McCarthy v. ENVIRONMENTAL TRANSP. SERVICES

• Decision Date: 25 January 2005
• Docket Number: No. 2003-376-M.P.,2003-376-M.P.
• Citation: 865 A.2d 1056
• Parties: George McCARTHY et al. v. ENVIRONMENTAL TRANSPORTATION SERVICES, INC.
• Court: Rhode Island Supreme Court

865 A.2d 1056

George McCARTHY et al. v. ENVIRONMENTAL TRANSPORTATION SERVICES, INC.

No. 2003-376-M.P.

Supreme Court of Rhode Island.

January 25, 2005.

John J. Flanagan, Middletown, for Plaintiff.

Gregory L. Boyer, Providence, for Defendant.

Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.

OPINION

GOLDBERG, Justice.

This case came before the Supreme Court on December 7, 2004, pursuant to a petition for certiorari filed by the petitioners, George and Nancy McCarthy (petitioners), co-administrators of the estate of John M. McCarthy (John or decedent). The petitioners sought review of a decree of the Appellate Division of the Workers' Compensation Court (Appellate Division or panel) that affirmed a decision of the trial court rejecting the decedent's petition for review of a benefits determination made by the respondent, Environmental Transportation Services, Inc. (respondent). The petitioners challenge the Appellate Division's determination that the suspension of benefits under G.L.1956 § 28-35-58 is based on the gross settlement received by an employee from a responsible third party. For the reasons set forth herein, we grant the petition and quash the decree of the Appellate Division.

Facts and Travel

It is uncontested that on September 14, 1988, decedent was injured while working as a truck driver for respondent at a Stop & Shop facility in Massachusetts (Stop & Shop). A memorandum of agreement dated March 13, 1989, sets forth the location of the injury as John's right shoulder, back, and ribs. John's weekly compensation rate was set at $360, plus a $9 dependency benefit. John also sued Stop & Shop for negligence. A jury awarded him $226,495.50 in damages, from which he paid attorney's fees amounting to $73,165, litigation costs of $9,740.80, and $49,034 to satisfy the lien of respondent's workers' compensation insurance provider. As a result of the Stop & Shop judgment, on June 19, 1991, the Workers' Compensation Court decreed that John's weekly compensation benefits be suspended in accordance with § 28-35-58.¹

On April 14, 1993, the Workers' Compensation Court awarded John specific compensation amounting to $7,300.80 for a 26 percent loss of use of his right arm. The respondent appealed to the Appellate Division, which found that an employee may not receive specific compensation benefits while weekly compensation benefits are suspended in accordance with § 28-35-58. Because John already had been paid the specific compensation award, the Appellate Division ordered that the amount of the award be added to the excess proceeds of his recovery from Stop & Shop for purposes of expanding the benefits suspension period.² This ruling is not before us.

On March 29, 2000, John filed a petition with the Workers' Compensation Court seeking termination of the suspension period and resumption of his weekly compensation benefits. John asserted that, under a proper interpretation of § 28-35-58, the suspension period should have been calculated based on his net recovery, after payment of attorney's fees and costs, and not on his gross recovery. The court denied and dismissed his petition, finding that § 28-35-58 requires that the period of suspension of weekly compensation benefits after an employee's recovery from a responsible third party is based on the employee's gross recovery.

John filed a timely claim of appeal but died on February 2, 2003, before the Appellate Division heard his appeal. The petitioners were substituted as proper parties.

On appeal to the Appellate Division, petitioners argued that this Court's decision in Rison v. Air Filter Systems, Inc., 707 A.2d 675 (R.I.1998), allows for the use of an employee's net recovery when calculating the period of suspension. Further, petitioners asserted that calculating suspension periods based upon the gross amount of compensatory damages works a hardship on injured employees that was not intended by the Legislature. The Appellate Division denied and dismissed petitioners' appeal, concluding that the Legislature did not intend for suspension periods to be based on net recovery because it did not specifically provide for the deduction of attorney's fees and litigation costs. We granted certiorari to review this holding.

Standard of Review

This petition raises an issue of statutory construction, which this Court reviews de novo for any error of law or equity. Star Enterprises v. DelBarone, 746 A.2d 692, 695 (R.I.2000) (citing Rison, 707 A.2d at 678 and § 28-35-30(a)(3)). On certiorari, our review of the record "is limited to examining the record to determine if an error of law has been committed." Matter of Falstaff Brewing Corp. Re: Narragansett Brewery Fire, 637 A.2d 1047, 1049 (R.I.1994).

