validity of the statute.  If
    this were the posture of the case, a court might be the more
    appropriate tribunal.  See Flanders Lumber & Building Supply Co.
    v. Town of Milton, 128 Vt. 38, 44, 258 A.2d 804, 808 (1969) (when
    issue is whether particular law is valid, "it is undoubtedly
    judicial economy and wisdom to decide the issue by declaratory
    judgment before the administrative channel has been invoked or
    exhausted").

  158 Vt. at 392, 610 A.2d  at 148; see also Williams v. State, 156 Vt. 42,
  57-58, 589 A.2d 840, 850 (1990). (FN3) 
   
       ¶  11.  We are particularly influenced by the first C.V. Landfill
  factor as applied to this case.  The Legislature has adopted a broad
  general standard for issuance of interim orders - that the "evidence does
  not reasonably support the denial."  21 V.S.A. § 662(b).  The Commissioner
  has implemented this standard on a case-by-case basis.  Thus, each case
  necessarily involves mixed questions of fact and law.  Except in cases of
  de novo appeals, see Pitts v. Howe Scale Co., 110 Vt. 27, 35, 1 A.2d 695,
  698 (1938) (review under 21 V.S.A. § 670 is de novo), we accord the
  Commissioner substantial discretion in rendering a decision and review only
  for abuse of that discretion.  Wood v. Fletcher Allen Health Care, 169 Vt.
  419, 422, 739 A.2d 1201, 1204 (1999).

       ¶  12.  Travelers requests instead that the superior court issue
  standards that specifically regulate how the Commissioner must decide
  interim order requests.  Rather than developing the law on a case-by-case
  basis, Travelers seeks that the judiciary order a substitute statute,
  resolving contested issues in its favor.  Even if we could create such
  standards disconnected from the facts involved in specific cases, it would
  be an inappropriate interference with the discretion of the Commissioner.
   
       ¶  13.  The second C.V. Landfill factor is related and underscores
  that judicial intervention in the way Travelers seeks would be
  inappropriate.  The doctrine of primary jurisdiction cautions courts
  against "exercising jurisdiction when an alternative tribunal with
  expertise in the subject matter is available to decide the dispute."  CV
  Landfill, 158 Vt. at 389, 610 A.2d  at 146.  As we emphasized in C.V.
  Landfill, "[o]ur cases underscore the importance of prior adjudication by
  administrative bodies."  Id., 610 A.2d  at 147; see also Molesworth v. Univ.
  of Vt., 147 Vt. 4, 7, 508 A.2d 722, 723 (1986) ("Where . . . the
  Legislature has delegated authority to the Trustees of the University of
  Vermont to determine eligibility for reduced tuition charges . . . the
  declaratory judgments vehicle can not be used to frustrate that legislative
  choice.") (FN4); In re State Aid Highway No. 1, Peru, 133 Vt. 4, 8, 328 A.2d 667, 669 (1974) ("[P]roceedings under various declaratory judgment
  statutes cannot be substituted for adequate and available remedies of
  review . . . of decisions by administrative tribunals.").

       ¶  14.  The doctrine of primary jurisdiction applies to the
  administrative adjudication system established for workers' compensation. 
  See Demag v. Am. Ins. Co., 146 Vt. 608, 610, 508 A.2d 697, 698 (1986) ("The
  Declaratory Judgments Act cannot be used to circumvent the statutory remedy
  provided in the Workers' Compensation Act.").  The Legislature has
  entrusted the administration of the workers' compensation laws to the
  Commissioner, see 21 V.S.A. § 606, and the Commissioner necessarily has
  developed expertise in this administration.  As a result, we give deference
  to the Commissioner's interpretation and application of the workers'
  compensation laws.  Bedini v. Frost, 165 Vt. 167, 169, 678 A.2d 893, 894
  (1996).  The Commissioner is required to make the claims adjudication
  process as "summary and simple as reasonably may be," 21 V.S.A. § 602, and
  "may make such investigation or inquiry or conduct such hearing or trial in
  such manner as to ascertain the substantial rights of the parties," id. §
  604.

       ¶  15.  Nothing in the amended complaint suggests why we should bypass
  the responsibility and expertise of the Commissioner.  The issues Travelers
  raises here have never been definitively adjudicated by the Commissioner. 
  For many of the cases Travelers cites, it has never sought any relief from
  the interim payments order; for others, the dispute was resolved in
  Travelers's favor by administrative remedies provided by the Commissioner.
   
