Sheehan v. VT Dept. of Employment & Training

Sheehan v. Dept. of Employment & Training (98-197); 169 Vt. 304; 733 A.2d 88

[Filed 11-Jun-1999]


       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.


                                 No. 98-197


Peter Sheehan, et al.	                             Supreme Court
t/a G & S Forest Products
                                                     On Appeal from
     v.	           	                             Employment Security Board

Vermont Department of Employment	             April Term, 1999
and Training


Susan D. Auld, Chair

Peter W. Sheehan, Pro Se, Perkinsville, Plaintiff-Appellant

Brooke Pearson, Montpelier, for Defendant-Appellee.


PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       MORSE, J.   Employer G & S Forest Products appeals from the Employment
  Security  Board's decision sustaining the Department of Employment and
  Training's August 8, 1997  successor status determination.(FN1)  In its
  appeal, employer seeks to challenge the Department's  May 7, 1996 successor
  status determination with respect to employer's purchase of another 
  business.  Because the May 7, 1996 determination was upheld in an earlier
  Board decision from  which employer failed to file a timely notice of
  appeal, we conclude that the doctrine of collateral  estoppel precludes
  employer from challenging that determination in this appeal.  Accordingly,



  we affirm the Board's decision.

       As best as we can tell from the record and sporadic factual history
  related in the parties'  briefs, Peter and Susan Sheehan and another
  couple, the Goodriches, were partners who operated  a business called G & S
  Forest Products.  The Department assigned employer a contribution rate  of
  0.6% for the 1995-1996 fiscal year.  In April 1996, employer stated in the
  Department's status  report forms that it had acquired the entire business
  formerly known as Palmer H. Goodrich II/P  & L Trucking.  On May 7, 1996,
  the Department notified employer by letter that G & S Forest  Products was
  designated as a successor to Palmer H. Goodrich II as of April 1, 1996. 
  The letter  stated that (1) the predecessor's experience rating record
  would be transferred to and combined  with that of the successor; (2) the
  successor's assigned contribution rate would not change during  the
  remainder of that fiscal year, but effective July 1, 1996 the successor's
  rate would be based  on the combined experience rating records of the
  successor and predecessor; (3) the successor's  experience rating record
  might be charged with benefits paid to individuals based on wages earned 
  from the predecessor; and (4) if either the successor or predecessor
  disagreed with the successor  status determination, either employer could
  petition for a hearing before a referee within thirty  days of that notice. 
  Employer did not seek to contest the notice of successor status
  determination  contained in the letter.

       On June 25, 1996, the Department sent employer a notice stating that
  its contribution rate  for fiscal year 1996-1997 would be 5.3%.  Employer
  appealed that determination first to the  appeals referee and then the
  Board.  The referee noted in his decision that employer objected to  having
  inherited the experience rating record of Palmer H. Goodrich II, but ruled
  that the rating  was final because the employer had failed to appeal the
  Department's May 7, 1996 successor  status determination.  On April 4,
  1997, the Board issued a decision upholding the appeals  referee.  The
  Board expressly stated that in reaching its decision it had carefully
  considered  employer's arguments concerning the Department's successor
  status determination.  In rejecting  those arguments, the Board explained
  that the Department had determined that employer 

 

  purchased Palmer H. Goodrich II/P & L Trucking, which had always been
  considered one and  the same employer.  The Board expressed its
  satisfaction that the Department's determination of  the status of the
  companies involved was correct.  The Board also noted that employer had
  failed  to appeal the successor status determination in a timely manner. 
  Employer appealed the Board's  decision, but in December 1997, this Court
  dismissed that appeal as untimely filed.

       On June 25, 1997, the Department notified employer that its
  contribution rate for fiscal  year 1997-1998 would be 4.1%.  Effective July
  1, 1997, the Sheehans and Goodriches split  employer's assets, with the
  Sheehans continuing to operate G & S Forest Products and the  Goodriches
  taking over sole ownership of the trucking component of the business under
  the name  P & L Trucking.  Employer appealed the 1997-1998 contribution
  rate notice first to the appeals  referee and then to the Board.  In
  sustaining the decision of the appeals referee to uphold the  assigned
  contribution rate, the Board rejected employer's arguments that (1) the May
  7, 1996  successor status determination was erroneous; and (2) because
  employer had recently sold the part  of the business whose acquisition had
  led to the increase in its contribution rate, employer was  now entitled to
  a contribution rate based upon its experience rating record before its
  purchase of  that part of the business.  The Board noted that it had
  already addressed the first argument in its  April 4, 1997 decision
  upholding the 1996-1997 contribution rate, and that in doing so, it had 
  determined that the May 7, 1996 successor status determination was correct. 
  In rejecting  employer's second argument, the Board ruled that the
  Department had properly treated Palmer  H. Goodrich II/P & L Trucking,
  which were sole proprietorships operated by the same person,  as a single
  employer for purposes of assigning an employer contribution rate.

       Meanwhile, on August 8, 1997, the Department notified the Sheehans and
  Goodriches that  P & L Trucking, as a successor to G & S Forest Products,
  was assigned a contribution rate of  2.3% for fiscal year 1997-1998.  This
  time as the predecessor business, employer appealed that  determination to
  the referee and then the Board.  Employer argued that it had incorrectly 
  completed the forms upon which the initial May 7, 1996 successor status
  determination was

 

  made, and that in fact it had never been a full successor to the business
  formerly operated by  Palmer H. Goodrich II.  The referee ruled that the
  time for appealing any error in the May 7,  1996 successor status
  determination had long since passed.  In addition to adopting the referee's 
  conclusions, the Board concluded in its April 10, 1998 decision that under
  the circumstances of  this case it was proper for employer to retain its
  entire experience rating record because such  records are either retained
  or transferred in their entirety upon a change of ownership.