Discussion

In this case we are called upon to interpret the meaning of "excess damages" as that term is used in the formula set forth in § 28-35-58 for determining the number of weeks an injured employee's weekly compensation benefits should be suspended to account for damages recovered from a responsible third party. The respondent asserts that, under a proper interpretation of § 28-35-58, an employee's excess damages are all the money recovered in excess of the workers' compensation lien. The petitioners contend that the formula must refer to net recovery, after additional deductions for the attorney fees and litigation costs. They argue that using an employee's gross recovery to calculate the suspension period contravenes the policy underlying the Rhode Island Workers' Compensation Act (WCA or act) that injured workers may recover damages from third parties without surrendering their rights to workers' compensation benefits in the event of a deficient tort recovery.

It is an oft-cited proposition of statutory construction that, when faced with statutory language that is clear and unambiguous, "this Court must interpret the statute literally and must give the words of the statute their plain and ordinary meanings." Oliveira v. Lombardi, 794 A.2d 453, 457 (R.I.2002) (quoting Accent Store Design, Inc. v. Marathon House, Inc., 674 A.2d 1223, 1226 (R.I.1996)). "`If statutory provisions appear unclear or ambiguous, however, we shall examine the entire statute to ascertain the intent and purpose of the Legislature.'" Jeff Anthony Properties v. Zoning Board of Review of North Providence, 853 A.2d 1226, 1230 (R.I.2004). Such an inquiry requires us to "`determine and effectuate the Legislature's intent and to attribute to the enactment the meaning most consistent with its policies or obvious purposes.'" Oliveira, 794 A.2d at 457. Further, "[i]t is a well-known maxim of statutory interpretation that this Court `will not construe a statute to reach an absurd [or unintended] result.'" America Condominium Association, Inc. v. IDC, Inc., 844 A.2d 117, 127 (R.I.2004) (quoting In re Estate of Gervais, 770 A.2d 877, 880 (R.I.2001)).

This Court had occasion to examine § 28-35-58 in Rison and signaled our concern about the application of the statute: "we express no opinion on whether the figure representing `the excess damages paid' should reflect a deduction from the gross settlement amount for the employee's attorneys' fees and other litigation expenses." Rison, 707 A.2d at 680 n. 5 (quoting § 28-35-58).³ The General Assembly has not taken steps to clarify the meaning of "excess damages," and we are compelled to construe the language at this time.

Although it is not specifically articulated in the statute, the parties agree that the amount of the workers' compensation lien must be deducted from the tort recovery to arrive at the excess damages calculation.⁴ The disputed issue is whether the attorney's fees and costs associated with the underlying action also should be deducted. The statutory language under review provides that "the suspension paid shall be that number of weeks which are equal to the excess damages paid divided by the employee's weekly compensation rate." Section 28-35-58. (Emphases added.) It is reasonable to look to the statutory language providing for reimbursement of the lien: "the employee or his [or her] attorney shall be entitled to withhold from the amount to be reimbursed that proportion of the costs, witness expenses, and other out-of-pocket expenses and attorney fees which the amount which the employee is required to reimburse the person by whom compensation was paid bears to the amount recovered from the third party." Id. (Emphasis added.) It is clear from this provision that the employer or insurer is not entitled to reap the benefit of the employee's recovery without bearing its share of the cost.

Furthermore, an attempt to reconcile the use of the word "paid" in "suspension paid" with that in "excess damages paid" and "person by whom compensation was paid" gives rise to an ambiguity. In the latter two instances, "paid" clearly refers to the employee's receipt of money, but such usage is meaningless in the context of a suspension of benefits.⁵ We, therefore, must construe the statute in light of this ambiguity.

In an attempt to justify the harsh result its interpretation of § 28-35-58 would work upon injured workers like decedent, the respondent urges us to consider that, before the 1985 amendment, injured workers were forced to choose between workers' compensation benefits and tort damages. See Travis v. Rialto Furniture Co., 101 R.I. 45, 49, 220 A.2d 179, 181 (1966) (holding an employee who recovers tort damages from a negligent third party presumptively is made whole by that recovery). We do not agree that respondent's all or nothing argument is helpful to our analysis. The 1985 amendment addresses dual concerns: that responsible tortfeasors should bear their share of liability for employees' on-the-job injuries; but that injured employees should not receive a windfall by recovering damages and workers' compensation benefits. Rison, 707 A.2d at 683-84. This amendment did not change the WCA's foundational premise...