Prevost v. Hess Oil Virgin Islands Corp.
| Decision Date | 07 August 1986 |
| Docket Number | Civil No. 1985/28,Civil No. 1984/195,Civil No. 1985/86 |
| Citation | 22 V.I. 340 |
| Parties | PAULIPHY PREVOST and JOAN PREVOST, Plaintiffs v. HESS OIL VIRGIN ISLANDS CORPORATION, Defendant PHILLIP SCOTLAND, et ux., Plaintiff v. HESS OIL VIRGIN ISLANDS CORPORATION, Defendant LOGAN GREENE, Plaintiff v. MARTIN MARIETTA ALUMINA, INC., Defendant |
| Court | U.S. District Court — Virgin Islands |
Defendant's motion for summary judgment, based on borrowed employee defense, where plaintiffs with injuries sustained in the course of employment relied upon 1986 amendment specifically providing that the abrogation of the borrowed employee doctrine should retroactively apply to pending cases. The District Court, O'Brien, J., held the statute constitutional and denied defendant's summary judgment motion, ruling that the 1986 amendment retroactively abrogated the borrowed employee doctrine.
JOHN R. COON, ESQ., St. Croix, V.I., for Pauliphy Prevost
DESMOND L. MAYNARD, ESQ., St. Thomas, V.I., for Phillip Scotland
ESZART A. WYNTER, ESQ., St. Croix, V.I., for Logan Greene
BRITAIN H. BRYANT, ESQ., St. Croix, V.I., for Hess Oil Virgin Islands Corporation
R. ERIC MOORE, ESQ., St. Croix, V.1., for Martin Marietta Alumina, Inc.
MEMORANDUM OPINION AND ORDER
We confront in these cases the issue whether constitutional protections preserve the borrowed employee defense. Specifically we must determine whether the recent amendments to the Workmen's Compensation Act, retroactively abolishing the borrowed employee defense, violate the contract and due process clauses of the Revised Organic Act. Since we find they do not, we will deny the defendants' motions for summary judgment.
On October 19, 1984, the Virgin Islands Legislature amended the Workmen's Compensation Act to abrogate the borrowed employee doctrine.1 This legislation was silent concerning its application to pending cases.
On January 23, 1986, the Virgin Islands Legislature again amended the Workmen's Compensation Act specifically eliminating the borrowed employee doctrine as a defense in all pending cases.2 In the cases before us, workers sustained injuries and filed suits prior to the passage of the 1986 amendment.
Each defendant moved for summary judgment based on the borrowed employee doctrine. Vanterpool v. Hess Oil V.I. Corp., 766 F.2d 117 (3d Cir. 1985). The plaintiffs counter these motions by asserting the 1986 amendment specifically provides that the abrogation of the borrowed employees doctrine should retroactively apply to pending cases.
The defendants reply by challenging the constitutionality of the 1986 amendment. Because of the interest in this issue, we invited all counsel, and amicus counsel, to submit briefs addressing the constitutionality of the amendment.
The defendants raise three constitutional challenges to the 1986 amendment. First, they assert that retroactive application of the 1986 amendment impermissibly impairs their contract rights. These rights arise from the provisions of the Virgin Islands workmen's compensation scheme which are an "implied" term of all employment contracts. Amending the workmen's compensation scheme by retroactively eliminating the borrowed employee defense unconstitutionally impairs these vested rights.
The second and third constitutional challenges involve the due process clause. The manner in which the 1986 amendment was passed is challenged on procedural due process grounds while the effect of the amendment is challenged on substantive due process grounds. The plaintiffs attack the first argument by challenging its initial premise: workmen's compensation schemes are not implied terms of employment contracts but rather relate to the "status" of the employment relationship. Constitutional issues involving the contract clause are not reached since no contract is implicated.
Likewise, procedural due process is not infringed because the act was validly passed by the Virgin Islands Legislature. Finally, the plaintiffs submit that the 1986 amendment is economic and social legislation rationally related to the achievement of a valid legislative purpose and therefore is not a violation of substantive due process.
For the following reasons we find the 1986 amendment is constitutional.
