Overhead Door Co. of Norfolk v. Lewis, Record No. 0597-98-2.

• Decision Date: 26 January 1999
• Docket Number: Record No. 0597-98-2.
• Citation: 509 S.E.2d 535,29 Va. App. 52
• Parties: OVERHEAD DOOR COMPANY OF NORFOLK and Hartford Fire Insurance Company v. Daniel Lee LEWIS.
• Court: Virginia Court of Appeals

509 S.E.2d 535

29 Va. App. 52

OVERHEAD DOOR COMPANY OF NORFOLK and Hartford Fire Insurance Company v. Daniel Lee LEWIS.

Record No. 0597-98-2.

Court of Appeals of Virginia, Richmond.

January 26, 1999.

S. Vernon Priddy, III (Sands, Anderson, Marks & Miller, on brief), Richmond, for appellants.

No brief or argument for appellee.

Present: ELDER and LEMONS, JJ., and COLE, Senior Judge.

ELDER, Judge.

Overhead Door Company of Norfolk and Hartford Fire Insurance Company (collectively referred to as employer) appeal from a decision of the Workers' Compensation Commission denying employer's request to terminate or suspend an award of benefits payable by employer to Daniel Lee Lewis (claimant). Employer contends that claimant, who sustained his compensable injuries as a result of third-party negligence, failed to consult employer before settling a legal malpractice claim with an attorney whose negligence prevented claimant from recovering on the third-party claim.¹ Employer contends the commission erred (1) in failing to exercise its equitable powers to prevent claimant from realizing a double recovery; (2) in holding that employer had to have a valid lien on the malpractice settlement proceeds before the commission had power to grant the termination or credit employer sought; (3) in applying res judicata and/or collateral estoppel, based on prior circuit court rulings regarding employer's entitlement to a lien, to bar the application for termination or suspension of benefits; (4) in refusing to terminate claimant's claim after he settled his legal malpractice claim without employer's authorization; and (5) in issuing an opinion under the names of Commissioners Tarr, Dudley and Diamond, when the panel before which the parties argued consisted of Commissioners Tarr and Dudley and Chief Deputy Commissioner Link. For the reasons that follow, we affirm the commission's ruling.

I. FACTS

While working for employer in 1990, claimant was injured in a motor vehicle accident in North Carolina due to the negligence of' a third party. The commission entered an award for benefits, and claimant hired an attorney to pursue an action against the third party tortfeasor. The attorney failed to have the suit served in a timely fashion, and claimant's negligence action was dismissed with prejudice.

Claimant filed a malpractice action in the Virginia Beach Circuit Court against the attorney and his law firm. Employer filed a notice of lien on the malpractice proceeds in that same court, alleging that it had paid over $120,000 in disability and medical benefits for claimant and that the Workers' Compensation Act (Act) entitled it to such a lien. Claimant and the attorney filed a joint motion to quash employer's notice of lien. They contended that Code §§ 65.2-309 and 65.2-310 provide an employer with subrogation rights when the injured employee recovers from a third party who caused the injury but that those code sections do not provide subrogation rights when the employee seeks damages from a party who did not cause the employee's injury. After considering the parties' pleadings and arguments, the trial court granted the motion to quash,² and claimant and the attorney settled the malpractice suit.

Employer petitioned the Virginia Supreme Court for an appeal of the trial court's order quashing the lien. On September 8, 1995, the Court denied the petition on the merits, finding "no reversible error."

While awaiting the outcome of its appeal, employer pursued two other potential avenues for recovery. It filed an independent action for malpractice against the attorney in the Richmond Circuit Court, which was dismissed on the attorney's motion for summary judgment.³ It also filed an application for hearing before the commission, the same application on which the current appeal is based, alleging that claimant's failure to obtain employer's consent prior to settling the malpractice claim prejudiced employer's "statutory assignment and subrogation rights" and seeking termination or suspension of benefits. Claimant contended that employer raised the same issue already ruled on by the Virginia Beach Circuit Court and that res judicata and/or collateral estoppel therefore barred employer's application. Following briefs submitted by the parties in December 1995, the deputy commissioner issued an opinion adopting employer's arguments and suspending claimant's benefits. On appeal, following oral argument, the full commission issued an opinion reversing the deputy commissioner's suspension of benefits. It held that (1) absent a lien, the commission could not enforce any subrogation rights and that res judicata and collateral estoppel applied to bar any credit or suspension of benefits because the circuit courts already had concluded that no valid lien existed, and (2) because of the circuit courts' rulings, employer had no legally enforceable right which was prejudiced when claimant settled the malpractice claim without consulting employer.