       Employer appeals the April 10, 1998 decision, arguing that the
  Department's May 7, 1996  successor status determination was erroneous
  because employer had mistakenly stated in the  Department's forms that it
  had acquired the entire predecessor business.  Contending that the 
  Department's May 7, 1996 notice did not adequately apprise employer that
  its contribution rate  was going to change dramatically, employer asserts
  that its failure to challenge the notice should  not have precluded it from
  challenging the successor status determination in the context of its 
  appeal of the Department's June 25, 1996 notice informing employer that its
  contribution rate  would increase from 0.6% to 5.3%.  According to
  employer, it had no reason to appeal the May  7, 1996 notice until it
  became aware of what was at stake.

       Employer's arguments fail for the simple reason that employer was
  given the opportunity  to challenge the Department's May 7, 1996 successor
  status determination in its appeal of the June  25, 1996 contribution rate
  notice.  The record reflects that although the Board believed that 
  employer was not entitled to review of the successor status determination
  because it had not timely  challenged the May 7, 1996 notice, in its April
  4, 1997 decision the Board did in fact consider  and reject on their merits
  employer's arguments concerning the Department's initial successor  status
  determination.  Employer did not timely appeal that decision and thus is
  precluded under  the doctrine of collateral estoppel from relitigating
  issues necessarily decided in that decision.

       Similar in effect but more narrow in scope than res judicata, the
  doctrine of collateral  estoppel, also known as issue preclusion, "`bars
  the subsequent relitigation of an issue which was 

 

  actually litigated and decided in a prior case between the parties
  resulting in a final judgment on  the merits, where that issue was
  necessary to the resolution of the action.'"  Berlin Convalescent  Center,
  Inc. v. Stoneman, 159 Vt. 53, 56, 615 A.2d 141, 144 (1992) (quoting
  American Trucking  Ass'ns v. Conway, 152 Vt. 363, 369, 566 A.2d 1323, 1327
  (1989)).  It is generally recognized  that "[t]he doctrines of res judicata
  and collateral estoppel are applicable to administrative  proceedings when
  an agency is acting in a judicial capacity."  1 C. Koch, Administrative Law
  and  Practice § 6.63, at 312 (Supp. 1997); see United States v. Utah
  Constr. & Mining Co., 384 U.S. 394, 422 (1966) ("When an administrative
  agency is acting in a judicial capacity and resolves  disputed issues of
  fact properly before it which the parties have had an adequate opportunity
  to  litigate, the courts have not hesitated to apply res judicata to
  enforce repose.").

       Employer has not argued, and we see no reason, why it would be
  inappropriate to apply  this general rule in this particular situation. 
  All of the criteria for applying issue preclusion  appear to be met, and
  employer does not contend otherwise.  See Trepanier v. Getting Organized, 
  Inc., 155 Vt. 259, 265-66, 583 A.2d 583, 587-88 (1990) (stating criteria
  for applying issue  preclusion, and noting that party opposing its
  application has burden to show existence of  circumstances that make it
  appropriate for issue to be relitigated).  The administrative proceedings 
  provided employer a full and fair opportunity to raise its arguments
  concerning the Department's  May 7, 1996 successor status determination. 
  Employer did in fact raise those arguments, the  Board considered and
  rejected the fact-based arguments on their merits, and employer failed to 
  timely appeal the Board's decision rejecting the arguments.  See Koch,
  supra, at 280 ("The  preclusive effect of an administrative decision may be
  stronger where the party did not seek  judicial review of the prior
  decision.").  Given this history, we conclude that employer was  precluded
  from relitigating the Department's May 7, 1996 successor status
  determination in  proceedings following the Board's April 4, 1997 decision
  sustaining the initial increase in  contribution rate that resulted from
  the determination.

       Although we reject employer's appeal, we acknowledge employer's
  legitimate concerns 

 

  about the Department's failure to fully apprise a successor business of the
  impact of a successor  designation.  As employer points out, the
  Department's response that it would have to be  "clairvoyant" to estimate
  the effect of a successor status determination on the future contribution 
  rate of a successor employer places the burden of predicting the rate
  impact on the employer.  It  is unreasonable to expect a successor company
  -- particularly when many are unrepresented sole  proprietorships -- to
  timely exercise an appeal right the importance of which can be understood 
  only when one knows the impact of the successor status determination on the
  successor employer's  contribution rate.  Since the Department concedes
  this knowledge would  require a capacity for  prediction that is beyond
  even the Department's expertise, it is not surprising that an employer 
  like plaintiff characterizes the process as unfair.  Accordingly, we
  caution the Department that an  employer who does not appeal a successor
  status determination which fails to apprise the employer  of the nature and
  extent of the deprivation involved does not waive its right to challenge
  that  determination at a later time when the extent of the deprivation is
  specified.

       Affirmed.

                                       FOR THE COURT:

                                       ________________________________________
                                       Associate Justice


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FN1.  An individual or other entity succeeding to or acquiring the
  business of any employer is  considered the successor to the former
  business for purposes of determining the rate at which the  new employer
  will contribute to the unemployment compensation fund.  See 21 V.S.A. § 
  1325(b)(1).  The Commissioner of the Department of Employment and Training
  transfers the  experience-rating record of the predecessor employer to the
  successor employer, who must then  contribute to the unemployment
  compensation fund at a rate based on the experience record of  either the
  predecessor employer or a combination of the predecessor and successor
  employers,  depending on whether the successor employer is a new employer. 
  See id.