       ¶  16.  Travelers attempts to avoid the deference to the
  responsibility and expertise of the Commissioner by arguing that the issue
  is whether the Commissioner has acted constitutionally.  Travelers claims
  that the Commissioner cannot have primary jurisdiction over that issue both
  because she has no power to judge the constitutionality of her own act and
  because she would have no expertise in such an adjudication.   We do not
  find these reasons to be persuasive.  In Alexander v. Town of Barton, 152
  Vt. 148, 565 A.2d 1294 (1989), we adopted the analysis of Professor Kenneth
  Davis differentiating between the constitutional applicability of statues
  and the constitutional validity of statutes. 152 Vt. at 151, 565 A.2d  at
  1296 ("When a tribunal passes upon constitutional applicability, it is
  carrying out the legislative intent, either express or implied or presumed. 
  When a tribunal passes upon constitutionality of the legislation, the
  question is whether it shall take action which runs counter to the
  legislative intent." (quoting 3 K. Davis, Administrative Law Treatise §
  20.04, at 74 (1958))).  As Professor Davis stated: "[w]e commit to
  administrative agencies the power to determine constitutional
  applicability."  Id.  Travelers argues that Alexander is inapplicable
  because the governing statute in that case required the state board of
  appraisers to take into account constitutional requirements.  We have,
  however, applied Alexander in cases where there was no comparable statutory
  requirement.  See Stone v. Errecart, 165 Vt. 1, 5, 675 A.2d 1322, 1326
  (1996); Harrington v. Dep't of Employment & Training, 152 Vt. 446, 447 n.2,
  566 A.2d 988, 989 n.2 (1989).  Under Alexander, the Commissioner can judge
  the constitutionality of her implementation of interim orders under 21
  V.S.A. § 662(b).
   
       ¶  17.  Nor are we persuaded that the Commissioner brings no
  expertise to such an adjudication.  This objection arises from the
  artificial description of the issue on which Travelers now relies. 
  Notwithstanding the description of the various interim order cases cited in
  the complaint, Travelers's claim is a broad constitutional attack on the
  Commissioner's practices in issuing interim orders under § 662(b), separate
  and apart from any particular application of the statute in a particular
  case.  The first and foremost claim, however, is that the Commissioner has
  violated § 662(b) in each of the three practices in the cases the company
  enumerated in its complaint.  In such interpretations of the Workers'
  Compensation Act, we give deference to the Commissioner because she
  administers it and has expertise in the administration.  See 21 V.S.A. §
  606 (questions arising under provisions of workers' compensation statutes
  "shall be determined" by the Commissioner); Wentworth v. Crawford & Co.,
  ___ Vt. ___, ___, 807 A.2d 351, 355 (2002) (same).  Even if we were dealing
  solely with constitutional arguments, we still must begin with a
  construction of the statute, which again must be done in the first instance
  by the Commissioner.  Moreover, the constitutional claims are likely to
  involve a weighing of competing interests, and we would be informed by how
  the Commissioner weighs those interests.
   
       ¶  18.  Applying the third CV Landfill factor to the amended
  complaint also counsels in favor of dismissal.  The primary claim Travelers
  presents is a challenge to the Commissioner's application of the statute
  authorizing interim payments.  In general, use of a declaratory judgment
  action to attack the application of the statute in particular cases is not
  appropriate. (FN4)  See Georgia Oilmen's Ass'n. v. Georgia Dep't of Revenue,
  2003 WL 21204466, *5 (Ga. Ct. App. 2003) (administrative practice may not
  be attacked in declaratory judgment action); Christian Nursing Ctr. v.
  Dep't of Human Serv., 419 N.W.2d 86, 92 (Minn. Ct. App. 1988) (validity of
  rule as applied may not be challenged by declaratory judgment action);
  Verkouteren v. Supervisor of Assessments, 380 A.2d 642, 644 (Md. Ct. Spec.
  App. 1977) (statute as applied may not be challenged in declaratory
  judgment action; "The validity of the application of a statute, however,
  usually involves factual issues which have been committed to the expertise
  of administrative agencies by the legislature and in many instances the
  constitutional issue may never arise if the administrative remedy is
  exhausted.").  On the other hand, a facial challenge to the governing
  statute, or to rules adopted pursuant to that statute, may be allowable in
  a declaratory judgment action.  See Flanders Lumber & Bldg. Supply Co. v.
  Town of Milton, 128 Vt. 38, 44, 258 A.2d 804, 808 (1969).  Thus, dismissal
  of Travelers's claims against the Commissioner's implementation of § 662(b)
  was appropriate.