The Revised Organic Act provides in part, "[n]o law impairing the obligation of contracts shall be enacted." Rev. Organ. Act § 3 (1967). Whether a contractual relationship is impaired is the threshold inquiry for contract clause issues. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411 (1983).If no contractual relationship is impaired, we do not reach this constitutional issue.3
Whether the relationship between an employment contract and workmen's compensation scheme is contractual is the precise issue before us. Since this is a question of first impression, we must look to the rules of common law as generally applied in the United States.4
One school of thought considers workmen's compensation rights and obligations as implied terms of the employment contract invoking contract clause protection; Mitchell v. United States Fidelity and Guaranty Co., 206 F. Supp. 489, 490 (E.D. Tenn. 1962); Cooper v. Wicomico Cty., Dept. of Public Works, 366 A.2d 55, 58 (Md. Ct. App. 1976); Miller v. Norris Creameries, 250 N.W.2d 161 (Minn. 1976) citing Yeager v. Delano Granite Works, 84 N.W.2d 363 (Minn. 1957);5 while the opposing school holds that the rights and obligations of workmen's compensation are based on the status of the employer-employee relationship. Changes in workmen's compensation schemes, therefore, are not unconstitutional impairments of contracts. K-Mart Corp. v. State Indus. Ins. System, 693 P.2d 562, 565-67 (Nev. 1985); Jenkins v. Sal Chemical Co., 280 S.E.2d 243, 244 (W. Va. 1981) citing Lester v. State Workmen's Compensation Com'r, 242 S.E.2d 443 (W. Va. 1978) (); Price v. All American Engineering Company, 320 A.2d 336, 339-40 (Del. 1974).6 Jurisdictions, including the Supreme Court, appear evenly divided between these two theories and we find no clear trend in eitherdirection.7 The absence of a clear trend in favor of either theory allows us the freedom to adopt the "better rule". Edwards v. Born, Inc., 792 F.2d 387 (3d Cir. 1986); LaPlace v. Sun Insurance Office, Ltd., 298 F. Supp. 764, 766 (D.V.I. 1969).
Initially we note that some evidence slightly favors the status theory. This evidence is found in Lester, supra, which expressly replaced the contract theory with the status theory, and in recent cases such as K-Mart, supra.
In K-Mart, the Nevada Supreme Court rejected the contract theory after questioning its theoretical footing. Like Nevada, we too question the rationale behind the contract theory.
In general, the contract theory evolved from jurisdictions which allowed employers the option to participate in workmen's compensation programs. Employers received the protection of the statutory bar in exchange for participating in the insurance program, while qualified workers received guaranteed benefits in lieu of possible larger awards from negligence suits. Since workmen's compensation was optional parties freely entered into employment contracts with reference to the statute and the statute was considered an implied term of the contract. K-Mart, supra, at 566-67; Lester, supra, at 449. This theory is unpersuasive for two reasons.
[1] First, the Virgin Islands Workmen's Compensation scheme is mandatory. 24 V.I.C. § 272 (1970). The initial assumption of the contract theory, therefore, does not conform to our situation. Second, even assuming Virgin Islands employers could elect into the system, this election is far from voluntary.
The overwhelming advantages of workmen's compensation make an employer's "elective choice" a foregone conclusion. Similarly, it is unlikely that workers make employment decisions based on a prospective employer's workmen's compensation insurance plan.8 These theoretical problems undermine the persuasiveness of thecontract theory. For the above reasons we reject the contract theory.
[2] The status theory, on the other hand, views workmen's compensation as incidental to the employment relationship and not an implied term of the employment contract. We believe this is the better view and now adopt the status theory in the Virgin Islands.9 Since this theory considers workmen's compensation as incidental to the employment relationship the contract clause is not infringed.
[3] Assuming, arguendo, we adopted the contract theory, and thus satisfied the initial inquiry, our next step would be to determine whether contract clause prohibitions have been breached. Though the language of the clause is facially absolute, its prohibition must be balanced against the inherent police power of the territory to safeguard the vital interests of its people. Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 410 (1983), citing Home Building & Loan Asso. v. Blaisdell, 290 U.S. 398, 434 (1934). The Third Circuit, summarizing the Supreme Court's contract clause jurisprudence, outlined the criteria used for determining whether the clause has been violated. Troy Ltd. v. Renna, 727 F.2d 287. 297 (3d Cir. 1984). The suggested analysis is first to determine whether the state has "a significant and legitimate public purpose behind the" statute and, if so, whether "the adjustment of the rights and responsibilities of the contracting parties is based upon reasonable conditions and is of a character appropriate to the public purpose justifying the legislation adoption." Troy, supra at 297, quoting Energy Reserves, supra. Deference is paid to the legislature's judgment concerning the necessity and reasonableness of a particular measure unless the territory itself is a contracting party. Id. Mindful of this standard, we find the 1986 amendments can pass constitutional...
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