II. ANALYSIS

A.

COMMISSION'S AUTHORITY TO TERMINATE OR SUSPEND BENEFITS

Code § 65.2,309(A) provides, in relevant part, as follows:

A claim against an employer under this title for injury or death benefits shall operate as an assignment to the employer of any right to recover damages which the injured employee, his personal representative or other person may have against any other party for such injury or death, and such employer shall be subrogated to any such right and may enforce, in his own name or in the name of the injured employee or his personal representative, the legal liability of such other party.

"The purpose of the statute is to reimburse an employer who is compelled to pay compensation as a result of the negligence of a third party and to prevent an employee from obtaining a double recovery of funds." Tomlin v. Vance Int'l, Inc., 22 Va.App. 448, 452, 470 S.E.2d 599, 601 (1996). Under Code § 65.2-310, an employer may petition the court for a lien against the third-party judgment in the amount of compensation and other benefits employer has paid. If the employee impairs the employer's right of subrogation by settling the claim without the employer's knowledge and consent, even when the employer has general knowledge that the third-party action is pending, employer may be entitled to a termination of the employee's benefits under the Act. See Green v. Warwick Plumbing & Heating, 5 Va.App. 409, 411, 364 S.E.2d 4, 6-7 (1988).

We hold that the commission did not err in concluding it lacked authority to provide the requested relief pursuant to Code §§ 65.2-309 and 65.2-310. In employer's earlier appeal of the circuit court's denial of its request for a lien, the Virginia Supreme Court denied employer's petition on the merits. See Harward v. Commonwealth, 5 Va. App. 468, 476, 364 S.E.2d 511, 515 (1988) (noting that "`decision to . . . refuse a petition for writ of error is based upon . . . the merits of the case'" (quoting Saunders v. Reynolds, 214 Va. 697, 700, 204 S.E.2d 421, 424 (1974))). This denial constituted a ruling that Code §§ 65.2-309 and 65.2-310 do not permit any employer to obtain a lien on proceeds from a legal malpractice suit under the facts of this case. See id. (noting that "doctrine ... applies] even when the precise issue involved' resulted in denial of a petition for a writ of error in a separate case'" (quoting Stillwell v. Commonwealth, 219 Va. 214, 226, 247 S.E.2d 360, 368 (1978))). But see Williams v. Katz, 23 F.3d 190, 192-94 (7th Cir.1994) (holding, under similar Illinois statute, that employer was entitled to lien on legal malpractice proceeds, which had been awarded in lieu of damages for medical malpractice resulting from treatment for compensable injury); Bongiorno v. Liberty Mut. Ins. Co., 417 Mass. 396, 630 N.E.2d 274, 277-78 (Mass.1994) (holding, under similar statute, that general intent of legislature permitted employer to obtain lien on legal malpractice proceeds recovered by employee in lieu of damages from third-party tortfeasor); seealso Toole v. EBI Cos., 314 Or. 102, 838 P.2d 60, 65-66 (Or.1992) (en banc); Frazier v. New Jersey Mfrs. Ins. Co., 142 N.J. 590, 667 A.2d 670, 674-76 (N.J.1995). Therefore, claimant had no duty under the Act to consult with employer prior to settling the malpractice claim, and the commission had no authority under the Act to terminate claimant's benefits or give employer a credit for the amount of the malpractice proceeds. See also Code § 65.2-310 (providing that, in any third-party action by an employee which results in a judgment, the court shall ascertain the amount of benefits paid by employer under the Act and order the third party to pay this amount directly to employer prior to paying the employee); Jones v. Arlington Hosp., 61 O.T.C. 252, 253 (1982) (holding that whether employer has a valid lien on judgment against third-party tortfeasor is determination for court, not commission).

Because we affirm the commission's ruling based on the precedential impact of the Supreme Court's ruling, we need not consider whether the commission erroneously applied the doctrines of res judicator or collateral estoppel to bar employer's request for relief. See, e.g., Dziarnowski v. Dziarnowski, 14 Va.App. 758, 762, 418 S.E.2d 724, 726 (1992) (upholding right result on appeal, even if reached for wrong reason).

Employer nevertheless contends that the commission had, and wrongly failed to exercise, the equitable power to award employer such a credit even in the absence of a lien. We reject this argument. On appeal to this Court, employer cites various cases from this Court and the Virginia Supreme Court, asserting the "ample power [of the commission] to do complete justice in each case."⁴ These cases deal with the doctrine of imposition, which has evolved as a method by which the commission may exercise its equitable power,⁵ although loyer did not expressly mention this doctrine as a basis for its request. As we have noted...