       ¶  19.  Although we affirm the dismissal of most of Travelers's
  complaint because it challenged § 662(b) as applied by the Commissioner,
  Travelers's brief indicates that it intended two facial challenges to the
  statutory scheme.  Travelers claims that it is denied (1) equal protection
  of the law because the decision to issue an interim order "is not guided or
  constrained by any objective standard;" and (2) due process of law because
  it cannot recoup benefits paid under an interim order when a claimant is
  found after hearing not to be entitled to benefits.  We take the first
  challenge to be that the statutory standard that "the evidence does not
  reasonably support the denial," 21 V.S.A. § 662(b), is constitutionally
  inadequate.  We agree with Travelers that it can bring a declaratory
  judgment action to challenge the constitutionality of the statute on its
  face on the grounds it alleged, see 12 V.S.A. § 4712 (party may challenge
  validity of a statute), and such a challenge is not an appeal requiring
  certification of questions of fact and law by the Commissioner, cf.
  Flanders Lumber & Bldg. Supply Co., 128 Vt. at 44, 258 A.2d  at 808
  (exhaustion of administrative remedies unnecessary for facial attack on a
  zoning ordinance).  We also agree that the complaint is broad enough to
  encompass these facial challenges within it.  To this limited extent, we
  reverse the dismissal of the complaint.  In all other respects, the
  dismissal was proper.
   
       ¶  20.  The parties have briefed whether Travelers can obtain
  judicial review of an interim payments order, either immediately, or after
  the claim is finally adjudicated. (FN6)  In view of our construction of the
  complaint as one for declaratory relief, and in light of our disposition,
  we need not reach either question. 

       The Superior Court's decision dismissing Travelers's complaint is
  affirmed, except as to allegations challenging 21 V.S.A. § 622(b) on its
  face.  The dismissal of allegations facially challenging 21 V.S.A. § 622(b)
  is reversed and remanded for proceedings consistent with this order.


                                       FOR THE COURT:



                                       _______________________________________
                                       Associate Justice

         
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                                  Footnotes


FN1.  For these, it would appear that Travelers has failed to exhaust
  administrative remedies, and this is a separate ground for rendering
  declaratory judgment inappropriate.  See In re D.A. Assocs., 150 Vt. 18,
  20, 547 A.2d 1325, 1326?27 (1988) ("[W]hen an administrative remedy is
  established by statute or regulation, relief must not only be sought in
  accordance therewith, but must first be exhausted before recourse to the
  courts is available.").

FN2.  All parties have treated the superior court order as a dismissal.  In
  fact, the order remanded the case to the Commissioner for the certification
  of questions.  Apparently, the parties assume that because the Commissioner
  considers the matter moot, she will not certify questions.  While we might
  question that assumption, particularly because a different person is now
  commissioner, we accept that the order is sufficiently final to enable this
  appeal to go forward. 

FN3.  Williams raises an additional ground to reject the applicability of
  declaratory relief in this case.  In Williams, we noted that

    [D]eclaratory relief would not give plaintiffs what they want; it
    would only advise the ultimate decision?maker on points of law
    necessary to get a refund. . . . The judiciary is not empowered to
    render advisory opinions the sole purpose of which is to aid in
    the resolution of a dispute that properly belongs in another
    tribunal.

  156 Vt. 42, 58-59, 589 A.2d 840, 850 (1990).  Exactly the same deficiency
  applies here.

FN4.  Travelers has independently claimed jurisdiction under V.R.C.P. 75. 
  As Molesworth holds, the invocation of Rule 75 adds nothing beyond the
  scope of the Declaratory Judgment Act in a case such as this.  See
  Molesworth v. Univ. of Vt., 147 Vt. 4, 7, 508 A.2d 722, 723 (1986).

FN5.  Travelers argues that jurisdiction is provided by 3 V.S.A. § 807
  because it alleged that the Vermont Workers' Compensation and Occupational
  Disease Rules as written and as applied impair the legal rights of
  Travelers.  In its brief, it explains this challenge as one to the
  Department's authority to issue interim orders "absent an articulated
  standard for doing so."  As we understand Travelers's position, it is
  claiming that defendants have violated its rights by failing to provide by
  rule a standard beyond that set out in the statute.  Section 807 authorizes
  challenges to the "validity or applicability of a rule" by an action for a
  declaratory judgment.  We cannot conclude that this claim involves a
  challenge to the validity or applicability of a rule.

FN6.  Below, Travelers also argued for a determination on whether the
  superior court could adjudicate in an appeal a challenge to an interim that
  has been rescinded, but Travelers has abandoned that argument here.